Reported Decision : (2003) 46 ASCR 504 (2003) 21 ACLC 1810 New South Wales Court of Appeal CITATION : Adler and Anor v Australian Securities and Investments Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131 HEARING DATE(S) : 17, 18, 19, 20, 21, 24, 25, 26, 27 March 2003 JUDGMENT DATE : 8 July 2003 JUDGMENT OF : Mason P at 1; Beazley JA at 2; Giles JA at 3 DECISION : IN THE APPEAL BY MR ADLER AND ADLER CORPORATION: (1) Appeal allowed in part; (2) Vary declarations 3 and 4 made on 27 March 2002 by adding before "182(1)" the word "and" and deleting the words and figures "and 183(1)"; (3) Direct that within 21 days the parties calculate the compensation payable to HIH Casualty and General Insurance Ltd in accordance with the reasons of this Court and advise the Registrar of the sum calculated; (4) Vary order 7 made on 6 June 2002 by deleting the sum of $7,986,402 and substituting the sum advised to the Registrar; (5) Liberty to apply in the event of disagreement as to the calculation; (6) Appeal otherwise dismissed; (7) Appellants pay the respondent's costs. IN THE APPEAL BY MR WILLIAMS: (1) Direct that within 21 days the parties calculate the compensation payable to HIH Casualty and General Insurance Ltd in accordance with the reasons of this Court and advise the Registrar of the sum calculated; (2) Vary order 7 made on 6 June 2002 by deleting the sum of $7,986,402 and substituting the sum advised to the Registrar; (3) Liberty to apply in the event of disagreement as to the calculation; (4) Appeal dismissed; (5) Appellant pay the respondent's costs. CATCHWORDS : CORPORATIONS ACT - CONTRAVENTIONS OF CIVIL PENALTY PROVISIONS - orders for compensation and pecuniary penalties and disqualification from managing corporations - whether error shown in the trial judge's findings of contraventions - consideration of appellate review of first instance findings - whether findings paid regard to matters outside the plaintiff's pleaded and particularised case - consideration of functions of pleadings and particulars - to ensure procedural fairness -- CONTRAVENTIONS OF S208 OF THE ACT RELATING TO GIVING A FINANCIAL BENEFIT TO A RELATED PARTY - whether payment of money to related party as loan or held on trust - if held on trust whether a bare trust for payer - in any event was giving a financial benefit - financial benefit not on reasonable arms length terms - no error in findings - INVOLVEMENT IN THE CONTRAVENTIONS OF S208 - whether necessary to know financial benefit was given otherwise on reasonable arms length terms - sufficient to know facts whereby financial benefit was given otherwise than on reasonable arms length terms - CONTRAVENTIONS OF S260A OF THE ACT RELATING TO A COMPANY GIVING FINANCIAL ASSISTANCE TO ACQUIRE ITS SHARES - same payment of money - whether material prejudice to the company - whether opinion evidence of material prejudice properly admitted - no error in holding that opinion wholly or substantially based on witness's experience - even without the opinion evidence, material prejudice whether or not money held on trust - no error in findings - INVOLVEMENT IN THE CONTRAVENTIONS OF S260A - whether plaintiff must prove knowledge of facts constituting material prejudice to the company - not necessary - in any event there was knowledge - CONTRAVENTIONS OF SS180, 181, 182 AND 183 OF THE ACT RELATING TO DIRECTOR'S DUTIES - same payment of money and use of the money in various ways - whether opinion evidence that conduct was contrary to the provisions properly admitted - again no error in holding - no error in trial judge's findings of contraventions of ss180, 181, 182 - but conduct alleged and proved did not constitute contravention of s183 - JONES V DUNKEL INFERENCES - whether available in civil penalty proceedings - are civil proceedings and inferences available - were available on the facts - RULES OF PROSECUTORIAL FAIRNESS - whether applied so that plaintiff obliged to call a material witness - did not apply - in any event no miscarriage if witness not called - CAUSATION OF LOSS TO THE COMPANY PAYING THE MONEY - necessity to show company would not have paid if director's duties fulfilled - whether analogy with claims against defaulting fiduciaries - not analogous and must show causation in fact - on facts no error in finding of causation - LOSS THROUGH LOSS OF USE OF MONEY - whether analogy with claims against defaulting fiduciary - not analogous and must show loss in fact - different interest rate to calculate loss from that used by trial judge - PECUNIARY PENALTIES - trial judge's orders affirmed - DISQUALIFICATIONS - whether can make order as to some corporations only - order is as to management of corporations and can not do so - in any event trial judge's orders affirmed. Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79; Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; ASIC v Plymin [2003] VSC 123; Australian Cement v Adelaide Broughton [2001] NSWSC 645; Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd (1999) 39 ACSR 339; Azzopardi v The Queen (2001) 205 CLR 50; Banque Commerciale SA v Akhil Holdings Ltd (1996) 169 CLR 279; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; Belmont Finance Corporation v Williams Furniture Ltd (No 2) (1980) 1 All ER 393; Black v S Freedman & Co (1910) 12 CLR 105; Briginshaw v Briginshaw (1938) 60 CLR 336; Charterhouse Investment Trust Ltd v Tempest Diesels Ltd (1986) PCLC 1; Chew v The Queen (1992) 173 CLR 626; Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 398; Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115; Daniels v Anderson (1995) 37 NSWLR 438; Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 192 ALR 561; Dare v Pulham (1982) 148 CLR 658; Dyers v The Queen (2002) 76 ALJR 1552; Eastman v R (1997) 76 FCR 9; Employment Advocate v Williamson (2001) 111 FCR 20; Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477; Fabre v Arenales (1992) 27 NSWLR 437; Giorgianni v The Queen (1985) 156 CLR 473; Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336; Godfrey v New South Wales (No 1) [2003] NSWSC 160; Gould v Vaggelas (1985) 157 CLR 215; Greek Herald Pty Ltd v Nikolopoulos (2001) 54 NSWLR 165; Hamilton v Whitehead (1988) 166 CLR 121; Henville v Walker (2001) 206 CLR 459; HG v The Queen (1999) 197 CLR 414; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358; House v The King (1936) 55 CLR 499; CASES CITED : Hungerfords v Walker (1989) 171 CLR 125; Hunters Beach Investments Pty Ltd v Braams (2001) 38 ACSR 71; I & L Securities Pty Ltd v NTW Valuers (Brisbane) Pty Ltd (2002) 76 ALJR 1461; Jones v Bradley [2003] NSWCA 81; Jones v Dunkel (1995) 101 CLR 298; King v GIO Australia Holdings Ltd (2001) 184 ALR 98; Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281; Lee v The Queen (1998) 195 CLR 594; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262; Paper Products Pty Ltd v Tomlinsons (Rockdale) Pty Ltd (1994) AIPR 41-315; Pereira v Director of Public Prosecutions (1988) 63 ALJR 1; Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328; The Queen v Apostilides (1984) 154 CLR 563; The Queen v Byrnes (1995) 183 CLR 501; Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1979) 42 FLR 204; R v Yilditz (1983) 11 A Crim R 115; Regina v Glennan (1970) 91 WN (NSW) 609; Reid v Howard (1995) 184 CLR 1; Richardson v The Queen (1974) 131 CLR 116; Robins v Incentive Dynamics Pty Ltd (In Liquidation) [2003] NSWCA 71; RPS v The Queen (2000) 199 CLR 620; Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236; Smith v The New South Wales Bar Association (1992) 176 CLR 256; Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; Swindle v Harrison (1997) 4 All ER 705; Target Holdings Ltd v Redfern (1996) AC 421; Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96; Wallersteiner v Moir (1975) 1 QB 373; Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 630; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Whitehorn v The Queen (1983) 154 CLR 657; Williams v The Minister for Aboriginal Land Rights Act 1983 (2000) Aust Torts Reports 81-578; Yorke v Lucas (1985) 158 CLR 661; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 77 ALJR 895. Rodney Stephen Adler and Adler Corporation Pty Ltd - Appellants in matter No 40538/02 PARTIES : Raymond Reginald Williams - Appellant in matter No 40556/02 Australian Securities and Investments Commission - Respondent in both matters FILE NUMBER(S) : CA 40538/02; 40556/02 B W Walker SC, I M Jackman SC - Mr Adler & Adler Corporation Pty Ltd COUNSEL : P D Crutchfield - Mr Williams R B Macfarlan QC, P Durack, A J Abadee - ASIC Gilbert + Tobin - Mr Adler & Adler Corporation Pty Ltd SOLICITORS : Arnold Bloch Leibler - Mr Williams Jan Redfern, Australian Securities & Investment Commission - ASIC LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT SC 2753/01 FILE NUMBER(S) : LOWER COURT Santow J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40538/02 CA 40556/02 ED 2753/01 MASON P BEAZLEY JA GILES JA Tuesday 8 July 2003 ADLER & ANOR v AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION WILLIAMS v AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION Judgment 1 MASON P: I agree with Giles JA. 2 BEAZLEY JA: I agree with Giles JA. 3 GILES JA: The Australian Securities and Investments Commission ("ASIC") brought proceedings against Mr Rodney Adler, Adler Corporation Pty Ltd ("Adler Corporation"), Mr Ray Williams and other persons alleging contraventions of sections of the Corporations Law. When the Corporations Act 2001 (C'th) ("the Act") came into force the proceedings were taken to have been brought under its corresponding provisions (see s 1383). These are appeals by Mr Adler, Adler Corporation and Mr Williams from declarations that they contravened sections of the Act, orders that they pay compensation and pecuniary penalties, and in the cases of Mr Adler and Mr Williams orders that they be disqualified from managing corporations for significant periods. 4 The declarations of contravention were made pursuant to s 1317E of the Act, which provides that a Court must make a declaration of contravention if satisfied that a person has contravened one of a number of identified sections. The sections are described as civil penalty provisions, and include those next mentioned. 5 The contraventions found involved a variety of transactions, and can be grouped as follows. 6 First, it was found that Mr Adler, Adler Corporation and Mr Williams contravened s 209(2) of the Act because they were involved in contraventions by HIH Insurance Ltd ("HIH") and HIH Casualty and General Insurance Ltd ("HIHC") of s 208. Section 208 is concerned with a public company or an entity controlled by the public company giving a financial benefit to a related party of the public company. The transaction was the payment of $10,000,000 by HIHC to Pacific Eagle Equity Pty Ltd ("PEE"). 7 Secondly, it was found that Mr Adler, Adler Corporation and Mr Williams contravened s 260D(2) of the Act because they were involved in contravention by HIHC of s 260A. Section 260A is concerned with a company financially assisting a person to acquire shares in the company or a holding company of the company. The transactions were the payment of the $10,000,000 by HIHC to PEE and its use in part for the purchase by PEE of shares in HIH. 8 Thirdly, it was found that Mr Adler contravened ss 180(1), 181(1), 182(1) and 183(1) of the Act and that Adler Corporation contravened ss 181(2), 182(2) and 183(2) because it was involved in the corresponding contraventions by Mr Adler. Sections 180-183 are concerned with the duties of directors and other officers of corporations, essentially care and diligence (s 180), good faith and proper purpose (s 181), proper use of position (s 182) and proper use of information (s 183). Contraventions were found in relation to Mr Adler's directorships of HIH and PEE and his position as an officer of HIHC. The transactions were the payment of the $10,000,000 by HIHC to PEE; its use in part for the purchase by PEE of shares in HIH; its use in part to acquire from Adler Corporation shares in dstore Ltd ("dstore"), Planet Soccer International Ltd ("Planet Soccer") and Nomad Telecommunications Ltd ("Nomad"); and its use in part in loans to companies and a trust with which Mr Adler was associated, morehuman Pty Ltd ("morehuman"), Pacific Capital Partners Pty Ltd ("PCP"), Intagrowth Fund No 1 ("Intagrowth") and PCP Ensor No 2 Pty Ltd ("PCP Ensor"). 9 Fourthly, it was found that Mr Williams contravened ss 180(1) and182(1) of the Act and that Mr Adler contravened s 182(2) because he was involved in the corresponding contravention by Mr Williams. Contraventions were found in relation to Mr Williams' directorships of HIH and HIHC. The transaction was the payment of the $10,000,000 by HIHC to PEE. 10 The orders for payment of compensation were made pursuant to s 1317H of the Act, which provides that a person may be ordered to compensate a corporation for damage suffered by the corporation if the person has contravened a civil penalty provision and the damage resulted from the contravention. It was found that HIHC had suffered loss of $7,986,402, and each of Mr Adler, Adler Corporation and Mr Williams was ordered to pay it that amount. 11 The orders for payment of pecuniary penalties were made pursuant to s 1317G of the Act, which relevantly provides that a person may be ordered to pay to the Commonwealth a pecuniary penalty if a declaration of contravention by the person has been made and the contravention materially prejudices the interests of the corporation or is serious. It was ordered that Mr Adler and Adler Corporation pay pecuniary penalties of $450,000 and that Mr Williams pay a pecuniary penalty of $250,000. 12 The disqualification orders were made pursuant to ss 206C and 206E of the Act. Section 206C provides that a person may be disqualified from managing corporations if a declaration is made under s 1317E that the person has contravened a civil penalty provision and the Court is satisfied that the disqualification is justified. Section 206E relevantly provides that a person may be disqualified from managing corporations if he has at least twice contravened the Act while an officer of a body corporate and the Court is satisfied that the disqualification is justified. It was ordered that Mr Adler be disqualified from managing corporations for twenty years and that Mr Williams be disqualified from managing corporations for ten years. 13 Material to some of the submissions in the appeals, while Mr Adler and Adler Corporation were represented by counsel throughout the hearing, Mr Williams was not. Mr Williams was represented by counsel at the commencement of the hearing. His counsel informed the trial judge that, for financial and other reasons, Mr Williams "will not be represented during the plaintiff's case" but wished "to have the right to call evidence" and sought "to make submissions about what the plaintiff's evidence should mean for any findings the court makes" and if ASIC was successful "to make submissions as to what is the appropriate form of relief". He said, "It is proposed that the Second Defendant, through his legal advisors, will monitor the proceedings, read the transcript and reserves the right to come back, as was discussed on the last occasion." Mr Williams did not call evidence, but through counsel put submissions as to liability and as to relief. 14 The findings of contravention were made in reasons published on 14 March 2002 ("the liability judgment"), after a hearing over some weeks in late 2001. The declarations were made on 27 March 2002 after a further hearing on that day and for reasons published on that day ("the declarations judgment"). The orders were made on 5 and 6 June 2002 after a further hearing in early May and for reasons published on 30 May 2002 ("the orders judgment"). Unless otherwise sourced, references to the trial judge's reasons will be to the liability judgment. The scope of the appeal 15 Much of the evidence at the trial was documentary. Affidavit evidence was given of actions, conversations, states of knowledge, reactions and opinions, and many of the deponents were cross-examined. Neither Mr Adler nor Mr Williams gave evidence. A deal of the non-documentary evidence required assessment for its true import and for its reliability or weight. The evidence as a whole was voluminous and detailed. 16 The trial judge's findings were correspondingly detailed, and included inferences and characterisations from facts which were beyond dispute and from facts which were arrived at upon assessment of the evidence. The appellants challenged many of the findings, particularly those arrived at upon assessment of the evidence and by the inferences and characterisations. 17 It is necessary that the appellants demonstrate factual error on the part of the trial judge. The observations of Santow JA, with which Meagher and Beazley JJA agreed, in Jones v Bradley [2003] NSW CA 81 at [113]-[116] are pertinent to the appellants' challenges to the findings - "113 … In Williams v The Minister for Aboriginal Land Rights Act 1983 and the State of NSW (supra), Heydon JA delivering judgment for the court gave a detailed exposition of the law in this area. Many of his comments have particular application here, as the Appellant is seeking the Court to undertake a detailed review of all of the evidence in the case. Heydon JA held at [60] that the Appellant " bore the burden in the appeal not merely of showing that on the facts her contentions might be available or even correct, but of showing that the Trial Judge's conclusions ought to be reversed ". Heydon JA then favourably referred to the Full Federal Court decision of Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359 at 369 where it was held: ' ... the court is not obliged to proceed to make new findings of fact on all relevant issues and discharge the judgment appealed from if those findings differ from those of the Trial Judge and do not support the judgment. The court must be satisfied that the judgment of the Trial Judge is erroneous and it may be so satisfied if it reaches the conclusion that the Trial Judge failed to draw inferences that should have been drawn from the facts established by the evidence. The court is unlikely to be satisfied if all that is shown is that the Trial Judge made a choice between competing inferences, being a choice the court may not have been inclined to make but not a choice the trial judge should not have made.' 114 In dismissing the appeal in Williams v The Minister for Aboriginal Land Rights Act 1983 and the State of NSW , Heydon JA highlighted that the Appellant's approach was inadequate to warrant appellate court interference with the judgment at first instance. The impugned approach was characterised by His Honour as [61]: 'The Plaintiff's approach sometimes invited the court to survey for itself, afresh, all the evidence on particular points and arrive for itself at particular conclusions about them, without essaying the necessary task of positively demonstrating that the Trial Judge was wrong. The Plaintiff's approach also paid insufficient regard to the difference between, on the one hand, pointing to difficulties in the Defendants' path of establishing matters which they wished to contend for and, on the other, pointing to sufficient evidence to permit an inference to the contrary of the Defendants' contention.' 115 Heydon JA then favourably quoted from Biogen Inc v Medeva plc [1997] RPC1 at 45 per Lord Hoffman: 'The need for appellate caution in reversing the judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la [vérité] est dans une nuance ), of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation. It would in my view be wrong to treat Benmax as authorising or requiring an appellate court to undertake a de novo evaluation of the facts in all cases in which no question of the credibility of witnesses is involved.' 116 Thus it is clear that for the Appellant to succeed it is necessary that the Appellant demonstrate more than that there were alternate findings (which this Court may or may not prefer) available. The appellant must demonstrate, positively, that the Trial Judge in making the findings that he did was wrong." 18 Where the facts are undisputed, or are established by the findings of the trial judge, this Court will give respect and weight to the conclusions of the trial judge, and the demonstration of error on the part of the trial judge - " … may not be straightforward where findings or conclusions involve elements of fact, degree, opinion or judgment or when the findings on conclusions in question can be seen as made with the advantage of hearing the evidence in its entirety, presented as it unfolded at the hearing and adjournments for reflection and mature contemporaneous consideration and assessment, in particular in a long and complex hearing … ". ( Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [24]). 19 As well, the appellants contended that the trial judge fell into legal error in a number of respects – in some of the tests for contravention of the Act, in relation to causation of loss, in admission of evidence, and in other ways. They particularly contended that the trial judge had taken into account, in finding the contraventions and in the orders for payment of pecuniary penalties and disqualification, matters outside ASIC's pleaded case against them, and that in law many of the findings of fact made by the trial judge were not open to him on the pleaded case. 20 Thus the scope of the appeal was considerable. There were canvassed in this Court, for one reason or another, most of the trial judge's findings, including those involving assessment, inference and characterisation, and most of his reasoning to his conclusions. It was an extensive exercise. These reasons must go to the facts, inferences and characterisations at some length, and explore also at some length the trial judge's arrival at his conclusions. 21 The Adler appellants' submissions were to a considerable extent adopted by Mr Williams, as was proper to avoid repetition. Some submissions were directed to the separate positions of Mr Adler and Adler Corporation and of Mr Williams. In these reasons I generally refer to Mr Adler, Adler Corporation and Mr Williams by name. Where there is reference to the appellants, it is either to all of Mr Adler, Adler Corporation and Mr Williams or, if the context so requires, only the Adler appellants, and where there is reference to the appellant it is to Mr Williams. The transactions and some of their context 22 HIH was a listed public company conducting the business of an insurer. Mr Williams was one of the founders of the insurance business, and was a director of HIH from 2 December 1988 to 15 December 2000. He was Chief Executive Officer at all relevant times until about 12 October 2000. 23 In January 1999 HIH completed a takeover of FAI Insurances Ltd ("FAI"), a company also conducting the business of an insurer in which Mr Adler had a substantial interest. Following the takeover, Mr Adler became a director of HIH on 16 April 1999. He remained a director until 26 February 2001. 24 The other directors of HIH during 2000 were Mr Charles Abbott, Mr Terrence Cassidy (to 12 October 2000), Mr Geoffrey Cohen, Mr Dominic Fodera (to 12 October 2000), Mr Justin Gardener, Mr Michael Payne (to 12 September 2000), Mr Robert Stitt, Mr George Sturesteps (to 12 September 2000) and Mr Hermann Wein. Mr Cohen was Chairman of the Board of Directors. Mr Cassidy held the office of Managing Director, Australia, and Mr Fodera that of Financial Director. 25 HIHC was a public company conducting the business of an insurer. At all material times it was a wholly owned subsidiary of HIH. Mr Williams was a director of HIHC from very early times until 15 March 2001. The other directors of HIHC during 2000 were Mr Cassidy, Mr Fodera and Mr Sturesteps (until 12 September 2000). Mr Adler was not a director of HIHC, but it was found in the proceedings that he was an officer of HIHC within the extended definition in s 9 of the Act. There was no appeal from that finding. 26 At all material times Mr Adler was a director of Adler Corporation and the beneficial owner of one of its two issued shares. His wife Mrs Lynda Adler was the other director and beneficial shareholder. It was accepted in the proceedings that Mr Adler controlled Adler Corporation. (a) The payment of the $10,000,000 and the purchase of shares in HIH 27 At all material times Mr Williams held 10,517,714 shares in HIH. After the takeover of FAI Adler Corporation held 6,922,831 shares in HIH. In June and July 1999 Adler Corporation sold 1,422,831 of its shares in on-market transactions. On 14 June 2000 it sold its remaining 5,500,000 shares in HIH to Mr Adler in an off-market transaction at $0.95 per share. 28 From at least the beginning of 2000 the traded price of shares in HIH was in decline. From a price at that time in the vicinity of $1.50 it fell, with some intermediate minor fluctuations, to a price in the vicinity of $1.00 as at 9 June 2000. On that day the high was $1.03, the low was $0.99, and the closing price was $1.03. 29 On 9 June 2000, a Friday, Mr Adler sent to Mr Williams a fax on the letterhead of Adler Corporation. Omitting salutations, it read - "Drenmex (or one of its wholly owned subsidiaries) is an investment company with a history of share trading and would like to borrow unsecured, $10M for the purpose of venture capital and share trading. Drenmex would like absolute discretion to invest the funds as it sees fit but would report profits and/or losses on a quarterly basis. The management of Drenmex suggests it would like to take 10% of profits to initially prove itself to HIH Management with no management fee and only after HIH receives interest on its money at 10% per annum and these profits will be calculated on a yearly basis and cumulative. I would appreciate your timely response to this matter as it follows up on our previous discussions." 30 Mr Williams responded by a fax dated the same day. It was headed "Subject: Venture Capital and Share Trading", and read - "Many thanks for your fax of today. This is an issue that you and I have been discussing for some months now. As you know one of my concerns has been the approporiate [sic] level of interest and fees to be earned and incurred on such a transaction. What you propose appears to me to be fair and reasonable since no management fees will be charged to HIH. I will therefore arrange for these funds to be transmitted to you early next week. There is one aspect which should be clarified and that is the limit on any one particular venture or share trade." 31 There was no direct evidence of the previous discussions. 32 A much later report based on interviews with Mr Adler and Mr Williams, the Minter Ellison report dated 29 November 2000 to which reference will later be made, included - "5. In early June 2000, Mr Adler suggested to Mr Williams that the Australian Equities Unit Trust ("Trust") be set up with a fund of approximately $30 - $40 million and with HIH as the foundation stakeholder investing $10 million. It was envisaged that Mr Adler would attract other investors, such as Phil Green of Babcock & Brown. 6. It was intended by both Mr Williams and Mr Adler that the Trust would be totally independent from HIH, managed by Mr Adler or a related person or entity who would have complete discretion as to the type of investments to be made. At this stage, it was not envisaged by either Mr Adler or Mr Williams that PEE would trade in HIH shares." 33 The first of these paragraphs reappeared in modified form in a letter from HIH to ASIC dated 22 December 2000, as a suggestion by Mr Adler to Mr Williams - " … that the Australian Equities Unit Trust ('Trust') be set up to allow HIHC opportunities that were offered to Mr Adler or related entitles. The proposed Trust was to have a fund of approximately $30-$40 million, with HIHC as the foundation shareholder investing $10 million. It was envisaged that Mr Adler would attract other investors." 34 As will appear, the accuracy and reliability of the information given to Minter Ellison and taken up in the letter is questionable. The faxes said nothing of a larger fund, and were concerned with a "transaction" (Mr Williams' fax) of Drenmex borrowing $10,000,000 which it would then invest. It is plain from later events that there was no commitment to a trust named the Australian Equities Unit Trust at this time. 35 As earlier noted, on 14 June 2000, the following Wednesday, Adler Corporation sold its 5,500,000 shares in HIH to Mr Adler. When on 14 June 2000 the administrative steps involved in the sale were taken did not appear. 36 HIH's copy of Mr Williams' fax bears a note in the writing of Mr Williams dated 14 June 2000 - "Dominic [Fodera] Please arrange for the funds to be forwarded to DRENMEX PTY LTD. [initials] 14/6" 37 The evidence did not reveal any communication providing the clarification mentioned in Mr Williams' fax, or otherwise such that Mr Adler was told at this time that the instruction to transmit the money was about to be or had been given. 38 Late on 14 June 2000 Mr Adler sent to Mr Williams a fax on the letterhead of Adler Corporation, reading - "I look forward to seeing you tomorrow at 7:30 am. For various tax, disclosure and accounting reasons, it is not appropriate to use Drenmex. The name of the company that has been incorporated is Pacific Eagle Equity Pty Limited." 39 The fax was anticipatory: PEE had not been incorporated, and was incorporated on 15 June 2000. Mr Adler was its only director and Adler Corporation was the holder of its one issued share. 40 There was no evidence of what passed between Mr Adler and Mr Williams at the foreshadowed meeting at 7.30 am on 15 June 2000. 41 At 10 am on 15 June 2000 Mr Adler instructed a stockbroker at Foster Stockbroking to purchase 2,000,000 HIH shares at market in the name of PEE. 1,873,661 shares were purchased at $1.0062 per share. 42 At some time on the morning of 15 June 2000, although the evidence did not reveal at what time, Mr Fodera called to his office Mr William Howard, the General Manager Finance of HIH, and gave him the copy of Mr Williams' fax of 9 June 2000 with the note in the writing of Mr Williams. He said to Mr Howard, "Bill, here is a piece of paper", with words to the effect that Mr Williams had passed it on to him. He said, "I would like you to talk to Rodney to draw a cheque for $10,000,000. I don't want to give this to John because it will be too hard." Mr Howard said, "Yes, you are probably right, I shall talk to Rodney". 43 There was no evidence of any communication between Mr Williams and Mr Fodera other than by the handwritten note. "John" was Mr John Ballhausen, the General Manager, Investments of HIH. Mr Howard thought that Mr Fodera did not want Mr Ballhausen to deal with the matter because of a "personality clash" between Mr Adler and Mr Ballhausen, well known within HIH. The trial judge was more specific. He concluded that the difficulty involving Mr Ballhausen was that Mr Ballhausen was seen as an impediment to making the payment. He referred to evidence that Mr Adler had a poor opinion of Mr Ballhausen's abilities and in particular considered that he was too conservative in his investment policies, and the clash was essentially over investment approach. 44 Mr Howard telephoned Mr Adler. The conversation as recounted in Mr Howard's affidavit was - "I said: 'Rodney, I've been asked to talk to you about the drawing of this cheque.' He replied: 'Thanks Bill. I'd like you to make it payable to Pacific Eagle Equities Pty Ltd and could you have that done today. The ten million is for venture capital and short term trading opportunities. We've started to purchase some shares to take advantage of the over sold situation in HIH. I need the money today for settlement.' I said: 'I thought, you know, that we were doing the paper work as well.' He said: 'We're doing that in parallel at the same time. Minter Ellison is dealing with that issue. I have also had conversations with Ray that the trust may or may not purchase other venture capital investments that I was associated with such as dstore at cost to give them a chance to make money. The discussions with Ray have been ongoing for a period of time and Ray will look after the necessary internal procedures.' I said: 'I will check back with Dominic in regards to drawing the cheque today.' He replied: 'Do that, but I need the money today.'" 45 According to Mr Howard's oral evidence, "Mr Adler also said that HIH had been making losses on the insurance side, and with investment returns that were average, that we needed to do something". 46 Mr Howard did not explain why he thought HIH was "doing the paper work", and it may be that it was only an assumption. As will be seen, Mr Adler did instruct Minter Ellison, and Mr Howard later sought unsuccessfully to have an HIH involvement in that regard. 47 Mr Howard spoke to Mr Fodera - "I said: 'Rodney wants the cheque drawn today. Did you know we had purchased some shares in HIH today and that the funds are required to settle those trades?' He said: 'Talk to Dr Williams about it – I don't want to know about it.'" 48 Mr Howard then spoke to Mr Williams - "I said: 'I've spoken to Rodney and we've bought some HIH shares. And he wants the $10,000,000 to settle the trades.' He said: 'Go ahead, draw the cheque but make sure Rodney follows through with the documentation.'" 49 Mr Howard gave the fax of 9 June 2000 to Mr Doug Cubbin, Head of Accounts Payable and Management Accounting, saying "Please organise for this cheque to be drawn". The fax also bears a note in the writing of Mr Cubbin reading - "Catherine Please prepare a manual cheque for $10M to these people. Pacific Eagle Equities Pty. Ltd. Code as follows: 060-17141. Thanks Doug 15/6" 50 A cheque was drawn on an account of HIHC with the National Australia Bank, for $10,000,000 payable to PEE, and was delivered to Mr Adler. The evidence did not show the meaning of the code. The $10,000,000 was allocated in HIH's investments portfolio to "loans unsecured" rather than "unlisted investments". Why that happened was not explained, but it is understandable if the person directing the allocation referred to Mr Adler's fax of 9 June 2000. 51 Still on 15 June 2000, Mr Adler sent a fax to Mr Howard. It read - "This is just to acknowledge that we received the $10,000,000 cheque today. It will be duly banked and documentation is being prepared by Minter Ellison and a draft will be forwarded to you next week. The reason that we are seeking Minter Ellison to draw-up the legal documentation is that there are aspects like investor advisor's license, related party transactions, etc, that we are making sure are being properly provided for." 52 The cheque was banked on 15 June 2000 in an account of PEE. An Adler Corporation internal receipt voucher was generated, with the brief narration "units". This is the first indication, albeit only internal to Adler Corporation, of the unit trust later created. 53 Minter Ellison were instructed on 16 June 2000, as appears from a "client opening" form of that date signed by Ms Margaret Taylor. The client was Adler Corporation. There was no direct evidence of what the instructions were. 54 On 16 June 2000 Mr Howard rang Mr Leigh Brown at Minter Ellison, apparently the person with whom he was accustomed to deal in relation to legal advice for HIH. Mr Howard "had a discussion with him about it and he said that he would – couldn't do anything about it in terms of advising the company, but would make enquiries into [sic] the firm about who was drawing the documentation"; Mr Brown "advised me while he couldn't do anything about it, if mandated, he would do so and that the firm should look to someone to get an opinion on this". So far as the evidence showed, nothing more was done at this time to have HIH involved in Minter Ellison drawing up the legal documentation, though Mr Howard later sought to have a review by Mr Brown of what had been done. 55 In the period 16 to 30 June 2000 further shares in HIH were purchased by PEE on Mr Adler's instructions, through Foster Stockbroking and later Southern Cross Equities, at prices ranging from $1.00 to $1.03 per share. The purchases were on 16 June (951,339 shares), 19 June (425,000 shares), 20 June (425,000 shares), 21 June (75,000 shares), 22 June (79,545 shares), 23 June (50,000 shares) and 30 June (45,000 shares). With the initial purchase of 15 June, 3,9924,545 shares in all were purchased for a total sum, including stamp duty and brokerage, of $3,991,856.21. 56 The stockbroker from Foster Stockbroking did not give evidence. The purchases on and after 20 June 2000 were through Southern Cross Equities. Mr Brent Potts of that firm gave evidence that on 20 June 2000 Mr Adler said that he thought HIH was underpriced and that he was "looking to do a short term trade in them". He said that in giving PEE as the client Mr Adler described it as "a venture capital vehicle which has been set up principally with HIH", and "it's a trust arrangement and we've had legal advice that we can buy HIH shares". According to Mr Potts, when the market price for HIH shares rose above $1.03 he asked Mr Adler whether he wanted to raise his limit, to which Mr Adler replied - "No I want to be careful as the company that is buying the HIH shares is investing for a short term trade. At a $1.02/$1.03 it's cheap but I don't want to go any higher at the moment. When it gets higher I intend to sell" 57 For a time the decline in the traded price of HIH shares ceased. They were at their temporary nadir of $0.94 on 14 June 2000, with a closing price of $0.95. They were traded in the vicinity of $1.05 until the end of June 2000, then over about a week crept up to trading at around $1.20. The zenith was $1.21 on 11 July 2000, with a closing price of $1.19. Then the traded price began to decline again. 58 As the controller of PEE, Mr Adler was required by s 205G of the Corporations Law to give notice to the stock exchange of his "relevant interests", in effect of PEE's purchases of the shares, within 14 days. Mr Adler gave notifications, commencing with a notification on 19 June 2000. It was necessary that he state "the circumstances giving rise to the relevant interest". The notifications were in the form, "Purchase of [number] shares at [$] per share on [date] in an on-market transaction". A copy of each notification was sent by Mr Adler to Mr Frederick Lo, the Secretary of HIH and HIHC, on the day it was given to the stock exchange, and Mr Adler also sent to the Secretary of HIH letters in the form, "I hereby notify you that Pacific Eagle Equities Pty Limited (a company in which I have a relevant interest) bought [number] shares in HIH Insurance Limited on [date] at [$] per share". 59 Returning specifically to 19 June 2000, on that day Mr Adler sent a fax to Mr Williams reading - "Just a courtesy note to inform you that interests associated with myself have purchased more shares in HIH and probably over this next week, there will be numerous statements issued that I have bought many millions of shares. To date, I have purchased over 3 million shares and I intend to purchase AUD$4.5 to $5 million worth." 60 There were no other purchases answering the description in this fax, and as at 19 June 2000 PEE had purchased a little over 3,000,000 shares. The purchases to which Mr Adler referred must have been the purchases by PEE. Whatever the reason for Mr Adler writing in terms of "interests associated with myself", the fax put Mr Williams on notice that the market was being told that the purchases, in truth not by Mr Adler using Mr Adler's money, were of that character. 61 As a result of his s 205G notifications, if for no other reason, there were indeed reports that Mr Adler had bought many shares in HIH. There had been much interest in HIH's fortunes in the financial press in the period prior to 9 June 2000. The first notification to the stock exchange brought press reports to the effect that Mr Adler was increasing his shareholding in HIH. Further consideration of this and its significance in the proceedings, to the traded share price, and otherwise, is left for later in these reasons, but Mr Williams must have been aware of the press reports and the fax of 19 June 2000 specifically drew his attention to them. 62 Also on 19 June 2000 Mr Rob Baulderstone, the Secretary of Adler Corporation, wrote to Minter Ellison - "Further to our telephone conversation it would be appreciated if you could prepare a Unit Trust Deed for the Austral [sic] Equities Unit Trust. The trustee will be Pacific Eagle Equities Pty Ltd ACN 093 319 227. The Trust is being established to manage a portfolio of shares in listed companies. There will be two classes of Units with the following rights attaching: Class A – entitled to 10% of the net income of the Trust Class B – entitled to 10% of the net income of the Trust - no interest or rights in respect of the assets of the Trust." 63 There was no direct evidence of the telephone conversation. 64 On 28 June 2000 Ms Taylor wrote to Mr Adler at Adler Corporation providing a "general overview of the issues involved in setting up an investment fund". The letter opened "Dear Rodney" and referred to preceding discussion, but there was otherwise no evidence of the circumstances in which the advice came to be given. The letter canvassed a number of ways in which the fund could be structured "such as through a partnership, a company or a trust – onshore or offshore", and asked for some further information "before we recommend a particular structure to you". It is plain that the letter was a response to the instruction as formulated in Mr Baulderstone's letter. 65 On 5 July 2000 Ms Taylor wrote to Mr Adler, copied to Mr Baulderstone, advising "the following general issues which arise in setting up the Australian Equities Unit Trust". The letter noted that "[o]ther relevant issues were discussed in our earlier advice dated 28 June 2000". The general issues were the relevant interests provisions of the Corporations Law, conflicts of interest, insider trading and licensing to carry on a securities business. The advice was in broad terms, but presupposed that there was to be a unit trust and that Mr Adler would control the trustee. There was no evidence of the circumstances in which this further advice came to be given. 66 A deed poll constituting the Australian Equities Unit Trust ("the AEUT") was executed by PEE as the trustee, with Mr Adler as the signatory attesting its seal, on 7 July 2000. The document had been prepared by Minter Ellison. Units gave the unit holders an undivided beneficial interest in the trust property as a whole. There were A class units and B class units. The A class units carried entitlements to ten per cent of the distributable income and to the balance of income and capital after the entitlements of the B class units were satisfied. The B class units carried no entitlements to any interest in the trust property except for the right to receive ninety per cent of the distributable income and an amount on termination calculated according to a formula. Redemption could be requested only after three years, and required the trustee's agreement. The trust deed left investment policy and management of the trust wholly in the hands of the trustee, and the trustee could deal in any capacity with any related company or association. Voting at meetings gave one vote to each unit holder on a show of hands and one vote to each unit on a poll. The trustee could be compulsorily retired only by a vote of all unit holders. 67 It will be recalled that Mr Adler's initial fax of 9 June 2000 included that Drenmex would "take 10% of profits". PEE had replaced Drenmex. The trust deed said nothing of PEE taking 10 per cent of the profits, although stating that the trustee was entitled to "such fee as is agreed between the Trustee and the Holders from time to time" (cl 26). There was no evidence of agreement. However, in a memorandum dated 18 August 2000 from Mr Adler to Mr Howard and the two other persons whose entities held A class units in the AEUT, sent by way of a "Quarterly Report" on the performance of the AEUT, it was said "At this stage, over AUD$10 million dollars [sic] has been invested and, it is our intention to grow the fund. Everyone is aware of the fee arrangement in relation to PEE". There was nothing to suggest any arrangement other than the 10 per cent of profits arrangement, and it seems that it was carried through. 68 Unit certificates were issued dated 7 July 2000 for four A class units in the AEUT. Three A class units were issued to Adler Corporation on subscription of $75,000 and one A class unit was issued to Sofisco Nominees Ltd on subscription of $25,000. 69 On 7 July 2000 Mr Adler sent a fax to Mr Howard. It was headed "Re: Australian Equities Unit Trust", and read - "I refer to HIH's investment in the above named Trust, in mid-June, and now enclose your application form for your 'B' Class Unit. As the only holder of 'B' Class Unit, you are entitled to 90% of the net income of the Trust. It would be appreciated if you would complete the application form attached and return it to me as soon as possible. The Trust will keep you informed as to the range and type of investments made on a regular basis." 70 The application form was addressed to PEE and, after spaces for details of the applicant company, read - "Note: Defined terms used in this letter have the same meaning as when used in the deed constituting the Australian Equities Unit Trust ("Trust") executed by Pacific Eagle Equities Pty Limited as Trustee on 7 July 2000 ("Trust Deed"). We hereby irrevocably and unconditionally apply for 1 "B" Class Unit in the Trust at an Issue Price of $10,000,000 per Unit. We undertake to pay the sum of $10,000,000 (being the aggregate Issue Price for the Units subscribed by us) in accordance with clause 7 of the Trust Deed in cleared funds to the Trustee before any Units are issued to us. We warrant and confirm that this application for Units and any subsequent issue of Units to us falls within one of the excluded categories set out in section 708 of the Corporations Law and does not contravene the securities laws of the jurisdiction to which we reside or have an address. We undertake that we have not applied for the Unit(s) specified in this Application for purposes of selling or transferring or granting, issuing or transferring interests in or options or warrants over such Units and that during the 12 month period after the allotment of the Unit or Units applied for in this Application, we will not make any offer for sale of any or all of the Units with the purpose of the person to whom the Unit(s) are to be sold selling or transferring or granting, issuing or transferring interests in, or options or warrants over such Units. We agree to hold the Units issued to us subject to the Trust Deed, as amended from time to time. We authorise you to register us as the Holder of the Unit(s) allotted to us in the Register under the name and address indicated above." 71 On 12 July 2000 the application form, completed with particulars of HIHC as the applicant company, was signed by Mr Cassidy and Mr Lo. There was no evidence of the circumstances in which they came to sign it. A unit certificate dated 12 July 2000 for one B class unit was issued to HIHC on subscription of $10,000,000. The $10,000,000 paid on 15 June 2000 was plainly treated as the subscription monies. 72 There was no evidence that the terms of the AEUT were made known to HIH or HIHC at this time. A copy of the trust deed was provided to Mr Williams on 21 July 2000, see below. HIHC became a minority unit-holder, although by far the major subscriber to the trust. The terms of the trust deed effectively locked in a minority unit-holder for three years and left it entirely in the hands of the trustee, in practice meaning Mr Adler, and the majority unit-holders. 73 A unit certificate dated 14 July 2000 for one A class unit was issued to Castlecrag Investments No 2 Pty Ltd ("Castlecrag") on subscription of $25,000. Castlecrag was a company of Mr Frank Wolf, who will be mentioned later in connection with the loans to companies associated with Mr Adler. No further units were issued. 74 As appears from the letter next mentioned, at some time in July Mr Howard asked that documents concerning the establishment of the AEUT be provided to him so that he could have them reviewed by Mr Brown of Minter Ellison. 75 On 21 July 2000 Mr Adler wrote to Mr Williams, under a heading referring to the AEUT - 'I enclose copies of Letters of Advice dated 28 June 2000 and 5 July 2000 from Ms Margaret Taylor of Minter Ellison regarding the establishment of the fund and the tracing of relevant interests under the Corporations Law, together with a copy of the Trust Deed. As discussed, the Trust was structured to ensure that HIH did not have a relevant interest in the assets of the Trust. As provided in the Trust Deed, the B Class unit held by HIH Casualty and General Insurance Limited carries no entitlements to any interest in the Trust Property except for the right to receive:- 1. 90% of all Distributable Income; and 2. an amount on Termination equal (or as near as possible) to the Redemption Price. The letter of advice from Margaret Taylor, who is Chairman of Minter Ellison, states that a holder of more than 20% of the votes in the Trust will be deemed to have the same relevant interests as the Trust. There are five 'A' Class Units and one 'B' Class Unit on issue and on the basis of Margaret's advice HIH will not be deemed to have the same relevant interest as the Trust as it holds less than 20% of the votes in the Trust. Bill Howard contacted my office and requested that all documents and advice regarding the establishment of the Trust be forwarded to him as he wished to have them reviewed by Leigh Brown, also at Minter Ellison. I appreciate the desire to have a legal sign-off, but professional jealousies can exist within firms and it would be a shame if the current advice is changed in any way. I would suggest that the advice we have already received from Minter Ellison covers the issues that you and I have discussed." 76 There was no evidence of discussion as referred to in the second and last paragraphs of the letter, or evidence of a direct response to Mr Howard's request from Mr Adler or his office, from Mr Williams, or from anyone else. Mr Howard's request was not fulfilled, and there the matter rested until about October 2000, see later in these reasons. This was a rather extraordinary letter, in that it contemplated that a review might bring adverse advice and sought to discourage review. 77 The traded price of HIH shares fell after mid-July 2000. It hovered at a little over $1.00 during August, then fell to a closing price of $0.99 on 8 September. There was a marked drop on 13 September, on that day the high being $0.98 and the low $0.80 and the closing price $0.82; then again on 14 September when a large volume was traded with the high $0.71, the low $0.53 and the closing price $0.58. Further decline followed, to below $0.50 by the end of September, to a little over $0.30 by the end of October, and with an intermediate rally to a closing price of $0.24 at the end of December. 78 Commencing on 13 September 2000, Mr Adler began to sell his shares in HIH. The sales prior to 26 September 2000 were - Date Number Price 13 September 624,945 $0.85 14 September 775,055 $0.65 15 September 1,100,000 $0.59 19 September 1,170,875 $0.48 20 September 329,125 $0.49 4,000,000 79 On 26 September 2000 Mr Adler sent to Mr Williams, copied to Mr Howard, a fax dated 25 September 2000 on the letterhead of Adler Corporation. The fax was headed "Re: Reorganisation of Unit Trust Investment", and was accompanied by a balance sheet for the AEUT as at 25 September 2000. It included - "Further to our conversation, we have decided to reorganise the Trust Investment and for that to be carried out to the maximum advantage of HIH and Adler Corporation, I propose the following. The rationale for the reorganisation is that the environment has changed. 1. I will take Bill Howard through all of the investments – why they were made and how to manage them; 2. As HIH is the largest holder, subject to your permission and that of the other unitholders, I will purchase the HIH shares currently held in the Trust at the prevailing market price for any large line of stock … " 80 There was no evidence of the conversation between Mr Adler and Mr Williams. 81 The proposed purchase of the HIH shares by Mr Adler did not occur. Also on 26 September 2000, Mr Adler sent a hand-delivered letter to Mr Williams saying that "after discussion with various individuals, including yourself, I have decided that it would be cleaner and simpler to sell the HIH shares in the market rather than purchase them myself". There was no evidence of the discussions. 82 On 26 September 2000 Mr Adler gave instructions whereby PEE sold its 3,924,545 shares in HIH at $0.48, realising a gross sum of $1,883,781.60. PEE obtained proceeds of sale of $1,870,595.10 net of stamp duty and brokerage. PEE's net loss on the HIH shares was $2,102,802.74. 83 Thereafter Mr Adler sold the balance of his shareholding in HIH - Date Number Price 3 October 169,301 $0.48 3 October 180,699 $0.48 4 October 400,000 $0.48 4 October 78,441 $0.49 5 October 121,559 $0.49 18 December 550,000 $0.26 1,500,000 84 Mr Williams did not sell any of his shares in HIH. (b) The purchases of shares from Adler Corporation 85 As at June 2000 Adler Corporation held 99,404 shares in dstore, having acquired them in February 2000 at a cost of $500,002.12; 1,000,000 shares in Planet Soccer, having acquired them in March 2000 at a cost of $820,748.52; and 3,627,143 shares in Nomad, having acquired them in August 1999 at a cost of $2,539,000.10. 86 On 10 July 2000 Mr Adler sent a memorandum on a PEE letterhead to Mr Williams and Mr Howard. It read - "As the fund being managed by Pacific Eagle Equities Pty Limited (PEE) is to be a dynamic/non risk adverse fund, it should be noted that apart from subsequent investments made on the formation of the trust, I will place two of my own investments, being dStore [sic] and Planet Soccer into the fund at my original cost. Both would be valued at higher than that level, I am reliably informed. I will furnish further details through the normal reporting mechanisms when the fund reports." 87 There was no evidence of any response to this memorandum, or of further communications concerning placing dstore and Planet Soccer into the fund. 88 The memorandum of 18 August 2000 to Mr Howard and the two other persons whose entities held A class units in the AEUT was headed "Re: Quarterly Report", and amongst other things described the AEUT's "investments". The description included - " INVESTMENTS At this time PEE as [sic] the following investments: 1. HIH 3,924,545 publicly listed shares at an average price of AUD$1.02 2. dStore AUD$500,000 3. Planet Soccer $US$500,000 … DETAILS 1. HIH Self-explanatory, publicly listed company. 2. dStore* This is an online department store that intends to be listed next year. Has very good backing from LookSmart and various other known venture capitalists. 3. Planet Soccer* This is an e-commerce site that provides soccer content to the sport's one-billion –plus international fans. The site is positioned to capitalise on the resulting e-commerce and other revenue opportunities that arise out of this sport. Hope to list this year. … * Please note these two interests were purchased from Adler Corporation as per my original letter at the inception of the fund." 89 The "original letter at the inception of the fund" was presumably the memorandum of 10 July 2000. 90 In fact neither dstore nor Planet Soccer had been placed into the fund as at 18 August 2000. On 25 August 2000 Mr Adler caused PEE, as trustee of the AEUT, to acquire Adler Corporation's shares in dstore for $500,212. On the same date he caused PEE, as trustee of the AEUT, to acquire Adler Corporation's shares in Planet Soccer for $820,748.52. 91 In Mr Adler's fax of 25 September 2000 to Mr Williams concerning reorganisation of the trust investment he stated, "4. The Trust will purchase from Adler Corporation its interest in Nomad Technologies". The company so referred to was Nomad. So far as the evidence showed this was the first mention of Nomad, and there was no evidence of any response to the bald statement that the purchase would take place. 92 On 26 September 2000 Mr Adler caused PEE, as trustee of the AEUT, to acquire Adler Corporation's shares in Nomad for $2,539,000. 93 The shares in each of dstore, Planet Soccer and Nomad eventually proved all but worthless to PEE. The shares in dstore were disposed of by PEE in November 2000 for about $50,000, in exchange for shares in Harris Scarfe Holdings Ltd. Planet Soccer was still in existence in mid-2001, but valuation evidence gave its shares a nil value. Nomad went into receivership on 18 January 2001 and into liquidation on 22 January 2001. PEE lost on the purchases of the shares from Adler Corporation a total of about $3,810,000. (c) The loans 94 On 26 July 2000 Mr Adler caused PEE, as trustee of the AEUT, to lend $160,000 to morehuman. Mr Adler was a director and the secretary of morehuman. Adler Corporation held 19.6 per cent of the shares in the company. The loan was recorded in a letter of 26 July 2000 to Mr Gassy Bayni, the other director of morehuman, as "for three (3) weeks" and "to meet short-term working capital commitments and is very clearly a loan that must be repaid when any new capital or other loan funds come into morehuman". It was guaranteed by Mr Bayni by his signing a copy of the letter. There was no reference to interest. There was no other documentation for the loan. 95 Prior to the loan by PEE, Adler Corporation had lent $250,000 to morehuman. Something should be said of the recovery of the Adler Corporation loan as well as the PEE loan. 96 Mr Baulderstone wrote to Mr Bayni on 24 August 2000, on behalf of PEE, noting that the PEE loan had not been repaid and requiring payment from Mr Bayni as guarantor. 97 On 7 September 2000 Mr Adler wrote to Mr Bayni, agreeing to give more time for repayment of the Adler Corporation loan but saying - " … however, in regard to the $160,000 loan from Pacific Eagle Equities, this is a fund that I manage and the $160,000 plus interest must be returned next week. If it is not returned, it will be taken out of my hands and legally acted upon under the Trust Deed." 98 The reference to action under the trust deed is difficult to understand. In any event, it was not taken. 99 In a letter to Mr Bayni dated 18 September 2000 Mr Adler said - "I wrote to you on Friday, 15 September indicating my great concern in regard to your $160,000 exposure to Pacific Eagle Equity. You very promptly rang back and we met over the weekend at which time we discussed that exposure plus Adler Corporation's much larger exposure. You indicated to me that you would assign your interest and the income that you expect to receive from the 'Republic Development' to Adler Corporation. Although the legal documentation underlying that agreement will take some time, I appreciate your response to the most serious matter for it concerns me greatly and I will have Rob Baulderstone draw up the appropriate legal agreement and then have it signed forthwith. I am aware that you are not travelling well financially at the moment and would appreciate you signing a copy of this letter indicating your acceptance of this agreement. Could you also please ring Rob Baulderstone as soon as possible and organise the details so we can enter into the agreement more formally." 100 Mr Bayni signed the copy of the letter. The agreement was for some kind of security for or satisfaction of the Adler Corporation loan. The PEE loan was left unsecured and unsatisfied. 101 After HIH took over the AEUT Mr Ballhausen sought information from Mr Adler. As to the PEE loan to morehuman, in a fax dated 2 February 2001 Mr Adler said - "4. In regard to morehuman, we have sent a legal default letter to Mr Gassy Bayni, telephone number 0414 578 880. He acknowledges the debt but is in financial difficulty, nevertheless, my own recommendation would be to ring Mr Bayni and place additional financial pressure upon him" 102 What HIH did was not disclosed. But a deed of charge was executed by morehuman on 18 May 2001, in which it charged its present and future assets, rights and undertaking to Adler Corporation to secure its indebtedness (stated as a maximum of $750,000) to that company. 103 The loan to morehuman was repaid, with interest of $21,610.96, on 14 September 2001, by a cheque enclosed with a letter from Mr Adler on the letterhead of Adler Corporation reading - "Pacific Eagle Equities advanced Morehuman [sic] funds for $160,000. Please find attached a cheque for $181,610.96 being the full return of said funds plus full interest. That is better than a kick in the head!!" The cheque was a cheque of Trafalgar Properties Ltd. The evidence did not show who stood behind that company. 104 On 20 September 2000 Mr Adler caused PEE, as trustee of the AEUT, to lend $500,000 to Intagro Projects Pty Ltd ("Intagro"), the trustee of Intagrowth. The loan was recorded in a letter of that date as for two months at 10 per cent and to be secured by a floating charge. In fact it was not secured. Pacific Mentor Pty Ltd, of which Mr Adler was a director and in which he owned 70 per cent of the shares, held 50 per cent of the units in Intagrowth. 105 Monthly interest was paid on the loan to Intagrowth, and the loan was repaid as to half on 4 October 2000 and as to the balance on 13 December 2000 (in fact there was an overpayment of $1,506). 106 On 3 October 2000 Mr Adler caused PEE, as trustee of the AEUT, to lend $200,000 to PCP. The loan was recorded in a letter of that date as for two years at 20 per cent compounded monthly, and was neither guaranteed nor secured over property. Mr Adler was a director of PCP and Adler Corporation held 50 per cent of its shares. The other director was Mr Wolf earlier mentioned, whose company Castlecrag held one of the A class units in the AEUT. 107 Between 28 June 2000 and 30 November 2000 Mr Adler caused PEE, as trustee of the AEUT, to lend a total of $1,275,476 to PCP Ensor by making payments to or for the benefit of PCP Ensor. The payments were made pursuant to a Shareholders Agreement providing for a joint venture to develop some land, under which PEE was to provide such loans as were required to enable PCP Ensor to comply with its payment obligations. PEE held 60 per cent of the shares in PCP Ensor and Mr Adler was a director of PCP Ensor. The payments so made were to be at an interest rate of 30 per cent and were to be guaranteed by a number of companies apparently associated with the other joint venturer. 108 After the Shareholders Agreement was entered into it was agreed between Mr Adler, apparently for PEE, and Mr Wolf, apparently for PCP Ensor, that the development project would be managed by PCP for a monthly fee of $7,500. Of the $1,275,476, $50,631 was payments representing monthly management fees paid to PCP. 109 The loan to PCP and the loans to PCP Ensor were the subject of a payment of $1,300,000 on 5 March 2001. The payment was made to PEE by Mr Wolf on behalf of PCP, and was said to be "in full and final settlement of your interests in PCP Ensor No 2 Pty Limited and in the amount owing by Pacific Capital Partners Pty Limited." Underlying this was an agreement that Adler Corporation and Castlecrag would buy PEE's shares in PCP Ensor and discharge the indebtedness of PCP Ensor by the one payment. Principal and interest were not otherwise met. 110 Mr Adler made a file note dated 7 March 2001 - "In reviewing the portfolio of Pacific Eagle Equities, HIH determined that they wished to dispose of their property interest in North Steyne, Manly. After discussions between Bill Howard and Dr Frank Wolf, it was decided that Adler Corporation, on behalf of the joint venture between Adler Corporation and Dr Frank Wolf (Pacific Capital Partners), would bid $1.3 million and buy Pacific Eagle Equities interest in that project for $1.3. The reason that this transaction was mandated was: 1. Documentation between Pacific Eagle Equities and Pacific Capital Partners was not as precise as originally thought; 2. HIH/Pacific Eagle Equities is in desperate need of cash; 3. We were the logical buyer. It was pointed out that there was substantial profit with that investment but management of Pacific Eagle Equities decided that the cash was more important than the profit." 111 It will be noted that Mr Adler was responsible for PEE's entry into the transaction upon imprecise documentation, and profited from the contribution that the inadequacy made to the under-recovery. 112 I have earlier mentioned the quarterly report sent by Mr Adler to Mr Howard and others on 18 August 2000, listing the AEUT's then "investments". None of the loans then on foot was listed or otherwise mentioned, that is, the loan to morehuman or some of the loans to that time made to PCP Ensor, nor were PEE's shares in that company listed. The balance sheet accompanying the fax of 25 September 2000, however, did include the loans to morehuman, Intagrowth and PCP Ensor, in the case of PCP Ensor at $1,070,507.86. 113 The fax of 25 September 2000 concerning reorganisation of the AEUT contemplated that HIH would take over the management of its investments. Mr Adler resigned as PEE's director on 4 October 2000, although it is not clear that the HIH personnel knew it. In early October Mr Williams asked Mr Howard "to get all the records relating to the PEE trust so we can have a look". Mr Howard rang Mr Adler and asked for the records, and a few weeks later a box of files was delivered to him. Mr Howard looked at the contents of the box and then passed it on to Mr Williams. He regained the box in late 2000, and in early 2001 Mr Ballhausen "reviewed" the files. 114 The one share in PEE was transferred by Mr Adler to HIHC by a share transfer dated 10 February 2001. Mr Howard was appointed its director on 10 March 2001. A letter dated 7 February 2001 from Mr Adler to Mr Ballhausen indicates that the share transfer had been signed by Mr Adler and sent to HIH in early October 2001. According to the note Mr Ballhausen made as part of his review, following his resignation Mr Adler had "continued to act and execute documents as though he were a director well after October". In the letter Mr Adler said that "any actions that I took in the period since October such as filing the annual return were to protect the interests of the Company". 115 According to the report by HIH to ASIC of 22 December 2000 earlier mentioned, in November 2000 "Mr Adler consulted Mr Williams and advised that he had decided to collapse the Trust", for the reasons then stated. This is not easy to reconcile with the preceding paragraphs; again, the accuracy of the report is questionable. 116 PEE received from unitholders a total of $10,125,000. The purchase of shares in HIH, the purchases of shares from Adler Corporation and the loans took up $9,987,292.71. 117 The quarterly report memorandum of 18 August 2000 referred to an investment of $500,000 in "Jewish Minds", described as "a very interesting product that will specialise in on-line education", and to trading in North Broken Hill shares at a loss of $2,255. The fax of 25 September 2000 concerning reorganisation of the trust referred to an investment "MindAtlas", said to have a book value of $1,000,000 although shown in the balance sheet accompanying the fax at $400,000, and to "one property investment". MindAtlas and Jewish Minds were the same investment, and the property investment may have been the shares in PCP Ensor. The balance sheet accompanying the fax also had as assets shares in Renaissance Capital Ltd with a book value of $250,000 and a Concept Systems Int Ltd debenture with the same book value. An HIH letter written after HIH had taken control of the AEUT referred to investments of $1,000,000 in Psiron made on 19 September 2000 and $250,000 in Worlduct Services made in August 2000 (neither of which was in the balance sheet accompanying the fax of 25 September 2000). These investments are referred to in ASIC's calculation of the loss to HIH, together with an investment by the purchase of shares in North Ltd on 28 June 2000 for $970,000; this seems to have been the North Broken Hill Trading. 118 These other uses of PEE's money were not part of the contraventions alleged by ASIC. No point was taken that the purchases of shares from Adler Corporation and the loans were apparently from a mixed fund. On the surface, the investments in total required more than the subscribed $10,125,000. It is, however, not necessary to go into an accounting exercise further explaining and reconciling income to the fund and the uses of money, because no point was taken that on an accounting some of PEE's money was unexplained. 119 This is a sorry tale of incestuous and selfish dealings and loss to HIHC. However, that does not mean that there were the contraventions of the Act. The questions are whether, with the regard to what occurred which was open upon ASIC's case as pleaded against the appellants, the contraventions alleged by ASIC were made out, and if so whether the compensatory and other orders were properly made. The structure of the pleading 120 As I have indicated, prominent in the appellants' submissions was that the trial judge had taken into account, in finding the contraventions and in making the orders for payment of pecuniary penalties and disqualification, matters outside ASIC's pleaded case against them. I will return to the specific allegations of contravention, including their particularisation, when considering the contraventions. An overview of the pleading is appropriate. 121 In accordance with the Corporations Law Rules, ASIC brought the proceedings by filing an originating process and supporting affidavits. Exercising its power to do so in order better to define the issues, the Court ordered that ASIC file a statement of claim, to which the defendants filed defences. 122 A party's pleading is required "to contain, and contain only, a statement in summary form of the material facts on which he relies, but not the evidence by which the facts are to be proved" (Supreme Court Rules, Pt 15 r 7(1)). It must be "as brief as the nature of the case allows" (Pt 15 r 8), but a plaintiff must "plead specifically any matter which, if not pleaded, may take the defendant by surprise" (Pt 15 r 13(1)). The party pleading "shall give the necessary particulars of any claim, defence or other matter pleaded by him" (Pt 16 r 1(1)). A party pleading "any condition of mind", which includes "fraudulent intention" but does not include "knowledge", must give particulars of the facts on which he relies (Pt 16 r 3). 123 ASIC's statement of claim in its form at the trial was divided into parts, being "A: The parties"; "B: HIH Investments, Authorities and Management"; "C: Payment of $10 million to PEE and HIH Share Purchases"; "D: Other AEUT Investments"; and "E: Contraventions of the Corporations Law". Then followed the statement of the relief sought. 124 Part A contained paras 1-11. They dealt with ASIC's existence and powers, the existence and nature of HIH, HIHC, Adler Corporation and PEE and their relationships, and the directorships of the various companies. 125 Part B contained paras 12-14. They dealt with HIH's investment portfolio, the membership and functions of its Investment Committee and its Investment Guidelines. 126 Part C contained paras 15-46. They dealt in some detail with the payment of the $10,000,000, and with the purchase of shares in HIH and giving of the notifications (paras 21-24). The allegations broadly encompassed the course of events as to those transactions earlier described, and went further in alleging consequences, intentions or purposes. Four respects in which the allegations went further should be set out. 127 First, after referring to Mr Adler's notifications of relevant interests to the stock exchange as to the June 2000 share purchases, it was alleged - "25. None of Adler's notifications referred to in paragraph 24 disclosed to the Australian Stock Exchange that in acquiring the HIH shares the subject of the notification PEE had been financially assisted by HIH or HIHC. 26. In late June 2000, Adler made public statements to a journalist, to the effect that he was using his own money to purchase shares in HIH and that this demonstrated that he believed in HIH and the insurance industry. 27. Such statements were likely to induce the purchase of shares in HIH by other persons. 28. No public statements were made by HIHC or HIH to the effect that the HIH share purchases had in fact been funded by HIHC. 29. At the time of the HIH share purchases none of Adler, Williams and Fodera intended that the funding of the HIH share purchases by HIHC be the subject of any public statement. 30. The natural consequence of the matters referred to in 21, 22, 24, 25, 28 and 29 above was the creation of an impression that the HIH share purchases were funded by Adler or his interests and not by HIHC or HIH." 128 Secondly, as to the constitution of the AEUT it was alleged that it was constituted by the entry into the deed poll of 7 July 2000 (para 33), and - "35. The AEUT was constituted specifically as a means of accounting for the payment of $10 million by HIHC to PEE which had taken place on 15 June 2000. 36. The HIH shares purchased by PEE in June 2000 were, subsequent to 7 July 2000, treated as an asset of the AEUT. 37. From the time of the constitution of AEUT on 7 July 2000, it was always intended by Adler that: 37.1 the only B Class unitholder would be HIH; 37.2 the payment of $10 million by HIHC to PEE which had taken place on 15 June 2000 would be taken to be a subscription by HIHC for one B Class unit; 37.3 there would be at least five A Class unitholders; 37.4 the A Class units would be held either by himself or a related or associated entity or by persons or entities subject to his control and direction." 129 Thirdly, it was alleged - "40. The terms of the AEUT and HIH's subscription for one B Class unit for $10 million: 40.1 would not have been reasonable in the circumstances if HIH or HIHC and PEE were dealing at arms length; or 40.2 alternatively, were not less favourable to PEE than the terms referred to in (40.1) [sic]. Particulars (a) the effect of the provisions of the deed concerning the distribution of income as between HIH, as the only B Class shareholder, and the A Class shareholders, including Adler Corporation was that HIHC provided 98.8% of the fund but received only 90% of the income whereas the A Class unitholders provided only 1.2% of the funds and received 10% of the income; (b) HIHC did not receive any priority on termination, notwithstanding that it provided the majority of the fund; (c) HIHC was locked into the investment in the AEUT for three years as redemption was not possible until 7 July 2003 and removal of the trustee required the direction of all unitholders; (d) HIHC had no capacity to control the conduct of the trustee in any way; (e) HIHC could not self convene a meeting of unitholders notwithstanding that it provided 98.8% of the fund; (f) the voting power was entirely disproportionate to the level of contribution to the fund as between HIHC and the A Class shareholders; (g) there was no limit on the type of the investments which the trustee could make; (h) clause 24(c) exposed the trust fund to the risk of transactions by the trustee involving clear conflicts of interest without any protections requiring independent evaluation of the terms of the transactions; (i) the effect of the provisions concerning the issue price of new units and the redemption price of all units was that if the fund was successful, a new unit could be issued to a new unitholder with the effect that the value of HIHC's units would be immediately diminished the instant after the issue of the new unit. Conversely, if the fund was unsuccessful, the value of a new unit was immediately diminished to the benefit of HIHC the instant after it was issued. Hence, the more that the fund lost money the less likely it was to attract new unitholders and the more successful the trust, the more attractive it was to new unitholders who could achieve a windfall at the expense of HIHC." 130 Fourthly, it was alleged - "43. Apart from Williams, Adler and Fodera, no other director of HIH or HIHC was made aware of or consulted in relation to the fact that Adler, on behalf of PEE, was purchasing shares in HIH utilising funds which had been advanced by HIHC until about September or October 2000. 44. On no occasion prior to about September or October 2000 did Williams: 44.1 notify the Investment Committee or any of its members of the advance of $10 million to PEE, though in the circumstances pleaded in paragraphs 15, 17, 20 and 38 above Cassidy, Fodera and Adler were aware of the advance; 44.2 seek to have the Investment Committee ratify the advance of $10 million to PEE; 44.3 notify the Investment Committee or any of its members (other than Adler) that PEE was purchasing shares in HIH utilising the funds which had been advanced by HIH. 45. On no occasion prior to about September or October 2000 did Adler: 45.1 notify the Investment Committee of the advance of $10 million to PEE, though in the circumstances pleaded in paragraph 15, 17, 20 and 38 above Cassidy and Fodera were aware of the advance; 45.2 seek to have the Investment Committee ratify the advance of $10 million to PEE. 45.3 notify the Investment Committee that PEE was purchasing shares in HIH utilising the funds which had been advanced by HIH." 131 Part D contained paras 47-60. They dealt with the purchase from Adler Corporation of its shares in the three companies and the loans to companies and a trust with which Mr Adler was associated. The allegations broadly encompassed the course of events as to those transactions, including corporate associations, earlier described. They went further, in alleging knowledge on the part of Mr Adler. 132 First, as to the purchase of the shares in dstore it was alleged - "49. At the time of the acquisition by PEE of the shares in dstore, Adler was aware that: 49.1 dstore was in need of significant capital in order to continue in business; 49.2 dstore was encountering difficulties in raising new capital; 49.3 dstore was having cashflow difficulties; 49.4 there was a significant risk that dstore would fail; 49.5 in transferring the dstore shares to PEE, Adler Corporation was in breach of pre-emptive rights clauses in a shareholders agreement to which it was a party." 133 Secondly, as to the purchase of the shares in Planet Soccer it was alleged - "52. At the time of the acquisition by PEE of the shares in Planet Soccer, Adler was aware that: 52.1 Planet Soccer was in need of significant capital in order to continue in business; 52.2 Soccer [sic] was encountering difficulties in raising new capital; 52.3 there was a significant risk that Planet Soccer would fail." 134 Thirdly, as to the purchase of the shares in Nomad it was alleged - "54. At the time of the acquisition by PEE of the shares in Nomad Technologies [sic] Limited, Adler was aware that: 54.1 Nomad Technologies [sic] Limited was in need of significant capital in order to continue in business; 54.2 Nomad Technologies [sic] Limited was encountering difficulties in raising new capital; 54.3 there was a significant risk that Nomad Technologies [sic] Limited would fail." 135 As well, in para 55 the loans were alleged to have been made "unsecured … and without any or any adequate documentation". 136 Part E contained paras 61-98. Paras 61-67 were addressed to contravention of ss 208 and 209(2) of the Act. Paras 68-73 were addressed to contravention of ss 260A and 260D(2) of the Act. Paras 74-80 were addressed to contravention of s 180 of the Act. Paras 81-87 were addressed to contravention of s 181 of the Act. Paras 88-94 were addressed to contravention of s 182 of the Act. Paras 95-96 were addressed to contravention of s 183 of the Act. Paras 97-98 were addressed to involvement in the various contraventions. There was some reference back to the paragraphs in the earlier parts of the pleading and some particularisation. 137 Further detail should be left for the consideration of each contravention, but a general observation is appropriate at this point. 138 The function of pleadings is to state with sufficient particularity the case that must be met: Banque Commerciale SA v Akhil Holdings Ltd (1996) 169 CLR 279 at 286. They "serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision" (ibid). 139 But their function as a foundation for procedural fairness means that whether matters were within or outside ASIC's pleaded case must have regard to the pleading as a whole, and should not be approached with undue pedantry. As was said by Mason P in Greek Herald Pty Ltd v Nikolopoulos (2001) 54 NSWLR 165 at [18], speaking of but going beyond the pleading of defamatory imputations - "The pleader's task is to capture the essence of the specific matters imputed in relation to the plaintiff. Necessarily there will be questions of degree and "if a problem arises, the solution will usually be found in considerations of practical justice rather than philology" (per Gleeson CJ in Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 at 137). In this as in other areas, pleadings serve the ends of justice: they must not be permitted to assume an independent self-referential function. The pleaded imputation remains "the statement which, as the plaintiff alleges, the publication gives the reader or viewer to understand" (per Mahoney JA in Singleton v Ffrench (1986) 5 NSWLR 425 at 428). It is not a straitjacket, although the rules of procedural fairness place limits upon judge and jury's capacity to enlarge the issues." 140 Particulars serve the same function, but for a further reason are not a straitjacket. Thus in Dare v Pulham (1982) 148 CLR 658 at 664 it was said, after putting aside cases where parties choose to disregard the pleadings and to fight the case on issues chosen at the trial - "But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed ( Mummery v. Irvings Pty. Ltd , at pp. 111, 112, 127), though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence ( Leotta v. Public Transport Commission (N.S.W.) , at p. 668)." 141 The underlying regard to procedural fairness is material to whether it should be concluded that a pleaded and particularised case, fleshed out by evidence, was not open to a party. The nature of the proceedings 142 As I have said, the sections the subject of the contraventions are amongst those described in s 1317E of the Act as civil penalty provisions. The definitions in s 9 of the Act include that "civil penalty order" means any of a declaration of contravention under s 1317F (it seems an error for s 1317E), a pecuniary penalty order under s 1317G, a compensation order under s 1317H or an order under s 206C disqualifying a person from managing corporations. (Curiously, ss 206D and 206E, also providing for disqualification orders, are not mentioned.) 143 The concept of civil penalty is thus firmly embedded in the orders sought and obtained by ASIC in the proceedings. 144 However, the proceedings remain civil proceedings, and are not criminal proceedings. Thus by s 1317L - "The Court must apply the rules of evidence and procedure for civil matters when hearing proceedings for: (a) a declaration of contravention; or (b) a pecuniary penalty order." See also the following ss 1317M-1317Q dealing with coexistence of criminal proceedings for an offence constituted by conduct that is substantially the same as the conduct constituting or alleged to constitute the contravention, giving primacy to the criminal proceedings, and with the use in criminal proceedings of information given or documents produced by an individual subjected to proceedings claiming a pecuniary penalty order. 145 There is no similar stipulation as to proceedings for a compensation order or proceedings for a disqualification order, but a finding or a declaration of contravention of a civil penalty provision is the foundation for the order and different rules of evidence and procedure could not sensibly be applied. No submission to the contrary was made. 146 While the standard of proof in the proceedings is the civil standard of proof on the balance of probabilities, rather than the criminal standard of proof beyond reasonable doubt, their nature as proceedings for the recovery of a pecuniary penalty should be taken into account in deciding whether there has been proof on the balance of probabilities; so also should the fact that ASIC claimed the disqualification orders. 147 That now flows from s 140(2) of the Evidence Act 1995, which provides that in deciding in a civil case whether it is satisfied that the case has been proved on the balance of probabilities the court is to take into account the nature of the cause of action or defence, the nature of the subject-matter of the proceedings, and the gravity of the matters alleged. 148 In Employment Advocate v Williamson (2001) 111 FCR 20 at [65] and Booth v Bosworth (2001) 114 FCR 39 at [70] it was said that s 140(2) is intended to reflect the common law position. The statement by Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2 is consistent with s 140(2) and still a valuable guide - "Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences." 149 The trial judge directed himself accordingly, the appeals were conducted on that basis, and I take that approach. Disclosure and associated matters 150 The trial judge found - "248 Apart from the later limited awareness of Mr Cassidy (as to the existence of AEUT) and of Messrs Adler and Williams (as to the existence and operations of the Trust, though only Mr Adler would have been fully familiar with it) and of Mr Fodera (to a more limited extent as earlier described), I am satisfied that no directors were aware of the AEUT investment and its purchase of HIH shares or of its subsequent investments until the Audit Committee Meeting of 12 September 2000, save that Mr Gardener (and possibly others) would have learnt about it about a week earlier, on or about 5 September 2000. I am also satisfied that the Investment Committee as such were not informed about the AEUT investment either. Moreover it never approved any 'appointment', or 'mandate' for AEUT as required by the Investment Committee's 'terms of reference' earlier quoted (TB, 24). Nor did it approve or 'ratify' the investment in AEUT as laid down by para (viii) of the earlier quoted investment guidelines (TB, 5). Nor did Mr Adler, Mr Williams or Mr Fodera take any timely action or indeed any, to have the matter referred to the Investment Committee, though each were aware of the AEUT investment, with only Mr Adler having complete knowledge of the subsequent transactions. I note however that Mr Fodera was aware of the commencement of purchases in HIH by an entity associated with Mr Adler, as also Mr Williams. There was thus no collective disclosure to the Board or to the Investment Committee either prior to the investment in AEUT nor subsequently of the particular investments made by AEUT, including the share purchases in HIH and the purchases from Adler Corporation and the loans to Adler associates. This was until there was disclosure of AEUT and its HIH share purchases at 12 September 2000, though only, and informally, at the Audit Committee. Mr Williams subsequently gave false and misleading information on 12 October 2000 that 'it had been fixed', that the trust had been brought to an end. As to the 'in-house' investments from Adler Corporation and loans to Adler associates, there was for the first time information given, though incomplete, on 5 December 2000 (TB, 261). There is no specific disclosure of their 'in-house' character, in particular that the investments had been acquired from Adler corporation at cost and the loans made to Adler associates, inadequately documented and with no independent appraisal as I later conclude (see para 682 and following)." 151 The trial judge found, with reference to the particulars - (a) that Mr Adler and Mr Williams intended that HIH's Investment Department, meaning Mr Ballhausen as General Manager Investments who he considered would have at least questioned the payment of the $10,000,000 and "required proper procedures to be followed, including submission to the Investment Committee for approval", be sidestepped, and that the payment of the $10,000,000 was made in such a way that it would not come to the attention of directors of HIH other than Messrs Adler, Williams and Fodera or to the attention of the Investment Committee; (b) that the payment of $10,000,000 and its investment in HIH shares, the shares acquired from Adler Corporation and the loans required approval or ratification by the Investment Committee and was not approved or ratified, and that "Likewise the investment mandate of AEUT had not been approved, as required of the Investment Committee by the Terms of Reference". 152 The appellants challenged these findings. Putting aside pleading points, they said, in substance, that Mr Williams' authority was sufficient for the payment of the $10,000,000 to PEE and the purchase of the HIH shares, that Investment Committee or Board approval was not required, and that any notion of "sidestepping" was not warranted. 153 The appellants' submissions insufficiently recognised first, that proper conduct is not judged wholly by manuals or guidelines; secondly, that conduct must be seen as a whole, and not reduced to one element with the remainder abandoned; and thirdly, that even judged by the manual (the Terms of Reference) what occurred was not just payment of money but empowerment of an external investment manager (in practice Mr Adler). The loans are particularly eloquent of the unwisdom of "investment" of the $10,000,000 in the manner it was done. The particulars were in my view ample for this approach. 154 Mr Williams was the Chief Executive Officer, but the extent of his authority was not unbounded; nor, if he had authority, was every exercise of the authority a proper exercise. Mr Howard said that he was not aware of "any transactions similar in nature to this $10 million payment", and that it was an unusual cheque to be drawn out of his Department and "unusual for any one-off investment like this not to go to the Investment Committee for approval". While he agreed that Mr Williams' "say-so" was sufficient to authorise a cheque to be drawn for investment purposes, because Mr Williams was the Chief Executive Officer, that did not mean that the payment of the $10,000,000 in the circumstances earlier described was something which Mr Williams could do without reference to the Board or the Investment Committee. More particularly, nor did it mean that it was something which Mr Adler and Mr Williams should cause to be done without reference to the Board or the Investment Committee. Having authority does not mean that it is proper to exercise it. 155 The constitutions of HIH and HIHC were not in evidence. Presumably as a committee of the Board, HIH had established an Investment Committee with the Terms of Reference as from August 1999 - "• Consider and approve Policy Asset Allocation (PAA) and Asset Allocation Ranges (ARR), PAA is the neutral asset allocation benchmark, the characteristics of which are designed to meet the Group's investment objectives. These objectives include solvency and capitalisation issues, liability profiles and return on equity requirements. ARR defines the degree to which weightings may vary from PAA. This creates a framework enabling asset allocation decisions to be made within acceptable risk boundaries. • Consider and approve Strategic Asset Allocation (SAA). SAA is an alternative set of benchmarks to reflect shorter term conditions (unlike PAA). SAA is generally not changed more than once or twice a year. • Consider and approve the Group's Investment Guidelines including, credit and counterparty policy, derivative usage and exposure controls and foreign exchange policy. • Consider and approve valuation methods for all investments. • Review and approve foreign currency exposure and hedging policy. • Approval of all acquisitions, disposals, capital expenditures and major decisions relating to property investments. • Review and approve investment income budgets (and assumptions) and monitor and evaluate actual investment income results. • Approve appointments, mandates and performance benchmarks for all external investment managers. • Approve investment authorities and performance benchmarks for all internally managed investments. • Review the performance of all external managers against approved benchmarks. • Review the performance of all internally managed funds against approved benchmarks. • Review the performance of all internally managed NSW WorkCover Authority investment portfolio. • Report all decisions and recommendations made to the Board." 156 The members of the Investment Committee were Messrs Adler, Cassidy, Cohen and Fodera. Mr Cohen was Chairman of the Committee. Mr Ballhausen as General Manager, Investments regularly attended meetings of the Committee; so did Mr Howard. Two external consultants also regularly attended meetings of the Committee, Mr Martin Braden and Dr Steven Vaughan. Mr Braden was described in the Investment Guidelines next mentioned as "a long-term corporate advisor to the Group with a background in banking and economics", and Dr Vaughan was described as "an economist with extensive corporate advisory experience". 157 As contemplated by the Terms of Reference, Investment Guidelines were established. 158 The Investment Guidelines began with a Management Overview, with ten sub-topics. It then dealt with Australia, with six sub-topics, and Offshore Subsidiary Companies, with four sub-topics. 159 At the commencement of the Management Overview there was stated the objective - "To maximise the return on assets within prudent risk parameters. These parameters reflect the risk adverse approach the Group adopts with investment management . The level of acceptable risk is defined through the Group's asset allocation and long term benchmarks." (emphasis added) 160 It was then said that the Policy Asset Allocation (PAA) and Asset Allocation Ranges (AAR) had been ratified by the Board on the recommendation of the Investment Committee, and that in addition to making such recommendations the Investment Committee was responsible for formulating strategic asset allocation recommendations within the AAR. The membership of and attendances at meetings of the committee was described, and it was said - "The Committee meets formally each quarter to review current asset allocation. This ensures the Group's risk tolerance is properly reflected in the investment portfolio. At these meetings the Committee reviews the Group's effective exposure to all asset classes. Comparisons of investment results are made to budget forecasts and against performance benchmarks where appropriate. An economic presentation by Dr Vaughan is followed by debate on the appropriateness of current asset weightings. Subsequent approved recommendations of the Committee are delegated to the General Manager, Investment for implementation." 161 After mention of the Investment Committee's Terms of Reference, it was said - "Meetings of the Investment Management Group take place each month (except months in which the Committee's meetings fall). This Group comprises the executive members/invitees of the Investment Committee. The Group's role is to monitor at more regular intervals asset allocation and investment performance. The Group may alert the Committee of concerns in policy settings should it feel such issues required attention before the Committee's next meeting." 162 There were then set out in a table asset allocation benchmarks and authorised AAR's, as recommended by the Investment Committee and "ratified" by the Board. The benchmarks were said to be "designed to minimise total portfolio risk for given corporate objectives". The table was - Assets Class Long Term Benchmarks Asset Allocation Ranges (AAR) (PAA) Fixed Interest 65.0% 55.0%-75.0% Equities 17.5% 10.0%-25.0% Property 10.0% 5.0%-15.0% Property Loans 5.0% 0.0%-10.0% Unlisted Investments 2.5% 0.0%-5.0% Total 100.0% 163 It was said - "Exposure to growth assets (equities, property, and unlisted investments) must not fall below 20% or exceed 40% of total portfolio. The Group utilises external fund managers to complement its internal investment skills. This policy allows the Investment Committee to concentrate on asset allocation and the selection and monitoring of these managers ." (emphasis added) 164 Descriptive matter concerning each of the classes of asset was then set out. Of particular present relevance, it was said in relation to property loans - "Loans secured by mortgage on real property. The property loan portfolio (originating principally from FAI) is to be run-off. Property loans may not be written or renegotiated without prior approval of the Managing Director, Australia, or Finance Director. All such transactions are to be then ratified by the Investment Committee ." (emphasis added) And in relation to unlisted investments - "Unlisted equities and venture capital, (originating principally from FAI). Investment in new unlisted equities and venture capital may not be undertaken without prior approval of the Managing Director, Australia, or Finance Director. All such transactions are to be then ratified by the Investment Committee ." (emphasis added) 165 In the sections dealing with Australia and Offshore Subsidiary Companies guidelines for investments of various kinds in Australia and in Hong Kong, New Zealand, the United Kingdom and the United States were set out. For Australia the assets classes did not fully correspond with those set out in the overview; in particular, there was no express reference to unlisted investments. As to equities, however, it was said - "The Group's equity portfolio consists of a mix of internally and externally managed funds. The maximum effective exposure of the internally managed fund is not to exceed A$100m. Securities must be listed on the Australian Stock Exchange or, initial public offerings of securities in unlisted companies to attain ASX listing within six months of purchase. Details of limitations to individual or sector exposures are contained in a separate mandate to be approved by the Investment Committee. The Group's current external equity managers are, Lend Lease Corporate Services Limited, Macquarie Investment Management Limited, First State Fund Managers, and Alpha Investment Management Pty Limited ." (emphasis added) 166 The Investment Committee was active in policing compliance with the Investment Guidelines. It submitted half-yearly Investment Reports to the Board in which it advised of, amongst other things, breaches of exposure limits and performance of investment managers, and made corrective recommendations which the Board approved. For example, at the Board meeting of 8 September 2000 Mr Adler reported that there were breaches of the asset allocation guidelines and of the maturity band of Australian fixed interest securities, and at the Board meeting of 29 November 2000 Mr Cassidy reported amongst "compliance issues" that $2,000,000 had been "invested in Business Thinking Systems (of which Mr Adler was a shareholder and a director) in October 2000 despite a $500,000 investment limit on unlisted investment". (According to the minutes, after discussion it was resolved that the investment be ratified). 167 The Investment Committee's reports showed caution with respect to technology stocks. In the report as at 31 March 2000 it was noted that a decision had been made to reduce the exposure of the internally managed equities portfolio to that section by $20,000,000 and that the reduction had been completed in early April. HIH's internal financial report for the nine months ended 31 March 2000 included that during April 2000 "a significant correction in world equity markets occurred, particularly in technology related stocks". In the Investment Committee's report as at 30 June 2000 it was noted that its exposure was "continuously lowered into 30 June 2000". 168 At the least, the placement of $10,000,000 in a "dynamic/non risk adverse fund" (the description comes from Mr Adler's memorandum of 10 July 2000) did not sit well with the "risk adverse approach" stated generally in the Investment Guidelines and given point by the prohibition on investment in new unlisted equities and venture capital without the prior approval of the Managing Director, Australia (Mr Cassidy) or the Finance Director (Mr Fodera) and ratification by the Investment Committee. More than that, because of the unfettered discretion there was effectively a mandate for an external investment manager. The funds were outside HIH's internal investment procedures and skills; the Investment Committee had no say in giving their control to Mr Adler. 169 That the funds were under the absolute control of one person, a director and substantial shareholder in HIH known to disagree with the investment policies of the General Manager, Investments (Mr Ballhausen) meant departure from utilisation of internal investment skills or the skills of the four external fund managers, with obedience to the Investment Guidelines and the checks and balances and independence that such utilisation brought. Added again was the legal and practical danger of HIH trading in its own shares, as was intended from the beginning albeit maybe through the AEUT, and of being known to be trading in its own shares. Added again was investing HIH's money, albeit at the time through the AEUT, in technology stocks, as Mr Adler intended from the beginning to Mr Williams' knowledge, from exposure to which the Investment Committee had been deliberately withdrawing; and more, investing by the fund acquiring the technology stocks from the director of HIH and controller of the fund. It is unnecessary to go to the loans. The Investment Guidelines probably required prior approval of the Investment Committee as a matter of prescription, but even if they had not as a matter of proper practice there should have been disclosure to the Investment Committee for its approval. 170 Save that Mr Fodera had such knowledge as came from his involvement on 14 and 15 June 2000, none of the transactions was made known to the members of the Investment Committee. individually or as a committee, prior to the transaction. Mr Cassidy had such knowledge as came from his signature of the application for the B class unit on 12 July 2000, but that was after the payment of the $10,000,000. The appellants suggested that there was compliance with the Investment Guidelines through prior approval by Mr Fodera from his involvement, and approval by Mr Cassidy from his signature of the application. 171 This would be no answer to what I have just said. In any event it was plain that Mr Fodera had but limited knowledge of the payment of the $10,000,000, and that he exercised no judgment about it – Mr Fodera was doing administratively what Mr Williams told him to do. Mr Adler had to explain to Mr Howard. By the time Mr Cassidy signed the application for the B class unit the payment of the $10,000,000 was a fait accompli. It should not be accepted that Mr Fodera or Mr Cassidy gave prior approval, or that Mr Adler or Williams thought that they had. And, of course, nothing was done with a view to ratification by the Investment Committee. 172 As will be seen, Mr Adler and Mr Williams later acknowledged that the prior approval of the Investment Committee had been required. 173 With the same observations as to Mr Fodera and Mr Cassidy, none of the transactions was made known to the other directors of HIH, individually or as a Board, prior to the transaction. Knowledge of the transactions began only in early September 2000. 174 The Audit Committee of the board of HIH was to meet on 12 September 2000. The members of the Audit Committee from June 2000 were Messrs Abbott, Cohen, Gardener and Stitt. Mr Cohen was Chairman of the Committee. Other directors and officers of HIH often attended its meetings. 175 There was a meeting with the auditors a few days before the meeting of 12 September 2000 at which the draft financial statements were discussed, attended by Mr John Buttle of the auditors and Messrs Fodera and Gardener. Mr Fodera said to Mr Gardener that Mr Buttle "has something to tell you – it's just crazy". Mr Buttle asked whether Mr Gardener and Mr Fodera were aware "that the company has made an investment in a trust to be managed by Rodney Adler, and that this trust has invested in HIH shares". 176 Mr Gardener was not so aware. He said that he was "horrified that the company has invested in HIH shares", and that it should be raised as a matter of urgency at the next meeting of the Audit Committee and the next meeting of the Board. 177 The matter was raised at the meeting of the Audit Committee on 12 September 2000. Although not members of the Committee, other directors were present, including Mr Adler and Mr Williams. 178 The minutes of the meeting relevantly refer only to the tabling by Mr Buttle of a paper summarising "the major audit issues, including outstanding matters yet to be resolved". The paper was not in evidence. 179 According to Mr Cohen, Mr Buttle said that he had "some concerns with the documentation concerning a trust". Mr Cohen could not recall the detail, but was "under the impression that this matter was simply a loose end that would be tidied up in due course". 180 According to Mr Gardener, however - "22. At the Audit Committee meeting on 12 September 2000, Mr Adler and Mr Williams explained this transaction. Whilst I am unable to recall the precise words they used, they made statements to the following effect: Mr Alder: 'I went to see Ray because I wanted to help improve the company's investment performance. I completely overlooked the fact that the investment in the trust needed the prior approval of the Investment Committee and the board. This was an innocent oversight on my part. There was considerable legal advice taken from the Group's lawyers establishing the trust in such a way that its dealings would be at arm's length from HIH. Therefore I do not believe that there is a legal problem in the trust buying HIH shares.' Mr Williams: 'I agree with Rodney's comments. I also had not considered that the trust and its investment would require prior approval of the Investment Committee and the board.' 23. I made a statement to the following effect: 'I am shocked that the investment has been made in the trust, and that the trust has bought HIH shares, both from a governance point of view and from an investment point of view.' A number of other board members used words to similar effect, but I cannot now recall who said what." 181 It will be noted that Mr Adler recognised that prior approval of the Investment Committee and the Board had been required. Mr Williams submitted that the evidence of what he said was less than a similar recognition. He agreed with Mr Adler, and in my view the only sensible reading is that by "I had not considered" he meant that, like Mr Adler, he had overlooked the necessity. That is how the trial judge read it, and I see no error. 182 The evidence of Mr Stitt as to this meeting was a little different. He said that, when asked by Mr Cohen what more he needed before he could sign off on the accounts, Mr Buttle listed a number of things including, "and there is the question of the trust to be sorted out". Mr Stitt said that he did not know what "the trust" was and did not ask, and that the matter was not considered further at the meeting. 183 The recollections of Mr Cohen and Mr Stitt were not good. The trial judge was entitled to accept the evidence of Mr Gardener, which he did. 184 A board meeting was held also on 12 September 2000. Despite what Mr Gardener had said when first expressing his horror, that HIH had invested in its shares was not raised. 185 A further meeting of the Audit Committee was held on 12 October 2000. Again, Messrs Adler and Williams were in attendance. According to the minutes, Mr Buttle advised that a number of amendments to the financial reports were necessary, including "Inclusion of investment activities conducted through entitles of which Mr Adler had a relevant interest in related party transactions (Note 42)." Note 42 in the then draft accounts said nothing of the AEUT or its activities, and Mr Buttle must have meant that it should. Still according to the minutes, Mr Buttle said, "The trust may be a related party transaction and it needs to be recorded in the accounts". 186 However, according to the letter of 15 November 2000 from the auditor later mentioned - "The particular matter was formally raised with the Board Audit Committee at its meeting on 12 October 2000. At that meeting we requested that the Board consider the circumstances surrounding the investment in the Trust and the subsequent activities of the Trust in order to satisfy itself that such arrangements and activities do not contravene relevant aspects of the Corporations Law and the Australian Stock Exchange listing requirements. We also requested that the Board communicate its conclusions to us within a reasonable period of time." 187 The meeting of the Audit Committee was followed, on 12 October 2000 by a meeting of the Board. According to Mr Stitt - "14. Immediately prior to the commencement of the 12 October Board meeting Geoffrey Cohen said words to the effect: 'What is this trust thing Buttle is talking about?' 15. Ray Williams and Rodney Adler both responded to Cohen's question. I cannot recall the words they used or who conveyed what information however I recollect that the following was conveyed to the Board members present: 15.1 There had been an investment. 15.2 It had involved the creation of a trust. 15.3 That it had been organised by Rodney Adler. 15.4 That Ray Williams had invested some of HIH's money in the Trust. 15.5 That the transaction had concluded. 15.6 That the Trust had been brought to an end or never formed. 15.7 That Leigh Brown of Minter Ellison had provided advice that the transaction breached no provisions of the law. I recall Williams saying words to the effect: 'There is nothing in it, it all happened a long time ago, it shouldn't have happened but it is fixed now. Lets move on'.'" 188 Mr Stitt said that as at 12 October 2000 he was not aware of the trust's structure, terms or name, the identity of the trustee or the beneficiary, the amount invested by HIH in the trust, or the nature of the investments made by the trust. 189 Mr Stitt's recollection seems to have been faulty, at least because Mr Brown had not advised by this time. There was little other evidence of this occasion. 190 According to the minutes of the meeting, - "1.3 Audit Committee's Report The financial report and the concise financial report for the year ended 30 June 2000 were tabled. The Chairman reported that the Audit Committee came to the conclusion that, subject to the inclusion of certain amendments agreed with the auditors, the financial report and the concise financial report were in order for approval and adoption by the Board. The Financial Statements Questionnaire for the year ended 30 June 2000 in respect of the preparation of the financial reports was tabled. It was resolved that it be accepted and signed by the Chairman. It was resolved that, upon the abovementioned amendments being effected, Mr G A Cohen and Dr R R Williams be authorised to sign the directors' report and the directors' declaration attached to the financial report and the concise financial report respectively." 191 Note 42 in the financial accounts had come or came to include – "• At balance date the consolidated entity had invested $10 million in the Australian Equities Unit Trust. The manager and trustee of this fund is Pacific Eagle Equities Pty Limited, an entity controlled by a director R S Adler AM. Mr Adler also had a 5% beneficial interest in the fund at balance date." This was incorrect at least so far as the AEUT had not been constituted as at the balance date. 192 The financial accounts were signed by Messrs Cohen and Williams on 16 October 2000. 193 At some time in the latter part of October 2000, but when and in what circumstances the evidence did not disclose, Mr Brown of Minter Ellison was asked by Mr Howard to advise on what Mr Brown's advice described as "the participation by [HIHC] as a unit holder in [the AEUT] in light of the acquisition by [PEE] of shares in [HIH], and the self-acquisition provisions of the Corporations Law". A draft advice dated 26 October was faxed to HIH on that date. It was to the effect that there was no acquisition by HIH of its own shares because HIH did not control PEE or the operation of the AEUT and that HIHC did not have a relevant interest in the shares. The draft advice became a final advice by a letter dated 1 November 2000. 194 The auditors followed up what they had formally raised at the Audit Committee meeting of 12 October 2000. Mr Cohen met Mr Buttle on 8 November 2000, and asked Mr Buttle to write so that he could put the matter before the Board. In a letter to Mr Cohen dated 15 November 2000 Mr Buttle referred to the meeting on 8 November 2000 and a subsequent meeting with Messrs Adler and Williams on 13 November 2000 (of which there was no evidence), and sought "a written response from the Board to the matter raised concerning the Group's investment in Australian Equities Unit Trust". Mr Buttle set out his then understanding of what had occurred and adverted to the auditor's obligation to notify ASIC if the auditor has reasonable grounds to suspect a contravention of the Corporations Law and believes that the contravention has not been or will not be adequately dealt with by comment in the Auditor's Report or by bringing it to the attention of the directors. He said that he had reviewed solicitors' letters of advice, but that the letters "do not comprehensively deal with all aspects of the arrangements and related activities", and asked that "the matter … be given the urgent attention we believe it deserves". 195 Although there was no direct evidence of its commissioning, this brought a report by Mr Brown to the Board by a letter dated 29 November 2000. 196 In its summary, the report said that - "Having made appropriate enquiries, we are not aware of any matter which would indicate that the investment by Pacific Eagle Equities Pty Limited ('PEE') in HIH shares, and the subsequent disposal of that investment involves any breach of: (a) Part 2J.1 – share buy-backs; (b) Part 2J.2 – self acquisition of shares; (c) Part 2J.3 – financial assistance; (d) Chapter 2E – related party transactions; (e) Part 7.11 – conduct in relation to securities; or (f) Part 2D.5 – notifying interests by directors (other than that the notice in respect of the sale of HIH shares was lodged by Mr Adler six days late), of the Corporations Law ." 197 The report said that Minter Ellison had "reviewed copies of the following documents", referring to a number of documents but not the faxes and letters passing between Mr Adler and Mr Williams in June 2000, and that they had interviewed Mr Williams on 21 November 2000 and Mr Adler on 24 November 2000. Their "understanding of the relevant factual background" was set out in a schedule of facts. There was then reference in turn to the parts or chapter of the Corporations Law, with an explanation of why there were no breaches. 198 The schedule of facts included - "3. Mr Adler believed that HIH should have the opportunity to take advantage of investment opportunities that were offered to Mr Adler or related entities. 4. Mr Ray Williams had been impressed by some of the FAI investments, such as being a founding shareholder of One Tel. On a number of occasions, Mr Adler and Mr Williams discussed the possibility of creating a new investment fund that would take advantage of such investment opportunities. 5. In early June 2000, Mr Adler suggested to Mr Williams that the Australian Equities Unit Trust ("Trust") be set up with a fund of approximately $30 - $40 million and with HIH as the foundation stakeholder investing $10 million. It was envisaged that Mr Adler would attract other investors, such as Phil Green of Babcock & Brown. 6. It was intended by both Mr Williams and Mr Adler that the Trust would be totally independent from HIH, managed by Mr Adler or a related person or entity who would have complete discretion as to the type of investments to be made. At this stage, it was not envisaged by either Mr Adler or Mr Williams that PEE would trade in HIH shares. 7. Mr Williams decided that HIH would make the proposed $10 million investment in the Trust provided that no more than 40% of the Trust was invested in one opportunity. Mr Adler agreed to that condition. 8. On 15 June 2000 Mr Williams arranged for HIH to deliver a cheque for $10 million to Pacific Eagle Equities Pty Ltd ('PEE' or 'Trustee') as a subscription for the Trust (which was yet to be formed). At that time, Rodney Adler personally held all of the shares in the Trustee. 9. PEE received the sum of $10 million from HIH as subscription money for a stake in the yet to be constituted Trust. 10. Between 15 and 30 June 2000 PEE acquired, in 8 tranches, 3,924,545 shares in HIH ('Shares') for prices ranging from $1.00 to $1.03. Mr Adler lodged with ASX notices under section 205G of the Corporations Law in respect of each tranche of shares purchased. 11. Mr Adler made the decision to invest in HIH shares as he considered them to be undervalued. In his view, there was no real reason for the recent fall in the share price and he considered it was likely that the share price would bounce back. He saw the fall in the share price as a good trading opportunity and expected to make a quick profit and boost the funds of the Trust . 12. At the time that the decision was made to purchase the shares, Mr Adler was not in possession of information that was not generally available which he considered to be price sensitive. 13. PEE purchased the Shares in anticipation of PEE becoming trustee of the yet to be constituted Trust and intended that the Shares purchased with the funds received from HIH would become Trust Property (as defined in the Trust Deed) once the Trust was formally constituted. 14. On 16 June 2000, Mr Adler telephoned Mr Williams to say that he had decided to take advantage of the low HIH share price and had decided to invest some of the Trust funds in HIH shares. 15. Mr Williams had no prior knowledge of Mr Adler's decision to purchase HIH shares. He was surprised at this decision because of he had not intended to invest in HIH by investing in the Trust. 16. On 7 July 2000 the Trust was established with PEE as Trustee. Mr Adler controlled PEE and the operation of the Trust." 199 Contrary to these paragraphs – (i) the proposal by Mr Adler to which Mr Williams agreed, unchanged prior to the payment of the $10 million, was one of apparent loan, not trust, without involvement of other investors; whatever its character, however, the correspondence evidencing the proposal does not seem to have been disclosed to Minter Ellison; and (ii) before the $10,000,000 was paid by HIHC to PEE, Mr Williams was aware that it was to be used to pay for the purchase already made of shares in HIH. 200 Advice is only as good as the facts on which it is based. The advice that HIH "does not appear" to have contravened s 260A of the Act, for example, was that "as HIH did not know that PEE would use the funds to acquire shares in HIH, then the funds were not provided to PEE to acquire shares (or units of shares) in HIH, but rather in anticipation of HIH or HIHC becoming a unit holder in the Trust". The trial judge was rightly sceptical of the schedule of facts so far as dependant on what Mr Adler or Mr Williams told Minter Ellison. 201 The Minter Ellison report of 29 November 2000 was tabled at the Board meeting on that day. According to the minutes of the meeting - " 2.17 Australian Equities Unit Trust ("Trust") The Chairman informed the meeting that $10 million had been invested in the Trust without Board approval. The Company's auditors, Arthur Andersen, had raised certain regulatory issues which Minter Ellison was asked to investigate. The Chairman then tabled a draft report from Minter Ellison advising the Board that there had been no breach of any applicable law/regulations. Mr Adler, who had a relevant interest in the Trust, informed the meeting that the Trust had no intention to specifically invest in HIH shares. The Trust was so structured after due regard to related party considerations as Mr Adler was: (a) a director of the Company; and (b) a member of the Investment Committee. The matter was discussed and noted by the Board. It had no prior knowledge of that investment." 202 Mr Adler wrote to Mr Cohen on 30 November 2000. The letter included - "There were two issues that were brought up yesterday regarding myself and HIH and although they were fully discussed and properly noted in the Minutes, I would like to place on the record my concerns: 1. … 2. In regard to Pacific Eagle Equities (PEE) once again; I accept full responsibility for the decisions made by PEE but I am concerned that the Board was unaware of the creation of the Trust. I accept that other than Ray Williams and myself, the knowledge was not imparted to the Board but how was I to know that fact? I approached Dr Williams with an idea that I felt would be beneficial for myself (obviously) and to HIH. After discussion over an extensive period of time, Dr Williams agreed, on behalf of HIH, to make a $10 million investment, it was duly recorded, structure created, cheque presented and I was given Mr Bill Howard as a 'point man' to update on a regular basis and to have any future discussions. This is evidenced by the quarterly report and the discussions I had with Bill Howard. I accept that the trading in HIH is of concern to the Board but I did feel comfortable then and I do feel comfortable now that the legal opinion received and my own statements, shield HIH from the responsibility of that decision, however, I am not to know whether Dr Williams spoke to members of the Board or the Investment Committee, believing, that Dr Williams either has a certain amount of discretion as Chief Executive or went through the normal procedures, I just presumed that he had dealt with the matters, in my absence or directly with the Board and the members of the Investment Committee." 203 Implicit in this was that there should have been prior Investment Committee or Board approval, and (contrary to overlooking it) Mr Adler believed it had been attended to. Whatever may be thought of the presumption that Mr Williams had made disclosure to the Investment Committee or the Board, and the trial judge was entitled to consider that Mr Adler was here dissembling, Mr Adler did nothing himself to ensure disclosure. 204 The correspondence between Mr Adler and Mr Cohen should be completed. Mr Cohen replied to Mr Adler's letter of 30 November 2000 on 6 December 2000, saying that he "would assume you knew the transactions had not been approved by the Investment Committee of which you are a member". Mr Adler replied in turn on 8 December 2000, saying that Mr Cohen's assumption was wrong, and - "I did not know the transaction had not been approved by the Investment Committee even though I am a member. As we both know, I am frequently asked to leave meetings due to conflicts or meetings are held in my absence due to conflicts." 205 On 4 December 2000 Mr Cohen sent a copy of Minter Ellison's report to Mr Buttle, saying that at the board meeting of 29 November 2000, "After careful consideration the board came to the view that no breaches of any applicable laws and/or regulations had occurred". 206 The auditors remained concerned, and on 13 December 2000 Mr Buttle wrote to Mr Cohen effectively stating that, unless HIH referred the involvement of HIH in the AEUT to ASIC, the auditors would do so. Implicit in the letter was the auditor's view that there had been inadequate investigation, since it was said that Senior Counsel had advised the auditors "that it is unlikely that a full investigation could be satisfactorily conducted without the powers available to ASIC". 207 The auditor's letter was tabled at a meeting of the Board on 14 December 2000. At that meeting, in response to a comment that the investment in PEE was not authorised by the Investment Committee, Mr Adler "responded that it was Company Management that should have complied with the requisite internal procedures", yet another and quite astonishing exercise for the absence of Investment Committee approval. 208 Thus far the attention was on the purchase of HIH shares. According to Mr Gardener, he was not aware until told by Mr Fodera early in December 2000 that some of the AEUT's investments had been acquired from Adler Corporation. An AEUT balance sheet provided by Mr Adler was tabled at the meeting of 14 December 2000, which did not disclose the source of the investments. The Minter Ellison report, however, had included what was described as "a two page document received from Mr Adler detailing the activities of PEE as trustee of the trust over the period May 2000 to 6 November 2000". This was annexure C to the report, and referred to purchases of shares in dstore, Planet Soccer and Nomad "from Adler Corporation". It is not impressive that this does not seem to have been noted or, if it was noted, to have caused concern. 209 On 22 December 2000 Mr Cohen wrote to ASIC informing it of "the events which are set out in the attached Schedule". The letter included - "Having made appropriate enquires, the Board of HIH understands that all relevant matters concerning the events that Arthur Andersen became aware of are set out in the Schedule of Events. Upon legal advice, the Board does not believe that the matters in the Schedule involve any contravention of the Corporations Law. Nevertheless, the Board of HIH has decided to bring to the attention of the Commission the matters in the Schedule of Events." 210 The Schedule of Events was the Minter Ellison schedule of facts with some alterations. In particular there was added, following the reference to PEE receiving the $10,000,000 from HIHC as subscription money for a stake in the yet to be constituted trust - "7. Prior approval of the Investment Committee, a committee of the HIH Board, is required for such an investment to be made. As the proposal to make this investment was not presented to the Investment Committee, the investment as a consequence was not authorised." 211 The letter does not seem to have been written with formal Board approval. At the Board meeting of 14-15 December 2000, according to the minutes, it had been resolved to seek from the auditors a copy of Counsel's advice and ask them what further material might remove their concerns. According to Mr Cohen, he spoke to Mr Buttle, following which "it was agreed that HIH would inform [ASIC] about this transaction". Mr Gardener said that it was resolved "at a later date" that the matter would be reported to ASIC, but there was not another Board meeting prior to 22 December 2000. It is therefore not clear that the new para 7 had Mr Adler's concurrence as a member of the Board, although one would not expect the letter to have been written without the concurrence, perhaps not at a formal meeting, of the members of the Board. By this time Mr Williams was no longer on the Board. 212 It should be added, and Mr Williams relied on it, that Mr Cohen said in his affidavit - "38. In hindsight I believe that Mr Williams alluded to this investment fund in about July 2000. At the time, Mr Williams and I were discussing media reports that Mr Adler was active in buying HIH shares at the time. Mr Williams said to me words to the effect of, 'We have an interest in that'. I did not understand what he meant and I did not think any more of it." 213 There was no secret about the payment of the $10,000,000 to the extent that, beyond Mr Adler and Mr Williams, Messrs Fodera and Howard were involved in the payment; about the purchase of the HIH shares to the extent that, beyond Mr Adler and Mr Williams, Mr Howard was told of the initial purchase and various s 205G notifications were sent to Mr Lo (although they were uninformative as to PEE and were consistent with purchases by Mr Adler in his own right); about the AEUT to the extent that, beyond Mr Adler and Mr Williams, Mr Howard was told of the preparation of the legal documentation and (through Mr Howard) Messrs Cassidy and Lo signed the application for the B class unit; or about the purchases of the shares from Adler Corporation to the extent that, beyond Mr Adler and Mr Williams, Mr Howard was told of them in the memorandum of 10 July 2000 and the fax of 25 September 2000. The loans were in a rather different position, but the then loans were disclosed in the balance sheet accompanying the fax of 25 September 2000. But the officers of HIH were presented with faits accomplis. There was no disclosure, for approval, at the levels called for. That is effectively what the trial judge found. I do not think the trial judge has been shown to have been in error; indeed, I consider that he was correct. Maintenance or stabilisation of the share price 214 Whether ASIC's pleaded case encompassed the trial judge's findings allegations concerning maintenance or stabilisation of HIH's share price was especially contentious. For the present I deal only with the facts. 215 I have referred to the allegations in para 30 of the statement of claim as to the creation of an impression that the HIH share purchases were funded by Mr Adler or his interests and not by HIHC or HIH. The trial judge's findings included that Mr Adler - " … wished to convey to the Market, as he did to Mr Westfield, the false impression that he was purchasing shares on his own behalf or on behalf of family interests through some related trust, but certainly not that he was acting on behalf of HIH as a beneficiary of and real funder of such trust" (para 148). 216 The trial judge's finding as to Mr Adler's wider purpose, to which this contributed, was - " CONCLUSION 165 Mr Adler's purpose in causing PEE to purchase shares in HIH, giving the market the impression that it was his money that was being used, and passing up the opportunity to sell at a profit on 11 July 2000, was to maintain or stabilize the HIH share price, or prevent it falling by an even greater amount, doing so for the benefit of his own company's very substantial shareholding in HIH and not because in reality he sought a "quick profit" for AEUT and indirectly HIH by so doing, which was the purpose attributed to him (see TB, 268 containing "schedule of events", para 11 accompanying letter from Mr Cohen to ASIC dated 22 December 2000 and said by Mr Cohen to have been prepared "having made appropriate enquiries"). Indeed Mr Adler's actions showed that he forewent the opportunity to make such "quick profit", deliberately passing by the opportunity to sell at a profit around 11 July 2000 and maximising the ultimate loss for AEUT (and therefore HIH) by selling his own interest's shares in HIH first, in a falling market." 217 Early in 2000 Mr Adler had been privately critical of HIH's value. In a fax to Mr Williams dated 25 January 2000 he had commented adversely on Mr Ballhausen, had expressed concern over the falling share price and the loss caused to himself and other shareholders, and had said that - " … if there is a small correction in the equities market and with our poorly structured investment folio and the rising interest rate scenario I cannot see us making a profit this year." 218 There had been a "correction" in the equities market, in the fall in technology stocks in April 2000 earlier mentioned. This achieved the description of the "tech-wreck". I have referred to the decline of the traded price of shares in HIH. 219 To go straight to 9 June 2000, and to interest in HIH's fortunes in the financial press, an article by Mr Mark Westfield in the business section of The Australian published on that date described HIH as a "troubled insurer" and asserted that it "faces a fresh challenge in the form of tougher capital adequacy requirements soon to be imposed by the Australian Prudential Regulation Authority". The article said that if the APRA proposals were implemented "it is understood HIH would need to raise about $250 million in fresh capital", and that - " … HIH's prospects of raising capital in the short term at least are not good. Its share price edged closer to the psychological $1 threshold yesterday, closing at $1.03 but trading as low as 99c in trading." 220 A little after 9am on 15 June 2000 HIH issued a media release complaining of "a significant level of misinformation prevalent in relation to the company and its operations" and, amongst other things, saying that "[b]ased on our current 3 year business plan and taking into account possible regulatory changes to be introduced by the Australian Prudential Regulatory Authority, we reiterate the comments made at our Interim Results that no capital raising is required, imminent or planned". The media release's summary of itself was - "• No capital raising • Market performance on investments • Australia sound, international outlook improving in 200/2001 • Global review of operations initiated by management." 221 What was said about market performance on investments was less forthright - "• on investment - Under the market-to-market accounting standard applicable in Australia, the HIH investment portfolio performance will generally be consistent with market performance. - Also subject to market-to-market treatment will be HIH's non-core investment in One.tel Ltd. An unrealised loss will be accounted for based on the movement in the One.tel share price between 31 December 1999 and 30 June 2000. HIH currently holds 25 million One.tel shares." 222 As to international operations, the media release said that it "will not be contributors to the bottom line this year". 223 The media release was issued shortly after the 7.30 am meeting between Mr Adler and Mr Williams to which Mr Adler referred in his fax of 14 June 2000, and shortly before Mr Adler instructed the purchase of the 2,000,000 HIH shares at market in the name of PEE. 224 Mr Westfield read the media release. He telephoned Mr Adler. According to Mr Westfield's affidavit - "During the conversation we talked about the announcement made by HIH, and I said words to the following effect: 'This announcement tells us nothing.' He replied with words to the following effect: 'It doesn't say all that much, but now that the company has made this disclosure which it says fully states its position, I feel that there is no restriction on me buying shares.' I then said words to the effect: 'Why would anyone want to buy shares in HIH? They will probably only go lower.' Mr Adler replied with words to the effect: 'I think they are undervalued. I think it is a good time to buy HIH. I have been buying shares through a trust associated with me.' He may have said 'intend to buy', rather than 'have been buying'." 225 Mr Westfield's account of the conversation in his oral evidence was to the same effect, and included that he told Mr Adler, "You're mad". Mr Westfield said that he assumed that the trust to which Mr Adler referred was a family trust, and that Mr Adler said nothing further about which entity associated with him was purchasing HIH shares, how the purchase was structured, or who was paying for or financing the acquisition of those shares. He said that in neither this conversation nor in that a few days later, see below, did Mr Adler say anything to the effect that he was "buying the shares with his own money". 226 Mr Westfield's article in the business section of The Australian on 16 June 2000 was less than enthusiastic. It began - "HIH Insurance staged a weak recovery yesterday in response to a statement to the Australian Stock Exchange notable for containing no new information – but the general insurer's problems loom as large as ever." The article went on to assert that HIH was in need of fresh capital if it were to grow and also to meet foreshadowed capital adequacy requirements, and that it "has a time bomb ticking away in its capital structure". The article asserted that "HIH's plunging share price and questions over its capital and profit outlook come at the very worst time, as insurance brokers decide on behalf of clients whether or not to renew insurance lines with underwriters ahead of June 30." 227 At a time which Mr Westfield put at about two days after their conversation of 15 June 2000, but which must have been on 19 June 2000, Mr Adler telephoned Mr Westfield. He told Mr Westfield that he had issued a substantial shareholder notice and would fax it to him. This was the first s 205G notice earlier mentioned. Plainly enough Mr Adler wanted to assure the author of the gloomy article that he, Mr Adler, was buying HIH shares. 228 Also on 19 June 2000 Mr Adler telephoned Mr Morgan Mellish, a journalist with the Australian Financial Review with whom he had previously had media contact. Mr Mellish had become aware of Mr Adler's s 205G notice, and had telephoned Mr Adler; Mr Adler was returning the call. Mr Mellish asked about Mr Adler's purchase of the shares. Mr Adler said that he started buying after the media release because "it freed me up because everyone had the same knowledge and I had no market sensitive knowledge", and that he bought the shares because - "The shares were undervalued in the long term. HIH have fallen an awful lot because of tax loss selling because it has been a hideous under-performer. I think there will be a weakness for another week or two and that will give me a chance to get some volume. And I'm fairly confident about the medium-term outlook of the company. I think it's a solid medium-term acquisition." 229 Mr Adler said that he had bought more shares, and that "I've waited a while and watched the stock come down and you've got to make a stand some time". Mr Mellish asked, "Do your family interests own about 5 per cent?", and Mr Adler answered "The Adler family owns less than 5 per cent". 230 Mr Mellish wrote an article which was published in the Australian Financial Review of 20 June 2000. The article asserted that - "A director of HIH, Mr Rodney Adler, has topped up his holding in the company by spending $1.9 million to buy another 1.87 million shares late last week. The on-market buying at $1.01 a share takes Mr Adler's personal stake to 7.4 million shares, or 1.6 per cent of the company. Adler family interests now total about 4 per cent." The article said that Mr Adler intended to buy more shares, and included Mr Adler's confidence about the medium-term outlook of the company. 231 On 20 June 2000 Mr Mellish became aware of another s 205G notice of that date; it was as to the 951,359 shares bought on 16 June 2000. He telephoned Mr Adler and asked why he was "buying these shares". Mr Adler replied, "I think there's value in medium to long-term in HIH. I think the company's cheap. This is off the record . I don't want to be quoted." 232 Later on 20 June 2000 Mr Mellish had another telephone conversation with Mr Adler. At its commencement Mr Adler asked if they could talk off the record, and Mr Mellish agreed. Mr Mellish asked, "Why have you bought the shares?", and Mr Adler replied that "HIH has been oversold" and talked about management difficulties. Mr Adler said that HIH did not have "any solvency issues" but it could need more equity. When Mr Mellish said that there was a lot of talk that the profit was going to be "really bad" and asked what it was going to be like, Mr Adler said, "The results are going to be lousy". The conversation included - "I said: 'How committed to HIH are you?' He said: 'I want people to know I'm a committed insurance person. People think I sold out and I've got my money and gone. That's not true. I'm making a number of statements by buying these shares. I believe in the company. I'm putting my money up which shows I believe in the industry. I think the company can be a billion dollar company again." 233 Mr Mellish asked whether he could quote Mr Adler on any of their conversation, and Mr Adler said that he was happy to be quoted about his buying shares and his commitment to the industry. Mr Mellish went through the particular matters he proposed to use in writing an article. At no time in his conversation with Mr Mellish did Mr Adler refer to PEE, or to the AEUT or any other trust. 234 An article in the Sydney Morning Herald on 20 June 2000, under the name of Anthony Hughes, was headlined "Adler buys into embattled HIH". It included - "Businessman Mr Rodney Adler has emerged as a potential saviour for besieged insurer HIH Insurance, buying close to $2 million worth of shares during last week's plunge and saying he will buy more. Mr Adler, and HIH director and former managing director and major shareholder of FAI Insurances, bought 1.87 million shares at $1.01 each on Thursday, the same day HIH issued a statement to the market aimed at quashing concern about its capital position. HIH closed slightly lower at $1.02 but dropped to new lows below $1 last week. Mr Adler said yesterday he was an 'ongoing buyer'. … Mr Adler yesterday bought more shares and is expected to file another director's interest notice today. … Mr Adler said the company's long-term potential was strong given it had 2 million customers and 14 per cent of the general insurance market, "They have some serious fundamental strengths, he said." Mr Hughes was not called as a witness, and there was no direct evidence of the source of his information. 235 Mr Mellish wrote an article which was published in the Australian Financial Review on 21 June 2000. The article began - "Mr Rodney Adler has raised his family's stake in HIH insurance to about 5 per cent in a move analysts believe will increase pressure on senior management to turn the ailing company around. Mr Adler, an HIH director and former managing director and major shareholder in FAI, said yesterday he wanted to signal to the market that he was a long-term investor. 'People think I sold out and I've got my money and gone and that's not true,' he said. 'I want people to know that I'm a committed insurance person. 'I'm making a number of statements by buying these shares. It shows I believe in the company and I'm putting my money up which shows I believe in the industry. 'I think it could be a billion dollar company again'." 236 Later in the article it was said - "Over the past three days, Mr Adler has bought 2.9 million shares at between $1.01 and $1.02 a share. The purchases have raised his personal stake to 8.3 million shares, or 1.8 per cent. Adler family interests control about another 3 per cent." 237 An article by Mr Westfield was published in the business section of The Australian on 28 June 2000, under the headline "Adler pays his way to save HIH". It began - "The market has written off Australia's second largest general insurer, HIH , and its share price is being kept above the $1 threshold only through support from director Rodney Adler. Had Adler not started his buying spree a fortnight ago after the company released an unconvincing explanation to the Australian Stock Exchange about its capital adequacy and earnings outlook, HIH shares would still be wallowing in the 90c range, perhaps lower." A little later it was said that "Adler's Adler Corp has topped up his family's interest in HIH to just over 5 per cent … ". 238 A brief note in the Australian Financial Review published on 7 July 2000 said that Mr Adler "has topped up his holding in HIH", referring to a s 205G notice for the purchase of 45,000 shares on 30 June 2000 and saying that it took "his total holding to 9,425 million". 239 The newspaper articles were admitted as evidence only of what was abroad in the market, not as evidence of the truth of their contents. There can be no doubt that the market perception, as brought about by and reflected in the financial press, was that the purchases in fact made by PEE using HIHC's money had been made by Mr Adler using his own money. From what Mr Adler said to Mr Westfield and Mr Mellish, he deliberately conveyed that picture to them and, through them, to readers of the financial press. He told Mr Mellish that he was making statements by buying the shares. He specifically said that he was "putting my money up". He did not correct the picture then presented through the articles. Nor did the s 205G notices expose the position; rather, the first s 205G notice was pointedly made known to Mr Westfield as a demonstration of Mr Adler's purchasing. 240 The appellants said that Mr Adler can not have intended to affect market perception because he stated that the 20 June 2000 conversations with Mr Mellish should be off the record. There was, of course, the earlier conversation, and Mr Mellish's evidence included that it was not uncommon for talk initially off the record to become on the record, as happened with the later conversation on 20 June 2000. But apart from that, even an off the record conversation would condition Mr Mellish to regard the share purchases as purchases by Mr Adler with his own money. Mr Adler did not correct what Mr Mellish wrote in the article of 21 June 2000. 241 The appellants pointed, to the contrary of the picture presented to the press at least so far as he referred to PEE as "a venture capital vehicle which has been set up principally with HIH", to what Mr Adler said to Mr Potts on 20 June 2000 when instructing the purchase of HIH shares, see earlier in these reasons, and to what Mr Adler said to Mr Carl Le Soeuf. 242 Mr Le Souef was an investor who knew Mr Adler and had participated with him in some small joint ventures. He said that at about a time which must have been when HIH issued the media release on 15 June 2000 he had a telephone conversation with Mr Adler, in which Mr Adler said words to the effect, "I am looking at setting up an investment vehicle, probably some form of trust arrangement, that will be funded by HIH which will be used in venture capital type of investments with hopefully give [sic] HIH a greater rate of return. At first it will be funded by HIH and later on we may look to other investors". 243 Mr Le Souef said that in the period around 20 June 2000 he read press articles indicating that Mr Adler had recently been buying HIH shares, which caused him to telephone Mr Adler. He said to Mr Adler, "Mate, aren't you already long enough in HIH shares?", meaning that Mr Adler already held a considerable amount of HIH shares, and that Mr Adler replied, "These shares were bought through the investment vehicle that we spoke about previously and were only bought for a trade". 244 These were all private communications. The communications with representatives of the financial press were otherwise. In my opinion, the trial judge's finding as to what Mr Adler wished to convey to the market was well open, and was correct. 245 There was ample evidence that giving the impression that Mr Adler's money was being used was a way of maintaining or stabilising the HIH share price. 246 Mr John Mesley, an experienced stockbroker, said in his affidavit - "6. In my experience, information that 'insiders' are buying shares in a company is a significant tip to 'outsiders' that the company is going well. By insiders I mean directors and executives of the company. 7. In normal situations insider selling is not an automatic sign of trouble within a company. There are many reasons that insiders might sell. Generally, however, the only reason in my experience that insiders will buy is because the stock is undervalued and will eventually go up. 8. In my experience, there is no better indication as to the probable success of a stock than that people in the company are putting their own money into it. As a stockbroker advising clients I would use this information to advise them on the merits of an investment in the company. 9. Normally, public knowledge that an 'insider' has recently bought shares will increase demand for the shares with a consequent increase in the share price, even more so where the size of the investment by the 'insider' is substantial. 10. Based on my experience, I consider that disclosure to the market that an 'insider' was investing millions of dollars buying shares in HIH in, say, June 2000 would have been likely to result in the share price of HIH being materially higher than what it would otherwise have been." 247 Mr Potts, also an experienced stockbroker, said having read Mr Mesley's affidavit - "I agree with the general proposition that purchases by directors of shares in their companies can encourage others in the market to purchase those shares as well. However, I am also of the view that recommendations made by market analysts can also influence and encourage others in the market to purchase shares in companies that are recommended by those analysts. In this regard I am aware and have been shown the following recommendations made in respect of HIH." 248 Mr Potts then referred to two recommendations, one in a Salomon Smith Barney report dated 9 June 2000 and the other in a UBS Warburg "company update" on HIH dated 16 June 2000, and to HIH's media release of 15 June 2000. He said that these "could encourage others in the market place to purchase HIH shares during this period", and that recommendations by major brokerage houses such as Salomon Smith Barney and UBS Warburg "are likely to cause institutional buying" with a more significant impact on the volume of shares traded. 249 The Salomon Smith Barney report categorised HIH shares as "Outperform, High Risk" and as trading "at a 39% discount to our fundamental valuation of A$1.85". The UBS Warburg company update recommended "Hold" with a valuation of $1.39, although it said that "the outlook continues to remain difficulty for HIH due to a weak capital position and the deterioration of workers compensation markets, both domestic and international". No doubt different opinions could be reached, and two only are not a fair indication. But that is not the point. The market price of HIH shares had fallen, to Mr Adler's dismay, and Mr Adler had foreseen nil profit and thought that the as yet unannounced profit results were going to be lousy. Even if recommendations by market analysts could encourage the buying of shares, that was not inconsistent with encouragement by information that the insider was buying shares (which may well, of course, have been something that market analysts would take into account). 250 The fact is that the decline in the traded price of HIH shares was for a time halted and reversed. Mr Potts agreed on a mechanism, that but for the purchase by PEE of fairly large numbers of shares sellers might have lowered their limits and the price might have fallen, and agreed that the PEE purchases in the period 15-30 June 2000 would have "some influence" on the market price, either preventing it falling or causing it to increase. Mr Mesley's cross-examination brought agreement that he could not say whether the normal rule to which he referred in para 9 of his affidavit applied to HIH in June 2000 without knowing more about HIH than he knew, and reduced the opinion as to likelihood in para 10 of the affidavit to one of possibility. Even without opinions as to the effect in fact on the traded price of it becoming known that Mr Adler was buying shares in HIH, that he intended that there should be an effect was a conclusion well open to the trial judge. The opinions as to effect in fact did not count to the contrary; although qualified to some extent, they supported the conclusion. 251 Why, then, would Mr Adler have had the purpose of maintaining or stabilising the HIH share price? 252 It is unlikely to have been part of short-term trading in the shares, as said by Mr Adler to Mr Howard on 15 June 2000 when explaining why the $10,000,000 was needed that day and to Mr Potts on 20 June 2000 when instructing him to buy shares. It was also said in the Minter Ellison schedule of facts, para H, and the letter to ASIC of 22 December 2000: no more need be said of the reliability of these. 253 First, making the purchases known in the market place by prompt s 205G notices, well before the time required by law and including specifically drawing Mr Westfield's attention to the first s 205G notice, was detrimental to the short-term trading. It had the potential, at the least, to maintain or increase the price at which PEE purchased shares, instead of PEE purchasing at unaffected prices with a view to making greater profits when selling in the short term. It was inconsistent with the objection of short-term trading. 254 Secondly, Mr Adler did not cause the shares to be sold in order to take a short-term profit. According to Mr Potts when Mr Adler declined to raise his limit beyond $1.02/$1.03 he said that he intended to sell when the price got higher. He did not. After the zenith in the vicinity of $1.20 in mid-July 2000, the traded price gradually fell. Yet still there was no sale. The appellants said that selling in mid-July 2000 was not mandated, and that opinions could differ on when the price of shares had reached the cusp. Inherent in this was that Mr Adler thought that the shares had not reached the cusp. The fall in the traded price of the shares after mid-July 2000, in the light of the earlier consistent decline, was a clear indicator of a poor short-term future. More important, Mr Adler can not have thought there was a good short term future. 255 In a confidential letter to Mr Williams dated 6 September 1999 Mr Adler had told of "my fears and concerns regarding HIH". He had said - "Ray, HIH is in turmoil. It is not a question of profitability, it is a question of survival. Leaving aside the raw fundamentals which are net assets of just shy of 70c therefore HIH is already trading 2½ times book, a solvency margin that does not allow for further growth and an investment strategy which is not only conservative but is so conservative that it does not maximise the opportunities that currently exist in the market. The company has no vision nor any real structure that will successful lend itself to the 21st Century. I would like to outline in point some of the main areas of my concern. … " 256 Mr Adler set out a number of points, and said - "The facts of the matter are that with a solvency ratio of just over 40%, a low share price, monumental good will on the balance sheet (which means you start every year negative $15 million in a profit and loss sense), a rising interest rate environment which is positive for insurance side but negative for the investment strategy undertaken, a tired and outdated management structure and worse, much worse no strategy or appreciation of the above problems. My only conclusion is that you should sell the company as soon as possible or limp on disappointing the market for next few years. I do not believe the company will collapse and I believe all the problems can be rectified but you need to have 'heart' and 'determination' and apart from you and Dominic those two attributes are sadly missing." 257 In January 2000 Mr Adler had forseen no profit in that year. There had been a correction in the equities market, and Mr Adler had told Mr Mellish that the profit results were going to be lousy. 258 Then Mr Adler wrote another letter to Mr Williams dated 18 October 2000, marked confidential but copied to other members of the Board. It was modelled on the earlier letter, again telling of Mr Adler's "fears and concerns regarding HIH", and after stating that Mr Williams had made the right decision to retire and stating four "major mistakes" made by HIH under his leadership in the past three years said - "Ray, HIH is in turmoil. It is not a question of profitability, it is a question of survival. Leaving aside the raw fundamentals: our stated net assets are just shy of $0.90 (which noone believes), an acceptable solvency margin, however, that probably does not allow for future growth and an investment strategy which is not only conservative but is so lacking in foresight that we will not be able to maximise any opportunity that currently exists in the market. The Company has no vision nor any real structure that will successfully lend itself to the 21st Century. The Group structure of HIH is hopelessly inefficient, every product has a General Manager and basically, its own computer system. There is no centralised approach to customer attraction and marketing. It is virtually impossible to cross-market with the structure currently employed. By definition, there are no economies of size and all the legacy systems cannot easily talk to each other. In other words, HIH is a co-operative of individual companies which market only one product therefore, the reality is separate fiefdoms are the of the day. We are we now, post-sale to Allianz? – we are still a large Australian insurer, probably in the top five by premium income, broker-led, commercially oriented and highly reliant upon a S & P rating which will, more than likely, drop a notch to just below investment grade within a month. Why have I been selling shares when all the other Directors are buying? – very simply, there is no vision, no plan, no understanding of the future – it is not an asset problem that scares me and not even the lack of profitability, it is cash flow that wakens me at night. Solvency is not an issue – paradoxically, if what I believe will happen transpires, our solvency will be at its highest level when, not if, S & P reduces us to just below investment grade or worse. At that time, the Broking community will start to move their quality business, we will become cash flow negative, we will start selling good assets to meet claims, we will accept business that we should not, we will slowly die the death of a 'thousand cuts'. Simplistic, yes, unfortunately, realistic – I could expand but the above is a succinct summary." 259 Mr Adler went on to say that there was "not much time left" to make the right decisions for HIH, and to suggest major changes; but to say, "Simply, I believe, the lack of any vision and structure will cause us to panic and sell the Company to the first real bidder at an unacceptable price." 260 Mr Adler concluded a fax to his fellow directors of HIH dated 12 December 2000 commenting on the draft Chairman's Address, "we must state that the company is in serious trouble". 261 These clear indicators of Mr Adler's views, embracing June-September 2000 and reflecting back on that period, may or may not have been consistent with confidence in the "medium term outlook of the company" or the "medium to long term in HIH" as stated to Mr Mellish. They are not consistent with retention of the shares purchased by PEE for a short-term profit after the price began to fall in mid-July 2000. The short term, in Mr Adler's belief as revealed, was dismal. The position stated in the schedule of facts to the Minter Ellison report, which could only have come from Mr Adler, that Mr Adler thought the shares were undervalued and that there was "no real reason for the recent fall in the share price and … it was likely that the share price would bounce back", is very difficult to accept. 262 There is, in my opinion, a compelling case for the conclusion that Mr Adler's purpose in causing PEE to purchase the HIH shares was not to make a quick profit, but was as found by the trial judge. 263 It may fairly be asked why, if Mr Adler's purpose was as found by the trial judge, he did not sell his own shares in mid-July 2000 or before the resumed decline in the traded price had gone too far, rather than in and after September 2000. The most obvious answer is that it would have been too gross a contradiction of what Mr Adler was saying to the market, through Mr Westfield and Mr Mellish, for him to have sold his shares within weeks. The commencement of his sales coincided with a media release by HIH reporting a joint venture arrangement with another insurer and extolling HIH as "financially strong and positioned for the future", perhaps thought the earliest and optimum time for the sales. The shares bought by PEE, however, were not sold. There may be other answers. Even without a clear answer, I consider that on the materials to which I have referred the conclusion to which the trial judge came was well open to him, and it has not been shown to be erroneous. 264 The trial judge noted other matters in coming to his conclusion as to Mr Adler's purpose. I do not think it necessary to refer to them, since I consider they are peripheral to the core reasoning to the effect explained above. Even if they be discounted, the finding should stand. One matter, however, is that the trial judge noted that Mr Adler had not given evidence that his purpose was to make a quick profit. This is part of the Jones v Dunkel question later considered. For reasons then given, it was open to the trial judge to draw a Jones v Dunkel inference against Mr Adler in this respect, but even if it were not in my opinion his finding should stand. 265 It follows that the position as stated in the Minter Ellison report, which could only have come from Mr Adler, that he caused PEE to purchase the shares because he saw the fall in HIH's share price as a good trading opportunity "and expected to make a quick profit and boost the funds of the Trust", can not be accepted. The trial judge did not accept it, and was entitled not to do so. 266 It does not follow that Mr Williams shared Mr Adler's purpose. The trial judge was not prepared to find that he did, noting in particular that, while Mr Williams as a significant shareholder could be moved to try to maintain or stabilise the price of HIH shares in a falling market, he did not sell any of his shares. ASIC did not submit to the contrary in the appeal. 267 But it is notable that at no time did Mr Williams cause to be corrected the impression conveyed to the market that the share purchases were by Mr Adler using Mr Adler's money. I have earlier referred to the fax of 19 June 2000 putting Mr Williams on notice of the press reports; the press reports were wrong, as he would have known. He stood by with knowledge that Mr Adler was conveying an incorrect impression. Contravention by HIH and HIHC of s 208 of the Act 268 The contraventions of s 208 of the Act by HIH and HIHC underlie the contraventions of s 209(2) by Mr Adler, Adler Corporation and Mr Williams. If there were no contraventions by HIH and HIHC, there would be nothing in which Mr Adler, Adler Corporation and Mr Williams could be involved. It is convenient, therefore, first to consider the underlying contraventions. 269 Section 208(1) provides - " (1) For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company: (a) the public company or entity must: (i) obtain the approval of the public company's members in the way set out in sections 217 to 227; and (ii) give the benefit within 15 months after the approval; or (b) the giving of the benefit must fall within an exception set out in sections 210 to 216." 270 Section 210 provides - " 210. Arm's length terms Member approval is not needed to give a financial benefit on terms that: (a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm's length; or (b) are less favourable to the related party than the terms referred to in paragraph (a)." 271 By s 209(1), if the public company or entity contravenes s 208 the contravention does not affect the validity of the relevant transaction and the public company or entity is not guilty of an offence. By s 209(2), the sanction is imposed on any person who is involved in the contravention - "(2) A person contravenes this subsection if they are involved in a contravention of section 208 by a public company or entity." 272 Section 229 of the Act provides - " 229 . Giving a financial benefit (1) In determining whether a financial benefit is given for the purposes of this Chapter: (a) give a broad interpretation to financial benefits being given, even if criminal or civil penalties may be involved; and (b) the economic and commercial substance of conduct is to prevail over its legal form; and (c) disregard any consideration that is or may be given for the benefit, even if the consideration is adequate. (2) "Giving a financial benefit" includes the following: (a) giving a financial benefit indirectly, for example, through 1 or more interposed entities; (b) giving a financial benefit by making an informal agreement, oral agreement or an agreement that has no binding force; (c) giving a financial benefit that does not involve paying money (for example by conferring a financial advantage). (3) The following are examples of "giving a financial benefit" to a related party: (a) giving or providing the related party finance or property; (b) buying an asset from or selling an asset to the related party; (c) leasing an asset from or to the related party; (d) supplying services to or receiving services from the related party; (e) issuing securities or granting an option to the related party; (f) taking up or releasing an obligation of the related party." 273 The allegations of contraventions of s 208 by HIH and HIHC were pleaded as follows - "61. As at 15 June 2000, the following persons were related parties of HIH and HIHC: 61.1 Adler, by reason of his directorship of HIH; 61.2 Adler Corporation by reason of the fact that Adler was a director and it was controlled by Adler; 61.3 PEE by reason of the fact that Adler was a director and it was controlled by Adler. 62. The payment of $10 million by HIHC to PEE on 15 June 2000 amounted to the giving of a financial benefit to each of PEE, Adler Corporation and Adler. 63. HIH did not obtain the approval of its members in relation to the payment of $10 million to PEE in the way set out in sections 217 of the Corporations Law . 64. By reason of the matters referred to in paragraphs 3.5, 61, 62 and 63 above, HIH and HIHC contravened section 208 of the Corporations Law ." 274 Paragraph 3.5 of the statement of claim alleged that HIHC was controlled by HIH. It will be noted that the paragraphs identified in para 64 did not in terms allege that the financial benefit was given on reasonable arms length terms within s 210(a), or terms less favourable to the related party than reasonable arms length terms within s 210(b). Allegations of that nature, expressed as to the terms of the AEUT and HIH's subscription for one B Class unit for $10 million rather than as to the payment of the $10,000,000 on 15 June 2000, were made in para 40. 275 When the $10,000,000 was paid on 15 June 2000, the AEUT did not exist. Taken at face value, the allegation in para 62 that the payment of the $10,000,000 on 15 June 2000 amounted to giving a financial benefit excluded any regard to the AEUT. On the other hand, from the allegations that AEUT was constituted as a means of accounting for the payment of the $10,000,000 (para 35) and that the terms of the AEUT would not have been reasonable arms length terms and were not less favourable than reasonable arms length terms (para 40), the allegation in para 62 was not to be taken at face value, but in some manner took up regard to the AEUT. This obscurity caused some difficulty at the trial, as will appear. 276 But it should be noted that the defences also called for regard to the terms of the AEUT. Paragraph 27 of the defence of Mr Adler and Adler Corporation answered para 33 of the statement of claim, in which the constitution of the AEUT by the deed poll of 7 July 2000 was alleged, by saying that "the trust was constituted at the time of the payment by HIHC of the $10 million to PEE", and that its terms were evidenced by the deed poll later executed. The defence of Mr Williams to the original statement of claim was hopelessly uninformative, and he did not file a defence to the statement of claim in its final form, but he did not take a different stance. Again in some manner the payment of the money on 15 June 2000 was linked with the AEUT. 277 There was no dispute over paras 3.5, 61 and 63 of the statement of claim. HIH controlled HIHC. Mr Adler was a related party of HIH because he was a director. PEE was a related party of HIH, within the definitions in s 228 of the Act, because Mr Adler was a director of HIH and controlled PEE. No members' approval was obtained, nor did any of the exceptions referred to in s 208(1)(b) of the Act apply. 278 The questions at the trial were whether the payment of the $10,000,000 by HIHC to PEE was giving a financial benefit to PEE, Mr Adler and Adler Corporation and, if so, whether the financial benefit was given on reasonable arms length terms within s 210(a). Terms less favourable to the related party than reasonable arms length terms did not arise. As the trial was conducted, any niceties of distinction between benefiting PEE, Mr Adler or Adler Corporation were ignored. If yes and no to the questions, both HIH and HIHC contravened s 208 of the Act. 279 The trial judge said - "Leaving aside to begin with the terms of the AEUT Trust Deed entered into on 7 July 2000, and concentrating on, to use the words of para 62 of the Statement of Claim 'The payment of $10 million by HIHC to PEE on 15 June 2000', the starting point is the characterisation of that payment". 280 He noted ASIC's "preferred characterisation" of the payment of the $10,000,000 as an interest free unsecured loan, with the alternative characterisation that the $10,000,000 was held by PEE on trust for HIHC. In either case, ASIC contended that a financial benefit was given. His Honour noted the appellants' characterisation of the payment, as "the only available finding", as one of trust of the money. He noted the appellants' ensuing argument, that because the money and the the HIH shares then purchased by PEE were held on trust for HIHC, HIHC had an asset or assets worth no less than $10,000,000 (judged as at the date of each purchase) and there could not have been any financial benefit given to PEE, Mr Adler or Adler Corporation. 281 The trust in ASIC's alternative characterisation, from the discussion later in the trial judge's reasons, was on the terms of the AEUT found in the trust deed of 7July 2000. 282 The trust in the appellant's characterisation was a different trust. The trial judge noted the appellants' reasoning - "The initial correspondence on 9 June 2000 from Mr Adler to Mr Williams, in referring to a loan from HIH to Drenmex, was overtaken by the circumstances which prevailed by 15 June 2000 whereby (it is said) any idea of a loan was replaced by an intention to create a trust, or otherwise the circumstances gave rise to a resulting trust such that the $10 million and any HIH shares acquired were held absolutely for HIHC." 283 This trust was either some kind of express trust ("an intention to create a trust") or a resulting trust. It must have arisen on 15 June 2000, and necessarily excluded the terms of the AEUT trust, since for the appellants' ensuing argument the money or the shares had to be held absolutely for HIHC. 284 It does not seem to have been in dispute that, if the payment of the $10,000,000 was characterised as an interest free unsecured loan, a financial benefit was given to PEE, Mr Adler and Adler Corporation, or that any financial benefit which was given was given to all three of them. 285 The trial judge did not resolve the characterisation of the payment. He did set out the appellants' argument against its characterisation as a loan. On the other hand, he pointed to difficulties arising if, by reason of the trust, HIH were to be regarded as holding shares in itself through HIHC (see in particular s 259C of the Act). In the course of doing so he said that, for that and other reasons, the transaction would hardly meet the description in s 210 of arms length terms - "176. … That is to say it is hardly on terms that "would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm's length". Even assuming the propriety of the overall transaction and accepting that a financial benefit is given, one would not consider it "reasonable" (within s210) for the transaction to involve a purchase of shares in the parent HIH, to be paid for by its wholly owned subsidiary HIHC, without any legal documentation whatsoever nor any prospect of security. If (as the Defendants say) the general law of trusts may be invoked to confer remedial protection in this unsatisfactory state of affairs, from HIH/HIHC's viewpoint, that is hardly to render the terms of any financial benefit "reasonable" in any arm's length sense. In particular, HIHC could never have obtained a valid transfer of the shares (see s259C). Moreover s259B would preclude taking security over the relevant shares further to protect its interest." 286 The trial judge addressed giving a financial benefit on the appellants' characterisation of the payment. After referring to s 229 and the wide meaning to be given to "financial benefit", he said - "182 The Defendants argue that from 15 June 2000 it was only the bare legal title to the sum of $10 million and the shares bought with part of that sum, which were held by PEE. The entire beneficial interest was held by HIHC. They say there cannot therefore be any financial benefit conferred on PEE, Adler Corporation or Mr Adler on 15 June 2000 by reason of the $10 million payment made that day. But that cannot be right. First, it was intended from the outset, before any purchases took place, that Mr Adler or interests associated with him, would have a 10% interest. That this started with Drenmex, subsequently replaced by PEE, is nothing to the point. Clearly Mr Adler never forewent that 10% interest. Second, there is the financial benefit in a practical sense of PEE having control over the sum of $10 million and legal title, even if bare, to the shares. That must be a real benefit looking, as s229 directs, to economic and commercial substance, even if as the Defendants' contend the beneficial interest resides with HIHC. Remember even on that hypothesis, this is in circumstances where a transfer to HIHC of the HIH shares would have been precluded, as would any protective charge. Clearly the terms of s229 are wide enough to embrace these kind of benefits as "financial benefits". CONCLUSION 183 The payment of $10 million by HIHC to PEE on 15 June 2000 amounted to the giving of a "financial benefit" to each of PEE, Adler Corporation and Mr Adler within the meaning of s229 of the Corporations Act. Further, the terms of that financial benefit so given were not, within the meaning of s210 of the Corporations Act , what it defines as "arm's length", so as to be saved by that exception in s210. As a result both HIH, and HIHC being an entity which it controlled, contravened s208 of the Corporations Law (with equivalent result under the Corporations Act ). That result follows even on the Defendants' characterisation of the relevant payment as giving rise to a trust over the shares in HIH acquired out of the A$10 million, as well as over the balance of the A$10 million. It would clearly arise if the payment of $10 million were characterised as an (undocumented) unsecured borrowing with no provision for interest. Finally, I am satisfied that the Plaintiff's pleadings in paragraphs 61 to 64 have sufficiently identified the elements required to be established by the Plaintiff to found this conclusion, which is amply supported by the evidence. That result is not altered by the earlier pleading in relation to the formation of AEUT, to be found at paras 33 to 40 of the Plaintiff's Statement of Claim." 287 The trial judge then said - "184. I need now to turn to the constitution of AEUT on 7 July 2000 and the implications of that as it bears on the foregoing matters." 288 His Honour referred to ASIC's "alternative reasoning, pleaded by the earlier-mentioned paragraphs", and referred to para 40 of the statement of claim. His Honour noted the appellants' contention that the terms of the AEUT trust deed did not fall for consideration because the pleading of the contravention was limited to the payment of $10,000,000 on 15 June 2000 and predated the trust deed. He said, "If that be right, then my earlier finding simply stands against the Defendants, with the consequence that the application of s 210 in relation to the later trust deed does not arise", but that he would go on to deal with "that further argument, recognising that it was debated by the First and Fourth Defendants in any event". 289 The "further argument" then dealt with was ASIC's submission that the terms of the AEUT trust deed were highly prejudicial to HIH's interests, an argument supported by reference to the evidence of Mr Roderick Cameron called in ASIC's case. His Honour discussed that and other evidence and submissions, and expressed his conclusion - " CONCLUSION 193 In so far as the provisions of the Trust Deed for AEUT may be taken into account in determining whether a contravention of s208 of the Corporations Act occurred, though entered into some weeks after the payment, the relevant dealing was not within the arm's length exception in s210 from the prohibition on dealings with a related party without shareholder approval. There was a "financial benefit" given, within the meaning of s229 of the Corporations Act in access to the $10 million, the more so given lack of proper safeguards. This is so whether or not the $10 million was initially impressed with a trust or was an unsecured borrowing until AEUT was formed. There were indeed lacking the safeguards that would be reasonable in the circumstances. These circumstances include that Mr Adler was himself a director of HIH and his associated interests had a significant shareholding in HIH, and thus he had a potential conflict of interest as he did with respect to Adler Corporation's unlisted investments which he planned to sell to AEUT. The Trust Deed, lacking such safeguards, was grossly inadequate, in the respects pleaded and as particularised in para 40 of the Plaintiff's pleading." 290 The obscurity causing difficulty earlier mentioned can now be better appreciated. While the appellants' argument focused on the payment of the $10,000,000 "on 15 June 2000", with emphasis on the date, it extended to the subsequent share purchases insofar as it took account of the purchases and it was said that judged at the date of each purchase HIHC obtained an asset worth no less than what was paid for it. The argument did not go to the extent of regard to the terms of the AEUT, contrary to the defence whereby the trust was constituted at the time of the payment of the $10,000,000 on the terms of the later executed deed poll, but it did go beyond mere payment of the $10,000,000 on 15 June 2000. ASIC's "further argument" went further, to regard to the terms of the AEUT trust deed. 291 When it came to submissions at the trial the appellants were not arguing that the trust constituted at the time of the payment of the $10,000,000 was on the terms of the later executed deed poll. It is not certain that ASIC was arguing that either. I later suggest that the pleading was capable of encompassing what was done with the money after it was paid on 15 June 2000. With respect, it is not clear what the trial judge meant when he spoke of "the implications of [the constitution of AEUT on 7 July 2000] as it bears on the foregoing matters". In the trial judge's attention to that matter the regard to the terms of the AEUT trust deed and HIH's subscription for the B Class unit did not go to whether a financial benefit was given as well as to whether, as para 40 of the statement of claim alleged, the terms of the AEUT trust deed and HIH's subscription for the B Class unit would not have been reasonable in the circumstances if HIH or HIHC and PEE were dealing at arms length. The reasons at this point were concerned with the latter, although in the conclusion it was said that there was a financial benefit given in access to the $10,000,000, the more so given the lack of proper safeguards. 292 In the result, however, contraventions of s 208 were found whether the payment of the $10,000,000 on 15 June 2000 was as an interest free unsecured loan, whether the money was trust money held by PEE on trust for HIHC on an express trust or a resulting trust (but not on the terms of the AEUT trust deed), or whether the money was trust money held by PEE on trust for HIHC on the terms of the AEUT trust deed. 293 On appeal the parties maintained the characterisations put to the trial judge and, perhaps with some refinements, the arguments put to him. In particular, the appellants said that ASIC's case was confined to the payment of the $10,000,000 by HIHC to PEE on 15 June 2000, with emphasis on the date, and that regard could not be had to the terms of the AEUT trust deed; they said that the trial judge erred in treating the terms of the AEUT trust deed as relevant to the contraventions. Their position was, and was only, that the $10,000,000 was held on a bare trust for HIHC as the sole beneficiary – hence no-one was given a financial benefit. For its part ASIC urged characterisation as a loan, and if the characterisation was as a trust, adopted the trial judge's consideration of the AEUT in his paragraphs leading to para 193 set out above and that conclusion. 294 I do not think that the character of the payment of the $10,000,000 is essential to whether the payment of the $10,000,000 to PEE on 15 June 2000 was giving a financial benefit to PEE, Mr Adler and Adler Corporation. It is nonetheless appropriate, in the light of the arguments presented, to take a course similar to that taken by the trial judge. 295 If, as the appellants urged, ASIC's case be confined to the position as at 15 June 2000, in my opinion the preferable characterisation of the payment of the $10,000,000 by HIHC to PEE was as an interest free unsecured loan. 296 The initial request by Mr Adler's fax of 9 June 2000 was for a loan to Drenmex or one of its wholly owned subsidiaries. On the same day Mr Williams agreed to the request. On 14 June 2000 Mr Williams gave instructions for the money to be paid. Mr Adler's fax of 14 June 2000 changed the borrower to PEE, but the original request and agreement otherwise remained. 297 The appellants submitted that by 15 June 2000 "any idea of a loan was replaced by an intention to create a trust". They relied on the evidence of Mr Adler's conversations with Mr Williams as told to Mr Howard, on the internal receipt voucher, on Mr Baulderstone's letter of 19 June 2000, and on the references to a trust in Mr Adler's conversations with Mr Westfield, Mr Le Soeuf and Mr Potts. (In Mr Williams' case, the reliance on evidence of Mr Adler's conversations with Mr Williams does not seem consistent with his submission later considered that as against him it was inadmissible hearsay.) 298 Mr Adler told Mr Howard that he had had conversations with Mr Williams "that the trust may or may not purchase other venture capital investments … ". Assuming that this could be used as evidence that Mr Adler and Mr Williams had had conversations speaking of a trust as the investor, and presumably therefore as the recipient of the $10,000,000 to be used for the investment, it is common in commercial life for a trustee to be a borrower and for a trust to be referred to as a borrower. An obvious illustration is that Intagro was the trustee of Intagrowth, a unit trust, that the $500,000 was lent to it, and that the loan was referred to as a loan to the trust. The conversations speaking of a trust were consistent with PEE as trustee borrowing the $10,000,000. Similarly, the references to a trust in the conversations with Mr Westfield, Mr Le Soeuf and Mr Potts, some of course later than 15 June 2000, do not make the $10,000,000 trust property as distinct from borrowed money. What is absent is acceptable evidence that, as at 15 June 2000, as between Mr Adler for PEE and Mr Williams for HIHC the money was to be subscribed for units in and become trust property in a unit trust. 299 Mr Adler may have had in mind the constitution of a unit trust, to which the $10,000,000 would be directed and of which it would become trust property. Apart from "units" in the internal receipt voucher, the first explicit suggestion of a unit trust was Mr Baulderstone's letter to Minter Ellison of 19 June 2000, but the letter of 28 June 2000 from Ms Taylor shows that the unit trust the subject of the letter was not yet the chosen vehicle. Still if ASIC's case be confined to the position as at 15 June 2000, the initial character of a loan remained. From HIH's point of view the payment was made as a loan, because the letters describing it as a loan were what Mr Fodera was given and what the HIH personnel acted upon; it was also accounted for within HIH as a loan. Anything in Mr Adler's mind reflected in the internal receipt voucher was not shown to have been communicated to HIH or HIHC. 300 The appellants also relied on the schedule of facts in the Minter Ellison report and the Schedule of Events in the letter to ASIC. For reasons by now apparent, they are not reliable evidence that as at 15 June 2000 Mr Adler and Mr Williams had determined on what became the AEUT, or on a unit trust at all. Acknowledging that the AEUT had not been constituted as at 15 June 2000, the appellants nonetheless said that a payment made as an investment before the execution of a trust deed should be treated as trust money for investment rather than a loan, citing Hunters Beach Investments Pty Ltd v Braams (2001) 38 ACSR 71 at 40-46. This, however, does not take matters any further. In Hunters Beach Investments Pty Ltd v Braams it was agreed that there should be a unit trust and that the investment would be by purchase of units, but the documentation was delayed. What is presently in question is the initial character of the investment. 301 It was still not in contest in the appeals that, if the $10,000,000 was paid by HIHC to PEE as a loan, a financial benefit was given to PEE, Mr Adler and Adler Corporation. In the Adler appellants' submissions it was said that giving a financial benefit depended on whether the $10,000,000 "was held entirely on trust by PEE for HIHC as the sole beneficiary". At one point counsel for the Adler appellants said, "I am not going to attempt an argument about an unsecured borrowing, I am running an argument about a trust", and at another point he said, with refreshing brevity, "If I can't persuade your Honours on the terms of the trust as at 15 June, I'm gone.". 302 Nor is it seriously open to contest that the terms of the loan would not be reasonable in an arms-length transaction. There was no security, the use of the money was entirely at the discretion of PEE (perhaps subject to a "limit on any one particular venture or share trade"), and interest depended on profitable use of the money; PEE was controlled by one man, known to favour less conservative investment policies than those in place at HIH; he was also a director of HIH. Such a loan by HIHC in an arms length situation would have been quite unreasonable. 303 On this preferred approach, in my opinion the questions should be answered yes and no, and HIH and HIHC contravened s 208 of the Act. 304 I will consider, however, how the $10,000,000 might have been held on trust. The appellants argued for an express trust or alternatively a resulting trust. They disclaimed whatever is involved in a Quistclose trust, which it is fortunately not necessary to explore. 305 The appellants' argument for an express trust can not be supported on the evidence, and otherwise has its own difficulties. The AEUT was not constituted as at 15 June 2000, and no other formal trust was agreed. Nor, on the evidence, was there an express agreement or a common intention that the $10,000,000 would be held by PEE on trust for HIHC pending the constitution of the AEUT or some other formal trust. At best for the appellants, if the initial loan arrangement had fallen away in favour of investment in a unit trust to be constituted in the future, and the documentation as to which Mr Williams told Mr Howard to "make sure Rodney follows through with the documentation" was yet to come, until the unit trust was constituted the law would impose a trust on PEE: Hunters Beach Investments Pty Ltd v Braams. This could be described as a resulting trust, although for present purposes it would be better to avoid debate over terminology. 306 But in the circumstances as revealed by the evidence the trust would not be a bare trust of the $10,000,000 under which PEE held the money entirely on trust for HIHC as the sole beneficiary. The purpose in Mr Adler's fax of 9 June 2000 remained, under which the money was to be used for venture capital and share trading and PEE was entitled to 10 per cent of profits. Even before the money was paid over it was known that some shares in HIH had been purchased and that the money was needed "to settle the trades", and the trustee was engaged in active investment duties. If there were a bare trust of the money, PEE would immediately have been in breach of trust. It would be absurd so to conclude, and any trust imposed by law would have to take up the faxes of 9 June 2000. Assuming this trust imposed by law, still a financial benefit was given to PEE, Mr Adler and Adler Corporation. PEE had $10,000,000, which it had previously not had, for investment in joint venture capital and share trading, which was the giving of "finance or property" within s 229(3)(a) of the Act. It was entitled to 10 per cent of any profits. 307 There was no security in the nature of a charge. PEE was subject to the obligations of a trustee, although as later explained that is neither an answer to the financial benefit in having the money nor an answer to unreasonableness, quite apart from the entitlement to share in the profits. The trustee had unfettered discretion, was controlled by one man known not to be risk adverse, and was in the position of an investment manager but outside HIH's normal criteria. The circumstances were quite different from investing money in an established investment vehicle after prudential investigation. And, as the arguments in the proceedings show, from inadequacy of documentation the very basis of the payment of the money was open to contest. The financial benefit was not given on terms which would be reasonable in an arms length transaction. 308 Let it be assumed, however, that as at 15 June 2000 the $10,000,000 was held by PEE on a bare trust, and was held entirely on trust for HIHC as the sole beneficiary. This was the nub of the appellants' argument, namely, that where the entire beneficial interest in the $10,000,000 was held by HIHC there can not have been a financial benefit conferred on PEE, Mr Adler or Adler Corporation on 15 June 2000 by reason of the payment of the $10,000,000 on that day. According to the argument, the law would preclude PEE from obtaining any benefit from the money or the use of the money otherwise than with the fully informed consent of the beneficiary, and it was axiomatic that in those circumstances it could not be said that any financial benefit was given to PEE or, through it, to Mr Adler or Adler Corporation. 309 I do not think that this argument should be accepted. It is not consistent with the direction in s 229(1) of the Act to give a broad interpretation to financial benefits being given, and to have regard to economic and commercial substance rather than legal form. One of the examples of giving a financial benefit, in s 229(3)(a), is "providing the related party finance or property". The reality remains, even on the assumption of the bare trust, that PEE had $10,000,000 which it did not have before. The money could be used for its benefit, and for the benefit of Adler Corporation and Mr Adler, as it was in fact used, and it will be recalled that in his letter of 30 November 2000 to Mr Cohen Mr Adler said that he approached Mr Williams "with an idea that I felt would be beneficial for myself (obviously) … ". 310 Amongst other things, the sorry tale earlier set out demonstrates that, although PEE lost money, Adler Corporation and Mr Adler benefited in consequence of the payment of the $10,000,000. They benefited from the ability to do what was done, whether or not the shares were purchased from Adler Corporation for more than their then value and whether or not the loans should not have been made. The evidence of what happened was relevant within the pleaded case to show, at the least, the potential exposed by the payment of the $10,000,000 on 15 June 2000, making the $10,000,000 available thereby being the giving of a financial benefit. Further, in the circumstances described above the payment of the $10,000,000 on 15 June 2000 was in fact a step on the way to the constitution of the AEUT and the money being treated as subscription for the B class unit, whereby PEE, Adler Corporation and Mr Adler obtained benefits, and on the facts of this case that was in my opinion part of the economic and commercial substance of the conduct comprised in the payment of the $10,000,000 on 15 June 2000. 311 True it is that, on the present assumption, by legal proceedings HIHC could have an accounting for the use of the $10,000,000, and could recover it and any profits gained by PEE or others (or at least others who took or gained with notice of HIHC's beneficial interest). But legal rights are not always able to be enforced effectively. It is everyday experience that a right to money is not as good as having the money, and that having money is better than being entitled to have the money. Having money is much better than not even having an entitlement to have the money, which was the position before the payment of the $10,000,000 (and as a present entitlement became the position under the AEUT). In my opinion, therefore, even on the appellant's best characterisation of the payment of the $10,000,000 on 15 June 2000, a financial benefit was given. 312 The appellants submitted that, if the terms of the trust were those imposed by the general law of trusts, they were by definition reasonable in the circumstances; alternatively, that because PEE was precluded from deriving any remuneration or other personal benefit from its role as trustee, the terms were less favourable to PEE than would ordinarily be negotiated in an arms length dealing. However, this requires an unduly limited view of the nature of the financial benefit and what constitutes the terms on which financial benefit was given. The terms on which the financial benefit was given were not to be found only in the assumed end result of the $10,000,000 being held by PEE entirely on trust for HIHC as the sole beneficiary. They included that the $10,000,000 was paid to PEE in circumstances in which, still on the present assumption, it was necessary that the law impose a trust because the payer and the payee had not concluded the arrangements for investment of the money. The assumption is itself questionable because of the absence of proper arrangements (and I have not felt able to agree with it). In an arms length dealing it would hardly be reasonable to pay over $10,000,000 to the company of an officer of the payer for discretionary investment, arguably leaving the general law of trusts to step in and save the payer from its folly. 313 In my opinion, therefore, the questions should still be answered yes and no, and HIH and HIHC contravened s 208 of the Act. 314 For understandable reasons, the appellants did not in their characterisation of the payment of the $10,000,000 assert that the money was held by PEE for HIHC under a remedial constructive trust, because received by PEE through misapplication by Mr Adler and/or Mr Williams in breach of their fiduciary or equivalent statutory duties: see Belmont Finance Corporation v Williams Furniture Ltd (No 2) (1980) 1 All ER 393 and later cases considered in Robins v Incentive Dynamics Pty Ltd (In Liquidation) [2003] NSWCA 71. If the contraventions by Mr Adler and Mr Williams of (for example) s 182(1) of the Act remain, that may be an available analysis of the position. It was not argued, and so it would be wrong to do more than note the availability of the analysis, but the analysis has some relevance to the appellants' arguments. It would be most odd if an officer of a company who had misapplied its money for his own benefit, or the knowing recipient of the money, could say that they had not benefited after all because the law imposed a constructive trust over the money in favour of the company. It is a different situation, but a thief remains a thief although in law the stolen property is held on trust for its owner (Black v S Freedman & Co (1910) 12 CLR 105). Closer to home, on the analysis presently postulated the company's money has been misapplied although it is held on constructive trust for the company, and in a real sense the recipient of the company's money has received a benefit although the recipient can be forced by legal process to give over the money and any profits to the company. 315 My reasons thus far are congruent with those of the trial judge. There is, however, some artificiality in this discussion of financial benefit. While para 62 of the statement of claim speaks of the payment of the $10,000,000 by HIHC to PEE "on 15 June 2000", in fact the money was applied in subscription for the B class unit in the AEUT and on any view financial benefits were thereby given to PEE, Mr Adler and Adler Corporation. The appellants' submissions sought to hold ASIC strictly to 15 June 2000, and they submitted that the trial judge went beyond ASIC's pleaded case in paying regard to the terms of the AEUT trust deed. The trial judge did so only as an alternative, and found the contraventions in any event. But in my opinion the obscurity earlier mentioned should be resolved, in accordance with my earlier observations upon the function of pleadings and particulars, adversely to the appellants' stricture. 316 The statement of claim had to be read as a whole. Paragraph 62 meant little unless one took account of, for example, the more detailed allegations of the payment of the $10,000,000, and of what PEE was; certainly it was appropriate to go beyond it in those respects. Para 40 of the statement of claim was not surplusage, it was there for a reason, and para 62 used the words "amounted to" with a reach beyond the appellants' stricture. In my opinion the allegation in para 62, read against the background of the allegations of constitution of the AEUT as a means of accounting for the payment of the $10,000,000 which had taken place on 15 June 2000 and, in para 40, of the arms length unreasonableness of the terms of the AEUT and the subscription for the B class unit, should not be read as confining attention to what occurred on 15 June 2000. The payment of the $10,000,000 on that day was the first step on the path to the money being held on the terms of the AEUT, and an allegation that it "amounted to the giving of a financial benefit … " is capable of encompassing what was then done with the money whereby there was the giving of the financial benefit through the constitution of the AEUT. ASIC's further argument was open to it on the pleading. 317 On this view, the appellants fare no better. PEE had $10,000,000 which it previously did not have, with an absolute discretion as to its use and de facto ability to apply the money or misapply the money and, at least in the way the AEUT was dealt with, continuance of the entitlement to 10 per cent of the profits. Adler Corporation gained an entitlement to income and capital, and through it Mr Adler gained a benefit. The general position that the trustee could not derive any remuneration or other personal benefit from its role as trustee was abrogated by the terms of the AEUT trust deed, and the reality was that Mr Adler procured PEE to act for his own benefit in the acquisition of the shares from Adler Corporation and the making of the loans. To repeat matters earlier mentioned, PEE was controlled by Mr Adler, who was known to favour less conservative investment policies than those in place at HIH and was also a director of HIH, and the terms of the AEUT left HIH the major contributor but with a minority voice in the Trust; HIH was locked in and had no effective control over its investment. If it was in contest that the reasonable arms length terms test was failed, it clearly was. 318 The appellants' submissions included that, in assessing whether any financial benefit was given on terms which "would be reasonable in the circumstances if the public company or entity and the related party were dealing at arms length" (s 210(a)), it was impermissible to take account of the fact that PEE, Mr Adler and Adler Corporation were related parties. This was described as "using for the s 210 comparison the very thing which is removed"; for example, it was said that the investment by the payment of the $10,000,000 or through the AEUT had to be seen as investment in a conventionally managed external fund rather than investment in a fund under the control of "the insider" Mr Adler. I do not accept this approach. Section 210(a) includes the related party as one of the parties dealing at arms length. In the hypothetical arms length dealing one party is still a related party to the public company, and the assumption is that there can be a dealing with the related party resulting in reasonable terms; it is not that the relationship is ignored. 319 Accordingly, on this approach also the questions should be answered yes and no, and HIH and HIHC contravened s 208 of the Act. 320 In my opinion, the trial judge's conclusion in this respect should not be disturbed. Contravention by Mr Adler and Adler Corporation of s 209(2) of the Act 321 Section 209(2) has been earlier set out: for convenience, it is repeated - "(2) A person contravenes this subsection if they are involved in a contravention of section 208 by a public company or entity". 322 Involvement in a contravention is dealt with in s 79 of the Act - " 79. Involvement in contraventions A person is involved in a contravention if, and only if, the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention." 323 The allegation of contravention of s 209(2) by Mr Adler was pleaded as follows - "65. By reason of his conduct as pleaded in, inter alia, paragraphs 15, 17 and 20 above, Adler: 65.1 aided, abetted, counselled or procured; 65.2 alternatively, induced; 65.2 alternatively, was knowingly concerned in or a party to the contravention of section 208 by HIH and HIHC and thereby contravened subsection 209(2) of the Corporations Law ." 324 The paragraphs of the statement of claim non-exhaustively identified in this, paras 15, 17 and 20, detailed the payment of the $10,000,000 as follows - "15. On 9 June 2000: 15.1 Adler sent a facsimile transmission to Williams, on the letterhead of Adler Corporation, in which he requested HIH to lend 'Drenmex', or one of its wholly owned subsidiaries, $10 million 'for the purpose of venture capital and share trading' ('the Adler facsimile'); 15.2 Williams replied to the Adler facsimile by a facsimile transmission in which he stated, inter alia, that the funds would be transmitted early the following week. ('the Williams facsimile')." "17. On 14 June 2000: 17.1 on a note written on the bottom of the Williams facsimile, Williams instructed Fodera to forward $10 million to Drenmex Pty Limited; 17.2 in a facsimile transmission on Adler Corporation letterhead, Adler advised Williams that 'for various tax, disclosure and accounting reasons' the $10 million should be advanced not to Drenmex Pty Limited but to 'Pacific Eagle Equity Pty Limited'." "20. Thereafter on 15 June 2000: 20.1 PEE was incorporated; 20.2 Fodera handed the Adler facsimile with Williams' handwritten instruction to forward $10 million to Drenmex to an employee of HIH, Bill Howard ('Howard'); 20.3 Fodera instructed Howard to speak with Adler concerning the $10 million payment; 20.4 Adler advised Howard that the $10 million was to be paid to PEE; 20.5 Adler advised Howard that Adler, on behalf of PEE, had placed an order or orders for the purchase of HIH shares on behalf of PEE and that the $10 million was urgently needed to pay for those shares; 20.6 Each of Fodera and Williams was made aware of the matters referred to in 20.4 and 20.5 above; 20.7 Fodera instructed Howard that the $10 million was to be paid out of the HIHC operating account rather than being paid out through the HIH investments department; 20.8 Fodera instructed Howard to pay the $10 million; 20.9 a cheque for $10 million drawn on an account of the National Australia Bank in the name of HIHC and payable to PEE was drawn, signed by two employees of HIH and provided to Adler." 325 The allegations of contraventions by Adler Corporation, all through involvement in other contraventions, were globally pleaded in para 98 of the statement of claim. I will set it out in full at this point, although prestently relevant only to contravention of s 209(2), and will refer back to it as appropriate in relation to other contraventions. Paragraph 98 was as follows - "98. By reason of the matters pleaded in paragraphs 15 to 60 (inclusive), Adler Corporation: 98.1 aided, abetted, counselled or procured; 98.2 alternatively induced; 98.3 alternatively was knowingly concerned in or party to; the following contraventions: 98.4 the contraventions by HIH and HIHC pleaded in paragraphs 64 … above; 98.5 the contraventions by Adler pleaded in paragraphs 81, 82, 83, 88, 89, 90, 95 and 96 above; 98.6 the contraventions by Williams pleaded in paragraphs 84, 85, 91 and 92 above and thereby contravened subsections 181(2), 182(2), 183(2), 209(2) and 260D(2) of the Corporations Law. Additional Particulars (a) Adler Corporation acquired the majority of units in the AEUT. (b) Adler Corporation at all material times controlled PEE. (c) The acquisition by PEE of Adler Corporation's interests in dstore, Planet Soccer and Nomad Technologies Limited." 326 Assuming contraventions of s 208 by HIH and HIHC, the question at the trial was whether Mr Adler and Adler Corporation were involved in the contraventions. No distinction was drawn between the contravention by HIH and the contravention by HIHC. 327 The trial judge dealt together with involvement of Mr Adler, Adler Corporation and Mr Williams. He set out s 79 of the Act, and said - "195 There can be no question but that each of Messrs Adler and Williams were knowingly concerned in that contravention [the contravention of s 208 of the Act], when regard is had to the events summarised in paragraphs 15, 17 and 20 of the Plaintiff's Statement of Claim. In particular, there can be no doubt that both Mr Adler and Mr Williams knowingly brought about the relevant payment through PEE, which was undoubtedly a related party (see in particular s228(2) and (4) of the Corporations Act ). It is conceded that "Mr Williams knew that Mr Adler controlled PEE" though it is then said that fact does not lead to a breach of duty. The transaction was carried out totally bypassing the Investment Committee and the Board, though even if that were not so, the wide "aiding and abetting" language of s79 would clearly catch both Mr Adler and Mr Williams. They were on any view 'knowingly concerned in' the contravention, even if they did not appreciate it was a contravention. They could hardly deny knowledge of the factual elements making up the contravention, even if (and no evidence at all or to that effect is given by either) each mistakenly considered the transaction on arm's length terms in the sense used by s210." 328 The trial judge then considered matters particularly material to the involvement of Mr Williams, and continued - "198 Thus the transaction was carried out at Mr Adler's initiative and with Mr Williams' concurrence and direction. That is most clearly evidenced by the exchange of faxes on 9 June 2000 earlier quoted and Mr Williams' handwritten note to Mr Fodera, written on the bottom of Mr Williams' facsimile of 9 June 2000. It is true that the corporate entity was shortly after corrected to substitute Pacific Eagle Equities Pty Limited for Drenmex but this was of incidental importance, Mr Adler advising Mr Williams of the need for this "for various tax, disclosure and accounting reasons". It could not fairly be suggested that Mr Williams' direction to implement was in any way altered, save in so far as a different but still Adler associated entity was to be the recipient; see letter of 14 June 2000 (TB, 130). That the transaction came to involve a trust does not alter the necessary involvement, as there is no suggestion that Mr Williams would have been unaware of that. As to Adler Corporation, because it acquired the majority of the units in AEUT and at all material times controlled PEE, it too was "involved" in the relevant transactions. Its capacity to sell to PEE at cost its interests in the unlisted investments in their then known state (see paras 513 and following) illustrated the lack of safeguards in the trust documentation, and Adler Corporation's knowledge and exploitation of that; see generally, the Plaintiff's pleadings, para 98. Finally, as stated at para 6.3 of the material facts pleaded, Mr Adler was a director of Adler Corporation at all material times, such that Mr Adler's knowledge may be attributed to Adler Corporation which I infer was under his effective control. That knowledge would include the essential elements as make up the contravention of s208." 329 His Honour stated the result - "CONCLUSION 199 I am satisfied that within the meaning of s209(2) of the Corporations Act both Mr Adler and Mr Williams were 'involved' in a contravention of s208 of the Corporations Act by HIH and HIHC, as was Adler Corporation." 330 On appeal it was not suggested that Adler Corporation was in any different position from Mr Adler. It was submitted that it was necessary that the trial judge find that Mr Adler knew that the payment of the $10,000,000 on 15 June 2000 gave PEE, Mr Adler or Adler Corporation a financial benefit at that time, and that he erroneously considered that it was irrelevant to the allegation of involvement that Mr Adler may have "mistakenly considered the transaction on arms length terms in the sense used by s 210". It was submitted that, for the involvement, ASIC had to establish knowledge in Mr Adler that the payment of the $10,000,000 on 15 June 2000 gave a financial benefit (the emphasis still being on the position as at 15 June 2000) and that the payment was not on reasonable arms length terms. It was said that this was necessary in order to make out actual knowledge of all material ingredients of the contraventions by HIH and HIHC, in conformity with what was said in Yorke v Lucas (1985) 158 CLR 661 at 668-70, and that there was "no evidence that Adler actually knew that he received a financial benefit on 15 June 2000 and that he actually knew that the terms on which PEE held the money which it received that day were not reasonable arms length terms". 331 In Yorke v Lucas damages were claimed from Lucas for involvement in a contravention of s 52 of the Trade Practices Act 1974 (C'th). The description of involvement in s 75(b) of that Act was materially the same as that in s 79 of the Act. The contravention of s 52 came from false representations as to the average weekly turnover of a business. The claim against Lucas failed, however, because it was found that he was not aware and had no reason to suspect that the turnover information which he relayed to the purchaser of the business was incorrect. 332 So far as Lucas may have been involved through aiding, abetting, counselling or procuring the contravention, it was held that this used an existing concept drawn from the criminal law and that there had to be intentional participation in the contravention; to form the requisite intent a person "must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime" (at 667). While Lucas was aware of the representations, he "had no knowledge of their falsity and could not for that reason be said to have intentionally participated in the contravention" (at 668). So far as Lucas may have been involved through being knowingly concerned in or party to the contravention, a person could not be knowingly concerned in a contravention "unless he has knowledge of the essential facts constituting the contravention" (at 670), which Lucas did not, and the same requirement of knowledge of the essential facts extended to being party to the contravention so that the party had to be "an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention" (at 670). 333 Attention is thus directed to the essential facts constituting the contravention. Section 52 proscribed engaging in misleading or deceptive conduct, and in Yorke v Lucas making the representations as to the average weekly turnover of the business was misleading or deceptive conduct because the turnover information was incorrect. The relevant fact was that the turnover information was incorrect. It was not necessary that Lucas knew that the making of false representations as to the average weekly turnover of the business was engaging in misleading or deceptive conduct as referred to in s 52, and if Lucas had known that the turnover information was incorrect a finding of involvement would have followed. 334 Many cases have considered the Yorke v Lucas requirement of knowledge in the context of misleading or deceptive conduct, applying the principle that there must be knowledge of the essential facts making out the contravention but there need not be knowledge that the facts amounted to misleading or deceptive conduct and constituted a contravention. Thus in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189 it was found that Collins knew that a statement made to a meeting of investors required qualification and (at 209), "It followed from that finding that Collins possessed knowledge of the circumstances that gave the conduct of the appellant a misleading character. It is immaterial whether Collins understood the import of those circumstances or held a positive belief as to the truth of the assertion he had made for the appellant"; and in Paper Products Pty Ltd v Tomlinsons (Rockdale) Pty Ltd (1994) AIPR 41-315 it was said (at 42,204) that knowledge of the essential elements of the contravention "does not require knowledge or awareness that the conduct has the capacity to mislead nor knowledge that it may be a contravention of s 52". 335 Rural Press Ltd v Australian Competition and Consumer Commision (2002) 118 FCR 236 applied the principle in a different context. Rural Press Ltd and Waikerie Printing contravened s 45 of the Trade Practices Act, which proscribed making and giving effect to an arrangement having the purpose and/or likely effect of substantially lessening competition. The arrangement, brought about by Rural Press threatening increased competition in another circulation area, was that Waikerie Printing would withdraw from a circulation area. Law and McAuliffe of Rural Press were the principal actors for that company, and at first instance were held to have been knowingly concerned in the contravention. They argued on appeal that it had not been established that they had actual knowledge that the purpose or likely effect of the arrangement would be a substantial reduction of competition in the circulation area. 336 The Court said (at 283-4) - "[162] It may be readily accepted, as the appellants contended in the Court below and before us, that concepts underlying s 45(2)(a)(ii) and (b)(ii) of the TP Act can be elusive. In this case, however, the primary judge made findings sufficient to establish that Mr Law and Mr McAuliffe were aware of the material facts and circumstances constituting the contraventions of those provisions, even though they may not necessarily have turned their minds to the legal characterisation of those facts or circumstances or to the legality of the conduct. The primary judge made specific findings about the role of Mr McAuliffe and Mr Law in the communications with the representatives of Waikerie Printing. Indeed, on those findings Mr McAuliffe and Mr Law were instrumental in the making of the arrangement that gave rise to the contraventions of s 45(2)(a)(ii) and (b)(ii) of the TP Act. The other findings which we have recounted establish that Mr McAuliffe and Mr Law intended, by means of the arrangement, to cause Waikerie Printing to stop distributing the River News in the Mannum area and that they sought to bring about this result because they perceived that the River News was in competition with the Standard. The primary judge found that each of them was aware of the general market in which the Standard operated. Plainly they were aware that the Standard was the only regional newspaper circulating in the Murray Bridge area, including Mannum, before the incursion by the River News. They intended that the incipient competition in that area should be brought to an end. [163] It was not, in our view, necessary for the primary judge to find that Mr McAuliffe and Mr Law knew and appreciated that the purpose or effect of the arrangement was substantially to reduce competition in the market ultimately identified in the judgment. The definition of the market is a mixed question of fact and law involving sophisticated economic and legal concepts. It is not to be supposed that accessory liability is to depend on issues that business people are unlikely to address and, in any event, often cannot be resolved without detailed expert evidence and fine legal analysis. In the present case, the findings and the evidence amply support the conclusion that Mr Law and Mr McAuliffe had actual knowledge of the essential elements of the contraventions by Rural Press and Bridge Printing of s 45(2)(a)(ii) and (b)(ii) of the TP Act." 337 Similarly in the present case. Mr Adler knew the material facts and circumstances constituting the contraventions of the Act, relevantly the facts whereby there was the giving of a financial benefit otherwise than on reasonable arms length terms. 338 Hamilton v Whitehead (1988) 166 CLR 121 was also a decision in a different context, the offence of being knowingly concerned in the commission by a company of offences under the Companies (Western Australia) Code. The offences were offering or issuing prescribed interests to the public. The company's acts had been performed by Whitehead on its behalf. It was held that, since he "was the actor in the conduct constituting the offences and had knowledge of all the material circumstances", it followed that he was knowingly concerned in the commission of the offences by the company. Yorke v Lucas was referred to in another connection, but it was not suggested that some knowledge additional to that of the company was required. If it was not necessary for HIH or HIHC to know that a financial benefit was given and that the payment was not on reasonable arms length terms, it was not necessary for Mr Adler and Adler Corporation to have that knowledge. 339 Another case in a different context is Regina v Glennan (1970) 91 WN (NSW) 609, in which it was held that there could be a conviction for aiding and abetting the commission of an offence of driving with more than the prescribed concentration of alcohol in the blood when the accused "knew all the circumstances which gave rise to the commission of an offence by O'Rourke, in particular that she had consumed a large quantity of alcohol in the afternoon" (at 615), but did not know the concentration of alcohol in her blood. This was cited with approval, save as to the suggestion that suspicion of all the circumstances could suffice rather than actual knowledge, in Giorgianni v The Queen (1985) 156 CLR 473, which was the principal source of the criminal law concept taken up in Yorke v Lucas. 340 In the present case, Mr Adler knew all the facts which made the payment of the $10,000,000 to PEE the giving of a financial benefit otherwise than on reasonable arms length terms. He knew of the faxes between himself and Mr Williams, the incorporation of PEE, the payment of the $10,000,000 to PEE, and the absence as at 15 June 2000 of the "documentation"; if it be material, he knew of the constitution of the AEUT, the terms of the AEUT trust deed and the issue to HIH of its B class unit. There was no lack of knowledge equivalent to the lack of knowledge in Yorke v Lucas that the turnover information was incorrect. 341 The postulated knowledge in Mr Adler that a financial benefit was given was not knowledge of a fact constituting contravention, but knowledge that the known facts satisfied the concept of giving a financial benefit in the Act, and the appellants' submission gave the status of fact to the conclusory description in the Act and put a premium on obtuseness. If it were otherwise, on the appellants' other arguments knowledge would depend on Mr Adler's understanding of the law of trusts. The postulated knowledge in Mr Adler that the terms on which PEE held the money were not reasonable arms length terms was also not knowledge of a fact constituting contravention, but knowledge that the known facts satisfied the concept of reasonable arms length terms in the Act. 342 It is not necessary to consider whether, from his explanation to Mr Howard that Minter Ellison was involved because of "aspects like … related party transactions" and his rather extraordinary letter of 21 July 2000 to Mr Williams adverse to further advice, it could be inferred that Mr Adler was conscious of possible contravention of the Act. In my opinion, no error has been shown in the trial judge's conclusion. Contravention by Mr Williams of s 209(2) of the Act 343 The allegation of contravention of s 209(2) by Mr Williams was in the same terms as the allegation against Mr Adler, and was pleaded as follows - "66. By reason of his conduct as pleaded in, inter alia, paragraphs 15, 17 and 20 above, Williams: 66.1 aided, abetted, counselled or procured; 66.2 alternatively, induced; 66.3 alternatively, was knowingly concerned in or a party to, the contravention of section 208 by HIH and HIHC and thereby contravened subsection 209(2) of the Corporations Law ." 344 As I have said, the trial judge dealt together with the involvement of Mr Adler, Adler Corporation and Mr Williams. Paragraph 195 of his reasons and his conclusion have been set out above. 345 When considering matters particularly material to the involvement of Mr Williams, the trial judge said - "196 Thus it does not avail Mr Williams that he "left it" to Mr Howard to ensure the transaction was documented and legal advice obtained; indeed he went further and urged him to "make sure Rodney follows through with the documentation" (Howard, para 10). The payment very clearly did advantage Adler and Adler Corporation, as indeed Mr Adler conceded (letter 30 November 2000, TB, 1/253.9). This is in any event obvious when regard is had to the advantage of having unrestricted access to $10 million in cash, as Mr Williams must have known, leaving HIH/HIHC merely to hope for documentation and meantime rely on trust law for protection; the latter with the disadvantage of likely extended and expensive litigation if enforcement were required. This is apart from the fact that the evidence does not support any express trust at 15 June 2000 as its terms and indeed the precise beneficiaries were not resolved. The trust was just one vehicle in contemplation at the time, probably the likeliest." 346 The trial judge said - "197. … Further to establishing his [Mr Williams'] knowledge, I accept and consider admissible as part of the contemporaneous steps in the transaction itself though hearsay (Cross on Evidence 6th ed para 31080-31110) what Mr Howard quotes Adler as having said to him on 15 June 2000 (para 8 of his affidavit): 'The $10 million is for venture capital and short-term trading opportunities. We've started to purchase some shares to take advantage of the oversold situation in HIH. I need the money to-day for settlement.' Para 10 of Mr Howard's affidavit, unchallenged, confirms Mr Williams' knowledge at 15 June 2000 that the HIH shares had been bought and that Mr Adler was known by Mr Williams to need the $10 million "to settle the [HIH] trades". That knowledge finds further support in the obvious lack of surprise of Mr Williams on hearing of the HIH share purchases (Howard, para 10) and in the fax from Adler to Williams dated 19 June 2000 (TB, 109A) referring to Adler having purchased "more" shares. Mr Williams does not successfully negate knowledge by reference to the self-serving statements written to ASIC as regulator (PX1/268) on 22 December 2000 and the earlier Minter Ellison report of 29 November 2000 (PX1/238) and in particular its Schedule of Facts. However that Schedule does contain the admission (TB, 1/268 point 7) that the prior approval of the Investment Committee was required but not obtained, making Mr Williams' decision to fund the transaction with HIHC's money very much one to which he was not merely a party, but the principal party apart from Mr Adler (see s79(e)). 347 Mr Williams adopted the submissions involving reliance on Yorke v Lucas made by Mr Adler and Adler Corporation. For the reasons I have given, I do not think that ASIC was required to establish that Mr Williams knew that PEE, Adler Corporation and Mr Adler were given a financial benefit or that the terms on which PEE held the $10,000,000 received on 15 June 2000 were not reasonable arms length terms. 348 As later appears, Mr Williams submitted in relation to contravention of s 180(1) of the Act that the only evidence of knowledge on Mr Williams' part that the $10,000,000 might be used to purchase investments from Mr Adler or entitles associated with him came through Mr Howard's evidence of his conversation with Mr Adler on 15 June 2000. To repeat, Mr Adler said to Mr Howard that he had "had conversations with Ray that the trust may or may not purchase other venture capital investments that I was associated with such as dstore at cost to give them a chance to make money". In relation to contravention of s 180(1) Mr Williams submitted that Mr Howard's evidence of the conversation was not admissible to prove against Mr Williams that there had been the conversations with that content. In relation to involvement by Mr Williams in the contravention of s 208 of the Act the trial judge referred to another part of the same conversation, dealing with the existing purchase of shares in HIH. At one point Mr Williams' submissions may have extended to impermissible use of the conversation in that respect also, going to Mr Williams' knowledge of the transaction. 349 I will return to the evidentiary question later in these reasons when considering contravention by Mr Williams of s 180(1) of the Act, and will explain why in my opinion Mr Howard's evidence of the conversation with Mr Adler was admissible to prove against Mr Williams that there had been conversations with the relevant content. But I do not think any similar question arises as to Mr Williams' involvement in the contraventions of s 208 of the Act. 350 Knowledge in Mr Williams that the $10,000,000 might be used to purchase investments from Mr Adler or entities associated with him was not part of the trial judge's reasoning to involvement in the contraventions of s 208 of the Act. The trial judge's essential reasoning was that the transaction "was carried out at Mr Adler's initiative and with Mr Williams' concurrence and direction", and that Mr Williams knew the facts from which giving a financial benefit other than on reasonable arms length terms followed. Knowledge that the HIH shares had been bought and the $10,000,000 was needed "to settle the trades" was not essential for Mr Williams' involvement in the contraventions of s 208 of the Act. But the knowledge was in any event established by the direct evidence of Mr Howard's conversation with Mr Williams on 15 June 2000, in which he told Mr Williams that "we've bought some HIH shares" and Mr Adler "wants the $10,000,000 to settle the trades". Mr Williams' knowledge of the essential facts constituting the contraventions did not materially differ from that of Mr Adler. Contravention by HIHC of s 260A of the Act 351 The contravention by HIHC of s 260A of the Act underlies the contraventions of s 260D(2) by Mr Adler, Adler Corporation and Mr Williams. If there were no contravention by HIHC, there would be nothing in which Mr Adler, Adler Corporation and Mr Williams could be involved. Again it is convenient first to consider the underlying contravention. 352 Section 260A provides - " 260A. Financial assistance by a company for acquiring shares in the company or a holding company (1) A company may financially assist a person to acquire shares (or units of shares) in the company or a holding company of the company only if: (a) giving the assistance does not materially prejudice: (i) the interests of the company or its shareholders; or (ii) the company's ability to pay its creditors; or (b) the assistance is approved by shareholders under section 260B (that section also requires advance notice to ASIC); or (c) the assistance is exempted under section 260C. (2) Without limiting subsection (1), financial assistance may: (a) be given before or after the acquisition of shares (or units of shares); and (b) take the form of paying a dividend. (3) Subsection (1) extends to the acquisition of shares (or units of shares) by: (a) issue; or (b) transfer; or (c) any other means." 353 By s 260D(1), if the company provides financial assistance in contravention of s 260A the contravention does not affect the validity of the financial assistance or of any contract or transaction connected with it and the company is not guilty of an offence. The sanction is imposed by s 260D(2) on any person who is involved in the contravention - "(2) Any person who is involved in a company's contravention of section 260A contravenes this subsection." 354 Material to one of the submissions made by the appellants, s 260D(3) provides - "(3) A person commits an offence if they are involved in a company's contravention of section 260A and the involvement is dishonest." 355 The allegation of contravention of s 260A by HIHC was pleaded as follows - "68. The provision of $10 million by HIHC to PEE in the circumstances referred to in paragraphs 20 to 23 (inclusive) above amounted to the provision of financial assistance by HIHC to enable PEE to acquire shares in its holding company, HIH. 69. The giving of the financial assistance materially prejudiced the interests of HIHC and its shareholder, HIH. Particulars (a) a diminution in the value of HIHC's stake in PEE reflected by actual loss on the HIH share purchases of $2,102,802.74; (b) exposure to diminution in the value of HIHC's stake in PEE should the price of HIH shares fall and therefore cause PEE to suffer a loss; (c) loss of use of $3,973,397.84 which could have been used for other investments or other business purposes; (d) the creation of the false impression that a high profile director of HIH such as Adler was funding the purchase of HIH shares rather than HIHC; (e) the exposure to the risk of publication of the fact that HIHC was funding the acquisition of HIH shares and the consequent negative impact on HIH, HIHC and the HIHC stake in PEE of publication of that information in the circumstances of the declining HIH share price. (f) neither HIH nor HIHC acquired any, or any satisfactory, means of ensuring that HIHC could recover the amount provided together with interest thereon, or profit in respect of its use. 70. By reason of the matters pleaded in paragraphs 68 and 69, HIHC contravened section 260A of the Corporations Law ." 356 Paragraphs 20 to 23 of the statement of claim contained, in short, the allegations of payment of the $10,000,000 to PEE and purchase of the HIH shares. 357 HIHC financially assisted PEE to acquire shares in its holding company HIH. The assistance was not approved by shareholders, and none of the exemptions in s 260C applied. The question at the trial was whether giving the assistance materially prejudiced the interests of HIHC and HIH, whereby HIHC contravened s 260A. 358 The trial judge made the opening observation - "339 When regard is had to the substance of the transaction, it amounts to this. HIHC handed over $10 million to PEE, without in the first instance any documentation, of which $3,991,856.21 (inclusive of stamp duty and brokerage) was used to pay for the HIH share purchases, such intended use being known to Mr Williams, the Chief Executive Officer of the HIH Group. Thus, the interest of HIHC and through it HIH in the cash amount so applied, was converted into the interest, but only by 7 July 2000, of a unit holder in a unit trust in which HIH had no direct interest in the assets. It is said in paragraph (b) of the pleaded Particulars that this materially prejudiced the interests of HIHC and through it HIH by bringing about: "exposure to diminution in the value of HIHC's stake in PEE should the price of HIH shares fall and therefore cause PEE to suffer a loss" And see also the other Particulars." 359 The trial judge then said that "before dealing with the evidence relied upon in support of the Particulars, I should start with s 260A itself". He discussed the interpretation of that section. In the discussion he indicated acceptance of an interpretation "which embraces the whole transaction constituted by the assistance to acquire the shares and so brings into account its immediate consequences in terms of 'material prejudice'", describing that as a commercial approach inviting the court "to look at all interlocking elements in a commercial transaction as a whole, and to determine where the net balance of financial advantage lay" (these words were taken from Charterhouse Investment Trust Ltd v Tempest Diesels Ltd (1986) PCLC 1 at 10-11). The appellants did not contest that as a proper approach. 360 The trial judge referred, apparently as alternative formulations of a similar approach, to a "net transfer of value test" and an "impoverishment doctrine". He accepted that the onus was on the person seeking to defend the transaction to show that there was no material prejudice. 361 The trial judge then turned to "the potential application of s 260A in the present circumstances". After considerable discussion, he stated his conclusion - " CONCLUSION 355 HIHC suffered material prejudice as a result of its financial assistance, so contravening s260A of the Corporations Act . It did so by exchanging cash for either unsecured indebtedness owed to it, or alternatively in the first instance equitable rights by way of resulting or other trust in respect of the HIH shares being contemporaneously bought. Such rights against PEE were from the start of materially lesser value than the cash handed over. This is because such equitable rights would be likely to be contentious and to require expensive litigation to enforce in Court. Thereafter material prejudice also resulted from the other elements of the transaction, that is, the lack of safeguards in, and disadvantageous terms of, the AEUT Trust documentation and the circumstances which, from its inception, rendered the investment in HIH shares inherently likely to give rise to the loss that in fact occurred. These included Mr Adler's intention, not to make a quick profit, but to support the HIH share price. A loss was inherently likely from the inception, and did in fact eventuate, both in HIH's carrying value as an investment and when the shares were realised at a loss. Either would constitute "material prejudice" both to HIHC and HIH within the meaning of s260A(1)(a) and in terms of the pleaded Particulars. That completes the elements for such contravention by HIH and HIHC to have occurred. It leads to the conclusion that both HIH and HIHC contravened s260A of the Corporations Act ." 362 The discussion leading to this conclusion requires some analysis, since the appellants submitted that in finding that the giving of financial assistance materially prejudiced the interests of HIHC and HIH the trial judge relied on four matters which were not open on the particulars, being - (a) the constitution of the AEUT by execution of the deed poll three weeks after 15 June 2000; (b) findings to the effect that Mr Adler's intention was "to use his totally unsupervised control of PEE and the absence of express safeguards in the AEUT documentation to shore up the HIH share price for the benefit of his own company's very substantial shareholding in HIH"; (c) a finding found in para 350 of the reasons - "350 There was therefore a fundamental mismatch between HIHC's intention of making a quick profit and the reality that - (a) it had surrendered its cash to a Trust; (b) which it did not control; (c) to a person with an inherent conflict of interest; (d) subject to no proper safeguards beyond the general law to ensure that that conflict was resolved in favour of HIHC; (e) where Mr Adler intended (i) rather to support the HIH share price even at the cost of a quick profit, which would in any event be locked in for three years if made; and, (ii) to conceal from the public the fact that it was HIHC's money that was being used, by pretending it was for Adler or his family interests."; and (d) a finding that Mr Adler "deliberately conveyed the impression that it was his own interests that were buying the shares yet he put HIHC at risk that if the true facts were known, the public would see that Mr Adler had no wish to put at risk his own family interests' money". 363 The trial judge first recorded the appellants' submission that "the time for determining whether the giving of financial assistance materially prejudiced the interests of HIHC and its shareholder HIH, is at the time the financial assistance is given", and that it thus "could not comprehend events giving rise to material prejudice at a later point of time, in particular events three and a half months later when the shares were sold at a loss, actually realised of $2,102,802.74." He said that the appellants contended "that as no actual loss had occurred at 15 June 2000, that is all that is relevant, so disposing of Particular (a) above". He said that that was an oversimplification, and that "one assesses material prejudice by reference to the transaction with its interlocking elements giving rise to the financial assistance, taking into account its financial consequences for the interests of the company or its shareholders", and that one did so "in order to determine where the net balance of financial advantage lies from the giving of the financial assistance". 364 The trial judge said of the interlocking elements of the transaction and the net balance of financial advantage - "349 … Those elements of the transaction start with the receipt of cash by PEE by way of unsecured loan or so as to give rise to an interest as beneficiary under an express or resulting or Quistclose purpose trust pending documentation. Subsequently, within three weeks, the next element of the transaction sees the interest of HIHC become that of a holder of B class units, all this with the intention on HIHC's part to purchase and subsequently make profit on future re-sale of, the HIH shares. Meantime such profit would be locked into the trust for three years along with any other profits or losses. I say this, though Mr Adler's true intention, and thus PEE's, as distinct from that of HIH and HIHC, was as I have earlier determined, to use his totally unsupervised control of PEE and the absence of express safeguards in the AEUT documentation, to shore up the HIH share price for the benefit of his own company's very substantial shareholding in HIH. That Mr Adler's intention was not to make a "quick profit" is borne out by the fact that when the price rose to $1.21 on 11 July 2000 and a profit of up to twenty percent could thus have been realised, Mr Adler passed up the opportunity to cause PEE to sell. Moreover, when PEE did sell later, it was only after Mr Adler had caused Adler Corporation first to sell his own shareholding in HIH down, thus accentuating the loss for PEE. 350 There was therefore a fundamental mismatch between HIHC's intention of making a quick profit and the reality that (a) it had surrendered its cash to a Trust; (b) which it did not control; (c) to a person with an inherent conflict of interest; (d) subject to no proper safeguards beyond the general law to ensure that that conflict was resolved in favour of HIHC; (e) where Mr Adler intended (i) rather to support the HIH share price even at the cost of a quick profit, which would in any event be locked in for three years if made; and, (ii) to conceal from the public the fact that it was HIHC's money that was being used, by pretending it was for Adler or his family interests. Material prejudice thus resulted from giving the financial assistance. In the words of paragraph (f) of the Particular even at the outset: 'Neither HIH nor HIHC acquired any, or any satisfactory, means of ensuring that HIHC could recover the amount provided together with interest thereon or profit in respect of its use.' And note also Particulars (b), (c), (d) and (e) in relation to the eventual loss realised referred to in Particular (a)." 365 This was related to all the particulars. It encompassed the first three of the four matters which the appellants submitted were not open on the particulars. 366 The trial judge then said - "351 That the loss of $2,102,802.74 was ultimately realised, simply reflected the working out of the consequences which were inherent in the financial assistance given, culminating in the subscription by HIHC of B class units in the trust on 7 July 2000 and attended by the disadvantageous consequences from HIHC's point of view as are set out that at paragraph 40 of the Plaintiff's Statement of Claim (and see also paragraph 34)." 367 This amounted to acceptance of particular (a), seen in the trial judge's conclusion as the rights against PEE "being from the start of materially less value than the cash handed over", and of particular (b), seen in the trial judge's conclusion as the investment in HIH shares being inherently likely to give rise to the loss that in fact occurred. The actual loss of $2,102,802.74 was not alleged as, or found to have been, the material prejudice suffered at the time of the giving of financial assistance. By the words "reflected by" the actual loss was proffered as a measure of the potential diminution in the value of HIHC's stake in PEE to which, reading particulars (a) and (b) together, HIHC and HIH were exposed by the giving of the financial assistance. The analogy is not complete, but in assessing the value of property at a given date subsequent events may be looked at in so far as they illuminate the value at that date (Gould v Vaggelas (1985) 157 CLR 215 at 220; Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 at 291), and the realisation of the loss illuminated the exposure to diminution in value. 368 It can be seen from the trial judge's conclusion that the creation of the AEUT and the issue of the B class unit, Mr Adler's intention as described, and the mismatch described in para 350 of the reasons (which referred again to Mr Adler's intention) were used to illustrate the elements of the transaction which "from its inception, rendered the investment in HIH shares inherently likely to give rise to the loss that in fact occurred". This was within particulars (b) and (f). I do not think that ASIC was precluded, in making out the exposure to loss and lack of satisfactory means of recovery or controlling the use of the $10,000,000, from demonstrating that the exposure and lack of satisfactory means were not just a theoretical prejudice, but were a real prejudice because of Mr Adler's true intention at the time of payment and because the prejudice came home. It would have been unduly restrictive to confine ASIC to speculative prejudice, and the particulars did not do so. To take in particular the matter which most agitated the appellants, Mr Adler's purpose of maintaining or stabilising the HIH share price in his own interests, distinct from making profits for HIH on short-term trades, it was an important element in the material prejudice suffered by HIHC and HIH. Making $10,000,000 available to a person for the purchase of HIH shares, without adequate control, could be prejudicial even if there was a common purpose of trading in the shares in order to make quick profits, but it was all the more prejudicial if there was conflict of interest because the person had his selfish purpose of the purchase of shares promoting the value of his own shareholding. 369 The appellants submitted that s 260A(3), earlier set out and providing that dishonest involvement in a contravention is an offence, bore upon whether regard could be had to Mr Adler's purpose of maintaining or stabilising the HIH share price. They said that dishonest involvement was treated differently in the Act from ordinary involvement, and that dishonesty on Mr Adler's part should have been specifically pleaded if it was to be alleged. However, the proceedings were not criminal proceedings charging commission of the offence, and dishonestly was not an element of the contraventions alleged. That Mr Adler may have acted dishonestly does not preclude regard to the intention with which he acted if his conduct and intention were within the particulars. 370 The appellants also submitted, here and more particularly as to other contraventions in which Mr Adler's purpose of maintaining or stabilising the share price was taken into account, that ASIC was precluded from relying on it because early in the proceedings its counsel had eschewed any allegation of dishonesty. It is convenient to deal with the submission now. 371 The originating process and supporting affidavits were filed on 23 May 2001. On that day ASIC applied ex parte for interlocutory orders under ss 1323 and 1324 of the Act whereby the defendants could not dispose of their assets. The hearing of the application brought early reference to analogous relief under the general law and to conduct suggesting the likelihood of disposal of assets to frustrate any judgment. Then, referring to the originating process, the following was said between the judge (as it happened, the trial judge) and counsel for ASIC - "HIS HONOUR: Is there a convenient summary of what the process involves? Perhaps you could tell me. BANNON: The sections are set out in paragraph 1 and 2 of the originating process. The contraventions alleged are 180, 181, 182, 209. HIS HONOUR: I want to see whether these involved dishonesty , or merely lack of care and diligence. BANNON: They don't involve dishonesty . 181 involves a lack of good faith. HIS HONOUR: 181(1) is care and diligence. This is about Mr Williams, is it? BANNON: And Mr Adler and Mr Fodera. HIS HONOUR: I can assume there is a mirror image for both. Is there an allegation of dishonesty? BANNON: It is not necessary an element of the allegations, hence it is not made , but the material will demonstrate that an involvement in a transfer of funds of $10 million out of HIHC in circumstances where there were guidelines which, on the face of the material, were deliberately avoided. The material will show a diversion of funds from HIHC in knowledge of investment procedures within the HIH group which were knowingly not observed and which would have required review by persons other than the individuals involved. HIS HONOUR: Are you seeking only civil penalties? BANNON: Yes, in these proceedings, obviously; compensation as well. This is not a criminal proceeding . HIS HONOUR: I understand. BANNON: And a banning order as well. HIS HONOUR: I wanted to clear that up. Preventing being a director? BANNON: Yes. HIS HONOUR: I was, in all of that, testing to what extent the nature of the allegations are of the kind that could be said to be proved to be cognate with the kind of conduct that might lead to denuding oneself of assets to meet a judgment. BANNON: I understand that. The only way to truly test that is by looking at the material in some detail." (emphasis added) 372 The appellants were not present, but the judge directed that the transcript be served on them and they received it. It was submitted that they had thereafter been entitled to conduct the proceedings on the basis that no allegation of dishonesty was made, and that ASIC could not later go back on its stance as then stated. 373 It is not obvious that what was said on 23 May 2001 governed all that thereafter occurred, through the filing of the original and then amended statement of claim and the leading of evidence. Nor were we referred to any occasion on which, in the course of the proceedings to the close of evidence, objection was taken on the ground that dishonesty was not alleged. 374 However, I do not accept that what was said on 23 May 2001 precluded ASIC from relying on Mr Adler's purpose of maintaining or stabilising the share price, or any other conduct on his part, if otherwise relevant, because it was dishonest. What ASIC's counsel told the judge was that the contraventions alleged did not involve dishonesty in that dishonesty was not "necessary [as] an element of the allegations", and by "hence it is not made" that the pleaded allegations therefore did not include allegations of dishonesty. Any eschewing of any allegation of dishonesty went to the elements of the contraventions, not the nature of the conduct relied on. Counsel went on to advert to deliberate avoidance of the guidelines and knowing diversion of funds without observance of investment procedures, thereby making clear enough that conduct arguably of a dishonest nature was relied on, and was relied on for that nature. The "looking at the material in some detail" was directed to the likelihood of disposal of assets to frustrate any judgment, and from later in the transcript a written outline provided to the judge alleged "serious improper conduct". ASIC was not precluded from leading evidence of conduct by Mr Adler making out the contraventions by the fact that the conduct might or would be described as dishonest conduct, or from relying on its dishonest nature if that was relevant to the contraventions. 375 Returning to the trial judge's reasons, he then referred to six other matters which "bore out" the material prejudice, before stating the conclusion which I have earlier set out. Although what he said is lengthy, I think it is necessary to include it - "352 That the essential elements were in place from the outset for the later loss and consequent material prejudice which did occur, is borne out both by the circumstances set out above and by the following additional circumstances which surrounded the financial assistance: (i) HIHC paid out $10 million to an entity incorporated upon the very day of payment, without any security for its return and without any control over its disposition, and without any documentation whatsoever, in circumstances where the law (s259C) would have precluded effectuation of any such resulting trust by a transfer of the relevant shares back to HIHC, it being no answer that such resulting trust still gave a beneficial interest to HIHC. Clearly it suffered material prejudice when that result is compared to the position HIH and HIHC would have had if HIHC had retained the $10 million in its hands free of risk or invested it otherwise (see Particular (c) in para 69 which essentially reflects this); (ii) There was material prejudice in the prospect of the covert financing by HIHC of the share purchases becoming known to the public and being seen by the public as an act of desperation by HIH to shore up its share price, exacerbated by the fact that Mr Adler deliberately conveyed the impression that it was his own interests that were buying the shares yet he put HIHC at risk that if the true facts were known, the public would see that Mr Adler had no wish to put at risk his own family interests' money. (iii) Mr Cameron, (at paras 11 and 17(a) of his affidavit) said that it would have been likely to be so seen and Mr Potts (T, 651.1) conceded that it would be possible that it would be seen in this way. He also stated that it would be seen as an act of confidence on the company's part in buying its own shares, though he did not deal with how it would be so seen if the public were to learn that Mr Adler had first allowed, even encouraged, a misleading impression to be conveyed, that it was his own money or that of his family's which was being so used. The fact that some, even though not all, people might be likely to have seen the transaction in that way, would be enough to raise the prospect of real prejudice to HIH's reputation and indeed to its share price, thus putting at risk the short term profit which lay behind the company's motivation in entering into the transaction in the first place though not, as I have said, the true motivation of Mr Adler. (iv) From an investment point of view, there were a number of indications against the appropriateness of the financing, including that the share price had been continuously falling since the beginning of the year (TB, 104A - E), there was publicity in the market place indicating in strong terms that HIH was in need of capital and would have difficulty raising it bearing in mind the state of its share price (Westfield article at TB, 26), Mr Adler's view that HIH would in fact need to raise $250,000,000 more capital (Mellish para 25; Westfield at T, 626.5); indeed, contrary to what the Media Release of 15 June 2000 asserted, Mr Adler had, and had expressed to Mr Williams, extremely gloomy views about the company (letter of 6 September 1999 at PX17 T1 and the later letter of 12 December 2000 at TB, 258A) and finally HIH, but not the market, knew of HIH's " lousy " profit performance for the year ended 30th June 2000 (submissions paras 19, 20 and 34). 353 Mr Cameron expressed the view in his second affidavit (13 [sic: 30] November 2001) that an investment in HIH shares at this time was " speculative " (para 2 and see para 11 of his first affidavit). I agree with the Plaintiff's submissions that Mr Cameron was well justified in his evidence having regard to the matters noted above. Moreover he did not think that the UBS Warburg publication, which was more favourable, would necessarily have any effect because it was only one analyst's view (T, 312.55 referred to in the First and Fourth Defendants' written submissions at para 15(b)). Mr Potts, in cross-examination, gave evidence that there were ten or twelve very large broking firms that published a great deal of research material and had only referred to reports from two of them (T, 643.45 - 643.50). 354 Moreover, neither the Salomon Smith Barney nor the UBS Warburg Report constituted a recommendation to buy HIH shares, being favourable reports upon which the First and Fourth Defendants rely. Mr Potts' interpretation of the Salomon Report was that it was saying that for those prepared to take a higher risk profile, HIH was a "speculative buy" (T, 645.35 - .40) thus reinforcing that it was a speculative stock." 376 It will be noted that the trial judge referred to the essential elements being in place from the outset. He had in mind material prejudice at the time the $10,000,000 was paid to PEE and the shares in HIH were purchased. 377 In para 352(i) the trial judge found material prejudice in part as alleged in particular (c). In para 352(ii) the trial judge referred to the fourth of the matters which the appellants submitted were not open on the particulars, the deliberate conveying of a false impression by Mr Adler. He did so as part of finding material prejudice in the prospect of the covert financing by HIHC of the share purchases becoming known, with detrimental consequences, a finding which was within particulars (d) and especially (e), that finding extending over paras (ii) and (iii). This finding was not explicitly carried into the statement of the conclusion. The deliberate conveying of a false impression by Mr Adler was described as exacerbation of the material prejudice in this respect. Clearly it was. The adverse perception of covert financing by HIHC of the share purchases could not but be exacerbated if it had been preceded by positive and deceptive representation by Mr Adler that the purchases were by his own interests. 378 The remainder of para 352 and paras 353 and 354 amounted to a finding that purchasing shares in HIH was not a sound investment because "speculative". This fell at least within particular (b), see also particulars (a) and (c). The trial judge was entitled to find that the speculative nature of the purchase of the shares contributed to the provision of the financial assistance for their purchase being materially prejudicial. 379 The appellants then submitted that the finding that the giving of financial assistance materially prejudiced the interests of HIHC and HIH was erroneous on the matters open on the particulars. 380 The appellants said that so far as the trial judge considered that HIHC and HIH had no satisfactory means of ensuring that HIHC could recover the amount provided plus interest or profit from its use, within particular (f), the money and so the shares were held by PEE on trust entirely for HIHC as beneficiary, and as sole beneficiary HIHC had all the entitlements to recover the money and the shares and any profits earned from the use of the money which the law of trusts conferred. They said, "The notion of material prejudice arising by reason of contentious and expensive litigation as hypothesised by the trial judge is entirely speculative". This was a return to the trust argument earlier considered. In essence, it was said that if no financial benefit was given then HIHC and HIH can not have been prejudiced. That does not follow, since there can be prejudice in many ways. In any event, I do not agree. First, for reasons earlier given I do not accept that $10,000,000 or the shares were held by PEE on trust entirely for HIHC as sole beneficiary. Secondly, in conformity with my earlier observations I do not accept that an entitlement to have money or shares is as good as having the money or shares, or that the possibility of contentious and expensive litigation should be dismissed as speculative so that not having the money or shares is not disadvantageous. As the trial judge explained, the shares could not be transferred to HIHC, but apart from that the whole of the circumstances must be considered. This was not investment in an established, well documented, independently managed and externally regulated fund. The arguments in the proceedings over the characterisation of the payment of the $10,000,000, flowing through to the nature of PEE's holding of the HIH shares, could well have been reversed, and their existence itself contributed to material prejudice. 381 The appellants said that the finding that an investment in HIH was not a sound investment because speculative did not lead to material prejudice. They said that it fell within particular (b), and that exposure to diminution in the value of HIHC's stake in PEE should the price of HIH shares fall was no more than the correlative of exposure to increase in the value of HIHC's stake in PEE should the price of HIH shares rise. The finding, they said, was in substance that the shares in HIH were not worth the price paid for them, although it was the market price, and that there was no admissible opinion evidence supporting such a finding. 382 The appellants sought at some length to demonstrate that there was no admissible opinion evidence supporting a finding that the shares in HIH were not worth the price paid for them. In my opinion, the exercise was misconceived. Shares bought at the market price have the potential to increase in value or decrease in value. There may be reasons to forecast decrease in value rather than increase in value, or uncertainty as to what may happen, either of which may make the purchase of the shares an unsound investment. It was well open to the trial judge to conclude that, for the reasons he gave, the shares in HIH were not a sound investment, a conclusion which must be seen not in the abstract but against the background of HIH's investment policies. It was, in short, not a risk adverse investment. There was no error in seeing a risky investment in HIH shares materially prejudicial in comparison with having the money which was invested. 383 As part of their submissions at this point the appellants contended that the trial judge erred in admitting the opinion evidence of Mr Roderick Cameron, which included the opinions that HIH investing in its own shares would be likely to undermine public confidence in the companies (see para 352(iii) above) and that an investment in HIH shares at this time was speculative (see para 353 above). They submitted that it was not shown that Mr Cameron was qualified to give his opinions. They further submitted that ASIC's counsel had not read that part of Mr Cameron's affidavit dealing with whether financial assistance by HIHC to enable PEE to acquire shares in HIH was materially prejudicial to the interests of HIH or HIHC, being question 4 in the affidavit, and had said that no conclusion in paras 16 or 17 in relation to question 4 was led in evidence; para 17(a) contained Mr Cameron's opinion - "(a) if the payment and its purpose had become known to the public then it would have been likely to undermine public confidence in the companies. Public knowledge of the transaction would have been likely to give rise to the perception that the company was engaging in illegal or improper activity in order to support its share price;" 384 I consider the admissibility and reading of Mr Cameron's affidavit later in these reasons. I conclude that no error in its admission has been shown. As there explained, while counsel for ASIC did not read question 4 asked of Mr Cameron and the conclusions directed to it in paras 16 and 17, he did read para 11 directed to question 2 asked of Mr Cameron and paras 17(a) and (c) as reasons for the answer to question 2. In the result, Mr Cameron's opinion in para 17(a) was put in evidence, and counsel's statement that no conclusion in paras 16 or 17 was led in evidence in context meant only that those paragraphs were not led as Mr Cameron's answer to question 4. I do not accept the appellants' submissions in this respect. 385 The appellants submitted that Mr Cameron's opinion as to HIH shares being speculative had been cut down in cross-examination, to the point where he conceded that whether any investment was speculative depended on the circumstances and he did not have adequate knowledge or experience of the relevant circumstances. We were taken in detail through Mr Cameron's cross-examination. 386 This was an instance of an assessment of the evidence within the trial judge's province. The weight of Mr Cameron's opinion depended not only on the experience from which he spoke and on what he said, including when what he said became parsed, layered and less clearly apparent in the course of a lengthy cross-examination. It also depended on the impression he made upon the trial judge. Having carefully considered the cross-examination, I consider that the trial judge was entitled to accept as evidence on which he could place reliance Mr Cameron's opinion of the nature of investment in HIH shares. But I do not think it matters for the outcome. The trial judge agreed with ASIC's submission that Mr Cameron was "well justified in his evidence having regard to the matters noted above". I consider that the trial judge independently came to the same opinion from his own assessment of the position, and found support as well in Mr Potts' interpretation of the Salomon Report as saying that HIH shares were a risky buy. Despite the appellants' submissions, again made at some length, I do not think error has been shown in the trial judge coming to his own opinion. 387 The appellants said that material prejudice in the prospect of covert financing by HIHC of the purchase of HIH shares becoming known to the public, and being seen as an act of desperation by HIH, was not supported in the evidence. They said that it was not self-evident, because when there was express legislative power for a company to assist financially in the acquisition of its shares (s 260A) "there is no reason in principle to suppose that such publicity would be materially prejudicial". 388 The reasoning is astray. That something can legally be done in permitted circumstances does not mean that doing it exposes no prejudicial perception, especially if the circumstances are not known to the perceiver. And, as later noted, more than the mere giving of financial assistance was involved. 389 Apart from referring in para 352(iii) to Mr Cameron's opinion that "it would have been likely to be so seen", the trial judge said that Mr Potts "conceded that it would be possible that it would be seen in that way". As to Mr Potts' evidence, the appellants submitted that he only gave "an equivocal answer as to mere possibilities of the market's hypothetical reaction"; they said that on a fair reading of his evidence he rejected that knowledge of HIH funding the purchase of its own shares in June 2000 would have reflected adversely on the wisdom of purchasing HIH shares at that time, rejected that the market would have perceived HIH buying its own shares as an act of desperation by HIH trying to shore up the share price, and on the contrary thought that the self-funding would have given investors confidence in HIH as financially sound. 390 I do not think that Mr Potts was so indeterminate. He said that HIH being seen to buy shares in itself in the falling market, which he accepted showed lack of market confidence in the shares, may be seen as an act of desperation or may be seen as an act of confidence. The trial judge correctly noted that Mr Potts expressed both possibilities. Mr Potts' earlier expressed opinion that the perception would have been one of confidence was cut down by his later agreement that it could have been one of desperation. It was for the trial judge then to determine, on all the evidence, what the perception would have been, but more important whether material prejudice would arise from the possibility that the perception would have been one of desperation. 391 That is what the trial judge did. His finding was of material prejudice in the prospect of the covert financing becoming known and being seen as an act of desperation. His finding was well open on the evidence as a whole, including that of Mr Cameron, and was open apart from the evidence of Messrs Cameron and Potts. It approaches sophistry to say that the existence of the legislative power under s 260A stands against publicity of the exercise of the power being materially prejudicial. It must depend on the circumstances in which the financial assistance is given, and in the present case the circumstances included that the giving of the financial assistance was covert and was misrepresented to the market, as Mr Adler and Mr Williams knew. The perception upon the true position becoming known could hardly have been other than negative. I do not think error on the part of the trial judge has been shown. 392 The appellants finally submitted that the trial judge had found that material prejudice occurred because of the loss later realised when the HIH shares were sold, and that he had erroneously done so because events months after the giving of the financial assistance could not be material prejudice at the time the financial assistance was given. I have already adverted to this. The loss was particularised as a reflection of the diminution in value; the material prejudice was the exposure to diminution in value, and there was no error in appreciation of the realisation of that exposure. 393 In my opinion, the trial judge's conclusion that giving the financial assistance materially prejudiced the interests of HIHC and HIH, whereby HIHC and HIH contravened s 260A, was not flawed by going beyond the particulars and has not been shown to be in error. Contravention by Mr Adler and Adler Corporation of s 260D(2) of the Act 394 Again for convenience, s 260D(2) of the Act is repeated - "(2) Any person who is involved in a company's contravention of s 260A contravenes this subsection." 395 The allegation of contravention by Mr Adler of s 260D(2) was pleaded as follows - "71. By reason of his conduct as pleaded in paragraphs 15, 17, 19, 20 and 22 above, Adler: 71.1 aided, abetted, counselled or procured; 71.2 alternatively, induced; 71.3 alternatively was knowingly concerned in or a party to; the contravention of section 260A by HIHC and thereby contravened subsection 260D(2) of the Corporations Law ." 396 This allegation of involvement in the contravention of s 260A differed from the allegation of involvement in the contraventions of s 208, in that the paragraphs identified were apparently exhaustively identified. The additional identified paragraphs alleged the purchases of the HIH shares. (For some reason para 21 of the statement of claim was omitted, but no point was taken as to that). 397 The allegation of contravention by Adler Corporation of s 260D(2) was pleaded in para 98 of the statement of claim earlier set out. 398 The trial judge said that he would deal in turn with the involvement of the defendants - "But before doing so I need to deal with a preliminary question, namely, whether 'involved' as defined by s79 requires that there be actual knowledge on the part of the person concerned, not only of financial assistance to acquire shares, but also that the assistance did materially prejudice, in this case, 'the interests of the company or its shareholder', as the First and Fourth Defendants contend." 399 The trial judge did not immediately deal with the preliminary question, but made findings as to actual knowledge. He referred to Yorke v Lucas. He observed that the knowledge of the essential facts constituting the contravention was actual and not constructive, but that "a combination of suspicious circumstances and the failure to make appropriate inquiry when confronted with the obvious, makes it possible to infer knowledge of the relevant essential matters: Pereira v Director of Public Prosecutions (1988) 63 ALJR 1 at 3." He continued - "359 Turning to s260A, if it be the case that the onus lies upon the company to demonstrate, relevantly, that giving the assistance does not materially prejudice the interests of the company or its shareholders, this being in effect by way of defence rather than an element of the contravention, it would follow that each of Mr Adler and Mr Williams (I leave aside Mr Fodera) had the necessary knowledge of the essential facts. This is because, first, each were aware that HIHC was financially assisting AEUT when formed with an intent for it to buy HIH shares. Before that, each were aware that the assistance was to an entity, initially Drenmex then PEE, to acquire shares in HIHC's holding company HIH. Even if, contrary to the inference I would draw, Mr Williams only knew of the HIH share transaction on 16 June 2000, that is still sufficiently contemporaneous with the funding and ongoing share purchases. These did not end on 15 June 2000 with the hand over of the cheque but continued throughout June 2000. Thus the later HIH share purchases were interlocking elements of the same transaction. Clearly, the evidence on this makes the position beyond dispute. However, if actual knowledge had to extend to whether the assistance did in fact materially prejudice the interests of the company, while I would conclude that Mr Adler had knowledge of that too, I will need to deal in more detail with the extent and relevance of the knowledge of Mr Williams and later Mr Fodera." 400 The trial judge then considered whether there was what he called the "more limited requirement for actual knowledge", that is, knowledge not extending to whether the assistance did in fact materially prejudice the interests of the company. Although not expressly stating a result, he gave reasons for knowledge not having to extend to whether the assistance did in fact materially prejudice the interests of the company. I will return to his reasons in this respect. 401 As to Mr Adler's involvement, the trial judge then said - "364 As I have said, whether actual knowledge is required of the matters of material prejudice or not, Mr Adler was fully aware of all of the matters earlier recounted which demonstrate the presence of material prejudice." 402 This was taken up in the trial judge's conclusion, in which he did say expressly that he did not consider that "there need be knowledge of what is essentially a defence rather than an ingredient of the contravention" - " CONCLUSION 369 Each of Mr Adler and Mr Williams were "involved" in the contravention by HIHC of s260A of the Corporations Act , in giving financial assistance to HIHC to acquire shares in its holding company HIH, being assistance which did materially prejudice the interests of the company or its shareholders. However, if it be the case that for Mr Fodera to be so involved, he had to have knowledge not only of the financial assistance but also of the essential facts pertaining to material prejudice (though it be a defence rather than an element of the contravention) then I could not be positively satisfied that at the time Mr Fodera had that knowledge of material prejudice. As I do not consider that there need be knowledge of what is essentially a defence rather than an ingredient of the contravention, I conclude that he too was sufficiently involved, though to a lesser degree than Messrs Williams and Adler. The result is that each contravened s260D(2) of the Corporations Act as did Adler Corporation, with the above qualification concerning Mr Fodera." 403 The appellants submitted that it was necessary that ASIC establish knowledge of material prejudice as well as of the financial assistance, and that ASIC had failed to establish that Mr Adler had actual knowledge at the time that the financial assistance was materially prejudicial to the interests of HIHC or HIH. As will appear, I do not accept the second limb of the submission, and it is no more necessary to decide the first limb than it was for the trial judge. It is nonetheless appropriate to address the trial judge's preliminary question. 404 As has been seen, the trial judge had earlier accepted in relation to s 260A that the onus was on the person seeking to defend the transaction to show that there was no material prejudice. He had said this in the context of contravention of s 260A by HIHC. Onus of proof had not, however, been further discussed in his consideration of contravention by HIHC of s 260A; he found that the giving of the financial assistance materially prejudiced the interests of HIHC and HIH, and onus of proof did not arise. 405 The preliminary question posed by the trial judge in relation to s 260D was in the different context of involvement in the contravention of s 260A, but returned to the onus of proof concerning material prejudice. It was related to, but was not the same as, the question involving reliance on Yorke v Lucas earlier discussed. In the earlier discussion what was in issue was the distinction between knowledge of the essential facts which satisfied the statutory description of the contravention and knowledge that the known facts satisfied that part of the description. The preliminary question raised whether proof of material prejudice to the interests of the company was necessary to make out the contravention, such that there had to be knowledge of the essential facts which satisfied that part of the description of the contravention. 406 The earlier acceptance as to onus of proof had been - "345 Finally, I would adopt what Ford says as to onus being on the party seeking to demonstrate lack of material prejudice (at 24.710): 'The notion that the onus is on those seeking to defend the transactions to show that there is no material prejudice is reinforced by s1324(1B) which says that in proceedings for relief under that section based on the alleged contravention of s 260A(1)(a), the Court must assume that the transaction constitutes a contravention unless the Defendant proves otherwise.' 346 That contention is reinforced by the presence of the "material prejudice" provisions (s260A(1)(a)) immediately alongside what in earlier versions of the prohibition on financial assistance was the other gateway out of that prohibition, namely shareholder approval (see s260A(1)(b)) and note the final gateway added in the contiguous s260A(1)(c)." 407 This was taken up in the first two of the trial judge's reasons for upholding the more limited requirement for actual knowledge, the reasons in summary being - (a) under s 260A "the contravention is made out unless the company satisfies the onus upon it to show that one or other of the potential defences or gateways apply", and "To convert what is thereby expressed in the negative to an affirmative element of the contravention when it comes to the aiding and abetting provisions of s 260D(2) would be incongruous in terms of the primary position of the company as principal offender"; (b) under s 1324 of the Act an injunction can be obtained against a person whose conduct would constitute aiding, abetting, counselling or procuring a contravention, and by s 1324(1B) the court is required to assume that the alleged contravening conduct is contravening conduct unless the alleged contravenor proves otherwise; the reversal of the onus "supports on ground of consistency the preferred interpretation of the more limited scope required for actual knowledge under the operative s 260A(1)"; (c) sections 1317S and 1318 of the Act "allow the court latitude where there are degrees to culpability in terms of lack of knowledge of matters pertaining to potential defences, so enabling the court to excuse the contravention in appropriate circumstances"; and (d) the more limited requirement "accords with the legislative history of s 260A", in that its predecessors were "prophylactic in intent" and not requiring impoverishment of the company and "it would be a radical change to the old law were impoverishment, which had not been an element of the offence under the old law, to become under the current legislation, not merely a defence but an actual element of the contravention." 408 In essence, the trial judge began with the onus of proof of absence of material prejudice to the interests of the company on the company, and from that starting-point reasoned that knowledge of material prejudice (more correctly, facts constituting material prejudice) was not necessary because proof of material prejudice was not necessary to make out the contravention. The appellants challenged both the starting-point and the conclusion. 409 As to the starting-point, the appellants submitted that s 260A is a permissive provision which enables a company to give financial assistance; that there is no contravention simply by the giving of financial assistance; and that there is a contravention only where the financial assistance is given in circumstances where none of paras (a), (b) and (c) of s 260A(1) is satisfied. They said that it followed that it must be shown that the conditions on which the permission is granted do not apply. They pointed out that ASIC had alleged material prejudice in para 69 of the statement of claim: the significance of this is doubtful, however, since on the appellants' reasoning ASIC should also have alleged that none of the other paragraphs of s 260A(1) was satisfied and, indeed, that none of the other kinds of material prejudice in para (a) was suffered. 410 On the other hand, the substance of s 260A(1) is that financial assistance is not to be given unless one of some conditions is satisfied, and it begins with a prohibition which does not apply in the circumstances stated in its paras (a), (b) and (c). That there are the conditions, including a number through the exemption in para (c), suggests that the company has the burden of proof, because it would otherwise be necessary for the plaintiff to exclude a great many matters some of which are known only to the company. Further, the negative in para (a) suggests the burden is on the company, since the issue is not whether giving the assistance is prejudicial to the company, its shareholders or its creditors, but whether giving the assistance is not prejudicial to any of them, and the tenor of the provision is that the company can give the financial assistance only if it is satisfied that there will not be the prejudice. 411 We were not referred to any direct or analogous authority on the point. I prefer the considerations last expressed, and in my opinion the trial judge was correct in his starting-point, although I do not find in s 1324(1B) of the Act assistance for or against his holding since it deals with contravening conduct in general: it does not deal with a debatable element of contravening conduct such as the material prejudice in s 260A(1), let alone with s 260A(1) itself. 412 The appellants then submitted that it does not follow that knowledge of facts constituting material prejudice is unnecessary for involvement in a contravention. They said that "a question of practice and procedure should not govern the substantive question of whether intentional wrongdoing for the purpose of accessory liability is established", and that Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 630 supported the knowledge being necessary. 413 Onus of proof is more than a question of practice and procedure, and what governs the substantive question is the principle thoroughly established in Yorke v Lucas. If the burden of proving that the giving of financial assistance does not materially prejudice the interests of the company lies upon the company, upon proof of giving financial assistance and with no evidence at all on that subject the contravention is made out. Facts showing no material prejudice are not essential facts constituting the contravention, and there can be intentional participation in the contravention if there is knowledge of the giving of financial assistance without proof that the alleged participant did not know of facts negativing material prejudice. Whether the alleged participant can himself prove knowledge of facts negativing material prejudice does not arise in the present case. 414 In Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd Westbay was held to have engaged in misleading or deceptive conduct by making a promise without the intention of fulfilling it, also said to have been making a representation as to a future matter without reasonable grounds for making it within s 51A of the Trade Practices Act. The claim that Lonie was involved in Westbay's contravention of the Trade Practices Act was rejected because the judge was not persuaded that he believed that the directors of Westbay lacked the intention of fulfilling the promise or believed that Westbay did not have reasonable grounds for making the representation. Under s 51A Westbury was deemed not to have had reasonable grounds for making a representation as to a future matter unless it proved that it did, and it did not so prove. The appellants said that Lonie's knowledge of the reasonable grounds, as to which the burden of proof lay upon Westbury, was treated no differently from any other knowledge of an alleged participant in a contravention; in effect, that absence of reasonable grounds was treated as an essential fact constituting Westbay's contravention. 415 With respect, there was confusion so far as the representation found was sometimes regarded as a representation as to a future matter, and I do not think the brief reasons are persuasive on the present question. It may be noted that in King v GIO Australia Holdings Ltd (2001) 184 ALR 98 it was held that it was arguable that s 51A operated in proceedings alleging involvement to relieve the plaintiff from proving that the representations as to a future matter was misleading. 416 In my opinion the trial judge was correct in his conclusion. It was not necessary that ASIC prove that Mr Adler was "fully aware of all the matters earlier recounted which demonstrate the presence of material prejudice". 417 I go then to the appellant's submission that the trial judge erred in finding that Mr Adler was so aware. The submission was brief - "62. There is no evidence that Adler actually knew that the financial assistance was materially prejudicial to the interests of HIH/HIHC. On the contrary, the evidence called by ASIC proves that Adler believed that the purchase of shares in HIH was beneficial in taking advantage 'of the oversold situation in HIH' (Howard, 28.9.01 affidavit, para 8 Blue vol 7, p 1629B-R), and that he believed that HIH shares were 'undervalued in the long-term', would be weak 'for another week or two', and were 'a solid medium-term acquisition' (Mellish, Ex PX20, para 18 Blue vol 36, p 8676F-8677W). This is reinforced by the evidence given by Westfield, that Adler said to him on 15 June 2000 that HIH shares are 'undervalued' and that 'I think it is a good time to buy HIH' (Westfield, 22.10.01 affidavit, para 7 Blue vol 21, p4859Q-48601)." 418 These statements did not persuade the trial judge. They count for little against the finding of Mr Adler's true purpose, which carried with it material prejudice to the interests of HIHC and HIH. Other matters established Mr Adler's knowledge. In particular Mr Adler knew of the exposure to loss earlier discussed, and that HIHC's money had been "invested" outside the prudential procedures within HIH and initially informally; from the letters to Mr Williams and other matters earlier described he was gloomy as to at least the short-term prospects of HIH shares. The trial judge's finding as to Mr Adler's knowledge was well open and has not been shown to be erroneous. On either requirement of knowledge, Mr Adler and Adler Corporation contravened s 260D(2) of the Act. Contravention by Mr Williams of s 260D(2) of the Act 419 The allegation of contravention of s 260D(2) by Mr Williams was pleaded as follows - "72. By reason of his conduct as pleaded in paragraphs 15, 17 and 20 above, Williams: 72.1 aided, abetted, counselled or procured; 72.2 alternatively, induced; 72.3 was knowingly concerned in or a party to; the contravention of section 260A by HIHC and thereby contravened subsection 260D(2) of the Corporations Law." 420 It will be seen that the material conduct of Mr Williams was more confined than the material conduct of Mr Adler. It did not include the pleading, in paras 19 and 22 of the statement of claim, of the initial purchase of HIH shares on Mr Adler's instructions on 15 June 2000 and the subsequent purchases of HIH shares later in June 2000. That did not mean, as Mr Williams' submissions seemed to assume, that the purchases were not part of the case against Mr Williams. The purchases were not conduct of Mr Williams. By reason of his conduct, however, he could be involved in the contravention of s 260A by HIHC of which the purchase of the shares in HIH was part. 421 As earlier noted, the trial judge said that he would deal in turn with the involvement of the defendants. His consideration of the "more limited requirement for actual knowledge" applied also to Mr Williams. 422 As to the involvement of Mr Williams, the trial judge said - "365 Mr Williams, who gave no evidence as to his knowledge, may nonetheless have been unaware of Mr Adler's true purpose in having PEE, through AEUT, purchase shares in HIH in order to support the HIH share price. If so, he would most likely have had the purpose which Mr Adler (falsely) professed. That purpose was to make a short term profit from the dealing in HIH shares. But even absent that knowledge of Mr Adler's real purpose (supporting HIH's share price), Mr Williams was aware of all of the other features of the transaction which rendered the assistance materially prejudicial to the interests of the company, even if, as might be assumed in his favour, he gambled on ultimate benefits outweighing any material prejudice. But if that were so, what he was gambling on was that later events would produce a profit for the company notwithstanding that at the time of the financial assistance he was aware of all of the factors pointing to material prejudice, save (it may be) Mr Adler's true motive. 366 Moreover, Mr Williams and Mr Adler had co-operated to ensure that the in-house HIH expertise was not brought to bear in assessing the wisdom of purchasing shares in HIH itself, through the fact that the transaction was entered into with no input from the Investment Committee or the Board or indeed from those involved with investment management. Mr Howard's role was purely to implement the transaction, not to advise on its wisdom. In circumstances where Mr Williams has chosen not to give evidence of matters which would be peculiarly within his knowledge and where otherwise an inference is amply available that he had actual knowledge of all the elements of the contravention, both in the wider and narrower sense, Mr Williams must be taken to have been " involved " in HIHC's contravention of s260A, for the purposes of s260D of the Corporations Act." 423 The trial judge found in his "Conclusion" earlier set out that Mr Williams was involved in HIHC's contravention of s 260A of the Act, and contravened s 260D(2). Particularly from "both in the wider and narrower sense" in his para 366, he concluded that Mr Williams' knowledge extended to the financial assistance materially prejudicing the interests of HIHC and HIH. 424 Mr Williams adopted the submissions of the Adler appellants that it was necessary that ASIC establish knowledge of material prejudice as well as of the financial assistance. It is not necessary to return to that matter, and on knowledge in "the narrower sense" Mr Williams contravened s 260D(2) of the Act. 425 Again it is nonetheless appropriate to go to Mr Williams' submission as to error in finding knowledge in "the wider sense". He submitted, without amplification, that the trial judge was "wrong to conclude that notwithstanding that Williams was 'gambling' on later events producing a profit for the company he was nevertheless aware of all the factors pointing to material prejudice, 'save (it may be) Mr Adler's true motive'": this referred to para 365 of the reasons. He adopted without elaboration paras 59 and 60 of Mr Adler's written submissions, the first being the paragraph concerned with Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd and the second being only conclusory. There was no attempt to demonstrate error in the finding. 426 Mr Williams knew of the initial informality of the "investment", that prudential procedures had been by-passed, and of the exposure to loss earlier discussed. Even on the basis that he envisaged short-term trading in the HIH shares (which he wrongly told Minter Ellison was a surprise decision, see para 15 of the schedule of facts), giving control to the known non-risk adverse Mr Adler, contrary to HIH's investment policy, carried with it the gambling of which the trial judge spoke. I do not think the trial judge's findings should be held to be in error. Contravention by Mr Adler of s 180(1) of the Act 427 Section 180 of the Act provides - " 180. Care and diligence---civil obligation only Care and diligence---directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. Business judgment rule (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. (3) In this section: "business judgment" means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation." 428 The allegations of contraventions of s 180 were separately pleaded against Mr Adler as a director or officer of each of HIH, HIHC and PEE. 429 The contravention by Mr Adler as a director of HIH was pleaded as follows - "74. By reason of the matters pleaded in paragraphs 15 to 60 (inclusive) above, Adler, being a director of HIH, failed to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they: 74.1 were a director or officer of a corporation in HIH's circumstances; and 74.2 occupied the office held by, and had the same responsibilities with the corporation, as Adler; and thereby contravened section 180 of the Corporations Law . Particulars (1) By his conduct as pleaded, Adler caused or procured HIHC, a subsidiary of HIH, to make a payment which: (a) was a substantial sum of money; (b) was on terms which were not finalised and which were not documented at the time the payment was made; (c) was made to a company which Adler controlled; (d) directly or indirectly advantaged Adler, Adler Corporation and PEE; (e) was made on terms which, to the extent that they were known, were not reasonable in the circumstances if HIHC and PEE had been dealing at arms length; (f) was made with the contemplated object of enabling PEE to acquire from Adler Corporation unlisted investments which were not the subject of independent analysis; (g) further, or in the alternative to (f), was made with the object of: (i) enabling PEE to purchase shares in HIH; (ii) enabling Adler to state publicly that he was purchasing HIH shares; and thereby maintain or stabilise the HIH share price; (h) was ultimately accounted for as a subscription for a unit in a trust the terms of which were not reasonable as far as HIH was concerned and over which HIH had no control; (i) resulted in HIH and HIHC contravening section 208 of the Corporations Law by reason of the fact that no steps were taken to obtain the approval of the members of HIH; (j) resulted in HIHC, a subsidiary of HIH, contravening section 260A of the C orporations Law ; (k) was not disclosed to the directors of HIH other than Adler, Williams and Fodera or to the Investment Committee of HIH; (l) was made in such a way that it would not come to the attention of the directors of HIH other than Adler, Williams and Fodera or to the attention of the Investment Committee of HIH; (m) was not approved or ratified by the Investment Committee of HIH; (n) if, contrary to the plaintiff's primary allegation at paragraph 20.6 above, Williams and Fodera (or either of them) were not aware that the $10 million payment was to be used in whole or in part by PEE to pay for the purchase of shares in HIH, was made in circumstances where this purpose was not, but should have been, disclosed by Adler to them. (2) By his conduct as pleaded, Adler caused or procured PEE, as trustee of the AEUT, to purchase shares in HIH and purchase unlisted securities from Adler Corporation and to make loans to entities related to or associated with Adler in circumstances where those purchases and loans: (a) were not advantageous to the AEUT, the unitholders of the AEUT, including HIHC, or to HIHC's holding company, HIH; and (b) were not disclosed to other directors of HIH or brought to the attention of the Investment Committee of HIH." 430 The contravention by Mr Adler as an officer of HIHC was pleaded in para 75 of the statement of claim, in the same terms save for referring to him as an officer of HIHC and with the same particulars. 431 The contravention by Mr Adler as a director of PEE was pleaded, in slightly different terms and with different particulars, as follows - "76. By reason of his conduct pleaded in paragraphs 47 to 60 (inclusive) above, Adler, being a director of PEE, failed to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they: 76.1 were a director of officer of a corporation in PEE's circumstances; and 76.2 occupied the office held by, and had the same responsibilities with the corporation, as Adler; and thereby contravened section 180 of the Corporations Law . Particulars By his conduct as pleaded, Adler caused or procured PEE to purchase shares in HIH and purchase unlisted securities from Adler Corporation and to make loans to entities related or associated with Adler in circumstances where those purchases and loans were not advantageous to PEE but were advantageous to Adler Corporation and Adler." 432 The particulars to paras 74 and 76 were taken up in the later allegations of contraventions of ss 180-183. The trial judge considered the contraventions of ss 180, 181, 182 and 183 of the Act to some extent together and to some extent by reference forward and back in his reasons. It is convenient to focus for the present on his consideration of the contraventions of s 180. 433 The trial judge first set out "as a series of propositions, the principles applicable to the duty of care and diligence, now as enacted in s 180 of the Corporations Act and as they relate to delegation". He then dealt with the contraventions in relation to the payment of the $10,000,000 and the purchase of shares in HIH, and later with the contraventions in relation to the purchases of shares from Adler Corporation and the loans. 434 As to the contraventions in relation to the payment of the $10,000,000 and the purchase of shares in HIH, the trial judge made the opening observation - "374 So far generally as the purchase of shares in HIH is concerned and its funding via monies made available by HIHC to AEUT, I conclude for essentially the reasons earlier set out, that the Particulars in para 74 were made out. It might be said that this should be with the minor qualifications that: (a) it might be argued that sub-paragraph (k) should have added Mr Cassidy to the directors to whom disclosure was made (see earlier paras 44 to 46 of the Statement of Claim where Mr Cassidy is mentioned as aware of the advance) but as this disclosure was both late and limited, being only of the subscription to the Trust, when he made the application for B class units (TB, 208) and is included in the earlier pleaded material facts, I do not consider this material, and subparagraph (k) is not thereby negated. (b) Subparagraph (n) was not applicable in the circumstances, because Mr Williams and Mr Fodera were aware that the $10 million payment was to be used in whole or in part by PEE to pay for the purchase of shares in HIH. 375 I would likewise conclude that the Particulars in paragraph 76.2 [sic] are made out in relation to PEE in so far as the purchase of shares in HIH is concerned." 435 The trial judge went on to refer, as support for concluding that the contraventions were made out, to evidence of Mr Cameron. His Honour said that he accepted the evidence. He set it out, referred at some length to the cross-examination of Mr Cameron, and noted but rejected the objection that Mr Cameron did not have experience enabling him to "make that an expert opinion". He said - "386 In summary then, Mr Cameron's evidence to the effect that a careful and diligent director in Mr Adler's position had a conflict of interest and would have taken the view that the proposed transaction was quite contrary to HIH and HIHC's interest and at the very least would have sought approval of the transaction from the Board and the Investment Committee was essentially unchallenged in cross-examination. Nor was it effectively refuted during cross-examination on behalf of Mr Fodera." 436 His Honour expressed his conclusion to this point - "CONCLUSION 387 (a) A reasonably careful and diligent director or officer of HIH or HIHC in the position of Mr Adler, would not have caused or procured the payment on 15 June 2000 of $10 million by HIHC to PEE to be applied as it was (in part) in purchasing HIH shares. To the extent that $3,973,397.84 was so used for the purpose of assisting PEE to acquire shares in HIH, not only did that assistance materially prejudice the interests of HIH and HIHC and in that sense was not advantageous to AEUT, the unit holders of AEUT, including HIHC or to HIHC's holding company HIH, but also it was not disclosed as it should have been to other directors of HIH (save Mr Adler, Mr Williams, Mr Fodera and to a limited extent only, as regards the subscription to AEUT, Mr Cassidy). Nor was it brought by Mr Adler to the attention of the Investment Committee of HIH for approval or ratification, as it should, nor was the mandate for AEUT's investments ever brought to the Investment Committee for approval by Mr Adler, as mandatorily required by the Investment Committee's Terms of Reference. The semi-covert bypassing of proper corporate safeguards for these arrangements (only executive directors apart from Mr Adler were aware), reflects consciousness of impropriety on Mr Adler's part. Furthermore, the purchase was made with Mr Adler stating publicly that he was purchasing HIH shares and with the object to maintain or support the HIH share price rather than for HIH's purpose, of enabling HIHC to obtain, through its interests in AEUT, the benefit of a quick profit on the resale of HIH shares so acquired. Mr Adler thereby breached s180 of the Corporations Act . This was in failing to follow authorised practices (see para 372(13) above) and in properly safeguarding the interests of HIH and HIHC (in the latter case as an officer), falling well short of the standard of a reasonably competent person in his category of appointment, well familiar as he was with investment practices; see para 375 above. (b) [Here the trial judge dealt with contravention of s 181 of the Act.] (c) [Here the trial judge dealt with contravention of s 182 of the Act.] (d) Insofar as the 'business judgment' provisions of s180(2) are concerned, these could not apply to exonerate Mr Adler. This was because there was no 'business judgment' (as either a defence or as an element in the contravention) shown by Mr Adler to have been made 'in good faith for a proper purpose' (s180(2)(b)). Clearly Mr Adler did have 'a material personal interest in the subject matter of the judgment' so also precluding application of that rule. No equivalent defence at general law is made out either." 437 The trial judge's conclusions as to the contraventions in relation to the purchases of shares from Adler Corporation and the loans are to be found in a number of places. 438 First, after a lengthy consideration of the purchase from Adler Corporation of its shares in dstore he said - "CONCLUSION 576 At the time of the acquisition by PEE of the shares in dstore, it is a fair inference, on the evidence, and strengthened by Mr Adler's failure to give any other explanation, of a matter which was peculiarly within his knowledge, that he was aware that: (a) dstore was in need of significant capital in order to continue doing business given the "burn rate" it was known to Mr Adler to have been experiencing; (b) dstore was encountering difficulties in raising new capital; (c) dstore was having cash flow difficulties; (d) there was a significant risk that dstore would fail (para 49 of ASIC's Statement of Claim). (e) PEE had thereby acquired from Adler Corporation an unlisted investment (dstore) which was not the subject of independent analysis, was purchased from interests associated with a director (Adler), who had not disclosed this to the directors of HIH other than Mr Williams and Mr Fodera (and subsequently Mr Cassidy) nor sought approval from the Investment Committee or Board either for the investment of $10 million in AEUT or its application in part to acquire assets such as dstore from Adler Corporation, in circumstances where this entailed a clear conflict of interest for Mr Adler; (f) that purchase was not advantageous to AEUT or to the unit holders of the AEUT, including HIHC, or to HIH but was to the advantage of Adler Corporation and Mr Adler; (g) no disclosure was made by Mr Adler to HIH or HIHC before dstore was acquired of the matters in (a) through (d) above and the first HIH and HIHC knew of the failure of this investment was on 15 December 2000; 577 In so doing, Mr Adler breached his obligation (a) to exercise the degree of care and diligence required from a director by s180 of the Corporations Act breaching his obligations as a director or officer to HIH, HIHC and PEE, and having a material personal interest in the subject matter of any business judgment could not rely on any defence under the business judgment rule ; … [The trial judge went on to state conclusions as to contraventions of ss 181-183 of the Act.]" 439 Secondly, after another lengthy consideration of the purchase from Adler Corporation of its shares in Planet Soccer, he said - " CONCLUSION 621 At the time of acquisition by PEE of the shares in Planet Soccer, Mr Adler was aware that: (a) Planet Soccer was in need of significant capital in order to continue in business; (b) Planet Soccer was encountering difficulties in raising new capital; and (c) There was a significant risk that Planet Soccer would fail, in the absence of such new capital. In all other respects, the position with regard to the investment in Planet Soccer is substantially the same as for dstore. Mr Adler is in contravention of s180 to s183 in relation also to the purchase of Planet Soccer, as also is Adler Corporation (save for s180) by reason of its involvement in the relevant breaches." 440 Thirdly, after another lengthy consideration of the purchase from Adler Corporation of its shares in Nomad he said - " CONCLUSION 678 At the time of the acquisition by PEE of the shares in Nomad, Mr Adler was clearly aware that: (a) Nomad was in need of significant capital in order to continue in business; (b) Nomad was encountering difficulties in raising new capital and failed to do so when needed by the time of the sale to AEUT, nor subsequently; (c) there was a very significant risk, which Mr Adler must have appreciated, that Nomad would fail, which risk eventuated in less than four months; and (d) again the Investment Committee and its approval process were bypassed by Mr Adler, and also Mr Williams. Despite this, Mr Adler and Adler Corporation caused the sale to occur to extricate Adler Corporation from an investment with which he had long been dissatisfied to advantage himself and disadvantage PEE, HIH and HIHC. In the circumstances, this produces the same finding as in relation to dstore and Planet Soccer. Mr Adler contravened ss180-183 of the Corporations Law , as also Adler Corporation (save for s180) by reason of its involvement in the relevant breaches." 441 The trial judge then said - "Overall Assessment of the three unlisted investments 679 It remains to consider the collective effect of these three investments. 680 No reasonable director in Mr Adler's position and possessing his knowledge and acting bona fide for a proper purpose would have committed PEE to acquire Adler Corporation's investments in Nomad, dstore and Planet Soccer, at the prices Adler Corporation paid for these investments in the circumstances. 681 The risk of total loss on these investments had heightened considerably after Adler Corporation's purchases, as was borne out by subsequent events, most markedly in Australia by the financial collapse of Nomad and dstore within a matter of months after PEE's acquisitions. Such a conclusion is supported by the known radical change in market conditions in mid-April 2000 after Adler Corporation's purchases of these technology stocks and before they were on-sold at cost to AEUT, the lack of any due diligence, and the misleading statements and omissions made by Mr Adler in relation to on-sale of these investments. This was all in circumstances where it may properly be inferred that Mr Adler had lost confidence in these investments, having been an early round investor where it was obvious that the critical capital needs of those companies was not forthcoming. So it is quite fallacious to suggest that AEUT was getting the benefit of a high risk/ high prospective gain opportunity. What it got was the known prospect, that is, known to Mr Adler, of a likely loss, when these three investments were to varying degrees at real risk." 442 Fourthly, his Honour concluded his consideration of the loan to morehuman - " CONCLUSION 694 Mr Adler caused PEE, as trustee of the AEUT, to make an unsecured loan without any adequate documentation of $160,000 to Morehuman [sic] Pty Limited, without any documented obligation to pay interest and with no security other than an inadequately documented guarantee. That loan was not advantageous to AEUT, nor disclosed to other Directors of HIH, or brought to the attention of the Investment Committee of HIH, save that it came to the attention of Mr Adler and Mr Williams. In those circumstances, Mr Adler was in contravention of s180 to s183 of the Corporations Act for similar reasons as are set out in relation to the earlier findings, as is Adler Corporation (save for s180)." 443 Fifthly, as to the loan to Intagrowth his Honour said (para 706) that his conclusion was "the same as the finding in relation to the Morehuman [sic] loan in para 694, above". This must have referred to the conclusion as to contravention. There was a documented obligation to pay interest. From the preceding discussion, the contravention was because the loan "did not properly provide security and in fact was unsecured", was "not properly documented", was not disclosed to the other directors of HIH or brought to the attention of the investment committee of HIH, and further was to a trust in which Mr Adler had a substantial interest and was neither "venture capital" nor "share trading" within the description of those terms in the 9 June 2000 correspondence between Mr Adler and Mr Williams. 444 Sixthly, after consideration of the loans to PCP and PCP Ensor, in the course of which he observed that they were not for venture capital or share trading in accordance with the 9 June 2000 faxes between Mr Adler and Mr Williams, the trial judge said - "CONCLUSION 730 The finding in relation to the two loans to PCP and PCP Ensor respectively, is the same as for the loan to Intagrowth (para 706) and earlier to Morehuman [sic] (para 694). The PCP Ensor loans were favourable to Mr Adler because of his apparent entitlement to a very substantial share of the profits in respect of the development and via PCP's role as project manager. The loans were disadvantageous to HIH/PEE because they were made without security other than the Wolfe [sic] guarantee (itself unsecured) in respect of the PCP Ensor loan, for a very limited (ten percent) share of profits which was never paid and in circumstances where the careful scrutiny and monitoring would ordinarily have attended an HIH property development investment, through the Investment Management Group and Investment Committee, was entirely bypassed." 445 The appellants' submissions also dealt separately with the contraventions in relation to the payment of the $10,000,000 and the purchase of shares in HIH and the contraventions in relation to the purchases of shares from Adler Corporation and the loans. 446 The form of the submissions concerning the contraventions as to the payment of the $10,000,000 and the purchase of shares in HIH was as follows. First, the appellants identified what they said were "two central propositions in the trial judge's reasoning", and said that one was not made out on the evidence and the other was neither open within ASIC's particularised case nor made out on the evidence. Secondly, they said that none of the other particulars of ASIC's case was made out. The appellants did not assert that the business judgment rule applied. Thirdly, they said that the evidence of Mr Cameron had been wrongly admitted. In large measure, although not wholly, the appellants sought to have this Court undertake the de novo evaluation of the facts which in Williams v The Minister for Aboriginal Land Rights Act 1983 (2000) Aust Torts Reports 81-578 Heydon JA said was not authorised or required. 447 The "two central propositions in the trial judge's reasoning", as formulated by the appellants, were that the payment of the $10,000,000 on 15 June 2000 - "(a) Was made without applicable approvals being obtained from the Investment Committee of HIH; and (b) Was made for the purpose of promoting Adler's personal interest by maintaining or stabilising the HIH share price for his own benefit as a substantial shareholder." 448 The submissions as to the first of these propositions took particular issue with the earlier finding by the trial judge, as an inference, that Mr Adler and Mr Williams "were actually intending that the Investment Department be sidestepped", and with the reference in the conclusion in his para 387(a) to "semi-covert by-passing of proper corporate safeguards". It was said that the Investment Guidelines did not mandate prior approval by the Investment Committee, that the payment of the $10,000,000 was known to Mr Cassidy, Mr Fodera, Mr Lo and Mr Howard at the times and in the circumstances which have earlier been described, that the first meetings of the Investment Committee and the Board subsequent to 15 June 2000 were in September 2000 and about that time the directors of HIH were made aware of the transaction, and that the instruction to by-pass Mr Ballhausen was given by Mr Fodera, not by Mr Adler: in those circumstances, it was said, a finding of intentional sidestepping or by-passing was not open. 449 The essence of the trial judge's reasoning in this respect was not that the approval processes were mandatory, although they were at least so far as the payment of the $10,000,000 to PEE for use in venture capital and other investments was giving a mandate to an external investment manager. It was that the payment of the $10,000,000 for that ostensible purpose (putting aside Mr Adler's own purpose) should have been disclosed to the Investment Committee and the Board before the payment was made. 450 As I have earlier said, that prior approval of the Investment Committee may not have been a matter of prescription does not mean that it was not called for. It was a large sum of money given into the sole control of a director of HIH, without adequate documentation; it was known that it was being used in the purchase of HIH shares; it was known that the director's aversion to risk in investment was not that of HIH; and the director stood to gain personally if the money was used profitably. Disclosure beyond Mr Williams and Mr Adler, not just directions to Mr Fodera and Mr Howard to implement the payment of the money or the application for the unit put before Mr Cassidy and Mr Lo as a fait accompli, but disclosure to the Investment Committee and the Board, was necessary, and the necessity was later acknowledged by Mr Adler and Mr Williams. They did not cause disclosure after the event, and the disclosure only came about through Mr Buttle's intervention. In my opinion, the trial judge was entitled to infer that there was the intentional side-stepping or by-passing, and more important to consider that in what was not done there was departure from the standard of a reasonably careful and diligent director in the position of Mr Adler. 451 I have earlier referred to the submission, in connection with the contraventions by HIH and HIHC of s 260A of the Act, that regard to Mr Adler's intention to shore up the HIH share price for the benefit of his own company's substantial shareholding in HIH was not open on the particulars. The trial judge took this up in his conclusion, referring to Mr Adler "stating publicly that he was purchasing HIH shares and with the object to maintain or support the HIH share price rather than for HIH's purpose …". It may not be correct to regard it as a central proposition to the trial judge's reasoning, but the appellants submitted that Mr Adler's purpose was not open on the particulars. 452 The particulars to para 74 of the statement of claim included that the payment of the $10,000,000 was with the object of enabling Mr Adler to state publicly that he was purchasing HIH shares and thereby maintain or stabilise the HIH share price (particular (g)). The appellants submitted that the particulars were neutral as to whether the maintenance or stabilisation of the HIH share price was for the intended benefit of Mr Adler or for the intended benefit of HIH. However, particular (d) included that the payment directly or indirectly advantaged Mr Adler and Adler Corporation, and that and a number of the other particulars in my view made apparent that particular (g) extended to Mr Adler stating that he was purchasing HIH shares in order to maintain or stabilise the HIH share price in his own interests. It is not without significance that the same particulars were taken up for the allegations of failure to discharge directorial duties in good faith and for a proper purpose. Harking back to the function of pleadings and particulars, I do not think that on a sensible reading of the statement of claim Mr Adler's purpose was put out of consideration. 453 The appellants then submitted that the evidence did not justify the finding as to Mr Adler's purpose. I have dealt with that matter earlier in these reasons. The appellants said that what they termed the express evidence of Mr Adler's purpose, found in what he said to Mr Howard, Mr Potts, Mr Westfield and Mr Le Soeuf and to the effect that it was to take advantage of the oversold situation of HIH shares and thereby make a short-term trading profit, should not be rejected in favour of inference from other circumstances; they said that so far as the inference was drawn from the "mere fact" of PEE purchasing the shares in HIH, purchases in those quantities were not shown to have been sufficient to have maintained or stabilised the share price; and they said that so far as an inference was drawn from Mr Adler's public statements that he was purchasing HIH shares, on a close analysis of the evidence the inference was unwarranted. The analysis proffered by the Adler appellants was selective and in some respects could be called carping; at best it offered an alternative view, but I do not find it persuasive. Having considered it, I remain of the view that there was a compelling case for the conclusion that Mr Adler's purpose in causing PEE to purchase the HIH shares was not to make a quick profit, but was as found by the trial judge. 454 The appellants' submissions as to the other particulars significantly depended on the trust argument earlier considered, that the $10,000,000 and the shares purchased with the money were held by PEE on trust entirely for HIHC as sole beneficiary. Thus it was said that particular (b), alleging that the payment "was on terms which were not finalised and which were not documented at the time the payment was made", mattered not because the general law of trusts provided for HIHC's beneficial interest; that particular (d), that the payment "directly or indirectly advantaged Adler, Adler Corporation and PEE", was unfounded because of the trust imposed by law; and that particular (e), that the payment "was made on terms which, to the extent that they were known, were not reasonable in the circumstances if HIHC and PEE had been dealing at arms length", was also unfounded because the terms were those imposed by the general law of trusts and were ex hypothesi reasonable terms. For reasons earlier given, this can not be accepted. In the present context it is quite unreal to suggest that, even if the payment of the $10,000,000 by HIHC to PEE on 15 June 2000 were characterised as a trust, the obligations of care and diligence would be satisfied in the circumstances of the payment as they occurred. 455 Some of the submissions as to other particulars required that the conclusions as to contraventions of ss 208 and 260A of the Act be wrong. For the reasons I have given, I do not think that they were. 456 Some of the submissions as to the other particulars could warrant the adjective "carping" earlier used. One example is the submission as to particular (f), that the payment "was made with the contemplated object of enabling PEE to acquire from Adler Corporation unlisted investments which were not the subject of independent analysis". The submission took issue with whether it had been shown that the intention was that the investments would not be the subject of independent analysis. The evidence established acting outside HIH's prudential procedures with a view to non-risk adverse investment at the discretion of Mr Adler, and acquiring shares from Adler Corporation, which of itself went to make out the contravention; the shares were acquired without independent analysis. The circumstances were eloquent that independent analysis was not in contemplation. Another example is the submission as to particular (c), that the payment "was made to a company which Adler controlled", which was said not to support a finding of a lack of care and diligence because retention of control by Mr Adler rather than parting with control was "in Adler's favour". The comparison was not between control by Mr Adler and lack of control. It was between control by HIH and control by Mr Adler. As a third example, it was submitted that particular (2) to para 76, that the purchases of the HIH shares "were not disclosed to other directors of HIH or brought to the attention of the Investment Committee of HIH", was not made out because the purchases were known to Messrs Williams and Fodera, who were directors. I later come to this in a little more detail; the particular is not to be read in such a very narrow way. 457 The submissions made much of particular (h), that the payment "was ultimately accounted for as a subscription for a unit in a trust the terms of which were not reasonable as far as a HIH were concerned and over which HIH had no control". It was said that the terms of the AEUT trust were "within the bounds of reasonableness if HIH/HIHC had been dealing with PEE at arms length", relying on the HIH annual report as at 30 June 2000 treating what it erroneously described as an investment of $10,000,000 in the AEUT at balance date as a transaction on reasonable terms and some evidence from Messrs Cohen and Gardener to the effect that the treatment in the annual report reflected their then genuinely held views. A reading of the evidence suggests that these gentlemen were rather uncomfortable in their adherence to the treatment in the annual report, but in any event the trial judge was not bound by their views or by the treatment in the annual report. It was well open to him to conclude, as he did after considering the same submission as was put to us (that appearing from his reasons), that they were wrong and that the terms of the trust deed "were entirely inappropriate to regulate dealings between a director-related entity under the control of a conflicted insider Mr Adler". The trial judge has not been shown to have been in error; indeed, I would for myself conclude that particular (h) was made out. 458 Some further submissions of the same nature were made, to which I have had regard, but in my opinion the endeavour to negate the trial judge's conclusion that, in relation to the payment of the $10,000,000 and the purchase of the shares in HIH, there was contravention by Mr Adler of s 180 of the Act, was to no avail. It is necessary to consider the circumstances of the transactions as a whole, with an eye to reality. The trial judge's conclusion has not been shown to be in error. 459 I do not overlook the submission that the evidence of Mr Cameron had been wrongly admitted. As I have indicated, for reasons later given I consider that no error has been shown in its admission. Mr Cameron was asked (question 1) whether a reasonably careful and diligent director or officer of HIH or HIHC in the position of Mr Adler would have caused or procured the payment on 15 June 2000 of $10,000,000 by HIHC to PEE. He was given detailed assumptions. He answered no, and gave reasons. The reasons were - "5. Mr Adler had a conflict of interest because he was to benefit from the transaction, at least by obtaining control of $10 million which he could use in any way he wanted. Also, there was a potential benefit from a 10 per cent share of profits. 6. In my view, a reasonably careful and diligent director or officer of HIH or HIHC in Mr Adler's position would have taken the view that the proposed transaction was quite contrary to HIH and HIHC's interests as it was to involve the payment of a large sum of money to a company controlled by a director, for investment completely at the discretion of the director, without security and without adequate documentation of appropriate arrangements including arrangements as to interest and/or profit share. 7. At the very least, a reasonably careful and diligent director or officer of HIH or HIHC in the position of Mr Adler would in my view at least have sought approval of the proposed transaction from the Board of HIH and from its Investment Committee and would have made full disclosure of all of the proposed terms and the use to which the funds were to be put." 460 It may be thought no more than common sense that reasonably careful and diligent directors do not cause or permit $10,000,000 of company money to be handed over to one of their own to use in an unrestricted manner. The trial judge considered that the contravention of s 180 had been made out apart from Mr Cameron's evidence, and referred to Mr Cameron's evidence as support for concluding that the contraventions had been made out. On my reading of the reasons, he would have reached the same conclusion in the absence of Mr Cameron's evidence, so in any event it does not matter. 461 The appellants' submissions as to the contraventions in relation to the purchases of shares from Adler Corporation and the loans again significantly sought to have this Court undertake the de novo evaluation of the facts which in Williams v The Minister for Aboriginal Land Rights Act1983 Heydon JA said was not authorised or required. 462 At a more general level, the submissions came down to these. First, in the trial judge's reasoning there were two "central propositions" which were outside the case as particularised by ASIC, being that Mr Adler failed to undertake due diligence or other similar enquiry or investigation on behalf of PEE prior to the transactions and that Mr Adler was acting in a position of conflict of interest and with a purpose of advancing his self-interest. Secondly, that whether the purchases of shares and the loans were "not advantageous" (see the particulars in para 74(2) and to para 76 of the statement of claim) turned on whether the investments were of less value at the time of acquisition by PEE than the price at which PEE acquired them and whether the making of the loans "was objectively beneficial … at the time they were made"; that there was no valuation evidence as to the value of the shares and loans at the time of the transactions; and that "the evidence is contrary to the proposition that the share purchases and loans were not advantageous to AEUT at the time of the transactions by reference to the price paid for the shares and the terms agreed for the loans". Thirdly, that the purchases of shares and loans were not disclosed to other directors of HIH or brought to the attention of the Investment Committee of HIH (see the particulars in para 74(2) of the statement of claim) was not made out because there was disclosure to one or more of the directors. 463 The trial judge did refer on a number of occasions to absence of due diligence or other similar enquiry or investigation on behalf of PEE prior to the transactions. An example is in para 576(e) as to dstore, set out above and referring to the acquisition of the shares "which was not the subject of independent analysis". He also referred on a number of occasions to Mr Adler's position of conflict as vendor through Adler Corporation and acting on behalf of the buyer PEE, and to Mr Adler advantaging himself in the transactions. Examples are the same para 576(e) and para 678, set out above in which the acquisition of the shares in Nomad is described as extrication "from an investment with which [Mr Adler] had long been dissatisfied to advantage himself … ". 464 I do not think it correct to say that these were "central propositions" in the trial judge's reasoning, but it does not matter because in my opinion they were within ASIC's case as particularised. 465 ASIC's case as particularised alleged that the purchases from Adler Corporation and the loans were not advantageous to the entities on the purchasing and lending sides, variously PEE, the AEUT, the unit holders of the AEUT, HIHC and HIH, and that they were advantageous to Adler Corporation and Mr Adler. Whether the transactions were disadvantageous or advantageous was not simply a comparison between the price paid for the shares and some assessment of their value at the time of purchase, or whatever may have been meant by "objectively beneficial" at the time the loans were made. Nor were the transactions to be looked at in isolation from the circumstances in which they came about, through Mr Adler being put in control of $10,000,000 of HIHC's money without effective constraint upon him causing the money to be used in purchases from himself and transactions for his own benefit. That the transactions were without independent prudential investigation, in particular because of the circumstances in which control of the $10,000,000 had been given to Mr Adler outside HIH's prudential procedures, was itself an aspect of the disadvantage to the purchasing and lending sides of the transactions. A risky transaction is disadvantageous when made even if it turns out well, and a purchase made after requisite due diligence is better than one casually made, much better than one made by the person controlling the purchaser from that person at the price fixed by that person, and much better again than a purchase made at a price so fixed being the cost to the vendor rather than an attempt at the true value of the shares. That the person effecting the transaction was in a position of conflict and had a purpose of advancing his own interests was also an aspect of disadvantage, for obvious reasons, and as well fell within the allegation that the transactions were advantageous to Adler Corporation and Mr Adler because they served his interests. The appellants' submissions required an unduly narrow view of the particulars. 466 In my opinion, absence of due diligence or other similar enquiry or investigation (which I have earlier said was properly found) was relevant to disadvantage and advantage. So was Mr Adler's dissatisfaction with his investments in dstore, Planet Soccer and Nomad. Depending on the circumstances, that a vendor is moved to dispose of an investment because he is dissatisfied with it may provide reason to think it is not a good investment and that the disposition is disadvantageous to the purchaser and advantageous to the vendor. Other circumstances may nullify the reasoning, or they may enhance it. But the particulars permitted regard to Mr Adler's dissatisfaction; and Mr Adler was not a tyro in investment matters. 467 The appellants said that the trial judge took the view that "not advantageous" meant that the investments were of less value at the time of acquisition by PEE than the price at which PEE acquired them. It is not easy to translate this to the loans, as distinct from the purchases of shares. I do not think it is correct. 468 In the passage to which the appellants referred the trial judge was summarising ASIC's contentions as to the purchases from Adler Corporation being to the advantage of Mr Adler. He referred to a number of matters and said, still as ASIC's contentions, that they were sufficient in themselves to establish breaches of duty, but that that conclusion was supported by evidence "that the three investments were not advantageous to AEUT … being of less value at the time of acquisition of [sic: by] PEE than when acquired originally by Adler Corporation". He then referred to a number of other matters. 469 The comparison to which this referred was between value at the time of acquisition by PEE and value when acquired originally by Adler Corporation, and it was not an exhaustive discrimen of advantage or disadvantage. The trial judge's reasons amply bear out that ASIC's substantial contention was that Mr Adler advantaged himself and Adler Corporation, and disadvantaged the AEUT, HIHC and HIH, by disposing of investments with which he was dissatisfied, at prices which did not reflect the severe difficulties that the companies had experienced in raising capital since shares in the companies were purchased by Adler Corporation or the fall in technology stocks in the April 2000, "tech-wreck". A case of that nature was upheld. 470 The appellants submissions as to the value of the shares purchased from Adler Corporation did not properly address the case made and found against them. If regard be had to the trial judge's conclusions in relation to each of dstore, Planet Soccer and Nomad and his "Overall Assessment of the three unlisted investments", simple comparison between the price paid for the shares and their value at the time of acquisition is not found. That does not mean that the value of the shares purchased from Adler Corporation was irrelevant, but the intricate examination of the evidence by the appellants in the appeal with a view to showing that ASIC had not established, as a valuation exercise, that the shares did not have the value paid for them, was misdirected. 471 The trial judge's discussions leading to his conclusions adequately explain them, and I see no reason to burden these already overlong reasons with a rehearsal of what the trial judge said. Nor in the circumstances do I think it necessary to recount the detail of the appellants' submissions that the evidence was contrary to the proposition that the share purchases and loans were not advantageous to the AEUT (the thrust of which was, more correctly, that ASIC had failed to show that the purchases and loans were not advantageous to the AEUT). The evidence on which the appellants called filled many volumes, and I can deal with the submissions without their detail where I state the appellants' submissions, I direct attention to the principal submissions and do not overlook unstated surrounding submissions. 472 The commencement of the appellants' submissions as to the purchases of shares from Adler Corporation was that, although there had been the "tech-wreck" in the venture capital investment market and particularly as to investment in technology and internet ventures - (a) it was essential to refer to the circumstances of the particular investment; (b) venture capital investments were long-term in nature; (c) it was inherent in the nature of venture capital investments that capital had to be raised and that there was a significant risk that the business would fail; and (d) valuation of venture capital investments was very subjective. 473 From this platform, the submissions were to the effect that - (a) so far as it was held against the purchases of shares from Adler Corporation that the investments were speculative or risky, that did no more that "state features inherent in venture capital investment"; at one point it was said that a significant risk that dstore would fail was not a cause for concern "because that's true of any venture capital stock"; (b) price comparison was not of significance because value was in the eye of the beholder, or at least arrived at on factors not susceptible of purported calculation of value (my expressions, not those of the appellants); and (c) from the analysis of the evidence undertaken by the appellants, which evidence included some optimistic opinions as to the futures of the companies in contrast with grounds for forecasting the failures which soon came about, it could not properly be concluded that at the time the shares were purchased from Adler Corporation their values were less than the prices paid. 474 I have considered in full the appellants' submissions in these respects. I am not persuaded that the trial judge was in error in his conclusion that the purchases of the shares from Adler Corporation were disadvantageous to the purchasing side and advantageous to Mr Adler and Adler Corporation, or his reasons for his conclusions. Comparison between the prices paid and somebody's attempt at valuation of the unlisted shares would not have meant much, and ASIC did not attempt it. There was much more to the findings of contraventions than disadvantage and advantage, but the trial judge's closing summation that what the AEUT got "was the known prospect, that is, known to Mr Adler, of a likely loss, when these three investments were to varying degrees at real risk" was fully justified. That a significant risk of failure was not a cause for concern because of the nature of the stock did not mean that purchasing the stock was reasonable, it meant that stock of that nature was contra-indicated. 475 There was good reason to conclude that the shares were worth less when sold to PEE than when acquired by Mr Adler, from the evidence of overall fall in values and from the "tech-wreck". It is particularly pertinent that when Mr Adler wrote to Mr Ballhausen on 28 February 2001 about buying MindAtlas from PEE at cost, he supported the fairness of his offer, and described it as "probably realistically fantastic", by saying "please note, every technology/dot.com company has fallen dramatically this last year, between 60% -80%". The inference that Mr Adler caused the shares to be sold to PEE (at their earlier cost to him) because he had lost confidence in them was strong, and was properly drawn. In the circumstances in which Mr Adler did so, no reasonable director of HIHC, HIH or PEE exercising care and diligence would have purchased them this on behalf of those companies. 476 The appellants' submissions as to the loan to morehuman were that payment of interest "must have been understood", because there was no evidence that Mr Adler's letter to Mr Bayni of 7 September 2000 asserting an entitlement to interest brought a protest and interest was in fact paid; that there was security in the form of the personal guarantee and there was documentation, being the letter of 26 July 2000; and that the fact that the cheque repaying the loan plus interest was a cheque of Trafalgar Properties Ltd "does not prove that morehuman did not have the resources on its own account to repay the loan". The submissions ignored the circumstances of an informal loan to a company of which Mr Adler was director and secretary and in which he held a substantial shareholding, a loan which from subsequent events morehuman plainly did not have the resources to repay, and a loan not secured in any real sense by Mr Bayni's guarantee which from subsequent events was of little if any value. The loan was plainly not advantageous to PEE and advantageous to Adler. Again, the loan should not be looked at in isolation, nor was the only question whether it was advantageous to the AEUT. The contravention lay in Mr Adler's "conduct as pleaded", beginning with the payment of the $10,000,000 to PEE. Mr Adler should not have been in a position of control over the $10,000,000 whereby he could cause the loan to be made, and should not have caused it to be made in the manner it was made or at all. The trial judge was correct in his conclusion that there was contravention of s 180 of the Act. 477 As to the loan to Intagrowth, the appellants submitted that the fact that it was not secured appeared to be an unintended error but that in any event there was a history of Intagrowth honouring its borrowings; that no loss was suffered; and that it was wrong to say that the loan was other than advantageous. That the loan was unsecured by mistake hardly supports due care and diligence, but the submissions passed over the other matters to which the trial judge referred. The loan should never have been made. 478 The appellants also submitted that so far as the trial judge took into account that the Intagrowth loan was neither venture capital nor share trading within the terms of the 9 June 2000 faxes between Mr Adler and Mr Williams, he was not entitled to do so within ASIC's case as pleaded and particularised. This was but a passing reference, but the fact that Mr Adler had such control over the $10,000,000 that he could depart from what on one view was his mandate went to the commencement of his "conduct as pleaded" and bore upon the contravention of s 180 of the Act. 479 As to the loan of $200,000 to PCP, the appellants submitted that the loan was adequately documented by the letter of 3 October 2000 and that the interest rate of 20 per cent "no doubt [took] into account the commercial risk in lending money without security". The trial judge was critical of the way the letter was signed, but that does not appear to have been significant to his conclusion. The risk reflected in the interest rate underlined the need for security, and the other matters which the trial judge incorporated by reference in his conclusion justified his finding that the loan was not advantageous to the AEUT and was made in circumstances of contravention of s 180 of the Act. Again, Mr Adler should not have been in the position whereby he could cause it to be made outside HIH's prudential procedures, and should not have caused it to be made to a borrower which he half owned. 480 As to the loans to PCP Ensor, the appellants submitted that there was security by way of personal guarantee and that "[t]here is no allegation that the only acceptable security was some form of hypothecation". It is unnecessary to rule on whether "security" means some form of hypothecation or extends to a personal guarantee; the usage will depend on the circumstances. The interest rate of 30 per cent reflected a high risk, itself indicating disadvantage through a risky investment. From later events, the security was plainly inadequate, and Mr Adler himself excused the disadvantageous settlement in early March 2001 in part because "[d]ocumentation between Pacific Eagle Equities and Pacific Partners was not as precise as originally thought". Once again, the disadvantageousness to the AEUT and the advantage to Mr Adler and Adler Corporation came also from the loans (and PEE's participation as joint venturer) being to Mr Adler's personal profit. 481 I am not persuaded that error has been shown, either in the trial judge going outside the case open to ASIC or in the conclusions to which he came. 482 I come finally to the appellants' submissions concerning disclosure of the purchases of shares from Adler Corporation and the loans to other directors of HIH and bringing them to the attention of the Investment Committee of HIH. It was submitted that the allegation in the particulars in para 74(2) of the statement of claim was not made out, because the purchase of the shares in dstore was disclosed to Mr Williams by the memorandum of 10 July 2000 (the appellants also relied on the trial judge's reference to disclosure to Mr Fodera and Mr Cassidy, but that was erroneous); because the purchase of the shares in Planet Soccer was similarly disclosed to Mr Williams by the memorandum of 10 July 2000; because the purchase of the shares in Nomad was disclosed to Mr Williams in the fax of 25 September 2000; and because the loans to morehuman, Intagrowth and PCP Ensor were disclosed in the AEUT balance sheet accompanying the fax of 25 September 2000. 483 The submission calls for an unduly narrow interpretation of the particulars in para 74(2). In my opinion, on its natural reading particular (b) is not wholly negated by disclosure to one director of HIH, but extends to failure to disclose to other directors as a class and (separately) failure to bring to the attention of the Investment Committee. It would be contrary to common sense to read the particular in any other way, its point being that there was not the Board or Investment Committee consideration of the share purchases or loans which should have occurred. Contravention by Mr Williams of s 180(1) of the Act 484 The allegations of contraventions of s 180 were separately pleaded against Mr Williams as a director of each of HIH and HIHC. 485 The allegation of contravention by Mr Williams as a director of HIH was pleaded as follows - "77. By reason of the matters pleaded in paragraphs 15 to 46 (inclusive) above, Williams, being a director of HIH, failed to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they: 77.1 were a director or officer of a corporation in HIH's circumstances; and 77.2 occupied the office held by, and had the same responsibilities with the corporation, as Williams; and thereby contravened section 180 of the Corporations Law . Particulars By his conduct as pleaded, Williams caused or procured HIHC, a subsidiary of HIH, to make a payment which: (a) was a substantial sum of money; (b) was on terms which were not finalised and which were not documented at the time the payment was made; (c) was made to a company which Adler controlled; (d) directly or indirectly advantaged Adler, Adler Corporation and PEE; (e) was made on terms which, to the extent that they were known, were not reasonable in the circumstances if HIHC and PEE had been dealing at arms length; (f) was made with the contemplated object of enabling PEE to acquire from Adler Corporation unlisted investments which were not the subject of independent analysis; (g) further, or in the alternative to (f), was made with the object of: (i) enabling PEE to purchase shares in HIH; (ii) enabling Adler to state publicly that he was purchasing HIH shares; and thereby maintain or stabilise the HIH share price; (h) was ultimately accounted for as a subscription for a unit in a trust the terms of which were not reasonable as far as HIH was concerned and over which HIH had no control; (i) resulted in HIH and HIHC contravening section 208 of the Corporations Law by reason of the fact that no steps were taken to obtain the approval of the members of HIH; (j) resulted in HIHC, a subsidiary of HIH, contravening section 260A of the Corporations Law ; (k) was not disclosed to the directors of HIH other than Adler, Williams and Fodera or to the Investment Committee of HIH; (l) was made in such a way that it would not come to the attention of the directors of HIH other than Adler, Williams and Fodera or to the Investment Committee of HIH; (m) was not approved or ratified by the Investment Committee of HIH." 486 The allegation of contravention by Mr Williams as a director of HIHC was pleaded and particularised in para 78 of the statement of claim in relevantly the same terms. 487 The difference in particulars between the allegations against Mr Adler in para 74 of the statement of claim and the allegations against Mr Williams was that the former particulars had, but the latter did not have, particular (n) (which in the event was not material) and the particulars in para 74(2). 488 Again, the trial judge considered the contraventions of ss 180 and 182 of the Act partly together and partly by reference forward and back, and dealt first with the contraventions in relation to the payment of the $10,000,000 and the purchase of shares in HIH and later with the contraventions in other respects. I focus for the present on the contraventions of s 180. 489 After a lengthy consideration of contravention of s 180 by Mr Williams in relation to the payment of the $10,000,000 and the purchases of shares in HIH, the trial judge said - "CONCLUSION 453 As to s180 and the duty of care and diligence, Mr Williams was not entitled to rely on Mr Adler to make investments, which conformed with the law and were not detrimental to the interests of HIH, without at the least making sure there were put in place proper safeguards including independent appraisal of the investments made by way of proper due diligence and by ensuring that before the arrangements were put in place, the terms of the mandate were approved by the Investment Committee, if not the Board. Mr Williams simply did not do this either when making the original commercial deal or by instructing Mr Howard. It is nothing to the point to say that he hoped that the investment would turn out profitably or he would not have made it. The fact of the matter was that Mr Williams did not ensure that the company complied with its own safeguards laid down for approval of such a mandate by its Investment Committee, nor did he put in place safeguards to avoid investments being made which were in breach of the law and which, directly or indirectly, advantaged Mr Adler, Adler Corporation and PEE and were not reasonable in the circumstances even if HIHC and PEE had been dealing at arm's length. Mr Williams' concern should have been heightened by the fact that he was dealing with a fellow director. That is enough, though one can add that Mr Adler, as should have been apparent, had an obvious inherent conflict of interest as a significant shareholder in HIH. That is quite apart from his early intention to on-sell investments to AEUT like dstore; the evidence of the extent of Mr Williams' knowledge about such investment is set out at para 515 below. Accordingly, I conclude that Mr Williams was in breach of s180 of the Corporations Act in failing to exercise the degree of care and diligence that a reasonable person would have exercised as a director in the circumstances and occupying the office held by Mr Williams. Mr Williams is not able to invoke the business judgment rule in the circumstances where he either failed to make a business judgment at all or to the extent that he did, failed to establish that he made it in good faith for a proper purpose, and in any event, where he had a material personal interest in the subject matter of the judgment and had failed to inform himself to the extent he could reasonably believe to be appropriate." 490 ASIC's case in relation to Mr Williams of contravention otherwise than in relation to the payment of the $10,000,000 and the purchase of the shares in HIH was more limited than for Mr Adler, effectively being as to the purchases from Adler Corporation of its shares in dstore and Planet Soccer. 491 The trial judge had in his "Conclusion" just set out found contraventions of s 180 "quite apart from [Mr Adler's] early intention to on-sell investments to AEUT like dstore', saying that "the extent of Mr Williams' knowledge about such investment is set out at para 515 below". In para 515 the trial judge said - "515 So far as Mr Williams' role concerning these "in-house" investments (as well as the earlier HIH investment) as bears particularly on Particular (f) of para 77 of the Statement of Claim, the Plaintiff put the position thus: (a) evidence from Mr Howard (para 8) that Mr Adler told Mr Howard that he (Mr Adler) and Mr Williams had had conversations "that the trust may or may not purchase other venture capital investments that I was associated with such as dstore at cost to give them a chance to make money"; this is evidence which I have admitted pursuant to s60 of the Evidence Act and which, in the absence of any countervailing evidence I accept; (b) evidence which is undisputed that Mr Williams had prior knowledge that PEE would be investing in "venture capital and share trading" (TB, 28, 29 and 268); (c) Mr Adler's memorandum of 10 July 2000 (TB, 212A) to Mr Williams (and Mr Howard) notifying them of the [still to be made] purchase of dstore and Plant Soccer at "my original cost" and described as "two of my own investments", such that Mr Williams then clearly knew of them coming from Mr Adler on those terms, as well as having Mr Adler's assurance that "both would be valued at higher than that level, I am reliably informed"; (d) Mr Williams did nothing about seeking the necessary approvals from the Investment Committee (or Board) and must have known they had never been obtained; see earlier and note here the admission in the letter of 22 December 2000 to ASIC para 7 from Mr Cohen on behalf of the Board in para 7 of the Schedule that "Prior approval of the Investment Committee ... is required for such an investment [the $10 million to AEUT] to be made" and "the proposal to make this investment was not presented to the Investment Committee, the investment as a consequence was not authorised", negating any suggestion that Mr Williams' own approval was enough; (e) Mr Williams left to Mr Adler, as is admitted (First and Fourth Defendants' written submissions para 4(f)) "total discretion as to the investment of the $10 million" (see also TB, 252D, letter to the Board of HIH by Minter Ellison 29 November 2000, para 6 of Schedule: "... managed by Mr Adler or a related person or entity who would have complete discretion as to the type of investments to be made" and I note also paras 3 and 4 as to taking advantage of investment opportunities offered to Mr Adler or related entities as distinct from those already taken up. To resolve these issues, it is necessary to consider in more detail the circumstances surrounding each unlisted investment." 492 The consideration of these purchases included whether Mr Williams had "the contemplated object" that PEE would use the $10,000,000 "to acquire from Adler Corporation unlisted investments, which were not the subject of independent analysis" (particular (f)). The trial judge was satisfied that particular (f) and other particulars had been made out. He expressed his conclusion - "CONCLUSION 586 Subsequent events concerning the investment in dstore, insofar as they bear on the relevant Particulars in para 77 of the Plaintiff's pleading (see in particular, Particulars (f), (k) and (l)) but only on the material facts pleaded at paras 15 to 46); support the earlier conclusions reached concerning Mr Williams' contravention of s180 (see para 453) and s182 (see para 461)." 493 The trial judge's preceding discussion had been of both dstore and Planet Soccer, and the reference to dstore clearly enough should have been to Planet Soccer as well. As is apparent from the trial judge's paras 453 and 586, his findings as to the investment in dstore and Planet Soccer were supportive of his conclusion that contravention of s 180 by Mr Williams had been made out, but were not essential for that conclusion. 494 Prominent in Mr Williams' submissions on appeal was that the trial judge had acknowledged that the only evidence that Mr Williams had the particular (f) contemplated object was Mr Howard's evidence of what Mr Adler said to him on 16 June 2000 about conversations with Mr Williams. To repeat, Mr Adler said to Mr Howard, "I have also had conversations with Ray that the trust may or may not purchase other venture capital investments that I was associated with such as dstore at cost to give them a chance to make money". Mr Williams submitted on appeal that as against him this was inadmissible hearsay, and so that there was no evidence establishing particular (f). 495 As has been noted, Mr Williams was not represented during ASIC's case, and so did not object to the admissibility of any part of Mr Howard's affidavit when it was read. Nor did any other defendant object. At no time was an order sought limiting the use to be made of Mr Howard's evidence pursuant to s 136 of the Evidence Act 1995. When counsel for Mr Williams put submissions at the trial he did not submit that the evidence was inadmissible, but accepted that it had been admitted, and said that "as second-hand hearsay" the evidence of conversations between Mr Adler and Mr Williams should be given little weight. Where that was his counsel's stance at the trial, it is not easy to see how Mr Williams can now submit that the evidence was inadmissible. 496 Further, even if the evidence in question was inadmissible hearsay as against Mr Williams, that would not affect the outcome. The trial judge did say in para 582 that "It is true that the only evidence that Mr Williams had the 'contemplated object' of enabling PEE to acquire from Adler Corporation unlisted investments is … ", then referring to Mr Howard's account of what Mr Adler said to him on 16 June 2000. This was not entirely accurate. It was the only evidence of Mr Williams being told of future purchases of "venture capital investments that [Mr Adler was associated with such as dstore", but in coming to his conclusion that Mr Williams had the particular (f) contemplated object the trial judge had regard also to the later knowledge imparted by the memorandum of 10 July 2000 and failure to ensure that there was independent due diligence. If the submission were correct, the contravention of s 180 of the Act would nonetheless remain, because the trial judge's findings as to the investment in dstore and Planet Soccer were only supportive of his conclusion otherwise reached. 497 However, I do not think that Mr Williams' submission as to inadmissibility should be accepted. 498 The trial judge referred to the status of this evidence on a number of occasions. 499 First, he said - "423 It is true that the only evidence that Mr Williams had the 'contemplated object' is the evidence of Mr Howard (para 8). That evidence is admissible as original evidence dealing with the steps in the very transaction itself (Cross on Evidence, 6th Australian Edition, para 31080), so that the hearsay rule is not applicable to it (s60 of the Evidence Act ). 424 The question is, therefore what weight should be placed upon that evidence. The conversation itself is second-hand hearsay, namely that on 15 June 2000, Mr Howard was told by Mr Adler that he (Mr Adler) and Mr Williams, had had conversations: 'That the trust may or may not purchase other venture capital investments that I was associated with, such as dstore at cost, to give them a chance to make money.' See para 8 of Mr Howard's affidavit. 425 Recognising that this is second-hand hearsay does not mean that it should lack weight when the conversation occurred contemporaneously with the very transaction itself in conjunction with the carrying out of its steps, namely payment over of the money." 500 Secondly, he said in para 515(a) earlier set out, when recording ASIC's submissions as to Mr Williams' "role concerning these 'in-house' investments" - "(a) evidence from Mr Howard (para 8) that Mr Adler told Mr Howard that he (Mr Adler) and Mr Williams had had conversations 'that the trust may or may not purchase other venture capital investments that I was associated with such as dstore at cost to give them a chance to make money'; this is evidence which I have admitted pursuant to s60 of the Evidence Act and which, in the absence of any countervailing evidence I accept;" 501 Thirdly, he said - "583 That evidence was admitted as original evidence dealing with the steps in the very transaction itself, such that the hearsay rule was not applicable to it ( Evidence Act s60; Cross on Evidence, 6th Aust Ed, para 31080-31110). I have earlier concluded that evidence is admissible. It is entitled to considerable weight because it is of statements made in the course of the very transaction in question so as to be more likely to be inherently reliable. This is in contrast to statements that may be made after the event, by which stage different interests and motivations may have intruded. I agree with the Plaintiff's submission that the memorandum of 10 July 2000 (TB, 212A) is not inconsistent with that evidence, being addressed to Mr Howard and Mr Adler. It did not need to allude to Mr Howard's prior knowledge (though Mr Howard clearly had such knowledge), when referring to the dstore and Planet Soccer investments." 502 It was submitted in the appeal that Mr Howard's evidence of what Mr Adler said was not admissible to prove what was said in conversations with Mr Williams because, being second-hand hearsay, the hearsay rule applied to it notwithstanding s 60 of the Evidence Act. Mr Williams relied on Lee v The Queen (1998) 195 CLR 594. 503 Section 59(1) of the Evidence Act states the "hearsay rule" - "(1) Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that the person intended to assert by the representation." By s 59(2), such a fact is referred to as an asserted fact. 504 By s 60 - "60. The hearsay rule does not apply to evidence of a previous representation that it admitted because it is relevant for a purpose other than proof of the fact intended to be asserted by the representation." 505 In succeeding sections it is provided that, amongst other exceptions to the hearsay rule, in various stated circumstances it does not apply to evidence of a previous representation that was made by a person who had personal knowledge of an asserted fact. Such a previous representation is regarded as first-hand hearsay. 506 From his references to s 60 of the Evidence Act, the trial judge considered that Mr Howard's evidence of what Mr Adler said, being evidence of a previous representation made by Mr Adler, was admitted because it was relevant for a purpose other than proof of the fact intended to be asserted by the representation. That purpose was to prove a step in the transaction, no doubt meaning the transaction of payment of the $10,000,000 by HIHC to PEE. Hence, the trial judge said, the hearsay rule was not applicable to it, and the fact that it was second-hand hearsay went only to weight. 507 Cross on Evidence, 6th Aust Ed, para 31080 to which the trial judge referred says that "evidence is said to be 'original' when a witness narrates another person's statement for some purpose other than that of inducing the court to accept it as true". A footnote states that under s 60 of the Evidence Act "original evidence is, subject to any limiting order made under s 136, admissible to prove the truth of any facts asserted", citing Eastman v R (1997) 76 FCR 9 at 78. In that case it was said that the effect of s 60 is that a statement made to a witness by a person who is not called as a witness, if called to prove the fact that the statement was made, can be "used for a hearsay purpose". 508 In Lee v The Queen, not cited to the trial judge and unaccountably not mentioned in Cross, it was said that s 60 did not "provide a gateway for the proof of any form of hearsay however remote" (at [40]); the question whether s 60 "permitted an out of court statement that is itself a report of what someone else said, to be used as proof of the truth of what was reportedly said" was answered in the negative. Mr Williams submitted that, as second-hand hearsay, Mr Howard's evidence of what Mr Adler said was excluded by the hearsay rule despite s 60. 509 I do not think that Lee v The Queen supports the submission, and do not accept it, because despite the trial judge's description of it the evidence was not second-hand hearsay within Lee v The Queen. 510 Lee was charged with assault with intent to rob. Calin had given a statement to the police in which he said that Lee confessed to him that he just "did a job" and fired some shots. Calin was called for the prosecution but asserted lack of recollection. The Crown was permitted to cross-examine Calin upon the statement, it was tendered and admitted, and it was said (at 17) that the charge to the jury "would have been understood as an instruction that if the jury were satisfied that [Lee] said these words to [Calin], they were a confession by [Lee] to the crime with which he was charged". 511 The reasoning of the Court was as follows - "[26] Evidence that Mr Calin had seen what was recorded in his statements was relevant to the issues in the case. Mr Calin's representation out of court that he had seen these things was hearsay. Because his representation out of court (that he had seen these things) was relevant for the purpose of showing that he had made a prior statement that was inconsistent with his evidence in court, the hearsay rule did not apply and the representation was admissible to prove the existence of the fact that Mr Calin intended to assert by his earlier representation. [27] By contrast, Mr Calin did not, in his out of court statements, intend to assert any fact about his conversation with the appellant other than that he had said certain words and that he had heard the appellant say the words he attributed to him. [28] The nature of what Mr Calin said in his statements to the police was such that evidence of those statements was evidence both of representations made by Mr Calin to the police (about what Mr Calin had seen and heard) and of representations made to Mr Calin by the appellant (about what the appellant had done). By virtue of s 59, the evidence was not admissible to prove the existence either of the facts which Mr Calin intended to assert to the police or of the facts which the appellant intended to assert to Mr Calin. Section 60 operated only upon the former representations; it had nothing to say to the representations made by the appellant to Mr Calin. It was only the representations made by Mr Calin to the police that were relevant for a purpose referred to in s 60: the purpose being to prove that Mr Calin had made a prior inconsistent statement and that his credibility was thus affected. The hearsay rule was rendered inapplicable to Mr Calin's representations, but not to the representations allegedly made by the appellant. And, of course, the representations allegedly made by the appellant were not admissible under the confession exceptions to the hearsay rule created by s 81 because the evidence of these confessional statements was not first hand (s 82). [29] To put the matter another way, s 60 does not convert evidence of what was said, out of court, into evidence of some fact that the person speaking out of court did not intend to assert. And yet that is what was done here. Evidence by a police officer that Mr Calin had said, out of court, that the appellant had said that he had done a job was treated as evidence that the appellant in fact had done a job — a fact which Mr Calin had never intended to assert. (Of course, it would be different if Mr Calin had said in evidence in court that the appellant had said he had done a job. Then the representation made out of court would be the appellant's, not Mr Calin's.) [30] It follows that evidence that Mr Calin had earlier reported that the appellant had confessed was not evidence of the truth of that confession. It should not have been received at the trial of the appellant, as it was, as evidence establishing that the appellant had committed the offence." 512 Identification of the previous representations was critical. There were two representations. Treating the statement as a police officer giving evidence, A (the police officer) gave evidence of a representation by B (Calin) that a representation was made by C (Lee). Section 60 operated only on the first of the representations. It would have been different if there had not been the interposition of the police officer. If Calin had been giving evidence, A (Calin) would have given evidence of a representation by B (Lee), and s 60 would have operated on that representation. 513 This case is of the different kind. A (Mr Howard) gave evidence of a representation by B (Mr Adler). What Mr Adler intended to assert by the words, "I have also had conversations with Ray that the trust may or may not purchase other venture capital investments that I was associated with such as dstore at cost to give them a chance to make money", was that there had been conversations with the stated content. With respect to the trial judge, I do not think any question of second hand hearsay arose. The previous representation was made by a person who had personal knowledge of the asserted fact, in that Mr Adler had personal knowledge of the fact that there had been conversations with the stated content. 514 If the evidence was available as evidence that Mr Adler and Mr Williams had conversations with the stated content, it could properly be concluded that Mr Williams shared the particular (f) contemplation. At the least, the use of the money would benefit Mr Adler because he was associated with the venture capital investments, but the words "purchase … at cost" made plain enough that what was in mind was purchase from Mr Adler of his venture capital investments. Alone or taken with the other matters to which the trial judge had regard, the finding that Mr Williams had the particular (f) contemplation was well open, and other than as to second-hand hearsay no error on the part of the trial judge has been shown. 515 In this I do not overlook Mr Williams' submission that there was no evidence that Mr Williams had that part of the particular (f) contemplation found in the words "which were not the subject of independent analysis". Mr Williams referred to the schedule of facts (which can not be regarded as reliable) and to the memorandum of 10 July 2000. Neither suggests that there might be independent analysis, indeed they are to the contrary so far as the manager of the trust would have a complete discretion and the memorandum of 10 July 2000 asserted only that Mr Adler was "reliably informed" that the investments "would be valued at higher than" his original cost. The circumstances belied any contemplation of independent analysis. 516 Mr Williams' submissions otherwise went to the particulars of para 77 of the statement of claim, and took issue with most of them. Much of what was said repeated or put in different ways matters which have already been considered, and I do not propose to go at length to every point sought to be made. The substance of the submissions can, I think, be summarised as follows. 517 It was said that any failure properly to document the terms on which the $10,000,000 was paid at the time of payment, and properly to define the terms on which it was paid, was not to be held against Mr Williams, because Mr Williams had told Mr Howard to "make sure Rodney follows through with the documentation" and in any event the law of trusts stepped in; and it was pointed out that Mr Adler had later provided to Mr Williams copies of the AEUT trust deed and the Minter Ellison letters of advice of 28 June and 5 July 2000. It is difficult to regard as satisfactory leaving it to the recipient of $10,000,000, a director of HIH and to be possessed of an absolute discretion as to investment of the money, to arrange the documentation, and to pay the money over immediately. What thereafter happened illustrates why, and Mr Williams' neglect at the time of payment should be seen in the light of his failure to question what had occurred when provided with the unreasonable terms of the AEUT trust deed and urged not to obtain from Minter Ellison the review which Mr Howard desired because "professional jealousies can exist within firms and it would be a shame if the current advice is changed in any way". The submission highlights Mr Williams' failure of duty. 518 It was said that ASIC failed to make out particular (d), that the payment of the $10,000,000 "directly or indirectly advantaged Adler, Adler Corporation and PEE", because as at 15 June 2000 the $10,000,000 was held on trust by PEE for the benefit of HIHC. For this Mr Williams adopted the submissions earlier considered, and no more need be said. It was also said that there was no evidence that Mr Williams knew that the payment would directly or indirectly advantage Mr Adler, Adler Corporation or PEE, because to his knowledge there were other investors in the AEUT. It is difficult to treat this seriously, and it should not be accepted. 519 It was said that when Mr Williams agreed upon payment of the $10,000,000 on 9 June 2000 there was no evidence that he knew of Mr Adler's intention to cause PEE to acquire HIH shares. This is beside the point. Mr Williams knew that Mr Adler had caused PEE to acquire HIH shares on 15 June 2000, prior to payment of the $10,000,000. 520 It was said that approval or ratification of the Investment Committee was not required because Mr Williams, as the Chief Executive, had within his general authority the power to enter into the transaction on behalf of HIH. It is not evident that he did, but for reasons earlier given I do not think that is to the point. The submissions included that "[t]he substance of the transaction was disclosed by Williams to Cohen in July", referring to Mr Cohen's evidence that in hindsight he thought that Mr Williams may have been referring to the purchase of the HIH shares when, probably in July 2000, he (Mr Cohen) commented about press reports indicating that Mr Adler had been purchasing large parcels of shares in the company and Mr Williams said words to the effect "we have some interest in those transactions". It was just an aside, and at the time Mr Cohen did not think that "we" meant HIH "because of the potential for it not to be a legal transaction". This could not be regarded as disclosure to the Board or to the Investment Committee; indeed, it is consistent with HIH in the person of Mr Williams being interested in the then trading in HIH shares. Mr Cohen's later thought that Mr Williams may have been referring to the purchases to which Mr Buttle had drawn his attention counts for little, and there was certainly not the requisite disclosure. 521 I have considered all Mr Williams' submissions as to the particulars, none of which in my opinion is of any greater substance than these and none of which persuades me that the trial judge's conclusion was in error. 522 Mr Williams submitted that he could rely on s 180(2) of the Act, the business judgment rule. 523 In the trial judge's conclusion in para 453 he gave a number of reasons for rejecting reliance by Mr Williams on the business judgment rule. The trial judge's more detailed discussion of those matters at paras 406-409 amply bore out what he said in his conclusion. Mr Williams' submissions took issue with the reasons only in part, in that it was said that the suggested material personal interest in encouraging share purchasing in HIH shares by PEE via Mr Adler, because of Mr Williams own shareholding, was "an unsatisfactory explanation of Williams' motives", and that it should have been found that Mr Williams' true motivation was to benefit HIH by the short-term share trading. Further, it was said that in his earlier discussion the trial judge had made clear that he did not find positively that Mr Williams did not act in good faith for a proper purpose, but was "not able to be positively satisfied, in the absence of any evidence on his part, that he acted for a proper purpose, as distinct from sharing Mr Adler's improper purpose"; the submission was in effect that neutrality was insufficient to exclude business judgment in good faith for a proper purpose. 524 The trial judge's reference to proper or improper purpose was directed to Mr Adler's purpose of maintaining or stabilising the HIH share price, for his own benefit. A material personal interest in Mr Williams because of his own shareholding was consistent with his not sharing Mr Adler's improper purpose. 525 At this point in the submissions Mr Williams relied on the evidence that public knowledge that HIH's money was being used to buy its own shares would be likely to undermine public confidence in HIH and to lead to a fall in the HIH share price, and it was said that it was implausible that he would "involve Messrs Howard, Lo, Fodera and Cassidy in various aspects of the transaction" because that would risk the matter becoming public and affect Mr Williams' personal wealth; further, it was said that Mr Williams would have sold some of his own shares. These are relevant considerations, and the mere fact that a director holds shares in the company can not mean that the business judgment rule is unavailable to the director because of a material personal interest in any judgment which might affect the share price, as many judgments will. However, this was only one aspect of the trial judge's reasoning. Quite apart from it, I consider that the trial judge was correct in the other matters on which he relied whereby the business judgment rule was not available to Mr Williams. 526 Finally, Mr Williams submitted that the trial judge was in error in finding that his conduct fell below the degree of care and diligence that a reasonable person in his circumstances would exercise. 527 Mr Williams said that the proper performance by a director of his duties depends on all the circumstances, citing in particular from Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 125 where it was said that - " … what constitutes the proper performance of the duties of a director of a particular company will be dictated by a host of circumstances, including no doubt the type of company, the size and nature of its enterprise, the provisions of its articles of association, the composition of its board and the distribution of its work between the board and other officers." 528 In particular, Mr Williams said, it remained the law that a director was entitled to rely on others (citing amongst other cases Daniels v Anderson (1995) 37 NSWLR 438 at 394-7, 501-2 and 518 and distinguishing Mr Williams' position from that of Hooke because Hooke had reason to be concerned about the others). He said that for actionable breach of duty there had to be "something more than an error of judgment or naivety on the part of the director in relying on others". 529 I do not think that the trial judge's approach was inconsistent with this, and it was not submitted that the series of propositions he set out as the principles applicable to the duty of care and diligence were deficient. The propositions included, in para 372 - "(7) In determining whether a director has breached the statutory standard of care and diligence (s180(1)), the court will have regard to the company's circumstances and the director's position and responsibilities within the company: see also Explanatory Memorandum to the CLERP Bill 1999 (para 6.75). (8) In accordance with these responsibilities directors are required to take reasonable steps to place themselves in a position to guide and monitor the management of the company: Daniels t/as Deloitte (supra) at 664. That is to say, (supra) at 666-67: (a) a director should become familiar with the fundamentals of the business in which the corporation is engaged; (b) a director is under a continuing obligation to keep informed about the activities of the corporation; (c) directorial management requires a general monitoring of corporate affairs and policies, by way of regular attendance at board meetings; and (d) a director should maintain familiarity with the financial status of the corporation by a regular review of financial statements. Indeed, he or she will be unable to avoid liability for insolvent trading by claiming that they had never learned to read financial statements: Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 125. … (10) At general law, a director is entitled to rely without verification on the judgment, information and advice of management and other officers appropriately so entrusted. However, reliance would be unreasonable where directors know, or by the exercise of ordinary care should have known, any facts that would deny reliance on others: Daniels t/as Deloitte at 665-6." 530 The complaint was that the trial judge failed to see Mr Williams' conduct in the circumstances as no more than an error of judgment or naivety in relying on others. No additional argument was directed to why the trial judge was in error in this respect. I am not persuaded that he was. Contravention by Mr Adler of s 181(1) of the Act and by Adler Corporation of s 181(2) of the Act 531 Section 181 of the Act provides - " 181. Good faith---civil obligations (1) Good faith - directors and other officers A director or other officer of a corporation must exercise their powers and discharge their duties: (a) in good faith in the best interests of the corporation; and (b) for a proper purpose. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection." 532 The allegations of contraventions of s 181(1) were separately pleaded against Mr Adler as a director or officer of each of HIH, HIHC and PEE. 533 The allegation of contravention by Mr Adler as a director of HIH was pleaded as follows - "81. By reason of the matters pleaded in paragraphs 15 to 60 (inclusive) above, Adler, being a director of HIH, failed to exercise his powers and discharge his duties: 81.1 in good faith in the best interests of HIH; and 81.2 for a proper purpose and thereby contravened section 181 of the Corporations Law . Particulars The plaintiff repeats the particulars to paragraph 74." 534 The contravention by Mr Adler as an officer of HIHC was pleaded and particularised in relevantly the same terms. 535 The contravention by Mr Adler as a director of PEE was pleaded as follows - "83. By reason of the matters pleaded in paragraphs 47 to 60 (inclusive) above, Adler, being a director of PEE, failed to exercise his powers and discharge his duties: 83.1 in good faith in the best interests of PEE; and 83.2 for a proper purpose and thereby contravened section 181 of the Corporations Law . Particulars The plaintiff repeats the particulars to paragraph 76." 536 The allegation of contravention by Adler Corporation of s 181(2) was pleaded in para 98 of the statement of claim earlier set out. 537 As I have indicated, the trial judge considered these contraventions largely together with related contraventions. 538 I have set out para 387(a) in which the trial judge stated his conclusion as to contravention by Mr Adler of s 180 in relation to the payment of the $10,000,000 and the purchase of shares in HIH. He went on in para 387(b) to state his conclusion as to contravention by Mr Adler of s 181 - "(b) The foregoing circumstances also give rise to breach of s181, applying the principles set out at para 735 particularly (1), (2), (4) (5) and (6), with (3) not applying in the circumstances. Mr Adler as a director was required to act in good faith, and for a proper purpose, neither of which he did. This was in promoting his personal interest by making or pursuing a gain (of maintaining or supporting the HIH share price for his own benefit as a substantial shareholder) where looked at from the viewpoint of a person familiar with the circumstances, there was a real or substantial possibility of a conflict between his personal interests and those of the company in pursuing a profit, and in failing to make proper disclosure. Moreover the interests of HIH and HIHC were put at risk by the illegality under s208 and s260A as well as by concealment from the market that HIHC was funding these purchases of HIH shares, not Mr Adler or his interests." 539 The particular principles to which the trial judge referred, as set out in para 735, were part of his description were "in summary form [of] the principles applicable to s 181 of the Corporations Act as applicable to the relevant transactions … ". They were - "(1) A director (as a fiduciary) is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances where there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the company: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 per Mason J at 103. This is both at general law and by statute (s181 and as applicable ss182 and 183). Such promotion would not be to act in good faith in the best interests of the corporation, or for proper purposes (s181). If the director has improperly used his position or information to gain such advantage ss182 and 183 respectively are breached. (2) In order to assess whether or not there is a real sensible possibility of conflict one must adopt the position of the reasonable person looking at the relevant facts and circumstances of the particular case: Phipps v Boardman [1967] 2 AC 46 per Lord Upjohn (at 124); Queensland Mines Ltd v Hudson (1978) 18 ALR 1. … (4) In certain circumstances, such as a director in "a position of power and influence" over the board, mere disclosure of a conflict between interest and duty and abstaining from voting is insufficient to satisfy a director's fiduciary duty. The director may also be under a positive duty to take steps to protect the company's interest such as by using such power and influence as he had to prevent the transaction going ahead: Permanent Building Society (In Liq) v McGee (1993) 11 ACSR 260 per Anderson J (at 289). Here neither Mr Adler nor Mr Williams, and failing them Mr Fodera did anything to have the following reach the Investment Committee or the Board; that is, payment of the $10 million, the formation of AEUT and its investment in HIH. This allowed the subsequent unlisted investments and loans to be made with no properly approved mandate permitting this and no specific approval or ratification within a reasonable time thereafter. (5) What action, beyond disclosure, the director must take will depend on matters such as the degree to which the director has been involved in the transaction, and the gravity of possible outcomes for the company: Fitzsimmons v R (1997) 23 ACSR 355 per Owen J (at 358). Here Mr Adler was intimately involved in all aspects of the transactions, while Messrs Williams and Fodera were involved to the lesser degrees earlier identified, with Mr Fodera least involved and the outcomes for HIH and HIHC were clearly adverse, in terms of ultimate loss. (6) A director of a company (here Mr Adler) who is also a director of another company (here Adler Corporation) must not exercise his or her powers for the benefit or the gain of the second company without clearly disclosing the second company's interests to the first company and obtaining the first company's consent: R v Byrnes (1995) 183 CLR 501 per Brennan, Deane, Toohey and Gaudron JJ at 517 (which here was never effectively given by HIH or HIHC)." 540 As to the contraventions in relation to the purchases of shares from Adler Corporation and the loans, the trial judge's conclusions set out earlier in relation to contravention of s 180 of the Act extended to contravention of s 181 - (i) for the purchase from Adler Corporation of its shares in dstore, in para 577(b) to breach by Mr Adler of his obligation "(b) to act in good faith for a proper purpose as required by s 181 of the Corporations Act ."; (ii) to the purchase from Adler Corporation of its shares in Planet Soccer, see para 621 set out above; (iii) to the purchase from Adler Corporation of its shares in Nomad, see para 678 set out above; (iv) to the loan in morehuman, see para 694 set out above; (v) to the loan in Intagrowth, see para 706 noted above; and (vi) to the loans to PCP and PCP Ensor, see para 730 set out above. 541 Adler Corporation was globally caught up as to all of the sections which Mr Adler was found to have contravened - "578 Adler Corporation, by reason of its "involvement " as vendor to PEE of the unlisted investments, and being in (shared) control of PEE as majority unit holder, must be taken to have contravened each of the provisions of the Corporations Act that Mr Adler has contravened (save s180 which is not pleaded against Adler Corporation)." 542 The submissions which I have already considered were directed also to Mr Adler's contravention of s 181. It was not submitted that, if Mr Adler contravened s 181(1), nonetheless Adler Corporation was not involved in his contravention and did not contravene s 181(2). 543 The pleading and particularisation of the allegations was materially identical to the pleading and particularisation of the allegations of contravention of s 180 the Act. The principles in the trial judge's summary were not disputed. Accordingly, it follows from what I have earlier said that I do not think that error has been shown in the trial judge's conclusions that the contraventions of s 181 were made out. 544 It may be added that, for s 181, Mr Adler's purpose in stabilising or maintaining the price of HIH shares for his own benefit was particularly significant. The attention given by the appellants to whether Mr Adler's purpose was open on the particulars and whether the evidence justified the finding as to his purpose is understandable. Conversely, that s 181(1) turned on good faith and proper purpose was relevant to an understanding of ASIC's pleaded and particularised case. Particular (g) concerning maintenance or stabilisation of HIH share price had to bear upon good faith and proper purpose, and in my view this underlines that the particulars encompassed that the $10,000,000 was paid and the shares in HIH were purchased with Mr Adler intending to shore up the HIH share price for the benefit of his own company's substantial shareholding. Contravention by Mr Adler of s 182(1) of the Act and by Adler Corporation of s 182(2) of the Act 545 Section 182 of the Act provides - " 182 . Use of position---civil obligations (1) Use of position---directors, other officers and employees A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection." 546 The allegations of contraventions of s 182(1) were separately pleaded against Mr Adler as a director or officer of each of HIH, HIHC and PEE. 547 The allegation of contravention by Mr Adler as a director of HIH was pleaded as follows - "88. By reason of the matters pleaded in paragraphs 15 to 60 (inclusive) above, Adler, as an officer of HIHC, improperly used his position to: 88.1 gain an advantage for himself; 88.2 in the alternative, gain an advantage for PEE; 88.3 in the alternative, gain an advantage for Adler Corporation; and thereby contravened section 181 of the Corporations Law . Particulars The Plaintiff repeats the particulars to paragraph 74." 548 The allegation of contravention by Mr Adler as an officer of HIHC was pleaded and particularised in para 89 of the statement of claim in relevantly the same terms. 549 The allegation of contravention by Mr Adler as an officer of PEE was pleaded as follows - "90. By reason of the matters pleaded in paragraphs 47 to 60 (inclusive) above, Adler, as a director of PEE, improperly used his position to: 90.1 gain an advantage for himself 90.2 in the alternative, gain an advantage for Adler Corporation; and thereby contravened section 182 of the Corporations Law . Particulars The Plaintiff repeats the particulars to paragraph 76." 550 The allegation of contravention by Adler Corporation of s 182(2) was pleaded in para 98 of the statement of claim earlier set out. 551 In the consideration of these contraventions largely together with related contraventions again there were a stated conclusion and extension of other conclusions to contravention of s 182(1), and the conclusion as to Adler Corporation already noted caught up contravention of s 182(2). 552 The stated conclusion in relation to the payment of the $10,000,000 and the purchase of shares in HIH was in para 387(c) - "(c) Moreover, he improperly used his position as a director (thereby in breach of s182) to gain the foregoing advantages to himself, as a substantial shareholder, via Adler Corporation, in HIH; the principles set out at para 458 below are directly applicable. This was for the improper purpose earlier described, namely maintaining or supporting the price of shares in HIH, so as to benefit his own HIH holding rather than HIH, as evinced by his conduct earlier described including foregoing a quick trading profit and selling his shares first rather than after, or at least at the same time. Moreover, it was concealed from the Investment Committee collectively, though known to Messrs Fodera, Williams and to a much more limited extent Mr Cassidy, as well as Mr Howard. As a consequence, Mr Adler, as a director of HIH and an officer of HIHC, and as a director of PEE, contravened s182." 553 The extensions of conclusions as to the contraventions in relation to the purchases of shares from Adler Corporation and the loans are found in the paragraphs earlier noted, and again Adler Corporation's contraventions were globally caught up. 554 The principles to which the trial judge referred as set out in para 458 were described as "a brief statement of the effect of the case law on the application of s 182 in the present context". They were - "(1) causing a company to enter into an agreement which confers unreasonable personal benefits on a director is a breach of ss180, 181 and 182. (2) failing to end an agreement that pays reasonable benefits to a related consultant after the director should realise that the company is insolvent breaches s182: Simar Transit Mixers Pty Ltd v Baryczka (1998) 28 ACSR 238 [CL s232 1992]. (3) obtaining the agreement in a manner which keeps any independent director "in the dark" is strong evidence that the benefits are unreasonable, as is the lack of any evidence as to what the director did for the company in return: Claremont Petroleum NL v Cummings (1992) 10 ACLC 1685, 9 ACSR 1; on appeal (1993) 11 ACLC 125, 9 ACSR 583 [CC s229 1989]. (4) Moreover it is sufficient to establish that the conduct of a company was carried out in order to gain an advantage for that director or someone else without also having to establish that an advantage was actually achieved: Chew v R (1992) 173 CLR 626 per Mason CJ, Brennan, Gaudron and McHugh JJ at 633. (5) Where a director acts in relation to a transaction in which he or a party to whom the director owes a fiduciary duty stands to gain a benefit without making adequate disclosure of his interest, that director acts "improperly" within the meaning of s182(1): R v Byrnes (1995) 183 CLR 501 at 516-17. That is likely to lead also to a conclusion of lack of good faith for s181 purposes. There could be no adequate disclosure here, or the essential fully informed consent, where there was neither disclosure to HIH's or HIHC's board or even to the Investment Committee. It does not suffice that Mr Williams or Mr Fodera knew (or Mr Howard as a non-director knew) of the transactions, or for that matter Mr Cassidy, his knowledge being in any event limited. (6) Finally, impropriety for the purposes of s182(1) is to be determined objectively and does not depend upon the director's consciousness of impropriety. It consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case: R v Byrnes (supra) at 514-15 per Brennan, Deane, Toohey and Gaudron JJ." 555 Save so far as Mr Williams submitted that the trial judge failed to apply a "purposive" approach, see later in these reasons, the trial judge's statement of principles was not disputed. What I have said in relation to the contraventions of s 181 applies, and I do not think error has been shown in the trial judge's conclusions that the contraventions of s 182 were made out. Contravention by Mr Williams of s 182(1) of the Act 556 The allegations of contraventions of s 182(1) were separately pleaded against Mr Williams as a director of each of HIH and HIHC. 557 The allegation of contravention by Mr Williams as a director of HIH was pleaded as follows - "91. By reason of his conduct pleaded in paragraphs 15 to 46 (inclusive) above, Williams, as a director of HIH, improperly used his position to: 91.1 gain an advantage for Adler; 91.2 in the alternative, gain an advantage for PEE; 91.3 in the alternative, gain an advantage for Adler Corporation; and thereby contravened section 182 of the Corporations Law . Particulars The Plaintiff repeats the particulars to paragraph 77." 558 The allegation of contravention by Mr Williams as a director of HIHC was pleaded and particularised in para 92 of the statement of claim in relevantly the same terms. 559 The particulars were the same as the particulars of the allegation of contravention of s 180, and the trial judge took up his earlier consideration of that contravention. After the para 458 statement of the case law, he said - "459 I have concluded that Mr Williams did on that basis improperly use his position to gain an advantage for Mr Adler, namely in using such authority as he had or purported to have, to authorise the payment of $10 million without proper safeguards and without the relevant mandate being submitted for approval to the Investment Committee and without obtaining subsequent ratification from the Investment Committee in accordance with the Investment Guidelines. The advantage to Mr Adler is as I have earlier described. 460 The advantage that he secured for Mr Adler did indeed cause detriment to the corporation HIH and HIHC, as well as PEE. The causal link between the improper use of his position to cause that detriment is made out by the matters I have just recited. But for Mr Williams occupying the position of the most senior executive in the company, he could not have authorised the payment of $10 million and had that course of action carried out without question. The end result is indubitably to have caused detriment to both HIH and HIHC. CONCLUSION 461 Mr Williams breached his statutory obligation under s182 not to improperly use his position as a director of HIH and HIHC to gain an advantage for Mr Adler. He likewise improperly used his position to cause detriment to HIH and HIHC, in authorising the relevant payment without proper safeguards and without having the relevant mandate to Mr Adler and PEE submitted for approval to the Investment Committee and for the relevant investment to be ratified by the Investment Committee, in accordance with the Investment Guidelines." 560 The earlier description of the advantage to Mr Adler appears to have been paras 413-420, in substance either Mr Adler had the $10,000,000 as an unsecured loan for his absolute discretionary use and was entitled to 10 per cent of the profits or even if there was some kind of trust he had the money and it was for HIHC to enforce its rights as beneficiary, and if it were material when AEUT came into being its terms were one-sided in Mr Adler's favour. 561 It will be noted that the trial judge found that Mr Williams improperly used his position in two respects, first to gain an advantage for Mr Adler, being an advantage which caused detriment to HIH, HIHC and PEE, and secondly to cause detriment to HIH and HIHC. Mr Williams' submissions did not take the point, but it is arguable that the findings went beyond paras 91 and 92 of the statement of claim, because they went to causing detriment as well as gaining an advantage. The two are not necessarily sides of the same coin. In this case, however, the two were found to be related in that the advantage secured for Mr Adler caused detriment to the companies, and the nature of the advantage is illuminated by its detrimental result. In any event, save in one respect Mr Williams' submissions did not take issue with either the advantage or the detriment. They were directed to what was necessary to establish improper use for the purposes of s 182(1). 562 Mr Williams submitted that the trial judge failed to apply a "purposive" approach to determine whether he (Mr Williams) intended to gain an advantage for Mr Adler. Even if Mr Williams used such authority as he had or purported to have to authorise the payment of the $10,000,000 without proper safeguards etc, it was said, and even if there was inadequate disclosure, there was no finding that Mr Williams intended the advantage. Mr Williams submitted that ASIC was required to establish that intention, and had not done so. 563 In Chew v The Queen (1992) 173 CLR 626 Chew was charged with offences against s 229(4) of the Companies (Western Australia) Code, by which it was an offence for an officer or employee of a corporation to "make improper use of his position as such an officer or employee to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the corporation". In the joint judgment of Mason CJ and Brennan, Gaudron and McHugh JJ it was said that "to gain" should be given a purposive rather than causative meaning, such that "to" was read as "in order to". Their Honours expressed the purposive approach (at 633) - "Once, as a matter of interpretation, the conclusion is reached that 'to' means 'in order to' s 229(4) expressly declares purpose to be an element of the offence and purpose in the context of that sub-section, is the equivalent of a specific intention." 564 Their Honours explained this further (at 633-4) - "It follows that we do not agree with the respondent's contention, accepted by Murray J in the Western Australian Court of Criminal Appeal, that s 229(4) is satisfied by a willed act performed by an officer or employee of a corporation which can be categorized as an improper act and which in fact gains an advantage or causes a detriment within the terms of the sub-section. Nor do we agree with the view expressed by Malcolm CJ that s 229(4) is satisfied by a deliberate act or combination of acts done by a director as such, "with knowledge that what is being done is not for the purpose of furthering any interest of the company, but [of] achieving a collateral purpose which will gain an advantage for himself or another, or cause a detriment to the company". … In the course of argument, it was suggested that it was not necessary to establish that an accused person perceived that the alleged advantage or detriment was an advantage or detriment. We do not read the provision in that way. Once one concludes that there is a purposive element in the offence, it is necessary to establish not merely that the accused intended that a result should ensue, but also that the accused believed that the intended result would be an advantage for himself or herself or for some other person or a detriment to the corporation." 565 Mr Williams relied on this decision as applicable to the construction of s 182(1) of the Act, and ASIC accepted that it was so applicable. 566 Mr Williams submitted that there had been "a generalised finding of contravention of s 182(1) without detailed analysis". He said that although the trial judge had referred to Chew v The Queen in para 458(4), and had used the words "in order to gain an advantage", he had otherwise referred to breach of s 182 in apparently objective terms, in para 458(1), (2), (5) and (6). 567 However, it is plain that the trial judge correctly had in mind the objective test of impropriety in The Queen v Byrnes (1995) 183 CLR 501, a matter different from the intention of the alleged contravenor. In that case it was pointed out that there was a difference between impropriety of use of a position and the purpose (or intention) with which the position was improperly used, and it was said that improper use was to be found objectively and did not depend upon the alleged offender's consciousness of impropriety. I am not persuaded that the trial judge misdirected himself in law. Directing himself that it was not necessary that an advantage was actually achieved, because the approach was purposive, showed full appreciation of the purpose approach, and Chew v The Queen was specifically cited in that connection. 568 Mr Williams' submission was really one of fact, that ASIC had not established an intention to gain an advantage for Mr Adler. It was submitted that, even Mr Williams knew that the $10,000,000 being paid to PEE would be used to purchase HIH shares and had the para (f) contemplation ("the contemplated objective of enabling PEE to acquire from Adler Corporation unlisted investments which were not the subject of independent analysis"), that showed no more than that he knew of the advantages his conduct would or might bring to Mr Adler. It was said that it fell short of establishing that he acted in order to gain the advantages for Mr Adler. 569 The distinction between knowing that conduct will or might advantage another person and intending by the conduct to advantage the other person can be elusive. On the present facts it is barely discernable. The point of the payment of the $10,000,000 was that Mr Adler should have unfettered discretionary control over it, including (from what Mr Adler said to Mr Howard) that it might be used to purchase venture capital investments with which Mr Adler was associated. At the least, if there were profits Mr Adler (in the guise of PEE) would take 10 per cent (and as was stated in Chew v The Queen it is not necessary that there were profits. Mr Williams could not but have intended that the advantages of having the money, if things went well of making the 10 per cent, and of maybe selling the venture capital investments with which Mr Adler was associated, should be gained. 570 The trial judge did not spell this out. I do not think he needed to. A judge's reasons must be read as a whole, and in a common sense way; the obvious need not be expressly stated. The trial judge plainly found the intention to gain an advantage for Mr Adler, and no error in his doing so has been shown. 571 Mr Williams submissions took issue with the finding of advantage in that it was said that the trial judge must have been influenced in finding contravention of s 182 by erroneously going beyond ASIC's pleaded and particularised case, and that he then got one of the facts wrong. 572 It was said that the pleaded and particularised case was "limited to the initial investment by HIHC in the Trust and the purchase by the Trustee of HIH shares", but that the trial judge took into account against Mr Williams that at the end of 2000 he failed to make full and frank disclosure of what had occurred and misleadingly said on 12 October 2000 that "it is fixed now". The trial judge did refer to these matters, in paras 296 and 248, but expressly in the case of the former and clearly enough also in the case of the latter as showing consciousness of impropriety in what had earlier occurred. They were matters which "[bore] upon the improper purpose of Mr Williams … first in relation to the purchase of the HIH shares and then in relation to the other investments" (para 296). As evidence of the impropriety of the pleaded conduct, there was no infringement of the bounds of ASIC's pleaded and particularised case. 573 The trial judge did say, referring to the Minter Ellison report of 29 November 2000 - "295 Importantly, there was no reference anywhere in the letter of advice to the unlisted investments acquired by PEE from Adler Corporation or to the loans made by PEE to entities associated with Mr Adler . Clearly enough, neither Mr Adler nor Mr Williams disclosed to Minter Ellison that important fact. It may not have been known to the auditor either. This is so, though a quarterly report had been provided by Mr Adler on 18 August 2000 to, amongst others, Mr Howard (TB, 217-8) which refers to, amongst other investments, dstore and Planet Soccer. There was however no reference to either having been acquired from Adler Corporation." (emphasis added) 574 This was not entirely correct. Annexure C to the Minter Ellison report tabulated assets of the AEUT, and included, identifiably albeit briefly, the purchases of shares from Adler Corporation and at least some of the loans. It did not reveal that the loans were to entities associated with Mr Adler. However, I do not think the error materially detracts from the trial judge's finding of consciousness of impropriety, bearing on improper purpose, which was supported by much else; nor do I accept Mr Williams' submission that it caused the trial judge to think that Mr Williams shared Mr Adler's motives. 575 Mr Adler had an interest in the contravention by Mr Williams of s 182(1), since it was alleged that he was involved in the contravention. Other than as to the particulars, see below, he did not put submissions specifically directed to Mr Williams contravention. 576 In my opinion, material error has not been shown in the trial judge's conclusion that the contraventions of s 182 were made out. Contravention by Mr Adler of s 182(2) of the Act 577 The allegation of contravention of s 182(2) by Mr Adler was pleaded as follows - "97. By reason of the matters pleaded in paragraphs 15 to 60 (inclusive), Adler: 97.1 aided, abetted, counselled or procured; 97.2 alternatively induced; 97.3 alternatively was knowingly concerned in or party to; the contravention by Williams pleaded in paragraphs … 91, 92 above and thereby contravened subsection(s) … 182(2) of the Corporations Law ." 578 The allegations of contravention by Adler Corporation in para 98 of the statement of claim included contravention by involvement in Mr Williams' contraventions of s 182 pleaded in paras 91 and 92. However, this does not seem to have been addressed, or at least no declaration was made that Adler Corporation was involved in Mr Williams' contraventions, as distinct from Mr Adler's contraventions. Involvement in Mr Williams' contraventions by Adler Corporation, as distinct from by Mr Adler, does not arise in the appeal. 579 The trial judge dealt with this contravention briefly, referring in para 731 to Mr Williams' contravention of s 182 and saying that "[q]uite clearly Mr Adler had the necessary knowing involvement in that contravention" and stating in para 732 that Mr Adler "was knowingly involved in Mr Williams' contravention of s 182 so as to be in breach of s 182(2)". There was no elaboration. 580 Mr Adler's submissions went as follows. First, he said that the allegation of involvement "requires proof that Adler and Adler Corporation [sic] had actual knowledge of all the material ingredients of the alleged contraventions: Yorke v Lucas (1985) 158 CLR 661". He did not expressly submit that the proof was wanting, but see the third submission below. Secondly, he said that the particulars of the allegation against Mr Williams in para 77 of the statement of claim were the same as the particulars in para 74(1) of the statement of claim, and that his submissions made in respect of those particulars (which were identified by paragraph references in the written submissions) "are relevant to the allegations against Williams". Thirdly, he said that in that connection "one cannot tell from the finding at [731]-[732] … which, if any, of the matters particularised against Williams in paragraph 77 … it was found that Adler had actual knowledge of". 581 The trial judge's lack of elaboration was matched in the submissions. There is no need to be elaborate in these reasons. It was not necessary for the trial judge to spell out the obvious. Everything taken up in the conclusion that Mr Williams improperly used his position to gain an advantage to Mr Adler was known to Mr Adler. The submissions made in respect of the particulars in para 74(1) of the statement of claim against Mr Adler did not wholly translate to Mr Williams' position, particularly the matter of Mr Adler's purpose of maintaining or stabilising the share price for his own benefit, but they have not availed Mr Adler and I do not think that, so far as applicable to Mr Williams' position, they are any more successful. If it was intended to take up the reliance on Yorke v Lucas earlier discussed, Mr Adler knew the essential facts constituting Mr Williams' contraventions. Contravention by Mr Adler of s 183(1) of the Act and by Adler Corporation of s 183(2) of the Act 582 Section 183 of the Act provides - " 183. Use of information---civil obligations (1) Use of information---directors, other officers and employees A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection." 583 The allegations of contraventions of s 183(1) against Mr Adler were separately pleaded as a director or officer of HIH and HIHC. 584 The allegation of contravention by Mr Adler as a director of HIH was pleaded as follows - "95. By reason of his conduct pleaded in paragraphs 15 to 60 (inclusive) above, Adler, as a person who obtained information because he was a director of HIH, improperly used that information to: 95.1 gain an advantage for himself; 95.2 in the alternative, gain an advantage for PEE; 95.3 in the alternative, gain an advantage for Adler Corporation; and thereby contravened section 183 of the Corporations Law . Particulars (a) The information obtained by Adler was information concerning the Investment Committee procedures and the Investment Guidelines, the HIH investment portfolio and the susceptibility of Williams to a proposal whereby HIH invest money in less conservative ways, such as in unlisted equities and venture capital. (b) The plaintiff otherwise repeats the particulars to paragraph 74." 585 The allegation of contravention by Mr Adler as an officer of HIHC was pleaded and particularised in para 96 of the statement of claim in relevantly the same terms. 586 The allegation of contravention by Adler Corporation of s 183(2) was pleaded in para 98 of the statement of claim earlier set out. 587 The conduct whereby it was alleged that Mr Adler had improperly used information was widely pleaded, in that paras 15 to 60 of the statement of claim encompassed all the transactions. Fundamental to the contraventions alleged was the information particularised in subpara (a) of para 95. It was of three kinds - (i) information concerning the Investment Committee procedures and the Investment Guidelines; (ii) information concerning the HIH investment portfolio; and (iii) information concerning "the susceptibility of Williams to a proposal whereby HIH invest money in less conservative ways, such as in unlisted equities and investment capital". 588 The trial judge first came to contravention of s 183 at paras 388-94. To that point he had concentrated on the payment of the $10,000,000 and the purchase of shares in HIH. 589 Under the heading "Application of s 183 of the Corporations Act to the investment of AEUT and AEUT in HIH in relation to Mr Adler", the trial judge said that he turned to s 183 "where the contravention alleged is in relation to Mr Adler only and in relation to his position as a director of HIH". He referred to para 95 of the statement of claim and its particulars, and noted that "a similar allegation is made in relation to HIHC but not in relation to PEE". He then said - "393 The Particulars relate principally to unlisted equities and venture capital in so far as the information is concerned, which is said to have been improperly used. Therefore that allegation relates not specifically just to the HIH share purchasing but the HIH share investment is rather an instance of investing "in less conservative ways" as the first of a series of investments of that character, following the formation of AEUT with that purpose. CONCLUSION 394 It is premature to consider whether Mr Adler contravened s183 of the Corporations Act in so far as the investment in shares in HIH was concerned, without considering that in the overall context of all of the transactions, being all investments "of a less conservative character". The factual position and findings with regard to the investment in unlisted equities and the loans are dealt with later (between paras 513 to 730). It is there concluded (see principally para 577(d)) that Mr Adler contravened s183 taking into account each of the unlisted investments acquired from Adler Corporation and each of the loans to Adler associated entities." 590 Paragraph 577(d) of the trial judge's reasons was part of his "Conclusion" concerning the purchase from Adler Corporation of its shares in dstore: I have set out paras 576-577 earlier in these reasons. In para 577(d) the trial judge said that Mr Adler breached his obligation - "(d) not to improperly use information obtained by him to gain an advantage for himself or to gain an advantage for Adler Corporation, so contravening s183 of the Corporations Law , being information concerning the Investment Committee procedures and Investment Guidelines, the HIH Investment Portfolio and the susceptibility of Mr Williams to a proposal whereby HIH invest money in less conservative ways, such as in unlisted equities." 591 This was then extended to contravention by Adler Corporation, by involvement in Mr Adler's contravention, in para 578. 592 The conclusions concerning the purchases from Adler Corporation of its shares in Planet Soccer (para 621) and Nomad (para 678), and the loans to morehuman (para 694), Intagrowth (para 706), and PCP Ensor (para 730) also extended to contravention by Mr Adler of s 183 and to Adler Corporation's contravention by involvement in that contravention. 593 As before, the submissions which I have already considered were directed to Mr Adler's contravention of s 183. They do not call for further consideration. There were additional submissions particularly directed to Mr Adler's contravention of s 183. First, it was said that the trial judge came to "generalised conclusions" as to the purchases of shares from Adler Corporation and the loans, but "never returned to the issue left open at [394] … as to whether the purchase by PEE of shares in HIH contravened section 183". Secondly, it was said that "[i]t would be difficult to reconcile a finding to the effect of the particulars in paragraph 95 and 96 … with other aspects of his Honour's reasoning". Thirdly, it was said that the evidence did not support improper use of the particularised information. 594 The trial judge did not clearly return to contravention of s 183 of the Act "insofar as the investment in shares in HIH was concerned", as foreshadowed in para 394. With respect, I have some difficulty in seeing the reach of his findings. From the reliance on paras 15 to 60 of the statement of claim, ASIC's case extended to the investment in shares in HIH, and in para 393 the trial judge described the HIH share investment as an instance of investing "in less conservative ways" as the first of a series of investments of that character. But he seems to have done so as an understanding of the particulars rather than a finding, and to have regarded the improper use of information as relating "principally to unlisted equities and venture capital". His final conclusion (so to speak) is in terms only of the unlisted investments and the loans. 595 ASIC submitted that, although he did not express a finding, the trial judge must have concluded that by procuring and causing the payment of the $10,000,000 on 15 June 2000 and the subsequent investments by PEE in HIH there was a breach of s 183(1), because he made declarations to that effect. 596 The declarations involving contravention of s 183(1) were in the form (I take that referring to Mr Adler as a director of HIH) - "A declaration, pursuant to section 1317E(1) of the Corporations Act, that the First Defendant, Rodney Stephen Adler, whilst being an officer of HIH Insurance Ltd, contravened sections 180(1), 181(1), 182(1) and 183(1) of the Corporations Law by reason of conduct in so far as described in the facts and matters referred to under "the Conclusion" in paragraphs (3), (2), (21), (26), (28), (29), (30), (31) and (32) of the Conclusions pertaining to Mr Adler's involvement in having: (a) instigated and caused the payment of $10 million by HIH Casualty and General Insurance Limited to Pacific Eagle Equities Pty Limited on or about 15 June 2000 ; (b) caused the purchase of shares in HIH Insurance Limited by Pacific Eagle Equities Pty Limited in the period from 15 June 2000 to 5 July 2000 ; (c) caused the sale of shares in dstore Limited, Planet Soccer International Limited and Nomad Telecommunications Limited by Adler Corporation Pty Ltd to Pacific Eagle Equities Pty Limited in the period from 25 August 2000 to 26 September 2000; and (d) caused the making of loans by Pacific Eagle Equities Pty Limited to morehuman Limited, Pacific Capital Partners Pty Limited, Intagrowth Fund No.1 and PCP Ensor No.2 Pty Limited in the period from 28 June 2000 to 30 November 2000." (emphasis added) 597 "The Conclusion" was the trial judge's collection, at the end of his reasons in numbered paragraphs, of the conclusory paragraphs found in the body of the reasons. 598 The form of the declarations, however, detracts from ASIC's submission. Because the contraventions of s 183(1) were stated together with the contraventions of ss 180(1), 181(1) and 182(1), it may not be right to see each of the descriptions of what Mr Adler was involved in as constituting, or as part of, the contraventions. The trial judge's summation of contraventions found against Mr Adler in para 15 of the orders judgment is in the same distributive terms, and does not provide clarification. 599 If the trial judge's finding of improper use of information be taken to have been confined to the purchases of shares from Adler Corporation and the loans, that is sufficient for the contravention of s 183(1). Whether it went further could be material to the orders made. It does not matter, since for the reasons I now come to I consider that the findings of the contraventions can not stand. 600 In amplification of the second submission, it was said that making improper use of information concerning the Investment Committee procedures and Investment Guidelines for the purchase of the unlisted investments was "contrary to one of the two central bases on which the trial judge found a contravention of sections 180-182, namely that Adler was acting in disregard of those procedures and guidelines". ASIC submitted in response that there was consistency because disregard of the Investment Committee guidelines and procedures "itself constituted an improper use of them". 601 The issue raised was really not one of consistency. It was whether disregard of the Investment Committee guidelines and procedures could be an improper use of information. I do not think that, in the present case, it could. It may be that information as to corporate procedures is improperly used if, from the knowledge of the procedures, a person is able to devise a way of using the procedures to gain an advantage or cause detriment, or to devise a way of evading protections against advantage or detriment. But straightforward disregard of guidelines and procedures is a different matter. The trial judge's explanation of his finding, in the summation in para 576 and in the preceding discussion, did not go beyond failure to advise the Board or the Investment Committee of "investments made within AEUT" (para 569). Insofar as he considered that the failure was improper use of the Investment Committee guidelines and procedures, I am respectfully unable to agree. To this extent, therefore, the basis for the finding of contravention of s 183 is in my opinion unsound. 602 There is a similar difficulty in relation to information concerning the HIH investment portfolio. The trial judge did not explain what information of that kind had been improperly used or how it had been improperly used, and it is not self-evident. There was investment outside HIH's normal investment portfolio, and of a non-risk adverse kind. This was akin to disregard of whatever was known about the investment portfolio, and was not misuse. To this extent also, the basis for the finding of contravention of s 183 is in my opinion unsound. 603 The third submission then addressed the other information found to have been improperly used, information concerning Mr Williams' "susceptibility" to a proposal of less conservative investment. It was said that Mr Adler openly maintained that HIH's investment policy should be less conservative, that to the extent to which HIH had engaged in more speculative investment it had outperformed its benchmarks, and that Mr Cohen and Mr Gardener gave evidence that this was regarded as a source of satisfaction. It was said that there was room for legitimate debate over investment policy, and that there was no evidence of an amenability peculiar to Mr Williams to investment proposals "suggesting devotion of a very small fraction of the overall portfolio to relatively high risk/high reward investments". Even if there was, it was said, there was nothing improper in any use of that information. 604 The submission in substance questioned whether there was "information" open to improper use within s 183(1). The particularisation of Mr Williams' "susceptibility" was far from clear. ASIC submitted that the susceptibility was to be found in the indications in the faxes of on 9 June 2000 that Mr Adler and Mr Williams had been discussing the or at least a similar proposal for some months, in Mr Williams' knowledge that the investment company would have an absolute discretion to invest the money as it saw fit and that the $10,000,000 was to be used for venture capital and share trading, in Mr Williams' statement in his fax that the proposal was "fair and reasonable" subject to clarification about the limit upon any one particular venture or share trade, and in Mr Williams' failure to call Mr Adler to order over the later transactions. This could perhaps be described as susceptibility, but in my view the inference is of no more than assent to an investment proposal outside HIH's normal guidelines and prudential procedures; I have difficulty in seeing any "information" obtained by Mr Adler falling within s 183(1). Further, while it could be said that the by-passing of the Investment Committee and the Board was evidence of Mr Adler taking advantage of a susceptibility, I have difficulty in seeing agreement between Mr Adler and Mr Williams upon the investment proposal and its implementation as improper use of Mr Williams' side of the agreement. 605 A test may be whether it could have been said that Mr Adler took advantage of information concerning susceptibility if, knowing that (for example) Mr Cohen favoured the proposal, he had put the proposal to the Investment Committee or the Board. I do not think that Mr Williams' favourable view of Mr Adler's proposal is to be regarded as information open to improper use within s 183(1), and I respectfully do not think that it was open to the trial judge to conclude, to the requisite degree of satisfaction, that Mr Adler improperly used his knowledge that Mr Williams was favourably inclined. 606 Absent this basis also for the findings of contravention of s 183, in my opinion the findings can not stand. The matters on which the trial judge relied did not establish contravention by Mr Adler of s 183(1). ASIC did not by a notice of contention seek to support the result by going beyond the trial judge's reasons. Matters outside ASIC's pleaded case 607 There has already been considerable reference to submissions that the trial judge relied on matters not open on ASIC's case as pleaded and particularised. Departure from the pleaded case was prominent in the appellants' arguments. 608 The Adler appellants provided a "schedule of unpleaded matters in judgments of 14 March 2002 and 30 May 2002". Mr Williams provided a list of "findings outside the pleadings". The schedule and the list identified each paragraph in the judgments in which it was said a finding had been made outside the pleaded case. For the present I pass over the orders judgment. 609 In the way they were prepared there was a deal of repetition in the schedule and the list. Further, facts can be part of a proper consideration and understanding of what happened – events, communications, motivations and so on – although not part of the reasoning to legal responsibility. It is necessary to analyse the matters complained of for their substance, eliminating the repetition and occasional variety in expression, and for the part they played in the trial judge coming to his conclusions. 610 The matters complained of fell into the following categories. I do not distinguish between the complaints of the Adler appellants and the complaints of Mr Williams, which were not co-extensive. (1) That regard was had to the AEUT trust deed in relation to the contraventions of s 208 of the Act. (Although it was not on the schedule or the list, the complaint was also made in relation to the contraventions of s 260A of the Act.) I have dealt with this. Even if it was erroneous, the contraventions were otherwise made out, but it was within ASIC's case because the words "amounted to the giving of a financial benefit" encompassed what was done with the $10,000,000 whereby there was the giving of the financial benefit, and because regard could be had to the AEUT trust deed to show the reality of the prejudice to HIH and HIHC. (2) That there was an intentional by-passing of and lack of disclosure to the Board and the Investment Committee and failure to follow approval processes. This has been considered. It was within the particulars in paras 74(1)(l) and (m) and 74(2)(b). (3) That Mr Adler's real purpose was to support the HIH share price for the benefit of his own shareholding. This has been dealt with; within it is Mr Adler's conveying the false impression that his own interests were purchasing HIH shares. Mr Adler's purpose went to establish the exposure to diminution in the value of HIH's stake in PEE and the prospect of the loss which in fact occurred. The creation of a false impression was specifically particularised in para 69(d). The object of maintaining or stabilising the share price and advantage to Mr Adler and Adler Corporation were particularised in para 74(1)(g) and (d), which of itself answers this complaint. (4) That Mr Adler preferred his own interests in selling Adler Corporation's shares in HIH before PEE's shares in HIH. This is within (3) above. (5) That there was failure to have due diligence or similar enquiry or investigation for the uses of the $10,000,000. This has been considered. It went to establish disadvantage to PEE and HIH and advantage to Mr Adler. (6) That in the sales of shares by Adler Corporation Mr Adler was getting rid of investments with which he was dissatisfied. This has been dealt with. It also went to establish disadvantage and advantage. (7) That there was lack of frankness or misleading of the investigators in and after September 2000 when the transactions were under investigation. Most, but not all, of the conduct falling within this broad category has been described. It is not necessary to go to the detail. It has been dealt with. Consciousness of impropriety reflected upon the pleaded conduct. (8) That Mr Adler made (other) misleading statements. The trial judge's observations were to the effect that, when saying he would "place" dstore and Planet Soccer in the AEUT, when referring to dstore in the quarterly report, and when referring to Planet Soccer in a later memorandum to the Board, Mr Adler did not convey any concern. This is within (6) and (7) above. (9) That Mr Adler wanted to avoid having HIH obtain its own legal advice. This referred to the memorandum of 21 July 2000, and was relevant to disadvantage and advantage. (10) That the loans were not venture capital or share trading. This has been mentioned. It is not of great significance, but goes to establish disadvantage and advantage. 611 I note the submission made orally on behalf of Mr Adler, made advisedly but wisely not taken up in the schedule, that the trial judge went beyond the pleaded case that there was "a significant risk" that Nomad would fail by stating the conclusion that there was "a very significant risk" that Nomad would fail. The word "carping" again comes to mind; there is nothing in the point. 612 Of the same character is Mr Williams' submission that there was departure from the pleaded case in the trial judge postulating - " … whether Mr Williams knew that the investments, which would be made by PEE, involved acquiring assets owned by Adler entities or would be on a basis not advantageous to HIH or HIHC's interests, having regard to the pleading in para 74(2) in relation to the transactions being not advantageous to HIHC or to HIH as well as not being disclosed to other directors of HIH or brought to the attention of the Investment Committee of HIH ." (emphasis added) It was said that there was departure because the particulars in para 74(2) related to Mr Adler, not Mr Williams. They did, but the trial judge used para 74(2) to take up the matters of disadvantage and non-disclosure which were material also to Mr Williams, see the particulars in para 77(d), (e), (h), (i), (j), (k) and (l). 613 The greater detail in the schedule and the list do not persuade me that the trial judge materially erred in relying on matters not open on ASIC's case as pleaded and particularised. The evidence of Mr Cameron 614 I have earlier referred to the admissibility and reading of Mr Cameron's affidavit, including the submission that Mr Cameron's opinion in para 17(a) as to material prejudice to HIH or HIHC from the financial assistance given by HIHC was not led in evidence. I now explain why I consider that the admission of Mr Cameron's evidence has not been shown to be erroneous and that the para 17(a) opinion was put in evidence. It should be noted, however, that for reasons already given I do not think it would matter to the result if Mr Cameron's evidence were excluded. I also consider a separate submission as to error in reliance on para 17(c) of the affidavit. 615 ASIC read an affidavit of Mr Cameron sworn on 26 September 2001. Its counsel stated that it read part of the affidavit only on a particular basis. The Adler appellants objected to the affidavit in its entirety on the ground that Mr Cameron's evidence was inadmissible under the opinion rule in s 76 of the Evidence Act and not within the exception to the opinion rule in s 79 of that Act. Because Mr Williams was not represented during the taking of evidence, he made no like objection. In reasons delivered on 29 November 2001 the trial judge admitted the evidence, save for one part, as within the s79 exception. 616 The affidavit took the following form. In para 1 Mr Cameron briefly stated business experience and referred to further details of his experience in an annexure to the affidavit. In para 2 he recorded abbreviations used in the affidavit. In para 3, by reference to another annexure he stated the facts he had been asked to assume for the purpose of expressing his opinions on the questions later set out, identified the facts which he considered to be of particular significance, and said that he had also had regard to the copy documents in two folders exhibited to his affidavit. Mr Cameron then set out in turn five questions, stated his answer to each, and gave reasons for his answers. Question 1 was dealt with in paras 4 to 7, question 2 in paras 8 to 12, question 3 in paras 13 to 15, question 4 in paras 16 and 17. and question 5 in paragraphs 18 to 23. 617 The questions went fairly directly to the contraventions of the Act alleged in relation to the transactions. As an example, question 1 was, "Would a reasonably careful and diligent director of officer of HIH or HIHC in the position of Mr Adler have caused or procured the payment on 15 June 2000 of $10 million by HIHC to PEE?" I have earlier set out Mr Cameron's reasons for answering no. 618 Some reference to other questions and answers is necessary for the question as to the para 17(a) opinion, and will add to the background to the question of admissability. 619 Question 2 was the same as question 1, but as to Mr Williams. The answer was no. The reasons took up the reasons for the answer to question 1, and gave further reasons including, in para 11 - "If the proposal for the payment as put to the Board included an indication that some of the funds were to be used to buy shares in HIH then, in my view, a reasonably careful and diligent director of HIH or HIHC would not have voted to approve the payment for the reasons set out in paragraph 17(a) and (c) below ." (emphasis added) 620 Paragraphs 17(a) and (c) were part of the answer to question 4. Question 4, its answer and reasons were - "If you assume that the payment of $10 million made by HIHC to PEE on 15 June 2000 was made, as to $4 million, for the purpose of assisting PEE to acquire shares in HIH, did the giving of that assistance materially prejudice the interests of HIH or HIHC? 16. My answer is yes. 17. The giving of that assistance was materially prejudicial to the interests of HIH and HIHC because - (a) if the payment and its purpose had become known to the public then it would have been likely to undermine public confidence in the companies. Public knowledge of the transaction would have been likely to give rise to the perception that the company was engaging in illegal or improper activity in order to support its share price; (b) The Board of HIH was misled as to the level of support in the market because it was not made aware that the company had financed the transaction. As a consequence, the Board was not presented with the opportunity of assessing the future direction of the company in the context of appreciation of the true market for shares in HIH. If the transaction had not occurred there may have been an earlier and much keener analysis by the Board of the declining financial fortunes of HIH; (c) the investment in HIH shares was a speculative investment which resulted in substantial losses. I have been referred to press publicity at around the time of the transaction, in a context of a declining share price for HIH, concerning the need for HIH to raise very substantial additional capital (see press articles in Annexure C to this Affidavit). If such publicity was accurate then it was not a time for the company to be applying any of its surplus funds to such a speculative investment." (a) Admissibility 621 The "opinion rule" in s 76(1) of the Evidence Act is that evidence of an opinion is not admissible "to prove the existence of a fact about the existence of which the opinion was expressed". However, by s 79 - "79 If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge." 622 It was not in dispute that Mr Cameron's evidence was evidence of his opinion. That the evidence went fairly directly to the contraventions did not make it inadmissible, see s 80(a) of the Evidence Act, although care must be taken "when experts move close to the ultimate issue", see R v GK (2001) 53 NSWLR 317 at 326-7. The issue was whether Mr Cameron's opinion was wholly or substantially based on his specialised knowledge based on his training, study or experience. 623 Mr Cameron's specialised knowledge was based on his experience as found in his affidavit. The experience was as a member of Coopers & Lybrand from 1947 to 1985, with partnership from 1962 principally as an audit partner and the position of National Chairman and membership of the Executive Committee of the international firm from 1975; in a managerial role and acting as the senior engagement partner for a number of the firm's larger public company clients; and from 1985 in a career of private and public company directorships (which were outlined) and a period as a part-time Commissioner of the (former) National Companies and Securities Commission. 624 The trial judge said that he considered that the experience was "precisely of the kind that should make [Mr Cameron] familiar with what a reasonably careful and diligent director of a company would do in particular circumstances". 625 The trial judge then said - "16 It is said by the Defendants that each answer is a mere ipse dixit , that is, bare assertion with nothing to indicate how it derives from Mr Cameron's specialised knowledge. There is said to be no linking to any study or experience of Mr Cameron, nor to his observations either as auditor or on the boards upon which he has sat. 17 It should be observed from Ocean Marine (supra) [ Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd [2000] FCA 1463] that there needs to be a demonstration, at least normally, of the reasoning process by which the opinion was reached exposing the reasoning in such a way as to demonstrate particular specialised knowledge. However, when one looks at the specific paragraphs they clearly enough are derived from the experience Mr Cameron has as a public company director or auditor and do expose his reasoning process. One may in that regard draw the reasonable inference from the statement of his experience that it informs his stated reasons. Moreover those reasons clearly enough pertain to what a reasonably careful and diligent director in the relevant position would do. One does not need to indulge in some mechanical, formalistic process of cross-referencing particular board experience to each specific reason, in such circumstances. 18 It may be argued that greater weight could have been attributed to that expert evidence had it been more extensively elaborated, or amplified by specific examples of experience, of the kind that the Defendants contend is absent here. But even if correct, that goes to weight not admissibility. 19 I consider question 1 and the paragraphs that follow are sufficiently illustrative of the remaining paragraphs for me to conclude as follows in relation to each. The requirements of s79 have been satisfied so as to permit Mr Cameron's evidence to be admitted. This is as they apply to the particular field of discourse here in question, namely the experience of a company director and auditor in the context of the questions dealt with in the affidavit. In particular I consider that so applied, it meets the requirements for admission set out by Heydon JA in Makita (Australia) Pty Ltd v Sprowles ([2001] NSWCA 305, 14 September 2001, unreported) [now reported (2001) 52 NSWLR 705] at para 85. For convenience I quote those requirements from his judgment: '85 In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it inadmissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41])' 20 Specifically, one would not conclude that the matters of opinion in the way here stated warrant the adverse description given by Gleeson CJ of the psychologist's evidence (as quoted by Heydon JA above). Ultimate weight is a matter for further testing, but it is not at such a low level as to warrant exclusion or rejection at the outset." 626 In due course the trial judge ruled that para 17(c) of the affidavit was nonetheless inadmissible, see below, but for the present that may be passed over. 627 The appellants submitted that the trial judge was in error in considering that Mr Cameron's opinions were wholly or substantially based on specialised knowledge. They said that the practices of company directors "are too multifarious and individualated [sic] to constitute a field of 'specialised knowledge' within the meaning of section 79", and that it was not shown how Mr Cameron's experience applied to the facts he assumed so as to produce his opinions. 628 The submission as to a field of specialised knowledge may not have been fully maintained, since at one point counsel for the Adler appellants acknowledged that whether a reasonable and prudent director would have voted to approve the subscription for the B class unit in the AEUT (Mr Cameron's para 10) was capable of proof by opinion evidence. In any event, I do not accept the submission. 629 The phrase 'specialised knowledge" is not defined in the Evidence Act, deliberately so, see ALRC 26 at para 743. But it is not restrictive; its scope is informed by the available bases of training, study and experience, in the lastmentioned perhaps extending the common law. An ample scope has been suggested in, for example, R v Yilditz (1983) 11 A Crim R 115 (attitude of a member of a community), Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79 at 85 (investor behaviour) and Godfrey v New South Wales (No 1) [2003] NSWSC 160 (behaviour of prison escapees). Without going so far, proper professional conduct in the sense of due care and obedience to customary practices and ethical rules is in my view a field of specialised knowledge. That the common law and (now) the Act state directors' duties of due care and proper conduct itself suggests that a company director should have specialised knowledge and be able to speak of the duties and their application. 630 I do not think Australian Cement v Adelaide Broughton [2001] NSWSC 645 stands to the contrary, since there the accountant's opinion of what an experienced and competent company director would do was the product of his observations of others: the problem lay in his experience. In my opinion, the questions asked of Mr Cameron and his answers were within a field of specialised knowledge. 631 Whether an opinion has been shown to be based on the specialised knowledge is a question of fact, and s 79 provides that it is sufficient that it is substantially based on that knowledge. What is required by way of the explanation of which Heydon JA spoke in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at [85] will depend on the circumstances. The disconformity in HG v The Queen (1999) 197 CLR 414 to which his Honour referred was gross, in that the psychologist's evidence went to when the complainant was abused and who abused her, outside a psychologist's expertise and based on matters other than a psychologist's expertise. Other circumstances will be quite different. And, as was said in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157, absolute certainty that the opinion is based on the specialised knowledge is not required (at [14]) and many of the stated qualities of the opinion evidence by Heydon JA 'involve questions of degree, requiring the exercise of judgment" (at [87]). 632 A solicitor shown to have specialised knowledge of conveyancing practice can give opinion evidence of general conveyancing practice without spelling out the links between his training, study and experience and his opinion. The links are apparent from the nature of the specialised knowledge. If an exotic matter of conveyancing practice were in issue, it may be necessary for a satisfactory link to be made apparent. Mr Cameron's opinions and the reasons for them were not of an exotic kind, and the trial judge was entitled to take the view that they were based in his experience as a company director and auditor; no doubt more the former, but the later could contribute. I do not think that error has been shown in the admission of Mr Cameron's evidence. (b) Paragraph 17(a) 633 When the affidavit was read counsel for ASIC said that para 16 was not read. He then pointed out that in para 11 of the affidavit Mr Cameron had included in the reasons for his answer to question 2 "the reasons set out in paragraph 17(a) and (c) below", and said - "Your Honour, 17(a) and (c), being part of 17, are not read for the purpose of which 17 appears in the affidavit, but they are to be treated as part of the reasons expressed in paragraph 11, as if those matters are set out verbatim in paragraph 11. But 17 is not for any other purpose to be read or relied upon." 634 There was then some discussion of whether parts of para 17(c) were assumption or opinion, going to their admissibility even via para 11. In the course of the discussion the trial judge asked whether one of the sentences in para 17(c) "will be a statement of assumption incorporated in 11, rather than a reason", and counsel for ASIC replied, "Rather than a reason for the matter set out in the beginning of 17, which is not read". 635 Later in the course of submissions this was said - "HIS HONOUR: Just to understand your Honour [sic: ?] affidavit finally. If it be the case that 17 is out and 16 is out then presumably the evidence in relation to question 4 does not arise? MACFARLAN: No, because there is no separate objection – let me put it this way. HIS HONOUR: I thought you weren't pressing 16? MACFARLAN: We are not pressing 16 and 17, except insofar as the earlier paragraph incorporation by reference -- HIS HONOUR: What I am trying to say is, to use your Honour [sic: ?] expression; the chapeau has no body to it if you take out 16 and 17. It is like Thomas Helmut's [sic: Mahomet's] coffin. MACFARLAN: There is no conclusion in 16 or 17 that is being led into evidence. HIS HONOUR: What I am saying is that I disregard this evidence, insofar as I treat this evidence as not going to question 4 and question 4, therefore in the sense it is surplusage. MACFARLAN: Yes. Question 4 is not pressed." 636 In the reasons of 29 November 2001 the trial judge referred to paras 16 and 17 of the affidavit as "only pressed as reasons in relation to the statement in paragraph 11". This was not entirely accurate, since only para 17(a) and (c) had been pressed as reasons in relation to the statement in para 11. 637 The appellants submitted that ASIC's counsel had not read question 4 in the affidavit and had said that no conclusion in paras 16 or 17 in relation to question 4 was led in evidence; hence, they said, the trial judge was not entitled to rely on Mr Cameron's para 17(a) for material prejudice in the prospect of covert financing by HIHC of the purchase of HIH shares becoming known to the public. 638 I do not think this correctly represents the result of what occurred. As I have earlier indicated, I consider that what was said by counsel for ASIC was directed to question 4 and to paras 16 and 17 as reasons for the answer to question 4, but para 17(a) and (c) were read as reasons for the answer to question 2. Para 17(a) was available to the trial judge's fact-finding in its own right, although put into evidence as a reason for the answer to question 2. (c) The separate error 639 Apart from his ruling as to the general admissibility of the affidavit, the trial judge ruled as to the use of para 17(c) - "21 I should now revert to paragraph 11 of the affidavit. I do not consider that the cross-reference to paragraph 17(c) should be allowed which for convenience I quote below. '(c) the investment in HIH shares was a speculative investment which resulted in substantial losses. I have been referred to press publicity at around the time of the transaction, in a context of a declining share price for HIH, concerning the need for HIH to raise very substantial additional capital (see press articles in Annexure C to this Affidavit). If such publicity was accurate then it was not a time for the company to be applying any of its surplus funds to such a speculative investment.' 22 That particular paragraph is my opinion, not properly admissible either in relation to question 4 (where it is not pressed) or, on the current state of the evidence, in support of paragraph 11. 23 It follows that the proper course is for the Plaintiff in examination in chief to put to the witness whether, without the support of paragraph 17(c), he still wishes to maintain the opinion stated in paragraph 11." 640 Rather than dealing with this in examination in chief, ASIC read a further affidavit of Mr Cameron sworn on 30 November 2001. 641 In that affidavit Mr Cameron said - "2. My reasons for the view set out in paragraph 11 of my affidavit of 26 September 2001 are, first, the matters set out in paragraph 17(a) of that affidavit and secondly, that investment of HIH shares at the time would in my view have been speculative because: (a) the share price had been falling for a number of months; (b) the company was referred to in the financial press as being under pressure because of an apparent need for capital in order to comply with capital adequacy requirements shortly to be introduced. (see Annexure 'C' to my affidavit of 26 September 2001)." 642 The only objection taken to the affidavit at this time was to para 2(b), the objection being that an order should be made limiting its use so that it was not evidence of the truth of what was said in the financial press. Perhaps greater objection was not taken because in his reasons on the previous day the trial judge had ruled that Mr Cameron was qualified to give his opinion evidence, although a formal objection would probably have been appropriate. An order was made that part of what followed "secondly" was a matter of assumption only and not evidence of its own truth, but it remained as support for Mr Cameron's opinion. It is not necessary to consider the significance, if any, of the repetition by incorporation of para 17(a) of the affidavit of 26 September 2001. 643 As has been seen, in reaching his conclusion that Mr Adler had contravened s 180(1) of the Act the trial judge found support in the evidence of Mr Cameron. At one point the trial judge set out question 1 and the paragraphs dealing with the answer to the question, and continued - "377 Much of the cross-examination that followed on behalf of Mr Adler was whether that investment in HIH was a " speculative " one. However, this part of his evidence was not directed to that question. Nonetheless, to the extent it was called in aid as an additional reason for Mr Cameron's conclusion concerning Mr Adler, quoted above, I consider that the evidence earlier reviewed amply justifies that description ( see para 17(c) of Mr Cameron's affidavit ). … ". (emphasis added) 644 The appellants submitted that the trial judge had erroneously paid regard to para 17(c) of the affidavit of 26 September 2001 for the proposition that the investment in HIH was speculative. The error asserted was twofold. First, para 17(c) was not in evidence at all, even via para 11. It had been rejected, and had been replaced by the affidavit of 30 November 2001. Secondly, the trial judge was not entitled to rely on para 17(c) for the same reason that he was not entitled to rely on para 17(a). 645 There was error so far as the trial judge rested his acceptance of Mr Cameron's opinion that investment in HIH was speculative on a subparagraph which was not in evidence. However, I do not think that error is of any significance. Quite apart from para 17(c), para 2 of the affidavit of 30 November 2000 included Mr Cameron's opinion that investment in HIH was speculative. Had the trial judge referred to para 2 rather than para 17(c), there would not have been the error, and there was no more than a slip in reference. 646 I do not accept the second aspect of error, for the reasons I have given in relation to para 17(a). Further, the appellants' submission must accommodate that, as the trial judge noted, there was cross-examination of Mr Cameron directed to whether investment in HIH was speculative. It was by reference to para 2 of the affidavit of 30 November 2001, but was at large and not confined to a reason for the answer to question 2 – indeed, the extensive cross-examination by counsel for the Adler appellants was not really explained by question 2, because question 2 was as to Mr Williams. 647 At the risk of repetition, it is in any event plain that the trial judge independently found investment in HIH shares to be speculative, and regarded what Mr Cameron said as no more than a "description" which he adopted. Nothing flows from using para 17(c) of the affidavit of 26 September 2001 or para 2 of the affidavit of 30 November 2001 for Mr Cameron's opinion that investment in HIH was speculative. The Jones v Dunkel question 648 The appellants submitted that the trial judge's findings of the contraventions was flawed by Jones v Dunkel inferences erroneously drawn against Mr Adler and Adler Corporation and against Mr Williams because Mr Adler and Mr Williams did not give evidence. They said that Jones v Dunkel inferences could not be drawn because of the nature of the proceedings, alternatively that they should not have been drawn, and that the findings had been at least in part because of such inferences. ASIC submitted to the contrary at each point. There was a similar Jones v Dunkel question in relation to the orders made against Mr Adler, as distinct from the findings of the contraventions. 649 Unexplained failure by a party to give evidence may lead to an inference that the uncalled evidence would not have assisted that party's case. This instance of a Jones v Dunkel inference (Jones v Dunkel (1959) 101 CLR 298), also available where there is unexplained failure by the party to call a witness or tender documentary evidence, can entitle the judge or jury more readily to accept the evidence of the opposite party which might have been contradicted, or more readily to draw any inference fairly available from the evidence called by the other party. A Jones v Dunkel inference can not fill gaps in the evidence, or convert conjecture and suspicion into inference, but unless it is to be empty of content the inference if drawn may weigh the scales, however slightly, in favour of the opposing party. 650 In cases such as the present, where the reasonable satisfaction of the judge or jury takes into account the nature and consequences of what is to be proved, a Jones v Dunkel inference, may be of some importance. But it depends on the circumstances: a Jones v Dunkel inference may do no more than support an acceptance of the opposing party's evidence already sufficient for the outcome or the drawing of an inference from the evidence already drawn to the reasonable satisfaction of the judge or jury. 651 The trial judge referred to the failure of Mr Adler or Mr Williams to give evidence in a number of places in the reasons. (1) In his introductory paragraphs, the trial judge said - "10 None of the Defendants elected to give evidence. Such significance as that may have falls to be considered when considering what inferences, if any, may be drawn in relation to particular matters. Contrary to ASIC's position, the Defendants contend that no adverse inferences should be drawn in the circumstances." (2) Still in the introductory paragraphs, when giving an "overview" of the contentions of the various defendants the trial judge said that each defendant - "(bb) contends that the Court should decline to draw adverse inferences of the kind the Plaintiff invites the Court to draw from the fact that such Defendant did not give evidence in these proceedings; see written submissions in relation to Mr Williams paras 6-9, Mr Fodera paras 100 to 121 and Mr Adler para 152." (3) When he was recording what he described as ASIC's contention "that Mr Adler's purpose in causing PEE to purchase and then causing the market to be given the impression that it was his money that was being used, was to shore up the HIH share price for the benefit of his own company's very substantial shareholding in HIH of some 5,500,000 shares" (para 163), and recording the facts and matters on which ASIC relied, one of the matters noted by the trial judge was - "(ii) No contrary explanation, subject to testing, was given in the witness box by Mr Adler that he caused PEE to buy the HIH shares because he believed a short term profit could be made, such being in support of an inference otherwise available to be drawn as to Mr Adler's real purpose. " (emphasis added) (4) When he was considering Mr Williams' knowledge in connection with involvement in HIHC's contravention of s 160A of the Act, the trial judge said (the paragraphs have earlier been set out, but are repeated for convenience) - "365 Mr Williams, who gave no evidence as to his knowledge , may nonetheless have been unaware of Mr Adler's true purpose in having PEE, through AEUT, purchase shares in HIH in order to support the HIH share price. If so, he would most likely have had the purpose which Mr Adler (falsely) professed. That purpose was to make a short term profit from the dealing in HIH shares. But even absent that knowledge of Mr Adler's real purpose (supporting HIH's share price), Mr Williams was aware of all of the other features of the transaction which rendered the assistance materially prejudicial to the interests of the company, even if, as might be assumed in his favour, he gambled on ultimate benefits outweighing any material prejudice. But if that were so, what he was gambling on was that later events would produce a profit for the company notwithstanding that at the time of the financial assistance he was aware of all of the factors pointing to material prejudice, save (it may be) Mr Adler's true motive. 366 Moreover, Mr Williams and Mr Adler had co-operated to ensure that the in-house HIH expertise was not brought to bear in assessing the wisdom of purchasing shares in HIH itself, through the fact that the transaction was entered into with no input from the Investment Committee or the Board or indeed from those involved with investment management. Mr Howard's role was purely to implement the transaction, not to advise on its wisdom. In circumstances where Mr Williams has chosen not to give evidence of matters which would be peculiarly within his knowledge and where otherwise an inference is amply available that he had actual knowledge of all the elements of the contravention, both in the wider and narrower sense, Mr Williams must be taken to have been " involved " in HIHC's contravention of s260A, for the purposes of s260D of the Corporations Act." (emphasis added) (5) After considering contravention by Mr Williams of s 180(1) of the Act in relation to the payment of the $10,000,000 and the purchase of HIH shares, and finding the particulars of para 77 of the statement of claim made out, the trial judge said - " Jones v Dunkel - adverse inference from not giving evidence 447 It will be apparent that the inference that I would draw as to the failure to exercise reasonable care and diligence, does not depend upon the absence of Mr Williams in the witness box. That inference is well capable of being drawn without that fact, and is simply strengthened by his absence. 448 On this issue more generally, and in relation both to Mr Adler and Mr Fodera, as well as Mr Williams, I agree with the Plaintiff that a Jones v Dunkel inference against each of these persons has some significance in this case . It is not only because they are parties who are clearly available and not called, but also because of their personal involvement in the transactions in question. In Dilose v Latec Finance Pty Ltd (1966) 84 WN (Pt 1)(NSW) 557, Street J said (at 582): "The inference which a Court can properly draw in the absence of a witness, where such absence is not satisfactorily accounted for, is that nothing which this witness could say would assist the case of the party who would normally have been expected to have called that witness. The significance of this inference differs according to the closeness of the relationship of the absent witness with the party against whom the inference is sought to be propounded. Where the absent witness is a party himself then considerable importance may well attach to the inference. Similarly, the inference is significant if the absent witness is, as in the present case, a person who is a senior executive of a corporate party who was personally engaged in the transactions in question and who was in fact present at Court during part of the hearing..." (See also Cross 6th Australian Edition at para 1215). Where the Defendant elects not to give evidence "the court is entitled to be bold" (per Gleeson CJ and Handley JA, SS Pharmaceutical Co Ltd v Qantas Airways Ltd [1991] 1 Ll Rep 288 at 293 citing Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49; 55 ALR 356 per Rich J). 449 So far as Mr Williams is concerned, at the heart of the case against him is the question of the reasons for which, and purposes for which, he acted. He is the only one who could give direct evidence as to that. As he has declined the opportunity to do so, the adverse inferences which arise from his words and conduct may be more confidently drawn . This would be so even if this were a criminal trial stricto sensu RPS v The Queen (2000) 199 CLR 620 at para 27). 450 The supposed explanations proffered in the Second Defendant's written submissions (para 9) are unconvincing. The facts, which are said to provide an explanation for why the witness was not called, ( Fabre v Arenales (1992) 27 NSWLR 437) are the nature of these proceedings and the fact of an extant Royal Commission (which is empowered to recommend charges). There is however nothing about the nature of these proceedings or the existence of the Royal Commission which explains Mr Williams absence from the witness box. As to supposed inconsistencies which ASIC as prosecutor could have cleared up, between on the one hand, the letter to ASIC (TB, 268) together with Mr Cohen's evidence that he believed the schedule to it was accurate (T, 91-2, 503, 509) and Mr Howard's evidence on the other, Mr Howard's evidence rather casts doubt on the accuracy of the letter to ASIC than the other way round. There is no substance in that reason either. In those circumstances, the Court is entitled to conclude that nothing Mr Williams could have said would have assisted his case ." (emphasis added) (6) When stating his conclusion that Mr Adler contravened ss 180-183 of the Act in relation to the acquisition by PEE of the shares in dstore, see paras 576-577 earlier set out, the trial judge prefaced his summation of Mr Adler's knowledge with - "It is a fair inference, on the evidence, and strengthened by Mr Adler's failure to give any other explanation, of a matter which was peculiarly within his knowledge , that he was aware that … ". (emphasis added) (7) In the discussion leading to his conclusion that Mr Williams contravened s 180(1) of the Act in relation to the purchase from Adler Corporation of its shares in dstore (para 586 of the reasons, earlier set out), the trial judge said - "584 Thus, for these reasons and particularly given Mr Williams' bypassing of the approval process with Mr Adler and his knowledge that dstore and Planet Soccer were being purchased from Adler Corporation yet did not ensure that there would be an independent due diligence, I am satisfied that Mr Williams shared Mr Adler's: 'contemplated object of enabling PEE to acquire from Adler Corporation unlisted investments which were not the subject of independent analysis'. That inference is strengthened by the fact that Mr Williams chose not to give any evidence ." (emphasis added) (8) As part of his consideration of contravention by Mr Adler of ss 180 – 183 of the Act in relation to the purchase from Adler Corporation of the shares in Planet Soccer, the trial judge said - "617 I would draw the inference for which the Plaintiff contends. It is that in the absence of any other explanation being given by Mr Adler in the witness box that there is sufficient from the evidence ( without relying on his failure to give evidence ) to infer that Mr Adler was prompted to effect this transfer (which he had previously foreshadowed to Mr Williams) as a result of his dealings with Mr Marcolin in the preceding eight days and the reason for dissatisfaction with the Planet Soccer investment which they evinced." (emphasis added) (9) When considering contravention by Mr Adler of ss 180 – 183 in relation to the loans to PCP and PCP Ensor the trial judge noted a submission made by the Adler appellants that a Jones v Dunkel inference should be drawn against ASIC, in the variant found in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, because Mr Howard had not given evidence of trying to recover more than the $1,300,000 paid on 5 March 2001. Amongst the reasons for declining to draw that inference were - "First, the evidence is clear that Mr Adler ( who chose to give no explanation in the witness box ) took advantage of a situation that he himself brought about by his own conduct". (emphasis added) 652 In the orders judgment, the trial judge referred to factors taken into account as relevant to disqualification in an earlier case, and said - "72 In the present case each of those factors are present, though it should be noted that Mr Adler himself did not assert any personal explanation for what he had done . Rather, through his legal advisers, he denied that there was any contravention in the circumstances, a denial which is at odds with the findings of the Judgment and thus cannot stand." (emphasis added) 653 It is clear enough that the trial judge drew Jones v Dunkel inferences against Mr Adler (and Adler Corporation) and Mr Williams but it is not always clear whether the inferences were of importance or were no more than supportive of conclusions to which the trial judge came in any event. Instances (1), (2) and (3) were introductory or only noting submissions. Instance (8) is, with respect, internally inconsistent on the point. Instance (9) seems to be no more than a passing observation. Instance (5) begins with a clear enough statement that the trial judge's conclusion does not depend upon the absence of Mr Williams from the witness box, but the clarity is somewhat diminished by the following paragraphs. In instances (4), (6) and (7) a Jones v Dunkel inference appears to have contributed to the trial judge's conclusions. In my view, it is appropriate to proceed on the basis that the trial judge's findings of the contraventions were at least in part because of Jones v Dunkel inferences. 654 I earlier noted that the concept of a civil penalty is firmly embedded in the orders sought and obtained by ASIC in the proceedings. There has been some adaption of civil procedures in civil penalty cases. For example, in Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1979) 42 FLR 204 Deane J noted (at 207) "the well established principle that a defendant in proceedings solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents which may assist in establishing liability to a penalty"; see also Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328, Reid v Howard (1995) 184 CLR 1 and Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 192 ALR 561. 655 The appellants submitted that the trial judge should have held, and that we should now hold, that a Jones v Dunkel inference is not available in civil penalty proceedings. Emphasising their penal nature, they said that civil penalty proceedings attracted the reasoning of the High Court in the criminal case of RPS v The Queen (2000) 199 CLR 620. In that case Gaudron ACJ and Gummow, Kirby and Hayne JJ said that the observations in Jones v Dunkel must not be applied in criminal cases without taking into account that an accused person is not bound to give evidence and that it is for the prosecution to prove its case beyond reasonable doubt, and Callinan J said that they should not be applied in any circumstances. 656 However, the reasoning in RPS v The Queen began with what were described as the fundamental features of a criminal trial, that it is "an accusatorial process in which the prosecution bears the onus of proving the guilt of the accused beyond reasonable doubt" (at [22]). The nature of a criminal trial was contrasted with that of a civil trial, and the reasoning included that because of the prosecution's burden of proof beyond reasonable doubt "it will seldom, if ever, be reasonable to conclude that an accused in a criminal trial would be expected to give evidence" (at [27]). The majority Justices did not exclude as a matter of law a Jones v Dunkel mode of reasoning, but said that the fundamental features of a criminal trial generally made it inappropriate. 657 The contrast between a criminal trial and a civil trial was emphasised, in a similar context, in Azzopardi v The Queen (2001) 205 CLR 50 at [34] - "[34] The fundamental proposition from which consideration of the present matters must begin is that a criminal trial is an accusatorial process, in which the prosecution bears the onus of proving the guilt of the accused beyond reasonable doubt, per Gaudron A-CJ, Gummow, Kirby and Hayne JJ.. It is, therefore, clear beyond doubt that the fact that an accused does not give evidence at trial is not of itself evidence against the accused. It is not an admission of guilt by conduct; it cannot fill in any gaps in the prosecution case; it cannot be used as a make-weight in considering whether the prosecution has proved the accusation beyond reasonable doubt, per Mason CJ, Deane and Dawson JJ; at 235, per Brennan and Toohey JJ. Further, because the process is accusatorial and it is the prosecution that always bears the burden of proving the accusation made, as a general rule an accused cannot be expected to give evidence at trial. In this respect, a criminal trial differs radically from a civil proceeding . As was pointed out in the joint reasons in RPS: 'In a civil trial there will very often be a reasonable expectation that a party would give or call relevant evidence. It will, therefore, be open in such a case to conclude that the failure of a party (or someone in that party's camp) to give evidence leads rationally to an inference that the evidence of that party or witness would not help the party's case'." (emphasis added) 658 Proceedings for civil penalties do not share the same fundamental features of a criminal trial. Civil penalties can fairly be regarded as punitive, with a resemblance to fines imposed on criminal offenders, but the resemblance is not identity. 659 It is necessary to focus on these proceedings brought under the Act, rather than some general class of civil penalty proceedings, since the statutory foundation for and incidents of the proceedings may affect the view taken. As used in the Act the civil penalty provisions do not necessarily lead to imposition of pecuniary penalties, and may lead to a compensation order with the same effect as if the company had brought civil proceedings for breach of the directors' duties or to a disqualification order made not punitively but protectively. They are not to be equated with provisions for criminal offences. More important, the civil penalty proceedings are expressly to be maintained by civil law processes, not by a criminal trial with its fundamental features. 660 When civil procedures have been adapted in civil penalty cases, it has not been because of equation with a criminal trial. It has been because of the privilege against exposure to penalties. As was pointed out in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission at [13], the privilege against exposure to penalties has its origin in the rules of equity relating to discovery, although it has become a principle of the common law. While it was said at [31] that the privilege against exposure to penalties today "serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it", from the context and citation of Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 129 regarding the privilege as a reflection of the privilege against self-incrimination, that fell well short of equating proceedings for civil penalties with criminal proceedings. 661 In the end the argument must be that it would not be consistent with this stance against self-incrimination for an inference adverse to the person from whom a civil penalty is claimed to be drawn because of the failure of the person to give evidence. That reasoning did not find favour in RPS v The Queen, in which the "right to silence" was not thought to be a useful basis for reasoning (at [22]). To say that a person can not be forced to give evidence against himself, by providing discovery or answering interrogatories or, in a criminal context, making a statement to the police, says little when it comes to the giving of evidence in the person's own case. In ordinary civil proceedings the defendant can not be forced to give evidence in his own case. Civil penalty proceedings are no different in that respect. In my opinion, it was open for Jones v Dunkel inferences to be drawn against Mr Adler, Adler Corporation and Mr Williams in these proceedings. 662 I go then to the submission that the Jones v Dunkel inferences should not have been drawn. That the failure of the party to give evidence, call the witness or tender the documents must be unexplained follows from the nature of a Jones v Dunkel inference. For example, that the uncalled witness is likely to be favourable to the opposing party explains failure to call the witness and makes an adverse inference inappropriate, see Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343. The trial judge noted, in para 448 set out above, that the availability of the party and the party's direct interest in the matter can enhance the drawing of an adverse inference, and it may also mean that an explanation for the failure of the party to give evidence is not readily available. But it remains that, as was said in Fabre v Arenales (1992) 27 NSWLR 437 at 445-6, a Jones v Dunkel inference will not be drawn "if there are facts which provide an explanation of why the witness was not called or which show that the reason for not calling him was not that the party 'fears to do so'". 663 The appellants submitted that in proceedings for civil penalties it was sufficient explanation that the defendant may consider that the plaintiff's evidence does not establish the contraventions alleged. They invoked the reasoning in RPS v The Queen at [33], where it was said that there are many reasons why an accused may not wish to give evidence, the most important being that he may consider that the evidence adduced by the prosecution does not prove the commission of the offence as alleged beyond reasonable doubt. 664 As has been seen, in RPS v The Queen the Court was expressly dealing with criminal proceedings and the fundamental features of criminal trial. In ordinary civil proceedings it can be said that the defendant did not give evidence because he considered that the plaintiff had not made out the plaintiff's case. Civil litigation is adversarial, and there can not be found in RPS v The Queen reasoning applicable across the board. Civil penalty proceedings remain civil proceedings, and proceedings with the standard of proof on the balance of probabilities. However influenced by s 140(2) of the Evidence Act, the standard of proof is not beyond reasonable doubt. It must not be forgotten, also, that in these proceedings ASIC claimed the compensatory and disqualification orders. I do not think that the nature of the proceedings should be regarded as an explanation for the failure of Mr Adler and Mr Williams to give evidence. 665 The appellants then submitted that there was "the additional factor that the affairs of HIH and the issue of any civil or criminal responsibility on the part of its directors for its downfall are the subject of investigation by a Royal Commission". While not spelled out, the concern must have been that giving evidence would prejudice the appellants' respective positions in the Royal Commission's investigations and whatever might flow from them. 666 The Adler appellants' submissions to the trial judge had made the same submission, also not spelled out. There was no evidence before the trial judge of the Royal Commission, of its terms of reference, of how its investigations might be directed particularly to the conduct of Mr Adler or Mr Williams, in relation to these transactions or at all, or that the failures of Mr Adler and Mr Williams to give evidence was in some way related to the pendency of the Royal Commission. 667 Let it be assumed that the pendency of the Royal Commission could be judicially known. I do not think one could go further, and speculate upon its potential for Mr Adler and Mr Williams. A generalised assertion that Mr Adler and Mr Williams were justified in not entering the witness box in these proceedings, in which the most serious allegations were made against them, for fear that evidence they gave would in an unelucidated way redound to their disadvantage in the investigations of the Royal Commission, in the report of the Royal Commission, and in whatever followed from the report, is not in my opinion an answer to the Jones v Dunkel reasoning. 668 In my opinion, therefore, so far as the findings of the trial judge were aided by the Jones v Dunkel inferences, there was no error. 669 In Mr Williams' case there is an added matter. At the commencement of the hearing counsel for Mr Williams said, as part of the explanation for Mr Williams not being represented during ASIC's case - "Your Honour will be aware that the Royal Commission in relation to the collapse of HIH, is extant and continues next week and my client has made a decision that he wishes to be fully represented before that Royal Commission by counsel. And there is a conflict between his private interest in this proceeding and what he perceives as the public interest in telling his story, fully and properly, before that Commission. My client wants to do that, feels he has a moral obligation to do so and is cooperating with the Commission in that process. That is the Second Defendant's position." It is very difficult for Mr Williams to say that he failed to give evidence out of concern that he might prejudice his position in the Royal Commission's investigations and what might flow from them, when he had said he would tell his story, fully and properly, before the Commission. 670 It is not necessary to consider the intricacy that Adler Corporation, as distinct from Mr Adler, would in any event not be entitled to the benefit of the privilege against self-incrimination or exposure to penalties (Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477; Evidence Act s 187). It is also not necessary to consider whether s 1317Q of the Act or the provisions of the Evidence Act whereby certificates protective of use against a witness of incriminating evidence (s 128) negated the appellants' reliance on the pendency of the Royal Commission. Prosecutorial fairness 671 The appellants' grounds of appeal included that the trial judge erred because he "failed to take account of ASIC's unexplained failure to call [Mr Cassidy], which failure also amounted to a breach of rules akin to rules of prosecutorial fairness". The Adler appellants adopted Mr Williams' submission in this respect, without specific reference to their situations. 672 The submissions in support of the ground of appeal began that Mr Williams had not been represented during ASIC's case, indeed until making submissions: his counsel's statement at the commencement of the hearing has already been noted. An affidavit sworn by Mr Cassidy on 3 October 2001 had been served prior to the hearing. It was said that the proceedings were "of a quasi-criminal nature, involving the imposition of pecuniary penalties and banning orders", and that "[r]ules akin to those of prosecutorial fairness should apply to such proceedings". There was reference to criminal cases for the position that the prosecution should call all available material witnesses unless there is some good reason not to do so. 673 It was then said - "The Appellant was entitled to assume that, having filed and served the Cassidy affidavit, the affidavit would be tendered and Cassidy would be called as a witness in the Plaintiff's case. Given Cassidy's position within HIH and HIHC, he would have been able to give relevant evidence relating to a number of central issues, including whether, or the extent to which, the payment of the $10m by HIHC to PEE was disclosed to or approved by, the Investment Committee or the Board, whether or not Cassidy knew of the operations of the Australian Equities Unit Trust ("AEUT") (which the learned trial judge found he did not), the extent of Cassidy's awareness of the existence of the AEUT (found by the learned trial judge to be 'limited' and 'later'), whether or not the Appellant intended the Investment Department to be sidestepped (the learned trial judge found that he did) and whether the Appellant had the authority to cause HIHC or HIH to enter into a transaction of this kind (which the learned trial judge held he did not)." 674 In the first paragraph of his reasons the trial judge observed that, although they were not criminal proceedings, "it has been common ground that proceedings of this kind invoke requirements for prosecutorial fairness … ". Mr Williams' submissions referred to this, and it was said that ASIC accepted that rules akin to those of prosecutorial fairness applied. ASIC responded that it had not taken issue at the trial with "the assertions made on a number of occasions on behalf of the Adler parties that the character of the proceedings invoked requirements for prosecutorial fairness", and that this was presumably the basis for the trial judge's observation, but that - "These assertions by the Adler parties were not however made in a context which required a determination by the court as to whether the requirements for prosecutorial fairness applicable to criminal proceedings applied in their full rigour to the subject proceedings. In particular, no submission was made below by the Adler parties or Williams that ASIC had an obligation to call Mr Cassidy, or indeed any other witness." 675 We were not referred more specifically, by Mr Williams or ASIC, to what had been said at the trial. Where Mr Williams' submissions was in terms of "rules akin to those of prosecutorial fairness" and the matter has not been shown to have been clear at the trial, I do not think ASIC can be held to the requirements of the criminal cases if not in law bound by them. 676 ASIC accepted that it had to act fairly in the conduct of the proceedings, and said that it had done so. It said that it was not correct to treat the proceedings as criminal proceedings when by legislative declaration they were not, and that "to fetter [its] right to decide which witnesses to call would deprive the proceedings of a significant feature of civil litigation and tend to subvert this legislative intention". It said that if the rules of prosecutorial fairness had applied it would not have been required to call Mr Cassidy because he was not a material witness within the criminal cases. It said that the appellants should not now be permitted to raise the matter for the first time on appeal. And it said that in any event the absence of evidence from Mr Cassidy could not have brought some equivalent to the miscarriage of justice flowing from failure to call a witness in the criminal cases in order that a conviction be set aside. 677 While a Crown Prosecutor should call available material witnesses, that is not because of a duty imposed by law but because it "forms part of a description of the functions of a Crown Prosecutor" (Whitehorn v The Queen (1983) 154 CLR 657 at 674 per Dawson J). It is for the Crown Prosecutor to decide what witnesses he calls (Richardson v The Queen (1974) 131 CLR 116 at 119-21; Whitehorn v The Queen at 573-4; The Queen v Apostilides (1984) 154 CLR 563 at 575). The Crown Prosecutor represents the State, and in the system of criminal justice must "act with fairness and detachment and always with the objectives of establishing the whole truth in accordance with the procedures and standards which the law requires to be observed and of helping to ensure that the accused's trial is a fair one" (Whitehorn v The Queen at 663-4; Dyers v The Queen (2002) 76 ALJR 1552 at [11]). 678 However, it has not been suggested that when the State engages in civil litigation, as it frequently does, its representative's functions have a similar content, or that failure to call a material witness can lead to reversal of a judgment in the State's favour because of miscarriage of justice. The concepts have developed in the particular circumstances of criminal proceedings. By declaring that these proceedings are to be conducted as civil proceedings, the legislature has plainly declined to pick up the concepts. It was no doubt for this reason that Mr Williams' submissions were in terms of "rules akin to those of prosecutorial fairness", but once it is recognised not only that the proceedings are not criminal proceedings, but also that they are by prescription civil proceedings, the basis for some analogous rules is hard to see. In my opinion, Mr Williams' submission in this respect should not be accepted. 679 I note that in ASIC v Plymin [2003] VSC 123, a judgment given on 5 May 2003 after argument in the appeals had concluded, it was said at [549] that whatever might be the position in criminal proceedings, in proceedings governed by the rules of evidence and procedure in civil matters there was no obligation on ASIC to call some identified persons "or any other persons" as witnesses. 680 At the heart of prosecutorial fairness is just that, fairness, in the particular circumstances of criminal proceedings. Sometimes the alleged unfairness is that the Crown did not disclose that it held uncalled evidence; that is not this case. The potential evidence of Mr Cassidy was known to all. In Whitehorn v The Queen the complainant was not called in a charge of indecent assault, and Dawson J observed (at 673-4) that the absence of an application that the trial judge direct that the complainant be called or call her himself "may of itself be sufficient to dispose of these grounds". It is now more clear that, while the trial judge may invite the prosecution to call a witness, save in the most exceptional circumstances the trial judge should not himself call a person to give evidence (The Queen v Apostilides at 575). Whether there is unfairness, (and miscarriage of justice) depends on the circumstances, of which failure by the accused to raise the matter is part. 681 I am unable to conclude that even if rules analogous to the rules of prosecutorial fairness applied, there was here unfairness or miscarriage of justice. We do not know what Mr Cassidy's statement said, but it was known to the appellants. It is commonplace in civil litigation for a party not to call a witness notwithstanding that a statement of the witness has been served, and the appellants were not entitled to assume that Mr Cassidy would be called by ASIC. That ASIC did not call Mr Cassidy was known to the appellants. The matter was not raised with the trial judge. Mr Cassidy was not a witness "essential" to the unfolding of the case (The Queen v Apostilides at 577), any greater knowledge he held of the AEUT or its operation would not be significant, and it is no more than speculative that he might have given evidence of wider disclosure to the Investment Committee or the Board (all the minutes were in evidence and Messrs Cohen, Gardener and Howard were called) or of the states of mind of Mr Adler or Mr Williams about sidestepping the Investment Department. Nor was there reason to think that he could have significantly contributed to Mr Williams' authority. Mr Williams' submissions fell short of demonstrating how there could be some equivalent to miscarriage of justice in the criminal law. 682 I therefore do not otherwise accept Mr Williams' submissions, and it is not necessary to consider more directly ASIC's submission that the matter could not be raised for the first time on appeal. The declarations 683 The grounds of appeal of the Adler appellants included - "68. His Honour erred in expressing the declarations of contraventions pursuant to section 1317E of the Corporations Act in a way which did not specify the conduct that constituted the contraventions (as required by section 1317E(2)) at all, or by reference to the conduct referred to in the judgment of His Honour dated 14 March 2002." 684 No order was sought in the appeals involving different expression of the declarations of contravention; the order sought was that the statement of claim be dismissed. The submission of the Adler appellants was not that the declarations of contravention should be set aside because wrongly expressed, but that the form of the declarations "manifested" the trial judge's "approach of ordering disqualification and pecuniary penalties on the basis of unpleaded allegations". Complaint as to the declarations of contravention was no more than a step in the argument that the trial judge had erred in the exercise of his discretion as to disqualification orders and pecuniary penalties, by taking into account findings outside ASIC's pleaded and particularised case. 685 Mr Williams did not take a similar ground of appeal. 686 Section 1317E(2) of the Act provides - "(2) A declaration of contravention must specify the following: (a) the Court that made the declaration; (b) the civil penalty provision that was contravened; (c) the person who contravened the provision; (d) the conduct that constituted the contravention; (e) if the contravention is of a corporation/scheme civil penalty provision---the corporation or registered scheme to which the conduct related." 687 By s 1317F, a declaration of contravention "is conclusive evidence of the matters referred to in subsection 1317E(2)". As has been seen, the making of a declaration of contravention is also a precondition, relevantly, to making a pecuniary penalty order or a disqualification order. 688 I have earlier set out declaration (3) made by the trial judge, and the declarations were all in the same form. As the occasion for doing so indicates, it may have been better, with respect, if each contravention had been given its own declaration (although in Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd (1999) 39 ACSR 339 the one declaration of contravention of three provisions of the Corporations Law was made). But that was not the complaint of the Adler appellants. Their complaint, although not followed through to vitiation of the declarations of contravention, was of failure to specify the conduct constituting the contraventions. 689 The appellants submitted that the trial judge had not identified the substantive conduct constituting the contraventions but, by making declarations by reference to the "Conclusion" paragraphs in the reasons, had "pick[ed] up the combination of pleaded and unpleaded matters which infected the reasoning in the primary judgment of 14.3.02". It was said that if the declarations had been expressed in a way which "reflected 'a well drawn set of particularised pleadings'", it would have been apparent on the face of the declarations that the trial judge "had found contraventions on the basis of matters outside the set of particularised pleadings provided in ASIC's Amended Statement of Claim". 690 There is nothing in this. If the conduct constituting the contraventions was within ASIC's pleaded and particularised case, there was no error in incorporating the conduct in the declarations of contravention; indeed, it was required by s 1317E(2)(b). If the conduct was not within the pleaded and particularised case, the error lay in finding that the conduct constituted the contraventions, not in the form in which the declarations of contravention were expressed. The reasoning in the submission appears to have been that close adherence to the terms of the statement of claim would have exposed an illicit descent into unpleaded matters. That begs the question. 691 The difficulty is the degree of particularity of the conduct. In the declarations judgment the trial judge noted that no decided cases resolved the difficulty. He said that the declaration should be self-contained and intelligible, and that "a reasonable degree of specification of the relevant conduct" was required, based upon the facts found and conclusions reached. He said - "In searching for guidance as to what is reasonable, I have reviewed a number of examples of declarations made under predecessor provisions to s 1317E. These are appended to this judgment as a convenient reference point. They illustrate that the current judicial practice is to identify in fairly concise terms the substantive conduct which constitutes the relevant contravention and also the civil penalty provision contravened. The way in which I have framed the relevant declarations has been in accord with that approach, in setting out the relevant conduct. I have however included in that statement, in response to the Defendants' request for greater particularity, express reference to 'the facts and matters under "the Conclusion"' contained in the specified paragraph (or occasionally paragraphs) of the judgment. But I do so only insofar as the quoted conclusion(s) from the judgment set out at a level of generality the facts and matters 'pertaining to' the relevant defendant's 'involvement' in the specified conduct." 692 After setting out an illustrative declaration, the trial judge said - "15 I was invited by the First and Fourth Defendants to go even further and have those appended conclusions also incorporate reference to all of the detailed paragraphs of the judgment which underpin the conclusions. However, that course would have the fundamental difficulty that one would then confuse specification of conduct in broad terms, with the detailed evidence and legal analysis. Neither is appropriate for a declaration. There is nothing in the statutory context which would justify such a course. Fairness to the Defendants is already achieved through a reasonable level of particularity, by the course I have adopted." 693 From the transcript of the argument before the trial judge, the Adler appellants at first contended that the declarations of contravention should "follow precisely" the declarations claimed in the statement of claim. It was pointed out that the declarations claimed in the statement of claim were of contravention "through [Mr Adler's] involvement with" one or more of the transactions or "by being involved in" another contravention, and that this left unclear the conduct that constituted the contravention. After some discussion, the trial judge proposed the form "as set out in paragraph 512 of the judgment; see attachment", and the legal representative of the Adler appellants said, "as far as the first and fourth defendants are concerned, that would be acceptable to the first and fourth defendants, by cross-referring to the conclusions in the judgment". 694 That is what was done. In these circumstances, and in the absence of direct attack on the form of the declarations of contravention, the Adler appellants' ground of appeal should not be upheld, nor would it be appropriate to say any more as to the form of the declarations. The declarations can be framed in different ways, and the Adler appellants were content with the course taken by the trial judge. Compensation 695 Section 1317H(1) of the Act provides - " 1317H. Compensation orders---corporation/scheme civil penalty provisions (1) Compensation for damage suffered A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if: (a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation or scheme; and (b) the damage resulted from the contravention. The order must specify the amount of the compensation." 696 There was passing reference in the appeals to the effect of "may" at the beginning of the provision. The parties were in agreement that it gave the Court a discretion. There was some equivocation on whether it was an all or nothing discretion or permitted an order for partial compensation; it may be that s 1317S, rather than the word "may", provides an answer. It is not necessary to consider these matters, since the appellants did not submit that a discretion should have been exercised whereby no compensation or less than full compensation was ordered, or that relief under s 1317S should have been granted. 697 Through the evidence of Mr Paul Carter, ASIC proffered a calculation of the loss on the investments made by the AEUT. The trial judge accepted Mr Carter's calculation. 698 Mr Carter came to a value of the AEUT as at 31 August 2001 of $2,950,069. On that valuation, $7,049,931 of the $10,000,000 had been lost. To this figure Mr Carter added $718,403 as "the amount of interest which HIHC could reasonably have expected to earn on its funds of $10 million if they had not been paid to AEUT", on the assumption that the $10,000,000 would have been invested in thirty day bank bills compounding monthly. So he arrived at a loss suffered by HIHC, as a result of investing in the AEUT rather than investing in bank bills, of $7,768,334. This figure was later adjusted to give credit for what the trial judge described as "certain receipts for assumed repayments on maturity of the assumed 30 day bills" and "up-dated in the calculation of interest", and hence came the $7,986,402 ordered to be paid. 699 There were two questions on appeal. The first was whether the loss as a result of investing in the AEUT was damage suffered by HIHC which "resulted from" the contraventions found, see s 1317H(1)(b). The second, only arising if the first was answered in the affirmative, was whether the interest component in the calculation of loss had been correctly awarded. (a) Causation 700 The question of causation had two aspects. One was the correct approach to determining whether, within s 1317H(1)(b), damage resulted from a contravention. The other was whether, on the approach said to be less readily satisfied, causation had been made out. At least in the eyes of the parties, the question was driven by competing submissions upon whether, if Board or Investment Committee approval had been sought, the investment of the $10,000,000 through the AEUT would have been made. 701 The trial judge noted in para 743 that ASIC relied upon "the wider and thus more stringent test of causation … by analogy to that applicable in equity to breaches of fiduciary duty", as opposed to "the less stringent, common law test of causation". He said that ASIC relied in the alternative on the common law test and contended that the same result would follow under that less stringent test of causation. 702 The trial judge summarised "the applicable principles in relation to causation in equity compared to common law", and said - "749 The principal effect of applying the stringent test adopted in equity is that once the Court has determined that a breach has occurred, then the liability of the fiduciary is to pay sufficient compensation to put it back to the situation it would have been had the breach not been committed. Once the court has determined that the breach was a cause of the loss, though there be other immediate causes operative as well, there is no room for speculation as to whether the loss might have occurred even without the wrongdoing, or whether it might have been avoided under certain contingencies. 750 Applying that to the present circumstances, this would obviate any consideration of what the Board or Investment Committee might have done by way of authorisation or ex post ratification in the present case, had disclosure occurred." 703 The trial judge said - "752 I would accept the Plaintiff's submission that, by analogy from equitable claims against fiduciaries, the words "resulted from" should accommodate the more stringent equitable test so that the loss which follows is thereby treated as the causal consequence for which compensation is payable. That therefore means that the loss, as calculated by Mr Carter, is to be taken to have "resulted from" the relevant contraventions by Mr Adler and Mr Williams, and, to the extent identified, Mr Fodera." 704 The trial judge then turned to "the question of whether the common law test would produce the same result". He considered the evidence of Messrs Gardener, Cohen and Stitt, three directors of HIH, and declined to accept that they would have approved the investment of the $10,000,000 through the AEUT if made aware of it before it occurred. 705 The trial judge stated his conclusion - "CONCLUSION 768 Whether the more stringent equitable test applicable to fiduciaries is applied or the common law test, on either basis, the loss identified has "resulted from" the identified contraventions, so as to satisfy the requirements of s 1317H of the Corporations Act for the making of compensation orders." 706 Greater stringency in causation for the purposes of determining equitable compensation, meaning that causation is more readily found, is a matter of some debate, as regard to O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 272-3 and Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 90-94 will show. There is a normative aspect to the determination of issues of causation, and equity's concern for adherence to fiduciary obligations may have affected its approach to causation: Beach Petroleum NL v Kennedy at 90. It may still be appropriate to consider what would have happened if the equitable duty had been performed: ibid at 93. In Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 77 ALJR 895 at [44] there was noted the reminder, from Swindle v Harrison (1997) 4 All ER 705 at 733-4, that "[t]here is no equitable by-pass of the need to establish causation" and that "[i]n questions of causation it is important to focus on the relevant equitable duty", and at [47]-[50] it appears to have been accepted that on facts such as those in Target Holdings Ltd v Redfern (1996) AC 421 there was no causation if the loss would have been suffered had defaulting solicitors obeyed their instructions. 707 I do not think it necessary to further the debate over causation for the purposes of determining equitable compensation. I am respectfully unable to agree that analogy with equitable claims against fiduciaries influences the meaning and application of "resulted from" in s 1317H. As Spigelman CJ observed in O'Halloran v R T Thomas & Family Pty Ltd at 272 - " … the remedy of equitable compensation differs from damages at common law. It also differs from damages under a statutory regime where the Court is concerned with, and confined by, the construction of the statute. Causation for purposes of s 212 of the Corporations Law will not involve the same analysis of causation as is required for breach of a fiduciary obligation." 708 For s 1317H, the analogy with equitable claims against fiduciaries is all the more difficult because some civil penalty provisions in the Act do not involve contravention by a person standing in a fiduciary capacity. 709 In my opinion, the words "resulted from" in s 1317H are words by which, in their natural meaning, only the damage which as a matter of fact was caused by the contravention can be the subject of an order for compensation. Like the word "by" in s 82 of the Trade Practices Act 1974 (C'th) (see Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [38]-[42]), they should be given their ordinary meaning of requiring a causal connection between the damage and the contravening conduct, free from the strictures of analogy with equitable claims against fiduciaries. 710 ASIC submitted that the limited class of applicants for compensation orders distinguished this provision from s 82 of the Trade Practices Act, but I do not see that as a material distinction. It submitted that in Marks v GIO Australia Holdings Ltd, Henville v Walker (2001) 206 CLR 459 and I & L Securities Pty Ltd v NTW Valuers (Brisbane) Pty Ltd (2002) 76 ALJR 1461 it was recognised that general law principles could be useful guides. That is correct, but in doing so the High Court made clear that the ordinary meaning of the words of the statute had primacy. Section 185 of the Act underlines that the statutory duties in ss 180-183 are additional to and stand free of a director's common law and equitable duties. 711 The trial judge considered that HIHC's loss resulted from the contraventions even on the common law test, so it is necessary to go to the second aspect of the question of causation. 712 Before the trial judge the appellants submitted that, although each of Messrs Gardener and Cohen had in his affidavit said that he would not have voted to approve the transaction, the reasons given by them had been undermined in cross-examination and each had ultimately acknowledged that he would have voted to ratify the transaction; as well, it was said, Mr Gardener had agreed that "[p]robably in the end, probably it would have been approved". The appellants also said that Mr Stitt's evidence of rather muted general concern over governance issues and wanting answers to a lot of questions did not support that, if Board approval to the transaction had been sought, it would not have been approved. 713 In the trial judge's view, this did not adequately recognise the distinction between prior approval and subsequent approval. He considered that the evidence of Messrs Gardener and Cohen as to prior approval of the transaction remained and that, so far as they had spoken of subsequent ratification, presentation with a fait accompli explained their views; for example, he said that Mr Cohen made clear that there was a "big distinction" between what would have happened if prior approval had been sought and what happened after the transaction. He referred to the difficulty in "hypothesising a very different set of circumstances to those to which [Mr Cohen's] affidavit was directed, namely approval with proper disclosure of all relevant circumstances at the outset, before none [sic: ?any] of these steps had taken place". As to the evidence of Mr Stitt, he saw in the "properly cautious" evidence of concern over governance issues and wanting answers to a lot of questions "no reason to assume that Mr Stitt QC would have approved the transaction at the outset if it had been put to him for approval as a Board member before any of the steps had been taken and with legal advice which reflected the true situation". 714 The trial judge canvassed the submissions and ASIC's responses at length in paras 754-767. While he expressly so stated only as to Mr Stitt, he plainly found that it was more likely than not that all of Mr Gardener, Mr Cohen and Mr Stitt would have declined to approve the transaction if prior approval had been sought. He then stated the conclusion in para 768 earlier set out. 715 The appellants' submissions in the appeal went through the same evidence. ASIC's submissions made the responses found in the trial judge's reasons. We were asked to come to an opposite conclusion. I do not think it necessary to detail the evidence or the submissions; their nature and thrust were as I have described, and I have paid regard to the detail. In my opinion, it was open to the trial judge to reason as he did and come to the finding he did. If it matters, I consider that on the evidence the finding was correct. 716 It was submitted that the trial judge's observation that it cannot be predicated "with any certainty" that Mr Cohen would have approved the transaction showed application of a test other than proof on the balance of probabilities. As I have said, he plainly found unlikelihood of approval. 717 It was submitted that the trial judge's reasoning was flawed because ASIC's pleading "did not distinguish between prior approval and ratification in any way which suggested that only the former was acceptable". The trial judge was making a finding of fact. The distinction between prior approval and ratification was material to the finding, and a pleading point was not available. 718 It is not necessary to consider the competing submissions, with reference to R v Towey (1996) 21 ACSR 46 at 59, upon whether ratification was precluded because of the breaches of the Act. 719 What I have said is sufficient, on the submissions in the appeals, to uphold the trial judge's conclusion that HIHC's loss "resulted from" the contraventions. Some further observations are appropriate. 720 In Marks v GIO Australia Holdings Ltd at [42] it was said that the essentially "but for" test of causation requires a comparison "between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct". It was said that further enquiry may be necessary. 721 The parties' submissions upon whether, if Board or Investment Committee approval had been sought, the investment of $10,000,000 through the AEUT would have been made invoked the "but for" test. The contravening conduct, however, was not just failure to obtain Board or Investment Committee approval to the payment of the $10,000,000 to PEE, or to the investment of the money through the AEUT. It went further, to the use of the money to purchase HIH shares, to purchase shares from Adler Corporation, and for the loans. 722 Approval of the transaction would mean a number of things, according to the extent given to the "transaction". That can be seen in the affidavit evidence of Mr Cohen, which was that - (a) if he had been asked to approve payment of funds to an entity controlled by or associated with Mr Adler for the purpose of investment, he would have said that Mr Williams did not have authority to place the funds under Mr Adler's control and approval would have to be sought from the Board; (b) if such a transaction had been presented to the Investment Committee, he would have caused the matter to be referred to the Board with full disclosure of all terms because "the amount of the investment was material and, given that it involved a director of HIH, it would be desirable to have Board approval"; (c) if such a proposal had been put to the Board, either directly or from the Investment Committee, he would have required disclosure of all terms; and - "If those terms included that: a. HIH was to place $10,000,000 into a trust under the control of Mr Adler; b. Mr Adler would be able to employ the funds as he wished, including for the financial benefit of himself or his related companies; c. There would be no investment guidelines for the use of the funds; d. Up to 40 per cent of the funds may be invested in HIH shares; e. HIHC would not be able to recoup its investment for at least three years; f. HIHC, as a B Class unitholder, would have no power to control the activities of the trustee even though it would provide 98.8% of the trust fund; g. The A Class unitholders would receive a 10 per cent share of the profits even though these unitholders contributed only 1.2 per cent of the trust fund; h. A company controlled by Mr Adler, Adler Corporation Pty Ltd, would own sixty per cent of the A Class units issue [sic], I would not have supported the proposal. In such circumstances I would have immediately questioned the legality and propriety of the proposal. I would not have favoured an investment in a vehicle where one director had so much authority without clearly defined responsibilities for prompt reporting of the actions he was taking in relation to the funds. In addition, I would have expressed the view that it was unreasonable for HIH to contribute an amount of capital disproportionate to the share of profits that would accrue to it. Furthermore, I would not have favoured using the company's funds to invest in shares in HIH without the approval of the shareholders." 723 This evidence did not extend to the employment in fact of funds for the financial benefit of Mr Adler or his related companies. With the greater particularity, unlikelihood of approval of the contravening conduct is enhanced; it is the more unlikely, for example, that the purchases of shares from Adler Corporation would have gained approval. If it be asked what different position HIH was in because of the purchases of shares from Adler Corporation, the answer is that it was about $3,810,000 worse off. 724 There was room for an application of the "but for" test in which particular regard was paid to what followed from the payment of the $10,000,000 to PEE. That was not done, but it would not have advantaged the appellants. (b) Interest component 725 ASIC did not claim the interest component in HIHC's loss as interest included in a judgment sum pursuant to s 94(1) of the Supreme Court Act 1970, taking the view that a compensation order under s 1317H of the Act was not relief on a cause of action earlier arising. It is unnecessary to comment on the correctness of this view. ASIC said that the interest component was compensation for loss suffered through being deprived of the use of money, as discussed in Hungerfords v Walker (1989) 171 CLR 125. It said that the compensation in that respect was arrived at from the return which HIH or HIHC would have obtained from the use of the money expressed as a rate of interest. 726 As I have said, Mr Carter assumed that if the $10,000,000 had not been paid to PEE on 15 June 2000, it would have been invested in thirty day bank bills. In cross-examination he confirmed that he was not saying that that was a reasonable assumption. There was no evidence directly addressing what HIH or HIHC would have done with the $10,000,000 if it had not been paid to PEE. 727 The trial judge noted ASIC's reliance on analogy with the award of interest against a defaulting fiduciary, including that the fiduciary "is presumed to have made the most beneficial use of it (Wallersteiner v Moir (1975) 1 QB 373 at 388)". He said - " CONCLUSION 774 The proper analogy upon which the court should act in exercising its discretion in making a compensation order for damage suffered is that applicable to a defaulting trustee or other fiduciary, on the basis that Mr Adler, Mr Williams and, to the extent applicable, Mr Fodera, were each fiduciaries. Thus, it is in accordance with principle and a proper estimation of loss, to assume that the $10 million had been invested safely in thirty day bank bills and the loss calculated accordingly as Mr Carter, the Plaintiff's expert, has done." 728 For like reasons to those earlier given, the analogy with the award of interest against a defaulting fiduciary should not be adopted. The inquiry is into loss resulting from the contraventions, and the suffering of loss through loss of use of money is a matter of fact and is to be determined by evidence (see Hungerfords v Walker at 151, 152; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 363-4). For s 1317H, presuming a use made by the recipient of the money is not a correct approach; in fact in Wallersteiner v Moir the presumed use was by the company, not the fiduciary, but presuming a use made by the company is not a correct approach either. 729 Apart from analogy with the award of interest a defaulting fiduciary, ASIC placed some reliance on Armory v Delamirie (1722) 1 Stra 505; 93 ER 664, in which the defendant took the plaintiff's jewel, there was evidence of the value of "a jewel of the finest water that would fit the socket", and the jury was directed that unless the defendant produced the jewel and showed it not to be of the finest water "they should presume the strongest against him, and make the value of the best jewels the measure of their damages". There is here no equivalent of withholding the jewel, and this is not an alternative basis for a presumption as to the use of money. 730 It was common ground that the investment activities of HIH and its subsidiaries, including HIHC, were conducted holistically. The HIH Investment Report for the quarter ending 30 September 2000 contained tables for returns from cash and fixed interest, equities, property, property loans and unlisted investments, overall and in Australia, and within some of those classes of investment for particular sub-classes. 731 The appellants did not contend that the evidence was insufficient for any proof of loss. They submitted, as they had to the trial judge, that there was no adequate reason for assuming that the $10,000,000 would have been invested in thirty day bank bills. The preferable assumption, they said, was that the $10,000,000 would have been invested as part of the HIH Internally Managed Fund, one of the sub-classes of investment in equities in Australia. Perhaps not coincidentally, the HIH Internally Managed Fund had the worst return of all the tabled returns, a negative return of 8.99 per cent in the quarter ended 30 September 2000. 732 ASIC sought to support the trial judge's fiduciary approach, but as a fall-back said that assuming investment in thirty day bank bills was appropriate because, according to its 30 June 2000 financial report, the HIH group had $500,000,000 out of total investments of $1,753,000,000 in "Government and semi-government stocks and bonds". 733 It is unlikely that HIH would have done nothing with the $10,000,000, and on the balance of probabilities there was a loss from being deprived of the use of the money. It is necessary that the Court do its best to estimate the loss. I see no more reason to assume that the $10,000,000 would have been invested as part of the HIH Internally Managed Fund than to assume that it would have been invested in government and semi-government stocks and bonds, let alone in thirty day bank bills. In the way the evidence was left, in my opinion the estimation should take HIH's overall return on all of its investments, since the $10,000,000 was not a separate fund but was part of HIH's assets and there is nothing in the evidence whereby it could be concluded on the balance of probabilities that $10,000,000 worth of HIH's assets would have been devoted to one form of investment rather than another. 734 The relevant table in the HIH Investment Report earlier mentioned was - Actual Returns B/Mark Returns Asset Class 30/09/00 30/09/00 % % Cash & Fixed Interest 1.43 1.38 Equities -2.44 0.44 Property 0.78 0.39 Property Loans 2.47 2.52 Unlisted Investments 5.77 5.77 Total 0.83 1.24 735 From this table, the interest component should take a return of 0.83 per cent. The calculation of the interest component was for a longer period, but no party went to later returns achieved by HIH prior to its own demise. As part of the estimation, the interest should be compounded six-monthly. 736 The loss will be less than that found by the trial judge, and it will be necessary for the parties to agree on the calculations. Pecuniary penalties and disqualification – the Adler appellants 737 Section 1317G of the Act relevantly provides - " 1317G. Pecuniary penalty orders (1) Corporation/scheme civil penalty provisions A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if: (a) a declaration of contravention by the person has been made under section 1317E; and (aa) the contravention is of a corporation/scheme civil penalty provision; and (b) the contravention: (i) materially prejudices the interests of the corporation or scheme, or its members; or (ii) materially prejudices the corporation's ability to pay its creditors; or (iii) is serious. … (2) Penalty a civil debt etc. The penalty is a civil debt payable to ASIC on the Commonwealth's behalf. ASIC or the Commonwealth may enforce the order as if it were an order made in civil proceedings against the person to recover a debt due by the person. The debt arising from the order is taken to be a judgment debt." 738 Sections 206C and 206E of the Act provide - " 206C. Court power of disqualification - contravention of civil penalty provision (1) On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if: (a) a declaration is made under section 1317E (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision; and (b) the Court is satisfied that the disqualification is justified. (2) In determining whether the disqualification is justified, the Court may have regard to: (a) the person's conduct in relation to the management, business or property of any corporation; and (b) any other matters that the Court considers appropriate." " 206E. Court power of disqualification - repeated contraventions of Act (1) On application by ASIC, the Court may disqualify a person from managing corporations for the period that the Court considers appropriate if: (a) the person: (i) has at least twice been an officer of a body corporate that has contravened this Act while they were an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or (ii) has at least twice contravened this Act while they were an officer of a body corporate; or (iii) has been an officer of a body corporate and has done something that would have contravened subsection 180(1) or section 181 if the body corporate had been a corporation; and (b) the Court is satisfied that the disqualification is justified. (2) In determining whether the disqualification is justified, the Court may have regard to: (a) the person's conduct in relation to the management, business or property of any corporation; and (b) any other matters that the Court considers appropriate." 739 Section 206G of the Act relevantly provides - "(1) A person who is disqualified from managing corporations may apply to the Court for leave to manage: (a) corporations; or (b) a particular class of corporations; or (c) a particular corporation; if the person was not disqualified by ASIC. … (3) The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court. (4) The person must lodge with ASIC a copy of any order granting leave within 14 days after the order is made." 740 I have differed from the trial judge in that I consider that the contraventions of s 183 of the Act by Mr Adler and Adler Corporation were not made out. The contraventions found by the trial judge otherwise stand. To the extent of the s 183 findings, the grounds on which the trial judge made the pecuniary penalty and disqualification orders no longer obtains. 741 The trial judge noted ASIC's identification of nine "transactions" or "episodes", being the payment of the $10,000,000 (one transaction), the purchase of the HIH shares (one transaction), the purchases of shares from Adler Corporation (three transactions) and the loans (four transactions). He did not accept the defendants' contention "that the transactions directly involving each of them should be viewed as a single transaction". But nor did he act upon ASIC's calculation of a great many contraventions by multiplying the nine transactions or episodes by the number of corporate entities and the number of sections of the Act contravened by the same conduct. He said that he was "dealing with a repeated series of contraventions though that needs to be put in proper perspective", and that while a multiplicity of contraventions may "give a broad indication of the seriousness of the contraventions" it was "much more to the point … to look at the contraventions themselves". 742 The trial judge then approached the orders to be made through the nine transactions or episodes, saying that they were "to be judged individually as well for their cumulative effect". The orders made were not moulded by the particular sections of the Act contravened by Mr Adler and Adler Corporation, or by the number of sections contravened. They were made upon the contravening conduct. I do not think that the trial judge would have come to any different orders had he declined to find the contraventions of s 183 of the Act. That in his Honour's view Mr Adler's conduct was in contravention of s 183 as well as the other civil penalty provisions was not part of his reasoning to the orders to be made, and excluding the contraventions of s 183 from consideration does not materially affect the exercise of discretion in making a disqualification order and the order at which the trial judge arrived, or the exercise of discretion in making a pecuniary penalty order and the order at which the trial judge arrived. In any event, subject to the submissions next mentioned on a re-exercise of the discretions excluding the contraventions of s 183 from consideration I would affirm the orders his Honour made. 743 The submissions otherwise made do not call for wholesale review of the orders judgment. They were made globally in relation to both the pecuniary penalty orders and the disqualification order, and were that the trial judge erred in the exercises of his discretion in that – (a) he took into account "a substantial number of findings relating to the underlying transactions" which were outside ASIC's pleaded and particularised case; (b) he compounded that error by taking into account what was described as Mr Adler's "decision not to give evidence in respect of those unpleaded allegations" and by failing to take into account what was described as "the possibility of criminal prosecution"; (c) he failed to take into account the evidence of Messrs Gardener, Cohen and Stitt "in assessing the appropriate degree of censure attaching to the transactions" and treated their evidence as "pertaining only to the likelihood of ratification if such approval had been sought"; and (d) he erred in finding that ss 206C and 206E of the Act do not permit particular companies to be excepted from a disqualification order and not making an exception in relation to Adler Corporation. (a) Findings outside ASIC's pleaded and particularised case 744 The trial judge summarised the findings in the liability judgement. He noted that Mr Adler conceded that they were "extremely serious". He continued, and this is at the heart of the submission as to error - "ASIC, in its supplementary submissions on relief, summarises the position in these terms: 'So far as Adler is concerned, the findings indicate not only that he contravened the Corporations Law in many respects but also that he did so with knowledge of the impropriety of his conduct and for the purpose of advancing his own personal interests at the expense of the companies of which he was a director or officer. His conduct thus amounted to a most serious dishonesty, occurring not as an isolated act but as a pattern of conduct over a number of months. This conduct was coupled with persistent lies and deceits designed to conceal his conduct and/or its impropriety.' 58 Attachment A to ASIC's submissions fairly summarises those "persistent lies and deceits and the associated impropriety", by reference to the relevant paragraphs in the Judgment which elaborates upon those matters. For convenient reference, I reproduce that attachment below: [121-7], [148] False impression conveyed by Adler to Mr Westfield, journalist, that Adler was purchasing the HIH shares on his own behalf or on behalf of family interests through some related trust. [146-8] Adler intended to convey the false impression to the market through his s.205G notice that he was purchasing the HIH shares on his own behalf or on behalf of family interests through some related trust. [155], [161], [148] False impression given by Adler to journalist, Mr Mellish, that he was using his own money to buy the HIH shares. [164(xi)], [277] Adler blatantly preferred his own interests over those of AEUT and HIH by selling Adler Corporation's shareholding in HIH before that of AEUT. [165] Adler's purpose in causing PEE to purchase HIH shares was to benefit his own company's shareholding in HIH, not to benefit AEUT or HIH. [169] Adler less than frank in giving instructions to Minter Ellison in June 2000. [170] By not selling the HIH shares held by AEUT in July 2000, Adler preferred his own interests to those of HIH. [191] Adler preferred his own position over that of HIH and HIHC in a number of respects. [219] Adler made no attempt to correct the misleading impression given by press publicity which he had played an important role in generating. [221] Adler wanted to avoid HIH obtaining its own advice. [254] Adler intended that the Investment Department be sidestepped. [278], [280], [321], [349] Adler's purpose in having PEE purchase HIH shares in June 2000 was not to enable PEE to make a profit on the resale of HIH shares but to advantage himself. [296] Adler's failure at the end of 2000 to fully and frankly describe what had occurred was an admission of his consciousness of the impropriety in what occurred. [300], [307] Adler falsely stated in a letter to the Chairman of HIH that he was unaware that neither the Board nor the Investment Committee knew of the creation of the trust. [307] At the end of 2000, Adler gave Minter Ellison materially false information. [334] Adler knew that Minter Ellison's letter of advice to the HIH Board contained a number of misstatements and omissions but made no attempt to correct them. [359], [364] Adler knew that the assistance given by HIHC to PEE to purchase shares in HIH materially prejudiced the interests of HIHC. [387] The semi-covert bypassing of proper corporate safeguards reflected consciousness of impropriety on Adler's part. [571-2], [611-3] Adler's Quarterly Report to HIH/HIHC and other investors contained a number of obviously false statements and gave a grossly misleading picture. [618-9] Adler's memo to HIH directors of 15 December 2000 gave a misleading impression in connection with Planet Soccer. [725] In connection with PCP and PCP Ensor, Adler blatantly exploited for his own advantage a shortcoming which was to be laid at his own door. He was clearly advancing his own and not PEE/HIH's interests and taking advantage of HIH/PEE's desperate need of cash. 59 Moreover, Mr Adler's conduct from the time the PEE transaction first came to the attention of the non-executive directors until the present time has manifested no contrition whatsoever. While it may go only to mitigation of a statutory penalty, lack of contrition has a direct bearing upon disqualification. For here the interest of the public must be paramount. Mr Adler has at all times, by himself and through his counsel, vigorously denied any wrongdoing. In those circumstances, there is nothing whatsoever in his conduct to suggest that he would in the future act any differently in the performance of his duties as a company director or officer that he did in relation to the relevant transactions." 745 It was submitted that within the summary of lies, deceit and impropriety were the matters outside ASIC's pleaded and particularised case to which attention has already been given, and that reference to absence of contrition in relation to those unpleaded matters emphasised error in paying regard to them. Further, it was said, dishonestly was found against Mr Adler in its own right, although not within ASIC's pleaded and particularised case. In this respect, reliance was placed on a later observation by the trial judge that Mr Adler "committed offences involving dishonesty (though not fraud)" (para 111) and a reference to "the seriousness of the contraventions and the dishonesty apparent in them" (para 140). The matters in the Adler appellants' schedule of unpleaded matters took up paras 57-58 last set out and some other passages in the orders judgment. 746 Much was made of the word "offences" in para 111, which was not really appropriate but I do not regard it as significant. There is no doubt, however, that the trial judge acceded to ASIC's characterisation of Mr Adler's conduct. 747 The trial judge was not finding the contraventions. That had been done. In the task of finding the contraventions, for the reasons already given I do not accept that the matters in the schedule were not open to the trial judge. The appellants' submission must be considered in the different context of making the pecuniary penalty and disqualification orders. 748 Section 1317G gives a discretion as to making a pecuniary penalty order, see "may" at its commencement, and calls for an assessment of whether the contravention is serious. Sections 206C and 206E require that the Court be satisfied "that the disqualification is justified", and provide that the Court may have regard to "the person's conduct in relation to the management, business or property of any corporation" and "any other matters that the Court considers appropriate". For both pecuniary penalty and disqualification the task is normative, and the nature of the conduct of the person found to have contravened the civil penalty provision is relevant. That a director fails to exercise care and diligence through neglectful inattention is one thing; it is another thing if a director fails to exercise due care and diligence with knowledge that he is acting wrongly, contrary to the interests of the company, and in his own interests. Provided procedural fairness is afforded, there is no error in characterising the director's conduct as dishonest, if it fairly bears that characterisation, when it comes to deciding whether a pecuniary penalty should be imposed and if so in what amount, or to deciding whether disqualification is justified and if so for what period. It would be nonsense if that could not be done. 749 The appellants returned to s 160A(3) earlier set out, providing that dishonest involvement in a contravention of s 260A is an offence. Section 209(3) makes similar provision as to s 208. They said that provision for an offence if there was dishonesty meant that dishonesty could not come into consideration for the civil penalty contravention. That does not follow, and it is not necessary to consider how the argument could apply to the contraventions of ss 180-182 of the Act. It is unnecessary that the character of dishonesty be ascribed to the director's conduct for the purposes of finding a contravention of the Act, and so not necessary to plead dishonesty. But whether the director's conduct is of that character is important to any consequential civil penalty or disqualification order. 750 The appellants submitted that Smith v New South Wales Bar Association (1992) 176 CLR 256 was to the contrary. 751 Disciplinary proceedings were brought against Smith, on complaints that he had appeared before a magistrate without an instructing solicitor and had not believed in the truth of his statement to the magistrate that he was instructed. Smith gave evidence of a conversation with the solicitor bearing upon instruction to appear. He was disbelieved, and two members of the Court considered that he had lied in that evidence. A disciplinary order was made. Smith applied to reopen the proceedings on the ground that there had been a mistake of fact, and sought leave to present evidence of the conversation from the solicitor. Reopening was permitted, but the leave was refused. The disciplinary order remained. That he had lied was taken into account in the disciplinary order. The disciplinary order was set aside in the High Court. 752 Brennan, Dawson, Toohey and Gaudron JJ said (at 269) - "But even if the evidence was sufficient to support the findings so made [that Smith lied] and even if that finding could properly be taken into account in determining the result, considerations of procedural fairness required that the appellant be given an opportunity to be heard as to whether the finding should be made. In the first hearing before the Court of Appeal, no allegation of deliberately lying was made against the appellant before the adverse finding was made. That being so, the finding then made that the appellant had lied and the consequence of that finding then determined by Mahoney and Meagher JJA that the appellant be disbarred were flawed. In the second hearing, evidence which might have affected the finding of deliberate lying was erroneously rejected. It follows that the affirmation of the finding that the appellant lied and of the order that he be disbarred cannot stand." 753 Deane J said (at 271) - "If the members of the Court of Appeal were convinced that the appellant had deliberately given false evidence, they were entitled to take account of that in their assessment of the effect of the evidence as a whole and in their decision about whether the particularized complaints of alleged professional misconduct against the appellant, which were the subject of the proceedings before them, had been made out. Those particularized complaints were that the appellant had sought to appear for Mr Knight without the intervention of an instructing solicitor and that the appellant had deliberately misled the Penrith Local Court by informing it that he was instructed by Mr McDonald and in certain other specified respects. They were not amended to include a specific complaint that the appellant had deliberately given false evidence before the Court of Appeal. Nor was the appellant ever called upon to answer such a specific complaint or given an appropriate opportunity of being heard in relation to it. In those circumstances, the members of the Court of Appeal were not entitled to make an adverse order against the appellant which was wholly or partly based on a finding that the appellant was guilty of professional misconduct in that he had deliberately given false evidence before them. I turn to explain why that is so." 754 In his explanation Deane J referred to the failure to expand the allegations against Smith to include an allegation that he deliberately given false evidence to the Court, and said (at 272-3) - "In fact, there was no attempt to amend the particulars of complaint. In the absence of any such amendment, the issue before the Court of Appeal remained whether the effect of all the evidence, including the appellant's evidence about the car park conversation, was that the particularized complaints had been made out to the requisite standard of proof. The appellant could not realistically be expected, while maintaining the reliability of his evidence in relation to that issue, to have set out to establish how and why that evidence was honestly mistaken. If the Court of Appeal, after reaching the conclusion that the appellant's evidence about the car park conversation should be rejected, had thought it desirable or necessary to consider whether the appellant had been guilty of professional misconduct in that he had deliberately given false evidence before it, 'at the very least a new charge would have [had] to be laid (before it could be relied upon) so that [the appellant could] then know of it, appreciate what he [had] to meet and be allowed ample opportunity to meet it'. Such a new charge could have been laid by appropriate amendment to the particulars of complaint and an appropriate opportunity of being heard could have been provided by relisting the matter for that purpose. In fact, however, no specific charge of deliberately giving false evidence before the Court of Appeal was ever laid against the appellant and no opportunity was extended to him to deal with such a specific charge before the Court of Appeal made its initial finding of guilt." 755 His Honour said that it followed that the disciplinary order made following the initial finding of guilt "was affected by a denial of procedural fairness for the reason that [Smith] had never been given an appropriate opportunity of being heard in relation to the question whether his evidence of the car park conversation was deliberately false", and that on the re-opened hearing there had been a denial of procedural fairness in that Smith had not been given the opportunity of being heard or leading evidence upon whether he had deliberately given false evidence (at 273-4). 756 The appellants submitted that, from these passages, it was not open to the trial judge to take into account against them any dishonesty seen in Mr Adler's conduct, because dishonesty had not been alleged in ASIC's pleaded case. 757 I am unable to agree. The circumstances were quite different. The lying in Smith v The New South Wales Bar Association was lying to the Court, conduct distinct from the conduct before the magistrate. Dishonesty in the present case was not conduct distinct from the conduct constituting the contraventions, but the finding as to the nature of the latter conduct. Their Honours' reasons would not have precluded regard to the character of Smith's conduct before the magistrate, for example whether from misunderstanding or with consciousness of impropriety, when the Court was considering whether to make a disciplinary order and if so what order. 758 In my opinion, it was open to the trial judge to ascribe to Mr Adler's conduct the character of impropriety or dishonesty. (b) Failure to give evidence 759 I set out the relevant passage of the orders judgment when considering the Jones v Dunkel question; for convenience, it is repeated. After noting "factors" said in an earlier case to be material to the orders in question, the trial judge said - "72 In the present case each of those factors are present, though it should be noted that Mr Adler himself did not assert any personal explanation for what he had done . Rather, through his legal advisers, he denied that there was any contravention in the circumstances, a denial which is at odds with the findings of the Judgment and thus cannot stand." (emphasis added) 760 The submissions were a reprise of the appellants' Jones v Dunkel submissions. While the trial judge was referring to Mr Adler's failure to give evidence, it is not clear that it amounted to the drawing of a Jones v Dunkel inference. At this point the trial judge was not concerned with the findings of contraventions, but with the factors material to the orders to be made. However, for the reasons earlier given I do not think that so far as the trial judge paid regard to Mr Adler's failure to give evidence he was in error, any more when considering the orders to be made than when finding the contraventions. (c) The evidence of Messrs Gardener, Cohen and Stitt 761 It was submitted that the effect of the evidence of Messrs Gardener, Cohen and Stitt was that they saw nothing improper or unlawful in the transactions when they became aware of them in late 2000. It was acknowledged that their views were "not determinative of the appropriate approach which the Court should take", but it was said that they "indicate the genuine assessment by experienced company directors of unquestioned integrity as to the conduct of a fellow director in which there is no evidence of their own participation". 762 The submission had been made to the trial judge. He did not advert to it in the orders judgment. That is readily understandable. It is plain from the liability judgment that the trial judge did not consider that the evidence of Messrs Gardener, Cohen and Stitt was to the effect that they saw nothing improper or unlawful in the transactions, and that to the extent that their evidence went in that direction he considered that they were wrong. There is no reason to think that the trial judge overlooked the evidence or the submission made to him. (d) An exception for Adler Corporation? 763 The trial judge noted the submission on behalf of Mr Adler that any disqualification order should be made only in relation to the management of public companies, or that at the least it should permit Mr Adler to be involved in the management of Adler Corporation and its wholly owned subsidiaries - " … on the basis that the failure to provide such an exception would be harsh, oppressive and unfair against Mr Adler because it would deprive him of the means of earning substantially all his income". 764 After explaining why that would be contrary to the protective purpose of disqualification orders, the trial judge said - "81 The second matter is one of jurisdiction. Section 206C and s206E both confer upon the Court the power to "disqualify a person from managing corporations". There is no suggestion that an order may discriminate between corporations and thus operate distributively only against a certain class of corporation such as any corporation that is not a public company, or any corporation that is not Adler Corporation and its wholly-owned subsidiaries. Indeed, that logically follows from the public protective purpose earlier identified. 82 Moreover, the power of the Court to grant leave under s206G, in contrast to s206C and s206E, does contain language expressly permitting application for leave to manage "a particular class of corporation", or "a particular corporation". That strongly suggests that the associated disqualification provisions are not to be read as permitting a qualified order." 765 The appellants submitted that, since words in the plural include the singular unless a contrary intention appears (Acts Interpretation Act 1901 (C'th) s 23), "corporations" in ss 206C and 206E could be read in the singular, and that there was nothing to indicate a contrary intention. Reference was made to predecessor provisions referring to orders prohibiting a person from managing "a corporation". 766 In my opinion, the trial judge was correct in his construction of ss 206C and 206E. If contravention of a civil penalty provision justifies disqualification, it is because of the unfitness of the person to manage corporations, not because of unfitness of the person to manage a particular corporation or corporations. Selective unfitness is a difficult concept, but to the extent it can be recognised alleviation of a general disqualification comes through leave to manage a particular class of corporation or a particular corporation, on application made under s 206G. An intention contrary to the rule of interpretation is manifest. It is necessary to construe the Act, rather than the predecessor provisions, but prohibition from managing "a corporation" would naturally mean any corporation, not just one corporation. 767 The trial judge went on to give reasons why, if his construction of ss 206C and 206E were incorrect, he would not confine Mr Adler's disqualification. Although it strictly does not arise, I should address the appellant's submissions in that respect. 768 In the appeal the appellants made submissions directed to permitting Mr Adler to be involved in the management of Adler Corporation and its subsidiary companies. They were, in brief, that from its corporate name members of the public would not unwittingly deal with Adler Corporation as a corporation managed by a suitable person; that an exception for Adler Corporation would not signify the safety of dealing with that corporation; and that in declining to give significant weight to the financial consequences to Mr Adler of inability to manager Adler Corporation because the consequences flowed from Mr Adler's own misconduct, the trial judge relied on the unpleaded matters. 769 The first two arguments amounted to saying that a person unfit to manage corporations should be allowed to manage a corporation because everyone knew the person was unfit. They should not be accepted. Further, a change in corporate name could leave members of the public unaware of Mr Adler's management, or control of other corporations through Adler Corporation could be unknown to members of the public. For reasons already apparent, I do not accept the basis of the third argument. 770 I do not think error in the exercise of discretion has been shown within the principles for which House v The King (1936) 55 CLR 499 is conventionally cited. In my opinion, the reasons the trial judge gave for declining to confine disqualification to the management of public companies, or to permit Mr Adler to be involved in the management of Adler Corporation and its wholly owned subsidiaries, were well open to him in the exercise of his discretion in determining the extent of disqualification. I see no appealable error in that exercise of discretion. The pecuniary penalty and disqualification – Mr Williams 771 Mr Williams' grounds of appeal included that the trial judge erred in finding that the pecuniary penalty of $250,000 was just or appropriate, in finding that a disqualification order was justified, and in finding that the disqualification for ten years was justified. His submissions against the findings of contraventions of the Act at all went to those grounds, since contravention was a precondition to the orders. He did not otherwise submit that the orders were erroneous. 772 It may have been intended that the submissions of the Adler appellants be adopted so far as applicable to Mr Williams' position. The trial judge noted a number of findings which, in his submissions going to the contraventions, Mr Williams said were not open on ASIC's case as pleaded and particularised (for example, side stepping the Investment Department). While noting that Mr Williams had expressed deep regret for "the consequences of the PEE transaction on HIH and HIHC", the trial judge thought the contrition thus indicated was limited, and also observed that Mr Williams' submission that he was himself deceived "does not sit well with the findings which I have earlier summarised or the absence of any evidence from Mr Williams himself as to what he knew or did not know". Thus there was room for partial translation of the submissions of the Adler appellants to Mr Williams' position. 773 I have considered the submissions of the Adler appellants so far as they appear applicable to Mr Williams' position. I do not think that they are any more persuasive. The result 774 Although I have differed from the trial judge on some matters, the appeals in substance fail. The limited success of the appellants does not warrant any relief as to costs. The declarations of contravention should exclude contravention by Mr Adler and Adler Corporation of s 183 of the Act, and the amount of compensation must be recalculated, but otherwise the declarations and the orders stand. 775 I propose the following orders - In the appeal by Mr Adler and Adler Corporation - 1. Appeal allowed in part. 2. Vary declarations 3 and 4 made on 27 March 2002 by adding before "182(1)" the word "and" and deleting the words and figures "and 183(1)". 3. Direct that within 21 days the parties calculate the compensation payable to HIH Casualty and General Insurance Ltd in accordance with the reasons of this Court and advise the Registrar of the sum calculated. 4. Vary order 7 made on 6 June 2002 by deleting the sum of $7,986,402 and substituting the sum advised to the Registrar. 5. Liberty to apply in the event of disagreement as to the calculation. 6. Appeal otherwise dismissed. 7. Appellants pay the respondent's costs. In the appeal by Mr Williams - 1. Direct that within 21 days the parties calculate the compensation payable to HIH Casualty and General Insurance Ltd in accordance with the reasons of this Court and advise the Registrar of the sum calculated. 2. Vary order 7 made on 6 June 2002 by deleting the sum of $7,986,402 and substituting the sum advised to the Registrar. 3. Liberty to apply in the event of disagreement as to the calculation. 4. Appeal dismissed. 5. Appellant pay the respondent's costs. ********** Last Modified: 02/25/2005 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.