Case: Jubilee Mines NL v Riley (2009) 253 ALR 673
Outcome: considered
is an apparent distinction between Listing Rule 3.1 which requires that the information be expected to have a "material" effect on the price or value of the securities and the deeming provision in s 677 of the Act which requires only that the information would or would be likely to "influence" common investors. This was considered by the Court of Appeal of Western Australia in Jubilee Mines NL v Riley (2009) 253 ALR 673 in respect of equivalent provisions in the continuous disclosure provisions in the Corporations Law and the ASX Listing Rules. In Jubilee Mines 253 ALR 673 the provisions of the Act relating to continuous disclosure were at that time located in Chapter 7, Part 7.11, Div 2. They were relocated to Chapter 6CA by the Financial Services Reform Act 2001 . The relevant continuous disclosure Listing Rule was Rule 3A(1) the equivalent of that Rule is now Rule 3.1. The equivalent of s 674, s 675 and s 677 that were considered are s 1001A, s 1001B and s 1001D respectively. In Jubilee Mines 253 ALR 673 the issue was whether Jubilee, a small listed gold exploration company that wanted to transition into a gold producing company had to disclose information that it received, in 1994, of drilling results about the nickel development potential of its tenements, on receiving that information from a neighbouring tenement holder Western Mining Corporation Ltd, which had inadvertently conducted drilling on Jubilee's tenements. When such information was released in 1996, there was a resultant increase in Jubilee's share price. But, in 1994, Jubilee was focussed on gold and was short of cash, without the necessary ability to develop any nickel assets. The Court of Appeal allowed the appeal from a judgment of a master of the Supreme Court, and held that there had been no contravention of s 1001A essentially because the information was held to be not material in 1994. Martin CJ delivered the main judgment with which Le Miere AJA agreed. McLure JA delivered a separate judgment. Martin CJ rejected the argument that the Listing Rule can only be contravened if a reasonable person would expect the information to have a material effect on the price or value of a company's securities quite independently of the question posed by s 1001D. His Honour said the better view is that s 1001D applies to the Listing Rule, with the consequence that if information has the characteristic defined in that section, it should be taken to be information falling within the scope of the Listing Rule: [34], [54]-[62]. This was for the reason that acceptance of the argument would create an inconsistency between the Listing Rule on the one hand and ss 1001A and 1001D on the other, which would not have been intended by Parliament. The inconsistency would be that the Listing Rule would require notification only when there was a reasonably expected material impact on share price or value, whilst ss 1001A and 1001D would require notification whenever the information would, or would be likely to influence common investors: [60]-[61]. In a separate judgment, McLure JA considered whether s 1001D supplants the third element of the Listing Rule, namely materiality and concluded that because s 1001D was stated to apply for the purposes of s 1001A and s 1001B but not the Listing Rule; and because s 1001A and s 1001B apply only if information is not generally available, unlike the Listing Rule, which applies regardless, s 1001D did not describe materiality for the purposes of the Listing Rule: [149]-[150]. At [165] McLure JA also referred to the "obvious terminological differences" between the tests in s 1001D and the Listing Rule. Her Honour stated that the test in s 1001D does not rely on a hypothetical reasonable person and does not require a material effect on the price of securities. However, in the circumstances of the case, her Honour held it was unnecessary to determine whether the differences are capable of producing different outcomes, because the concession of the parties that the price of shares in the relevant company were determined by the conduct and motivations of share traders would apply to both tests and the outcome would have been the same. On 31 July 2009, the High Court refused application for special leave to appeal the Court of Appeal's decision. In my opinion, in substance, the approach adopted by the majority is correct. It is a matter of the proper construction of Listing Rule 3.1. I would construe "information" which "would, or would be likely to influence" common investors in deciding whether to acquire or dispose of securities as information, for the purposes of Listing Rule 3.1, that a reasonable person would expect to have a material effect on the price or value of the securities. This is merely an approach to the construction of the words "material effect on the price or value of the entity's securities" in Listing Rule 3.1 which provides harmony with the provisions of ss 674 and 677 of the Act. Paragraph 20 of Guidance Note 8 to Listing Rule 3.1, which refers to s 674 and s 677, supports this construction. The relevant requirements of Listing Rule 3.1 and s 674(2)(c), as applicable to FMG at the time it made the notifications to the ASX in August and November 2004 were as follows: (a) there must have existed "information" within the meaning of Listing Rule 3.1 and s 674(2); (b) FMG must have been aware of that information: s 674(2)(b), Listing Rule 3.1; (c) that information must not have been generally available: s 674(2)(c)(i), cf Listing Rule 3.1A.1; and (d) a reasonable person would have expected that information to have had a material effect on the price or value of FMG's shares, if it had been generally available: s 674(2)(c)(ii), Listing Rule 3.1. The meaning and operation of the last two requirements is governed by ss 676 and s 677 respectively. I find support, in my approach to the issue of opinion, in the context of Listing Rule 3.1, from the judgment of McLure JA in Jubilee Mines 253 ALR 673. This case involved competing opinions as to the significance of geological information (the WMC information) supplied to Jubilee. Jubilee had obtained an expert opinion from a geologist, Mr Cooke, who was also an executive of Jubilee. In light of his opinion, Jubilee's managing director decided there was no need to disclose the information to the ASX. The respondent's expert opinion given at trial was to the contrary. McLure JA observed at [160] that expert opinions held in good faith on reasonable grounds may differ. Her Honour also stated at [185]: However, the fact that there are competing expert opinions on the level of significance of the WMC information does not justify a conclusion that the appellant ought to have been aware that the WMC information was highly significant. No doubt if Mr Cooke's assessment was negligent (not based on reasonable grounds) there may be room for such a finding. However, I see no basis in the evidence for a finding that Mr Cooke's opinion was other than honestly held on reasonable grounds. Subsequent drilling results do not support a finding that Mr Cooke's 1994 assessment was unreasonable. Were ASIC's opinions as to the legal effect of the framework agreements self evident having regard to their terms? ASIC's case is that the opinions, in effect, expressed in the Informations were obvious and the only opinions reasonably open objectively. I say opinions, because even on ASIC's case there are competing opinions. First ASIC submits that the framework agreements have no legal effect and are therefore unenforceable. Second ASIC submits that if they are enforceable they are merely agreements to enter into negotiations. It follows that ASIC's contention necessarily extends to a submission that FMG's opinion as to the meaning and legal effect of the framework agreement, in effect contained in the disclosures opinion was not reasonably open. I accept however that evidence of the actual effect of the information actually disclosed on FMG's share price may be relevant to assist the Court in its determination of whether s 674(2) has been contravened: Rivkin Financial Services Ltd v Sofcom Ltd (2004) 51 ACSR 486 by analogy at [113]-[116]; Jubilee Mines NL v Riley (2009) 253 ALR 673 at [33], [130] and [134]. This involves an ex post inquiry . Such evidence may constitute a relevant cross-check as to the reasonableness of an ex ante judgment about a different hypothetical disclosure. Gzell J in ASIC v Macdonald (No 11) 256 ALR at [1067] said: Where likelihood of the occurrence of an event is in issue and relevant facts are available, they are to be preferred to prophecies.