Case: Australian Securities and Investments Commission v Mining Projects Group Ltd (2007) 164 FCR 32
Outcome: applied
These are civil proceedings in which penalties are sought: s 1331 of the Corporations Act 2001 (Cth) ("the Corporations Act "). They have been the subject of previous interlocutory decisions: Australian Securities and Investments Commission v Mining Projects Group Ltd (2007) 164 FCR 32 at [1] (" ASIC No. 1 ") at [1] and Australian Securities and Investments Commission v Mining Projects Group Ltd (No 2) [2008] FCA 951 (" ASIC No. 2 ") at [5]. Those reasons for decision adequately describe the nature of the proceedings. 2 For present purposes, it is sufficient to refer to Finkelstein J's description of the proceedings in ASIC No. 1 at [1]: In this action, which is still in its interlocutory phase, the plaintiff, Australian Securities and Investments Commission [("ASIC")], seeks various forms of relief in respect of alleged contraventions of the Corporations Act 2001 (Cth). The defendants are Mining Projects Group Limited (MPG), a minerals exploration company, and two of its directors, Mr Frost and Mr Revelins. ASIC contends that in breach of s 1041H MPG made misleading public announcements about the mineralisation and exploration potential for uranium mining at Niue Island in the South Pacific. The nub of the complaint is that the potential was overstated. The directors are alleged to have knowingly procured the breach and thereby contravened ss 180 and 181 , the directors' duties sections. There are also claims that the directors engaged in insider trading (s 1043A) and improperly used company information (s 183). The only relief sought against MPG is a declaration that it contravened s 1041H. But ASIC seeks the imposition of pecuniary penalties against the directors (s 1317G) and an order that they be disqualified from managing a corporation (s 206C). ... 3 At risk of undue abbreviation, ASIC's pleaded claim is that a Mr Blackburn, a geologist, was retained by MPG " to assist in considering information provided ... and to assess the potential mineralisation and exploration of the Niue Island ("the Blackburn Retainer ")" (par 9) and that, pursuant to that Blackburn Retainer, certain representations were made by Blackburn (pars 10, 11 and 13) ("the Blackburn Adverse Comments"). The substance of the Blackburn Adverse Comments is alleged to be such as would raise questions about the potential mineralisation and exploration of the Niue Island. ASIC further pleads that although the Blackburn representations were recorded in emails from Blackburn to one of the directors of MPG and were "adverse", the ASX released a company announcement about the Niue Island Project issued by MPG ("the Principal Announcement") which, inter alia , did not include one or more of the Blackburn Adverse Comments (par 20). 10 After the defences were filed, two issues arose - whether penalty privilege or privilege against self incrimination would ordinarily relieve the directors from any obligation to provide further details of their defence and, secondly, assuming the privileges could be relied upon, whether the directors had waived, in whole or in part, their right to assert either privilege by filing detailed defences. Those applications were heard and determined by Finkelstein J: see ASIC No. 1 (2007) 164 FCR 32 at [1]. In those reasons for decision, Finkelstein J described the content of the defences filed by the directors and the position of MPG in the following terms (at [5]): When going into the detail they did in their respective defences the directors were mindful of penalty privilege. Each of their defences opens with a statement that the director "claims and reserves his right to claim penalty privilege in the proceeding." No such statement was made by MPG for it is accepted that a corporation cannot claim the benefit of penalty privilege (Trade Practices Commission v Abbco Iceworks Pty Ltd [1994] FCA 1279 ; (1994) 52 FCR 96) or self-incrimination privilege (see Environment Protection Authority v Caltex Refining Co Pty Ltd ... [1993] HCA 74 ; (1993) 178 CLR 477). That MPG cannot claim the benefit of either privilege may not be of much assistance to ASIC if it successfully attacks the company's defence. If MPG's defence is defective and it is required to provide further information, it may not be able to satisfy that requirement if the only source of its information is the director defendants and they are entitled to remain silent. (Emphasis added).