FEDERAL COURT OF AUSTRALIA
VID 1315 of 2019
DATE OF ORDER:
THE COURT ORDERS THAT:
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 The applicant (ISX) is a listed company on the Australian Securities Exchange. Trading in its shares on the Australian Securities Exchange was suspended by the respondent (ASX), acting under ASX Listing Rule 17.3, on 2 October 2019 and the suspension is continuing. On 4 December 2019, ISX commenced this proceeding against ASX seeking an order that the suspension be lifted and its shares be reinstated for quotation on the Australian Securities Exchange upon the claims that: (1) ASX failed to accord procedural fairness to ISX and breached its implied obligation to act in good faith and/or honestly and fairly and/or reasonably before suspending the quotation of ISX’s shares from the Australian Stock Exchange (Amended Statement of Claim (ASC), ); (2) ASX failed to act in good faith and/or honestly and fairly and/or reasonably in exercising its suspension powers under the ASX Listing Rules (ASC, ); (3) ASX contravened s 792A(1)(a) of the Corporations Act 2001 (Cth) (the Act) by failing to apply its operating rules (which by s 761A of the Act include the listing rules made by ASX (Listing Rules)) in a fair manner and failing to ensure that ISX is treated in a like manner as other participants who are the subject of regulatory investigation (ASC, ); and (4) ASX’s decisions to suspend ISX’s shares and not to lift the suspension and reinstate quotation of ISX’s shares are amenable to judicial review and affected by legal error (ASC, –). ISX also seeks various declarations and damages. By amendments since made to the statement of claim, ISX has also challenged ASX’s decision to publish its reasons for continuing the suspension of trading in ISX’s shares (statement of reasons) and the lawfulness of ASX “in accordance with Listing Rule 18.8” directing ISX to do certain things (directions) (Further Amended Statement of Claim (FASC), –). The additional relief sought by ISX includes a permanent injunction restraining ASX from publishing its reasons in draft or final form and from disclosing the information in the statement of reasons to anyone other than the Australian Securities and Investments Commission (ASIC) on a confidential basis, and a permanent injunction restraining ASX from giving such directions to ISX. ISX also seeks both injunctions on an interlocutory basis pending the hearing and determination of the proceedings. It has supported its application by four affidavits of Anthony Seyfort, a partner of HWL Ebsworth Lawyers, the solicitors for ISX. ASX has opposed ISX’s application for the interlocutory injunctions and filed two affidavits in support of its opposition – an affidavit of Daniel Moran, the group general counsel and company secretary of ASX, and an affidavit of Luke Hastings, a partner of Herbert Smith Freehills, the solicitors for ASX.
2 Suppression orders to preserve the confidentiality of the statement of reasons and earlier drafts, as well as material in the evidence and submissions dealing with the subject matter of the statement of reasons, are in place. Accordingly, these reasons for decision necessarily do not traverse the detail of matters covered by the suppression orders.
3 The relevant principles to apply in determining whether to grant an interlocutory injunction are well settled and were not in dispute. For the interlocutory injunctions to be granted, ISX must show that there is a serious question to be tried and that the balance of convenience favours the granting of an injunction: Beecham Group Limited v Bristol Laboratories Pty Ltd  HCA 1; 118 CLR 618 (Beecham) at 622–623; Australian Broadcasting Corporation v O’Neill  HCA 46; 227 CLR 57 (O’Neill) at 68  per Gleeson CJ and Crennan J; 81-2  per Gummow and Hayne JJ.
4 To show that there is a serious question to be tried, ISX must make out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action ISX will be held entitled to relief: Castlemaine Tooheys Ltd v South Australia  HCA 58; 161 CLR 148 at 153 per Mason ACJ. A “prima facie case” does not mean that ISX must show that it is more probable than not that it will succeed at trial. It is sufficient merely that it shows a sufficient likelihood of success to justify in the circumstance the preservation of the status quo pending trial: O’Neill at 81–2  per Gummow and Hayne JJ, citing with approval Beecham at 622–3.
5 The “balance of convenience” consideration requires an assessment of “whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted”: Beecham at 623. That is, the Court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party which fails to establish its right at trial, or in failing to grant an injunction to a party which succeeds at trial: Bradto Pty Ltd v State of Victoria; Tymbook Pty Ltd v State of Victoria  VSCA 89; 15 VR 65 at 73 .
6 The following background is taken from the affidavit of Mr Moran and is not subject to a suppression order.
7 After the suspension of ISX’s shares, ASX commenced an investigative process to determine whether ISX was complying with the Listing Rules. That process involved the issue of four query letters to ISX pursuant to Listing Rule 18.7. The first query letter issued on 2 October 2019, with ISX’s response received on 10 October 2019. ASX released the correspondence to the market on 11 October 2019. The first query letter was an initial list of questions focused on eliciting information regarding ISX’s customer groups, with a particular focus on those customers engaged in cryptocurrency related activities, which was an area of general focus for ASX, and the revenue derived by ISX from those customer groups. The second query letter issued on 15 October 2019, with ISX’s response received on 25 October 2019. ASX released that correspondence to the market on 28 October 2019. The second query letter focused on eliciting information about a spike in ISX’s review in the June half of 2018, coinciding with the cut-off date for the achievement of revenue milestones for the conversion of ISX performance shares into ordinary shares. The third query letter issued on 31 October 2019, with ISX’s response received on 15 November 2019. ASX released this correspondence to the market on 18 November 2019. The third query letter sought to elicit information that would explain the relationship between ISX’s revenue in the June half of 2018 and four contracts, and the nature of those four contracts. The fourth query letter issued on 22 November 2019, with ISX’s response received on 26 November 2019. ASX also released this correspondence to the market on 5 December 2019. The fourth query letter was focused on information that had not been provided by ISX in response to the previous three letters or that was incomplete or otherwise required further information.
8 Having gathered information by way of the four query letters, ASX formed the view that ISX may not be in compliance with the Listing Rules. On 6 December 2019, ASX provided its draft “findings” to ISX for ISX’s comment. ISX provided extensive comments and, amongst other things, objected to ASX making and publishing “findings” (ISX response). ASX took ISX’s comments into account and provided a revised document on 26 February 2020, which it styled “draft reasons”, and invited ISX to make further representations on the content of those draft reasons. The draft reasons contain three directions that ASX “in accordance with Listing Rule 18.8” will give to ISX to do certain things, being the directions which ISX seeks to enjoin ASX from making by the grant of the interlocutory injunction. Mr Moran deposed that the directions were tailored to facilitate ISX’s compliance with Listing Rule 3.1 and to ensure its ongoing compliance. The directions would require ISX to disclose certain matters to the market, appoint an independent expert to review its policies and processes regarding compliance with Listing Rule 3.1, and include information about income it derives from customers in certain sectors in the quarterly activity report it gives to ASX under Listing Rule 4.7C. ISX did not make any further representations to ASX in respect of the draft reasons and on 13 March 2020, ASX finalised its conclusions and produced a final statement of reasons (final reasons) recording the reasons for the continuation of the suspension of ISX’s shares. The final reasons did not include the three directions that ASX intends to give ISX because ISX had by then filed its application for interlocutory injunctive relief seeking to enjoin ASX from making the proposed directions under Listing Rule 18.8.
9 Unless restrained, ASX will give directions to ISX as foreshadowed in the draft reasons and publish its final reasons. Mr Moran deposed that in ASX’s view, for the market to be fair, orderly and transparent and operated in accordance with ASX’s operating rules, the market must immediately be informed of the contents of the final reasons.
WHETHER THERE IS A SERIOUS QUESTION TO BE TRIED
10 ISX’s allegations against ASX in the FASC relevantly include (at –) that:
(a) Listing Rule 18.8 is repugnant to, or inconsistent with, the scheme for the enforcement of the Listing Rules established by Part 7.2, Division 3 and s 1101B of the Act and is therefore ultra vires and/or invalid; and
(b) by reason of the invalidity of Listing Rule 18.8, ASX does not have the power to give the directions to it.
11 ISX has also alleged (at –) that ASX will be in breach of its duty to act in good faith and/or honestly and fairly and/or reasonably in exercising its powers under the Listing Rules if it publishes the draft reasons and/or the final reasons and/or gives the directions to ISX by reason that the draft reasons and the final reasons:
(a) fail to take into account relevant considerations raised in the ISX response;
(b) take into account irrelevant considerations, notwithstanding the ISX response;
(c) notwithstanding the ISX response, contain reasons that have no foundation in fact or law, are based on supposition and conjecture, and are founded on facts which have been conflated to justify the conclusions;
(d) do not contain an accurate representation of the facts and circumstances concerning ISX;
(e) are likely to mislead the market and other persons who read the document; and
(f) contain findings which do not justify the making of the directions.
12 ISX has further alleged at  that ASX, by publishing the statement of reasons:
(a) would fail to meet its obligations under the operating rules (which include the Listing Rules): [74(a)];
(b) would contravene the operating rules (which include the Listing Rules): [74(1)(b)]; and
(c) in breach of s 792A(1)(a) of the Act, would fail to apply the operating rules (which include the Listing Rules) in a fair manner and ensure that ISX is treated in a like manner as other participants: [74(1)(c)].
13 The allegation in [74(1)(c)] was not relied on by ISX for the purposes of the application for injunctive relief.
Listing Rule 18.8
14 Listing Rule 18.8 (as it now is) provides as follows:
ASX may require an entity to do or refrain from doing any act or thing that, in ASX’s opinion, is necessary to ensure or facilitate compliance with the listing rules, including (without limitation):
(a) to give specified information to ASX for release to the market;
(b) to update, correct or retract information previously released to the market;
(c) not to enter into or perform an agreement or transaction that would breach the listing rules;
(d) to cancel or reverse an agreement or transaction entered into in breach of the listing rules;
(e) to seek the approval of the holders of its ordinary securities to an agreement or transaction required under the listing rules;
(f) to include specified information in a notice of meeting proposing a resolution under the listing rules;
(g) to update, correct or retract any information in a notice of meeting proposing a resolution under the listing rules;
(h) to impose a holding lock on specified securities;
(i) to enforce a provision in its constitution required under the listing rules;
(j) to enforce a provision in a deed or any other legal document required to be entered into by the entity under the listing rules;
(k) to introduce or update a policy or process to comply with the listing rules;
(l) to engage an independent expert to review its policies and processes to comply with the listing rules and to release to the market the findings of, and any changes the entity proposes to make to its compliance policies and processes in response to, the review; and
(m) to cause specified officers or employees to undertake a compliance education program in relation to the listing rules,
and the entity must comply with that requirement.
15 ISX submitted that there is a serious question to be tried as to the validity of Listing Rule 18.8, contending that to the extent that Listing Rule 18.8 purports to empower ASX to give directions the rule is inconsistent with, and repugnant to, the legislative scheme for the enforcement of operating rules (including the Listing Rules) contained in ss 793C and 1101B of the Act, being a scheme that can be traced back to the original Securities Industry Acts of 1970.
16 Section 793C relevantly provides:
(1) If a person who is under an obligation to comply with or enforce any of a licensed market's operating rules fails to meet that obligation, an application to the Court may be made by:
(a) ASIC; or
(b) the licensee; or
(c) the operator of a clearing and settlement facility with which the licensee has clearing and settlement arrangements; or
(d) a person aggrieved by the failure.
(2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:
(a) the person against whom the order is sought; or
(b) if that person is a body corporate (other than a notified foreign passport fund)—the directors of the body corporate;
about compliance with, or enforcement of, the operating rules.
17 Section 1101B(1) relevantly provides:
The Court may make such order, or orders, as it thinks fit if:
(a) on the application of ASIC, it appears to the Court that a person:
(i) has contravened a provision of this Chapter, or any other law relating to dealing in financial products or providing financial services; or
(ii) has contravened a condition of an Australian market licence, Australian CS facility licence, Australian derivative trade repository licence or Australian financial services licence; or
(iii) has contravened a provision of the operating rules, or the compensation rules (if any), of a licensed market or of the operating rules of a licensed CS facility; or
(v) has contravened a condition on an exemption from the requirement to hold an Australian market licence or an Australian CS facility licence; or
(vi) is about to do an act with respect to dealing in financial products or providing a financial service that, if done, would be such a contravention; or
(b) on the application of a market licensee, it appears to the Court that a person has contravened the operating rules, or the compensation rules (if any), of a licensed market operated by the licensee; or
(c) on the application of a CS facility licensee, it appears to the Court that a person has contravened a provision of the operating rules of a licensed CS facility operated by the licensee; or
(d) on the application of a person aggrieved by an alleged contravention by another person of subsection 798H(1) (complying with market integrity rules) or 981M(1) (complying with client money reporting rules) or a provision of the operating rules, or the compensation rules (if any), of a licensed market, or subsection 908CF(1) (complying with rules about financial benchmarks), it appears to the Court that:
(i) the other person did contravene the provision; and
(ii) the applicant is aggrieved by the contravention.
However, the Court can only make such an order if the Court is satisfied that the order would not unfairly prejudice any person.
18 ISX put the following arguments in support:
(a) ASX’s powers under Listing Rule 18.8 are “extraordinarily intrusive” on the rights of third parties, not merely those of the listed entity, and may affect very large transactions, potentially involving the movement of considerable funds and the public interest as well as the private interests of shareholders. For example, Listing Rule 18.8(c) (not to enter into or perform an agreement or transaction that would breach the Listing Rules); Listing Rule 18.8(d) (to cancel or reverse an agreement or transaction entered into in breach of the Listing Rules); and Listing Rule 18.8(l) (to engage an independent expert to review the entity’s policies and processes to comply with the Listing Rules and to release to the market the findings of, and any changes the entity proposes to make to its compliance policies and processes in response to, the review);
(b) by s 793C(2), a court can only give directions in enforcement of operating rules after giving opportunity to be heard to the applicant and the person against whom the order is sought. By s 1101B(1), a court can only make an order if satisfied that the order would not “unfairly prejudice any person”. No like protection for listed entities and third parties is found in Listing Rule 18.8. Unlike ss 793C and 1101B(1), Listing Rule 18.8 does not make provision for an opportunity to be heard prior to the exercise by ASX of its powers under Listing Rule 18.8. Furthermore, the right to have decisions made under the Listing Rules reviewed by the ASX Appeal Tribunal was abolished in December 2015;
(c) it is no answer that a listed entity or third party may choose to disobey a direction given by ASX under Listing Rule 18.8 with a view to compelling ASX to commence court proceedings under ss 793C or 1101B, as the issue for resolution by the court under either section would not be merits review – that is, whether the court in the exercise of its own discretion should give a direction for compliance with the Listing Rule – but judicial review on administrative law grounds for jurisdictional error. Furthermore, ASX might instead threaten to suspend or delist the securities of the listed entity (Listing Rules 17.3 and 17.12) if the entity did not comply with ASX’s directions, thereby circumventing any court proceeding at all;
(d) whilst a market licensee must have adequate arrangements for monitoring and enforcing compliance with the market’s operating rules (s 792A(1)(c)(ii)), it is a long step from that proposition to the appointment by a market licensee of itself as arbiter to give directions to listed entities and third parties given that the legislature has provided expressly for that task to be undertaken by the court under ss 793C and 1101B;
(e) moreover, under the scheme of Part 7.2 of the Act, the key regulatory functions are undertaken by ASIC, not the market licensee –
(a) if the licensee has reason to suspect that a person has committed, is committing, or is about to commit a significant contravention of the market’s operating rules, the licensee must notify ASIC: s 792B(2)(c);
(b) if a market licensee makes information about a listed disclosing entity available to participants in the market, the licensee must give ASIC the same information as soon as practicable: s 792C(1);
(c) a market licensee must give such assistance as requested by ASIC in relation to the performance of its functions: s 792D(1);
(d) ASIC is designated as the lead applicant for an application to the courts to enforce a licensed market’s operating rules: s 793C(1)(a);
(e) far-reaching investigatory powers are conferred upon ASIC under the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act): for example ss 13, 31 and 33 of the ASIC Act;
(f) the role of market licensees as supervisors of their financial markets was significantly diminished by the Corporations Amendment (Financial Markets Supervision) Act 2010 (Cth) which inserted Part 7.2A into the Act –
(a) ASIC now has the function of supervising financial markets (s 798F) whereas under the earlier laws, the market licensees had that responsibility;
(b) ASIC is empowered to make market integrity rules by legislative instrument (s 798G), and to the extent of any inconsistency with the operating rules of a financial market, the market integrity rules prevail: s 793B(2); and
(c) ASIC is empowered to give directions to an entity to suspend dealing in a financial product or class of financial products: s 798J;
(g) however, ASIC does not have power to require a listed entity to comply with a licensed market’s operating rules. It is inconsistent with the overall scheme of the legislation that ASX can legitimately confer upon itself a power to give directions where the whole-of-market supervisor, ASIC, lacks that very power.
19 Despite the force with which these submissions were put, I am not persuaded there is a serious question to be tried as to whether Listing Rule 18.8 is invalid.
20 First, by s 792A of the Act ASX, as the holder of an Australian market licence, is statutorily obliged, relevantly:
(a) to do all things necessary to ensure that the market is a fair, orderly and transparent market, to the extent that it is reasonably practicable to do so;
(b) to comply with the conditions on its market licence; and
(c) to have adequate arrangements for operating the market, including arrangements for monitoring and enforcing compliance with the market’s operating rules.
21 Accordingly, in considering the legislative scheme in Part 7.2 of the Act, it is pertinent to recognise that it is part of ASX’s function by force of s 792A to monitor and enforce compliance with the Listing Rules and to do all things necessary to ensure that the market is a fair, orderly and transparent market. Listing Rule 18.8 is part of the armoury of administrative action available to ASX in aid of its statutory responsibilities under s 792A, and the action which ASX may take under Listing Rule 18.8 is within, and consistent with, ASX’s statutory responsibilities.
22 Further, neither s 793C nor s 1101B, in terms, prescribe any limitation on the action which ASX may take to monitor and ensure compliance with the Listing Rules, nor does either section restrict to the province of the court the power to give directions about compliance with, or enforcement of, the Listing Rules. To the contrary, ss 793C and 1101B are both enabling provisions with respect to the powers of the court where there has been non-compliance, not restraints on ASX’s power. Although the manner of the exercise of ASX’s administrative powers and the court’s exercise of judicial function under s 793C and s 1101B may be different, the manner of exercise neither indicates that ss 793C and 1101B were intended to “cover the field” of enforcement in respect of the giving of directions to a listed entity or third party to comply with the Listing Rules, as submitted by ISX, nor does it make Listing Rule 18.8 inconsistent with the legislative scheme prescribed in Part 7.2. Administrative enforcement powers may exist in parallel with powers conferred on a court in respect of the same subject matter: Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd  HCA 7; 255 CLR 352 at 376 – per French CJ, Hayne, Kiefel, Bell and Keane JJ, 381  per Gageler J.
23 Secondly, as ISX observed, s 793C of the Act “can be traced back to the original Securities Industry Acts of 1970” and there is long standing authority that the powers of the court are supplementary to the powers given by the Listing Rules to the stock exchange itself. In Fire & All Risks Insurance Co Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760 Young J at 765 observed:
The listing requirements are, as they state themselves, standards which govern the conditions upon which a company can remain on the official list. Ordinarily the remedy for gross breach of those requirements will be de-listing … the powers of the court under ss 14 and 42 of the Securities Industry Code are a supplement to the powers of the exchange, a supplement that is similar to the powers which traditionally equity had in respect of the common law.
On appeal FAI Insurances Ltd & Anor v Pioneer Concrete Services Ltd & Ors (No 2) (1986) 10 ACLR 801 at 806 per Street CJ and 812 per Kirby P. The Court was not taken to any authority to the contrary or casting doubt on the correctness of the view expressed by Young J.
24 Thirdly, ISX challenges only the “recently changed [Listing Rule] 18.8”, which came into effect from 1 December 2019, replacing the rule which had applied from 1 July 1996, which provided that:
An entity must comply with any requirement ASX imposes on it in order to ensure compliance with the listing rules.
Relevantly, it appears that the change to the Listing Rule was not intended to enlarge ASX’s powers but, rather, to clarify ASX’s power by inserting a non-exhaustive list of requirements ASX might impose on a listed entity to ensure or facilitate compliance with the Listing Rules. The public consultation paper published in connection with the amendment to Listing Rule 18.8 made clear that ASX considered that its existing powers under the previous rules were broad enough to impose the requirements now listed but proposed the amendments “to put that position beyond doubt”. It is significant, as submitted for ASX, that when Parliament gave ASIC the function of supervising financial markets under Part 7.2A of the Act in 2010, it was not perceived that Listing Rule 18.8 (as it then was) was inconsistent with the statutory regulation of financial markets.
25 Fourthly, it does not follow from the absence of a power conferred on ASIC to make directions that ss 793C and 1101B cover the field for directions to be given to listed entities and third parties. ASX and ASIC perform different, albeit overlapping, functions and it is ASX, as the market licensee, which is charged by s 792A(1)(c) of the Act with the statutory obligation to have adequate arrangements for operating the market, including monitoring and enforcing compliance with the market’s operating rules (which include the Listing Rules).
26 Fifthly, in any event, whilst in the draft statement of reasons each of the directions which are the subject of the interlocutory injunction are said to be given by ASX “in accordance with Listing Rule 18.8”, ASX can require ISX to take the steps which are the subject of the proposed directions under other Listing Rules, even if Listing Rule 18.8 is invalid. The proposed directions are threefold:
(a) directing ISX to make an announcement to the market, satisfactory to ASX, with information as to whether Authenticate BV subcontracted some or all of its responsibilities under the Variation Letter and the Nona Agreement to third party contractors and, if so, what services were provided by the third party contractors and what fees were charged by those contractors to Authenticate BV;
(b) directing ISX to engage an independent expert, acceptable to ASX, to review its policies and processes to comply with Listing Rule 3.1 and to release to the market the findings of, and any changes ISX proposes to make to its compliance policies and processes in response to, the review;
(c) directing ISX to include in each quarterly activity report it gives to ASX under Listing Rule 4.7C a breakdown by sector of the revenue ISX has derived from customers during the applicable quarter divided into the following sectors:
Online video gaming
27 As submitted by ASX, the first and third directions simply require ISX to provide information to ASX or the market and Listing Rules 18.7 (giving ASX information) and Listing Rule 18.7A (release of correspondence between ASX and entity) together sufficiently authorise that course.
28 Listing Rule 18.7 provides:
An entity must give ASX any information, document or explanation that ASX:
(a) asks for to enable ASX to be satisfied that the entity is, and has been, complying with, or will comply with, the listing rules or any conditions or requirements imposed under the listing rules; or
(b) reasonably requires to perform its obligations as licensed market operator.
The entity must do so within the time specified by ASX. In the case of paragraph (a) above, ASX may:
• submit, or require the entity to submit, any information, document or explanation given to ASX to the scrutiny of an expert selected by ASX and the entity must pay for the expert; and/or
• require the information, document or explanation to be verified under oath.
29 Listing Rule 18.7A provides:
ASX may release to the market correspondence between it and an entity if ASX has reserved the right to do so and considers that it is necessary for an informed market.
30 The second direction requires ISX to submit information to the scrutiny of an independent expert selected by ASX and that course is sufficiently authorised by Listing Rule 18.7.
31 Accordingly I do not consider there to be a serious question to be tried on the claim that Listing Rule 18.8 is invalid.
Breach of duty
32 ISX submitted that even if Listing Rule 18.8 is valid, there is a serious question to be tried on the claim that ASX would be in breach of its duty to act in good faith and reasonably if it gives the directions that ISX seeks to enjoin and publishes the statement of reasons to the market. ISX advanced the following submissions.
33 First, ISX submitted that ASX has failed to act in good faith and/or reasonably by engaging in a wide ranging investigation of ISX, which, it was submitted, at times constituted “fishing”. It was submitted that conducting investigations is the remit of ASIC, which has the primary responsibility for supervising the market, and if ASX is concerned about a breach of the Listing Rules, the proper course is to give notice to ASIC (s 792B(2)(c)) and/or apply to the Court for an order giving directions pursuant to ss 793C and/or 1101B, not for ASX to begin its own investigation and make “findings”. ASX’s responsibility is to enforce the operating rules either by exercising its suspension power or by making an application to the court for directions. It was submitted that ASX lacks the investigation and information-gathering powers conferred upon ASIC under the ASIC Act. It also lacks the evidence-gathering powers conferred upon a judicial body and the evaluative expertise of that kind of body. Inevitably, by ASX attempting its own investigation with a view to producing supposed “findings” akin to those made by a court, those “findings” carry a risk of being wrong or incomplete and speculative. It was submitted that then to publish such “findings” conflicts with ASX’s statutory obligation to do all things necessary to ensure that the market is a fair, orderly and transparent market to the extent that it is reasonably practicable to do so: s 792A(1)(a).
34 ISX also submitted that ASX has failed to act in good faith and/or reasonably by conducting a parallel and necessarily deficient investigation into ISX in circumstances where ASIC had already commenced its own investigation into the same matters utilising its powers under the ASIC Act and ISX is fully cooperating with that investigation. Further, ASX intends, unless restrained, to publish the final reasons, notwithstanding the fact that its “findings” (or “reasons”) are expressed in incomplete and/or speculative language, reflecting the “obvious shortcomings” of ASX’s investigation. It was submitted that none of this ought to be permitted prior to a trial of this proceeding, given that ISX “attacks with vigour” the accuracy of ASX’s findings/reasons.
35 These submissions go beyond ISX’s pleaded case as it is not alleged against ASX that does not have the power to conduct its own investigations, or that it either exceeded its powers or was not acting in good faith and/or reasonably in conducting a “fishing” expedition, or that it was not acting in good faith and/or reasonably by conducting an investigation into ISX when ASIC had commenced its own investigation into the same matters. Moreover, the submissions elide the question of ASX’s powers with the content of ASX‘s duties in the exercise of those powers. Accordingly, I see no basis in these submissions for a serious question to be tried.
36 Secondly, ISX submitted that the “findings” in the statement of reasons have no foundation in fact or law, are based on supposition and conjecture and have been made because ASX failed to take into account relevant considerations and took into account irrelevant considerations. Thus, it was argued, the statement of reasons does not contain an accurate representation of the facts and circumstances concerning ISX and publication of the reasons is therefore likely to mislead the market and other persons who read the document (ISX’s written submissions, ). As there are suppression orders in place, the detail cannot be set out in these reasons for judgment. For present purposes, it must suffice to note ISX’s submission that there are a multitude of factual errors made by ASX in its draft reasons which, despite being pointed out by ISX in the ISX response, are ignored and/or repeated in the final reasons (amounting to a lack of good faith). The final reasons are also said to include an array of irrelevant considerations, matters not based on fact or law, conflated matters and findings/reasons that are, by ASX’s own admission, incomplete or speculative. ISX submitted that the ISX response, as supplemented by ISX’s affidavits in this application, establishes a serious question to be tried as to “the validity of the principle findings/reasons” in the statement of reasons.
37 I accept that the evidence before the Court shows a serious question to be tried in respect of the accuracy of particular findings made by ASX as detailed in its statement of reasons. ASX did not contend to the contrary. However, ASX did contend that demonstrating a serious question to be tried in relation to the publication of the reasons cannot be considered without regard to the suspension decision which the reasons support. Succinctly stated, ASX argued that a court, on a final basis, would only restrain the publication of the reasons if the suspension was set aside and ISX’s shares were reinstated for quotation so that the foundation for the publication of the reasons fell away. Thus, the argument went, ISX must show a prima facie case that the continued suspension of ISX’s shares should be set aside and ISX’s shares reinstated for quotation. ASX further submitted that establishing a prima facie case requires more than showing a dispute about matters of fact, because suspension under Listing Rule 17.3 depends on ASX holding the opinion that any of the following applies: (1) the listed entity is unable or unwilling to comply with, or breaks, a Listing Rule; (2) it is necessary to suspend quotation to prevent a disorderly or uninformed market; (3) ASX’s rules require the suspension; or (4) it is appropriate for some other reason. As it is ASX which must hold the opinion, the Court cannot evaluate the facts and material for itself and substitute its view as to whether or not there should have been a suspension of ISX’s shares. It can only determine whether ASX in fact holds the requisite opinion and acted according to law in forming that opinion. It was submitted that it is therefore not enough for ISX to show that a serious question to be tried on granular matters of fact. ISX must show a prima facie case that ASX does not hold its opinion honestly and in good faith, or did not arrive at it fairly in the circumstances, or that it is unreasonable in the Wednesbury sense. It was submitted that ISX has not shown such a prima facie case.
38 ISX disputed that it must show a prima facie case as to whether the exercise of the suspension power is valid in order to obtain the interlocutory injunction, submitting that the only question is whether publication of the reasons should be restrained. There are two responses to that submission.
39 First, the Court does not undertake merits review of the reasons but can only review the reasons for legal error. Necessarily, it must do so by reference to the decision-making which the reasons support. For there to be a serious question to be tried on the claim that ASX would be in breach of duty if it published the statement of reasons, it is not enough to rest on the claim that the statement of reasons does not contain an accurate representation of the facts and circumstances of ISX and hence publication is likely to mislead the market because of the inaccuracies and deficiencies which ISX contends are present in document.
40 Secondly, whilst ISX has used the language of legal error for the foundation of the allegation of breach of duty with respect to the inaccuracies and deficiencies which ISX contends are present in the document, and has put forward evidence of such factual inaccuracies and deficiencies, how such evidence was said to support the allegation of breach of good faith, and/or a failure to act honestly and fairly and/or a failure to act reasonably was not addressed. Merely establishing factual errors in the reasoning process would not impugn the decision to publish the reasons as a breach of any of those duties, including the allegation of breach of duty to act reasonably. To show a serious question to be tried on the alleged breach of the duty to act reasonably requires ISX to show a serious question to be tried as to the legal reasonableness of ASX’s decision to publish its reasons, and merely attacking the factual accuracy of the reasons does not suffice to found a claim of legal unreasonableness. Nor does the fact that some of the reasoning is conjecture or incomplete. Critically in this regard, no submission was made that the statement of reasons does not disclose an intelligent and justifiable or defensible basis for the views expressed by ASX and the action that it proposes to take in publishing the reasons.
41 Accordingly I do not consider there is any serious question to be tried on the claim of breach of duty. There is therefore no basis for restraining the publication of the statement of reasons.
BALANCE OF CONVENIENCE
42 I should nonetheless address the question of whether the balance of convenience favours the grant of the interlocutory injunctions in case I am wrong in my conclusion that no serious question to be tried has been demonstrated.
43 ISX argued that the lower risk of injustice favours the grant of both the injunctions it seeks on an interlocutory basis. In summary form, the arguments advanced by ISX included that:
(a) ASX’s stated objective of immediate, adequate and accurate disclosure to the market of information which a reasonable person would expect to have on the price of securities will not be achieved if, as ISX alleges, the final reasons do not contain an accurate representation of the facts and circumstances concerning ISX and are likely to mislead the market and other persons who reads the document;
(b) the permanent injunctive relief that ISX seeks in this case in relation to the publication of the final reasons and the directions which ASX intends to give ISX would otherwise be rendered nugatory;
(c) there is no urgency for ASX to release the final reasons as trading in ISX’s shares remains suspended;
(d) ISX does not object to ASX providing the final reasons to ASIC pursuant to s 792B(2)(c) of the Act to the extent not already communicated, and so ASIC is not inhibited from making use of the final reasons in the investigation that ASIC is separately undertaking; and
(e) there is no suggestion, nor could it be suggested, that damages would be an adequate remedy in lieu of an injunction.
44 Other submissions were advanced concerning the content of the statement of reasons, the directions which ASX intends to give ISX and the risk of reputational damage and potential injustice to ISX, but as those submissions are subject to suppression orders they are not detailed in these reasons.
45 ASX argued that the question of where the balance of convenience lies should be separately considered in relation to whether to restrain the publication of the reasons and whether to restrain ASX from giving the directions to ISX which ISX seeks to enjoin. ASX submitted, broadly:
(a) as to the balance of convenience on the publication of the reasons, the reputational damage which ISX claims is speculative and market discussion shows that ISX’s reputation is not unblemished. In any event, ISX’s reputation comes in no small part from the fact of it being listed on the ASX market. ISX cannot seek the benefits of the reputational cachet that comes from being listed on the Australian Securities Exchange while seeking to suppress consequences of such listing – such as the publication by ASX of information to the market – that it regards as unwelcome;
(b) on the other hand, restraining publication would prejudice ASX in its discharge of its functions as market operator, with associated prejudice to the integrity of the market, which depends on ASX being, and being seen to be, capable of monitoring and enforcing compliance with the Listing Rules. There is also a risk of prejudice to investors who may trade in ISX shares off-market between now and a final judgment.
46 As to the balance of convenience in relation to the proposed directions, the additional arguments advanced by ASX, in summary form, were that:
(a) the first direction would require ISX to announce whether a particular agreement was “back to back” with an agreement with a subcontractor. ISX did not suggest in its evidence or submissions that it would suffer any prejudice from disclosing this fact;
(b) the second direction would require ISX to engage an independent expert to scrutinise its policies and procedures to ensure compliance with Listing Rule 3.1. ISX did not suggest that this would occasion any prejudice;
(c) the third direction would require ISX to include in its quarterly activity reports certain information about the customer sectors from which its revenue is derived. ISX identified no prejudice flowing from this direction.
47 Both parties filed evidence to support their contentions as to where the balance of convenience lies. Much of that evidence is also the subject of the suppression orders but, in any event, it is unnecessary to go into the detail in order to provide reasons.
48 Although recognising there is a risk of reputational damage and a risk of injustice to ISX if an injunction in relation to the publication of the statement of reasons was refused for the reasons put forward by ISX, including that the statement of reasons does not contain an accurate representation of the facts and circumstances concerning ISX and are likely to mislead the market and other persons who reads the document, it is relevant in assessing where the balance of convenience lies to take account of the function that ASX performs as market operator and the public interest which ASX seeks to protect by discharging its functions as market operator. It is also relevant to take into account ASX’s view that it is necessary for an informed market that the final reasons be published, and that ISX be required to take the steps contemplated by ASX's proposed directions to ensure or facilitate ISX's compliance with the Listing Rules. By publishing the statement of reasons and giving the directions, ASX would be acting to protect the public interest in the operation of a fair, orderly and transparent market in relation to ISX’s shares and the wider public interest, in my view, outweighs the potential consequences for ISX of publication. Moreover, the suspension of ISX’s shares from trading does not in my view alleviate the legitimate concern for an informed market. It follows also that although there was evidence to indicate that off-market trading had been very limited thus far, such evidence does not, in my view, gainsay the broader public interest which ASX seeks to protect by discharging its functions as market operator.
49 The other matters raised by ISX would not in my view tip the balance in favour of granting the injunction in respect of the publication of the statement of reasons. Whether or not ISX had any objection to the provision of the reasons to ASIC is neither here nor there, as the provision of such information is not an incident of publication to the market but occurs by force of statute (s 792B(2)(c) of the Act) and/or the Memorandum of Understanding between ASX and ASIC. The claim that refusing to grant the interlocutory injunctions sought would render the final relief sought in these proceedings nugatory has some cogency but it is not a compelling matter, as such prejudice may be mitigated by the declaratory relief which ISX also seeks against ASX. Further, as submitted by ASX, publication of the statement of reasons is not irreversible or irremediable conduct. The statement of reasons can, if necessary, be formally retracted, revised, qualified, or explained. Nor are the consequences of publication irreversible or irremediable as, to the extent that ISX considers ASX’s conclusions to be erroneous or unwarranted, it can publish such facts as it considers relevant to evaluating the “findings” in the statement of reasons to the market, and to those with whom it deals.
50 Accordingly, if it were necessary to decide, I would have found that the balance of convenience weighed against granting an interlocutory injunction restraining ASX from publishing the final reasons.
51 ISX did not separately address the giving of directions from the publication of the statement of reasons, arguing that the directions are not separate from the reasons. I accept ASX’s submission, however, that the two matters should be considered separately on the question of balance of convenience, albeit that the statement of reasons provides the explanation for the directions sought to be given by ASX. ISX did not seek to identify any prejudice that would be occasioned by it if an injunction were refused with respect to restraining ASX from giving the directions, aside from its challenge to the statement of reasons. In the circumstances, had it been necessary to decide, there would have been no warrant on the balance of convenience consideration to grant the injunction with respect to the directions that ASX proposes to give ISX.
52 The application for interlocutory injunctive relief is refused.