ASIC should appeal the Harold Mitchell case without delay

Three weeks ago, Crikey ran a piece cautiously defending the corporate regulator ASIC for chasing advertising rich-lister Harold Mitchell despite effectively losing an expensive case about the Tennis Australia TV rights.

After reviewing much of the fascinating 400-plus page judgment, reading some commentary (especially a column in The Australian by Institute of Public Affairs chair Janet Albrechtsen) and looking further into the issue I’m now of the view ASIC should lodge an appeal.

Unfortunately the strong word on the street is that ASIC’s big-talking deputy chair and head of enforcement, Liberal Party supporter Dan Crennan QC, has decided not to appeal, even after putting out this bolshie statement when the judgment was made public on July 31.

What would the appeal grounds be?

First, the controversial decision of Justice Jonathan Beach to call Seven’s executive director Bruce McWilliam as his own witness is something that clearly went against High Court authority and is likely to be corrected on appeal.

The High Court has previously said a judge should never call a witness in any type of proceeding without the consent of both parties.

Beach’s justification for taking this unprecedented step is that he regards ASIC in a civil penalty proceeding as a quasi-prosecutor and subject to a duty of fairness like the prosecutor in a criminal case. That is contrary to what the High Court said in the James Hardie case, where it held that ASIC is like any other civil litigant in this type of case.

ASIC had a pretty open and shut case of collusion against Mitchell based on email exchanges with McWilliam. However, by calling McWilliam as a witness, Beach gave Mitchell’s counsel the right to cross-examine him, dramatically tipping the forensic balance away from ASIC.

This was evident in the reasons for judgment, where the judge relies heavily on answers given by McWilliam to Mitchell’s counsel in cross-examination to downplay the significance of the incriminating McWilliam emails and to dismiss most of the allegations ASIC made against Mitchell.

An appeal court would be asked to imagine a trial without McWilliam’s evidence and on the basis that the incriminating emails speak for themselves.

Not expensive or time-consuming

Albrechtsen’s column savaged ASIC for chasing Mitchell and also promoted Beach as a candidate worth considering to fill one of the upcoming High Court vacancies.

If that’s the case, it would be worth having Beach’s Tennis Australia judgment thoroughly assessed by the court of appeal which would take a couple of days to review all the material and any additional submissions. Relative to the main trial, it wouldn’t be expensive or time-consuming.

The problem with the Albrechtsen attack on ASIC is that it fails to even mention that ASIC had three former Tennis Australia directors, Kerryn Pratt, Janet Young and Scott Tanner, who gave evidence against Mitchell. The case was built around them.

Pratt was a compelling witness who produced a contemporaneous file note which contradicted the evidence given by Mitchell’s co-defendant, Steve Healy, the former Tennis Australia president who was accused of withholding key information from the board.

After hearing this evidence, ASIC’s QC, Michael Pearce, applied to have transcripts of the regulator’s earlier examination of Healy tendered as evidence, but Beach declined. This is the other key legal point worth exploring on appeal.

Albrechtsen is a former lawyer and Liberal partisan who was formerly married to fellow lawyer John O’Sullivan, another pro-business Liberal partisan who is on the AMP board and was proposed by his good friend Malcolm Turnbull to be ASIC chair in 2017-18, only to withdraw his nomination after Labor’s then shadow treasurer Chris Bowen expressed concern.

As chair of the anti-regulation IPA, it should come as no surprise that Albrechtsen attacked ASIC for tackling a successful businessman like Mitchell and getting in the way of business.

Albrechtsen launched similar attacks on proxy advisers last year — how dare they get in the way of businessmen like Gerry Harvey? — and has been equally voluble in her campaign to wind back the class actions industry.

It’s the classic pro-business, small government agenda prosecuted globally by News Corp, the Murdochs and the US Chamber of Commerce, but there was no nuance from Albrechtsen in looking at the specific circumstances of the Mitchell case.

Market interest should have been tested

On reading the judgment in full, I believe Mitchell should have done more to test interest in the market.

Taking big contracts to market is corporate governance 101. Pursuing a strategy of elimination against boardroom critics in having them voted off the board was also way too aggressive by Mitchell and his Tennis Australia board allies.

For some strange reason, Beach was particularly strong in his view that Tennis Australia did the right thing not going to market with the rights when there was evidence provided that then Network Ten chair Hamish McLennan was up for committing $50 million a year.

Anyway, the reason for writing about this now is that the deadline for ASIC to give notice of an appeal on the Healy charges is Friday. It has more time on Mitchell because Beach is expected to deliver “declaration of contraventions” on his three minor breaches next week.

Under the law, ASIC has 28 days to decide whether to appeal once a judge has completed the decision-making process on any charges brought, so a decision on any Mitchell appeal is not required until early October.

But if ASIC was to appeal the Mitchell matter it should also challenge the Healy exoneration, and for that to happen Crennan would need to change his mind before Friday.

Let’s hope he does.