Who Watches the Watchman ?

Report from New Zealand, where justice is too often "an orchestrated litany of lies" -- unless you are "one of the boys", of course. The one safety valve in a corrupt system was the right of appeal to the Privy Council in London but that has now been shut off. See here for original of the post below

Recently a NZ Court let a man go free even though he had confessed on video to the murder of a woman. The judge blocked the video evidence because police had 'failed to read him his rights'.

If I go fishing at the local stream and a fishing ranger appears to inform me I am breaking the law I will find myself in Court charged with poaching. And even if I genuinely claim I didn’t know that stream was out of season the judge will reject that plea and simply remind me it is my duty to know the law.

A few years back Kiwi millionaire Sir Bob Jones faced a claim he failed to tell fellow shareholders he was selling his enormous holding of shares in the public company that bore his name. Bob claimed he didn’t know about the substantial shareholders obligation of having to inform the stock exchange/public about selling out. So how did Bob get on in Court ? The judge accepted Bob's claim he didn't know the law and let him off lightly even though courts say ignorance of the law is no excuse. In the Jones case claiming ignorance was bliss and rewarding. Many thought the smoking gun was the fact during the months Jones was selling he was telling everyone the price was so low he was thinking of doing a takeover bid. Those comments had the market excited long enough for Bob to sell.

When I was the second largest shareholder of Australian public company Baden Pacific, even though I was only 26 I knew the rules of substantial shareholder obligations.

So what's going on ?

For years the legal system has rejected appeals for the law to blend in more closely with public policy considerations. They claim the system is the best we have got. Bullshit !

A murderer who confessors on tape of his own free will is still guilty to everyone except those managers of our law. So why does a court let a guilty man go on the basis he didn't get his rights read to him when all of society know the rule on right to silence ?

The judge accepted Bob Jones didn’t know the law. Yet any of us who know Bob, know he has a huge private library at his Lower Hutt home bigger than many public libraries. And we all know Bob is bright, just read his books and listen to him talk. He would know more about company law than I would know about a stream closed for fishing. Yet I would be guilty on the basis that ignorance is no excuse.

You begin to see the inconsistency. This is just the surface of the problem.

I have been dealing with public policy, governments, legislation, law, politicians, lawyers and judges for many years. My resume is from the streets and slums to the boardrooms of some of the worlds most successful companies private and public. My dealings with governments around the world to companies like IMG, GPG, Elbex, Brierley Investments and Kanematsu Japan I have seen it all.I was even in Washington DC during preparation of Desert Storm. So I think I know a scam when I see one.

Some think my battle over Arklow is about me getting a payout. Let me put this in writing - "this is not about the money".

This is about the biggest problem facing the human race today;

Who watches the watchman ?

At 22 I was a keen volunteer secretary for the New Settlers Federation. My job was to assist putting a submission together and help present that to the Senate Standing Committee for a Bill of Rights for the Australian Constitution. Back then I came to realise many lawyers and judges hate the notion of people having a Bill of Rights. They control the rights. In New Zealand where we do have a Bill of Rights the promises they make are mostly baseless. And as the years have passed me by with eyes wide open I have seen why. They want to call the shots to suit them and their friends.

Maybe a Solution

Given the recent news of politicians are attempting to erode more rights I thought this was an issue we need to put to the New Zealand people;

Government having the right to end people's appeal, versus a jury that could provide relief for Government/Crown/Judicial employee negligence, incompetence or even corruption *

* I note the growing trend of organizations being subject to legislation to stop them deciding the conduct of their own members. The argument that wins the legislation is the conflict of interest is too great to allow self regulation, a task to be controlled by others outside the circle of self interest.

There is a common problem with democracy and dictatorships- they make and call the final answer- there is no appeal, they rule. In all third world countries the people really suffer while at the same time their leaders live it up around the world in 5 star luxury. They get the power and forget the obligation to look after the people.

The problem is worldwide. Government after all is a trust entity working on our behalf, but somehow they never seem to represent us. And when they mess up we all pay while they retire in luxury.

In Arklow vs Maclean if there was an absence of fraud and serious judicial negligence I would have walked away from that long ago. But the unanswerable negligence began with Greig J and finished with Henry J in the Privy Council. No one has been able to explain the facts as found by Temm J being changed by the AC and PC. Or the law being quoted belonging to another type of relationship. I really want to know but the problem with the legal system reality is if you speak up you are out of the club forever.

Our justice system claims expertise and a professional service and that is the only thing I have ever been asking for. We can sue others for non-performance, so why can't we get the courts to account ? What we have is not good enough.

I didn't invest $5.5m, lose my family's home and my business just to wonder off and think about how better off I am with the lesson. To walk away would be the waste. These dictators need sorting out to make room for the better managers.

Last year Sir Peter Tapsell and Professor Frank Brosnahan came over to visit me. "Move on and learn from your lessons" both advised. They being among my closest friends I thought again about what I had learnt. But it just reaffirmed the problem I need to help fix.

We don't have enough safety valves in place to control those we allow to manage our societies.

The fact our Crown/ Government leaders don't give a dam about Arklow vs Maclean is the same issue as all the other problems they have caused and walked away from throughout history. Leaders have been doing it for thousands of years and being the entrepreneur, that is the problem I am attempting to address. And Arklow is just another example.

McGechan J's Judgment in Securities Commission v R E Jones

McGechan J had the opportunity to consider further the provisions of Part II when he heard one of the most highly publicised corporate trials in recent years. The Securities Commission applied for the forfeiture of 40 million shares held by Sir Robert Jones and his interests in Robt Jones Investments Ltd ("RJI"). A significant difference between this case and other previous cases is that this was the first to deal with the non-disclosure of the sale of voting securities in a public issue, rather than the non-disclosure of the purchase of voting securities. A further difference is that there was little or no dispute as to who held relevant interests in the voting securities and as to when they were sold. As McGechan J pointed out in his judgment his role was to consider "a claim arising from [the] failure to file certain statutory notices" and it was not to consider the "general commercial morality" of RJI. In essence the decision was about the quantum of the penalty to be imposed, rather than whether or not there had been a transgression of Part II of the Act.

The claim in this case was based on the failure to file some eleven notices required under section 21 of the Act. McGechan J described the Securities Commission's claim in this case as "one of [a] secret selldown by Sir Robert's interests, and within that certain other unacceptable commercial activity, both facilitated by absence of s 21 1% notices". The Securities Commission claimed that there was a deliberate decision on the part of Sir Robert Jones and other executives of the companies involved not to file the notices required under Part II in order to facilitate a number of transactions for the benefit of Sir Robert Jones, and (in some instances) RJI. McGechan J found that Sir Robert Jones was not aware of the "1% rule", although other executives involved in RJI clearly were. McGechan J was even prepared to go so far as to say that had Sir Robert been aware of the rule "he would have given notice in respect of all transactions now impugned". However, he found that the omission to file the required notices was deliberate on the part of some of the executives of RJI.

McGechan J discussed the issue of the standard of proof required under Part II. He noted that all that was required to establish "the essential ingredients of 1% shift and absence of notice" was a reasonable ground to suspect. However, there was no indication as to "'how well' associated aggravating or mitigating factors, going beyond essential ingredients, should be proved''. While Heron J had taken the approach in the Honor Friend decision of requiring the normal civil standard in relation to these elements, McGechan J decided that the correct approach was to allow proof of both aggravating and mitigating circumstances on the lower standard of "reasonable grounds to suspect" since this approach recognised the difficulties of proof faced by the Securities Commission in this area. For McGechan J the dangers inherent in relying upon such lower standards were to be controlled by the Court's discretion in granting a remedy. In his view, where the Securities Commission was only able to rely upon "reasonable grounds to suspect", "a Court will be so much slower, and in appropriate cases quite unwilling, to act in any draconian fashion as by forfeiture". While he had earlier commented that Parliament did not appear to have turned its attention to a question of the standard of proof in relation to mitigating and aggravating circumstances, McGechan J went on to find that Parliament would have been content to leave the Court to determine the appropriate remedies "in an expectation Courts would act cautiously and sensibly, given lower-grade proof along with all other circumstances." In any event he stated that he had considered all the significant matters at "the higher level of balance of probability."

Having discussed what was the standard required under Part II, and having discussed his findings on the facts, McGechan J considered the question of relief. In terms of general principles he noted that the legislature had opted not to provide for criminal sanctions but rather to rely upon civil relief. In his view Part II provided not only a compensatory regime since the civil sanctions "could be severe in the extreme" and the legislature clearly envisaged some transgressions that warranted "strong and punitive responses". Coupled with these aspects of relief was the issue of deterrence. As McGechan J noted, the provision of information which was late could serve little purpose. Consequently it was important to prevent an impression that compliance with Part II was not necessary.

Having set out the underlying principles of the relief available under Part II McGechan J attempted to balance the various principles. While relief could be compensatory it appeared preferable in his view that: a truly compensatory approach be ... left for individual proceedings by those injured eg for insider trading, where losses can be more precisely measured and allocated. There should he no blind principle that remedy (sic) is to be governed by amount of loss, or gain, or the resources of the defendant.

In relation to the punitive and deterrent elements he was concerned that the remedy should be a measured one and that the circumstances such as "knowledge and ignorance; defiance and oversight; major and minor share volumes; frequent and rare occurrence; significant and minor consequences" should be borne in mind.McGechan J also pointed out sections 6 and 21 of the New Zealand Bill of Rights Act 1990 as being relevant elements "pointing to construction against 'unreasonable' seizure of property''.

In applying these general principles to the facts before him he emphasised that it should be clearly signalled to the market that Part II had to be strictly observed. In his view, the signal to be sent was through the damage done to personal and corporate reputation if notice was not given and by financial penalties. As this particular trial was so well publicised the first had been met. In relation to the second McGechan set out those features which pointed towards moderation and those which pointed towards rigour.

In his view moderation was called for as Sir Robert had been ignorant of the requirements of the "1% rule", the persons who knew of the rule had failed to understand the seriousness of non-compliance, and, although the property transaction with 85 The Terrace caused increased losses to RJI and to some shareholders, Sir Robert was not the cause of the end of the property market boom nor the corresponding decline in RJI's price. In addition, Sir Robert had himself lost millions in the general decline. On the other hand, there had been a deliberate decision by executives administering his interests not to file notices, and a number of the transactions were facilitated by non compliance with Part II (which in his view was of particular concern)

Having considered these factors McGechan J finally decided that he would order forfeiture of 6 million shares out of the 40 million then held by Sir Robert Jones and his interests. His reasoning for this was that, while in theory a forfeiture operated to compensate the remaining shareholders, in this case as the capital structure of RJI was considerable there would be little benefit in the forfeiture. By contrast, in his view, forfeiture could work to the disadvantage of former (or existing) shareholders who contemplated other compensatory proceedings since it would reduce the judgment pool potentially available.

A further issue that McGechan J dealt with was the question of costs. Like Heron J he did not agree with a special regime of solicitor and client costs and he openly expressed a concern that "indemnity for costs [could] encourage excessive regulatory zeal". This comment seems in marked contrast to his view in the Gulf judgment that the Securities Commission had a "statutory duty" to bring such an action. In any event he was prepared to award "very substantial party and party costs and disbursements" on the basis that there was "no reason why a defendant found liable should not make a substantial reimbursement to the taxpayer for costs of regulatory proceedings [which] he has rendered necessary". He stated that the level of costs awarded "should enter as a factor into the overall remedy considerations". In fact the costs awarded ($200,000 and up to $50,000 for disbursements) were approximately half the estimated value of the forfeited shares. However, no indication was given as to the solicitor and client costs and the actual level of disbursements incurred by the Securities Commission.



(And don't forget your ration of Wicked Thoughts for today)