ASIC v Rich [2004] NSWSC 844

Reported Decision : 50 ACSR 521

New South Wales Supreme Court

CITATION : ASIC v Rich [2004] NSWSC 844 HEARING DATE(S) : 29 July, 9, 12, 23 and 24 August 2004, with subsequent written submissions JUDGMENT DATE : 13 September 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Plaintiff to pay costs of adjournment applications, to be assessed and paid forthwith, and 50% of costs with respect to discovery and production issues

CATCHWORDS : PRACTICE AND PROCEDURE - costs - costs of adjournment applications - costs of applications to set aside notices to produce and subpoenae - no issue of general principle CASES CITED : ASIC v Rich [2004] NSWSC 772 Fiduciary Ltd v Morningstar Research Inc [2004] NSWSC 664 Australian Securities and Investments Commission (P/A1) John David Rich (D1/R1) PARTIES : John Huyshe Greaves (D3) Mark Allen Silberman (D4/R2) PricewaterhouseCoopers (A2) FILE NUMBER(S) : SC 5934/01 COUNSEL : R B S Macfarlan QC with P R Durack and A J Abadee (A1/ A2) D L Williams SC with M J Steele and S Goodman (R1/R2) Jan Redfern, Solicitor for Australian Securities and Investments Commission (A1) SOLICITORS : Joanne Kelly, Solicitor (R1/R2) PricewaterhouseCoopers Legal (A2)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

MONDAY 13 SEPTEMBER 2004

5934/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V JOHN DAVID RICH & ORS JUDGMENT 1 HIS HONOUR: On 24 August 2004 I ordered that the final hearing of this proceeding, then scheduled to commence on 25 August 2004, be postponed until 6 September 2004, and I published my reasons for judgment: ASIC v Rich [2004] NSWSC 772. My decision was consequent upon an application formally made on 23 August and foreshadowed on 19 August, and arose out of a contest between the parties and PricewaterhouseCoopers ("PwC") as to discovery and the production of documents, which had been ventilated in interlocutory hearings on 9, 12 and 19 August. Now the first and fourth defendants (to whom I shall refer, for convenience, as "the defendants") make application for various costs orders against ASIC and PwC, and orders that those costs be assessed and paid forthwith. 2 Pursuant to my directions, made to minimise costs and disruption of preparations for commencement of the hearing on 6 September, the costs applications have been dealt with by written submissions. The defendants' submissions (40 paragraphs plus annexures) were dated 26 August 2004, submissions on behalf of ASIC and PwC were undated but comprised 12 paragraphs, there was a submission from the defendants in reply dated 31 August 2004 (11 paragraphs), and an undated supplementary submission by ASIC comprising one paragraph. 3 First, ASIC accepts that it should be ordered to pay the costs of the adjournment application heard on 23 August and any costs thrown away by reason of that adjournment. The reason it gives for this concession is that these costs were incurred as a result of mistakes made by ASIC in relation to discovery, principally in relation to the date upon which the contemplated litigation purpose became dominant over the investigatory purpose. As explained in my reasons for judgment of 24 August, paragraphs [6] and [24], ASIC had previously claimed litigation privilege in respect of documents created after mid-October 2001, and reduced that claim to documents created after 4 December 2001 by letter dated 19 July 2004. I regard ASIC's reason for submitting to an order for these costs as sufficient to justify the order. 4 As I mentioned in paragraph [1] my reasons for judgment of 24 August, there was an earlier postponement of the commencement of the hearing, from 2 August to 23 August, because ASIC filed a late affidavit by an important lay witness. The defendants claim a similar order for costs in respect of that postponement and ASIC has not contested that claim. 5 My first order, therefore, will be an order that ASIC pay the defendants' costs of the adjournment applications heard on 29 July and 23 August 2004, and any costs thrown away by reason of those two adjournments. 6 There is more contention about the costs of the hearings on 9, 12 and 19 August, relating to issues of discovery and production of documents. Before the court on those occasions was an application by ASIC to set aside paragraphs 8 and 9 of a subpoena to PwC dated 2 July 2004. PwC made a corresponding application to set aside paragraphs 8 and 9 of the subpoena. Counsel appeared on those days on behalf of both ASIC and PwC, and I therefore take it that the application by PwC as well as the application by ASIC was before the court for determination. The defendants contend that ASIC and PwC should be ordered to pay their costs of those two applications and of the hearings on those three days. 7 There is a summary of the evolving dispute with respect to discovery and production of documents in paragraphs [5] to [14] of my reasons for judgment dated 24 August. As I explained there, the parties were able to reach an accommodation in respect of some of their disputes by the time of the second hearing day on 12 August. It appeared on that day that, given time, further progress could be made, and so the interlocutory hearing was adjourned until 19 August. By 19 August, senior counsel for the defendants informed me that his clients would apply for postponement of the commencement of the hearing, then scheduled to begin on 23 August, by at least two weeks, on the ground that the documents that had been recently produced indicated that ASIC's discovery had been inadequate. 8 In my reasons for judgments of 24 August I observed that: · amongst the large volume of documents that had been produced by ASIC since early July, there were some that appeared potentially to have real significance (paragraph [17]); · it was reasonable for the defendants' legal team to wish to consider and analyse the documents further (paragraph [18]); · although documents were produced as part of a negotiated outcome and some of the defendants' demands were withdrawn, there was a basis for criticising ASIC's approach to the production process, especially with respect to litigation privilege and client legal privilege (paragraph [23]); · ASIC had changed its position with respect to litigation privilege by limiting its claim to the period after 4 December 2001, and had withdrawn claims for client legal privilege thereby releasing some apparently important documents concerning Mr Carter's relationship with ASIC in the period from October to December 2001, in each case with no explanation for the change of heart (paragraph [24]); · the cross-examination of Ms Rees, ASIC's solicitor, laid the foundation for a concern that she might have misapprehended the proper scope of client legal privilege (paragraph [24]); · the defendants had been placed in a predicament (of having inadequate time to consider large volumes of materials produced not long before the scheduled hearing date) which had arisen, to a significant degree, by the fault of ASIC in failing to discover documents that ought to have been discovered much earlier (paragraph [28]). 9 Those findings imply that a substantial part of the disputation with respect to production and discovery of documents during the July-August period arose out of inadequate disclosure and mistakes on the part of the ASIC team, which came to light only through the process of the defendants issuing multiple notices to produce and subpoenae.