ASIC v Rich [2006] NSWSC 266

New South Wales Supreme Court

CITATION : ASIC v Rich [2006] NSWSC 266

HEARING DATE(S) : 4 April 2006

JUDGMENT DATE : 4 April 2006

JURISDICTION : 5934/01

JUDGMENT OF : Austin J

EX TEMPORE JUDGMENT DATE : 04/04/2006

DECISION : Adjournment for period sought by plaintiff

CATCHWORDS : PRACTICE & PROCEDURE - civil penalty proceeding - effect of "penalty privilege" on conduct of trial - plaintiff's application for adjournment to review voluminous evidence filed and served by defendants - possibility of evidence in reply - discretionary considerations

CASES CITED : Re HIH Insurance Limited (in provisional liquidation); ASIC V Adler (2001) 40 ACSR 214

Australian Securities and Investments Commission (P) PARTIES : John David Rich (D1) Mark Alan Silbermann (D4)

FILE NUMBER(S) : SC 5934/01

COUNSEL : R B S Macfarlan QC with J P A Durack SC (P) D L Williams SC with M J Steele (D1, D4)

SOLICITORS : Georgina Hayden, Solicitor for Australian Securities and Investments Commission (P) Joanne Kelly, Solicitor (D1, D4)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

WEDNESDAY 4 APRIL 2006

5934/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V JOHN DAVID RICH & ORS JUDGMENT (Ex tempore; revised 6 April 2006) 1 HIS HONOUR: There has been an exchange between bench and counsel on a number of issues from which a reader of the transcript would be able to discern my attitude. I do not regard it as necessary, unless I am asked to do so, to give full reasons that would address every submission that has been made to me. 2 My assessment of the matter is that, unfortunate though it is from the point of view of the expeditious conclusion of this case, it is inevitably the position that a substantial adjournment must be granted in response to ASIC's application. The substantial adjournment already given to the defendants to enable them to prepare the defendants' evidence has led to the serving, within the time specified by those directions, of a very large volume of material. The affidavits of Mr Rich and Mr Silbermann run together to over 700 pages and there are large quantities of documents in the tender bundle and exhibits to the affidavits. 3 I have received today submissions from the parties on the one hand seeking to emphasise the sheer volume of material to be reviewed and, on the other hand, seeking to make the point that, to a significant extent, the documents that have been served and the affidavits that have been sworn are addressing familiar materials and organising evidence in a manner that would assist the convenience of the court rather than launching out in new and unexpected ways. 4 What seems to me significant is that, even accepting the defendants' submissions, there is still likely to be a very substantial amount of work required for the plaintiff's legal team by virtue of the simple fact that the material that has been served is the presentation for the first time (in contrast with the guesswork that has had to be undertaken during the course of the defendants' cross-examination of the plaintiff's witnesses) of the nature, scope and detail of the defendants' answer to ASIC's case against them. 5 The fact that the defendants' case is presented to ASIC now for the first time is a direct consequence of the High Court's decision in this case, that the so-called penalty privilege extends to a defendant in a civil penalty proceeding in which the plaintiff seeks a disqualification order. An adjournment is simply unavoidable now, some 10 days after the serving of the defendants' evidence, to give ASIC the opportunity for detailed consideration of the defendants' case for the settling of the strategy and detail of the approach to be taken in cross-examination of the defendants' two witnesses, a period of cross-examination which will inevitably be lengthy, and for other work as well. The additional work includes review of the defendants' evidence for the purpose of making objections to admissibility and I imagine, much more importantly, the making of inquiries which will inform the process of cross-examination and possibly also the adducing of some evidence in reply. 6 The time that ASIC seeks for that purpose is a period of about two months from now and it seems to me, having had the opportunity to review, though I admit not by any means to absorb, the defendants' material that this is not an unreasonable request. More importantly, the period that has been requested is an assessment made by senior counsel for ASIC on behalf of his client in circumstances where I think it appropriate to infer that ASIC would not seek an adjournment of such long-running litigation unless it were, in the view of ASIC and its advisers, necessary to do so. 7 I therefore give very considerable weight to the assessment of senior counsel of the amount of time which he says is the minimum time needed for his client to deal with the defendants' evidence. I should make it clear that Mr Macfarlan has put that assessment in very forceful and unambiguous terms. 8 One of the issues that has been explored in submissions relates to the prospect that ASIC may seek to adduce evidence in reply. ASIC has informed me that that matter is under consideration and that the consideration will include careful attention being paid to the judgment of Santow J in Re HIH Insurance Limited (in provisional liquidation); ASIC V Adler (2001) 40 ACSR 214. 9 The principles enunciated by his Honour in that case suggest that a decision by the court on whether evidence tendered by the plaintiff in reply should be allowed into evidence depends upon the application of some principles that are of their nature discretionary (see paragraph [6]). I think there is some force in the submission that the application of those principles cannot be made in the abstract and is a task that needs to be undertaken when the specific nature of the proposed evidence in reply, and perhaps also its content in detail, is presented to the court for determination. 10 In any event, without at this stage deciding that there are no points of principle that are impossible to have resolved before the evidence in reply is tendered, it does seem to me likely that any decision on the admissibility of evidence in reply will have to be taken when the plaintiff's intentions are more mature than they are now. 11 It also strikes me that the making of decisions on the part of the plaintiff as to evidence in reply is simply an aspect of the entire process of developing strategy, cross-examination in detail, making inquiries and deciding overall how best to handle the defendants' evidence that has been served. I do not regard it as feasible to expect the plaintiff to separate the process of making decisions on evidence in reply from all of the other aspects of the work that need to be undertaken. 12 Senior counsel for the defendants suggested that I should give directions requiring ASIC at an early date to notify the defendants of the paragraphs or documents in the defendants' evidence in respect of which ASIC intends to adduce evidence in reply, the nature and extent of the evidence in reply in respect of those paragraphs, and the identity of the deponent of any affidavit that would be proffered by way of evidence in reply. Senior counsel for ASIC submitted that it would be unfair to require ASIC to do so at an early date. 13 My assessment of this is not so much based on fairness or unfairness as, rather, on practicality. Assessing as best I can from my review of the documents and the submissions I have received what work it is that ASIC's legal team has to undertake, it seems to me impractical to require ASIC, before it has had the opportunity of properly and fully considering the defendants' evidence and making some inquiries in light of that evidence, to single out particular paragraphs and identify, presumably in a way that would bind it subsequently, how it intended to deal with the matter in any case in reply. 14 The unfortunate conclusion is, in my view, that ASIC's application should succeed and that the defendants' suggestion that a direction be given to file information about the proposed evidence in reply should not be taken up. I say "unfortunate" for a number of reasons. One in particular is that I am very conscious of the amount of time that this case has taken and the strains that it imposes on the defendants in financial and other terms. These are matters to which I referred in my judgment determining that ASIC's new expert's report, the so-called Smith report, should not be received into evidence. 15 When I look at those issues now, however, it does strike me that, serious though the prejudice is that the defendants are suffering and will continue to suffer so long as this case continues, given that it is inevitable that some adjournment beyond 10 April is needed in any event, the additional prejudice produced by acceding to the plaintiff's application today is not highly significant. Weighed against that prejudice is the prejudice that the plaintiff would suffer if it were forced to deal with the defendants' case without being given a proper opportunity to respond to the great volume of evidence that has been served. 16 The further adjournment is unfortunate, too, from the court's point of view, in the sense that it is necessary for the court to allocate judicial resources to the hearing of this case on the basis of an estimate of the length of time needed to bring it to conclusion. Whenever a further adjournment is needed, the court's calculations have to be recast and the availability of the Judge hearing this case to hear other cases is necessarily postponed - although, as I indicated in argument, there may be some compensating effect to the extent that the adjournment enables the Judge to do other work in the meantime. 17 So the postponement is unfortunate in various ways, but it seems to me the proper course is to order that the postponement should occur. I explored in argument whether it might be possible to bring forward the process of dealing with objections to admissibility of the evidence, but I was informed by senior counsel for ASIC that his estimate of the minimum amount of time needed to prepare to review the defendants' case was based on the assumption that all legal resources would be available for that task, and his assumption that neither of the two senior counsel involved on behalf of ASIC would be required to attend in court during the period of review in order to deal with objections to admissibility. I think I must accept that submission in the circumstances. **********