ASIC v Sydney Investment House Equities Pty Ltd [2009] NSWSC 107

New South Wales Supreme Court

CITATION : ASIC v Sydney Investment House Equities Pty Ltd [2009] NSWSC 107

HEARING DATE(S) : 2 March 2009

JUDGMENT DATE : 2 March 2009

JURISDICTION : Equity

JUDGMENT OF : Hamilton J

DECISION : Penalty and costs hearing to proceed in absence of defendant.

CATCHWORDS : PROCEDURE [110] – Supreme Court procedure – Procedure under Rules of court – Trial – Application to proceed with penalty and costs hearing in absence of defendant who has had notice of hearing.

LEGISLATION CITED : Uniform Civil Procedure Rules 2005 rr 29.7, 36.17

CATEGORY : Procedural and other rulings

CASES CITED : ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224

Australian Securities and Investments Commission (P) Sydney Investment House Equities Pty Ltd (D1) Sydney Investment House Capital Ltd (D2) Edwin James Goulding (D3) Stephen Geagea (D4) PARTIES : Sydney Investment House Pty Ltd (D5) Sydney Investment House (Newcastle) Pty Ltd (D6) Sydney Investment House (Beaconsfield) Pty Ltd (D7) Melbourne Investment House Pty Ltd (D8) Melbourne Investment House (Hawthorn) Pty Ltd (D9) Melbourne Investment House (Collingwood) Pty Ltd (D10)

FILE NUMBER(S) : SC 2941/06

COUNSEL : A J McInerney (P) No appearance (D3)

SOLICITORS : Kim Turner, Solicitor (P) In Person (D3)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

MONDAY, 2 MARCH 2009

2941/06 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v SYDNEY INVESTMENT HOUSE EQUITIES PTY LTD & ORS JUDGMENT 1 HIS HONOUR: I delivered my substantive judgment in these proceedings on 21 November 2008: ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224 ("my judgment"). On 28 November 2008 I amended my judgment and made orders in accordance with it. I fixed 3 and 4 February 2009 for the hearing of this matter on penalty and costs. That hearing was subsequently deferred to today and 4 March 2009 because of my indisposition. 2 Last night the third defendant, Mr Goulding, faxed to the Court a notice of appointment of Brian Gillard as his solicitor. He also faxed a copy of the same document to the plaintiff. At 11.50 pm he faxed a copy of it to Mr Gillard, to whose attention it did not come until about 10 o'clock this morning. 3 This morning Mr Gillard has appeared as a courtesy to the Court and informed the Court that, although he had some communications with Mr Goulding between early February when Mr Goulding sent him a copy of his written submissions on penalty and costs and yesterday, he does not regard himself as retained by Mr Goulding and does not regard any of those communications as amounting to instructions to appear on Mr Goulding's behalf either today or on Wednesday. 4 I made it quite plain on 28 November 2008, when the hearing on penalty and costs was originally fixed, that it was vital that the matter not be deferred to a later time. The reason for that was my impending retirement on 31 March 2009. 5 Mr Gillard has now withdrawn and Mr McInerney, of counsel for the plaintiff, has asked that, in the exercise of the power under r 29.7 of the Uniform Civil Procedure Rules 2005 ("the UCPR") and any other power the Court has in that regard, the Court should proceed with this aspect of the hearing in Mr Goulding's absence. The original time constraint is all the greater, because 31 March 2009 is closer. Mr Goulding has been informed of the fixtures on this day and Wednesday and the flurry of faxes last night makes it plain that he is well aware that the matter is to proceed today. The Court has full written submissions from Mr Goulding on these aspects of the case. In light of the foregoing, I propose to continue with the hearing as requested by Mr McInerney. 6 By e-mail (the only means of communication available with Mr Goulding), communication has been sent this morning informing Mr Goulding of what Mr Gillard has told the Court and of my proposal to continue with the hearing in his absence. He has been assured that I shall take into account the written submissions that the Court has received. He has also been invited to appear before the Court on the current hearing, either later today or on Wednesday, when it will resume. 7 An application has been made dealing with a matter under the slip rule, the reason for that being that I made an error in the following regard. In relation to Grounds 1 and 2 referred to in my judgment, the making of loans to insolvent borrowers and by insolvent lenders, I indicated that, in the case of the Equities loans, only two of the borrowers could be found to have been insolvent at the time of the loan agreements. 8 However, in [172] of my judgment I concluded that, in causing or permitting Equities to enter into the Equities Loan Agreements to persons not established to be approved development borrowers and under loan agreements that did not impose a condition restricting the use of the loan moneys to approved development projects, Mr Goulding committed breaches of his duties in relation to all of the Equities Loan Agreements. 9 Equally, in [180] of my judgment I found that Mr Goulding in causing or permitting the making of the Equities loans, that is, in entering into all the Equities Loan Agreements, Mr Goulding was in breach of his obligations as a director by reason of non compliance with the conflict of interest requirements imposed on directors. 10 As appears in [505] of my judgment, it is indicated that what ASIC sought was a finding that Mr Goulding's conduct in causing or permitting Equities and Capital to enter into and make advances under all of the Equities Loan Agreements and all of the Capital Loan Agreements constituted a breach of his duties as a director. 11 The finding that I in fact made is set out in paragraph [517] and the declaration that I made limited what ASIC requested in two ways. The first is that I declined to find that the making of advances under any of the loan agreements was established to be a breach of Mr Goulding's duties. That finding is not challenged and I am not now asked to alter the finding that I made to encompass the making of advances. 12 However, as to the second limitation, what is submitted is erroneous is that I excluded Equities Loan Agreements Nos (1) and (4) to (7) from the finding and the declaration. It is said that that was erroneous on the face of my judgment because, although not the larger but only the narrower finding was justified on the insolvency ground, my findings in [172] and [180] on other grounds meant that all the Equities Loan Agreements were entered into in breach of duty. Unfortunately, when formulating the finding and the declaration, I did not advert to my findings in [172] and [180], which separately justified the larger finding and declaration. ASIC submits that these should now replace the earlier ones. 13 It is perhaps regrettable that ASIC has not perceived this and made this submission until now, but I should make it plain that the error that produced this result was entirely mine. 14 Mr Goulding in his written submissions protests that for me to make this correction now would be yet another amendment which permitted the enlargement of ASIC's case and points to a number of amendments which have been made in its favour in the past. However, it is not correct to say that this is some new matter raised on ASIC's part. Not only did ASIC prove and make submissions at the trial concerning the alternative bases for this finding and declaration, but the relevant findings were in fact made and incorporated in [172] and [180] of my judgment. 15 What is encompassed within the slip rule (now contained in r 36.17 of the UCPR) is that it permits the correction, even after entry of orders, of "a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order". It does not, of course, permit correction to insert any new matter. However, in my view this is not a case of new matter. It was an accidental omission by the Court to give effect in its formal finding and orders to the findings clearly made in [172] and [180] of my judgment. 16 I therefore propose to withdraw the erroneous portion of my reasons for judgment and to substitute a formal finding and amend the relevant declaration to the form now sought by ASIC, which is both permissible within the slip rule and absolutely dictated to correct the inconsistency which at present exists on the face of my judgment. 17 I should say that, so far as the penalties and costs hearing is concerned, I do not think that this will in any case make any difference either to the disqualification that is imposed or, indeed, to what is done about the costs of the matter. So far as the overall bulk of the findings of breach against Mr Goulding is concerned, the additional findings in relation to five contracts will not be of significance in determining the length of the disqualification; even more so, on the costs front, what is involved is trifling and will make no difference to the determination I ultimately make as to the costs of the proceedings.