5164/01 AUSTRALIAN SECURITES & INVESTMENTS COMMISSION v AUSTRALIAN INVESTORS FORUM PTY LIMITED & 27 ORS
JUDGMENT - Ex Tempore (On Mr Luvara's application for adjournment of hearing)
1 HIS HONOUR: This is an application which is brought by Mr Dominic Luvara, who is the fourth defendant in some proceedings which are listed to commence this coming Friday. The proceedings are ones brought by ASIC against numerous defendants, seeking orders disqualifying natural people from participating in the management of corporations seeking compensation orders, and seeking the winding up of various corporations. They relate to the activities of Australian Investors Forum Pty Limited.
2 Mr Luvara was formerly the managing director or chairman of that company.
3 The notice of motion on which Mr Luvara moves is that the hearing be vacated as against him and the sixteenth defendant. The sixteenth defendant is a company, Casabanca Pty Limited, which he effectively controlled. It is alleged to have played a role in the activities of Australian Investors Forum Pty Limited.
4 The basis upon which the application is brought is an allegation that Mr Luvara is in no fit state, mentally, to be able to cope with a complex trial.
5 There is evidence before the Court from Dr Hampshire, a psychiatrist who was retained on 13 June 2003 by Tzovaris Legal, the solicitors acting for Mr Luvara. Dr Hampshire was asked to express a view, on, broadly, the ability of Mr Luvara to do the tasks which are involved in being a defendant in complex commercial litigation. Dr Hampshire has expressed the view that he is suffering from a severe major effective disorder, namely depression.
6 The basis for that is a history given to Dr Hampshire where Mr Luvara reported being very depressed and tearful on a daily basis, pervasively unhappy, unable to get out of bed, feeling hopeless about the future. He exhibits biological features seen in the more severe depressive illnesses, including profound loss of libido, marked loss of energy, loss of motivation, significant loss of concentration, a disturbed sleeping pattern characterised by early morning awakening, but also with nightmares and with a difficulty in falling asleep.
7 Dr Hampshire administered to him the BECK depression inventory, on which Mr Luvara scored 48 out of 60. This is a test where the higher the number achieved, the worse the extent of depression. Dr Hampshire said that a score of this kind would put him in the severe to extreme range of depression.
8 There are also some paranoid symptoms exhibited by Mr Luvara where he believes his phone could be tapped, or that he is being videotaped. However, Dr Hampshire is of the view that that is not something which was indicative of the depression being a psychotic depression.
9 As well, Mr Luvara described having panic attacks. Those panic attacks occur predominantly at night.
10 Dr Hampshire also made a subsidiary diagnosis of post traumatic stress disorder. It appears that the current accepted set of criteria for psychiatric disorders, the document known as the DSM IV, has, as an essential requirement for post traumatic stress disorder, that there has been a life threatening experience to which the patient has been exposed.
11 The diagnosis of Dr Hampshire of post traumatic stress disorder accepts that there has been no such life threatening experience on Mr Luvara's part, but there are various other symptoms of post traumatic stress disorder which he exhibits. He shows intrusive features involving flashbacks to an interview he had sustained with an ASIC investigator. Dr Hampshire also reports that he has a number of avoidance features seen in post traumatic stress disorders, including a significant social avoidance from his friends.
12 The picture he presented to Dr Hampshire was that he had given up his former social activities, is socially isolated, and stays at home most of the time. He avoids attending to matters which he should be attending to in preparation of his case, because when he does panic attacks are triggered, or he becomes exceedingly anxious.
13 Dr Hampshire expresses the view that he is not fit to give instructions to his legal team, and not fit to give evidence or be cross-examined. He says that Mr Luvara cannot accurately assess or evaluate advice given to him by his legal team, that there is a disturbance in his concentration and attention, and possibility and subjective experience of a disturbance in both short and long term memory, more particularly long term memory.
14 Dr Hampshire says his thinking is paranoid and not cohesive, nor is it rational or logical. Emotionally he is tearful and brittle, exceedingly depressed, and has no capacity to have a sustained sense of wellbeing. Dr Hampshire concludes that he is not fit to attend to any records or court appearances, particularly one that is heavy in paper, as the impending court appearance will be.
15 A different conclusion has been arrived at by another psychiatrist, Dr Kipling Walker, who saw Mr Luvara yesterday. Mr Luvara gave a similar history to Dr Walker as he had given a couple of weeks before to Dr Hampshire.
16 One aspect of the history is that Mr Luvara saw Dr O'Sullivan, a consultant psychiatrist, on one occasion during 2002. Dr O'Sullivan prescribed an antidepressant for him, which Mr Luvara took without effect for several months.
17 Dr Hampshire had prescribed a particular antidepressant for Mr Luvara, but by the time Mr Luvara went to Dr Walker, Mr Luvara had not started on that antidepressant. Nor had Mr Luvara done anything about taking up the advice of Dr Hampshire about consulting a Dr Michael Armstrong, who specialises in the treatment of depressive disorders.
18 The mental state examination which Dr Walker went through is one which concluded that Mr Luvara was poorly attentive, and a number of questions had to be repeated, but his thought processes were otherwise normal. His answers to questions were not delayed. He was aware of the purpose of the Court proceedings against him, namely, to ban him from being a director, and to seek compensation.
19 There was some discussion between Dr Walker and Mr Luvara about the process involved in being a party to court proceedings. The report of Dr Walker says:
"I asked Mr Luvara about evidence. He accepted my explanation that it could consist of affidavits and verbal evidence from witnesses. He accepted my explanation that he could challenge the truth of evidence through his counsel.
I asked Mr Luvara about instructing his counsel. He accepted my explanation that he could instruct his lawyers about how to conduct his case. However, he said he did not have 'the desire or the inclination' to complete his affidavit."
20 The ultimate diagnosis which Dr Walker came to was that Mr Luvara had an adjustment disorder with mixed anxiety and depressed mood, and also suffered from alcohol abuse. He concluded:
"Mr Luvara is fit to give instructions to his counsel and he is fit to give evidence to the Court. However. I recommend that his counsel and the Court be mindful of his being poorly attentive. His counsel would need to explain relevant issues as the case proceeded. In cross-examination, questions might need to be repeated, and he would need to be given adequate time to answer them."
21 There is evidence from Mr Tomaras, an employed solicitor at Tzovaris Legal. He has had conferences over some months with Mr Luvara. He says that during April 2003 Mr Luvara attended their office on several occasions to discuss section 837 hearings and to arrange a meeting with ASIC to discuss a settlement of the whole proceedings.
22 He says that since April 2003 it has been very difficult to arrange a conference with Mr Luvara to obtain instructions with respect to the proceedings and the section 837 hearing. He says that he has observed an ongoing decline in Mr Luvara, both mentally and physically, in that:
"(a) his facial features seem to be disfigured;
(b) he has substantially gained weight over a short period of time;
(c) both his attire and appearance seem neglected;
(d) he is unable to sit in a conference for a long period of time, he gets up and walks around the room, and it becomes impossible to continue the conferences;
(e) he repeats questions to which I have already given him answers to previously; and
(f) during the conferences, he does not seem to follow the discussions and does not understand the advice."
23 Against that picture is some evidence of lay witnesses. It emerges from an affidavit of Mr Thomson, an investigator with ASIC, that the interview with Mr Luvara which Mr Luvara had told Dr Hampshire about, was one which was conducted in the presence of Mr Luvara's solicitor. He says:
"Based on my past experience in conducting such examinations, I feel sure that answering questions in these circumstances is never a pleasant experience. However, the examination was not an acrimonious one, and Mr Luvara did not appear to me to become overly agitated or upset during the course of it.
To the best of my recollection Mr Tzovaris did not raise any objection to the line or style of questioning during the examination. Mr Tzovaris reminded Mr Luvara of his right to claim privilege, and occasional breaks were taken when Mr Tzovaris conferred with his client."
24 In February of this year Mr Luvara telephoned Mr Thomson to inform him about a matter which was unrelated to the present case, which in his view warranted some action by ASIC. As well, they spoke on the phone during April 2003, when Mr Luvara told Mr Thomson that he wanted to come into ASIC to discuss a settlement.
25 There is also some evidence from Mr Banovec. He is a corporate adviser of the Capital Trust. He gave evidence about how, during April and May 2003, the Capital Trust was seeking to raise funds by setting up an ASIC-approved debenture fund. In connection with that, he met Mr Luvara on 11 April 2003. He had further meetings with Mr Luvara on 29 April 2003 and 2 May 2003. His solicitor, Mr Ziman, was present during the meetings on 11 April and 2 May.
26 As a result of that meeting, a company called Burilla Asset Management Pty Limited sent to Mr Banovec a draft document which is a letter of appointment in relation to:
"Our mutual intention to establish a commercial lending institution for the purpose of raising public funds that will be applied as loans to borrowers offering security by a mortgage over real estate."
27 The letter is an extremely complex commercial document of five pages, setting out the basis upon which Burilla was willing to engage in that work. Mr Luvara purported to be the signatory of it.
28 Mr Ziman gave evidence of the meeting on 11 April, when he met Mr Luvara. At that meeting they lunched together and chatted. On 2 May there was another meeting which Mr Ziman attended, where Mr Luvara gave a lengthy presentation in front of a whiteboard. That meeting lasted until approximately 3 pm.
29 Mr Banovec deposed to Mr Luvara having presented himself in a very professional manner, with his business communications and grooming always being of the highest standard.
30 These observations of people who were psychiatrically untrained were matters of which Dr Hampshire had not been aware. He accepted that that evidence was not consistent with the way he had described him, as being someone isolated at home.
31 Some evidence was also called from Mr Lloyd-Cocks, who had been involved in Australian Investors Forum Pty Limited. He had observed Mr Luvara over the period from October 1999 to some time in 2001 in meetings. He says that at that time he observed a lack of attention on Mr Luvara's part from time to time. He said that Mr Luvara, at that time, was someone who would leave meetings early, who would arrive at the office late, 10.30 am to 11.30 am, and leave early, at 3 pm or thereabouts. He expressed the view that even at that time Mr Luvara was someone who had "a lack of attention to the essence of the deal".
32 The essence of the test which the Court needs to apply in deciding whether an application for adjournment should be granted, is one to do with whether it would be an abuse of process for the proceedings to continue. In the related question of fitness to plead, in criminal proceedings, the applicable tests have been propounded in Presser, (1958) VR at 45-48, as being:
"He needs ... to be able to understand what it is that he is charged with. He needs to be able to plead to the charge and to exercise his right of challenge. He needs to understand generally the nature of the proceedings, namely that it is an enquiry as to whether he did what he is charged with. He needs to be able to follow the course of the proceedings so as to understand the purpose of all the various court formality. He needs to be able to understand ... the substantial effect of any evidence that may be given against him; he needs to be able to make his defence or answer the charge.
Where he has counsel he needs to be able to do this through his counsel, by giving any necessary instructions and by letting his counsel know what his version of the facts is, and, if necessary, telling the Court what it is. He need not, of course, be conversant with court procedure and he need not have the mental capacity to make an able defence, but he must ... have sufficient capacity to be able to decide what defence he will rely upon and to make his defence, and his version of the facts, known to the Court and to his counsel, if any."
33 That test, while it cannot be transposed directly to the circumstances of civil proceedings, still lists the factors of mental capacity which it is necessary for someone who is a defendant in civil proceedings to have. It needs to be supplemented to include being able to follow and give instructions about the pre-trial documentation which is involved in civil proceedings.
34 The qualifications which Dr Hampshire placed on his evidence, as a result of the evidence of the lay witnesses, are matters which mean that his report could not be accepted completely at face value. However, neither can it be ignored. The evidence of Dr Walker, in describing the basis upon which he came to the view that Mr Luvara was fit to give instructions strikes me as inadequate - that Mr Luvara "accepted my explanations" of certain features of the trial process. Also, it does not, it seems to me, take into account the full range of tasks which are required to be performed to deal with complex commercial litigation.
35 The poor attentiveness of Mr Luvara, which is common ground, is something which cannot adequately be dealt with by the devices which Dr Walker suggested. It is not only necessary for a witness to be able to follow a case when he is actually in the witness box, he also needs to be able to follow a case when he is sitting in the back of the court, and hearing other witnesses giving their evidence. He needs to be able to deal with the allegations made in affidavits about events he was involved in, and to follow and provide instructions about the documents proposed to be tendered.
36 In my view, on the evidence as a whole, there would not be a trial which was a trial where Mr Luvara could adequately deal with the matters presented against him, if it were to take place on Friday.
37 Other parties put that there are additional factors which should be taken into account. The trial is one which has been stressful for everyone who has been involved in it. The trial is one which, it is suggested, could not take place without Mr Luvara, when he played the central role in the affairs of Australian Investors Forum Pty Limited, which goes with the position which he held.
38 It is put that there would be a waste of the Court's time and some duplication of effort if it were possible to segregate the case against Mr Luvara from the case against everyone else.
39 All of these matters are ones which I accept. However, it is just unacceptable that a court should be asked to proceed with a trial in circumstances where it will not be a fair trial for one of the participants.
40 Dr Hampshire was asked about the prospects of the condition of Mr Luvara being curable. He expressed the view that his condition is one which was curable, provided Mr Luvara co-operated with his medical advisers. He was confident that he would be able to be treated with antidepressants, and desensitised to those matters which are currently stressors to him. It is relevant here that there was no history in his family of psychiatric illness.
41 In these circumstances it is not appropriate for the trial to proceed on Friday against Mr Luvara or against the sixteenth defendant.
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