ASIC v Infomercial Management Group Pty Ltd [2001] VSC 181

ASIC alleged that promotional documents for several investment schemes falsely stated that project managers would make specified capital contributions and marketing expenditures; defendants denied that and pleaded they made the payments, listing amounts in tables. ASIC claimed the defendants' voluminous discovery left it unable to verify those claims and sought pre‑trial provision of specific information identified by an accountant (Moore Stephens). The defendants argued this would force disclosure of their trial evidence and exceed pleading obligations. Harper J. held that while parties are not required to plead mere evidence, the Court's case‑management power under r.34.01 authorises directions requiring a party to provide information reasonably required to confirm asserted payments where necessary to avoid surprise and to ensure an effective, economical trial, particularly when public interest is engaged. His Honour proposed to order the defendants to supply the Moore Stephens‑identified information, subject to limits and further submissions and to consequences if the defendants say they do not possess the material [66], [71], [75].

What happened

ASIC sued Infomercial Management Group Pty Ltd and others alleging that promotional literature for a sequence of investment schemes contained false statements. Specifically, ASIC alleged that literature asserted that the project manager would make specified payments of ordinary capital and preference capital and would commit to marketing expenditure; ASIC claimed those statements were knowingly false and the contributions and marketing expenditure never materialised [2].

The defendants denied the allegations and pleaded that the capital contributions were made and the marketing expenses paid. Those denials included tabular schedules in the defences listing, for named partnerships, the sums contributed as preference and ordinary capital and the marketing expenditure for the year ended 30 June 1998 [29].

ASIC sought further and better particulars and then, after an interlocutory order of 15 December 2000 directing identification of the information it reasonably required, engaged Moore Stephens to prepare a report (dated 15 January 2001) setting out what information was "reasonably required for confirmation of ordinary and preference investment contributions ... and to confirm marketing expenditure" for each product or project [35], [38]. ASIC then sought orders compelling the defendants to supply the information identified by Moore Stephens.

The defendants resisted. Their core objections were (a) that ASIC was seeking mere evidence and the defendants were not required to plead evidence; (b) that the Moore Stephens criteria had an audit focus exceeding what was reasonably required and usurped the Court's fact-finding; and (c) that the plaintiff could use discovery to find the information among the large volume of documents produced (some 18 volumes) [11], [14], [44], [48].

Harper J. heard argument, gave the defendants leave to file further submissions (they did not), and concluded that the Court should order the defendants to provide the particular information identified in the Moore Stephens report because r.34.01 empowers the Court to give directions for the effective, complete, prompt and economical determination of the proceedings, and because without disclosure ASIC would be 'taken hopelessly by surprise' at trial given the complexity of the evidence and the public‑interest nature of the case [35], [60], [66], [71], [75]. His Honour proposed to make orders generally in accordance with ASIC's draft orders, subject to hearing counsel and subject to limits he discussed [75].

Why the court decided this way

Two foundational ideas informed Harper J.'s decision.

First, the classical pleading principle remains: pleadings state material facts, not the evidence by which they are to be proved. Harper J. acknowledged this rule as preserved in the old O.19 r.4 and restated in the present rules, and that a party is not required to plead matters of mere evidence [20]. The defendants relied heavily on that principle.

Second, and decisive in this ruling, is the Court's case-management power under r.34.01: at any stage the Court may give directions it thinks conducive to the effective, complete, prompt and economical determination of the proceeding [66]. Harper J. framed r.34.01 as a broader supervisory mechanism that allows the Court to require disclosure beyond the confines of pleadings and particulars where necessary to prevent surprise and to facilitate a fair, efficient resolution. The judge stressed the public interest angle: ASIC represents the public interest in corporate affairs, and it cannot fulfill that role if defendants can determine what information the plaintiff can have before trial [23], [69].

Applying those principles, the court found that (a) the defendants’ pleaded assertions that payments were made placed on them the evidentiary burden, (b) the complexity of the schemes and the volume of documents meant ASIC would be unable to test those assertions at trial if the defendants disclosed their evidence for the first time, and (c) the public interest in transparent accountability justified pre-trial disclosure of the information reasonably required to test the asserted payments and expenditures [32], [35], [38], [60], [71].

Harper J. therefore exercised r.34.01 to require the defendants to produce the Moore Stephens‑identified information, emphasising that this direction was not a change to pleading rules nor an order transforming particulars into pleadings; rather it was a case-management direction to secure an effective and economical trial [63], [66], [71].

Before and after state of the law

Before this ruling, the established tension in Australian civil procedure law was between the traditional rule that pleadings state facts not evidence, and modern case-management approaches that permit courts to direct parties' conduct to secure just and efficient trials. Harper J. acknowledged both the old O.19 r.4 formulation and the current rules including r.13.07 and r.13.02(1)(a), which protect against surprise but do not convert evidence into pleaded facts [20], [63].

After this ruling, the practical consequence is an authoritative statement by the Supreme Court of Victoria that r.34.01 can be used to compel pre-trial disclosure of information that might otherwise be characterised as 'evidence' where such disclosure is necessary to avoid surprise and to enable the effective, complete, prompt and economical determination of proceedings, particularly where a public regulatory body is involved and the issues bear on public protection. The decision clarifies that a court can require a defendant to produce the evidentiary materials it will rely on to discharge an onus of proof, without converting that material into pleadings or particulars, and that the court must balance limits and consequences where a defendant says it does not possess the requested material [63], [66], [71], [72].

Key passages with plain-English translation

"A party is not required to plead matters of mere evidence." [20]
Plain English: Normally, you state the facts in pleadings, not the proof you will use. Pleadings are summaries of facts, not the documents or witnesses you will call.
"It is, I think, very important in litigation such as this that all parties are, before the hearing, fully informed about the case put against them by any opposite party." [66]
Plain English: Courts can and should ensure everyone knows the opposing case well before trial, so trials aren't ambushes and the public interest is protected.
"It is conducive - indeed necessary - to the effective, complete, prompt and economical determination of that issue that the defendants provide ... that information upon which the defendants will rely at trial to discharge that evidentiary burden which, in such circumstances, falls upon them." [71]
Plain English: If the defendants say they paid money or spent on marketing, they should show the documents or other proof early so the case can be decided efficiently and fairly.
"If the defendants do not have the information sought by the plaintiff, then they should of course simply say so ... But ... certain consequences will follow." [48]
Plain English: If defendants lack the documents, they must say; but that will affect how they can prove their case and the Court may not grant relief (like adjournments) merely to avoid prejudice to the plaintiff.

What fact patterns trigger this precedent

This decision is most directly engaged where:

A defendant pleads affirmative acts (such as payments made, expenditure incurred) that are central to the defence of alleged misrepresentations or breaches, and the defendant bears the evidentiary onus of proof on those issues [29], [32].
Discovery has produced large volumes of undifferentiated documents so the plaintiff cannot practically or reasonably extract the particular items needed to test the assertions, creating a real risk of surprise at trial [14], [35].
The plaintiff represents a public interest function (here ASIC) and the allegations concern conduct affecting the public's investment decisions, giving an added public‑interest weight to pre‑trial transparency [23], [69].
The information sought is reasonably precisely identified (for example, by an expert or accountant's report specifying the items necessary to confirm payments/expenditure) rather than a fishing expedition [38].

In such situations, the court may order pre-trial production of the identified evidentiary materials under its r.34.01 case-management power.

How later courts have treated it

The deep dive must be confined to the source text. The judgment itself does not provide later treatment or citations of subsequent decisions. Harper J. framed his ruling as an application of r.34.01 and as consistent with modern expectations of case management; the judgment does not report any follow-on decisions within its text. Therefore no later judicial treatment is contained within or cited by this judgment.

Still-open questions

Several management and legal questions remain open from the text of this ruling:

Limits of compulsion: Harper J. acknowledged there are limits beyond which a defendant cannot be compelled to disclose, but the judgment does not catalogue specific categories of privileged or protected material or the precise tests for when disclosure would be excessive [69]. Future cases will need to define the boundary between legitimate pre‑trial disclosure and impermissible intrusion into trial strategy or privileged material.
Form and timing of disclosure: The judge proposed to make orders in accordance with the plaintiff's draft orders but reserved to hear counsel on precise terms [75]. The judgment does not set out the exact form, timing, or mechanisms for inspection, redaction, or handling of sensitive materials, leaving implementation details to subsequent orders and argument.
Consequences of asserted non-possession: Harper J. stated that if defendants say they do not have the material, consequences will follow and other evidence must be adduced, but the judgment leaves open exactly what consequences (striking admissions, adverse inferences, or limitations on defence) might appropriately follow in varied factual settings [48], [72].
Interaction with privilege and legal professional privilege: The ruling recognises limits to compulsion but does not discuss legal professional privilege or other immunities. How r.34.01 obligations coexist with privilege claims, and the procedural steps for resolving those disputes, is not exhaustively addressed.
The boundary between 'materials reasonably required' and 'mere evidence': The judge accepted Moore Stephens' definition of information 'reasonably required' for confirmation, but there remains an open question as to how granular or audit-like the requisition may be before it becomes objectionable as an attempt to conduct discovery by specification or to usurp trial functions [44], [51], [54].

For practitioners, these are the factual and procedural contours that subsequent litigation would need to clarify. Any orders made under r.34.01 of this type will likely require careful drafting to address privilege, scope, format, timing and the consequences of non-possession.

Disclaimer: This is general legal information based on the text of Harper J.'s ruling in ASIC v Infomercial Management Group Pty Ltd [2001] VSC 181, not legal advice. I can make mistakes. Before you act on or rely on this analysis, or use any draft orders or procedural steps, get a qualified Australian lawyer to check it.

The plaintiff in these proceedings claims that the defendants, or one or more of them, produced documents which were intended to, and did, attract potential investors. These documents, it is alleged, contained information that was false. Among the alleged falsities were statements that the project manager of the relevant "project" (a) would make certain payments of each of (i) ordinary capital and (ii) preference capital, and (b) had committed itself to marketing expenditure as described in the impugned literature. These statements were, it is claimed, knowingly false; and neither the capital contributions nor the marketing expenditure ever materialised.

The defendants deny these allegations. They say that the capital contributions were made, and the marketing expenses were paid.

The plaintiff seeks further and better particulars of the payments to which the defendants here refer. While the payments themselves are listed in the relevant pleading documents, the plaintiff (it claims) is given no adequate means of checking their accuracy. The further and better particulars are therefore sought, it is said, so that the plaintiff will not be taken hopelessly by surprise at trial, unable adequately to follow such paper trail as might be indicated by the defendants during the course of the hearing. By this means, the defendants might gain a quite unfair advantage. Without the time to cross-check the defendants' evidence, without the knowledge to test that evidence in cross-examination, the plaintiff might be unable to uncover the truth; and the Court might be deceived into accepting as truth that which is not.

One possible answer lies in the proper use of discovery. If the defendants discover the relevant documents, the plaintiff would then be in a position to follow the payments through from ultimate source to ultimate destination. Since the defendants have produced some 18 volumes of documents, this (according to the defendants) is what the plaintiff should do.

By way of response to this argument, the plaintiff asserts that the great mass of undifferentiated documentation discovered by the defendants leaves it with the task of finding 100 needles in a 1,000 haystacks. Without the further and better particulars which it seeks, the great piles of paper which following discovery the defendants have produced will hide rather than reveal the answers to the very questions with which this litigation is concerned.

The defendants counter with the argument that what the plaintiff really wants is that they be forced, before trial, to reveal the evidence which, at trial, they intend to call. This, the defendants contend, is illegitimate. The extent to which a party must articulate the case it seeks to make against an opposite party may have varied through the decades over which various versions of the rules of pleading have come and gone; what has never varied is the rule that a party is not required to plead matters of mere evidence.

It is true that the Rules of the Supreme Court 1985 preserved the requirement (expressed in O.19 r.4 of those Rules) that every pleading contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies, but not the evidence by which those facts are to be proved. It is also true that the present Rules (S.R. No. 99 of 1986) re-state this position, albeit in somewhat different terms. On the other hand, the present r.13.07 specifies that a party shall in any pleading subsequent to a statement of claim plead specifically any fact or matter which, if not so pleaded, might take the opposite party by surprise. This is to be contrasted with the old O.19 r.15, which provided that a party must plead "all such grounds of defence or reply (as the case may be) as if not raised would be likely to take the opposite party by surprise."

It seems to me that the modern rule gives greater emphasis than did its predecessor to present-day conceptions of how litigation should be conducted. It is not a game of cat and mouse, played out by the parties before a tribunal which passively allows the litigants to move at their own pace towards a trial of issues which the parties have manipulated in ways that suit their individual purposes. While the metes and bounds of the dispute are still largely set by the parties, and while litigation is still properly classified as adversarial rather than inquisitorial, the Court will not allow issues of importance to be obfuscated to the point that injustice may result. Especially is this so where, as here, those issues incorporate elements which go directly to the public interest. Here, the Australian Securities and Investment Commission represents the public. It is in the public interest that, where members of the public are invited to contribute their funds to a commercial endeavour, the invitation provide them with the information required to make a fully informed decision whether or not to accept. This will not happen if the promoter of a scheme states that it holds a particular intention when in fact it does not.

The defendants claim that they not only had the relevant intention, but gave effect to it as well. Having raised this defence, it is in the interests of the defendants that it be made good - and the sooner the better. There can be no benefit to them in withholding material which is exculpatory of them. In the present circumstances, obfuscation serves no purpose except to shield a wrongdoer.

As presently pleaded in their points of defence, the defendants claim that "in respect of the following partnerships in the year ended 30 June 1998, the following sums were contributed by way of preference capital and by way of ordinary capital ... [and] by way of marketing expenditure ..." Tables incorporated into the pleading set out the name of the partnership and the amount contributed or expended in respect of each partnership over that period.

At trial, the issue here will be whether these payments were in fact made and, if they were, whether they constitute fulfilment of the impugned representations. The plaintiff having pleaded the negative, and the defendants the positive, the burden of introducing evidence on the point will be with the defendants. The difficulty faced by the plaintiff is that the evidence upon which the defendants will rely will likely be complex, because the relevant schemes were complex; and that very complexity means that, even if the defendants' position is without substance, it will not if seen for the first time at trial be readily open to meaningful challenge.

It was against this background that, by an order made on 15 December 2000, I required the plaintiff to identify the further information it reasonably requires if it is to test the accuracy of the defendants' claims of expenditure incurred and contributions made. Moore Stephens HF, Chartered Accountants, were engaged by the plaintiff for this purpose. The resultant accountant's report is dated 15 January 2001.

In this report, Moore Stephens set out what in their opinion is the information "reasonably required for confirmation of ordinary and preference investment contributions ... [and] ... to confirm marketing expenditure ... for each product [or] project ..." The plaintiff, having originally (by a request dated 13 July 2000) sought further and better particulars under the relevant paragraphs of the several defences, now seeks orders that the information thus identified by Moore Stephens be supplied.

The defendants oppose such measures. On 2 February 2001, they filed a document headed "Outline of defendants' submissions in relation to the Moore Stephens Report dated 15 January 2001". It is not a constructive response. It indicates that the defendants have no appreciation of the benefits to them were they to demonstrate, before trial, that their defence on this point (whether the contributions were made and the expenditure incurred) is good. Rather, the response appears to be so infected by the adversarial approach to litigation that what may be legitimate procedural arguments are ignored in favour of submissions which are presently irrelevant.

The defendants assert that the Moore Stephens Report not only focuses on that which the relevant books of account might be expected to show (as opposed, apparently, to that which the defendants' books of account actually reveal) but also:

"...has an audit focus as contrasted to recording transactions to the extent to which they have application. It raises entirely new issues. Further, the ... Moore Stephens criteria for an audit goes well beyond an appropriate audit standard, and embarks upon usurping the function of the court to make findings of fact."

There are several short answer to these arguments. The first is that Moore Stephens were not concerned with an analysis of the evidence, and therefore were never in a position to usurp the function of the Court. The second is that if the defendants do not have the information sought by the plaintiff, then they should of course simply say so when responding to the plaintiff's request for it. But if that is the defendants' position, certain consequences will follow. I will return to these later in this ruling.

The defendants in their response further submit that the report seeks more information "than what is reasonably required to ascertain facts". It seems that the point here is that the report considers not only "what would be sufficient appropriate evidence to establish whether the transactions which should have taken place did occur". It goes on, in addition, to identify the information required if one is to ascertain "whether the transactions which did actually take place were appropriately undertaken in accordance with the Joint Venture/ Partnership Management and Marketing Agreements": see the Moore Stephens Report, p. 2.

If the defendants have indeed made the payments they assert they have, then of course they would have nothing to lose and everything to gain if, taking advantage of the present circumstances, they were to supply "what is reasonably required to ascertain facts". It is nevertheless legitimate for the defendants to point out that Moore Stephens have gone further than I envisaged the exercise should go. My order made no reference to the agreements to which the report refers. On the other hand, the defendants do not in their response submit that they were not bound by those agreements. More importantly, the information now sought by the plaintiff does not (with several possible reservations which I will discuss with counsel before any orders are made) go beyond the scope of that order. I do not intend to do so either.

These matters were further debated on 27 April 2001. Because the defendants were then represented by Mr. Goldblatt, who had been briefed too recently to be able adequately to argue a case for his clients, I gave the relevant defendants leave to file and serve, on or before 16 May 2001, additional submissions in writing directed to the matters then before me. The defendants had not taken advantage of this leave.

In my opinion, I should require the defendants to provide further information about their alleged contributions of capital, and about their alleged expenditure on marketing. If the contributions were made, and if the expenditure was incurred, it is in the interests of both parties that that be demonstrated as soon as possible. If the defendants did not do as they claim, then it is in the interests of justice that the plaintiff be placed in a position from which it can expose that failure. If, the information having been provided, the parties disagree about the conclusions which should be drawn from it, then of course the Court will have to decide the matter.

I do not think it necessary to debate whether or not the orders I propose would require the defendants to reveal their evidence. Those orders do not derive from a judgment on a pleading point. I do not think that the information I have in mind should be presented by way of an allegation, or by way of a series of allegations, in a pleading. I do not even categorise that information as "further and better particulars" although if it were it would not in any event form part of the defences as pleaded: particulars are not encompassed within the proper meaning of the expression "pleading". As a matter of strictness, therefore, no departure from r.13.02(1)(a) is involved.

In my opinion, r.34.01 is apposite. It provides that, at any stage of a proceeding, the Court may give any direction for the conduct of the proceeding which it thinks conducive to its effective, complete, prompt and economical determination. It is, I think, very important in litigation such as this that all parties are, before the hearing, fully informed about the case put against them by any opposite party. The defendants are entitled to such particulars as will enable them to meet that case if they can. For its part, the plaintiff seeks to represent the public interest in ensuring that commercial endeavours in which the public is invited to contribute are transparently and honestly managed, with those directly involved in the endeavour in question being fully accountable for their conduct of it. The plaintiff cannot adequately perform this role if those whose behaviour is legitimately under examination by the Court can with impunity determine what if any information will be provided to the plaintiff before trial.

Of course there will be limits beyond which, in the provision of information, a defendant cannot be compelled to go. But those limits should not necessarily be confined to that which the rules governing the furnishing of particulars, and the giving of discovery, would allow. Take the present case. Here the plaintiff, a body whose statutory duty it is to protect the public against corporate malfeasance, alleges against the defendants that something which should have been done was not. The defendants respond by asserting that it was. It is conducive - indeed necessary - to the effective, complete, prompt and economical determination of that issue that the defendants provide to the plaintiff, before trial, that information upon which the defendants will rely at trial to discharge that evidentiary burden which, in such circumstances, falls upon them. Call that information "evidence", if you will. It is not, in the orders which I envisage, to be furnished as part of the defendants' pleading. It is not even to be furnished as "further and better particulars". The plaintiff is entitled to it because it is entitled to be protected against being taken by surprise at the trial; and the Court is entitled to it as a necessary element in the discharge both of its duty to the public and its duty to do justice between the parties. This is the very end which r.34.01 is designed to serve.

I said at paragraph [16] above that I would return to the consequences which will follow if the defendants claim that they do not have the information the subject of the orders I intend to pronounce following this ruling. In such circumstances it will necessarily be the case, if there is substance in the defendants' plea that the impugned payments were made, that those payments are to be demonstrated (to the extent necessary to discharge the evidentiary onus of proof) by the production of other evidence. But I will not allow such production if I think that to do so would result in an injustice which cannot properly be cured by such means as an adjournment, with or without costs as occasion may require; and I add, so that there may be no misunderstanding, that I will not grant an adjournment simply because such would overcome any prejudice which the plaintiff would otherwise suffer. There are other legitimate interests to consider, and they may tell the other way.

In my opinion, the proposed orders will have the effect of ensuring that the parties are appropriately informed before trial of each other's case. I propose, subject to hearing counsel on the matter, to order generally in accordance with the draft orders submitted by the plaintiff.

At a glance

Result

Key principles

Issues before the court

Plain English Summary

Deep Dive

Cited legislation