ASIC v Rich

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5934/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V JOHN DAVID RICH & ORS JUDGMENT (Ex tempore; revised on 10 November 2004) 1 HIS HONOUR: These reasons for judgment relate to issues that have arisen in relation to proposed evidence on the voir dire by Mr Carter, a forensic accountant retained to give evidence on behalf of the plaintiff in the proceeding. 2 Some time ago senior counsel for the defendants indicated in court that he proposed to cross-examine Mr Carter on the voir dire prior to making submissions on the admissibility of the search warrant materials. On 29 October 2004, the plaintiff's solicitor wrote to the defendants' solicitor indicating that on the assumption that the cross-examination would go to the question of Mr Carter's independence, the plaintiff would object to any application to examine Mr Carter on the voir dire. This was said to be on the ground that the authorities established that although lack of independence may go to the weight of expert evidence, it did not go to the admissibility of the evidence. 3 On 31 October 2004, the defendants' solicitor responded to that letter. She said that the issue of the nature and extent of the involvement of Mr Carter and those who assisted him in the preparation of his reports in the investigation and discussions which preceded the commencement of the proceeding and in the preparation of the plaintiff's case thereafter were matters going to the admissibility of Mr Carter's reports in at least two ways. 4 First, she said, those matters go to the exercise of the court's discretion under s 135 of the Evidence Act whether or not to exclude the evidence on the basis that it might be unfairly prejudicial to the defendants, be misleading or confusing, or cause or result in an undue waste of time. 5 Secondly, she said, those matters go to the question whether Mr Carter has properly complied with the principles concerning admissibility of expert opinion evidence and specifically the requirement that the expert identify explicitly and exhaustively the facts on which the opinion is based and the whole of the manner in which facts were dealt with, so that the court can satisfy itself that the opinions are wholly or substantially based on specialised knowledge (citing, inter alia, the well-known remarks of Heydon JA in Makita (Australia) Pty Limited v Sprowles (2001) 52 NSWLR 705 at [64] and [85]; see also defendants' written submission, DS28, para 4). 6 The defendants' solicitor contended that evidence of Mr Carter on the voir dire as to such matters is an appropriate and efficient way to proceed. She cited observations by Branson J in Sydneywide Distributors Pty Limited v Red Bull Australia Pty Limited (2002) 55 IPR 354 at [9]. There her Honour noted that it was no longer common practice for a witness from whom expert evidence was to be adduced to be examined by opposing counsel on the voir dire, though she expressed some regret that this was so. She pointed out that because of the absence of a voir dire before the expert's oral evidence-in-chief and cross-examination, the judge may be put in a position where evidence is received which, strictly speaking, should have been rejected and the judge is left only to make a determination as to its lack of weight. 7 On 3 November 2004, the plaintiff's solicitor responded, saying that, on the better view, evidence given on the voir dire (where there is no jury) is automatically evidence in the proceeding, but as there was some doubt about the position and there was the prospect of considerable duplication of evidence if cross-examination of Mr Carter on the voir dire were not treated as evidence in the proceeding generally, the plaintiff would not be prepared to agree to such cross-examination occurring unless the defendants were to accept that evidence on the voir dire would be evidence in the proceeding. 8 The correspondence produced an issue between the parties, for it is the defendants' view that they ought to be permitted to cross-examine Mr Carter on the voir dire on the basis that the evidence so adduced would not be evidence in the proceeding unless and until it was subsequently tendered. 9 Thus, the question for me to determine is whether, as a matter of law, evidence on the proposed voir dire of Mr Carter would be, "automatically" as it were, evidence in the proceeding generally, or only evidence if after the voir dire it were tendered and received. 10 If I take the view that the evidence is evidence in the proceeding, then questions arise as to whether it is appropriate for me to exercise a discretion under s 135 or s 136 of the Evidence Act so as to provide to the defendants a degree of protection comparable to the protection they would have if the contrary view of the law were correct. 11 Senior counsel for the plaintiff submitted that it was not appropriate at this stage for the court to hear Mr Carter's evidence on the voir dire because the defendants had not with sufficient clarity specified the issues to be explored. He relied on R v Lars (1994) 73 A Crim R 91 at 119 where the Court of Criminal Appeal in New South Wales said: "Where it is sought to explore on the voir dire the admissibility of evidence, the accused must make application to the judge for such an examination, specify the issues to be explored and show to whatever extent the judge may reasonably require that there is indeed a significant issue to be tried." 12 Those observations were quoted with approval by the same court in R v Meier (New South Wales Court of Criminal Appeal, Gleeson CJ, Dowd and Hidden JJ, unreported, 21 May 1996, BC9601936). In the plaintiff's submission, these standards have not been met in the present case. 13 I disagree with the plaintiff's submission on this point. The proposal to take Mr Carter's evidence on the voir dire arises after substantial exploration during the hearing of the case of what I have referred to in many judgments already as the search warrant issues. The issues as to admissibility that the court will be asked to determine, hopefully before too much longer, relate to whether material obtained by the plaintiff originally through the execution of search warrants on 1 June 2001 should be excluded from evidence on legal or discretionary grounds. 14 It appears to me that, in the context of the exploration of these issues over many weeks, the matters under investigation have reached a sufficient degree of specificity that it is unnecessary to require the defendants to make some further statement of the issues to be explored with Mr Carter at this point. 15 Moreover, there is a risk that by requiring the defendants to do so, I might inadvertently impose upon them some prejudice as to the course of the cross-examination and the forensic issues involved in it, and also as to the inflexibility inevitably introduced when an a priori definition is made. 16 I prefer in this case to allow the taking of Mr Carter's evidence on the voir dire to proceed, on the basis of the specificity derived from the course of events at the hearing. 17 In MacPherson v R (1981) 147 CLR 512 Gibbs CJ and Wilson J explained the position of the presiding judge at a criminal trial when an issue has arisen which might appropriately be addressed by a voir dire. According to their Honours (at 523), the judge's overriding obligation to ensure that the trial is conducted fairly and in accordance with law entails that he or she must exclude evidence tendered against the accused which is not shown to be admissible and, therefore, once a factual issue with respect to admissibility, such as the voluntariness of a confession, arises, the judge must satisfy himself or herself as to the factual matter. If this can only be done by holding a voir dire, the judge must proceed in that fashion, even if no voir dire is called for. 18 Those observations were directed to a criminal trial, and as Olsson J remarked in Casley-Smith v FS Evans & Sons Pty Limited (No.2) (1988) 49 SASR 332 at 333, observations made on the voir dire in criminal cases must be treated with care in the civil context. Nevertheless, the basic principles are the same. The judge's overriding obligation is to ensure that the trial is conducted fairly and in accordance with law, and therefore to be satisfied that the evidence to be adduced is properly admissible, and consequently to address any factual issues upon which admissibility depends. 19 Whether all of that amounts to a duty in the civil context for the judge to accede to an application to hold a voir dire might be open to debate, but it does suggest that where those criteria are satisfied the case for holding a voir dire is likely to be powerful. 20 In the present case, the court's objective is to hear evidence relevant to and materially significant in respect of the search warrant issues and then to make a determination on the admissibility of the Carter reports and documents and the plaintiff's tender bundle. If the defendants apply to have Mr Carter's evidence taken on the voir dire, and the procedure they propose will identify more clearly the issues relevant to that process and assist the court to reach a determination which may affect the length and efficiency of the trial, while preserving (if it is necessary to do so: see defendants' written submission, DS28) their right to decide whether to go into evidence at the conclusion of the plaintiff's case, the court will be inclined to support their application. 21 If, however, their only reason for proceeding by way of voir dire is to limit Mr Carter's evidence in cross-examination to the voir dire and prevent it from being evidence for general purposes, then for the reasons I shall explain, that basis for taking his evidence on the voir dire is not available to the defendants and they may wish to reconsider their position. 22 In this respect, it is relevant to note, as I explained in my reasons for judgment in ASIC v Rich [2004] NSWSC 970 at [5], that the evidence of other witnesses on matters relating to the search warrant issues, including Ms Reynolds and Ms Redfern, has been given on the basis that it is evidence generally in the proceeding, and without any formal characterisation of the evidence as evidence on the voir dire. 23 I, therefore, turn to consider the law with respect to the evidentiary status of evidence given on the voir dire. The starting point is the Evidence Act 1995 (NSW). One of the pivotal provisions of the Act is s 56(1), which says that evidence that is relevant in a proceeding is admissible in the proceeding. That provision identifies a general proposition as to the status of evidence once admitted. 24 On the basis of that proposition, and other matters, I held in ASIC v Vines (2003) 48 ACSR 282 that where evidence is admitted in a proceeding in which there are several defendants, the evidence is admissible in the proceeding against all defendants, subject only to any restricting order that may be made under section 136. 25 Section 56 signifies in this case that, subject to any other provision, once evidence is adduced in the course of a trial, it is evidence in the proceeding for general purposes. The other relevant provision in the present case might be s 189, which deals specifically with the voir dire. According to s 189(1), if the determination of a question whether, inter alia, evidence should be admitted depends upon the court finding that a particular fact exists, the question whether that fact exists is, for the purposes of the section, a preliminary question. Then subsection (4) says that if there is a jury, the jury is not to be present at a hearing to decide a preliminary question (except with respect to matters addressed in subsection (3)) unless the court so orders. According to subsection (8), if the jury is not present at a hearing to determine a preliminary question, evidence given by a witness at the hearing of the preliminary question is not to be adduced in the proceeding, unless certain conditions are satisfied. There is thus an express proposition in subsection (8) excluding for general purposes evidence given in a jury trial where the jury is not present. 26 Subsection (7) is also relevant. It says that in the application of Chapter 3 (which deals with admissibility) to a hearing to determine a preliminary question, the facts in issue are taken to include the fact to which the hearing of the preliminary question relates. That proposition assists, for example, in assessing relevance. 27 There is another relevant provision, namely, s 9, according to which the Evidence Act of New South Wales does not affect the operation of a principle or rule of common law or equity in relation to evidence in a proceeding to which the Act applies, except insofar as the Act provides otherwise expressly or by necessary intendment. 28 Before concluding this review of the statutory materials, I should mention ss 135 and 136, because there is a relevant submission by the defendants as to their effect. In their written submissions, at DS28, paragraph 1(d), the defendants said it was difficult to see how the potential application of the statutory discretions could easily sit side by side with the proposition that evidence on a voir dire, once admitted for the limited purpose of deciding a question relating to the admissibility of some particular piece of evidence, is available for use in the proceedings generally without having to be formally tendered. I shall return to the statutory discretions later. Suffice it to say for the present that I do not find them helpful as an indication of the evidentiary status of evidence adduced in a civil trial without a jury on the voir dire. The statutory provisions allow for the exercise of a discretion to exclude or limit evidence, when the evidence has been identified to a sufficient degree that a specific discretion can be exercised in respect of it. 29 This review of the statute leads one to the conclusion that there is no express proposition, in the case of a civil proceeding without a jury, to qualify the general proposition that evidence once admitted in the course of the trial is evidence in the proceeding; but that conclusion must be subject to consideration of the general law to establish whether there is any rule saved by s 9. 30 I therefore turn to the common law. I have had the benefit of relatively full argument as to its scope and content, although one has the sense that the topic would be illuminated by a more complete historical investigation if the time were available. 31 For present purposes, the starting point is the judgment of Meares J in Ex parte Whitelock; re McKenzie [1971] 2 NSWLR 534. That case arose out of a summary hearing without a jury concerning a charge of driving a motor vehicle with the proscribed concentration of blood alcohol. A question arose as to the circumstances in which the breath test was taken and the court purportedly allowed a police officer and the defendant to give evidence on the voir dire on that subject, although it appears that the court permitted the cross-examination to extend to other matters as well. It was later argued that none of the evidence so adduced could be considered as evidence touching upon the substantive issues arising in the prosecution. 32 Meares J concluded that the evidence was not in fact to be treated as evidence on the voir dire, but he addressed the point of legal principle that would arise on the assumption that the evidence was evidence on the voir dire. He drew a distinction between cases where the examination on the voir dire takes place before a judge sitting without a jury or before a magistrate, and cases where a jury is involved. As to the former, he asked (at 539): "If any of the examination is relevant on any issue in the case, is such a tribunal obliged to disregard such evidence in considering the issues unless it be formally repeated?" 33 He saw R v Amo [1963] P & NGLR 22 as authority for the proposition that it is the judge's duty, so long as the evidence remains on the record, to give such weight to it as is proper. 34 He found it unnecessary to consider the matter, as I have said, and noted that it had not been fully argued, but he added: "I should have thought that evidence given on the voir dire is evidence if relevant, on any issue if given in the presence of a jury in a jury trial or action and in all cases if given before a tribunal sitting without a jury." 35 The observations of Meares J were followed by Yeldham J in Dixon v McCarthy [1975] 1 NSWLR 617. 36 The High Court considered voir dire issues in Demirok v R (1977) 137 CLR 20. Gibbs J (at 34) considered the status of evidence in a case where the voir dire occurs in a jury trial in the absence of the jury. He said: "Evidence which is relevant solely to the question of competence should not be used by the jury for some other purpose, such as determining the credibility of the witness." 37 Although the observations of his Honour were expressed in general terms, it seems to me that they should be treated as an application of the general proposition with respect to evidence at a jury trial given on the voir dire in the absence of the jury, a proposition now contained in section 189(8). On that analysis, his Honour's observations are consistent with the observations of Meares J. 38 In Casley-Smith v Evans, Olsson J had to consider the status of voir dire evidence in a civil case without a jury. The evidence was evidence concerning the qualifications of a professed expert witness. The question squarely before him related to the status of voir dire evidence that he had received and the manner and extent to which it could be used in the trial of the main issues arising on the pleadings. 39 After carefully analysing other cases and referring in detail to the observations of Meares J in Ex parte Whitelock, he said (at 335) that in his opinion the logic of Meares J's reasoning was "unassailable" and identified the correct principle which ought to be applied. He referred to the observation from the judgment of Gibbs J in Demirok to which I have referred and expressed preference for the approach taken by Meares J. 40 He said that it would be "contrary to commonsense that a judge sitting alone should be required, notionally, to disregard what has been heard, and then have a witness who has been held properly qualified, retraverse much of the same ground again for the purpose (inter alia) of assessing what weight ought to be attributed to the evidence of the witness." 41 The Full Federal Court considered the matter in Brown v Commissioner of Taxation (2002) 119 FCR 269, at paragraphs [87]-[103] per Sackville and Finn JJ. Their Honours found it unnecessary to determine the evidentiary status of evidence taken on the voir dire in a civil hearing without a jury, pointing out that the relevant cases had not been adverted to in argument. 42 They said, however, that while the point was "by no means settled", it appeared to be arguable that "at least in a civil trial before a judge sitting alone, evidence admitted on the voir dire may be taken into account on the issues arising at the trial, even without being formally retendered" [at 95]. They added that, "At the very least ... the evidence must be relevant to the issues arising at the trial and must not be subject to any exclusionary rule." The defendants placed some reliance on that latter sentence, but it seems to me to be an obvious observation of no particular significance to the issue that I have to decide. 43 In my view, sitting as a judge at first instance in this court, the authorities referred to in Brown have a more strongly persuasive effect than their Honours' description of them might imply. Casley-Smith was a decision by a highly respected judge of the Supreme Court of South Australia dealing with the very issue that is before me now. Ex parte Whitelock was an expression of view, admittedly not in definitive terms, by a judge of this very court that has stood now for some decades. 44 Any hesitation I might have had about the persuasive status of the observations in Ex parte Whitelock and Casley-Smith is removed having regard to the way that those cases were treated by the Court of Appeal in New South Wales in Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419 (Beazley, Giles and Santow JJA, 24 December 2002). 45 Their Honours were dealing in the course of that judgment with a submission that any evidence given on an application would not have been evidence at the trial, but, rather, was to be treated as evidence on a voir dire. Their decision, recorded at [207], was that evidence on a third party application is different in nature and serves a different purpose from evidence on the voir dire. 46 In the course of reaching that view, however, their Honours referred to the issue before me now. They noted at [201] that the respondent's submission meant that the evidence would not have been evidence in the proceeding unless tendered in the proceeding or unless the witness were recalled. They said that this principle applied in a criminal trial where evidence was given on the voir dire in the absence of a jury. They continued (at [202]): "However, it appears a different rule applies to evidence on the voir dire in the case of a civil trial or a criminal trial without a jury." 47 They referred to Cross on Evidence, Ex parte Whitelock and Casley-Smith. They quoted the observations of Meares J in Ex parte Whitelock, evidently with approval, and noted that in Casley-Smith Olsson J had considered Meares J's reasoning to be unassailable. They also referred to R v Amo and added a reference to Smith v R (1957) 97 CLR 100 at 132 per Webb J (although, with respect, it does not seem to me that this observation advances the matter materially). 48 The Court of Appeal's observations in Marsden, though strictly obiter, are of a kind that a judge at first instance of this court would follow unless there were other inconsistent authorities. No such authorities have been cited to me. There are propositions to like effect in the Australian Law Reform Commission's Interim Report on Evidence (Report No 26, 1985), Vol 1, at [1041]; and J D Heydon, Cross on Evidence (6th Australian ed, 2000), [11035] at footnote 36 (p 282) (compare S Odgers, Uniform Evidence Law (6th ed, 2004), p 699, who says that the issue is "unsettled"). 49 My conclusion, in light of the statute and the cases to which I have referred, is that evidence on a voir dire in a civil proceeding without a jury, such as the present one, is, when taken, evidence in the proceeding, unless some order is made qualifying its status or significance under s 135 or s 136 of the Evidence Act. 50 I should add that, in my opinion, the fact that these are civil penalty proceedings which are, in one sense, "a hybrid between criminal and civil law" (Australian Law Reform Commission, Principled Regulation: Federal Civil and Administrative Penalties in Australia, Report No 65 (December 2002) at paragraph 2.47), does not detract from the application of the legal principles I have identified. Although civil penalty proceedings may have a special status for certain purposes, s 1317L of the Corporations Act 2001 (Cth) provides that the court must apply the rules of evidence and procedure for civil matters when hearing such a case. 51 In written and oral submissions, I was asked to take into account a range of discretionary matters which might lead, at an appropriate stage, to the exercise of a statutory discretion to exclude or limit the use of evidence. 52 I have some sympathy with the defendants' position in terms of the administration of cross-examination of Mr Carter in light of the conclusion I have reached as to the general application of the Evidence Act and the common law. In particular, the discretionary considerations identified by senior counsel for the defendants in paragraphs 9(b) and (d) of the written submissions at DS28, as supplemented in oral submissions (Transcript p 2204-2207), suggest that circumstances may well arise in the course of cross-examination when the court might be persuaded to impose some restrictions on the use of evidence or for the time being (subject to later tender) exclude it as admissible evidence in the proceeding. 53 It seems to me, however, that it would be wrong for the court in this case to seek to use the statutory discretions so as to define, a priori and in a general way, a line of evidentiary territory in respect of which evidence could only be used for limited purposes or was not to be treated as evidence at the final hearing unless successfully tendered at a later stage. 54 I am prepared to accept that s 135 and 136 are cast in wide enough terms to permit advance rulings of this kind to be made if a clear, case is established for the court doing so. The difficulty in the present case relates partly to the broad scope of the field of cross-examination likely to be explored, having regard to the range of questions administered to Ms Reynolds in earlier cross-examination. 55 It relates, as well, to the wording of the sections. Section 135 gives the court a discretion to refuse to admit "evidence" where the probative value is substantially outweighed by various factors. The section seems to assume that it is possible, with a sufficient degree of specificity, to include in the balancing exercise that the section mandates something that can be called evidence. I think it would be very difficult to carry out the balancing exercise in advance of the commencement of cross-examination in a case such as the present. 56 Section 136 creates a similar difficulty. It empowers the court to limit the use to be made of "evidence" where there is a danger that a particular use may be unfairly prejudicial to a party or misleading or confusing. Again, the exercise of the discretion seems to involve a form of balancing exercise where the court has a reasonably clear idea of the nature and perhaps the content of the evidence that a party seeks to limit. 57 In my opinion, it will be open to the defendants to invoke those sections at a point of time where there is sufficient clarity as to the nature of the evidence to which they wish the sections to be applied that the court can sensibly undertake the discretionary exercise that the sections have in mind. 58 It is no more than a consequence of the outworking of the statutory provisions and the common law that the defendants in a case such as this should be placed in a position which may present difficulties for them. Their legitimate concerns, identified in their submissions, are to be addressed in a more ad hoc and specific fashion than by an a priori ruling before cross-examination commences. 59 I agree with senior counsel for the plaintiff that there is nothing bizarre if, as a result of taking Mr Carter's evidence on the voir dire, the court might receive evidence from him in the proceeding even though it eventually rules that Mr Carter's reports are inadmissible or to be excluded on discretionary grounds. That, too, is a consequence of the statutory scheme and the common law. **********

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