ASIC v Sydney Investment House Equities Pty Ltd [2007] NSWSC 1456 | Case summary

2941/06 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v SYDNEY INVESTMENT HOUSE EQUITIES PTY LTD & OTHERS JUDGMENT - On further amendments (see T 185) 1 HIS HONOUR: This is an application for the further amendment of the plaintiff's originating process and statement of claim in this matter. 2 The application has been debated before me on the basis that the amendments fall into two categories. One has for convenience been called the factual amendments. They bring forward additional factual allegations concerning the actions of the third and fourth defendants ("the defendants") in relation to the handling of particular monies. The second category relates to compensation claims. These have been called the compensation claim amendments. The allowance of these amendments would have a much more radical effect upon the proceedings. It would allow substantial compensation claims sounding in millions of dollars that have not previously been brought forward to be agitated in these proceedings against the defendants. 3 The relevant history of the matter is that the proceedings were commenced by originating process filed on 26 May 2006. A great deal of the evidentiary material on which it was advancing emanated from a provisional report by Mr Quentin Olde, the liquidator of the relevant companies, dated 4 December 2006. The liquidator foreshadowed in that report the desirability of further investigations. 4 A barrier to further investigations was the impecuniosity of the companies and further investigations were not able to proceed until the liquidator had applied for and obtained funding from the Assetless Administration Fund. That funding was not formally put into place until 12 July 2007. The liquidator's further report was not brought forward until 28 September 2007. 5 The litigation in the meantime proceeded on the basis that what was sought against the defendants were orders disqualifying them from acting as company directors. Monetary penalties were not sought against them. Nor was any claim for compensation made in relation to the subject matter of the proceedings. 6 Despite the knowledge that further investigations were likely, ASIC decided to proceed with the proceedings as they stood, regarding it as important in the public interest that the disqualification proceedings be dealt with by the Court as soon as possible. In March 2007, the Court indicated that I was available as a trial Judge to hear the proceedings in that form commencing on 2 October 2007. 7 When the liquidator's supplementary report was received on 28 September 2007, ASIC thought it proper to serve it straight away on the defendants. However, in view of the immediacy of the impending trial, I have been informed by Mr A J McInerney, who has at all relevant times been leading counsel for ASIC, that the determination was to proceed with the case as it then stood without seeking an amendment or adjournment, which would in any event have been unlikely to have been granted at that time. I have also had the evidence of Mr Walker, a responsible officer of ASIC, that that course intended to be followed by counsel was in accordance with the view of ASIC, as the plaintiff. 8 The change that then took place was that the third defendant unexpectedly applied on 2 October 2007 for an adjournment of the proceedings. The application was on the ground of his ill health. Because of the difficulty of obtaining the relevant medical evidence on the run, that application extended over 2, 4, 8 and 9 October 2007 and was determined by me on 9 October 2007: ASIC v Sydney Investment House Equities Pty Ltd [2007] NSWSC 1189 ("my judgment"). The adjournment was opposed by ASIC, which was continuing to press vigorously that the course that should be followed was that the proceedings should go ahead and go ahead immediately in the form in which they then were. 9 Any question of the proceedings against the third defendant and the proceedings against the fourth defendant being separated out was precluded by counsel for the fourth defendant, Mr Loxton, submitting that it would be unfair if the proceedings continued at that stage against his client without the question of the third defendant's health, both at that time and at the time of the events the subject of the proceedings receiving further investigation. 10 Despite ASIC's resistance, I formed the view, adumbrated in my judgment, that it was established that the third defendant's health was not such at that time as to permit him to attend properly to the proceedings either by appearing in person, as he had been doing up to that time, or by instructing a legal representative. Mr Gillard, solicitor, had just then commenced to act for him and it was Mr Gillard who made the application for an adjournment. Accordingly, I cancelled the fixture. 11 As a result of the cancellation of the fixture, I fixed the hearing of the proceedings before me commencing on 5 May 2008. ASIC took the opportunity afforded by this hiatus to bring forward the present application. 12 The basis on which such applications should be dealt with is rooted in the decision of the High Court in State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; and see the decision of the Court of Appeal in Pringle v Everingham [2006] NSWCA 195. 13 What I have called the factual amendments arise out of Mr Olde's further report of 28 September 2007. Although they are extensive, neither of the defendants objects that he could not be prepared on 5 May 2008 for the trial of the existing proceedings as amplified by the factual amendments sought. Mr Gillard, for the third defendant, specifically consents to the factual amendments. Mr Loxton, in light of the current state of authority, says that he cannot realistically submit that the factual amendments ought not be allowed. In light of that attitude on behalf of both defendants, I propose to allow the factual amendments. 14 Mr McInerney has presented me this morning with a most useful written submission which encompasses the evidence and the submissions both factual and legal that are now relevant to the determination of the application. In that written submission Mr McInerney concedes that there is a distinction to be made between the factual amendments and the compensation claim amendments. He says in his written submission that the factual amendments must be allowed, as no party points to any prejudice arising from those amendments. The use of the word "must" is, perhaps, hyperbolic but as I have just determined, is in fact correct. 15 Mr McInerney also presses for the compensation claim amendments to be allowed, but concedes that material has been put forward which could amount to prejudice arising from the allowance of those amendments. The material is largely material put forward by Mr Gillard on behalf of the third defendant to the effect that, although Mr Gillard has had little time to consider the situation in a detailed way, he is of the view that it is both possible and likely that, if the compensation claim amendments are allowed, he will be instructed to bring cross claims on the third defendant's behalf against accountants and solicitors who gave the third defendant advice concerning the courses of action, or some of the courses of action, which the third defendant took that are complained of by ASIC in the proceedings. 16 Mr McInerney has pressed on me that there is no evidence that these cross claims will in fact be made or as to their effect on the proceedings. However, there has been little time for evidence and there is nothing improbable about Mr Gillard's assertion that such cross claims are likely to be made. If they are brought forward there is going to be considerable further contention in the limited period before the presently fixed trial as to whether they ought be allowed and whether, if filed, they ought be struck out. That alone in a matter of this size and complication will in one way or another take weeks to be determined rather than days. 17 Furthermore, the newly joined parties, if the cross claims are to be prosecuted, will have to prepare themselves to engage in proceedings in which they will have to deal both with ASIC's claims against the third defendant and with the third defendant's claims against them, by way of evidentiary and other preparation. 18 Whilst there can be no certainties in the uncertain arena of litigation, I think there is a high likelihood that the trial will be able to proceed in May 2008 if the compensation claims are not brought into them. On the other hand, I regard it as highly likely that the proceedings will not be able to go to trial on 5 May 2008 if the compensation claims are allowed in and cross claims are made. 19 Both defendants seek to retain those dates for trial. Both acknowledge that they are aware that the refusal of this application will not necessarily be the end of claims for compensation and that they may conceivably face further proceedings in the future, relating to claims for compensation. They still desire the trial of the present issues to proceed on 5 May 2008. 20 The grounds put against adjournment of the proceedings include the imposition of additional cost on the defendants. They also include the stress placed upon litigants by the pendency of proceedings. Compensation proceedings in the future are a matter of uncertainty. The pendency of these proceedings is a matter of certainty. I have not the slightest doubt that they constitute a black cloud which make the lives of both defendants difficult at the present time. This is all the more serious in relation to the third defendant as a result of his state of health as found in my judgment. 21 The relevance of considerations of this type was acknowledged in the majority judgment in JL Holdings at 154 - 155, where their Honours quoted from the speech of Lord Griffiths in Ketteman v Hansel Properties Ltd [1987] AC 189 at 220. Such considerations were also discussed by Kaye J in National Australia Bank Ltd v McKay VSC 6 August 1997 unreported; Bell J in Robert Hughes v Seven Network Ltd [2000] NSWSC 499 at [20] - [22]; Palmer J in Rebolledo v Royal & Sun Alliance Financial Services Ltd [2002] NSWSC 104 at [32], [33]; and Kaye J in Shinn v Commonwealth [2004] VSC 221 at [14]. 22 The course that I have in mind at least permits this aspect of the disputation between ASIC and the defendants to be brought to a close at a relatively early date, rather than the whole matter being simply thrown back into the melting pot, which would in my view be the likely result if I allowed the compensation claim amendments. 23 An unusual factor in this case that I bear in mind emerges from what I have already said. ASIC itself took the view that the determination of the proceedings in their present form was urgent at a time when they felt they were unable to include in them the compensation claims. That was their attitude on 2 October and, as I have said, their attitude was spelt into vigorous opposition to the adjournment of the trial at that time. There is no doubt that the view taken in the ASIC camp both at legal and at administrative levels was that the case could and should proceed without claims other than the present claims being brought forward. The trial was then deferred by nobody's fault, since the reason for its postponement was the state of the third defendant's health. 24 It is not suggested that any different situation will prevail if the proceedings in their present form, but with the factual amendments, go to trial on 5 May 2008. 25 For those reasons, the orders that I shall make upon the motion are that the plaintiff may bring forward a further amended originating process and a further amended statement of claim which incorporate or flow from the factual amendments. 26 I refuse the application to make amendments which would introduce the causes of action represented by the compensation claims amendments into the proceedings

ASIC v Sydney Investment House Equities Pty Ltd

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