ASIC v Vines [2002] NSWSC 1223 | Case summary

3138/01 AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION V GEOFFREY WILLIAM VINES & ORS JUDGMENT HIS HONOUR: The proceeding 1 This is a civil penalty proceeding in which the Australian Securities and Investments Commission ("ASIC"), as plaintiff, seeks the imposition of pecuniary penalties payable under the Corporations Act 2001 (Cth), s 1317G. Disqualification and compensation orders are also sought. Under s 1317L the Court must apply the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of contravention or a pecuniary penalty order. However, it has been said that since a consequence of a fact being proved can be the imposition of a penalty, there is a need for "exactness of proof": Ford's Principles of Corporations Law (Butterworths, Looseleaf), paragraph [3410], citing Briginshaw v Briginshaw (1938) 60 CLR 336, at 362-3 per Dixon J; generally see Australian Law Reform Commission, "Securing Compliance: Civil and Administrative Penalties in Australian Federal Regulation," Discussion Paper 65, April 2002, esp paragraphs 17.71 to 17.73. 2 On 11 February 2002 the Court directed ASIC to "file and serve all affidavits and serve all copies of documents upon which it intends to rely" by 17 June 2002. Subsequently extensions of time were granted. In due course ASIC served affidavits of a number of witnesses, and a trial bundle of documents. In the case of some witnesses who, it appears, have declined to sign an affidavit or witness statement, ASIC served documents called "Outlines of Evidence" and "Outlines of Proposed Evidence". Counsel for ASIC informed the Court that the insertion of the word "Proposed" in some cases was not intended to make any difference. 3 By an Interlocutory Process filed on 7 November 2002, the first defendant seeks the following relief, with the support of the second and third defendants: "an order and direction that, in the absence of a grant of leave to the contrary, any evidence in chief to be adduced by the Plaintiff from the witnesses listed below be limited as follows: (a) in respect of Stephen John McClintock, to the Outline of Proposed Evidence filed on 18 October 2002; (b) in respect of Patrick Thomas Murray, to the Outline of Proposed Evidence filed on 25 September 2002; (c) in respect of Alistair Euan Richardson, to the Outline of Evidence dated 24 September 2002; (d) in respect of Richard Stuart Yee, to the Outline of Evidence filed on 24 September 2002; (e) in respect of Diane Andre Dunbar, to the Outline of Evidence filed on 24 September 2002." 4 The applicant says that the outlines leave him in a position of uncertainty, for he must speculate about how closely or accurately they reflect the actual evidence of the witnesses. He says that as a matter of fairness, the burden should be clearly placed upon the plaintiff to demonstrate why, if leave to adduce evidence outside the outlines is sought at a later time, that leave should be given. 5 I find this argument unpersuasive. In this Division of the Court, the general practice is for evidence to be given by affidavit, and that evidence is not to be supplemented at the hearing except by leave: Supreme Court Rules, Pt 36 r 3. This is an ancient characteristic of equity procedure: Graves v Budgel (1737) 1 Atk. 444; 26 ER 283: see G W Keeton & L A Sheridan, Equity (second edition, 1976) p 320. I was referred in argument to Annexure 3 to Practice Note No.100 for Commercial List and Technology and Construction List matters, paragraphs 2 and 3 (e), but in my view they show nothing more than that the Commercial List judges follow, with some additional particularity, the general approach of the Equity Division where an affidavit has been filed and read. 6 Occasionally, a witness is not prepared, for whatever reason, to swear or affirm an affidavit. When that happens, the party who wishes to adduce evidence from the witness must resort to a subpoena ad testificandum and lead the witness's evidence orally before the Court. 7 Essentially ASIC is in no different position, in this regard, from other litigants. It has a power under s 1317R to require a person to give all reasonable assistance in connection with an application under the civil penalty provisions, but that does not entitle it to compel a person to sign an affidavit. It has the statutory power to compel a person to answer questions under oath (Australian Securities and Investments Commission Act, s 19), and may adduce evidence of the examination under Part 3 Division 9 of the ASIC Act (subject to examinee's right to limit the use of the evidence having regard to the privilege against self-incrimination), but again that does not entitle ASIC to require the examinee to sign an affidavit for use in a proceeding in the Equity Division. 8 Where a party knows that a witness will not execute an affidavit, the practice is for that party to provide all other parties with advice as to the evidence that it expects that the witness will give when called. The notice should be as full, within reason, as the available information permits. The party calling the witness must not conceal or suppress any part of the expected evidence, for the Court will not permit trial by ambush. But an outline of evidence should not be treated as if it were an affidavit, not to be supplemented except by leave. 9 The applicant and the other defendants have complained that ASIC has not made clear what the outlines of evidence purport to be. The applicant's solicitor wrote to the plaintiff on 16 October 2002 raising various matters about the outlines, some of which are now not pressed. One of the points made was: "We are particularly concerned to ensure that the proposed outlines are an accurate and complete record of the evidence that each witness will give." ASIC replied on 18 October 2002, saying only that "the outlines of evidence are comprehensive". 10 The third defendant's solicitor wrote to the plaintiff on 19 November 2002, seeking two assurances in respect of the outlines. They were: "1. that the plaintiff has no reason to believe that those for whom outlines of evidence have been prepared will not give evidence substantially to the effect of the outlines of evidence; and 2. that the plaintiff has no reason to believe that the reason that those for whom outlines of evidence have been prepared have not signed those outlines (or any other document, such as an affidavit, to that effect) is because those parties do not agree that they will give evidence substantially to the effect of the outlines." 11 The plaintiff replied on 11 December 2002, in the following terms: "The purpose of the outlines is to signal to the parties and the Court what ASIC will in good faith seek to lead as evidence from witnesses who have declined to swear affidavits. "It is not the purpose of the outlines to report ASIC's opinion of what each witness will say, or might reasonably be predicted to say, either in giving their evidence in chief or under cross-examination. It would be burdensome for ASIC to conduct the necessary analysis in order to reach such an opinion in respect of each and every statement in the outlines. It would be unfair to require ASIC to disclose such matters. "The second assurance effectively seeks information from ASIC as to any communications with witnesses regarding the truth of the matters stated in their outlines. Any such communications are privileged. "For the above reasons, as well as the reasons already included in submissions filed on ASIC's behalf, ASIC will not volunteer the assurances sought." 12 Frankly I find these statements in ASIC's letter to be incomprehensible. They are reaching for a distinction that eludes me. I would have thought that the very purpose of ASIC providing an outline of evidence is to report ASIC's opinion of what each witness will say, or might reasonably be predicted to say, in their evidence in chief. The practice of the Equity Division is that the party seeking to adduce such evidence gives an outline of what it expects the witness will say, in chief. 13 It may be that, notwithstanding the confusing terms of ASIC's letter, the outlines that it has prepared comply with the Equity Division's practice. The letter says that the outlines "signal" the evidence that ASIC will seek to lead from the witnesses. They are "forecasts" (to use the word found in paragraph 19 at ASIC's written submissions) or an attempt to "foreshadow" the evidence that will be given (ASIC's written submission, paragraph 9). I have decided that the proper course, to put the matter beyond doubt, is for me to direct ASIC to notify the defendants in writing, forthwith, whether each outline is an account of the evidence that ASIC expects the witness to give orally in chief at the hearing. Assuming, as I anticipate having regard to the remarks of ASIC's counsel at the hearing of the application, that ASIC confirms that the outlines comply with this description, there will be no need for additional assurances of the kind sought by the third defendant's solicitor. 14 For various practical reasons, an outline of evidence may prove to be an incomplete or inaccurate account of the evidence that the witness gives at the hearing. For example, it may be appropriate for the witness to give evidence on issues raised by the pleadings, as defined by the particulars, in circumstances where the party calling the witness is not able to anticipate what the witness will say on some or all those matters. Again, it may be appropriate, depending upon the precise way in which the witness gives the evidence summarised in the outline, for counsel to invite the witness to elaborate upon what he or she has said. Indeed, the very process of leading evidence orally from a witness is likely to lead to the witness giving his or her evidence using different language, to different effect, and in a different order, than a previous outline. 15 ASIC correctly acknowledges that it will not be free to lead any evidence from the witness, irrespective of how that evidence relates to the evidence foreshadowed in the outline. That is true. Sometimes departures by the witness from the outline of the foreshadowed evidence will be of no consequence, but on other occasions, the witness's departure from the outline may create a risk of prejudice (including prejudice through surprise) to another party. The risk of prejudice may be all the more serious in a civil penalty proceeding such as the present, given the likely effect of adverse findings on the career and commercial reputation of a defendant. Where a risk of prejudice arises, it is appropriate for the affected party to make an application, either to exclude prejudicial evidence or to seek an adjournment in order to have time to meet the new evidence. 16 It seems to me that nothing is gained by casting the "burden" on the party seeking to lead the new evidence, where a question of prejudice arises. The Court's task is to weigh up the risk of prejudice to one party against the disadvantage to the other party if the new evidence is excluded, regardless of where the "burden" may lie. 17 The potential for the witness to deviate from the outline inevitably means that the other parties can be less sure of the content of the evidence in chief that the witness will give, than they would be if an affidavit had been signed by the witness. That is an inevitable consequence of the witness's refusal to sign an affidavit. Provided that the outline is a full and bona fide attempt to notify the other parties of the evidence that the adducing party expects the witness to give, the uncertainty of the other parties' position (absent a risk of prejudice) is not a ground for preventing or limiting the witness's evidence. 18 An order of the kind proposed by the applicant would, in my opinion, tend to interfere with the efficient conduct of the hearing. It would be necessary for counsel for ASIC to make an application for leave whenever it appeared that the witness's evidence might be straying outside the outline. This would be so even if the order referred only to the substance rather than the letter of the outline. Indeed, the word "substance" might prove difficult to apply and make the problem greater. If no order is made, the defendants will be free to object whenever they believe that they may be prejudiced by the witness straying outside the outline, but the necessity for ASIC to make an application for leave whenever the outline has been departed from, regardless of whether the defendants may be subject to any real risk of prejudice, would be avoided. 19 The application is intended to raise a question of principle, and the applicant has not invited the Court to review the outlines of evidence that have been filed. In my opinion there is no principle justifying the making of the orders sought by the applicant. It is possible, though unlikely, that if an outline of evidence relates to particularly sensitive material, or for any other reason departure from the outline would be likely to create prejudice, the Court may be persuaded to make an order of the kind sought by the applicant, confined to the particular outline of evidence that creates this risk. But there is no such application before the Court now. 20 In my view there is no warrant for departing from the usual practice in the Equity Division simply because the proceeding is a civil penalty proceeding. It is appropriate to recognise that in such a proceeding, adverse findings may have disastrous consequences on a defendant, but that is not unique to civil penalty proceedings. While "exactness of proof" may be required in a civil penalty proceeding, that does not imply that some additional and inconvenient limitation should be imposed upon the process of adducing evidence from a witness who has not signed an affidavit. On the contrary, the serious consequences that can flow from adverse findings in a civil penalty proceeding provide a good reason for bringing the proceeding to an end efficiently and therefore not imposing a procedural obstacle in the way of the presentation of the evidence. 21 My conclusion is that the application should be dismissed, subject only to my making a direction to ASIC along lines referred to in paragraph 13 above. I shall hear the parties on the question of costs.

ASIC v Vines

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