Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd

Background facts 7 On 19 December 2019, the ACCC filed an interlocutory application seeking a finding that Mr McKeough has committed a contempt of court as specified in the statement of charge (contempt application). 8 The same day, the ACCC filed a statement of charge addressed to Mr McKeough and the following three affidavits (original affidavits): (1) an affidavit of Mr Garey affirmed on 19 December 2019; (2) an affidavit of Ms Rosati sworn on 19 December 2019; and (3) an affidavit of Michael Hogan, a liquidator of the respondent, sworn 17 December 2019. 9 On 27 February 2020, Mr McKeough's solicitor, Brenden Miller, sent an email to AGS seeking confirmation "in accordance with FCR 42.12" that the ACCC had served all of the evidence upon which it intended to rely to prove the charge. 10 Rule 42.12 of the Federal Court Rules 2011 (Rules) provides: An application alleging that a contempt has been committed must be accompanied by: (a) a statement of charge, in accordance with Form 137, specifying the contempt with sufficient particularity to allow the person charged to answer the charge; and (b) the affidavits on which the person making the charge intends to rely to prove the charge. 11 On 6 March 2020, AGS told Mr Miller that AGS was seeking instructions and anticipated providing a substantive response early the following week. 12 On 16 March 2020, Mr Miller telephoned AGS and was told by Sarah Tormey, a lawyer working with Mr Garey, that the ACCC had completed all of its evidence "in respect of liability on the contempt application" but may wish to adduce more evidence on any sentencing. 13 On 17 March 2020, and in reliance on AGS's statement on 16 March 2020, Mr Miller wrote to AGS requesting particulars of the charge against Mr McKeough. Relevantly, Mr Miller asked: In relation to the factual allegation that the lump sum invoices "were not reasonable legal expenses in defence of [the] proceedings"… please provide particulars of all factual matters upon which you rely for the Courts [sic] to draw this inference. 14 On 19 March 2020, the Court ordered the ACCC to answer the request for particulars by 3 April 2020. 15 By consent, on 3 April 2020, the date for compliance was extended until 17 April 2020. 16 On 14 April 2020, Mr Garey sent Mr Miller an email which said, relevantly: On further reflection, we consider that a proper response to your request for particulars may require us to file some limited further evidence. 17 Mr Garey proposed a timetable for filing that evidence and for providing the requested particulars. 18 By letter dated 16 April 2020, Mr Miller objected to Mr Garey's proposed course of action and made the following points: (1) But for AGS's 16 March 2020 confirmation that the ACCC had filed all of its evidence, "the request for particulars may not have been served or may not have been served in the form in which it was". (2) "[I]t is quite conceivable that my client will suffer prejudice if [the ACCC] is granted the leave it seeks to file and serve further evidence." Mr Miller indicated that AGS should identify the nature of the proposed evidence before Mr McKeough would give any consent to leave to file additional evidence. (3) It could not be correct that the ACCC was unable to particularise its case without filing the now proposed additional evidence, and the ACCC ought to provide the requested particulars by reference to the evidence filed to date. 19 By email dated 17 April 2020, Mr Garey replied: In short, we are seeking to put on 2 additional pieces of evidence which were prompted by your request for further and better particulars. The first would be a solicitor's affidavit indicating how the chronology that was briefed to our expert (Ms Rosati) was created and further instructions about the nature of the work carried out by the parties during the period of the invoices. The second would be a supplementary report from Ms Rosati examining the chronology of the invoices - ie the time periods in which all the invoices (Narrated and Lump Sum) were issued - and taking into account any further instructions from AGS as per above. It was prompted by your initial request for further and better particulars as to whether we allege that none of the Lump Sum Invoices were reasonable legal expenses in defence of the proceedings. 20 In an affidavit sworn on 6 May 2020, Mr Miller said, relevantly: 13. Had I been made aware by Ms Tormey on 16 March 2020 that the first applicant was to serve further evidence on liability, or that it was reserving its position, I would not have sent my letter on 16 March 2020. I would not have done this as I regarded that letter as disclosing a critical aspect of the respondent's defence to the first applicant's case against him, namely, a lack of evidence to prove beyond reasonable doubt that the five lump sum invoices the subject of the statement of charge "were not reasonable legal expenses in defence of these proceedings". 14. In relying on Ms Tormey's confirmation, I was conscious of the onus of proof attaching to the first respondent's case and the respondent's right to say nothing in response to the charge until it had been proved against him at a prima facie level. In the absence of such confirmation, I would have advised my client to not disclose this aspect of his defence until the hearing of the charge.

Accc's request for leave to file affidavits 21 There is no dispute that the new affidavits are relevant to the charge. To the contrary, Mr McKeough submitted that Ms Rosati's evidence "goes to the heart of the charge"; that the new affidavits are considered by the ACCC to be "critical" to its ability to prosecute the charge; and that the affidavits are indicative of a conclusion reached by the ACCC that it could not prosecute the charge on the basis of the original affidavits. 22 On behalf of the ACCC, Ms Orr QC submitted that leave should be granted to file the new affidavits on the basis of the following propositions: (1) Contrary to Mr McKeough's written submission, r 42.12 of the Rules does not confine the evidence that may be relied on in a contempt application to the affidavits that accompanied the statement of charge. Accordingly, the ACCC does not require dispensation from compliance with that rule. (2) The Court has a discretion to permit the ACCC to file further affidavits in support of the charge. The Court should exercise that discretion because the new affidavits contain relevant evidence from two existing witnesses, including the independent expert witness engaged by the ACCC, which the ACCC is seeking to file well in advance of any hearing, the date for which is not yet fixed. (3) The ACCC accepts that it has changed its position since it told Mr McKeough that its evidence was complete. It also accepts that Mr McKeough sought particulars of the charge in reliance on the statement that its evidence was complete. However, Mr McKeough will not suffer any relevant prejudice if leave is granted. In this regard, Mr McKeough has not been induced to disclose any positive defence or to reveal any mitigating circumstances or excuse at law. The request for particulars does no more than ask the ACCC to articulate the facts on which it relies to prove its case. All Mr McKeough has revealed is that he is considering whether he can submit that the ACCC has not satisfied its evidentiary burden which was already clear from an earlier indication that Mr McKeough presently intends to plead not guilty to the charge. (4) Mr McKeough will not be foreclosed from making any submission about the admissibility of the new affidavits. (5) The deponents of the new affidavits will be available for cross-examination. (6) If leave is not granted, the Court will have an incomplete picture of the views of the independent expert. 23 Ms Orr QC referred to the following contempt cases in which leave was granted to adduce evidence in addition to affidavits filed with the statement of charge. 24 In Director of the Fair Work Building Industry Inspectorate v Cartledge [2015] FCA 453; 239 FCR 405 (Cartledge), Mansfield J rejected a submission that affidavits filed and served with the contempt application and statement of charge set the outer boundaries of admissible evidence relevant to the charge, subject to cross-examination. 25 At [35] and [36], his Honour stated: [35] … [T]he purpose of [r 42.12] is to ensure that a person the subject of a charge of contempt has a clear understanding of what is alleged and to ensure a fair hearing of the contempt allegation, including the opportunity to answer what is alleged. I do not think that r 42.12 is intended to prescriptively limit what is admissible on the hearing of a charge of contempt. It is to ensure that a contempt charge is supported, in all its elements, by admissible evidence. The charge itself, and the affidavits, enable the person charged to understand the charge and to see whether admissible evidence supports it. [36] It would be surprising if r 42.12 was intended to go beyond that role. Firstly, it might be doubted whether the rule could, or was intended to, restrict the rights of cross-examination by a person charged with contempt subject to a judicial discretion, or to restrict the calling of admissible evidence, irrespective of the interests of justice in any particular matter. It is a rule prescribing a procedure for the commencement and conduct of a particular type of application, different from those in Parts 8 and 16 dealing with the general way in which proceedings in the Court are instituted and pleaded. Part 18 and Chapter 3 also address the institution and conduct of particular types of applications. 26 In Hurd v Zomojo Pty Ltd [2015] FCAFC 148; 110 ACSR 38 (Hurd) at [109], the Full Court rejected an argument that the primary judge erred in admitting into evidence affidavits that had not been served with the charges. 27 At [23], Besanko and Gilmour JJ recorded that the primary judge rejected the submission in relation to one affidavit, saying that r 42.12(b) did not have the effect that the Court could not, in the exercise of a discretion, allow a prosecutor to rely on additional affidavit material served before the trial. Their Honours also recorded the primary judge's observation that a prosecutor may wish to call evidence from persons who are not willing to swear affidavits but who are prepared to give oral evidence at trial. 28 Ms Orr QC noted that, in Hurd, leave was also granted to rely on evidence of admissions after the prosecutor successfully applied to reopen its case following the alleged contemnors decision not to go into evidence. The Full Court rejected a contention that the primary judge had erred in granting leave to re-open the case and to tender affidavits without notice. 29 Ms Orr QC submitted that Mr McKeough made a forensic decision to seek particulars and cannot be heard to complain if the request caused the ACCC and its lawyers to reflect on the strength of their case and seek to improve it. 30 Finally, Ms Orr QC noted that, as the final hearing of the charge has not yet been fixed, there is no question that Mr McKeough will not have a sufficient time to deal with the new evidence. Ms Orr QC noted that Mr McKeough has had the chronology at least since Ms Rosati's first affidavit was served on him in January 2020.

Mr McKeough's arguments against leave 31 On behalf of Mr McKeough, Mr Sirtes SC contended that the original affidavits are insufficient to prove the charge and that the ACCC has failed to comply with r 42.12 by reason of the insufficiency of those affidavits. Mr Sirtes SC also sought a finding that, at the time the statement of charge was filed, there was no evidence to support the charge. 32 Mr Sirtes SC submitted the ACCC's appreciation of the insufficiency of the original affidavits is evidenced by its conduct following the 17 March 2020 request for particulars. Instead of simply answering the request, the ACCC delayed, prevaricated and ultimately sought to file additional evidence. In those circumstances, Mr Sirtes SC argued, the Court should also infer that the ACCC could not answer Mr McKeough's request for particulars that goes to the heart of the charge without relying on the new evidence. 33 Mr Sirtes SC submitted that the position is therefore different from Cartledge where, as appears from [31] of the judgment, there was no doubt that the original affidavits were sufficient to support the contempt charge. 34 Mr Sirtes SC next contended that Mr McKeough will lose the opportunity of obtaining an acquittal because the evidence now sought to be filed goes to the root of the charge. 35 Mr Sirtes SC submitted that the Court should find that, but for Mr McKeough's request for particulars, the new evidence would not have been adduced. 36 Mr Sirtes SC referred to case law concerning the attributes of a fair trial observing that something done before trial may result in the accused being deprived of a fair trial, leading to a miscarriage of justice: Dietrich v The Queen [19920 HCA 57; (1992) 177 CLR 292 at 300, (Mason CJ and McHugh J), TKWJ v The Queen [2002] HCA 46; (2002) 2112 CLR 124 at [15]. Mr Sirtes SC noted that a serious departure from the prescribed processes for trial may constitute a substantial miscarriage of justice: Baini v The Queen [2012] HCA 59; (2012) 246 CLR 469 at [26] and [27]. 37 Mr Sirtes SC argued that the cases on the scope of r 42.12 show that, if the proposed additional evidence is not procedural, then the Court must dispense with compliance with the rule in order to permit filing. In support of this argument, he referred to the first instance decision in Zomojo Pty Ltd v Hurd (No 5) [2014[ FCA 537 at [28]-[30] where Tracey J said: [28] Rule 42.12 does not, in terms, or, in my view, implicitly preclude a prosecutor from relying on additional affidavit evidence which has been filed after the interlocutory application. The rule plainly contemplates, as a matter of fairness, that as much evidence as possible to support the charges should be provided to the accused person with the statement of charges. The extent to which a prosecutor may rely on additional affidavit material, served before trial, must be a matter within the discretion of the Court. It is also to be borne in mind that a prosecutor may wish to call evidence from persons who are not willing to swear affidavits but who are prepared to give oral evidence at trial. [29] Rule 1.34 confers a wide discretion on the Court to dispense with compliance with any other rule "either before or after the occasion for compliance arises." In Lazar v Taito (Aust) Pty Ltd (1985) 5 FCR 395 McGregor J (at 403-4) said that the power conferred by the predecessor of Rule 1.34 may be exercised in contempt proceedings, particularly "where there is no apparent injustice and the alleged error can only be one of procedure." Neaves J (at 414) accepted that, in contempt proceedings, there will be limited circumstances in which the discretion conferred by the Rule should be exercised. Fox J agreed (at 396) with McGregor and Neaves JJ on this point. In Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (No 2) (1985) 9 FCR 194 at 199 Smithers and Northrop JJ held that the affidavits referred to in the then O 40, r 8, which dealt with personal service are the affidavits filed in support of the motion and that O 40, r 8, did not apply to other affidavits which may be used at the hearing of the motion. Toohey J said (at 226) that: "In my view r 8 does not impose an absolute prohibition on the use of material that has not been served personally on an accused person. The intention of the rule is to ensure that no injustice is done to an accused person by reason of a failure to provide him with the material filed in support of the charge against him. Rule 7(2) contemplates that evidence may be given orally in support of the charge. Again the question is one of fairness to the accused. Evidence, whether orally or by some later affidavit, may represent such a departure from the material served on the accused person or may introduce such new matter that the applicant ought not to be permitted to adduce that material without service of the affidavit or notification of the proposed oral evidence to the accused person. But where, as in the present case, an accused person or someone with authority to speak on his behalf makes some comments at the time of service of material, the reception of that additional material is one for the discretion of the judge before whom the contempt motion comes." (Emphasis added). [30] Ms Whiting's second affidavit did no more than amplify material which had appeared in paragraph 47 of her first affidavit. She exhibited material, much of which appeared on the Court file. That material related to procedural matters of which the respondents were aware. The admission of the affidavit did not cause any injustice to the respondents. In these circumstances I considered it appropriate to exercise, to the extent necessary, the dispensation power conferred by Rule 1.34. 38 Mr Sirtes SC also contended that the ACCC had not given an adequate explanation for their change of position and there was no evidence about why the ACCC should be entitled to walk back from the assurance that all evidence in support of the charge had been filed. 39 Mr Sirtes SC tendered the particulars provided on 18 May 2020 in support of the contention that the ACCC could not have provided them without the new evidence. 40 Finally, Mr Sirtes SC submitted that leave should be refused because the ACCC has delayed in the filing of the new evidence in a manner that imposes undue strain on Mr McKeough, citing State Pollution Control Commission v Australian Iron & Steel Pty Ltd (1992) 29 NSWLR 487 at 494. Mr Sirtes SC measured that delay as the five months from the filing of the charge to the application for leave.

Consideration 41 Rule 42.12 required the ACCC to file, with its application, the affidavits on which it intended to rely to prove the charge of contempt. 42 Assuming that there may be non-compliance with r 42.12 if the affidavits filed and served with the application are insufficient to prove the charge, Mr Sirtes SC did not take the Court to the original affidavits. An analysis of that material would demonstrate, if it is the position, that the ACCC had failed to comply with r 42.12 by reason of the insufficiency of the affidavit. Without such an analysis, I am not persuaded that the ACCC's conduct demonstrates the insufficiency of the original affidavits and, consequently, non-compliance with r 42.12. 43 As to the scope of r 42.12, I do not accept that Tracey J's reasons imply that "non-procedural" evidence must be served with the statement of charge under r 42.12. Rather, as his Honour noted, it is a matter for the Court's discretion whether a prosecutor may rely on additional affidavit material in support of the charge. 44 I am also not persuaded that the ACCC's delay in responding to the request for particulars and its current application for leave together support a conclusion that the ACCC was unable to particularise its case without the new affidavits. It is equally possible that ACCC's conduct reflects further consideration on the part of the ACCC and its legal representatives about how to prove and particularise the case and Mr Garey's evidence, which I accept, is to that effect. The ACCC's case requires it to demonstrate the negative propositions that the relevant invoices were not reasonable legal expenses and that payment of the invoices was prohibited by reason of the relevant undertaking to the Court. The task is not a straightforward one and involves attention whether the case involves unstated but assumed facts that might require proof, whether by direct evidence or inference from other evidence, in order to demonstrate beyond reasonable doubt that the invoices were not for legal expenses or not for reasonable legal expenses. 45 Similarly, I do not find that the ACCC formed a view that Ms Rosati's first affidavit was so deficient that it was incapable of supporting particulars of the charge, when it is equally possible that the ACCC's decision to seek to file her second affidavit was based on a different view as to the weight of that affidavit which nevertheless led the ACCC to wish to supplement Ms Rosati's evidence. 46 The nature of the evidence contained in the new affidavits also does not support a conclusion that the ACCC could not have particularised their case prior to their preparation. Mr Garey's new affidavit is directed to proof of facts assumed by Ms Rosati. So far as I can see, Ms Rosati's new affidavit does not do anything more than analyse data that was included in the original affidavits and express an opinion on the basis of the additional analysis. 47 Accordingly, Mr McKeough's first contention fails. 48 It follows that there is no demonstrated non-compliance with r 42.12 and the application for leave requires the exercise of the Court's general discretion. It does not require the Court to dispense with compliance with r 42.12. 49 As to Mr McKeough's second contention, without finding that the original affidavits are insufficient to prove the charge, I cannot infer that Mr McKeough will lose the opportunity of obtaining an acquittal. 50 I also do not find that, but for Mr McKeough's request for particulars, the ACCC would not have sought to adduce the new evidence on the hearing of the charge application. It is a matter of speculation what steps may have been taken in the ACCC's preparation for hearing that could have led to a decision to seek to file the new affidavits. Similar considerations to the ones now being addressed (and perhaps others) would have arisen on another application for leave to file such evidence. 51 I accept Ms Orr QC's submission that Mr McKeough will not suffer relevant prejudice if the affidavits are filed. Even if Mr McKeough's request "telegraphed a deficiency in the ACCC's evidence", it was foreseeable that the request would stimulate further consideration of whether and how the case might be deficient, or could be improved. Mr McKeough made a forensic decision to seek particulars and cannot be heard to complain if the request caused the ACCC and its lawyers to reflect on the strength of their case and seek to improve it. 52 He will still have a reasonable opportunity to make any proper objections to the admissibility of the new affidavits, to test their weight and to make submissions in due course as to their weight. There is no reason to think that Mr McKeough will not have sufficient time to consider the new affidavits and to respond to it as appropriate before the charge application is heard. In this regard, I note in relation to Mr Garey's new affidavit that most if not all of the facts in the chronology are within (or would reasonably be expected to be within) Mr McKeough's personal knowledge. As to Ms Rosati's evidence, as I have explained above, it is substantially an analysis of invoices which are the subject of her original affidavit. 53 Contrary to Mr Sirtes SC's submission, I consider that the ACCC has adequately explained the circumstances which have led to the leave application. Based on the facts and evidence set out above, the new evidence was prompted by the request for particulars. 54 I have reviewed the particulars which the ACCC has now supplied. It is notable that the ACCC does not make a positive allegation as to the character of the amounts charged in the lump sum invoices. Although Mr Sirtes SC did not critique them, it is not obvious that they are sufficient to support a conclusion beyond reasonable doubt that the invoices "were not reasonable legal expenses in defence of [the] proceedings". 55 The particulars comprise facts about the following matters: (1) Costs agreements (2) Mr McKeough's awareness of the undertaking. (3) Narrated invoices. (4) Steps and events over the course of the proceeding. (5) Lump sum invoices. (6) An alleged departure from "billing practices" by the lump sum invoices. (7) Further facts concerning and relating to each of five lump sum invoices, including by reference to the contents of the narrated invoices. (8) Ms Rosati's opinion that the costs charged in the lump sum invoices are not costs that could be considered to be reasonable legal expenses in defence of the proceeding. 56 I am not persuaded that the ACCC could not have provided the particulars without the new evidence except to the limited extent that Ms Rosati's opinion is now also based on the additional analysis recorded in the new affidavit. To the extent that the particulars refer to the analysis in Ms Rosati's new affidavit, as explained above, in my view, the ACCC could readily have undertaken that analysis on the basis of the other facts set out in the particulars and, I infer, the detailed evidence that supports those facts.

Conclusion 57 Having regard to the matters set out above, it is in the interests of justice to grant leave to the ACCC to file the new affidavits because they are of apparent relevance to the case sought to be made by the ACCC and Mr McKeough will not suffer any relevant prejudice by the grant of leave. 58 As the ACCC was seeking the exercise of a discretion in its favour, the ACCC should pay the costs of the application. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.