Australian Securities and Investments Commission v ActiveSuper Pty Ltd

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

SYNDICATED PROPERTY GROUP LTD (BVI COMPANY NUMBER 1678711)

WORLDWIDE PROPERTY OPPORTUNITIES LTD (BVI COMPANY NUMBER 1678279)

JUDGE: GORDON J DATE: 22 April 2013 PLACE: MELBOURNE

INTRODUCTION 1 Mr Craig Gore, the 17th Defendant, seeks a stay of the proceedings: … until seven days after the [Australian Securities and Investments Commission (ASIC)] provides a written undertaking that it will neither institute criminal proceedings against [Mr Gore], nor brief the Commonwealth Director of Public Prosecutions with respect to any charge or indictment against [Mr Gore] arising from any matter the subject of this proceeding. Alternatively, if ASIC notified Mr Gore that it would "institute criminal proceedings against him or [has] briefed the Commonwealth Director of Public Prosecutions", he also sought a stay until further notice. ASIC opposed the application. 2 For the reasons that follow, Mr Gore's application is dismissed.

FACTS 3 On 9 November 2011, ASIC commenced a formal investigation pursuant to Div 1 of Pt 3 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) in relation to suspected contraventions of the Corporations Act 2001 (Cth) (the Corporations Act) by ACN 143 832 053 Pty Ltd (the Second Defendant) and its officers, employees and representatives. That investigation has widened to include the first and 12th Defendants and their former and current officers, employees, agents, representatives, associates and related entities. The investigation is in relation to suspected contraventions of: 1. ss 184, 601ED(5), 726, 727, 911A, 911B, 912A, 946A, 947D, 992A, 1041E, 1041G and/or 1041H of the Corporations Act; 2. s 12DA of the ASIC Act; 3. s 408(C) of the Criminal Code Act 1899 (Qld); and/or 4. Div 400 of the Criminal Code Act 1995 (Cth). 4 ASIC's investigation into possible criminal offences by, among others, Mr Gore is ongoing. 5 An ASIC Manager, Mr Price, provided the following update on the status of that investigation: [18] … Notwithstanding the commencement of these proceedings, the Investigation team has been and is continuing to undertake enquiries for the purpose of obtaining evidence to ascertain whether or not recommendations could be made in relation to the prosecution of possible criminal offences by the persons of interest. [19] As ASIC's enquiries are ongoing, it may continue to exercise its powers under the ASIC Act and, without limitation, may further compel persons of interest (including Craig Gore) to give information to ASIC, e.g. by way of requiring the person to participate in an examination under s 21 following a notice served under s 19 of the ASIC Act. [20] No decision has been made by ASIC to compile a brief of evidence to the [Commonwealth Director of Public Prosecutions (CDPP)] in relation to possible offences by the persons of interest and has made no decision that any brief of evidence will be referred to the CDPP. I am not yet in a position to decide whether to recommend that a brief be referred to the CDPP. Further investigation by ASIC is necessary before I could be in such a position. At present, I anticipate that the investigation will require approximately 8 months from today. 6 Of course, ASIC is not the prosecuting authority. It is the CDPP. As Mr Price explained to the Court, if a brief is referred to the CDPP, he cannot predict how long it will take the CDPP to review the brief or the likely outcome of that review. 7 What then is the basis of Mr Gore's present application? Mr Gore is the 17th Defendant in these proceedings. He is presently bankrupt. The history of these proceedings was summarised by Dodds-Streeton J in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 1) [2012] FCA 1519 at [5]-[31]. Mr Gore has not filed a defence or provided discovery of documents. 8 Mr Gore summarised the basis for the stay application as follows: 14. Where ASIC is continuing to investigate Mr Gore's conduct, Mr Gore contends that the continuation of this proceeding against him, in the face of future possible prosecution for the same or related conduct amounts to a type of abuse of conduct. 15. The abuse of conduct is said to arise in the following circumnstances (sic):- a. Decisions that Mr Gore will need to make in these proceedings will have to be made knowing that a future possible prosecution is possible; b. It follows that the substantive right that Mr Gore would have in any prosecution, namely, the privilege against self-incrimination would or may be undermined by the need to defend this proceeding. That privilege could also be undermined by the indirect evidence of others in the proceeding; c. It is unduly burdensome for Mr Gore, a bankrupt, to have to face the prospect of two sets of proceedings in respect of the same conduct; d. The Court should not make declarations of contraventions of offence provisions in circumstances where a declaration if made, would be based on a civil standard of proof and, because future prosecutions are on the cards, and may later be falsified by acquittals in the criminal prosecution; e. A civil case will be decided upon evidence that, for the most part, will not be available to a prosecutor in a criminal trial; f. The continuous promotion of these proceedings to the media by ASIC will prevent Mr Gore from getting a fair trial in any prosecution as the jury will be biased against him. 16. Mr Gore's position is that if ASIC decides that it will not prosecute him then this proceeding may continue. On the other hand, if ASIC decides it will prosecute him, then the stay of this proceeding should continue. 9 As noted earlier, ASIC opposes the application.

APPLICABLE PRINCIPLES 10 The Court has an extensive jurisdiction to stay proceedings in the interests of justice. The "matter is one of judicial discretion": Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 at 19 and 21. Each case is decided on its own merits: ML v Australian Securities and Investments Commission [2013] NSWSC 283 at [31]. 11 For many years, the "McMahon v Gould line of authority" has provided useful guidelines in applications of this nature: McMahon v Gould (1982) 7 ACLR 202 at 206 and 207; De Simone v Bevnol Constructions and Developments Pty Ltd (2010) 30 VR 200 at [9] and Australian Securities and Investments Commission in the matter of Northwest Resources Limited v Craigside Company Limited BVI Company Number 74124 named in the Schedule [2013] FCA 201 at [20]. The guidelines were as follows: (a) Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court (Rochfort v John Fairfax & Sons Ltd at 19); (b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds (ibid); (c) The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff's ordinary rights should be interfered with (Jefferson v Bhetcha at 905); (d) Neither an accused (ibid) nor the Crown (Rochfort v John Fairfax & Sons Ltd at 21) are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding; (e) The court's task is one of "the balancing of justice between the parties" (Jefferson Ltd v Bhetcha at 904), taking account of all relevant factors (ibid at 905); (f) Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors (ibid at 905); (g) One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused's "right of silence", and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding (ibid at 904). I return to this subject below; (h) However, the so-called "right of silence" does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding (ibid at 904-5); (i) The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings (ibid at 905); (j) In this regard factors which may be relevant include: (i) the possibility of publicity that might reach and influence jurors in the civil proceedings (ibid at 905); (ii) the proximity of the criminal hearing (ibid at 905); (iii) the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid at 905); (iv) the burden on the defendant of preparing for both sets of proceedings concurrently (Beecee Group v Barton); (v) whether the defendant has already disclosed his defence to the allegations (Caesar v Somner at 932; Re Saltergate Insurance Co Ltd at 736); (vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him (cf Re Saltergate Insurance Co Ltd at 735-6); (k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant's obligation to the plaintiff; (l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed (Beecee Group v Barton). (Emphasis in original.) 12 As Dodds-Streeton J recorded in Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562 at [63], Wootten J discussed in detail "the right of silence", and observed that some advantages conferred by the right of silence were not justifications for its existence. The tactical advantages identified included depriving the prosecution of the opportunity to check the defendant's story or to stay silent until the end and then fabricate a story or last minute alibi. As a result, Wootten J stated (at 208): … In exercising its discretion to stay civil proceedings the court need not be concerned to preserve these advantages. It should be concerned to avoid the causing of unjust prejudice by the continuance of the civil proceedings, not to preserve the tactical status quo in the criminal proceedings whether it be just or unjust. As has been said on many occasions, the central consideration in determining whether to grant a stay is what the interests of justice require: Websyte at [109]. 13 Recently, it has been suggested that the provisions of the Corporations Act and the decision of the High Court in Reid v Howard (1995) 184 CLR 1 have "adjusted the McMahon v Gould" line of authority: Re AWB Ltd (No 1) (2008) 21 VR 252 at 284; Northwest Resources at [11] and [20] and Websyte at [114]. 14 First, the relevant provisions of the Corporations Law. Section 1331 of the Corporations Act provides that "no civil proceedings under this Act are to be stayed merely because the proceeding discloses, or arises out of, the commission of an offence": see also, by analogy, s 1317P of the Corporations Act. As Jagot J said in Northwest Resources at [19]: I accept that these provisions disclose that the mere fact that a contravention involves an offence is not a reason of itself to stay a civil proceeding. Nor is the mere fact of a declaration of a contravention in a civil proceeding a reason to prevent the prosecution of an offence. To this extent, there is no divergence between the provisions and the common law. The provisions do not, however, purport to prevent the granting of a stay in an appropriate case where, on the facts, the risk of substantial injustice by reason of the continuation of a civil proceeding outweighs the interest in all proceedings being heard and determined in the ordinary course. 15 Next, the decision of the High Court in Reid v Howard (1995) 184 CLR 1. In Websyte, Dodds-Streeton J considered the discretion to grant a stay of a civil proceeding where a criminal prosecution relating to the same subject matter was "on the cards" and, in that context, the relationship between McMahon v Gould and Reid v Howard. Her Honour's reasoning was adopted by Jagot J in Northwest Resources as follows: • "It is well established that this court has an extensive jurisdiction to stay proceedings in the interests of justice and that "the matter is one of judicial discretion" (See Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 at [19] and [21] (sic) per Sugerman ACJ (with whom Holmes and Mason JJA agreed)) (at [53]). • "On the present state of the law, there is no automatic entitlement to a stay of a civil proceeding simply because there are or may be parallel criminal proceedings involving the same or related subject matter" (at [113]). • "While many courts have recognised tension between Wootten J's approach in McMahon v Gould to the right of silence in a parallel civil proceeding and the High Court's approach to the privilege against self-incrimination in Reid v Howard, it has been recognised that any authoritative re-evaluation of McMahon v Gould should be made only by an appellate court, or perhaps the High Court itself" (at [114]). • "While McMahon v Gould, unless authoritatively re-evaluated, remains applicable, Wootten J did not purport to establish a rigid code, but expressly recognised that the relevant considerations will vary according to the individual case and that his guidelines were not exhaustive. It is also important to observe that Wootten J did not suggest that potential impact on the privilege against self-incrimination was irrelevant in this context" (at [115]). • "The "real risk of injustice" relevant in this context can relate either to an actual or potential criminal proceeding" (at [117]). 16 It is against that background, that the current application is to be considered.

ANALYSIS 17 It is not in the interests of justice to order a stay of these civil proceedings against Mr Gore at this stage of the proceedings. Of course, if circumstances change there is nothing to prevent Mr Gore making a further application supported by appropriate material. 18 The application fails at the first hurdle. A prosecution of Mr Gore is presently not "on the cards". "On the cards" means there must be a "reasonable possibility" of a prosecution: Northwest Resources; Re Australian Property Custodian Holdings Limited (No 2) [2012] VSC 576 at [34]; Re AWB Ltd (No 1) at [86]; Director of Public Prosecutions v Selway (No 2) (2007) 16 VR 508. 19 In Australian Property Holdings v Woolridge [2012] VSC 576 Robson J found that no prosecution was "on the cards" in circumstances where the evidence supporting such a claim was a letter from ASIC to the defendant in which, in response to a request by the defendant as to whether ASIC intended on prosecuting the defendant, ASIC responded that investigations were continuing and no decision had yet been made: at [30]-[34]. Here, Mr Gore relies on having received a similar response from ASIC following his request concerning ASIC's intentions with regards to prosecuting him. The investigation is continuing and far from complete: see [5] and [6] above. It cannot be said that presently there is a reasonable possibility of a prosecution of Mr Gore. 20 Next, is Mr Gore's complaint that he will lose a tactical advantage by being required to disclose potential defence witnesses. The Courts have rejected as a relevant consideration the possible loss by the defendant of any tactical advantage that might flow from their so-called 'right of silence': McMahon v Gould at 208; Websyte at [120]. At first blush, that may seem harsh. It is not. It is not because in civil proceedings a defendant retains the power to decide what evidence to adduce and what submissions to make in response to allegations made against them. The fact that the defendant's decision not to call certain evidence or make certain submissions might be affected by considerations related to the possibility that criminal offences, or possible defences to future criminal charges, might thereby be revealed does not presently justify a stay of these civil proceedings: see ML v Australian Securities and Investments Commission at [44]-[46]. As Rothman J said in ML v Australian Securities and Investments Commission at [45] (citing R v Seller; R v McCarthy [2013] NSWCCA 42 at [10]), the question must always be whether the process being employed will be "inconsistent with the recognised purpose of the administration of criminal justice and so constitute an abuse of process". Put another way, what is the fundamental defect imposing unfair consequences that cannot be relieved by a trial judge in these proceedings and which therefore warrants the grant of a stay? ML v Australian Securities and Investments Commission at [46]. In relation to Mr Gore, the process being employed is not inconsistent with the recognised purposes of the administration of criminal justice and, moreover, no fundamental defect has been identified that has not been addressed, or is unable to be addressed, in the civil proceeding. 21 Mr Gore has not filed a defence. As ASIC submitted, it is open to Mr Gore to seek orders relieving him of an obligation to make discovery or put on evidence in advance of ASIC's case closing if he believes on reasonable grounds that do so might expose him to criminal prosecution or penalty: see ML v Australian Securities and Investments Commission at [53]. No such application has been made. 22 Third, these proceedings are listed for hearing in August 2013. There is no risk that Mr Gore will have to defend this proceeding and a possible criminal proceeding (should one be brought) concurrently. Moreover, as ASIC submitted, any evidence that is led during the civil proceedings may be excluded from any criminal trial if its admission would unfairly prejudice Mr Gore: ML v Australian Securities and Investments Commission at [58]. 23 Fourth, Mr Gore's concern about adverse publicity. The possibility of adverse media publicity does not provide grounds for a stay, nor is it a matter of any significant weight in determining whether to grant a stay: Guglielmin v Trescowthick (No 3) (2005) 220 ALR 535 at [46]; Australian Securities Commission v Kavanagh (1993) 12 ACSR 69 at 76. In fact, the evidence did not disclose any publicity of this proceeding that could prejudice any future criminal prosecution. To the extent that Mr Gore maintained a contention that ASIC has attempted to influence the Court through reports in the press, I reject those contentions. 24 Fifth, Mr Gore's contention that ASIC or possible future prosecution witnesses may fabricate evidence, or ASIC or other persons may interfere with defence witnesses. No evidence was adduced to support that allegation. It is rejected. 25 Fifth, Mr Gore's contention that he lacks necessary funds. Mr Gore is bankrupt. However, he recently retained solicitors and counsel to appear on this application. Funding for that representation has not been explained. Moreover, Mr Gore's contention that the trial will take eight weeks is rejected. The trial is currently listed for two weeks. That estimate of the length of the trial was made in conjunction with the parties and their legal representatives. 26 Sixth, Mr Gore submitted that the Court should not make declarations of contraventions of offence provisions in circumstances where a declaration if made, would be based on a civil standard of proof and, because future prosecutions are on the cards, may later be falsified by acquittals in the criminal prosecution. That submission is premature. A prosecution of Mr Gore is presently not "on the cards". The final hearing of the civil proceeding has not commenced, let alone been determined. Put another way, the form and content of the appropriate final relief (and the form and content of publication of reasons for judgment) in these civil proceedings is not presently able to be addressed, let alone resolved: see ML v Australian Securities and Investments Commission at [55]-[59]. 27 Finally, any delay resulting from the granting of a stay could be extensive. The consequences of that delay might not only undermine the ability of witnesses to recall accurately the events in dispute and, no less importantly, may impact on those said by ASIC to be affected by the allegations in these proceedings - the members of the public who have lost funds.

CONCLUSION AND ORDERS 28 The task is one of balancing justice between the parties, taking account of all relevant factors: Kavanagh at 77. As noted earlier, it is not in the interests of justice to order a stay of proceedings against Mr Gore at this stage of the proceedings. Of course, if circumstances change there is nothing to prevent Mr Gore making a further application supported by appropriate material. Mr Gore's application is dismissed. ASIC sought, and is entitled to, an order that its costs of and incidental to Mr Gore's application be paid by Mr Gore. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.