Australian Securities and Investments Commission v Bettles

1. The plaintiff pay the defendant's costs of and incidental to the application.
2. Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

GREENWOOD J: 1 These proceedings are concerned with the disposition of the reserved costs of and incidental to the resolution of an interlocutory application made by the defendant, Mr Bettles, for an order that the concise statement and supplementary concise statement in the proceedings be set aside and an order that the plaintiff file and serve a statement of claim in the proceeding. 2 Orders to that effect were made on 28 October 2020 with the disposition of costs reserved for later determination. As to the statement of claim, the plaintiff was directed to deliver a pleading within 28 days. Orders varying that timeframe were subsequently made. 3 These reasons ought to be read together with the reasons for judgment in Australian Securities and Investments Commission v Bettles [2020] FCA 1568. 4 The background is this. The plaintiff ("ASIC") commenced the proceedings by way of an originating application supported by a concise statement. The application was made under cl 45-1 of the Insolvency Practice Schedule (Corporations) which is Schedule 2 to the Corporations Act 2001 (Cth) (the "Act"), given effect by s 600K of the Act. The originating application recited that the proceeding concerned the conduct of the defendant "in connection with the performance of his duties as Registered Liquidator" of a particular company and other companies identified in the schedule to the application. The application recited that, on the facts stated in the concise statement, ASIC sought the following three grounds of relief: 1. An order that the Defendant's registration as a Registered Liquidator be cancelled. 2. An order that the Defendant be prohibited from reapplying for registration as a Registered Liquidator for such period as the Court considers appropriate. 3. An order that the Defendant be prohibited from consenting to any appointment and acting as a Liquidator for such period as the Court considers appropriate. [emphasis added] 5 The concise statement recited that it set out the "important facts giving rise to the claim". 6 ASIC filed the originating application and concise statement on 7 November 2019. At the first case management hearing held on 13 December 2019, the defendant submitted that orders ought to be made for the exchange of pleadings on the footing that the concise statement did not properly identify facts giving rise to causes of action relied upon, largely because the concise statement adopted, as a shorthand description of the contended underlying contravening conduct, the phrase illegal phoenix activity. The contention at the time was that that phrase, in the context of the concise statement, did not identify facts going to the integers of the provisions of the Act said to have been contravened thus giving rise to a basis for the claimed relief against the defendant in reliance upon s 79 of the Act. The case management hearing was adjourned so that ASIC could be provided with an opportunity to file and serve the defendant with the affidavit of its principal investigator, Mr Paul Christopher Dunn, on the footing that the concise statement, taken together with the facts set out in Mr Dunn's affidavit, might well convey the relevant matrix of fact properly supporting the contended contraventions and thus a basis for the relief claimed from the defendant. 7 On 13 December 2019, an un-filed version of Mr Dunn's affidavit was served on the solicitors for the defendant. Mr Dunn's sworn affidavit was filed on 16 December 2019. On 14 February 2020, the affidavit of Mr Oliver Jones was filed by ASIC. On 26 February 2020, ASIC provided the solicitors for the defendant with a document described as a "Concise Statement Evidence Matrix" which identified, by reference to each paragraph of the concise statement, the source of the evidence relied upon by ASIC said to make out the matters of fact recited in the concise statement found in the affidavits of Mr Dunn and Mr Jones. A further case management hearing was held on 4 March 2020 at which the parties were to address the utility of an exchange of pleadings rather than the proceeding continuing on the basis of the concise statement. 8 Rather than press the issue of an exchange of pleadings, consent orders were made that ASIC file and serve a supplementary concise statement addressing the criticisms made by the defendant of the concise statement and, in particular, the contended lack of clarity in the factual matters said to constitute the contended illegal phoenix conduct, in a way that properly engaged with the integers of the sections of the Act said to have been contravened. On 20 March 2020, ASIC filed a supplementary concise statement. 9 On 22 April 2020, the defendant filed and served a response which foreshadowed the defendant's contention that the concise statement and the supplementary concise statement ought to be struck out on the footing that the documents did not identify a coherent sequence of factual matters said to make good the integers of the sections of the Act alleged to have been contravened and conduct on the part of the defendant which, in respect of those contraventions, would render the defendant a person "involved in a contravention" of a relevant provision of the Act for the purposes of s 79 of the Act. In the result, the defendant was successful in obtaining an order setting aside the concise statement and supplementary concise statement based upon the central criticism that the documents did not coherently identify facts which, if proved, would give rise to contraventions of provisions of the Act and facts which, in turn, if proved, rendered the defendant a person involved in the relevant contraventions. 10 The defendant now contends that it ought to have an order that the ASIC pay his costs of and incidental to the application to set aside the concise statement and supplementary concise statement and replace those documents with a statement of claim. 11 ASIC resists that order for costs and submits that an appropriate order is "costs in the proceeding" or, alternatively, that there be no order as to costs or, in the further alternative, that the costs be the defendant's costs in the proceeding. 12 In its written submissions on the question of costs, ASIC places particular emphasis upon the legitimacy of its use of, and its entitlement to commence the proceeding with, an originating application supported by a concise statement consistent with what might be described as the modern method reflected in the provisions of the Commercial and Corporations Practice Note ("C&C-1"). 13 The defendant says that its criticism of the concise statement and supplementary concise statement was not ultimately directed to the selection of that procedure but rather the failure of the documents to coherently identify conduct, by reference to identified facts, giving rise to contended contraventions of the Act and conduct, by reason of identified facts, said to render the defendant a person involved in those contraventions. That criticism ultimately revolved around the use of the shorthand phrase illegal phoenix activity which either by itself or in the context of the narrative in the concise statement and supplementary concise statement failed to convey the content of the contravention by reference to the integers of the sections said to have been contravened. 14 As to C&C-1, these things should be noted. 15 One of the "key features" of the Commercial and Corporations National Practice Area, governed by C&C-1, is the Court's willingness to facilitate the use of mechanisms for the commencement of proceedings and case management tailored for commercial disputes so that proceedings are commenced and managed in the manner best suited to the character and needs of each case. These mechanisms include a method for applicants to expedite proceedings and state their cases concisely: cl 3.1, C&C-1. 16 A proceeding must be commenced by filing an originating application. The material supporting the originating application may take one or more of the following forms: a document described as a concise statement or a statement of claim or affidavit: cl 5.3, C&C-1. 17 As to a concise statement, that document is designed to operate according to a particular method. Clause 5.4 of C&C-1 is in these terms: A party commencing a proceeding may file a concise statement in support of an originating application. The purpose of a concise statement is to enable the applicant to bring to the attention of the respondent and the Court the key issues and key facts at the heart of the dispute and the essential relief sought from the Court before what might be the considerable cost of preparation of detailed pleadings is incurred. While the form of the concise statement is described in more detail below, it must first be emphasised that the concise statement is not intended to substitute the traditional form of pleading with a short form of pleading, but instead should be prepared more in the nature of a pleading summons, and may be drafted in a narrative form. 18 Clause 5.5 of C&C-1 provides that if a concise statement is filed with the originating application, no further originating material in support, whether by statement of claim or affidavit, is required to be filed until the Court orders that to be done. The concise statement contemplated by C&C-1 in the context of the method contemplated by C&C-1 must not exceed five pages and the Court would expect the document ordinarily to be less than five pages. Nevertheless, it must (avoiding repetition) summarise the important facts, the relief sought, the primary legal grounds (causes of action) for the relief sought and, where relevant, the alleged harm said to arise: cl 5.6, C&C-1. 19 By cl 5.8 of C&C-1, the Court anticipates that the majority of commercial and corporations matters will be assisted by being commenced with a concise statement and that applicants are encouraged to consider the alternatives carefully and to select the use of a concise statement unless it is clearly not an appropriate mechanism. 20 Having addressed those matters, cl 5.9 of C&C-1 provides that, alternatively, a party may file a statement of claim or affidavit in support of an originating application or an affidavit in support of an originating process for corporations matters. Where an affidavit is filed, it will be treated as a statement of the applicant's substantive factual case in the proceeding. Again, where a statement of claim or affidavit is relied upon, it must identify the material facts, the relief sought, the legal grounds for that relief and the alleged harm. 21 By cl 5.13 of C&C-1, the Court anticipates that a minority of commercial and corporations matters will be more effectively commenced by a statement of claim or affidavit. Clause 5.13 recognises that "[s]uch matters are likely to be simple, have narrow grounds of dispute, may be in the lower range of quantum claims, and will benefit from a 'one-step' pleadings process". 22 The elements of C&C-1 just described explain the basis upon which the Court was willing to entertain the possibility that ASIC serving the two affidavits earlier described might have conveyed, taken together with the concise statement, the material facts giving rise to the claim against the defendant, the relief sought against him and the primary legal grounds for the relief sought in reliance upon s 79 of the Act. 23 However, the defendant contended that those affidavits taken together with the concise statement did not convey those matters because there was a lack of clarity in the facts said to constitute the contraventions of the Act the defendant was said to have been involved in for the purposes of s 79 of the Act. That led to the election on the part of ASIC to deliver a supplementary concise statement and as already mentioned, the defendant, having considered that document together with the other material, responded by foreshadowing his intention to apply to strike out the concise statement and the supplementary concise statement. 24 A concise statement, consistent with the method described in C&C-1 addressing the imperatives of cl 5.6 of C&C-1, is a useful document in the sense that irrespective of whether the character of the proceeding is ultimately shown to be one which would require a statement of claim, the method of the concise statement encourages a party to focus upon the essential core elements of the claim to be made, the true basis for the claim both in fact and in law and the relief ultimately sought should the propositions of fact and law be made good. 25 However, it is very important to remember that whether a concise statement is adopted or a statement of claim, the fundamental point of the document is to bring clearly to the attention of the defendant (and the Court) the key issues and key facts at the heart of the dispute and the essential relief sought from the Court. In other words, the defendant must be told of the key facts said to constitute a contravention of the Act and the key facts which are said to establish his participation as a person involved in those contraventions for the purposes of s 79 of the Act. 26 The further matter to be taken into account is the character and seriousness of the case advanced against the defendant. In this case, the relief claimed is a very serious matter for the defendant. In real terms it may be career ending relief. In those circumstances, it is critical that the defendant is told as clearly as possible and in no uncertain terms, the critical factual matters which are said to give rise to liability on his part and his susceptibility to the orders sought against him. 27 In the primary judgment, the Court explains why it was not satisfied that the concise statement and supplementary concise statement conveyed clearly the essential facts by reference to the integers of the sections of the Act said to have been contravened and the clear facts which rendered the defendant a person involved in those particular contraventions. 28 Ultimately, the defendant sustained the criticism made of the concise statement and supplementary concise statement. Those documents were set aside with an order made for the filing and serving of a statement of claim. 29 The question of whether the proceeding could continue on the footing of the concise statement and supplementary concise statement (read together with the affidavits earlier described) was and is a discrete question. The resolution of the costs in relation to that question will not be informed by the ultimate resolution of the matter. The question of whether the defendant ought to have his costs of and incidental to the application to set aside the concise statement and supplementary concise statement ought fairly and reasonably to be determined now. 30 The defendant ought to have those costs. However, I can see no reason why the defendant ought to be given leave to enforce that costs order now. He ought to have the benefit of a costs order but his entitlement to enforce the costs order ought not to arise until the final resolution of the matter as expressed in final orders. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Greenwood.