Australian Securities and Investments Commission v Money3 Loans Pty Ltd

1. The applicant's application to adduce evidence in the form of the affidavit made by Ms Sky Malcolm on 9 May 2023 is refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCELWAINE J: 1 This is my ruling as to the admissibility of an affidavit made by Ms Sky Malcolm on 9 May 2023 in this proceeding (the affidavit). I gave leave for the issue of a subpoena to compel the attendance of Ms Malcolm on 28 October 2024. The request for leave stated inter alia: The applicant requests leave to issue this subpoena to ensure the addressee is available for cross-examination if required at the hearing commencing on 5 February 2025 2 It is now clear that Ms Malcolm was required for cross-examination at the hearing. The subpoena issued as requested. It is in the usual form, whereby Ms Malcolm was ordered to attend to give evidence, was warned that a failure to comply without lawful excuse is a contempt of Court (and may result in her arrest) and required her to attend on 5 February 2025, subject to any later notice from the Australian Securities and Investments Commission (ASIC). Ms Malcolm has not obeyed the subpoena. 3 We are at the end point of ASIC's case. Yesterday, shortly before lunch, ASIC filed and served on the respondent two documents. One, a notice pursuant to s 67 of the Evidence Act 1995 (Cth) (Evidence Act) of its intention to adduce evidence in the form of the affidavit, and the other, an affidavit made by Ms Jaymee Kay West, an ASIC officer, made on 11 February 2025. ASIC contends that s 63 (1) of the Evidence Act is engaged. That is, in a civil proceeding if a person who made a previous representation is not available to give evidence about an asserted fact, then subparagraph (2) provides that the hearsay rule does not apply. I am only concerned with subparagraph (1). ASIC contends that Ms Malcolm is not available within the meaning of s 63 and it has given reasonable notice as required by s 67. 4 The affidavit of Ms West, relevantly for present purposes, discloses the following. As early as 24 October 2024, there commenced a series of attempts by relevant officers of ASIC to speak with Ms Malcolm by telephone and to engage in SMS conversations with her. According to Ms West's affidavit at [22] and the table therein, those efforts were wholly unsuccessful between 24 October and 20 November 2024. Further attempts were made between 19 November and 10 December 2024, as set out at by Ms West at [24]. All were unsuccessful. 5 Paragraph [25] of Ms West's affidavit contains hearsay evidence, which is not objected to, that another officer of ASIC, Ms Berry, attempted to contact Ms Malcolm between 5 and 10 December 2024, either by telephone call to her mobile or by an email. Once again, those efforts were fruitless. There is then some evidence at [27] that there was a change in Ms Malcolm's mobile number and that it may be the case that the earlier attempts were unsuccessful because the wrong number was used. However, that problem having been remedied, from Ms West's evidence at [28], we know that contact was made with Ms Malcolm by telephone on 12 December 2024 and a file note was made of that discussion by Ms West. The substance of that file note is to the effect that Ms Malcolm said that she was "interested" in giving evidence in this proceeding. She was also told at that stage that ASIC would like to serve her with a subpoena which "also helps us to be able to cover her costs of travelling". The file note confirms that Ms Malcolm had a broad awareness of what a subpoena is and its purpose, and "understood that it is part of process". 6 Between 16 December 2024 and 8 January 2025, there were a series of text messages, calls and emails between Ms West and Ms Malcolm for the purpose of arranging personal service upon her of the subpoena, but it was not then served. On 16 December 2024, Ms West had a brief conversation with Ms Malcolm. Arrangements were made to meet with her on 9 January 2025. There were further text messages on 17 and 18 December 2024 that Ms Malcolm initiated and Ms West responded to. Email correspondence was sent to confirm the appointment on 24 December 2024. There was no response. There was no response to text messages and calls to the mobile of Ms Malcolm between 7 and 8 January 2025. In some cases, voicemail messages were left and, once again, they were not responded to. 7 On 9 January 2025, Ms West and Ms Rodgers attended at Ms Malcolm's home for the purpose of serving the subpoena. Apparently no one was at home. A call was placed to Ms Malcolm's mobile twice that afternoon at 5.08 pm and 5.12 pm, each without success. Text messages were then sent from 5.16 pm on 9 January 2025. They were responded to. Ms Malcolm said that she had forgotten about the appointment and had to go into hospital. There were further text messages to the effect that the proposed date for service of the subpoena be rescheduled. Those text messages continued between 13 and 14 January 2025. The messages were not responded to. 8 However, on 14 January 2025, personal service of the subpoena was effected by a visit to Ms Malcolm at her home without notice. Ms West's affidavit at [37] includes evidence that Ms Rodgers and Ms Berry (each officers of ASIC) spent approximately 20 minutes with Ms Malcolm, during which Ms Rodgers effected personal service of the subpoena and said words to the effect of: "I do need to tell you that there are serious consequences for not complying with the subpoena, which can include criminal penalties." At that meeting, Ms Malcolm agreed to meet with ASIC officers and lawyers on 30 January 2025 at 10 am by Microsoft Teams. There were further text messages and calls exchanged between Ms West and Ms Malcolm between 20 and 30 January 2025, as set out at [38] of Ms West's affidavit. Most were not responded to by Ms Malcolm. 9 On 30 January 2025, Ms West joined the pre-arranged Microsoft Teams meeting with Ms Berry, ASIC solicitors and counsel. Ms Malcolm did not join the call. Between 30 and 31 January 2025, Ms West exchanged further text messages and made attempts to telephone Ms Malcolm, each without success, as set out at [40] of her affidavit. At [41], Ms West deposes that Ms Berry made attempts to contact Ms Malcolm by telephone and text message between 30 and 31 January 2025 for the purpose of the previously discussed pre-arranged meeting. None of the attempts were successful. 10 On 3 February 2025, at around 8 am, there was an attendance by ASIC officers, including Ms West, at Ms Malcolm's home without notice for the purpose of speaking to her. Ms Malcolm later met with ASIC officers at around 3.30 pm and joined a Microsoft Teams call. There was cooperation by Ms Malcolm on 3 February 2025 as set out at [43] of Ms West's affidavit, during which Ms Malcolm is recorded as saying that she agreed to give her evidence in this proceeding on 6 February 2025, and that certain arrangements would be made to collect her and drive her to Brisbane so that she could give evidence remotely and return her to her home at the conclusion of her evidence. On 3 February 2025, however, Ms West attempted to speak with Ms Malcolm by telephone after the meeting, and she records that the call was cancelled or rejected. 11 On 6 February 2025, officers of ASIC drove to the Gold Coast for the pre-arranged purpose of conveying Ms Malcolm to Brisbane. That did not go well. Some contact was made by Ms Malcolm to the effect that her child was unwell and for that reason she could not attend to give evidence. At about 8.55 am on that day, the ASIC officers arrived outside the home of Ms Malcolm, and at 9.05 am, sent a text message that they were outside her house and would she "please come speak to us". 12 There was no response. Unsurprisingly, they went and knocked on the door. They called out for Ms Malcolm. There was no response; but they did see someone pull back a curtain and look down towards them. Further attempts were made to elicit a response from Ms Malcolm. There were some observations to the effect that there were people in the house, despite the fact nobody wanted to answer the door. On 6 February 2025, between 10.10 am and 3.29 pm, there was an exchange of text messages. One or two of them were answered. At 11.02 am on 6 February 2025, Ms Malcolm responded to a text message that: No, I'm not myself and the kids aren't feeling well. 13 At 1.30 pm, a telephone call to Ms Malcolm's mobile is recorded as having been rejected or cancelled. On 7 February 2025, I do not mean this disparagingly, ASIC officers engaged in a stakeout outside Ms Malcolm's home. They arrived at about 8 am. They called out to Ms Malcolm at about 8.45 am. There was no response. At approximately 9.15 am, they noticed Ms Malcolm and her children leave the house. There was a discussion. They asked Ms Malcolm how she was, and she told them she was going to Brisbane. She said words to the effect that she thought the Court hearing was "yesterday". She was told: "It's today too. We can arrange for you to give your evidence now by video". Despite having been served with the subpoena, Ms Malcolm thought it was more important to attend an appointment at Woolloongabba. She and her children then boarded a bus for that purpose. 14 On 7 February 2025, further text messages were sent and an attempt was made to speak with Ms Malcolm by telephone. The table at [48] of Ms West's affidavit once again reveals no response to four such attempts. A further attempt was made by text message on 10 February 2025. There was no response. An email was sent to Ms Malcolm on 11 February 2025 at 2.36 pm. Amongst other things, the email said: I wanted to touch base to let you know the subpoena you received is an order from the Court requiring you to give evidence. If you don't comply with the subpoena without lawful excuse, the consequences can be serious, including contempt of Court. Please contact Jaymee or me about arranging a time for you to give your evidence on Thursday - it can be from your home. If there is something preventing you from giving evidence, please let us know so we can tell the Court. 15 There was no reply to that email. On 11 February 2025, at approximately 2.25 pm, Ms West sent further text messages to Ms Malcolm, stressing the urgency of her providing a response. No response was received. Ms West then made her affidavit. 16 The first question is whether Ms Malcolm is not available as a witness in this proceeding, pursuant to s 63(1) of the Evidence Act. The Dictionary deals with the unavailability of persons in pt 2 at cl 4. The relevant paragraph that is relied upon is (g), that is, "all reasonable steps have been taken, by the party seeking to prove the person is not available, to compel the person to give the evidence, but without success". 17 No application has been made by ASIC pursuant to rule 41.05 of the Federal Court Rules 2011 (Cth) for the issue of a warrant. Mr Senathirajah KC for ASIC submits that step is not necessary and I should be satisfied that all reasonable steps have been taken. When I questioned Mr Senathirajah as to why a warrant had not been applied for, he answered to the effect that a decision had been made internally by ASIC not to take that serious step and that I should infer that there were either rational or proper reasons - my words - for not doing so. The difficulty that I have is that there is no evidence that has been adduced by ASIC as to why that step has not been taken, particularly when ASIC, on 11 February 2025, warned Ms Malcolm that non-compliance without lawful excuse can have serious consequences, including contempt of Court. 18 I have been referred to several cases. Of course, what I am dealing with is the facts of this case, and it is not very helpful to consider what other judges have concluded was the taking of reasonable steps on the facts of other cases. The first is R v Darmody [2010] VSCA 41;(2010) 25 VR 209 (Nettle and Ashley JJA, Habersberger AJA). It is useful to pause for a moment to consider the facts, which I take from the headnote. Darmody was presented for trial in the County Court on counts of intentionally causing serious injury and making a threat to kill. In September 2009, he was arraigned before the jury. However, when called to give evidence, the complainant refused to be sworn or testify, giving as his reason that he was being kept in custody in the same prison as the defendant and that he was concerned about his safety. The trial judge discharged the jury and remanded the defendant in custody. When the case was listed in February 2010, the complainant again stated that he was not prepared to give evidence as long as he was in prison. The prosecutor made an application to be permitted to lead evidence taken by the complainant at the defendant's committal hearing. The judge held the equivalent provision in the Evidence Act 2008 (Vic) was applicable and that the complainant was not available to give evidence. On appeal, that ruling was upheld by the Court of Appeal. 19 I accept, as I must, the decisions of intermediate courts of appeal in Victoria and New South Wales as set out from [22] of Darmody, that unavailability can include cases where a witness, having been served with a subpoena, refuses to give evidence after being warned of the consequence of refusing to testify. However, when one reads a little further into that case, there were four considerations which supported the ruling of the trial judge, which is set out from [30] through to [34]. Essentially, the Court of Appeal was not, on the facts of that case, satisfied that the discretion of the trial judge had miscarried. At [34], the Court said: The question being one of fact and degree, informed by considerations of which the trial judge is pre-eminently placed to assess the significance, an appellate court should refuse to intervene unless error is clearly established. 20 Clearly, Mr Senathirajah is correct that, Ms Malcolm having been served with the subpoena (and on the evidence being intent on disobeying it), is a basis to establish that a person is not available within the meaning of the statutory provisions. But as I explain, I do not consider that to be a dispositive consideration on the facts of this case. 21 My attention is also drawn to the decision in Huang v Wei [2022] NSWSC 222 (Kunc J). In that case, a draft affidavit had been submitted by a solicitor about facts in issue. The deponent refused to approve of the draft, and therefore, to sign a finalised copy. The question was whether the evidence should be admitted. His Honour ultimately concluded that it should. On the question of all reasonable steps, from [41], his Honour set out what is, in my view, a helpful list of factors that would ordinarily be considered, but observing, as I just have, that what is reasonable is deeply a fact-sensitive question in each case. The first consideration is the nature of the case. In this case, it is a civil penalty proceeding where the consequences of a finding in favour of ASIC are likely to be severe for the respondent. The second is the importance of the evidence. Plainly, the evidence of Ms Malcolm is of central relevance in this case because she is one of the six consumers in issue. The third is the inquiries that have been made, and their outcome. His Honour said: For example, a definitive statement of non-cooperation from the witness, or an inference that the witness does not wish to co-operate, may mean no further steps are reasonable. 22 I accept that. I draw that inference in this case. However, what is missing in this case is an explanation as to why ASIC did not take the next obvious step of applying for a warrant, when that is what flows from the contempt warning in writing on 11 February 2025. The fourth consideration is who the party is that is making the inquiries and about whom the inquiries are being made. Here a regulator brings this proceeding, I have been told on many occasions throughout the trial, in the public interest. There is no suggestion that it lacks the resources, the ability or the willingness (because it has chosen not to adduce evidence about these matters), to take the step of making an application for the issue of a warrant. The fifth consideration is the likelihood of any specific step yielding useful information. The obvious step that has not been taken is an application for a warrant. 23 The sixth consideration is the cost and delay that a particular step might cause. There is no issue that it would cause undue cost to ASIC, or would have caused undue cost to ASIC, to make an application for a warrant. The last consideration, at least in civil proceedings, is the obligation of all parties to give effect to the overarching purpose at ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). What troubles me, on the facts as I have found them, is that ASIC has known for some considerable period of time that there was likely to be a problem with Ms Malcolm giving evidence, but did not tell the respondent until shortly before lunch yesterday. That is not acting consistently with the overarching purpose. 24 I also draw attention to [44] of Huang. In particular, in that case the evidence was admitted because it was "not sufficiently important to warrant further steps being taken". The evidence of Ms Malcolm in this case does not, in my assessment, fall into this category. Further at [48], his Honour again emphasised that which I consider important in this case: where the evidence is central, then greater steps are likely to be required to establish reasonableness as required by subparagraph (g) of the Dictionary definition of when a "person is taken not to be available to give evidence about a fact". 25 Mr Caleo KC for the respondent draws to my attention to the decision of Flick J in Darlaston v Parker [2010] FCA 771;(2010) 189 FCR 1, again, a fact-sensitive decision. I note at [252] that his Honour expressed reservation as to whether the mere service of a subpoena upon a witness who has demonstrated an unwillingness to comply with its terms will, in all cases, have the consequence that all reasonable steps have been taken. I share his Honour's view. His Honour, however, was not required to decide that because he assumed that the witness in issue was not available and what his Honour decided was the question of reasonable notice. However, as I have said I accept that service of the subpoena is a basis to contend that a witness is unavailable when the witness refuses to comply. 26 During argument, I drew attention to the decision of the New South Wales Court of Appeal in Puchalski v R [2007] NSWCCA 220. It is useful to spend a little bit of time on the facts of that case. They emerge from [81] of the judgment of Smart AJ, with whom McClellan CJ at CL and Hislop J agreed. The witness, who was served with a subpoena on 13 October 2005 to attend court on 14 November 2005 "did not indicate to the officer serving the subpoena that he would be unable to attend court on that day or that he had made other arrangements". 27 What the witness did not disclose is that he intended to leave the jurisdiction, which he did on 13 November 2005, without the knowledge of the Crown. By the time of the trial, his whereabouts were unknown, despite steps that were taken by the Crown by making inquiries from the Department of Immigration, as it then was. What is important to note about that case is that, as is usual in New South Wales, there was a committal hearing. The witness was cross-examined at the committal hearing: Puchalski at [92]. At [101], his Honour observed that the cross-examination made no significant impact on his evidence. It will thus be seen that the facts of that case, where the application to adduce the evidence was ultimately successful, are far removed from this case where there has been no opportunity to cross-examine Ms Malcolm, and where that was the very purpose of the application for leave to issue the subpoena. 28 Having carefully reflected on the evidence and the authorities to which I have been referred, I am not satisfied that ASIC has taken all reasonable steps to compel Ms Malcolm to give evidence. That question is not concerned with any issue of prejudice to the respondent. My reasons for reaching that conclusion may be shortly stated. 29 First, and somewhat obviously, the cases to which I have been referred to are each factually distinguishable and what I am presently concerned with is a determination of whether, on the evidence that has been adduced by ASIC, it has discharged its onus by proving it has taken all reasonable steps to compel Ms Malcolm to attend Court to give evidence in obedience to her subpoena, but without success. 30 Second, it is telling in my view, that ASIC provides no evidence as to why it did not take the obvious step of applying for a warrant, given its very explicit warnings to Ms Malcolm of the consequences of non-compliance with the subpoena. Despite the very extensive affidavit of Ms West, no officer of ASIC has made any attempt to explain that decision to the Court. 31 Third, the consequences for the respondent are potentially significant in this civil penalty proceeding. 32 Fourth, the evidence of Ms Malcolm is not peripheral to the case. It is central in that, as I have noted, she is one of the six consumers in issue. 33 Fifth, the inference is open (which I draw) that ASIC made a choice not to proceed with the obvious step of applying for a warrant for forensic reasons, which it has not chosen to disclose to the Court. That is significant, in my view, because, on an application such as this and at a late stage in this proceeding, I consider that ASIC has an onus to put before the Court all relevant material on the question of whether it has taken all reasonable steps. It has failed to do so. 34 In any event, even if that hurdle had been negotiated, I am not satisfied as required by s 67 of the Evidence Act that ASIC has given reasonable notice in the circumstances of this case. What Flick J had to say in Darlaston at [255] and [256] resonates very clearly in this case. His Honour noted at [255], that the applicant was on notice from at least the first day of the hearing that the witness was not willing to attend. He said: For a party to know from the outset of a hearing that difficulties were being experienced in securing the attendance of a witness, and to foist upon an opponent the evening before the final day of hearing of its evidence notice of an intention to rely upon the evidence does not afford the opponent "reasonable notice". 35 It is clear, in accordance with the evidence that I have summarised from the affidavit of Ms West, that difficulties with ensuring the attendance of Ms Malcolm arose as early as 12 December 2024. That is, I infer from the evidence that there was a likelihood that must have been known to ASIC that Ms Malcolm may not cooperate. That indication then caused ASIC to serve the subpoena on 14 January 2025, which ASIC had in its possession since 21 November 2024. It is clear, in my view, from reading the evidence and drawing the necessary inferences, that Ms Malcolm would not likely comply at least by 30 January 2025, when she failed to attend the pre-arranged meeting with the ASIC officers. Despite what occurred thereafter, the respondent was not told of the difficulties, in obedience with the overarching purpose and as required by s 67 of the Evidence Act to give reasonable notice, until shortly before lunch yesterday. 36 Whilst Ms Malcolm did speak with the officers on 3 February 2025, and said she would attend on to give evidence remotely on 6 February 2025, she failed to do so. Thus, by 6 February 2025, the clock was ticking. There is no explanation in Ms West's affidavit as to why ASIC did not give notice from 6 February 2025. Even though the respondent does not claim prejudice, and I accept the submissions of Mr Senathirajah that is relevant, it is outweighed in my view by the fact that ASIC failed to act by giving reasonable notice of what was going on. 37 For those reasons, I refuse the application to admit into evidence the affidavit of Ms Malcolm made on 9 May 2023. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McElwaine.