6021/07 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V P.J.C.B. INTERNATIONAL LTD & ORS AS TRUSTEE FOR THE INTEGRITY & UNIT TRUST SUPERANNUATION FUND & ORS
JUDGMENT (EX TEMPORE; REVISED 19 JUNE 2009)
1 HIS HONOUR: This is an application by ASIC for an extension of the time within which leave will be sought to file and serve a statement of claim.
2 ASIC's application is that the timetable be set so that the draft statement of claim be served by no later than 20 November 2009, and that the matter be brought back into the Corporations List for further directions on Monday, 23 November 2009. At that stage the Court will be able to assess the progress of the matter generally. It will be able to consider whether the proposed statement of claim makes some further application desirable, such as an application for consolidation of proceedings or for leave to bring new proceedings, or some other application reflecting any increased breadth of the scope of the statement of claim. The Court will also be able to consider, in a timely fashion, whether the interlocutory regime in place in this and the related matters up to 30 November 2009, including asset preservation orders and in the case of some defendants passport control orders, should be extended.
3 I have decided, on balance, though not without some hesitation, that the appropriate course is to grant ASIC's application. My concern has arisen in the following circumstances.
4 The draft statement of claim was due to be served last Friday, and the present application therefore comes before the court after the expiry of the timetable.
5 ASIC now submits that as a result of enquiries conducted in New Zealand, and in particular interviews that have taken place with the seventeenth defendant, Mr Hobbs, it is considering a statement of claim of a wider kind than was evidently in contemplation when the originating process for these proceedings was filed, and that the wider statement of claim might involve additional parties, and might lead to the consolidation of the present proceedings with other related proceedings, namely ASIC v Idylic Solutions Ltd No 5864/07 and ASIC v Secured Bond Limited No 4532/08. Senior counsel for ASIC told the court that his client's change of thinking about the proceedings arose out of information obtained in New Zealand that suggested that Mr Hobbs was at the centre of the various schemes in relation to which the proceedings and the related proceedings have been brought, and that information affects, in some ways, the nature of the proceedings and the nature of the evidentiary case.
6 Just how much the statement of claim, when it is finalised after the current investigatory phase comes to an end, will differ from the case that was in contemplation when the originating process was filed, is a matter that appears to be quite unclear at present. At one stage Senior Counsel for ASIC described the statement of claim that was in contemplation as containing some fundamental differences from the case originally contemplated in the originating process. However, he explained that it was still likely that claims of contravention of the same provisions of the Corporations Act would be made against the principal defendants in the proceedings as presently constituted, and that some of the evidence would be substantially the same. The principal reason for the uncertainty seems to be that interviews in New Zealand with Mr and Mrs Hobbs, partially completed in May 2009, have been postponed because of their illness, and ASIC wishes to complete the interview process before settling the statement of claim.
7 In his judgment delivered on 12 February 2009 on an application by the 14th and 15th defendants for the discharge of asset preservation orders, ASIC v PJCB International Ltd [2009] NSWSC 34, at [16], Barrett J referred to evidence that ASIC had an advanced draft statement of claim for the proceedings, and made that reference in a fashion indicating that the existence of the advanced draft was a matter relevant to his decision. The only qualification expressed in the evidence before Barrett J as to the likelihood of immediate serving of the draft statement of claim was the prospect that the Commonwealth Director of Public Prosecutions would need to be consulted by ASIC before making an application for a civil penalty order. Barrett J was informed that it was likely that the DPP would require a brief and some time to review the brief, and that therefore ASIC would not be in a position to file a statement of claim in the ensuing six months.
8 The significance of that evidence in respect of the present application is that there was evidently nothing placed before Barrett J to foreshadow that ASIC might fundamentally change the advanced draft of the statement of claim that had been prepared, and that it might later decide to pursue a different and wider case against a wider class of defendants. The impression created by the evidence summarised by Barrett J was that the only obstacle to completing and filing the advanced draft of the statement of claim in these proceedings was the DPP's review.
9 The defendants are subject to interlocutory orders made upon the basis of an originating process that identifies anticipated claims for final relief alleging contraventions of identified provisions of the corporations legislation. Barrett J's judgment tends to confirm, as one would expect, that the Court's decision to make interlocutory orders on the application of ASIC was influenced by its perception of the nature of the proceedings. If ASIC is to replace the present proceedings with a wider case against a larger class of defendants, the justification to the interlocutory regime may need to be revisited. But that issue cannot be addressed until there is more clarity about the proposed statement of claim, which in turn depends upon completing the interviews with Mr and Mrs Hobbs.
10 At the hearing I was concerned with whether the present circumstances give rise to an issue of principle, namely whether the Court should countenance or regard as oppressive the combination of the following matters:
first, ASIC has commenced three sets of proceedings by originating processes specifying contravention of particular provisions and seeking interim relief on the basis of those originating processes;
second, ASIC has obtained interim relief on the basis of those originating processes, which has been in operation now for a substantial period;
third, in the context of an application to discharge the interim relief made by two of the defendants as recently as February 2009, ASIC informed the Court that a mature draft statement of claim has been prepared and gave evidence leading to the inference that the statement of claim was available to be filed, subject only to complying with the arrangements that ASIC had with the Commonwealth Director of Public Prosecutions;
fourth, that the result of some investigations in May 2009 has led to what has evidently been a fairly fundamental review of the nature of the case in pleading and evidentiary terms, and to the prospect that the case should be pleaded as a single case rather than three separate proceedings;
fifth, that the interim regime has been allowed to continue and ASIC has been given time to prepare and file a statement of claim in the present proceedings, but it has not complied with the timetable that has been set;
sixth, that ASIC now comes to the Court and seeks a further extension of the timetable, informing the Court that the statement of claim that it eventually seeks to file may be a single statement of claim in respect of the three proceedings, prepared on the basis of new information coming from the New Zealand investigations and possibly involving additional or other parties, and yet ASIC invites the Court to continue the interlocutory regime notwithstanding that change of focus.
11 My view is that there could well be a case, factually not very remote from what is before me now, where it would be inappropriate for ASIC to proceed in this fashion. If ASIC had reached a firm determination that the basis upon which originating processes were filed and interim relief was obtained is no longer viable in view of further information it has obtained through its investigation processes, ASIC may well be duty bound to do something about that situation, by making an appropriate application to the Court or even perhaps discontinuing the existing, now ill-founded proceedings and then initiating a new set of proceedings with a corresponding application for interim relief on the new basis.
12 As far as I can tell from the evidence that I have, that hypothetical situation is different from the one that in fact exists in an important respect. ASIC has not at this stage reached a position where it can make any firm decision about how its pleadings should be cast, and that is because the enquiries that it wishes to make in respect of the New Zealand information are incomplete. They are incomplete because of the unavailability through illness of Mr Hobbs and Mrs Hobbs, and ASIC is keen to obtain access to them and to complete its investigations accordingly.
13 ASIC needs time for that purpose. It foreshadows that, depending upon the outcome of those investigations, it may well seek to do what I have mentioned, namely, to substitute for the existing three sets of proceedings a similar proceeding cast on a wider basis with perhaps additional parties and at least a different evidentiary framework, if not different claims of contravention.
14 In terms of the potential prejudice that may be suffered by the defendants through the extension of time that ASIC seeks, in my view the disadvantages to the defendants of this extra time are outweighed by the importance in the public interest of ASIC having the opportunity to ascertain precisely what the foundation for the case that it wishes to mount in respect of serious investor losses is. In the present circumstances, the best way for ASIC to ascertain the proper basis for going forward is to grant the extension sought and to allow the investigations to proceed as soon as they can.
15 My view is that there needs to be an end point to this process, and that the end point ought to be defined (in the absence of some extraordinary new developments) by the timetable that ASIC has set itself. I think it would be unacceptable if I were to grant a very considerable extension of time, and then for the Court to be left in the position in November of dealing with another application by ASIC for another substantial extension of time for the filing of a statement of claim, without very much new development having occurred in the meantime.
16 If, for example, Mr and Mrs Hobbs continue to be unavailable for any further significant period of time, ASIC will in my view have to adjust its investigation timetable to face that reality, and to move forward to a situation where it will still be able to tell the Court on 23 November what it proposes to do about the proceedings, and will still be able to comply with the direction of the Court that a draft statement of claim be served by 20 November so that it can be considered by the Court and the parties when the matter next returns to Court.
17 I do not intend to make any form of guillotine order at the present time, but I wish to make it clear that in my view it will be difficult for ASIC to obtain any additional extension of time to serve a statement of claim in this matter, or to make an application for the filing of a single statement of claim in respect of the three matters, in the absence, as I have said, of extraordinary new developments.