Australian Securities and Investments Commission v Schlaepfer

Judgment (5 paragraphs)

[1]

Background

Prior to 21 November 2014, Merlito had a brokerage relationship with Macquarie Securities (Australia) Ltd (Macquarie). On 21 November 2014, Macquarie terminated that relationship with immediate effect.
On 25 November 2014, ASIC published on its website a document entitled "ASIC Market Supervision Update Issue 53" (Update 53). Update 53 made certain statements about the respondents.
On 3 December 2014, the respondents' then solicitors wrote to ASIC complaining that Update 53 contained serious allegations of criminal misconduct against SV and defamatory imputations about Mr Schlaepfer. The letter sought a correction to Update 53.
ASIC, through its Chief Legal Officer, denied that Update 53 was misleading or defamatory and also denied that ASIC (as the respondents alleged) had made threats to Macquarie concerning its dealings with the respondents.
On 15 December 2014, after further correspondence between ASIC and the respondents' solicitors, ASIC agreed to issue a clarification to Update 53 in "Market Supervision Update Issue 54" (Update 54). In return, the respondents agreed to release ASIC from any claims arising out of Update 53. ASIC duly published the correction in Update 54.
Towards the end of 2014, ASIC commenced an investigation into SV and its market dealings.
On 15 May 2015, the respondents' solicitors wrote to ASIC referring to the agreement reached in December 2014. The email included the following: "My client instructs me that SV has received information to the effect that ASIC officers have made unsolicited phone calls to market participants (brokers) stating that SV and Mr Schlaepfer and their affiliates are persona non grata in Australia, that they are suspected of serious wrongdoing, and that market participants should not do business with Mr Schlaepfer or his related entities if they wish to remain in ASIC's good favour. This, of course, is extremely damaging to SV and Mr Schlaepfer - not only from a business and financial sense, but also from a reputational point of view. It also seems to fly in the face of the agreement we reached last year. … Could you please confirm that ASIC and its officers have not made, and will not make, any false or defamatory statements about SV or Mr Schlaepfer or their various affiliates?"

Primary Judgment

The primary Judge quoted a passage from Carey v Australian Broadcasting Corporation [5] in which Beazley JA explained the operation of s 56A of the Limitation Act as follows: [6] "Her Honour, …, construed s 56A as imposing an onus on a plaintiff to satisfy the court that it was not reasonable in the circumstances for him or her to bring proceedings within the limitation period. Her Honour considered that s 56A did not involve the consideration of any prejudice to a defendant. Her Honour also held that s 56A did not confer a discretion. Rather, if the court was satisfied that it was not reasonable in the circumstances for the plaintiff to have commenced the action within one year, the court was required to extend the period of time in which to bring proceedings: see Ahmed v Harbour Radio Pty Ltd [2010] NSWSC 676. The same construction has been given to equivalent provisions in other jurisdictions: see Murphy v Lewis [2009] QDC 37 at [11]-[14]; Noonan v MacLennan [2010] QCA 50; 2 Qd R 537 at [15]-[18] per Keane JA; at [30] per Holmes JA and at [48] and [58] per Chesterman JA; Rayney v State of Western Australia (No 3) [2010] WASC 83 at [41] per Martin CJ. I agree with this construction of s 56A. The statutory test does not direct attention to whether it was reasonable not to have commenced proceedings. It requires the court to be satisfied it was not reasonable to have commenced an action within one year from the date of publication of the defamatory matter. This view is consistent with the preferred view given to the section in Noonan v MacLennan."
The primary Judge pointed out that the test posed by s 56A is not satisfied merely by showing that it was not unreasonable to have not commenced proceedings within one year: [7] "Ultimately, the question which the Court is asked to determine in considering whether it was '… not reasonable in the circumstances …' for the action to be commenced is an evaluative process, the outcome of which will vary from case to case, and is particularly fact dependent: Carey per Beazley JA at [61]." His Honour acknowledged that the statutory test is a difficult hurdle for a plaintiff to overcome [8] but accepted (as had the applicants) that: "an absence of knowledge of the defamatory utterance would provide a reason why it was not reasonable to commence proceedings within one year". [9]
The primary Judge, before recounting the facts, recorded the following: [10] "[18] On the hearing of the Notice of Motion, both the [respondents] and the [applicants] relied upon affidavits sworn by solicitors based on information and belief. This is permissible: s 75 Evidence Act 1995. [19] Neither of the deponents of the affidavits were required for cross-examination. It was not suggested that either of the deponents were not recounting accurately the information with which they had been provided. Additionally, both parties relied upon correspondence written, generally between solicitors for the parties, either in formal letters or by emails as recounting accurately the circumstances at the time that the letters were written. [20] Notwithstanding the submissions of the [applicants], where the Court is dealing with the issues in the proceedings by reference to the civil onus, that is on the balance of probabilities, there is no reason in these proceedings to decline to accept the evidence because there are other more direct means of proving the factual circumstances relied upon.
Section 75 of the Evidence Act 1995 (NSW) provides that: "In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source."
The primary Judge identified four circumstances on which the applicants relied to support their contention that his Honour could not be satisfied that it was not reasonable for the respondents to have commenced an action within one year of the defamatory publications. Only three are relevant for the purposes of the present application. They can be summarised as follows: (i) In late April and early May 2015, Mr Schlaepfer believed that ASIC had made telephone calls to market participants containing defamatory statements. In the light of ASIC's response it was incumbent on Mr Schlaepfer to make inquiries as to any other statements that ASIC may have made to market participants. (ii) There was no direct evidence from Mr Schlaepfer as to when he first knew, from any source, that Mr Yanco had made defamatory comments about him to market participants in November 2014 (other than to Macquarie). (iii) It was not until late May 2016 that solicitors acting for the respondents lodged a request under the Freedom of Information Act seeking documents recording the contents of conversations between Mr Yanco and market participants in November 2014. According to the applicants, there was no reason such an inquiry could not have been made in mid-2015.
The primary Judge considered that Mr Schlaepfer's belief in April and May 2015 that ASIC had made telephone calls was not at all relevant to the reasonableness of his failure to commence proceedings within twelve months of 21 November 2014. [11] The correspondence referring to Mr Schlaepfer's belief related to statements allegedly made later than the matter complained of in the proceedings and reflected Mr Schlaepfer's complaint that the statements were made in breach of the 2014 agreement between ASIC and the respondents. Moreover, in view of ASIC's response that it was unaware of any such statements it was not at all unreasonable for Mr Schlaepfer not to have pursued further inquiries. [12]
Secondly, his Honour was satisfied that Mr Schlaepfer first became aware of the Couper email on 30 June 2016. Mr O'Brien had given evidence to this effect on information and belief and the email itself showed the date it had been received. [13] His Honour was also satisfied that Mr Schlaepfer first became aware on 30 June 2016 of the telephone call to Credit Suisse. Those were Mr Schlaepfer's instructions to Mr O'Brien and were recorded in Mr O'Brien's letter of 5 August 2016. Mr O'Brien's affidavit in combination with the letter demonstrated that Mr Schlaepfer became aware of the telephone calls when he received a copy of the Couper email. [14] His Honour noted that there was nothing in the email sent by Mr Shalabi to Mr Schlaepfer to indicate that there had been any previous communications between them. [15]
Thirdly, in his Honour's view, there was no basis in mid-2015 for the respondents or their lawyers to have a reasonable suspicion or expectation that ASIC or its officers would have been telephoning participants in the market place, particularly those with whom the respondents had no commercial dealings, to inform them of the information the substance of which subsequently appeared in Update 53: [16] "After all, the purpose of putting information in Update 53 was to inform all participants in the market of particular facts and circumstances which ASIC regarded as relevant to the lawful and ordered operation of the markets."
The primary Judge reminded himself that rejecting the applicants' submissions did not demonstrate that the respondents had satisfied their onus of proving that it was not reasonable for them, in the circumstances, to have commenced proceedings within twelve months of the publication of the defamatory material. [17] However, his Honour accepted the respondents' submission that the principal circumstance supporting a finding that they satisfied the statutory test was that Mr Schlaepfer first knew of Mr Yanco's 21 November 2014 telephone call on 30 June 2016. Because the complaint related to an oral slander, it was reasonable for Mr Schlaepfer to wait until he received documentary corroboration of the telephone call. [18] There was no reason for him to make inquiries about the existence of the defamatory publication until he had some indication that it had been made. [19]
The primary Judge expressed his conclusion as follows: [20] "[95] In summary, I am satisfied of the following circumstances: (a) Mr Schlaepfer did not become aware of the oral publication of the allegedly defamatory statement by Mr Yanco to Mr Couper at any time before 30 June 2016; (b) there is no reason to differentiate the position of knowledge of that publication as between each of the three [respondents]. Accordingly, I am satisfied that none of the [respondents] knew of that publication before 30 June 2016; (c) none of the [respondents] knew of the oral publication of the allegedly defamatory statements made by Mr Yanco to an executive at Citibank, prior to the receipt by Deutsch Miller of a response by ASIC of the FOI application. Although the date is not proved in the evidence, I am satisfied that it was, on the probabilities, a time after 29 August 2016 …; (d) none of the [respondents], or their legal advisers, had any reason to suspect that, prior to the issue of Update 53, Mr Yanco, or any other officer of ASIC, had made allegedly defamatory statements about the [respondents] other than those which were allegedly made to Macquarie Securities (Australia) Ltd on or about 21 November 2014, or by way of Update 53; (e) it was not reasonable to expect that any of the [respondents] would have initiated enquiries, prior to 30 June 2016, which were intended to identify whether, and if so to what extent, or to whom, Mr Yanco or any other officer of ASIC, may have spoken to about the [respondents]; and (f) at no time prior to October 2016, did any legal practitioner certify, in accordance with the relevant legal professional legislation, that proceedings were in an appropriate state to be commenced. I am not satisfied that there was any earlier point in time when any such certification could have been made. [96] In those circumstances I am satisfied that it was not reasonable for the [respondents] in the circumstances to have commenced proceedings for defamation within the 12 month limitation period."

Reasoning

In determining whether this was a matter suitable for a grant of leave to appeal, the Court bore a number of matters in mind.
First, the applicants did not suggest that the primary Judge misconstrued s 56A of the Limitation Act nor that his Honour failed to refer to the relevant authorities construing the provision.
Secondly, the primary Judge did not reverse or fail to apply the onus cast on the respondents by s 56A of the Limitation Act. His Honour made it quite clear that the applicants had no onus of proof and that Mr Schlaepfer had to prove that it was not reasonable for him, in the circumstances, to have commenced defamation proceedings within the twelve month period. His Honour also made it quite clear that he considered the applicants' arguments first simply as a matter of convenience and only for the purpose of determining whether their contentions should be taken into account in determining whether the respondents satisfied the statutory test.
Thirdly, the affidavits sworn by Mr O'Brien, which contained material based on instructions given to him by Mr Schlaepfer, were read without objection. [22] Nor was objection taken to the annexures to Mr O'Brien's affidavits, including his letter of 5 August 2016 to ASIC. The applicants accepted that in these circumstances the affidavits and the correspondence, insofar as they were based on information and belief, were admissible pursuant to s 75 of the Evidence Act to prove the truth of the representations made by Mr Schlaepfer to Mr O'Brien and recorded by him. [23]
Fourthly, Mr O'Brien in his first affidavit stated as follows: "At that consultation [of 8 July 2016] I was instructed by Daniel Schlaepfer that: a. On 30 June 2016 he had first become aware of an email dated 21 November 2014 from Andrew V Couper, Director of Credit Suisse, to various officers and employees of Credit Suisse, a copy of which is annexed and marked 'A' (the Email) and that he received a copy of the email from a source at Credit Suisse who he agreed to keep confidential. b. The Email summarised a telephone conversation on 21 November 2014 between Greg Yanco (ASIC Head of Market Supervision) and Andrew Couper concerning, inter alia, the plaintiffs."
Mr O'Brien was not cross-examined. Thus he was not asked questions about these paragraphs of his affidavit or the statement in his letter of 5 August 2016 that Mr Schlaepfer first became aware on 30 June 2016 of Mr Yanco's telephone call to Credit Suisse on 21 November 2014.
Fifthly, the applicants served notices to produce on the respondents well before the scheduled hearing before the primary Judge. Apparently because the vacation intervened, the applicants did not call on the notices to produce until the outset of the hearing. Mr Tobin QC, who appeared for Mr Schlaepfer before the primary Judge, [24] produced some documents in response to the call. However, he informed the Court that because of the number of documents covered by the notices to produce and Mr Schlaepfer's absence from Australia (he resided in Canada), more time would be required to respond fully.
The primary Judge asked Senior Counsel for the applicants whether they wished to make a further application. This invitation clearly referred to (or included) an application to adjourn the hearing pending the respondents making a full response to the notices to produce. Senior counsel told his Honour he was content to proceed on the basis that the respondents' answer was "not produced".
It is fair to infer that the notices to produce sought production of documents evidencing, among other things, any communications between Credit Suisse or officers of Credit Suisse pre-dating 30 June 2016. By electing not to seek an adjournment and press for a full response to the notices to produce, the applicants forewent an opportunity to explore whether Mr Schlaepfer had sources of information available to him concerning the contents of the Couper email long before June 2016.
It was submitted that Ground 2 of the proposed notice of appeal did the "heavy lifting" in the applicants' case. In substance, the applicants submitted that the primary Judge should not have made the critical finding that Mr Schlaepfer did not learn of Mr Yanco's conversation with Credit Suisse until 30 June 2016. The applicants contended that his Honour should not have made that finding without Mr Schlaepfer giving evidence personally and thus exposing himself to cross-examination. It was submitted that there were some issues that could have been pursued with Mr Schlaepfer, such as whether he had any indication during the twelve month period after 21 November 2014 that ASIC may have contacted market participants other than Macquarie to express concerns about Mr Schlaepfer's probity.
The applicants submitted that the question of principle justifying a grant of leave to appeal concerned the weight that should be given to evidence given in an interlocutory hearing on information and belief. The applicants referred to Howley v Principal Healthcare Finance Pty Ltd (Howley). [25]
In Howley the issue was whether evidence given by a solicitor on information and belief provided an explanation for the applicant's delay in commencing workers' compensation proceedings. McColl JA accepted that the applicant in that case was required to lead evidence appropriate to give the Court a satisfactory understanding of why it was that proceedings were not commenced in time. However, her Honour explained that this requirement: [26] "does not mean the applicant must personally give such evidence. As the [applicant] submits, [the solicitor's] evidence was admissible pursuant to s 75 of the Evidence Act. Accordingly the hearsay rule did not apply, and the [applicant's] statements recited by [the solicitor] were admissible 'to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation': see s 59(1), Evidence Act. Provided the relevant requirements of the legislation were satisfied by the evidence, the source of that evidence was irrelevant so long as it was otherwise admissible on an interlocutory application of the kind in question … Further, the fact that the evidence was hearsay did not permit 'the primary judge to do other than address it on its terms as reasonably understood': Brierley v Ellis [2014] NSWCA 230; (2014) 67 MVR 282 (at [28]) per Meagher JA (Basten and Gleeson JJA agreeing)."
There is nothing in Howley to suggest that the applicants' submissions in this case raise any genuine issue of principle. Nor are the observations of Gleeson CJ in Russo v Aiello [27] , to which the applicants also referred, pertinent to the present case. His Honour's observations were directed to a case in which a claimant for compensation was required to provide a "full and satisfactory explanation for the delay in making the claim". Gleeson CJ's remarks were directed to the failure of the claimant to address a matter of which he had personal knowledge, thus producing a lacuna in the explanation offered to the Court.
The primary Judge made the critical finding of fact on the basis of evidence that, as the applicants accepted, was admissible and probative of the fact ultimately found. The evidence could have been challenged by the applicants, even in the absence of evidence from Mr Schlaepfer himself. For example, the applicants could have insisted on a full response to the notices to produce and examined the material produced with a view to challenge the truth of the instructions conveyed to Mr O'Brien. The applicants could have issued subpoenas to those entities or individuals who, so they suggested, might well have imparted information to Mr Schlaepfer long before June 2016 concerning any communications by ASIC with market participants in 2014. The applicants could also have elected to cross-examine Mr O'Brien in order to test whether Mr Schlaepfer provided Mr O'Brien with material that cast doubt on the accuracy of the instructions recorded by Mr O'Brien in his affidavit. (It is unlikely that a claim of client legal privilege, if made, would have succeeded having regard to the fact that Mr O'Brien's affidavit disclosed otherwise privileged information.)
Perhaps, as the applicants submitted, there were grounds for suspicion as to whether the instructions conveyed to Mr O'Brien were entirely accurate. Perhaps these matters could have been explored further at the hearing. But none of this established that the primary Judge erred in finding, on the uncontradicted evidence before him, that Mr Schlaepfer had proven on the balance of probabilities that he was not aware of Mr Yanco's communications with Credit Suisse until he received a copy of the Couper email on 30 June 2016.
The application for leave to appeal did not raise any question of principle. Nor did the applicants establish that refusing to grant leave to appeal would result in significant injustice to them.
For these reasons the Court dismissed the application for leave to appeal.

At a glance

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Judgment (5 paragraphs)

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Legislation Cited (3)

Cases Cited (21)

Cited By (7)