Australian Securities and Investments Commission v Storm Financial Limited

Federal Court of Australia|2012-07-18|Before: Reeves J

MACQUARIE'S OBJECTIONs 1 Macquarie Bank Limited (MBL) is the fourth respondent in these regulatory proceedings brought by the Australian Securities and Investments Commission (ASIC). It has objected to paragraphs 5 to 25 of the outline of the anticipated evidence of Ms Angela Winton served by ASIC. However, during oral submissions, Mr Sheahan SC, for MBL, indicated that some of these objections were no longer pressed. 2 Ms Winton was a Division Director at Macquarie Relationship Banking. The sole ground of objection raised by MBL is that, contrary to the requirements of ss 55 and 56 of the Evidence Act 1995 (Cth), none of the identified paragraphs of Ms Winton's outline of evidence is relevant to any issue in the case ASIC has pleaded against MBL. Specifically, MBL claimed that Ms Winton's evidence is not relevant to ASIC's case as it relates to MBL's knowledge of the managed investment scheme allegedly promoted by Storm Financial Limited (Storm Scheme). 3 Mr Sheahan submitted that the particularised allegations in ASIC's third further amended statement of claim that relate to Ms Winton are limited to a period in 2006, and yet the identified paragraphs of Ms Winton's outline of evidence detail her alleged knowledge at various times between 2000 and 2005. The paragraph of ASIC's third further amended statement of claim which particularises Ms Winton's knowledge of the Storm Scheme is para 36(xv)(E). Mr Sheahan is correct in submitting that the allegations about Ms Winton's knowledge in that paragraph only refer to dates in 2006.

The history surrounding THIS ISSUE 13 It is helpful to begin with some general observations about the nature of these proceedings and some of the history of the pre-trial management of these proceedings. First, the trial of this matter involves three proceedings, with three separate sets of pleadings. It follows that numerous legal and factual issues have been raised that will have to be addressed at the trial. Some of those issues will overlap; some will be common issues; and some will be discrete to each set of proceedings. Given this, both close case management and close trial management is called for, to ensure that the issues are clearly defined and that the evidence is properly confined to the issues pleaded in one or other of the proceedings. 14 MBL's knowledge of Storm's alleged promotion of an unregistered managed investment scheme in contravention of the Corporations Act 2001 (Cth) is one of the central elements of ASIC's case against MBL. As a corporation, that knowledge could only be held by its human agents, namely its officers. It was therefore incumbent upon ASIC to particularise precisely which of MBL's officers are alleged to have had the requisite knowledge, what that knowledge was, how it was obtained and when that knowledge was held. Apart from anything else, ASIC was required to do this in order to comply with Rule 16.43 of the Federal Court Rules 2011, which provides: (a) A party who pleads a condition of mind must state in the pleading particulars of the facts on which the party relies. (b) If a party pleads that another party ought to have known something, the party must give particulars of the facts and circumstances from which the other party ought to have acquired the knowledge. (c) In this rule: condition of mind, for a party, means: (a) knowledge; and (b) any disorder or disability of the party's mind; and (c) any fraudulent intention of the party. 15 This is what ASIC has endeavoured to do in the paragraphs of the third further amended statement of claim to which I referred earlier. But it is important to record, as Mr Sheahan pointed out, that those paragraphs have a particular history. On 3 February 2011, in one of the early pre-trial directions hearings for these proceedings, ASIC told me that it was content to limit itself to the knowledge case against MBL as pleaded in paras 36 and 37 of its then current version of its statement of claim. This position was taken notwithstanding concerns MBL expressed about the vagueness of the case ASIC had pleaded in those paragraphs. On 1 March 2012, ASIC reversed that position and sought leave to amend its statement of claim to change aspects of its knowledge case against MBL. During the debate surrounding that application there was a lengthy exchange between myself and Mr Strong, who appeared for ASIC, regarding the various paragraphs of the statement of claim where ASIC's knowledge case against MBL was pleaded. The discussion that led up to this exchange related to paras 17 and 43 of the statement of claim, and their link with paras 36 and 37 mentioned above. The exchange then proceeded as follows: HIS HONOUR: Well, let me tell you what I understand you to be saying about the knowledge matters. It relies upon, specifically, the dealings that are set out in 36. MR STRONG: Yes. HIS HONOUR: And you're not intending to expand the knowledge case beyond those particulars by referring to "at all material times" in other paragraphs. 16 I interpolate that this was an issue raised in relation to one of the paragraphs discussed in the period leading up to this exchange. The response was: MR STRONG: No. The references to "at all material times" in other paragraphs don't expand what 36 alleges. HIS HONOUR: You're bound by the particulars that you provided in [36]. MR STRONG: Yes. 17 Later, the following discussion regarding paragraphs 6B, 7, 7A, 18,19, 41 and, again, 36 and 37 occurred: HIS HONOUR: The only way that any company can gain knowledge is via its officers. MR STRONG: Yes. That's true. HIS HONOUR: So is that allegation of knowledge limited to the officers and circumstances pleaded in [36] and [37]? MR STRONG: Yes. 18 Leave was subsequently granted to ASIC to file a second further amended statement of claim. The second further amended statement of claim was delivered on 10 April 2012 and included most of the subparagraphs of paras 36 and 37 that are now in contention. The subparagraphs of paras 36 and 37 therefore represent ASIC's considered and re-pleaded knowledge case against MBL, including what Ms Winton knew, how she knew it and when she knew it. 19 Given this history and the discipline that is necessary to contain this trial within reasonable limits, I do not consider ASIC should be allowed to adduce evidence from Ms Winton, or any other witness for that matter, unless that evidence is directly relevant to an item of knowledge that has been clearly particularised in its further amended statement of claim. In my view, most of the paragraphs to which MBL has objected fall into that category. 20 Having made these general observations, I will turn to deal with the particular paragraphs objected to and address some of Mr Chesterman's other submissions in the process. Each paragraph objected to will be addressed in order, commencing with para 5.

FINDINGS 21 I was told in submissions that the second sentence of para 5 is admitted and is not therefore necessary. On that basis, that is disallowed. 22 The objections to paras 6 to 9 inclusive are not pressed, so they are allowed. 23 I have been informed that para 10 contains background material. Paragraph 10 will therefore be disallowed as unnecessary, and not directly relevant to a particular issue as pleaded in ASIC's case. This is an example of the strict control I consider is necessary in this case to confine the evidence to manageable limits. If this background material is particularly important to ASIC, it should be included in the agreed chronology that the parties are to supply prior to the trial. 24 The same observation applies to the background material in paragraph 21. That will also be disallowed. 25 Paragraphs 11, 12 and 17 to 20 relate to, in broad terms, Ms Winton's dealings with another MBL officer, Ms Lester. Those paragraphs do not particularise any knowledge held by Ms Winton. Ms Lester can give evidence about her knowledge, and no reason has been given as to why it is necessary for Ms Winton to provide what is, in effect, peripheral supporting evidence about her relationship with Ms Lester. This evidence is in a similar category to the background material discussed at [20] above. If this kind of peripheral supporting evidence is permitted to be given by witnesses, the evidence in this case will extend beyond manageable limits. Subject to some comments I will make below about the provenance of documents, those paragraphs are therefore disallowed. 26 The same applies to the similar evidence relating to Ms Winton's dealings with Mr Mickey Perrett, set out in paras 22 and 23. These paragraphs also appear to contain peripheral supporting evidence and no particular reason has been given as to why such evidence is necessary. Those paragraphs are therefore disallowed. 27 Paragraph 13 is an example of the limitation I discussed with Mr Strong on 1 March 2012 (see [16] above). That is, that ASIC's knowledge case is limited to the officers and circumstances pleaded and particularised in paras 36 and 37. If ASIC wanted to rely upon the knowledge Ms Winton had in 2001 about the particular matters identified in that paragraph, it should have particularised that in its statement of claim. ASIC has not done that and it cannot be permitted to, in effect, expand its particularised case by serving evidence that goes beyond it. It is, of course, open to ASIC to apply to amend its further amended statement of claim to make those allegations, and if it does that, its application will be dealt with on its merits. However, on ASIC's current pleading, para 13 must be disallowed. 28 Paragraphs 14, 16 to 20 and 24 (paras 16 to 20 are also discussed above at [25] in a different context) are paragraphs that, in part at least, appear to identify the provenance of various documents that Ms Winton either authored, or received from other persons. The admissibility of documents is to be dealt with in a separate process. Insofar as it is necessary for the purposes of that process to rely on the provenance information in those paragraphs, I will allow this to that limited extent. Otherwise the commentary in those paragraphs about what the documents contain is unnecessary; the documents can speak for themselves. With these qualifications, those paragraphs are disallowed. 29 Paragraph 15 appears to be unnecessary, as it recounts the contents of the email referred to in para 14. It should be disallowed for the same reason. 30 The objections to para 25 are not pressed, so para 25 will stand. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

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