Australian Securities and Investments Commission v Wilson

Statutory provisions 6 As will be seen, the application turns on the position in relation to the testimony of the witness based in the United States, Dr Paul Castella. The power to order that testimony be given by video link is conferred by s 47A(1) of the Federal Court of Australia Act 1976 (Cth), which permits the court for the purposes of any proceeding to direct or allow testimony to be given by video link, audio link or other appropriate means. The discretion is a broad one with the determining consideration being the interests of justice: Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 627; (2015) 231 FCR 531 at [16]. As with any exercise of discretion, reason for the exercise of the discretion must be made out by the party seeking a favourable exercise of the discretion: Corrigan v Commvault Systems (Aust) Pty Ltd [2011] FCA 107; (2011) 192 FCR 71 at [12] (Flick J). 7 Section 47C imposes certain conditions that must be satisfied before the power under s 47A is exercised. In essence these require the court to be satisfied that there is technology permitting all eligible persons in the courtroom (eligibility being determined by the court: s 47C(6)) to see and hear the witness, and that the technology in the place where the witness is located enables all eligible persons in that place to see and hear all eligible persons in the courtroom. Obviously, eligible persons in that context are likely to include the judge, counsel and the witness. There is no difficulty in finding that these preconditions are satisfied on the present application. The court has video conferencing technology, which can work with web based applications such as Microsoft Teams. ASIC has provided evidence to the effect that it will engage an experienced litigation service provider to make sure that all the necessary arrangements for remote access technology are made. There is no reason to suppose that the necessary connections to Melbourne and Texas (where the United States based witness lives) cannot be established. Mr Wilson has not submitted to the contrary. 8 The other matter which the Federal Court Act expressly makes relevant is that under s 37M(4), powers conferred by civil practice and procedure provisions of the Act must be exercised in the way that best promotes the overarching purpose of those provisions as described in s 37M(1), to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.

Relevant issues and evidence in the proceeding 9 The question in this application is whether, informed by those matters, the discretion should be exercised in favour of adducing the evidence of, at least, the United States and Melbourne based witnesses by video link. I have said it arises most acutely in relation to Dr Castella; that is both because of the existence of international travel restrictions and because, as it happens, his evidence is likely to be important to the outcome of the case. In order to appreciate why that is so, it is necessary to describe ASIC's allegations against Mr Wilson in overview. 10 The claim principally concerns events between September 2016 and March 2017. During that period, Mr Wilson was managing director of Quintis. Quintis was listed on the Australian Securities Exchange (ASX) and was subject to continuous disclosure obligations under the Corporations Act and the ASX Listing Rules. 11 Quintis's business involved sandalwood plantations, including the supply of pharmaceutical-grade East Indian sandalwood oil. Two United States subsidiaries of Quintis, Santalis Pharmaceuticals Inc and Santalis Healthcare Corporation, had previously entered into licence and supply agreements with Galderma SA, a subsidiary of Nestlé, which provided for the sale of a substantial volume of sandalwood oil to Galderma over a period of 20 years. 12 ASIC alleges that in November 2016, Galderma told Santalis Pharmaceuticals Inc that it wanted to terminate the supply agreements. It claims that Mr Wilson knew about this from December 2016, but did not tell the other members of Quintis's board of directors. ASIC alleges that on 16 December 2016, Galderma entered into agreements with the two Santalis subsidiaries terminating the supply agreements. Once again, it is said that Mr Wilson knew about this but did not tell Quintis's board. It is alleged that the board did not find out about the termination until May 2017. A market announcement was made soon after that and, in June 2017, a write-off linked to the cancellation of the Galderma supply agreements was made in Quintis's financial statements. 13 ASIC claims that by withholding knowledge of the termination from the board, Mr Wilson exposed Quintis to legal proceedings for breach of its continuous disclosure obligations, and representative proceedings against it have been commenced. It also claims that on 27 March 2017, in response to a query from the ASX, Mr Wilson authorised and approved a market announcement about the Galderma supply agreements that was misleading and deceptive. All of these things are said to have involved breaches by Mr Wilson of statutory duties as a director of Quintis. 14 The United States based witness, Dr Castella, is and was during the relevant period the Chief Executive Officer of Santalis Pharmaceuticals Inc. He has deposed to communications with Mr Wilson which go to Mr Wilson's alleged knowledge of the termination of the Galderma supply agreements. He will also give evidence as to Mr Wilson's response to allegedly learning of the termination. 15 ASIC accepts that the allegations about those matters are critical to its case and that proof of them relies to a significant extent on Dr Castella's evidence. Mr Wilson submits that the credibility of Dr Castella's evidence will therefore be central to the outcome of the trial. ASIC did not cavil with that, inasmuch as its senior counsel said that Dr Castella's credibility will be important, if not very important. 16 Mr Wilson also submits that the testimony of other key witnesses bearing on Dr Castella's evidence will be important, however who they were was not identified in his submissions and in the absence of specific submissions as to why their credibility is in issue and cross-examination of them is important, it is difficult to make much of the reference to them. I do not intend any criticism by that; Mr Wilson is entitled to rely on the privilege against exposure to a penalty and is under no obligation to explain how he proposes to test the evidence of any witness. But the practical result is that the outcome of the interlocutory application hinges on the court's view in relation to the manner in which Dr Castella will give evidence. 17 In that regard, Mr Wilson submits that this is a regulatory proceeding in which allegations of serious misconduct are made against him which may result in a fine and disqualification from managing corporations. He says that it is not essential to proceed to trial in a speedy way; what is essential is that he have a fair and proper opportunity to test the serious allegations made against him.

Case law 18 Mr Wilson relies on authorities in which the difficulties inherent in taking oral evidence by video link have been described, in particular oft-cited comments by Buchanan J in Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 3) [2009] FCA 1306; (2009) 181 FCR 152 at [78]. ASIC submits that those authorities were mostly decided at a time when the available technology had more limitations. But the relevant passage from Campaign Master was not confined to concerns about the technology. Buchanan J pointed out that the requirement to give evidence on oath or affirmation in the solemn environment of a court room in the presence of a judge has at least three potential benefits: It enhances the prospect that the witness will remain conscious of the nature and solemnity of the occasion and of his or her obligations. It affords the cross-examiner some reassurance that the gravity and immediacy of the moment, and of the supervising presence of the judge, are not lost on the witness and the cross-examination is not thereby rendered any less effective, to the possible prejudice of the cross-examining party. It provides the Court with a more satisfactory environment in which to assess the nature, quality and reliability of responses by a witness, both to questions and to the overall situation presented by the necessity to give evidence in court. 19 As senior counsel for ASIC points out, however, Buchanan J's conclusion was not that depriving the court and the cross-examining party of these advantages inevitably results in injustice. Rather, his Honour said: To my mind there remains, even in the modern context, a certain 'chemistry' in oral interchanges in a courtroom, whether between a judge and counsel (or other representative) or between cross-examiner and witness. I would not wish too lightly to deprive a cross-examiner of that traditional forensic element in the exchange although, as the cases universally make clear, the Court must now, if asked to do so, balance the interests of a cross-examining party against claimed inconvenience both in individual cases and with respect to individual witnesses. Notwithstanding the increased availability and use of video link technology, in my view, a case must be made out for the use of video link evidence if it is opposed by an affected party. 20 It must also be acknowledged that Campaign Master and some of the other authorities on which the parties relied were not decided in the exceptional circumstances that face the courts at present. Considerations which may have influenced an application for video evidence based on inconvenience to the witness take on a different complexion when in person evidence becomes a matter of practical impossibility for an indefinite time. The parties have referred to more recent decisions of this court which concern requests for adjournments that have been prompted by the current pandemic: in particular Capic v Ford Motor Company of Australia Limited (Adjournment) [2020] FCA 486; Australian Securities and Investments Commission (ASIC) v GetSwift Limited [2020] FCA 504; and Roberts-Smith v Fairfax Media Publications Pty Limited (No 4) [2020] FCA 614. In both Capic and Getswift, the court refused requests for adjournment; in Roberts-Smith the trial was vacated. 21 On the subject of the efficacy of cross-examination, in Capic Perram J, referring to the audio visual platforms the court currently uses, said that his perception of witnesses' facial expressions was greater than it is in court, because of the closer view afforded by the technology. But his Honour acknowledged the significance of loss of the chemistry to which Buchanan J referred. While Perram J did not grant an adjournment, he did make the point (at [16]) that 'this is a class action about allegedly defective gear boxes, not a fraud trial'. 22 In Getswift at [16], Lee J referred to disadvantage in assessing demeanour in circumstances where credit is likely to be in issue for some of the witnesses. However his Honour considered that, generally, although the process of receiving evidence via video link was 'sub-optimal', he did not consider it was impaired to the extent that it could be described as 'second-rate' or 'substandard' [25]. His Honour essentially shared Perram J's opinion that assessing demeanour by way of video link is not impaired, and may even be improved [33]. In the particular circumstances of the case before him, his Honour appeared to have been influenced by his evaluation of the nature of the evidence as being that 'the best assistance the Court is likely to receive is to be found in the contemporaneous documentary record' [32]. 23 In Roberts-Smith at [22] Besanko J found as a reason for requiring an in person hearing for a defamation matter that the trial was one 'where the credibility or reliability of the key witnesses may well be crucial in circumstances where the alleged imputations arising from the matters complained of are, as I have said, very serious indeed'. While his Honour accepted that some of the witnesses could give evidence by audio-visual link, from his knowledge of the issues he accepted as reasonable the view that the witnesses should give evidence in person in order to give the parties a proper and fair opportunity to present their respective cases. However in that case this was the view of all the parties; there was no opposition to the vacation of the trial. Also, there was another important reason for the vacation of the trial which followed from certain national security requirements (although his Honour did describe that and the other key consideration as 'independent'). 24 While these cases provide guidance on the approach the court must take, the reason to exercise the discretion 'is to be found in any individual proceeding in the facts and circumstances of each proceeding and by reference to the overriding consideration of ensuring that justice is done as between the parties to that proceeding': Corrigan at [12]. So, as Edmonds J said in Australian Competition and Consumer Commission v StoresOnline International Inc [2009] FCA 717 at [14]: … the choice in every case cannot be determined solely by reference to general principles because it is the application of those principles to the facts and circumstances of the particular case which must determine the choice; in the circumstances of a particular case, a matter may point one way and in another case it may point another way. At the end of the day, the exercise of the discretion as to what is appropriate in a particular case will involve a balancing exercise as to what will best serve the administration of justice consistently with maintaining justice between the parties …

Consideration 25 There are several matters relevant to the exercise of the discretion here, including two particular circumstances in the present case which weigh most heavily in that exercise. They are on opposite sides of the balance. 26 The first matter of particular significance is that, in my view, there is a real risk that Mr Wilson will not have a fair and proper opportunity to test the evidence of Dr Castella if that evidence is not given in person. This is a proceeding in which allegations are made of serious misconduct on Mr Wilson's part, which if made out could result in orders for a pecuniary penalty and disqualification against him. Both parties accept, at the least, that the outcome on a critical issue relies to a significant extent on Dr Castella's evidence. It is likely that when Mr Wilson learned of the proposed termination of the Galderma supply agreements, and when and how much he knew about the actual termination, will be central. It is common ground that the credibility of Dr Castella's evidence about that is likely to be in issue. 27 It does not necessarily follow from those matters alone that cross-examination by video link would be unsatisfactory. But it is also necessary to consider the nature of Dr Castella's evidence in this particular case. It is contained in two affidavits that ASIC has filed. Its tenor is that Dr Castella had several conversations with Mr Wilson during the period November 2016 to February 2017 about the termination of the Galderma supply agreements. Importantly, those conversations did not result in or coincide with any written record of Dr Castella's communications with Mr Wilson on the subject during the relevant time. The evidence of relevant written communications between the two men in the key period is confined to one unclear reference in an email to what, according to Dr Castella, is the subject of the termination of the Galderma agreements. There are also some text messages and further emails that may be relevant, but they date from April to June 2017, after Mr Wilson resigned as a director of Quintis. 28 The almost complete absence of any relevant written communications between Mr Wilson and Dr Castella during the crucial period needs to be assessed against Dr Castella's evidence that, at Mr Wilson's request, he did not email or otherwise send a copy of the Galderma termination agreement to Mr Wilson, but gave a copy of the agreement to Mr Wilson personally when he came to Perth for a Quintis board meeting in February 2017. That is in the context of allegations that the board did not find out about the agreement until May 2017. 29 It is therefore possible that the evidence of Dr Castella will be important to the outcome of the case in circumstances where it will not be possible to test or assess it by reference to the documentary record in any direct way. And the very reason why there are so few directly relevant written communications will be an issue in the case. Questions of demeanour and the intangible but important aspects of cross-examination described by Buchanan J in Campaign Master may be influential. 30 ASIC's submissions said that Mr Wilson did not identify any specific prejudice if the evidence is adduced by video, but senior counsel for Mr Wilson did point to the relative paucity of the documentary record for the purposes of cross-examination, to which I have referred. Senior counsel for ASIC also submitted that cross-examination by video of crucial witnesses in matters which may result in the imprisonment of an accused person regularly happens in courts in Western Australia and elsewhere. I understood counsel to be referring to criminal cases where vulnerable witnesses such as children or the victims of alleged sexual assaults are cross-examined in this manner: see, e.g., Evidence Act 1906 (WA) s 106N, s 106R. However that occurs as a result of judgments as to justice and policy relevant to those kinds of situations, and I do not consider that it provides much assistance in determining what is in the interests of justice in this different kind of case. 31 The time difference between Perth and Texas is also relevant here. Depending on the time of year, Texas will be between 12 and 13 hours behind. That means that Dr Castella's evidence will need to be taken at a time which will be evening in one place and early morning in the other. The possible need for Dr Castella to be cross examined for an extended period of time, and the possible difficulties in achieving that which may arise, mean that the importance of the time difference goes beyond mere inconvenience. The potential impact of all these factors on the cross-examination of Dr Castella, in the context of the importance and particular nature of his evidence, provides a strong reason why the trial should not proceed unless his evidence is given in person. 32 The other matter of particular significance, which points the other way, is the effect that it will have on the progress of the matter to trial if Dr Castella's evidence is not permitted to be taken via video link. Evidence has been adduced of travel restrictions resulting from the pandemic which are likely to mean that he will not be able to travel to Australia in the foreseeable future: see Haiye Developments Pty Ltd v The Commercial Business Centre Pty Ltd [2020] NSWSC 732 at [26]-[32], [38]. When those restrictions will ease so as to permit him to come to Perth is unknown. ASIC's senior counsel confirmed that the trial cannot proceed unless Dr Castella gives evidence, and given the importance of his evidence that is not surprising. So the effect of dismissing the present application will be to postpone the trial of the proceeding for an unknown period of time. 33 The importance of resolving disputes expeditiously is reflected in the overarching purpose of the civil practice and procedure provisions in s 37M(1) (although it is expressed in terms of the overall objective to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently 'as possible'). The nature of the matter as a regulatory proceeding adds to the importance of determining it promptly: see Getswift at [38]. ASIC submitted, and I accept, that this is especially so where, as here, an order for the disqualification of Mr Wilson from managing corporations is sought. The purpose of an order of that kind is to protect the public and consumers, creditors, shareholders and investors who deal with companies (Re HIH Insurance (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 at [56]). So if it turns out to be appropriate to make a disqualification order in this case, it should be made without undue delay. Further, there is the broader consideration, important to the administration of justice, that the overall work of the court should proceed and must not be suspended by reason of the pandemic, except to the extent necessary. 34 How should the court resolve these conflicting imperatives? There was some discussion in the course of oral submissions as to whether the question of risk of injustice to Mr Wilson was a threshold one, so that if a certain level of that risk was found to exist, it must necessarily follow that the orders sought should be denied. Dicta of Lee J in Getswift at [9] and [25] can be read to suggest that is so. However senior counsel for ASIC submitted that there was no threshold question of that kind, and that the court must undertake a balancing exercise, taking into account all relevant considerations in order to determine whether the discretion under s 47A of the Federal Court Act should be exercised. ASIC also submitted that the question of disadvantage is not all one way, so that it is possible that if seeing Dr Castella by video rather than in person makes it harder to assess his credibility, that may disadvantage ASIC just as it may disadvantage Mr Wilson. A submission to a similar effect was made about the time difference. ASIC submitted that while Mr Wilson is entitled to a trial that brings about a just resolution of the matter, he is not entitled to a perfect trial, and any trial must adjust to the circumstances that exist within the community at the present. The requirement to do justice is a requirement to do justice to all parties. 35 I accept that the statutory discretion conferred by s 47A of the Federal Court Act and confined and informed by s 47C and s 37M is not subject to any express or necessarily implied condition that it cannot be exercised if there is some particular level of risk of injustice to one of the parties. It would be incorrect and unhelpful to seek to confine the discretion by imposing some threshold, not expressed in the statute, that requires the court to state a test as to a particular level of disadvantage to a party. In Getswift, Lee J was not considering the specific discretion imposed by s 47A, and in any event nothing in his Honour's decision suggests that, in civil cases at least, there is some immutable prerequisite that must be met before a trial can proceed. 36 While it is difficult to conceive of how it could ever be appropriate to proceed where the result will be that injustice is done to a particular party, that assumes that the question of injustice points in one direction only. There can be circumstances where effectively denying the other party the ability to proceed to trial for an indefinite period of time can produce significant injustice to that party as well. I accept that the process of deliberation required in order to exercise the discretion properly is accurately described as a balancing exercise. 37 Nevertheless, on the interlocutory application considered in light of the circumstances as they are presently known, I do not consider that it would be appropriate to proceed to trial on the basis that Dr Castella's evidence be given by video. There is no precise standard to be applied; here it is enough to say that for the reasons I have given, the risk is real that the trial will not be a fair one because Mr Wilson will not have a proper opportunity to cross examine Dr Castella. In JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [2020] WASCA 38 at [15] the Court of Appeal of Western Australia said that '[j]ustice must not only be done but be seen to be done. But in the circumstances of this appeal hearing, for the reasons already given, we were unable to perceive any real risk of practical injustice in proceeding with an appeal hearing by telephone'. I perceive such a risk in the different circumstances here. 38 The choice between taking that risk and postponing the trial for an indefinite period is an invidious one. But in view of the particular characteristics of Dr Castella's possible evidence to which I have referred, I consider that on what is known at present, the risk of injustice to Mr Wilson outweighs the risk of injustice to ASIC and any resulting harm to the public interest. It is simply not clear how long the trial will be delayed. I may be a matter of months, it may be longer. It is relevant that no listing for trial has occurred, so there is no need to vacate particular dates with the inconvenience and wasted costs that would inevitably follow. It is also relevant that while ASIC has, rightly, placed emphasis on the public interest in proceeding to trial quickly, it has not pointed to any particular prejudice that it will suffer as a litigant or that will be suffered by any other person. There was no suggestion, for example, that Dr Castella's apparent willingness to give evidence was subject to a requirement that it be by video, or that it take place before any particular time, or that he would not be compellable as a witness if he did not consent to give evidence in a particular way. 39 For these reasons the application for Dr Castella's evidence to be adduced by video link is dismissed. Since ASIC's position at present is that the trial will not proceed in his absence, there is no utility in making similar orders in respect of the other witnesses or for the appearance of counsel, and the application for those orders will also be dismissed. There is also no utility at present in making other case management directions that ASIC seeks. 40 However, as Mr Wilson's counsel accepted, circumstances may change. As time progresses, the likely time frame of the impact of the pandemic on travel arrangements will become clearer. In my view it is appropriate to adjourn the case management hearing for a period of approximately two months so that the position may be reassessed at that time. For that reason, the application will be dismissed with general liberty to apply, so that when it becomes appropriate to reconsider the issue, that can be done without the need for a fresh application. 41 While ASIC is presently unsuccessful, the interlocutory application was necessary due to circumstances beyond either party's control. The competing considerations on each side were strong. The appropriate order as to the costs of the interlocutory application is that they be in the cause I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jackson.