Australian Securities & Investments Commission v Axis International Management Pty Ltd

Judgment (8 paragraphs)

[1]

The application is premature 22 ASIC submits that proceedings are at an early stage in that: (a) The plaintiff's amended statement of claim remains to be supplemented by various particulars. (b) Most of the defences (including Sattvic's) do not set out detailed substantive responses to the allegations in the statement of claim, and ASIC may yet apply for orders requiring responsive defences. (c) ASIC has not filed a reply. (d) Discovery has not been completed, and it is possible that a number of parties will seek to amend their pleadings after discovery. (e) ASIC has not yet filed all the affidavits on which it will rely at trial and, with the exception of one affidavit from Sattvic, the defendants have filed no such affidavits. (f) There has not yet been any mediation, which could and should narrow or otherwise change the issues in dispute. (g) The third defendant has filed an application to strike out the proceeding against it which, if successful, will reduce the number of parties. 23 I do not accept this submission. It transpires that particulars have now been supplied and discovery between these parties has been given. The defence of Sattvic is not in the nature of a set of bare denials. Positive allegations are variously pleaded. It is a matter for the plaintiff, should it wish to do so, to file a reply. Such is the position also in respect to the plaintiff's affidavits. Sattvic has filed affidavits by Mr Leslie Stein and Mr Kim Stokeld. A mediation can still take place between ASIC and Sattvic if a separation order is made. Should the third defendant's motion in due course succeed then, no doubt, subject to any appeal that would, in due course, spell the end of the action against Sattvic. 24 ASIC further submits that: (a) The live issues of fact and law in the proceedings may look very different after these steps have been completed. For example, ASIC may have settled with Sattvic, or with some or all of the other defendants. Clearly this could negate the need to order a separate trial. Discovery and particulars could prompt further admissions in the defences or in a reply, thus narrowing the issues in dispute. So it is impossible at this stage of the proceeding to know exactly what shape the trial will take, and it cannot at this stage be said that a joint trial would unfairly prejudice Sattvic. (b) Deferring determination of Sattvic's application for a separate trial will not occasion much, if any, extra cost and delay for Sattvic. The management of interlocutory steps on a joint basis should not create extra cost for Sattvic. Sattvic's implicit assumption that an order for a separate trial will result in the fast-tracking of its trial is unfounded. It might instead find that its trial is deferred until after the other trial or trials. The success of its application may encourage other defendants to make the same application, resulting in a large number of trials. No basis appears from Sattvic's submissions or evidence for its assumed priority in such an eventuality. (c) ASIC therefore submits that the appropriate course is to defer consideration of splitting the proceeding until after the pleadings are closed, interlocutory steps are finalised and mediation has occurred, so as to enable the proceeding to be cohesively managed, at least until it has progressed to the point where an informed assessment can be made of the likely length and complexity of the trial. 25 It is said by ASIC that on this approach the question of separate trials could be reviewed at the time that the proceeding is listed for trial: National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (No 2) (Unreported, Federal Court of Australia, 9 December 1996) at p 8. 26 I reject this submission. There is no reason, in my opinion, to adjourn this application on the basis of hypothetical and speculative considerations.

Common Questions and Similar Issues 31 ASIC submits that there are similarities between the way the share application form was used in the course of three of the offers alleged against Sattvic (at paras 212A to 212O of the plaintiff's amended statement of claim) and the way those forms were used in respect of certain offers alleged to have been made by other defendants (at paras 84-89, 160-164, 173-177 and 184-194 of the statement of claim). It then submits, without specificity, that much of the evidence and submissions on these issues are likely to be the same or substantially similar in respect of all defendants. I have considered the pleadings. In the end, as I have identified above, the issues for trial between ASIC and Sattvic are very limited. There is little or no dispute about factual matters which are substantially similar in the actions against the other defendants. 32 In addition, ASIC submits that common questions of statutory interpretation affecting important provisions of the Corporations Act 2001 (Cth) are likely to arise in respect of all defendants, in particular s 707(3) and (4). It says that the purpose test in s 707(4) is relied on against all defendants and there will be common questions concerning the application of that test affecting all defendants. However, there is no live issue as to this between Sattvic and ASIC as the contentions of ASIC in this respect are admitted. Accordingly, no question of inconsistent judgments on this question arises. 33 In support of its contention that the evidence concerning the claims against it will be unique, Sattvic has filed an affidavit from one of the two persons it has identified as likely witnesses it will call at trial. As to this ASIC submits that it is necessary to bear in mind that the evidence when called may reveal overlap and connection not presently capable of being detected: Meadow Gem Pty Ltd v ANZ Executors and Trustees (unreported, Supreme Court of Victoria, 8 May 1995) at 14. For example, it says, evidence from the seventh defendant, Mr Johnston, may bear on the question of the date of issue of shares to Sattvic which is raised in paragraph 2 of Sattvic's defence. As before these submissions are speculative. If there were indeed the real likelihood of overlap it would by now be evident. In any event, even if there were some limited overlap of the kind described I do not regard that, of itself, as a basis for declining the order sought. 34 The various factors which led Austin J of the Supreme Court of New South Wales to recently allow a joinder of defendants by ASIC in Australian Securities & Investment Commission v Somerville are absent in the matter. 35 There, Austin J, granted ASIC leave to join ten defendants in the one action. The first defendant was a Mr Somerville. The second defendant was the incorporated legal practice of which Mr Somerville had become a legal practitioner director. ASIC had contended that Mr Somerville had provided legal advice as a solicitor to each of the eight director defendants to the effect that they should sell the business or assets of a certain company to another purchaser company which each would control. The liability of Mr Somerville and his incorporated legal practice would only have arisen if contraventions by one or more of the other defendants were proved. It was the common participation of Mr Somerville as legal adviser that linked the transactions. Accordingly and most importantly, the cases against each of the eight director defendants were components of ASIC's case against Mr Somerville and his incorporated law firm for involvement in the contraventions by each director. It was, as his Honour found, an important part of ASIC's evidentiary case against Mr Somerville and his incorporated legal practice to show that, in respect of the eight transactions, there was a pattern and similarity devised by Mr Somerville [37]. Accordingly, ASIC and Mr Somerville were common parties to all claims. There was considered to be a likely saving of costs to ASIC and Mr Somerville by one proceeding, constituted with all ten defendants, going to trial. There was likely to have been a very substantial repetition of evidence should there have been a separation of the case against one of the defendants as Mr Somerville would have had to give evidence in the trial of that case as well as the case against the balance of the defendants. It was, accordingly, concluded that as a primary factor in refusing a separation order that the benefits to ASIC and Mr Somerville of a single proceeding in which the evidence of his involvement in the eight transactions was received once and for all was considered as of great significance. 36 In this case, however, the common thread passing through the cases against each of the corporate defendants and indeed the personal defendants is that each of these cases concerns transactions involving Firepower BVI shares. There is, otherwise, no relationship between the corporate defendants nor any between Sattvic and either Mr Ward or Mr Johnston, the sixth and seventh defendants respectively. 37 I am satisfied that it would be inconvenient to Mr Stein, particularly professionally, for the case against him to be tried together with the cases against the other defendants. More importantly, given the already adverse effect of these proceedings upon his reputation I think that the inevitable delay of a trial as against his company, Sattvic, would of itself render an injustice to him. I would expect such delay to be considerable in the circumstances. 38 In my opinion, for these reasons, the motion should be granted with costs. I will invite the parties to bring in a minute of order reflecting these reasons. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

The Relevant Principles 9 The relevant principles are not controversial. The basic principle, which ought to guide the exercise of discretion, is that "the Court should take whatever course seems to be most conducive to a just resolution of the disputes between the parties, but having regard to the desirability of limiting, so far as practicable, the costs and delay of the litigation": Bishop v Bridgelands Securities (1990) 25 FCR 311 at 314. This case involved an application for joinder of additional applicants, which raises similar considerations to the present one. 10 If inconvenience is alleged, it must be shown that there are factors which make it inconvenient for there to be a joint trial, rather than that a separate trial is more convenient: Mann v Board of Health (ACT) (1996) 67 FCR 383 at 399F. 11 Disadvantages to a defendant seeking a separate trial, including the possibility of unfairness, must be weighed against identified advantages to ASIC and to the defendants as a whole and the efficient use of the court's resources having regard to the commonality of issues raised by each claim: Dean-Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64 at [34]. The court should be concerned to determine what is the most efficient use of the resources of the parties and also of the court: Carter v Commissioner of Taxation (2001) 109 FCR 215 at [23]. 12 Factors which have been held to weigh in favour of exercising the discretion to order separate trials include: (a) the issues concerning the party seeking the separate trial are distinct and discrete: Bishop v Bridgeland Securities at 314; (b) a joint trial will involve the respondent in the expense of being present at the trial of questions with which they are not concerned and it would be unfair for the respondent to be compelled to participate in a large and costly proceeding where it has only marginal involvement: Hinze v Zed [1926] SASR 77 at 84; Knight v Beyond Properties Pty Ltd (No 2) [2006] FCA 192 at [30] and Newman v Hold Pty Ltd [2001] VSC 282 at [17]. 13 Factors which have been held to militate against making such an order include: (a) the potential overlap of evidence and argument, including the need for the same witnesses to be called at both trials: National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Limited [1996] FCA 1228 at [17]; Dean-Willcocks v Commissioner of Taxation 2003 45 ACSR 298 at [18]; (b) the interrelationship between issues which are not capable of being resolved independently of each other: Mann v Board of Health (ACT) at 400F; (c) the potential disqualification of the judge that hears the first trial, if adverse findings are made as to the creditabilityof witnesses: National Mutual Property Services (Australia) Pty Ltd v Citbank Savings Limited at [16]; Dean-Willcocks v Commissioner of Taxation at [18]; and (d) the undesirability of inconsistent findings as to the same transactions: Henschel v Brittany Crepe Company Pty Ltd [1981] Qd R 173 at 175-176. 14 ASIC submits that the following factors are also relevant: (a) the state of progression of the proceeding: Knight v Beyond Properties Pty Ltd (No 2) at [25]. (b) the degree to which cost and delay will be minimised by a single trial or by separate trials: Bishop v Bridgelands Securities Ltd at 314; (c) the efficient use of the resources of the parties and the court: Carter v Commissioner of Taxation at [23]; Dean-Willcocks v Air Transit International Pty Ltd at [34]; (d) that it is preferable from a public policy perspective to avoid a multiplicity of hearings: Main-Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd [2007] VSC 43 at [21]; (e) any relevant public interest in the proceeding: Dean-Willcocks v Air Transit International Pty Ltd at [35]; and (f) the degree of similarity in the transactions alleged in the proceedings - this may be a more weighty consideration than the somewhat technical point that the transactions do not form a series: Australian Securities & Investment Commission v Somerville [2008] NSWSC 788 at [42].

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Judgment (8 paragraphs)

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