In the matter of Regional Express Holdings Limited (Administrators Appointed)

Category: Procedural rulings

Parties: Australian Securities and Investments Commission (Plaintiff)
Regional Express Holdings Ltd (administrators appointed) (First Defendant)
Lim Kim Hai (Second Defendant)
The Honourable John Randell Sharp AM (Third Defendant)
Siddharth Dilip Khotkar (Fourth Defendant)
Lincoln Lin Feng Pan (Fifth Defendant)

Representation: Counsel:
M Borsky KC/R Kruse (Plaintiff)
D Krochmalik (First Defendant)
E Holmes SC/J Burnett (Second Defendant)
A Smith (Third Defendant)
D Thomas SC/N A Wootton (Fourth and Fifth Defendants)
Solicitors:
Norton Rose Fulbright (Plaintiff)
White & Case LLP (First Defendant)
Becketts (Second Defendant)
Arnold Bloch Leibler (Third Defendant)
Ashurst (Fourth and Fifth Defendants)

File Number(s): 2024/459470

JUDGMENT – ex tempore (Revised 15 May 2025)

Nature of the application

1. By Interlocutory Process filed on 1 May 2025, the Plaintiff, the Australian Securities and Investments Commission ("ASIC") seeks orders in respect of disclosure in these proceedings. Those orders address, first, the categories as to which disclosure is sought and second, the process which is to be adopted in respect of disclosure, where the documents which would be the subject of disclosure are held by the First Defendant, Regional Express Holdings Limited (admins apptd) ("Rex"). Rex is, as its title indicates, a company in voluntary administration, and the voluntary administrators are concerned to preserve the scarce resources of that company for the benefit, so far as possible, of its creditors.

2. The application for disclosure is made on the basis that the Defendants other than Rex, who are individual defendants against whom substantive relief is sought in the proceedings, presently assert a privilege against self-incrimination or exposure to a penalty, and would not be giving disclosure or reading affidavits until after ASIC closes its case in chief.

Affidavit evidence

3. I should first address the applicable evidence, before turning to the principles and a determination. ASIC reads the affidavit dated 31 March 2025, of its solicitor, Mr Cash, which addresses, inter alia, circumstances in which ASIC previously issued notices requiring production of documents under the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) and ASIC’s assessment that only partial production was made in response to those notices. That evidence explains why there is reason for disclosure in these proceedings, which might not have existed had there been full compliance with the notices previously issued by ASIC for the production of documents.

4. By a second affidavit dated 1 May 2025, Mr Cash undertakes a detailed review of the reasons for disclosure, as contemplated by the requirements of Supreme Court Practice Note SC Eq 11 (“Practice Note”), to which I refer below. Mr Cash addresses the particular categories which are proposed for disclosure, and the relationship which those categories have with the matters in issue in the proceedings, on a category by category basis, and with specific reference to the nature of the ASIC's allegations in the proceedings. Mr Cash also there addresses the likely cost of disclosure, as the Practice Note requires. There was previously some disagreement between the parties as to that cost estimate or at least as to the certainty of that cost estimate. That issue has now been addressed by an amendment to the process by which document review will take place, which has allowed Rex and its legal advisers to be comfortable that the work required of Rex can be completed within that costs estimate.

5. By a third affidavit dated 12 May 2025, Mr Cash addressed recent correspondence between the parties which has, shortly before the listing today, led to the development of consensus which is now reflected in the orders that are sought.

The parties’ submissions and applicable principles

6. The parties in turn made detailed submissions, and Mr Borsky, with whom Mr Kruse appears for ASIC, in particular addresses the process for discovery which ASIC proposes. Other parties, including Rex and individual Defendants had also made submissions, which are now largely displaced by the consensus which has developed between the parties.

7. Turning now to the applicable principles, orders for disclosure in this Court are approached having regard to the Practice Note which seeks to limit the costs of litigation, particularly so far as it concerns the cost of discovery of electronic material: Leighton International v Hodges [2012] NSWSC 458 (“Leighton”). The Practice Note contemplates the ordinary position that any disclosure will be sought following the service of evidence, although there are circumstances in which the Court may properly depart from that approach.

8. Dealing with the requirements of the Practice Note in turn, it provides that the Court will not make an order for disclosure of the documents until the parties to the proceedings have served their evidence unless there are exceptional circumstances necessitating disclosure (paragraph 4). In Leighton, McDougall J noted that that concept requires an assessment of the relevant provisions and their application in the particular case. The case law has also recognised that one situation where exceptional circumstances may be established is where information necessary for one party's case is wholly within the knowledge of another party from which disclosure is sought, or where disclosure is necessary in order to allow a party to adequately prepare its case for trial, see, for example, Danihel v Manning [2012] NSWSC 556 at [16]; Mempoll Pty Limited, Anakin Pty Limited and Gold Kings (Australia) Pty Limited [2012] NSWSC 1057. Mr Borsky here points to those exceptional circumstances which include at least the fact that some documents likely remain in Rex's possession, which are relevant to the matters in issue and which it appears may not have been produced in response to the previous notices under the ASIC Act; and, second, there will here be no disclosure by the Defendants until after ASIC has closed its case.

9. Both of those matters indicate that disclosure prior to ASIC's substantive evidence is desirable for the just, quick and cheap resolution of the matters in dispute. That proposition is obvious, where otherwise ASIC would lead evidence by reference to the information that it now has, then seek disclosure, then supplement that evidence by reference to further documents obtained on disclosure. There is no utility in putting the parties to the cost of that two stage process, rather than allowing ASIC to lead all its evidence after it has access to the totality of the documents that are available through disclosure.

10. The Practice Note also provides that there will be no order for disclosure in proceedings unless it is necessary for the resolution of the real issues in dispute in the proceedings and requires that affidavit evidence to be led indicating the reasons why disclosure is necessary and addressing its cost implications. The evidence led by Mr Cash is a model of compliance with those requirements, where it adopts an analytical approach by reference to ASIC’s claims in the proceedings, and addresses the likely cost of disclosure by reference to Mr Cash's experience in electronic disclosure in complex litigation.

11. I note for completeness, because it was addressed in earlier submissions of the parties, that there is no obstacle to disclosure orders against Rex by reason that it has filed a submitting appearance in the proceedings and sought to quantify its submitting appearance to exclude adverse financial consequences in the proceedings. The Court may in a proper case make an order for disclosure against a submitting party: Murex Diagnostics Australia Pty Limited v Chiron Corporation (1995) 128 ALR 525; BrisConnections Finance (Receivers and Managers Appointed) v Arup Pty Limited [2015] FCA 1077. Mr Krochmalik, for Rex, does not contend to the contrary.

12. For these reasons, I am satisfied that the Court can make the disclosure orders that are sought in the categories that are sought. I also recognise that the Court will more readily reach that conclusion where all parties to the proceedings, who are familiar with the issues in them, have reached the common view that the relevant categories reflect matters in issue in the proceedings, a matter which is not contested by any of them.

The mechanism for disclosure

13. I now turn to the mechanism which is proposed for disclosure, which seeks to minimise the costs to which Rex will be exposed in giving disclosure. The process involves Rex imaging the contents of specified mailboxes and specified share drive folders and delivering the data that emerges from that process to a forensic accounting firm (“Firm”) engaged by ASIC. The proposed orders expressly recognise that, upon completion by Rex of that step in the disclosure plan, its obligations under the orders are discharged and, to that extent, it is protected from incurring costs involved in the subsequent review process.

14. That mechanism in turn contemplates that the Firm (as defined) will then create a database in which the documents provided in electronic form are extracted, undertake a specified search strategy and de-duplicate those documents and then create a data set from that process (Data Set B). Data Set B is then to be provided to independent counsel retained by ASIC, under a brief which is to be approved by the Defendants, for review in respect of several categories which involve elements of judgment as to relevance and review as to legal professional privilege. I have borne in mind that Counsel, in undertaking a review of whether documents objectively fall within the specific categories, will not have access to instructions from individual Defendants. However, that is likely inevitable in the circumstances, irrespective of the mechanism adopted, where the Defendants are here maintaining the privilege against self-incrimination or incrimination as to a penalty, and Counsel will likely be in no worse position than a solicitor retained by the voluntary administrators in undertaking that review.

15. In respect of legal professional privilege, I also recognise that Counsel will also not have the opportunity to take instructions as to the circumstances in which particular documents were prepared, but will be left to draw inferences from the face of the documents. That approach is similar to that which a judge would take in undertaking a review of documents to determine a contested claim for legal professional privilege. It seems to me that that course can properly be adopted for three reasons. First, it is a consent position adopted between the parties in pragmatically addressing issues of costs affecting all parties in respect of the conduct of the proceedings. Second, importantly, the orders reserve liberty to apply, and to the extent that the inferences which are drawn from the documents do not resolve the status of any particular document, Counsel can indicate that to the parties; that liberty to apply may then be exercised; and privilege in respect of an uncertain or disputed documents may be resolved in that way. The orders also contemplate, sensibly, that a list of the emails and documents identified as subject to a claim for legal professional privilege will be maintained and that will allow any issues which may later arise, in respect of questions such as common interest privilege or waiver of privilege in particular circumstances, to be determined at an appropriate point in the conduct of the proceedings.

16. I am satisfied that this approach is a sensible one, and, again, I give weight to the fact that the parties, all represented by sophisticated legal representatives, have formed the view that it is one to which they can consent. This approach has the benefit of allowing disclosure to take place, minimising the costs to which Rex is exposed in respect of disclosure, recognising the legitimate interest of ASIC in proper access to documents in respect of the proceedings and recognising the legitimate interests of the Defendants in preserving their position at this point. I also bear in mind, importantly, that it is not only ASIC that has a proper interest in disclosure in this matter, where disclosure can be, in an appropriate case, a significant aspect of the just resolution of proceedings. All parties are well served by a mechanism that allows relevant documents to be identified to facilitate the determination of the proceedings on their merits.

Orders

17. For these reasons, I make orders in accordance with the orders initialled by me and placed in the file, noting that they are made by consent.

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