Rich & Anor v Australian Securities & Investments Commission [2005] NSWCA 233 | Case summary

1 JULY 2005 JOHN DAVID RICH & ANOR v AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION Judgment 1 HANDLEY JA: Following the collapse and liquidation of One-Tel Ltd ASIC has brought civil proceedings under the Corporations Act against two of its former directors. The next stage of the trial is due to commence next Monday, 4 July, before Austin J with the calling of the first substantive witness. There have been extensive pre-trial proceedings involving case management and rulings on evidence. As a result the proceedings have been under way before Austin J for some time. 2 On 7 March 2005 his Honour ruled that a report embodying the expert evidence of Mr Carter, which was concerned to identify the true financial position of the One-Tel group of companies at relevant times, how the officers should then have acted, and to quantify the compensation, was inadmissible or, alternatively, should be excluded in the exercise of the discretion conferred by s 135 of the Evidence Act 1995. Mr Carter's expert opinion was said to be founded on the documents in twelve lever arch files which ASIC sought to have admitted even if Mr Carter's report was not admitted. 3 There was then argument before Austin J, including extensive written submissions, for over a month leading to his Honour's ruling on 5 May 2005 that nine categories of documents selected from the lever arch files were admissible and should not be excluded in the exercise of his discretion. 4 On 20 May this Court granted leave to appeal from his Honour's ruling of 7 March 2005 relating to the report of Mr Carter and allowed the appeal. The ultimate admission of Mr Carter's report in whole or in part remains for determination but the admission of the nine categories of documents has independent significance. It was thought that the decision in relation to those documents would apply to other documents in the lever arch files and in a tender bundle. 5 Austin J, in his decision of 5 May of 151 pages, ruled that the nine categories of documents were admissible as business records under s 69 of the Evidence Act or as books of the company admissible under s 1305 of the Corporations Act. 6 This is an application for leave to appeal from the ruling of 5 May. During argument the Court raised the question whether the ruling constituted an "order" from which an appeal could be brought within s 101(1)(a) of the Supreme Court Act. ASIC was not in a position to present argument on the point and since in my opinion leave to appeal should be refused it is unnecessary and undesirable to enter upon the question. 7 The Court has decided to refuse leave to appeal essentially for procedural reasons. While some of Mr Walker's submissions for the claimants raised potentially important questions of principle under the Evidence Act the Court has not been persuaded that a decision on these questions at this time is necessary or desirable. 8 The business records provisions of the Evidence Act and s 1305 of the Corporations Act provided alternative and cumulative bases for the decision to admit the documents into evidence. Any decision with respect to particular documents or groups of documents would require this Court to review inferences and other findings made by the primary judge involving questions of fact and degree. The questions of admissibility could not be determined merely by rulings of this Court on the questions of legal principle which have been raised by the claimants. 9 Any rulings by this Court in favour of the claimants would not be final because it would be open to ASIC, at least in some cases, to re-tender the documents on a different basis following further evidence of their provenance and the reason for their creation. Moreover, evidence given during the trial may confirm or, indeed, undermine the admissibility of the documents by supporting or undermining the findings and inferences made by the primary judge in this evidentiary ruling. This has already happened with the spread sheet relating to gross margins (category 6) and the Butcher's paper presentation relating to billings (category 10) where ASIC will be calling witnesses whose oral evidence may make these documents admissible in any event. 10 A further factor militating against the grant of leave is that this Court is in no position to assess the importance of these documents to the ultimate decision in the case. The findings and decision of the trial judge may be based on or supported by other evidence which is clearly admissible so that, if ASIC is successful, an appeal on the ground of the wrongful admission of any of this evidence could not succeed because any errors would be immaterial. 11 A further factor pointing to the same conclusion is the question of weight. This concerns in particular the documents in category 8 comprising the administrators' and liquidators' reports. Their authors are to be called by ASIC to give oral evidence which may strengthen the grounds for the admission of these reports. ASIC proposes to rely upon the estimates of realisable value in some of these reports to prove aspects of its case on damages. 12 The Court is in no position to assess the weight that should be given to these estimates. This will depend on the oral evidence of the authors including any cross-examination and any other relevant evidence on the topic. If the trial judge determines that the valuation evidence in these reports is of little probative value any error in the admission of the evidence will become immaterial. 13 One of the potentially important questions of principle raised by Mr Walker concerns the relationship of s 69, the business records section, to Pt 3.3 of the Evidence Act dealing with the opinion rule, particularly s 79 dealing with opinions based on specialised knowledge. The primary judge may have thought that the principles stated by Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 apply with full force to statements by experts in business records made when litigation was not in contemplation. It is far from clear that these principles apply with their full force, or at all, to out of court statements by experts in business records even if such statements do have to meet the standard in s 79. 14 The claimants point out that they will be faced with decisions about cross examination, the calling of evidence, and giving evidence themselves, in proceedings which are penal in nature, which they might not have to make if the admission of the documents were overturned. This is a commonplace in proceedings including criminal proceedings. It is a relevant matter but in our opinion the circumstances of the present case have not been shown to be such that the judge's ruling, if an appellable order, should be subject to appeal at this stage of the proceedings. 15 Like any other litigant ASIC runs the risk that the evidentiary course it proposes to take will be found to have miscarried and that a successful appeal will result in judgment in favour of the claimants. 16 This Court will not readily grant leave to appeal to review interlocutory rulings of the trial judge, even if there is power to do so, for the reasons given by Sir Frederick Jordan in the Will of Gilbert (1946) 46 SR (NSW) 318, 323 and for the additional reasons articulated by Gleeson CJ in Rich v ASIC [2005] HCATrans 416 (17 June 2005) when he said, refusing leave to appeal from the decision of this Court in relation to the Carter report: "The fragmentation of trials of this nature by appeals against interlocutory rulings of trial judges is inappropriate other than in the most exceptional cases." 17 For the reasons given this is not such an exceptional case. The summons for leave to appeal is dismissed with costs. 18 GILES JA: I agree with Handley JA. 19 BASTEN JA: This is an application for leave to appeal in relation to certain rulings of the trial judge that particular categories of documents, tendered by the Opponent, should be admitted as evidence. It seems to be common ground that whatever his Honour decided did not constitute a "judgment or order of the Court in a Division" for the purposes of s 101(1)(a) of the Supreme Court Act, but may have constituted "an interlocutory judgment or order in proceedings in the Court" for the purposes of s 101(2)(e). 20 For the reasons given by Handley JA and Giles JA, leave should be refused. Accordingly, the case may be dealt with on the assumption, in favour of the Claimants, that this Court has jurisdiction to hear the application because the ruling of the trial judge that certain items of documentary evidence were admissible constituted "an interlocutory order or judgment". Had a different view been taken in relation to the discretionary considerations, the jurisdictional question would need to have been addressed. 21 A judgment or order, for the purposes of an appeal, is generally understood as an order of the Court disposing of the proceedings, or some discrete part of them, in a manner which determines the rights of the parties in relation to the matter in issue. The reference to "an interlocutory judgment or order" demonstrates that no rigid distinction can be drawn between orders which are final and operative in the sense that they dispose of the whole of the proceedings and those which are not. However, it does not follow that any ruling made by a trial judge in the course of proceedings is a judgment or order. 22 There is a line of authority in this Court and in the Court of Criminal Appeal considering whether a ruling on evidence is or may be an interlocutory judgment or order. In this Court, the only decision which appears to be directly in point is Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (NSWCA, unrep, 20 May 1996). Mahoney P (with whom Meagher JA agreed), after reference to authority, stated: "I think the thrust of authority is that a ruling that evidence is admissible, that is, evidence should be received into a trial, given in the course of a trial, is not an order for the purposes of leave to appeal or appeal." One of the authorities relied upon was the passage in Commonwealth v Mullane (1961) 106 CLR 166 at 169 also referred to by Gleeson CJ in Bozatsis (infra). 23 The question has also arisen in proceedings brought under s 5F of the Criminal Appeal Act 1912 (NSW). Many of the earlier cases are summarised in the judgment of the Court of Criminal Appeal in R v Steffan (1993) 30 NSWLR 633. The Court held (at 639G) "a ruling on evidence made in advance of or in the course of the trial, in either the Supreme Court or the District Court, is not an interlocutory judgment or order within the meaning of s 5F of the Criminal Appeal Act." 24 More recently, in R v King (2003) 59 NSWLR 472, a related question arose in relation to an application for a permanent stay. Given the purpose and history of s 5F of the Criminal Appeal Act, the Court of Criminal Appeal held that the determination of such an application was an interlocutory judgment or order. As Spigelman CJ noted at [20] the authorities in relation to a stay gave rise to no clear answer. His Honour was content to determine the matter by reference to the specific purpose of s 5F(2). Steffan was treated as authoritative in relation to a ruling on evidence in the later decision of the Court of Criminal Appeal in Attorney-General for New South Wales v Stuart (1994) 34 NSWLR 667 at 670C-D. Nevertheless, an order that documents be produced to the Court was held to be an interlocutory judgment or order, because it involved a rejection of a claim of public interest immunity in relation to the documents at 673C-D (Hunt CJ at CL). 25 That a ruling on evidence may constitute an interlocutory judgment or order is also demonstrated by the judgment of the Court of Criminal Appeal in Bozatsis and Spanakakis (1997) 97 A Crim R 296 at 302-304. Gleeson CJ concluded that the critical question was "the character and effect of the decision" which his Honour characterised in that case as "not merely deciding that some particular piece of evidence was admissible or inadmissible" but the making of "a discretionary decision not to receive any evidence tending to show the guilt of the respondents". Such a decision, his Honour, held, was "properly characterised as a judgment or order". The matter raised for consideration in ASIC v Rich [2005] NSWCA 152 may well have satisfied this test. It does not follow that the same conclusion would necessarily be reached in the present case. Nevertheless, because the issue was not argued, jurisdiction must needs be assumed for present purposes. 26 A second question concerns the precise form of the order made by Austin J, from which leave to appeal is sought. In effect, the order under challenge must be inferred from the final paragraph of his Honour's reason for judgment. The need to identify the relevant orders was a matter to which the parties should have been alert, as it had been raised with them by Gummow J in the course of hearing a motion in relation to the special leave application with respect to an early decision of this Court: [2005] HCA Trans 387, lines 55-65. But the terms of the actual order made (if any) is a matter of substance, not just form. The terms of the order define that which this Court is asked to set aside. 27 Had his Honour been asked to clarify the terms of the order, or even to make an order, he might have adopted the approach of Goldberg J in Peniche v United Mexican States (No. 3) [2000] FCA 340 and declined to make any order or further order. What would have happened in the present case is a matter of speculation. The fact that the precise terms of the order are not known, because the order has not been entered, does not assist the Claimants. 28 The next question concerns the test which should be applied in relation to a grant of leave, on the assumption that there is a relevant judgment or order. That test has not been defined with any precision, although it is generally acknowledged that the bar to be cleared in order to obtain leave is higher in the case of matters of practice and procedure, including rulings on evidence, than would be the case for decisions having an effect on substantive rights. The relevant principles were expressed by Jordan CJ in the well-known case of In Re the Will of F B Gilbert (Deceased) (1946) 46 SR (NSW) 318 at 323 approved in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177. Not all rulings with respect to evidence will be treated as matters of "practice and procedure" and, in particular, a ruling on legal professional privilege may be characterised as involving a "substantive and fundamental common law principle": Amalgamated Television Services Pty Ltd v Marsden [1999] NSWCA 97 at [17]-[18] (Giles JA). 29 No doubt different considerations are relevant in applications for special leave to appeal pursuant to s 35 of the Judiciary Act. Nevertheless, it may be noted that, in refusing leave to appeal from the decision of this Court with respect to the Carter report - Australian Securities and Investments Commission v Rich [2005] NSWCA 152 - Gleeson CJ stated: "The fragmentation of trials of this nature by appeals against interlocutory rulings of trial judges is inappropriate other than in the most exceptional cases. The Court of Appeal regarded this case as exceptional and gave leave to appeal to that Court. The case is not sufficiently exceptional to warrant a grant of special leave to appeal to this Court." 30 The appropriate formulation of the test need not be pursued further, because the Claimants were content to accept that they must establish special circumstances to obtain a grant of leave. For the reasons given by Handley JA and Giles JA, that case has not been made out and leave should be refused with costs. 31 HANDLEY JA: The order of the Court is leave to appeal refused, summons dismissed with costs. **********

Rich & Anor v Australian Securities & Investments Commission

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