The parties' respective submissions concerning material matters bearing upon the justification or otherwise for the grant of orders ancillary to the Mareva relief and my incidental observations
10 The affidavit filed in support of the application for leave to appeal by Mr Rohan Higgins, the solicitor for the Sharman applicants, contained the following broad submission under the heading '[i]njustice if leave is refused':
'If leave to appeal is not granted then the orders of Moore J will operate and will have to be complied with. Any subsequent challenge to those orders would then be futile and academic. The orders are interlocutory in form but final in the result in relation to the issues raised.'
So much is correct as a general statement as to the consequences of his Honour's orders. However, the nature and context of the application for leave here involved in practical terms an appeal, or virtually so, as will hereafter emerge.
11 The Music companies contended that the Sharman applicants' submissions proceeded in reality 'on the erroneous basis that every interlocutory decision that requires a party to do an act will be automatically susceptible to leave to appeal and to being stayed'. The Music companies' position was that the orders requiring Ms Hemming to file an affidavit disclosing the assets of Sharman Networks, and to attend for cross-examination on the affidavit she had earlier sworn as to disclosure of her assets, were merely procedural in nature and therefore, incapable as such of determining any final rights of the parties. So much accorded with Moore J's understanding of the nature of those orders, as indicated in [30] of his Honour's reasons for judgment.
12 The primary submission made by the Music companies as to why leave to appeal ought not to be granted related to the failure of the Sharman applicants to adduce evidence demonstrative of the claim that they would suffer 'substantial injustice', should leave be refused. The Music companies rejected any notion to the effect that the mere fact of Ms Hemming being compelled to swear an affidavit as to disclosure of Sharman Networks' assets, and to attend for cross-examination upon her own disclosure affidavits, without more, amounted to 'substantial injustice', in the sense that such expression has been used in numerous authorities concerned with the grant of leave to appeal. Reference was made to Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478, in which Gaudron, McHugh and Hayne JJ, in a different context, considered that the bare proposition that an order mandating 'trial by judge alone, as opposed to trial by judge and jury, can amount, without more, to a substantial wrong to a party or to a miscarriage of justice, [was] a startling proposition'. The reality of the dilemma in which the Court is placed by the present application is the need for consideration in some depth of the matters to which attention has been drawn by the Sharman applicants, before determining whether leave to appeal ought formally to be granted to appeal in the first place. The Sharman applicants relied upon a further passage from the majority's reasons for judgment in Gerlach at [13], as follows:
'The principles governing the grant of leave to appeal against interlocutory orders are well established…If it is plain that wrong principle was applied by the judge considering the application, it may well be that leave should be granted…'
13 The Music companies, for their part, placed particular reliance upon the joint reasons for judgment of Black CJ and Stone J in Brilliant Digital for the approach that they contended ought to be adopted in my consideration of the present application for leave to appeal. In refusing leave to appeal from Wilcox J's decision to decline to set aside earlier Anton Piller orders that had been made in the course of the subject litigation, their Honours were said not to have considered at all the merits of the contemplated appeal there in issue. The following passages appearing at [7]-[8] and [13]-[14] of their Honour's reasons for judgment in Brilliant Digital were asserted by the Music companies to be apposite to the present application:
'[7] In our view these matters [the matters contended by the applicants to amount to substantial injustice] would not, either individually or cumulatively, occasion injustice to the applicants of such a character and to such a degree as to justify the grant of leave. While it is neither necessary nor appropriate to attempt to define the concept of substantial injustice some observations may be ventured. The flexibility of the principles governing the grant of leave to appeal indicates that the concept of substantial injustice must also be flexible. The requirement of leave to appeal indicates, however, that substantial injustice requires something more than that the subject decision is incorrect, otherwise the criterion would be superfluous. The qualification of "injustice" by "substantial" points to a detriment that, while not necessarily irreparable, is more than mere inconvenience or delay in the exercise of a right.
[8] The distinction between interlocutory decisions concerning matters of practice and procedure and those that concern the substantive interests of the parties recognises both the greater likelihood of an incorrect decision as to a substantive right causing substantial injustice and the importance of preserving a judge's power to supervise the orderly preparation of a matter for trial. In determining whether there has been substantial injustice it is appropriate for the court to take these factors into account. The need to keep a tight rein upon interference with orders at first instance that do not determine substantive rights has even more force today in the context of procedural reforms and active case management undertaken with a view to the early identification of the real issues between the parties and the expeditious and efficient resolution of them…
[13] The challenged orders were plainly directed to matters of practice and procedure and did not determine any substantive rights. They were directed to the capture and preservation of certain data and information and this purpose has now been effected. Importantly, the applicants for leave do not seek to reverse this by destruction of the material seized pursuant to the challenged orders. The primary judge has now made orders relating to the use of the material seized including its safekeeping by an independent party and, subject to appropriate confidentiality undertakings, the making of a safety or backup copy of the material. Orders have also been made granting preliminary access to the material for the purpose of any application that includes material not falling within the challenged orders. The music companies are to have only such access to the seized material as would be normally available on discovery. This shows that there is presently in train an orderly process for the management of the seized material in which the interests of both parties will receive due consideration.
[14] In these circumstances we are far from satisfied that substantial injustice would follow from refusing the application for leave to appeal and, on that basis, we would refuse leave to appeal. That being so we do not propose to comment on the correctness or otherwise of the decision of the primary judge. Nothing we have said should be taken as suggesting that the making of the challenged orders was not a serious matter requiring very careful consideration by the primary judge; plainly, whether or not the applicants are correct in their contention that his decision was erroneous, the application for the challenged orders and the subsequent application to set them aside did receive consideration of that character.'
(The emphasis appearing in [7] above in non-italics is mine).
14 The Music companies contended that the orders made by Moore J were truly interlocutory in nature, rather than substantial in effect, being directed to 'the capture and preservation' of assets of the Sharman applicants pursuant to the Mareva relief granted. They pointed out that Moore J had reached his decision to impose those orders after careful application of the relevant legal principles, with due consideration of the lengthy evidence put before him by both parties. Moreover, Moore J was said to have made it clear in [39] of his reasons for judgment that any cross-examination would be subject to the control of the Court, thereby limiting any prejudice that may be suffered by Ms Hemming or the other applicants. In those circumstances, counsel for the Music companies further contended that the applicants had failed to show that the obligations imposed upon them by Moore J amounted to anything greater than 'mere inconvenience'. On that footing, the Music companies concluded that the Sharman applicants had failed to overcome the threshold requirement of establishing substantial injustice, and that leave to appeal should be refused on that basis alone. Acceptance of that proposition was said to have the consequence realistically that consideration of the draft grounds of appeal from Moore J's judgment as formulated by the Sharman applicants, would not be necessary. There is considerable force in those submissions of the Music companies.
15 The Sharman applicants submitted that Brilliant Digital was distinguishable from the present circumstances because in the former instance, the orders the subject of application for leave to appeal arose from an Anton Piller order that had already been executed, but in the present case, Ms Hemming was yet to be cross-examined and had not, as at the date of hearing of the application, sworn an affidavit for instance on behalf of Sharman Networks. I should interpolate to record that subsequent to reserving judgment on the question of leave to appeal, the Sharman applicants applied for a stay on Moore J's order requiring Ms Hemming to file that affidavit, and that I refused to grant that stay, but made orders requiring the affidavit to be left in a sealed envelope to be opened only upon further order of the Court. Because a Full Court on appeal is in a position to intervene in relation to the subjection of Ms Hemming to Moore J's orders, and because those orders were made, on the Sharman applicants' case, erroneously by his Honour, it was contended by the Sharman applicants to be unjust if leave to appeal was not to be granted in relation to his Honour's orders.
16 The Sharman applicants further submitted that the Full Court 'regularly' grants leave to appeal where it can be shown that the exercise of a discretion has miscarried, and where that miscarriage in the exercise of a discretion involves an important question of principle, citing as authority Wong at [22]. In Wong, the Full Federal Court held that the primary judge had failed to correctly apply the relevant legal test grounding the order made below. No mention was made by the Full Court of the need to establish 'substantial injustice' before a grant of leave to appeal is to be made. Counsel for the Music companies submitted in response that Wong was of no assistance, since it was a decision made as a result of the primary judge having ordered the filing of interrogatories in the absence of evidence from the party sought to be interrogated going beyond a 'mere allegation'. So much was said to stand in contrast with the considerable array of evidence provided respectively to Wilcox, Lindgren and Moore JJ at various interlocutory stages concerning Ms Hemming's control of the Sharman companies and a related and involved trust estate. In any event the Music companies submitted that the Court's decision in Wong must be read subject to the later reasons of the Full Court in Brilliant Digital, which required inter alia that 'substantial injustice' be shown. There is in my opinion clear force in those submissions of the Music companies.
17 Contrary moreover to the Music companies' primary submissions, the Sharman applicants contended that should leave to appeal be refused, they would indeed suffer 'substantial injustice'. That was said to be because the order to cross‑examine a deponent of a disclosure affidavit was an exceptional one, and because Moore J had failed correctly to apply the relevant principles in making the order, in that his Honour had not made a positive finding that the affidavit disclosure by Ms Hemming of her own assets was inadequate. In my opinion however, the reasons of the primary judgment, which I have extracted in [5] above of these reasons are in substance to that effect, or at least sufficiently so. In any event, the making of an order requiring cross-examination on a disclosure affidavit was said by the Sharman applicants to be tantamount to a finding of contempt, or at least predicated upon such a finding. That latter contention would seem to be directed to an overstatement, in circumstances where the complaint was inadequate responses to the enforcement of orders made ancillary to Mareva relief.
18 In support of those propositions of the Sharman applicants, I was taken to several authorities in the United Kingdom and Australia concerned with the making of orders for cross-examination on disclosure affidavits made in pursuit of compliance with a Mareva order.
19 Thus in Den Norske Bank ASA v Antonatos [1999] QB 271, Waller LJ (with whom Chadwick and Millett LJJ agreed) said in a passage at 290, upon which the Sharman applicants placed reliance:
'It is finally important to recognise that it is only in exceptional circumstances that cross-examination will be ordered on an affidavit sworn pursuant to a Mareva order: see House of Spring Gardens Ltd v Waite [1985] FSR 173 at 181, per Slade LJ. The anxieties expressed by Scott J in Bayer AG v Winter (No 2) [1986] 1 WLR 540 relating to the court wanting no part of a star chamber process must constantly be borne in mind…'
The passage from the reasons for judgment of Slade LJ in House of Spring Gardens, referred to by Waller LJ above, reads as follows:
'I can very well see that on the particular facts of many cases - perhaps most cases - the court might not consider it "just and convenient" to order the cross-examination of a defendant who has filed an affidavit in purported compliance with a Mareva order, in a case where the plaintiff has not yet seen fit to issue a motion for contempt and is not seeking an order for the swearing of a second affidavit by the defendant concerned…'
Whether there has occurred 'purported compliance with a Mareva order' must surely be viewed in terms of substance as well as mere form. Lord Justice Slade made those remarks in the course of overruling the decision of Scott J at first instance, which decision had been to the effect that a court did not have the power under s 37 of the Supreme Court Act 1981 (UK) to make an order requiring cross-examination ancillary to compliance with a Mareva order, in the absence of circumstances whereby a justiciable issue is before the Court in respect of which the evidence of the deponent is relevant to the resolution thereof, for instance where the deponent of the disclosure affidavit was the subject of a contempt motion. The 'anxieties expressed by Scott J', and also referred to by Waller LJ in Den Norske Bank, appear in Scott J's earlier reasons for judgment in Bayer AG v Winter (No 2) [1986] 1 WLR 540. In that latter case, Scott J was concerned with an application seeking orders that the defendant submit to cross-examination on a wide range of matters in aid of earlier Anton Piller and Mareva orders made by the Court. Scott J referred to the scope of the cross-examination contemplated at 543 as follows:
'Mr Prescott [for the plaintiff] made clear that the purpose of his proposed cross-examination of the first defendant is a free-ranging one. He proposes to question him as to the whereabouts of his assets world-wide. He proposes to question him as to his knowledge of and part played in transactions in counterfeit Baygon wherever they may have happened.'
20 The primary proceedings in Bayer concerned allegations of an organised system for the sale of counterfeit Baygon insecticide products. As at the time of the hearing before the presiding judge, no statement of claim had been filed. Moreover, no evidence proving the allegations of sale of counterfeit Baygon was placed before the presiding judge for the purposes of the application, and at no stage had the defendant had an opportunity to confront any such evidence. Counsel for the plaintiff had indicated to the presiding judge that pending receipt of certain answers in cross-examination, the plaintiffs were minded subsequently to pursue contempt proceedings against the defendant. It was in those somewhat extreme circumstances, well removed from the present context here presented that Scott J made the following emphatic statement (at 544) in the course of refusing the order sought for the cross‑examination of the defendant, being dictum upon which the Sharman applicants placed reliance in the present context:
'Star Chamber interrogatory procedure has formed no part of the judicial process in this country for several centuries. The proper function of a judge in civil litigation is to decide issues between parties. It is not, in my opinion, to preside over an interrogation.
The police, charged with the upholding of the public law, cannot subject a citizen to cross-examination before a judge in order to discover the truth about the citizen's misdeeds. How then, as a matter of discretion, can it be right in a civil case, in aid of rights which, however important, are merely private rights, to subject a citizen to such a cross-examination? A fortiori it cannot be right to do so in a case where the plaintiff seeking the cross-examination of the defendant is holding itself free to use the defendant's answers for the purpose of an application to commit him to prison for contempt.'
I would respectfully withhold from any such somewhat characterisation of the present conduct of the Music companies in their pursuit of what seems to me to be both reasonable and authentic means designed to ensure that Mareva relief is afforded adequate facilitation and implementation in the context of Music companies' intellectual property protection and preservation upheld by the primary judge in the principal litigation.
21 Senior counsel for the Sharman applicants asserted that nowhere in the reasons for judgment of Moore J is there a finding that the disclosures made by Mr Gee of the assets of the relevant two Sharman companies were incomplete, or that the disclosures by Ms Hemming in her affidavits as to her own assets were incomplete. I would first observe that any finding of Moore J on the completeness, or otherwise, of Mr Gee's disclosure affidavits could not possibly have any bearing upon the appropriateness of his Honour's order requiring Ms Hemming to attend for cross‑examination on her own affidavits, and any suggestion to the contrary is in my opinion incorrect. Moreover, any such conclusion begs the question as to the operation of the notion of 'incomplete', and the context in which it is used. The theme of the primary judge's concern was more in the nature of inadequacy and lack of clarity. Senior counsel for the Sharman applicants asserted that the Music companies had not demonstrated that Ms Hemming's assets included what he termed 'the beneficial interest in the Sharman companies' or that the 'loan transaction with TIL was a sham'. A present concern of the Music companies is indeed with the beneficial ownership of funds. In the case of tangible and intangible assets subjected to the interposition of a complexity of offshore established companies and trust estates purportedly controlled by an offshore trustee corporation, the task of gaining access to and control of those assets, in order to enforce onshore court judgments and orders, can be an expensive and formidable undertaking for a successful litigant. It was in the light of the complexity and opacity concerning Ms Hemming's apparent employment of a Vanuatu trust instrument that the primary judge observed for the time being as follows at [36]:
'… it is, in my opinion unnecessary for me to resolve some specific issues concerning that structure which were the subject of argument. One was whether [Ms Hemming]has a beneficial interest in the Sharman trust or at least has an interest which should have been identified in her disclosure affidavit.'
22 Senior counsel for the Sharman applicants submitted that having failed to make a finding on this point, the primary judge appeared to have concluded that the power to order cross-examination should be exercised in order to allow the matter of any such beneficial ownership to be further explored, his Honour observing in that context at [36]:
'If this issue [was] explored in cross-examination then the Court will be left with a greater measure of certainty about whether she does [have an interest in the Sharman companies per medium of the Sharman trust].'
23 In further response to the primary judge's endeavours to distil an expedient means for the ascertainment relevantly of beneficial ownership, it was contended by the Sharman applicants that in circumstances such as the present, an order for cross-examination of a deponent 'cannot be made unless the Court is affirmatively satisfied that there has been a non-disclosure', all that being said to have involved 'a resolution of the arguments expressly eschewed by Moore J in [36] [of his reasons]'. I have difficulty with that contention. In the context of his Honour's review of some of the offshore as well as onshore transactions, his Honour had made the significant finding, along the way as it were, that the 'evidence … suggest[s] a loan was made after the property was purchased…' and also that 'a loan was not secured by a mortgage'. Consequently his Honour was able to observe at [37] that '… real doubts arise about, and uncertainty surrounds, the reason why this transaction took place when it did, and whether the moneys transferred to TIL were, in truth, in satisfaction of a loan or continues to constitute an asset of, and requires disclosure by, [Ms Hemming].' In the circumstances I have thus far recorded, that was an apposite observation.
24 All that was referrable of course to the implications of the payment of $1,116,405.63 by Ms Hemming to TIL, following the sale of her Sydney residence on 4 February 2005; that payment appears to have been made out of the proceeds of a sale of that residence, which was effected for the gross price of $2,100,000 to a person identified by the evidence as an accountant of certain of the Sharman companies. There was no sufficiently detailed or otherwise cogent evidence as to who exercised the substantial or underlying control of decision making of TIL, or as to the basis of or reasons for such alleged indebtedness having crystallised in the first place. The state of the evidence as to the control of TIL was itself the subject of disputation before Moore J and senior counsel for the Sharman applicants sought to attribute error to his Honour's judgment for the further reason that he had failed to make a finding as to Ms Hemming's control, or otherwise, of that entity. The Sharman applicants postulated that the 'remark' made by Lindgren J at [13] of his Honour's reasons for judgment in Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802 that '[Wilcox J] accepted [in the course of granting the Mareva relief on 22 March 2005] that the Sharman Companies were controlled by Ms Hemming by reason of a "client services agreement" between her and TIL dated 8 April 2002' was an 'unsure foundation for any finding of control of the Sharman trust or the Sharman companies [by Ms Hemming]', and was thus inappropriately or impermissibly relied upon by Moore J in formulating his reasons for judgment. That submission lacked merit, particularly in the light of [31] of Lindgren J's reasons for judgment in which his Honour paraphrased the two-fold acceptance, given in cross-examination by the solicitor acting for Sharman License and Sharman Networks in their application before Lindgren J, that TIL as trustee of the Sharman trust was the ultimate beneficial owner of all the shares issued in Sharman License and Sharman Networks, and moreover that Wilcox J had himself appeared to accept that in consequence of the client services agreement, Ms Hemming 'controlled the Sharman trust'.
25 The Music companies had submitted to Moore J that given the evidentiary shortcomings on a subject readily susceptible to documentary demonstration, inclusive of banking records I might add, there was in truth and reality no antecedent loan, that the transfer of those funds by Ms Hemming to TIL in Vanuatu constituted a sham transaction, and consequently that those monies remained her own property beneficially, and should have been identified and disclosed as such in her affidavit provided in the Mareva context. Once more, so it was asserted by the Sharman applicants, his Honour declined to make any concluded finding on the subject. The point is however that his Honour had been able to infer from the surrounding circumstances I have already outlined that there was some force in the Music companies' submission. But in any event his Honour was of the view that he could permit cross-examination of Ms Hemming on and in relation to those matters because at least doubt existed in relation to that area of enquiry.
26 In respect of that finding, the Sharman applicants referred to Moore J's rationale expressed at [37] of his reasons for judgment and emphasised it as is indicated in non-italics:
'Greater clarity about this matter [being the transfer of funds to TIL on 4 February 2005] may arise from the cross-examination of [Ms Hemming].'
From what I have already reviewed, there was ample justification for his Honour to have reached that view of the unusual transactional offshore circumstances in evidence before him. It was submitted however on behalf of the Sharman applicants that so much did not imply that Moore J was satisfied that there had not been compliance with the order of the court to disclose assets by Ms Hemming, which affirmative finding was of course contended by the Sharman applicants to be a prerequisite to the making of an order for cross‑examination; I was referred for comparison to Planet International v Garcia (No 2) (1991) 1 Qd R 426, where the following appears at 427 of Thomas J's reasons for judgment:
'In the present case I am satisfied Mr Garcia has not adequately complied with the order of the Court. On the material before me, he has provided a collection of some untruthful statements, non-disclosures and qualifications…'
I was also referred, by way of further comparison, to the following observations of the Court of Appeal in England in Motorola Credit Corporation v Uzan (No 2) [2004] 1 WLR 113 at [147]:
'The piecemeal, late, untruthful and manifestly incomplete disclosure which the defendants gave amply justified the view that cross-examination was just and convenient because it might reveal assets which would make the freezing order more effective.'
But of course those respective findings related to differing matters and circumstances, and neither finding was intended to be definitively exemplary, such as to exclude the need for further exploration.
27 My reading of his Honour's reasons here was that he was far from satisfied with the nature or extent of the purported offshore structures and transactions to the extent apparent from the evidence, involving as they did the creation of a trust estate somewhat cognate to what have often been described as 'blind trusts'. Concerns of that nature appear to have persuaded or assisted to persuade the primary judge of the need to order that Ms Hemming submit to cross-examination on her disclosure affidavits. In determining to take that approach, his Honour paid regard to the relevant authorities dealing with both the grant of Mareva relief, and the making of orders ancillary to the same, including orders requiring the swearing of disclosure affidavits and cross-examination on those affidavits. After reviewing the relevant principles enunciated in those authorities, his Honour concluded at [28]:
'…ultimately the cautionary words of the four members of the High Court in [Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 403-404] set out at [18] above must be heeded. Orders made in the Court's ancillary jurisdiction must be founded on a doctrinal and principled basis. A Mareva order is protective of the Court's processes, including the efficacy of execution of those orders. Orders concerning disclosure affidavits and cross examination can, in turn, be made to render the Mareva order more efficacious. This is the touchstone for determining whether leave should be given to cross examine. A relevant consideration in determining whether leave should be given might, in an appropriate case, be the failure of the deponent of a disclosure affidavit to disclose assets completely or promptly or both. In such a case, leave might be given because doubts might arise about whether the deponent had understood and accepted the obligations and burdens imposed by the Mareva order and the ancillary order requiring the disclosure affidavit. Cross examination might be appropriate to test whether the disclosure affidavits fully revealed all assets on which the Mareva order operated and which might be available to satisfy any judgment. However, in other cases, other more significant factors might support the granting of leave to cross examine.'
The 'cautionary words' of the High Court in Cardile earlier extracted by his Honour at [18] of his reasons below referred to the need for courts to exercise caution in making Mareva orders and to only do so upon a principled basis, having regard to the impact that those orders may have on respondents and third parties.
28 It was submitted nevertheless on behalf of the Sharman applicants that the premise upon which the application for an order for cross-examination order proceeded here was that Ms Hemming had breached the order requiring her to disclose her assets, and that the basis upon which the Music companies litigated the proceedings below was to seek to convince the primary judge that there had occurred inadequate disclosure, on the footing that Ms Hemming did have a substantial asset, namely beneficial interests in the Sharman companies, and further that the loan transaction with TIL was in truth a sham arrangement. Those issues were to have been debated before his Honour at length below 'but were never resolved'. Certainly the premise upon which the order is sought, as I have already sought to explain, was an inadequacy of disclosure of such matters in circumstances that indicated the need for further exploration and inquiry.
29 It was next asserted by the Sharman applicants that the high point of his Honour's conclusion below, both as to the so-called 'putative ownership by Ms Hemming of the Sharman Trust' and as to 'the existence or otherwise of the loan made by TIL to Ms Hemming repaid in February 2005', was that there was 'a lack of clarity' about the matter. My observation is however, that any such lack of clarity about the alleged loan and its repayment or partial repayment derives from its inherently commercially, inexplicable origins and purposes in the first place. It was submitted therefore to be an unprincipled exercise of discretion for his Honour to have ordered cross-examination in circumstances where the Music companies had not convinced his Honour upon either of those conditions which they had raised. In truth, so the submissions continued, his Honour fell into the error of making an order for cross-examination in circumstances where no basis had been demonstrated to the Court to make such an order. For reasons I have already ventured, the concerns relevantly expressed by his Honour were more than some mere 'lack of clarity'.
30 In conclusion therefore, it was the case of the Sharman applicants that Moore J failed correctly to apply the relevant legal principles in committing Ms Hemming to cross-examination on her disclosure affidavit, and that it must follow that the Sharman applicants would inherently suffer 'substantial injustice' if Ms Hemming be so required to submit to cross‑examination in accordance with the relief granted by the primary judge. In short, the complaint was that Moore J gave leave for the cross-examination to take place because the Court might 'be left with a greater measure of certainty' [36], and further 'because cross‑examination may lead to greater clarity' [37], and that so much exemplified errors in principle in the exercise of his discretion.