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Anderson v Australian Securities and Investments Commission

 

[2012] QCA 301

Reported at [2013] 2 Qd R 401

 

 

SUPREME COURT OF QUEENSLAND

 

 

PARTIES:

FILE NO/S:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

DELIVERED ON:

2 November 2012

DELIVERED AT:

Brisbane 

HEARING DATE:

6, 7 September 2012

JUDGES:

Holmes and White JJA and Philip McMurdo J
Separate reasons for judgment of each member of the Court, each concurring as to orders made

ORDERS:

1. Appeal allowed.

2. Set aside paragraphs 5 and 6 of the orders made on 28 March 2012.

3. Each of the appellants to file and serve his or her defence, in accordance with these orders, within 28 days of the date of this judgment.

4. A defence filed and served by an appellant must at a minimum:

(a) state with respect to each allegation of fact in the statement of claim whether that allegation is admitted, not admitted or denied;

(b)   give notice of any intention by the defendant to rely upon any relevant statutory defence or ground of dispensation

but is not otherwise required to comply with rr 149(1)(b), (c), 150, 157, 165 and 166 of the Uniform Civil Procedure Rules.

5. The respondent to pay the appellants’ costs of the appeal.

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – PLEADING – DEFENCE AND COUNTERCLAIM – Uniform Civil Procedure Rules 1999 (Qld), r 165, r 166, r 167 – whether the rules for pleading should be modified to protect the privilege against exposure to a penalty and/or privilege against self-incrimination and the extent of the necessary modification

Corporations Act 2001 (Cth), s 209, s 601FC, s 601FD, s 1317E, s 1317G, s 1317L

Customs Act 1901 (Cth), s 255

Uniform Civil Procedure Rules 1999 (Qld), r 5, r 149, r 150, r 151, r 157, r 165, r 166, r 167

Uniform Civil Procedure Rules 2005 (NSW), r 14.23

A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union (2005) 226 ALR 247; [2005] FCA 1658, cited

ASIC v Managed investments Ltd and Ors (No 3) [2012] QSC 74, cited

Australian Securities and Investments Commission v Mining Projects Group Ltd (2007) 164 FCR 32; [2007] FCA 1620, considered

Bridal Fashions Pty Ltd v Comptroller-General of Customs (1996) 17 WAR 499, considered

Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; [2002] HCA 49, cited

Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477; [1993] HCA 74, cited

Hadgkiss v Construction, Forestry, Mining and Energy Union (2005) 146 IR 106; [2005] FCA 1453, cited

Lamb v Munster (1882) 10 QBD 110, cited

Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70; [1990] HCA 31, considered

MacDonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612; [2007] NSWCA 304, considered

Rank Film Distributors Ltd v Video Information Centre [1982] AC 380, considered

Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Live-stock Corporation (1979) 42 FLR 204, considered

Reid v Howard (1995) 184 CLR 1; [1995] HCA 40, cited

Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; [2004] HCA 42, considered

Sorby v The Commonwealth (1983) 152 CLR 281; [1983] HCA 10, considered

The King v Associated Northern Collieries and Ors (1910) 11 CLR 738; [1910] HCA 61, cited

Thompson v Bella-Lewis [1997] 1 Qd R 429; [1996] QCA 27, considered

Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96; [1994] FCA 1279, considered

Validity of Section 92(4) of The Vehicles Act 1957 (Saskatchewan) [1958] SCR 608, cited

Wentworth v Lloyd (1864) 10 HLC 589; [1864] EngR 492, considered

COUNSEL:

B D O’Donnell QC, with C K George, for the first appellant

R G Bain SC, with R P S Jackson, for the second appellant

D G Clothier SC, with D S Piggott, for the third appellant

P Freeburn SC for the fourth appellant

D L Williams SC, with C Withers, for the fifth appellant

D M B Derham QC, with M T Brady, for the respondent

SOLICITORS:

DibbsBarker for the first appellant

Brian Bartley & Associates for the second appellant

Tucker & Cowen Solicitors for the third appellant

James Conomos Lawyers for the fourth appellant

Kennedys Lawyers for the fifth appellant

Corrs Chambers Westgarth for the respondent

[1] HOLMES JA:  I agree with the reasons of Philip McMurdo J and the orders he proposes.

[2] WHITE JA:  I have read the reasons for judgment of Philip McMurdo J and I agree with the orders he proposes for those reasons.

[3] PHILIP McMURDO J:  This is a proceeding brought by the Australian Securities and Investments Commission (“ASIC”), seeking relief which includes the imposition of pecuniary penalties for contraventions of the Corporations Act 2001 (Cth).  As a civil proceeding, it is to be conducted according to the Uniform Civil Procedure Rules (“UCPR”), save to the extent that the Court orders or directs otherwise.[1]  The question raised by these appeals is the extent to which the requirements of the UCPR for the pleading of a defence must be varied in order to permit the appellants to rely on the privileges against self-incrimination and exposure to a civil penalty. 

[4] The primary judge reasoned that in one or possibly two respects, the operation of the pleading rules would have to be qualified to permit a proper claim for either privilege.  He ordered the defendants to file defences which complied with the rules subject only to those qualifications.  The appellants say that the outcome will compromise the benefit of each privilege.  Clearly that was not the intention of the primary judge or a consequence which was or is sought by ASIC.  The issues then are whether the relief from compliance with the pleading rules went far enough to preserve the privileges and, if not, what orders should be made. 

The proceeding

[5] This case was commenced by an Originating Application in late 2009.  It was brought against three corporations and the five individuals who are the appellants.  They are alleged to have been directors or officers of those corporations or other relevant entities. 

[6] The proceeding against two of those corporations has been discontinued.  The claim against the remaining corporate defendant[2] is that it contravened s 601FC(5) of the Corporations Act in various ways between November 2007 and April 2008.  ASIC alleges that this company, as the responsible entity for a registered managed investment scheme, misapplied more than $100,000,000 by paying it for the benefit of a related party or parties, rather than for the purposes of the scheme.  It is also alleged to have contravened s 601FC(5) by providing false information to its auditors, bankers, compliance officers and external lawyers and within its half yearly report lodged with ASIC, as to its dealings with those funds.

[7] There are some differences between the cases against the appellants, but each is alleged to have been involved in one or more of the contraventions by the first defendant of its duties as a responsible entity, so that he or she also contravened s 601FC.  And all but one of the appellants is alleged to have contravened also s 209(2) and s 601FD of the Corporations Act.  Each of those sections is a civil penalty provision according to s 1317E(1).  If ASIC proves a contravention of any of them by an appellant, then he or she may be ordered to pay a pecuniary penalty pursuant to s 1317G. 

[8] Therefore, it is plain that the very nature of these proceedings attracts a claim for the privilege against exposure to a penalty.  It is also conceded by ASIC that the privilege against self-incrimination might be relevant.  None of the arguments suggests that there is any practical difference between the two privileges for the way in which the pleading rules should give way to their operation. 

[9] In December 2009, this case came before a judge in the Applications List when orders were made for its progress.  They were made with the consent of all parties, except one of the appellants who was not then legally represented and who did not oppose them.  The proceeding was to continue as if started by a claim.  ASIC was ordered to file a statement of claim and there were orders for the filing of defences as follows (“the 2009 orders”):

 

“…

9.Subject to order numbers 10 and 11 below, each of the respondents (other than the second and third respondents[3]) is to file a defence by 30 April 2010.

10.So far as is necessary to allow the fourth, fifth, sixth, seventh and eighth respondents[4] to make a claim of privilege against self incrimination or exposure to penalties, it is directed that the defences filed by the respondents herein need not comply with the pleadings rules of the UCPR, in respect of those parts of the defences where such a claim is made.

11.Each of the fourth, fifth, sixth, seventh and eighth respondents has leave to amend its defence after the applicant closes its case on the trial of this matter.

…”

It was further ordered that none of the present appellants was obliged to make disclosure unless by a further order. 

[10] From that point, the progress of the case was not swift.  There were several editions of the statement of claim.  The case was assigned to the primary judge for supervision late last year.  Over two days in February this year, his Honour heard ASIC’s application for striking out various paragraphs of the appellants’ defences.  In a reserved judgment, the primary judge ordered that some of the defences of the appellants Mr Hutchings and Mr Anderson be struck out, with liberty to re-plead.  In these appeals the substantial challenge is to the order made for the content of further defences.

The decision of the primary judge

[11] ASIC’s complaint to the primary judge was that each of the appellants had filed a defence which did not comply with the UCPR, as qualified by the 2009 orders.  It sought no variation of the 2009 orders which, it submitted to the primary judge, had been intended by ASIC to give effect to the decision of the New South Wales Court of Appeal in MacDonald v Australian Securities and Investments Commission.[5]  No other party sought to vary the 2009 orders.  But in the course of the hearing, the primary judge saw fit to revoke order 10.  In his subsequent judgment, the primary judge said:

“In the course of argument I came to the firm conclusion that para 10 of the order of 7 December 2009 was causing confusion and argument because of its width and indiscriminate application to all of the defendants when their various positions were different.  Moreover the direction was argumentative:  it left unresolved what if anything was necessary to allow a claim of privilege.  A pleading regime which was more nuanced, which delivered greater precision in identifying the rules (if any) to be disapplied and which differentiated among the defendants was required.”[6]

The order which was substituted was one by which the appellants were to file and serve defences in accordance with those reasons. 

[12] The primary judge accepted that where the UCPR would require the admission of a fact alleged in the statement of claim, because the defendant believed it to be true, the appellants should be allowed to claim the benefit of the privilege in respect of that allegation instead of admitting it.  And he held that if the privilege was claimed, this would override any deemed admission under r 166(1).[7]

[13] The primary judge recognised another possible qualification of the rules, where there was a denial or non-admission pleaded in the defence.  Rule 166(4) requires a denial or non-admission to be accompanied by a direct explanation for the defendant’s belief that the allegation is untrue or cannot be admitted.  If a denial or non-admission does not comply with that requirement, the allegation is deemed to be admitted:  r 166(5).  His Honour recognised “the theoretical possibility that having to provide the explanation for a non-admission could conceivably infringe penalty privilege or privilege against self-incrimination” and that “perhaps in theory a similar situation could arise in relation to a denial”.  But he said that this point was hypothetical, because no claim for privilege in respect of the provision of such an explanation had then been pleaded.  If and when such a claim was made, it would be possible to determine whether the privilege was properly claimed and if so, an order could be made which excluded the operation of r 166(5).[8] 

[14] Apart from those two instances, the primary judge saw no possibility for the operation of the rules to affect a proper claim for privilege.  His Honour referred to rules 165 and 166, but not to rules 149, 150 and 157.  The effect of his judgment was that the limitations imposed by the rules for the pleading of a denial or a non-admission should remain (subject to that possibility of relieving from the requirement for an explanation).  A defendant would be permitted to plead a denial only where he or she believed the allegation to be untrue (r 166(4)) and to plead a non-admission only if, having made reasonable enquiries to find out whether the allegation was true or untrue, the defendant remained uncertain as to that matter (r 166(3)). 

The privileges

[15] The content of each privilege and the relevant principles for its operation are not in question.  No person can be compelled to incriminate himself or herself and a person may refuse to answer any question, or produce any document or thing, if to do so “may tend to bring him into the peril and possibility of being convicted as a criminal”.[9]  The privilege against self-incrimination operates not only to protect against the consequences of the direct use of a person’s statement or document, by that being tendered by a prosecutor, but also against its indirect use, by the statement or document setting “in train a process which may lead to incrimination or may lead to the discovery of real evidence of an incriminating character”, as Lord Wilberforce said in Rank Film Distributors Ltd v Video Information Centre.[10]  Applying that statement, Gibbs CJ in Sorby v The Commonwealth said:

“… If a witness is compelled to answer questions which may show that he has committed a crime with which he may be charged, his answers may place him in real and appreciable danger of conviction, notwithstanding that the answers themselves may not be given in evidence.  The traditional objection that exists to allowing the executive to compel a man to convict himself out of his own mouth applies even when the words of the witness may not be used as an admission.  It is a cardinal principle of our system of justice that the Crown must prove the guilt of an accused person, and the protection which that principle affords to the liberty of the individual will be weakened if power exists to compel a suspected person to confess his guilt.  Moreover the existence of such a power tends to lead to abuse and to ‘the concomitant moral deterioration in methods of obtaining evidence and in the general administration of justice’:  Validity of Section 92(4) of The Vehicles Act 1957 (Saskatchewan).[11]  It is true that in some cases the legislature may consider that it can only achieve the intended purpose of the statute by limiting or abrogating the privilege against self-incrimination, but, as I have said, if the legislature intends to render the privilege unavailable it must manifest clearly its intention to do so.  …”[12]

[16] In Environment Protection Authority v Caltex Refining Co Pty Ltd, Deane, Dawson and Gaudron JJ said of the privilege against self-incrimination:

“In the end, [the privilege] is based upon the deep-seated belief that those who allege the commission of a crime should prove it themselves and should not be able to compel the accused to provide proof against himself.”[13]

[17] The privilege against exposure to a penalty is similar to but distinct from the privilege against self-incrimination.  Its origin was in the rules of equity relating to discovery, but it has developed a wider operation.[14]  In the joint judgment in Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission, it was said that:

“Today the privilege against exposure to penalties serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it.”[15]

Similarly, in Trade Practices Commission v Abbco Iceworks Pty Ltd, Burchett J said of that statement which I have quoted from Environment Protection Authority, that substituting “the incurring of the penalty” for “the commission of a crime”, the statement would apply equally to the privilege against exposure to a penalty.[16]

[18] The penalty privilege also extends to the provision of information that could be used against a defendant indirectly, in the sense described by Gibbs CJ in Sorby.  In Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-stock Corporation, Deane J said that the privilege would operate to prevent the provision of any information that would assist in establishing the defendant’s liability to a penalty.[17]

[19] In proceedings of the present kind, s 1317L of the Corporations Act requires the Court to apply the rules of evidence and procedure for civil matters.  But rather than abrogating or qualifying either privilege, s 1317L “itself requires the application of the body of law which has developed in relation to the privileges against penalties and forfeitures …” as the majority said in Rich v Australian Securities and Investments Commission.[18]

[20] The privileges apply in the context, as here, of a defendant who is required to deliver a defence in a civil proceeding.  In Australian Securities and Investments Commission v Mining Projects Group Ltd, Finkelstein J said:

“…penalty privilege operates to relieve a defendant from the need to deliver a defence that complies with the pleading rules if the rules would override the privilege.  To the extent that pleading rules purport to impose such an obligation they must give way to the privilege:  Hadgkiss v Construction, Forestry, Mining and Energy Union (2005) 146 IR 106 at 111-112; A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union (2005) 226 ALR 247 at 251.”[19]

To the same effect, in MacDonald v Australian Securities and Investments Commission, Mason P (with whom Giles JA agreed) said that the procedural rules must yield to the rights conferred by the law of privilege unless there is a clear statutory authority to the contrary.[20]  And in A & L Silvestri Pty Ltd, Gyles J said:

“A personal respondent to a penalty proceeding is entitled to put the applicant to proof of its case.  Such a respondent cannot be forced to make an admission and no solicitor acting for that person can be held responsible for not ensuring that a party plead in a way which goes further than this.  In other words, such a respondent can decline to admit matters alleged against it.  To the extent that the rules of pleading require to be modified to enable this to take place, that will be done.”[21]

[21] The present questions are not affected by the decision of a Full Court of the Supreme Court of Western Australia in Bridal Fashions Pty Ltd v Comptroller-General of Customs,[22] where it was held that in an action to recover a civil penalty under the Customs Act 1901 (Cth), a defendant would have to go further than simply putting the plaintiff to proof of the allegations in the statement of claim.  As Finkelstein J explained in ASIC v Mining Projects Group Ltd, that conclusion was in the context of s 255 of the Customs Act providing that an averment of the facts alleged in the statement of claim is prima facie evidence of those facts, “the practical effect” being to require the defendant in such proceedings to plead and run an affirmative case.[23]

[22] The privilege against self-incrimination can be claimed where the claimant establishes a bona-fide apprehension of the consequence on reasonable grounds.[24]  The entitlement to the privilege against exposure to a penalty perhaps more clearly exists here, where the very purpose of the proceedings is the imposition of the penalty.  In R v Associated Northern Collieries, dealing with the availability of this privilege as a basis for refusing an order for discovery of documents against the defendant, Isaacs J said:

“[T]he whole and avowed object of the proceedings is the infliction of the penalty, and the discovery sought of documents relevant to the claim can therefore have no other intended consequence.  It does not require in such a case the oath of the defendant to establish the fact that the production of the documents would tend to penalize him.  The Court can see the effect of discovery from the nature of the proceeding.”[25]

On the assumption that ASIC will limit its pleading to material facts, the penalty privilege is thereby available for each and every allegation within that pleading.  Before the primary judge, ASIC is said to have submitted that the privilege applied only to “allegations which are central to the circumstances giving rise to the contraventions”, rather than those which were “peripheral or background”.[26]  His Honour correctly rejected that submission and it was not repeated here. 

The rules

[23] The tension between these privileges and modern procedural rules for civil proceedings, more specifically the UCPR, is immediately apparent.  The stated purpose of the UCPR is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense and a party impliedly undertakes to the Court and to the other parties to proceed in an expeditious way.[27]  The “real issues” in this sense are those for which there could be a genuine dispute and the rules for pleading operate to confine a case to them.  They prevent a defendant from contesting an allegation which the defendant believes to be true.  They require a defendant to make reasonable enquiries about the truth of an allegation if it is not to be admitted. 

[24] Rules 165 to 167 provide, in part, as follows:

165Answering pleadings

(1)A party may, in response to a pleading, plead a denial, a nonadmission, an admission or another matter.

(2)A party who pleads a nonadmission may not give or call evidence in relation to a fact not admitted, unless the evidence relates to another part of the party’s pleading.

166Denials and nonadmissions

(1)An allegation of fact made by a party in a pleading is taken to be admitted by an opposite party required to plead to the pleading unless-

(a)the allegation is denied or stated to be not admitted by the opposite party in a pleading; …

(3)A party may plead a nonadmission only if-

(a)the party has made inquiries to find out whether the allegation is true or untrue; and

(b)the inquiries for an allegation are reasonable having regard to the time limited for filing and serving the defence or other pleading in which the denial or nonadmission of the allegation is contained; and

(c)the party remains uncertain as to the truth or falsity of the allegation.

(4)A party’s denial or nonadmission of an allegation of fact must be accompanied by a direct explanation for the party’s belief that the allegation is untrue or can not be admitted.

(5)If a party’s denial or nonadmission of an allegation does not comply with subrule (4), the party is taken to have admitted the allegation.

(6)A party making a nonadmission remains obliged to make any further inquiries that may become reasonable and, if the results of the inquiries make possible the admission or denial of an allegation, to amend the pleading appropriately.

167Unreasonable denials and nonadmissions

If the court considers an allegation of fact denied or not admitted should have been admitted, the court may order the party who denied or did not admit the allegation to pay additional costs caused by the denial or nonadmission.”

[25] The primary judge ruled that the appellants could decline to plead to an allegation and instead make a claim for privilege, where those rules would require an admission.  He ruled that otherwise the appellants would have to plead a non-admission or denial only according to r 166, save for the possibility of being exempted from the need to provide an explanation.  A pleading according to this judgment would thereby reveal a defendant’s belief as to the truth or falsity of each allegation in ASIC’s case, or (in the case of non-admissions) a defendant’s uncertainty as to its truth.  The appellants argue that the operation of the privileges would be prejudiced by this disclosure of their states of mind.  In particular, it is said that ASIC would gain an unfair forensic advantage, by knowing what parts of its case ultimately will not be seriously challenged.  And a defendant making a non-admission would reveal an unawareness of a fact, where that lack of knowledge might itself be used by ASIC to advance ASIC’s case, by its saying that the defendant should have been aware of the fact at the time of the relevant events.

[26] The primary judge saw no impact upon the operation of the privileges, because under this regime, no allegation need be admitted.  But in my respectful opinion, there is some potential for the operation of the privilege to be affected by these orders. 

[27] First there is the use which might be made of a defendant’s response to an allegation by claiming the privilege.  At least where the alleged fact is something of which the defendant would have direct knowledge, a claim of privilege in response to the allegation could found an inference that the allegation was true.  This is because the privilege could be claimed only where the defendant would otherwise have to admit the allegation, that is to say where he or she believed it to be true.  If it is a fact of which the defendant would have direct knowledge, the defendant’s belief that the allegation was true could found an inference, as against that defendant, that it was true.  Understandably, none of the submissions for the appellants went so far as to concede that ASIC could tender such a plea as an admission of the truth of the allegation.  In Laws v Australian Broadcasting Tribunal, Mason CJ and Brennan J said that where pleadings are not required to be verified, they are not to be treated in the same way as any other form of admission, because “[a] defendant is entitled to put a plaintiff to proof of his or her cause of action and to raise alternative matters of defence which may possibly answer the plaintiff’s claim, without asserting in an absolute sense the truth or correctness of the particular matters pleaded”.[28]  But arguably, the present context is different.  Although these pleadings would not be verified, they must observe the limitations imposed by rr 165 and 166.  They must accord with the defendant’s actual state of mind.  A defence according to these rules should reveal the defendant’s state of mind as to every allegation.  Arguably then, this is a materially different regime for pleading than that described by Mason CJ and Brennan J.

[28] According to Cross on Evidence, Aust ed, [25,040], no adverse inference should be drawn from the fact that the privilege against self-incrimination is claimed.  The authors cite Wentworth v Lloyd,[29] adding that “the statement of principle from this case appears in the standard texts and doubtless is an accurate statement of the law”.  However, in Thompson v Bella-Lewis,[30] there was a division of opinion within this Court on the matter.  The Court was unanimous in the view that the claim for privilege did not constitute an admission.  Davies JA said that apart from using it as an admission, the jury had been entitled to draw whatever inference was reasonably open from the claim in the circumstances of that case.[31]  McPherson JA said that the claim was incapable of raising any inference, as distinct from mere conjecture.[32]  Fitzgerald P expressed no concluded view.[33]  But despite that difference of opinion, it is established that in general, the fact of a claim for privilege cannot be used as an admission. 

[29] Counsel for ASIC said that such a plea could not be tendered as an admission, for the reason that it would have no probative value.  They submitted that the most which could be inferred from a claim for privilege in the context of what was described as a complex circumstantial case, is that at the point at which the pleading was filed, the defendant was not in a position to dispute or not admit that allegation.  But that mistakes the effect of r 166 and the primary judge’s order.  If the defendant has made reasonable enquiries as to the truth of the allegation, having regard to the time for filing and serving the defence, and remains uncertain as to its truth, he or she would plead a non-admission.  The problem here is with the case of a claim for privilege, which under the regime put in place by the primary judge could be made only where the defendant believed that the fact was true. 

[30] The question of whether under what was ordered by the primary judge, a claim for privilege could be tendered as an admission was not fully argued.  Therefore I would prefer not to express a view about it except to say that a tender of part of a defence in that way would be arguably a misuse of the Court’s process to erode the protection of the privilege.

[31] For present purposes, it may be assumed that a claim for privilege within a defence, as permitted by the primary judge, could not be tendered as an admission.  But that is not to say that it could provide no assistance in the ultimate proof of ASIC’s case.  For example, it could be useful to ASIC in the event that a defendant gives evidence which is inconsistent with the allegation for which the claim was made.  Could the defendant not be challenged in cross-examination with his claim for privilege, upon the basis that the claim could not have been made absent a belief by the witness that the allegation was true?  Counsel for ASIC responded to that possibility, by saying that at that point in the trial, ASIC would have established a prima facie case, so that it would already “have proved all of the essential elements of the contravention”.  That may be accepted, but the outcome of the case would depend upon an assessment of all of the evidence.  The prima facie case of ASIC might be displaced by evidence of the defendant which contradicted an important allegation made by ASIC.  The evidence of the defendant in this context need not be given to advance a positive case:  it may be merely contradictory of ASIC’s case.  Ultimately, counsel for ASIC were unable to exclude the possibility that the defendant’s claim for privilege within his defence, according to this regime, could be used to discredit him in cross-examination.  At least in that way a defendant might be compelled to provide a pleading which ultimately assists ASIC to prove its case.

[32] There is a further possibility, in the operation of r 166, which was not considered by the primary judge.  A defendant may plead a non-admission only if he or she has made enquiries as to the truth of the allegation, which are reasonable enquiries having regard to the time limited for the defence:  r 166(3)(a), (b).  And a party making a non-admission remains obliged to make any further enquiries that may become reasonable and to amend the pleading appropriately:  r 166(6).  If a party pleads a non-admission without making such reasonable enquiries, the non-admission is susceptible to being struck out.  In that event, the allegation made by the plaintiff is taken to be admitted:  r 166(1).  These conditions upon the ability to contest an allegation are, of course, entirely appropriate in modern civil procedural rules and they facilitate the limitation of the litigation to what r 5(1) describes as the real issues.  However, they are difficult to reconcile with the privileges in question, according to which, in penalty cases, a plaintiff must prove its case without any assistance from the defendant.  A defendant might fail to make the required enquiry by choice, by inadvertence or perhaps because of a lack of means.  Where there is a failure to enquire for any of those reasons, the consequence is that part of the plaintiff’s case is established by the defendant’s own conduct, rather than by evidence adduced by the plaintiff.  Should that occur here, the defendant by his or her omission to inquire would assist in the proof of ASIC’s case. 

[33] Other potentially relevant rules do not appear to have been considered by the primary judge.  Rule 149(1)(b) requires a pleading to contain a statement of all the material facts on which the party relies.Rule 149(1)(c) requires a pleading to state specifically any matter that, if not stated specifically, may take another party by surprise.  Rule 150(4)(c) imposes the same obligation upon the pleader of a defence.  Rule 150(1)(k) requires to be pleaded any motive, intention or other condition of mind, including knowledge or notice and r 150(2) requires that any fact from which a matter in sub-rule (1) is to be inferred should also be specifically pleaded.  Rule 157 requires a party to include in a pleading such particulars as are necessary to define the issues and to prevent surprise at the trial and to support a matter specifically pleaded under r 150.

[34] Each of those rules could be relevant to the defences here.  The matters which they require to be pleaded or particularised could well constitute information which, according to the privileges, the defendants cannot be compelled to provide, because that information could lead ASIC to other evidence which could be used to prove the case against them.  Under the 2009 orders, the defendants were protected from that prospect.  The result of the primary judge’s orders was to leave the defendants exposed to it. 

[35] Counsel for ASIC submitted that although those rules were not considered in the primary judge’s reasons, it was consistent with his conclusions that a defendant be excused from compliance with those rules if to do so would tend to incriminate the defendant or expose him or her to a civil penalty.  Once the order of December 2009 was set aside, a specific order to that effect was necessary and in the hearing in this Court, ASIC proposed such an order. 

[36] At least one purpose of those rules is to provide the opposite party (ASIC here) with an opportunity to make enquiries and gather further evidence, with which to prove its case.  Of its very nature, information which is required to be pleaded under the “no surprise” rule, in proceedings such as these, is information which attracts the privilege because it may lead the plaintiff to discover other evidence which will matter for the ultimate proof of its case.  Thus the requirements of this rule are irreconcilable with the penalty privilege. 

[37] There have been different approaches as to whether these privileges might be prejudiced by requiring any form of positive case to be pleaded.  In MacDonald vASIC, Mason P said that not every form of affirmative defence might detract from the privilege and that there was nothing wrong with a pleading in this form:

“If, which is denied, the matters alleged in para X constitute a contravention of s Y of the Corporations Law, the defendant says that the matters alleged by ASIC also establish that the claimant relied on information or professional or expert advice (etc)/acted honestly (etc).  The defendant reserves the right to advance in his case additional material in support of his defence, the details whereof will be disclosed by amending this paragraph after the close of ASIC’s case.”[34]

In ASIC v Mining Projects Group Ltd, Finkelstein J said:

“There is a potential problem if, as in this case, a defendant wishes to run a positive case.  Ordinarily a positive case must be raised in the defence.  Whether it must be raised in a defence in a civil action to recover a penalty is by no means clear.  The view I favour is that there can be no such requirement as it would be inconsistent with the privilege.  On the other hand, if a defendant who wishes to run a positive case is required to plead his case that can be accommodated while maintaining the privilege.  What should occur is that the defendant should be entitled to rely on the privilege until the plaintiff’s case is concluded.  If at that point the defendant decides to run a positive case he can deliver an amended defence that will outline his case.  In an exceptional case the judge may grant a short adjournment to allow the plaintiff time to prepare, if he is otherwise taken by surprise.  In most cases that will not be necessary.  By the time the plaintiff has closed his case the nature of the defence will usually be apparent”[35]

According to Mason P, the privilege could be preserved whilst still requiring a defendant to give notice of an intention to rely upon a relevant defence under the Corporations Act, without requiring the defendant to plead the facts of that defence which are not already pleaded within the statement of claim.  According to Finkelstein J, no notice of a positive case should be required.  The difference here is unlikely to have a practical effect on the course of the proceedings or the privileges.  In my view, the defendants should be required to give notice in the way indicated by Mason P.

[38] Under the primary judge’s orders, there would be a potential for the operation of r 165(2) which could not have been intended.  Rule 165(2) provides that a party who pleads a non-admission may not give or call evidence in relation to a fact not admitted (unless the evidence relates to another part of the party’s pleading).  But there would be no similar impediment upon a defendant in relation to a fact for which the defendant had made a claim for privilege.  In that instance, where the defendant believed the allegation to be true at the time of pleading, the fact could be contradicted by evidence in the defendant’s case.  Yet where the defendant was simply uncertain, r 165(2) would prevent the defendant from doing so. 

[39] Because the procedural rules have some differences between jurisdictions, the outcomes of similar arguments in other courts need not be replicated here.  However, MacDonald is particularly instructive.  In New South Wales, there is a general requirement for the verification of pleadings.  A party’s pleading must be verified by an affidavit stating, in respect of a denial, that the deponent believes that the allegation is untrue and in respect of a non-admission, after reasonable enquiry the deponent does not know whether or not the allegation is true.[36]  In MacDonald, Young CJ in Eq at first instance ordered that the defence be unverified.  That remained the position under the orders of the Court of Appeal, which are set out in the judgment of Mason P.[37]  They included the filing of “an unverified Defence in accordance with these reasons”.  A further order made by the Court of Appeal was to dispense with the requirements of r 14.14 and r 15.1 “to the extent of permitting a pleading in accordance with these reasons”.  Rule 14.14(2) requires a defendant to plead a matter which, if not pleaded specifically, may take the opposite party by surprise and to “raise matters of fact not arising out of the preceding pleading”.  Rule 15.1 requires a defendant to give particulars of any defence as are necessary to enable the opposite party to identify the case that the pleading requires him or her to meet.  It can be seen then that the outcome in MacDonald was far different from that put in place in the present proceeding by the primary judge.  The defendant in MacDonald was relieved from the requirements of the rules which would have required him to reveal his belief in the truth or otherwise of the facts alleged by ASIC.  And he was relieved from the equivalent rules of r 149(1)(b), (c) and r 150(1) and (4). 

Conclusions

[40] The regime put in place by the primary judge was not sufficient to prevent the pleading rules affecting the privileges.  It is necessary to further relieve the appellants from the requirements of the rules.  I agree with the primary judge that order 10 of the 2009 orders was likely to lead to arguments as to the extent to which the rules should be qualified for the purposes of this case.  Therefore, although the appeal should be allowed, I would not restore that order. 

[41] The outcome should be one which ensures that the privileges are not affected and which also lessens the prospect of further disputes as to the required content of these pleadings.  In that second respect, under the orders of the primary judge, there was likely to be an extensive round of applications by the appellants to be excused from providing an explanation for the purposes of a non-admission or denial.  That would present a practical problem, in that the relevant explanation would have to be kept from ASIC whilst the point was argued.  That would not of itself be an insurmountable problem but it is another complication which would exist from the present orders. 

[42] In their submissions to the primary judge, counsel for ASIC referred to the orders made by Ryan J in the Federal Court in Australian Securities and Investments Commission v Healey.[38]  They suggested to the primary judge that those orders were consistent with the approach in MacDonald and saw fit to provide the primary judge with a copy of the orders.  In my view, somewhat similar orders should be made here, so as to require defences in terms of admissions, non-admissions and denials but without the constraints on non-admissions and denials which are imposed by r 165 and r 166.  Absent those rules, there would still be a constraint upon the pleading of a denial, in that a denial should not be pleaded where, according to the pleader’s instructions, it is not believed to be false. 

[43] The primary judge did not revoke order 11 of the 2009 orders, by which the appellants were given leave to amend their defences after ASIC closed its case at the trial.  That order should remain in place here.  It will permit a defendant to provide a more informative pleading on the close of ASIC’s case, as was considered appropriate in MacDonald and Mining Projects.

Orders

[44] I would order as follows:

1. Appeal allowed.

2. Set aside paragraphs 5 and 6 of the orders made on 28 March 2012.

3. Each of the appellants to file and serve his or her defence, in accordance with these orders, within 28 days of the date of this judgment.

4. A defence filed and served by an appellant must at a minimum:

(a) state with respect to each allegation of fact in the statement of claim whether that allegation is admitted, not admitted or denied;

(b) give notice of any intention by the defendant to rely upon any relevant statutory defence or ground of dispensation

but is not otherwise required to comply with rr 149(1)(b), (c), 150, 157, 165 and 166 of the Uniform Civil Procedure Rules.

5. The respondent to pay the appellants’ costs of the appeal.

Footnotes

[1] UCPR, r367.

[2] Which is not an appellant here.

[3] Being the two companies against which ASIC has since discontinued the proceedings.

[4] The appellants.

[5] (2007) 73 NSWLR 612.

[6] ASIC v Managed investments Ltd and Ors (No 3) [2012] QSC 74 at [6].

[7] [2012] QSC 74 at [21].

[8] [2012] QSC 74 at [37].

[9] Lamb v Munster (1882) 10 QBD 110 at 111 cited by Gibbs CJ in Sorby v The Commonwealth (1983) 152 CLR 281 at 288.

[10] [1982] AC 380 at 443.

[11] [1958] SCR 608 at 619.

[12] (1983) 152 CLR 281 at 294-295, Mason, Wilson and Dawson JJ agreeing at 310; see also Reid vHoward (1995) 184 CLR 1 at 6 per DeaneJ

[13] (1993) 178 CLR 477 at 532.

[14] Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at 142 [24] per GleesonCJ, Gummow, Hayne, Callinan and Heydon JJ.

[15] (2002) 213 CLR 543 at 559 [31], cited in Rich (2004) 220 CLR 129 at 142 [24].

[16] (1994) 52 FCR 96 at 129 and cited with approval in Daniels Corporation International Pty Ltd vAustralian Competition and Consumer Commission (2002) 213 CLR 543 at 559 [31].

[17] (1979) 42 FLR 204 at 207-208, cited in Australian Securities and Investments Commission v Mining Projects Group Ltd and Ors (2007) 164 FCR 32 at 37 [11].

[18] (2004) 220 CLR 129 at 140 [19].

[19] (2007) 164 FCR 32 at 37 [12].

[20] (2007) 73 NSWLR 612 at 619 [39].

[21] (2005) 226 ALR 247 at 251 [17].

[22] (1996) 17 WAR 499.

[23] (2007) 164 FCR 32 at 38 [14]-[16].

[24] Cross on Evidence, Aust ed at [25,100].

[25] (1910) 11 CLR 738 at 742.

[26] [2012] QSC 74 at [7].

[27] UCPR, r5.

[28] (1990) 170 CLR 70 at 86; see also at 98 per Gaudron and McHugh JJ.

[29] (1864) 10 HLC 589 at 590-2.

[30] [1997] 1 Qd R 429.

[31] [1997] 1 Qd R 429 at 436-437.

[32] [1997] 1 Qd R 429 at 454.

[33] [1997] 1 Qd R 429 at 434.

[34] (2007) 73 NSWLR 612 at 625.

[35] (2007) 164 FCR 32 at 37.

[36] Uniform Civil Procedure Rules 2005 (NSW), r14.23.

[37] [2007] 73 NSWLR 612 at 625 [75].

[38] Concerning the affairs of Centro Properties Limited.

Close

Editorial Notes

  • Published Case Name:

    Anderson & Ors v Australian Securities and Investments Commission

  • Shortened Case Name:

    Anderson v Australian Securities and Investments Commission

  • Reported Citation:

    [2013] 2 Qd R 401

  • MNC:

    [2012] QCA 301

  • Court:

    QCA

  • Judge(s):

    Holmes JA, White JA, P McMurdo J

  • Date:

    02 Nov 2012

Litigation History

Event Citation or File Date Notes
Primary Judgment [2012] QSC 59 21 Feb 2012 Objection by the seventh defendant to the use of an affidavit annexing affidavits from other proceedings overruled: Fryberg J.
Primary Judgment [2012] QSC 72 16 Mar 2012 Plaintiff's application for leave to proceed against the first defendant (a company in liquidation) granted: Fryberg J.
Primary Judgment [2012] QSC 74 28 Mar 2012 Certain paragraphs of defences struck out and directions made that fourth, fifth, sixth, seventh and eighth defendants to comply with UCPR pleading regime: Fryberg J.
Primary Judgment [2013] QSC 15 29 Jan 2013 Plaintiff's application for summary judgment against the first defendant refused; fifth defendant's application seeking to restrain plaintiff from obtaining summary judgment against first defendant refused: Fryberg J.
Primary Judgment [2013] QSC 280 17 Oct 2013 Declaration that notices to the fourth to eighth defendants given by the plaintiff pursuant to s 79(1) of the Australian Securities and Investments Commission Act (Cth) are invalid: Douglas J.
Primary Judgment [2013] QSC 313 11 Nov 2013 Applications to stay trial until determination of New Zealand prosecutions refused: Fryberg J.
Primary Judgment [2013] QSC 355 28 Nov 2013 Direction made that a witness answer a question: Douglas J.
Primary Judgment [2014] QSC 72 [2015] 2 Qd R 32 22 Apr 2014 Determination as to the use to which an affidavit may be put without the deponent being cross-examined in relation to it: Douglas J.
Primary Judgment [2014] QSC 204 07 Aug 2014 Determination made that witness not permitted to be cross-examined by being shown his answer to a question in an examination of him pursuant to s 597 of the Corporations Act 2001 (Cth) where he had claimed privilege against self-incrimination in that examination: Douglas J.
Primary Judgment [2016] QSC 109 23 May 2016 Primary judgment: defendants' found to have contravened ss 601FC and 601FD of the Corporations Act 2001 (Cth): Douglas J.
Primary Judgment [2017] QSC 96 26 May 2017 Declaratory relief ordered; fourth, fifth, sixth, seventh and eighth defendants ordered to pay pecuniary penalties and compensation; fourth, fifth, sixth, seventh and eighth defendants disqualified from managing any corporation; costs orders made against fourth, fifth, sixth, seventh and eighth defendants: Douglas J.
Notice of Appeal Filed File Number: Appeals 6281/17; 6289/17; 6306/17; 6319/17; 6320/17 23 Jun 2017 Appeals from [2016] QSC 109 and [2017] QSC 96.
Appeal Determined (QCA) [2012] QCA 301 [2013] 2 Qd R 401 02 Nov 2012 Appeal from [2012] QSC 74 allowed; each of the fourth, fifth, sixth, seventh and eighth defendants to be partly excused from compliance with the UCPR pleading regime: Holmes and White JJA and McMurdo J.
Appeal Determined (QCA) [2013] QCA 88 19 Apr 2013 Application by Australian Securities and Investments Commission to vary costs order in [2012] QCA 301 refused: Holmes and White JJA and McMurdo J.
Appeal Determined (QCA) [2013] QCA 357 03 Dec 2013 Appeal from [2013] QSC 313 (refusal of application to stay proceedings) dismissed: Muir and Gotterson JJA and Applegarth J.
Appeal Determined (QCA) [2018] QCA 352 18 Dec 2018 Appeals from [2016] QSC 109 and [2017] QSC 96. All appeals (and cross-appeals by ASIC) dismissed save for Appeal 6320/17 whereby appealed allowed in part with respect to the conclusion that Mr King was an officer and therefore Mr King's appeal allowed to the extent that he contravened the duties prescribed by s 601FD of the Corporations Act 2001 (Cth): Morrison and McMurdo JJA and Applegarth J.
Special Leave Granted (HCA) [2019] HCATrans 104 17 May 2019 Special leave application instituted by Australian Securities and Investments Commission against Mr King (Appeal 6320/17) granted: Bell and Keane JJ

Appeal Status

{solid} Appeal Determined (QCA) {hollow} Special Leave Granted (HCA)