Rich & Anor v Australian Securities and Investments Commission [2005] HCATrans 416 (17 June 2005)

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Rich & Anor v Australian Securities and Investments Commission [2005] HCATrans 416 (17 June 2005)

Last Updated: 24 June 2005

[2005] HCATrans 416

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S261 of 2005

B e t w e e n -

JOHN DAVID RICH AND MARK ALAN SILBERMANN

Applicants

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

Application for special leave to appeal

GLEESON CJ
McHUGH J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 17 JUNE 2005, AT 9.33 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MR D.L. WILLIAMS, SC, for the applicant. (instructed by Joanne Kelly)

MR R.B.S. MACFARLAN, QC: If the Court pleases, I appear with my learned friend, MR J.P.A. DURACK, SC, for the respondent. (instructed by Australian Securities and Investments Commission)

GLEESON CJ: Yes, Mr Walker.

MR WALKER: Your Honours, an objection to the tender of an expert report was in context an objection to the tender of a massive and important part of evidence in the case against my clients.

GLEESON CJ: Can you just remind us of what is going on in the trial?

MR WALKER: What is going on in the trial, I do not think literally as we speak but as close to that as is material, is the process of going through this very same report, paragraph by paragraph, so to speak, as contemplated in paragraph 168 of the Chief Justice’s reasons at page 261 of the application book.

GLEESON CJ: How long has the trial been going?

MR WALKER: It has had 82 sitting days.

GLEESON CJ: How long is it expected to go for?

MR WALKER: I do not think anybody any longer would put a number on that, your Honour, but it would have to be at least twice as long as that to come.

GLEESON CJ: How many interlocutory appeals have there been so far?

MR WALKER: One and one in the pipeline.

HEYDON J: There have been two to this Court, have there not?

MR WALKER: There has been one - - -

HEYDON J: There is a penalty appeal and an insurance appeal.

MR WALKER: The insurance is not really part of the main proceedings – critical to them but not part of it – but, yes, there have been those two appeals.

GLEESON CJ: Yes, Mr Walker.

MR WALKER: Now, your Honours, that 155 pages of report by Mr Carter, supported by numerous appendices and 12 volumes of so-called supporting documents, has been the subject of voir dire examination of a kind which was, as close as counsel could keep it, modelled on the admonitions of Justice Heydon in Makita. The purpose of the voir dire, from the point of view of the party resisting the tender, my clients, was to expose that the party proffering the report, responsible ultimately for its form by reason of the instructions given to the retained expert and the way in which they dealt with that retained expert, that party, in our submission, does not fall to excite any great tenderness when looking at an interlocutory appeal from the rulings of Justice Austin, the trial judge.

The voir dire was an opportunity for matters to emerge which would or could rehabilitate the fatal flaw identified by the trial judge, but what is clear as that examination continued, from the very closely reasoned and factually supported conclusions of the trial judge, was that far from being rehabilitated the report in its essential vice, resembling that identified by Chief Justice Gleeson in HG [1999] HCA 2; 197 CLR 414 at paragraph 41 was that it was based upon a now not fully traceable, indeed largely untraceable, combination of that which is apparent from the face of documents tendered together with the report, together with unspecified and, until examination on the voir dire, undisclosed second-hand, perhaps third-hand, descriptions of documents and business practices derived both before and after the retainer of Mr Carter as expert from what might be called the activities of the authorial team and those assisting them.

Now, it is true that the trial judge acquitted Mr Carter of what I will call compendiously expert bias. So we do not put a case on that matter for the present application. In our submission, what is important both for the section 79 and section 135 issues which were before the Court of Appeal is that there were undisturbed findings of fact in the Court of Appeal upon the basis of which the following consequences will follow.

Now, the particular passage in the Court of Appeal which best captures the difficulties happens to be at pages 260 and 261 of the application book. It relates of course to the section 135 matter. However, there is an overlap between the section 79 defect as we successfully put it before Justice Austin and the section 135 discretion which we also in the alternative succeeded on before Justice Austin.

In paragraph 164 Chief Justice Spigelman refers to “the weighing of essentially incommensurable factors” in section 135. They may be labelled conveniently prejudice on the one hand and probative value on the other. It is of course true that one cannot quantify or measure in some way that renders, for example, numerical comparison possible between prejudice and probative value. So much the more, in our submission, in this case it appears that the Court of Appeal has wrongly interfered with the nature of the decision taken by the trial judge, who had the benefit of seeing Mr Carter in particular react to the searching inquiry under voir dire which sought in certain cases to unravel between the influence, declared and manifest, of disclosed material and the influence, undisclosed until pushed and examined and self-servingly described as capable of being segregated by the witness, of undisclosed material.

McHUGH J: But what has happened here, is it not, is that the matter has been sent back to the trial judge to exercise his discretion by reference to the component parts, whereas he had exercised his discretion by a blanket view of the whole report?

MR WALKER: Yes, your Honour.

McHUGH J: Now, why should this Court intervene? The cases in which this Court should intervene in this type of proceeding or criminal proceedings are so rare that the jurisdiction should hardly ever be exercised. Why should we interfere? We are not like the Court of Appeal who can put the case on for hearing on Monday. This case would not come on for hearing in this Court for weeks, months. What is going to happen to the proceedings? Your rights are protected and you may succeed. It almost begs belief that ASIC would have gone about preparing its case the way that it was done in this particular case by this particular witness, given his history, but it is a matter for the trial judge.

MR WALKER: Your Honour, my response to those questions and comments will enable me to, I hope, come to the point. First, it is an extraordinary jurisdiction, but then a close parallel, not exactly parallel, is the restraint that ought to have been exercised by the Court of Appeal. The reasons which conduce to this Court, having only exceptionally, very exceptionally, to deal with matters which are interlocutory and which have to do with the running of a trial, are reasons which, leaving aside the apical position of this Court in the country’s judicature, sounded almost as greatly for the Court of Appeal. This, after all, was a ruling after a trial had commenced, by a trial judge in relation to one of the most important planks - - -

McHUGH J: I know that. More than 20 years ago the Full Court of the Federal Court in Lamb v Moss said appellate courts should not interfere in the running of this type of proceeding.

MR WALKER: Particularly when it was a ruling which was in relation to the form of an expert report of a kind so important, where the history so-called which cannot be put in a box and ignored – history, after all, is another way of saying what actually happened, what produced this report – when the history was of a kind that your Honour Justice McHugh has noted.

GLEESON CJ: The trial process has come a long way. I do not want to descend into anecdotage, Mr Walker, but 40 years ago there were a number of judges of the Supreme Court who would not even give reasons for rulings on evidence.

MR WALKER: Yes, your Honour. That virtue does not appear in this case. On the other hand, his Honour Justice Austin has fully exposed in great detail an approach which Justice McHugh’s comments to me characterised as a blanket approach. If I could seek to vindicate the trial judge in that regard. It is blanket in this sense, that it is true after an extremely detailed examination and consideration of the evidence by the trial judge there is a pall cast over the whole for the reasons which particularly appear in relation to the section 135 discretion. It is an overall effect. We do not run from that; we embrace it.

It was not, as perhaps the Chief Justice’s recollections prompt, a case of a summary or peremptory comprehensive dealing with a document which deserved better in terms of detail. This was a finding in detail by reference to particular exercises as well as to the way in which Mr Carter coped with challenges. Now, the challenges were of this kind. How could you state that as a fact – it is not footnoted – on the basis of the material you have told us was the material given to you to provide the foundation? His Honour records the occasions upon which – and he was able to assess the witness – Mr Carter attempted to grapple with those perfectly legitimate challenges. Indeed, there is charity to the witness throughout Justice Austin’s reasons that your Honours will have noticed along the lines of he ought to be forgiven because he did not know the questions in advance.

Now, with respect, ambush may be unfashionable with the notion that the cross-examiner must post a letter to the witness before asking the questions in relation to the witness’ own document and the way in which it was produced. It need only be stated to be rejected. In our submission, this was a very careful, as I say, in parts charitable, approach to the way in which Mr Carter had put together his report, which produced ultimately something to which we would not attach the word “blanket” but to which the trial judge attached the word “pervasive”; a pervasive influence of a kind which, with respect, this and other courts, intermediate courts of appeal, have deprecated from time to time, in particular the approach by which experts tell the court what the facts are that ought to be found.

Now, that is important when one comes to the distinction observed by Chief Justice Spigelman, somewhat in our favour for the future running of the trial we accept, between saying what a document is and saying what a document means or drawing inferences, intermediate or otherwise, from a collection of documents. In our submission, when the trial judge has so carefully as a result of a voir dire, which in the reading of its results sounds like drawing teeth – when a trial judge has found a pervasive effect then that is precisely when section 135 can and should operate, as the trial judge said, for the following reason.

In order to go through the process of paragraph 168 of Chief Justice Spigelman’s approach, which has now been embarked upon and a very small part has been I think nearly completed, in order to do that there is of course, so far as argument is concerned, the difficulty that as soon as absences are pointed up repair jobs may be contemplated. Now, this is a report which is now served three years ago. Any repair job would be, as it were, three years late. The history of the production of this report is very clear as to the decisions which were clearly deliberately taken by ASIC as to how it should be prepared and the form it should take. In our submission, his Honour was perfectly entitled in weighing up the witness he saw to decide that he could not accept as accurate what he nonetheless accepted as honest, namely the belief of the witness that he could put out of his mind, in advancing and under cross-examination defending the opinions he had formed, all the material that had come in such a multiple channel of ways, none of them disclosed and few of them traceable, leaving for anything that survives the current bout of pointillist objection, leaving the cross-examiner in precisely the position that many of the quotations cited by Justice Heydon in Makita illustrate, namely - - -

GLEESON CJ: Is there any contradictory report, or is it a consequence of the penal nature of the proceedings and the decision we made in relation to that, that the defence does not have to put its case at this stage?

MR WALKER: The latter. I will come back - - -

GLEESON CJ: I thought there was some suggestion, maybe nothing ever came of it, that even in criminal trials expert reports that were to be relied upon by the defence had to be put up-front, but I may be confusing that with something I read.

MR WALKER: I am sorry I cannot assist your Honour, but the position at the trial is as your Honour put to me. Now, your Honours, the present position which has been undertaken paragraph by paragraph has two vices which, in our submission, justifies special leave being granted, so that the trial can get on with other witnesses and other matters while this very important matter is dealt with in accordance with proper principle, and showing proper deference to the great detail and effort of the trial judge in assessing the way in which this witness had put together the report and could defend it as to its nature.

The first problem is of course that the paragraph-by-paragraph approach currently being undertaken is being undertaken in accordance with what we submit is the incorrect approach of the Court of Appeal, an incorrect approach which is highlighted by the dichotomy proposed by Chief Justice Spigelman between an asserted fact basis and a true fact basis, the very labelling of which shows the dangers of the approach. This in a case where the voir dire had showed that the so-called asserted basis was falsified and falsified by reference to a body of material not sufficiently easily traced so as to enable, fairly to the defendants and fairly ultimately to the trial judge who has to make findings, the unravelling exercise a bearable one. That is why the so-called blanket approach was appropriate. They are incommensurable.

The prejudice – pages 260 and 261 of the application book accepts the nature of the prejudice found by the trial judge. The prejudice was palpable and huge. The probative value as to the nature of the material was well understood by the trial judge. It is not correct, with respect, to say that he simply did not turn his mind to it. The very copious opening exposition of his reasons show that he understood and appreciated the nature, detail and force of the report very considerably and beneficially in favour of the party tendering it.

In our submission, it is for the first of the two reasons I have mentioned that what is presently being undertaken ought to be arrested by the grant of special leave so that other matters can be got on with. The plaintiff has an application, for example, to adduce three years out of time another expert report.

McHUGH J: Well, they say they have served half of it, or part of it, on you already.

MR WALKER: I can update that. The whole has been served in final form.

HEYDON J: Are you saying we should issue some order to the trial judge to desist from what he is doing?

MR WALKER: No, your Honour. No, that would be the subject of an application by us. Special leave should be granted so that the issue as to how this report should be dealt with as to its admissibility can be determined by this Court. The question of expert - - -

McHUGH J: But how is this Court going to effectively deal with it? You have a report with hundreds of pages of material.

MR WALKER: Well, it is not a rehearing, your Honour. There are findings of fact not challenged by the trial judge in a very careful judgment which provides the foundation text for an argument in this Court. It certainly does not involve any in terrorem exercise raised by those against us of having to root through 12 folders. There are findings of fact on the voir dire which are the basis of the ruling and which were the subject of challenge in the Court of Appeal and which would be the subject of vindication by us in this Court.

McHUGH J: Taking up the Chief Justice’s point, 40 years ago this witness could have done what he did but he would have gone in the witness box and counsel would have put facts to him and documents to him one by one and he would have been asked to express his opinion, and the fact that he had been an investigative accountant or the fact that he had read transcripts of evidence which are not admissible would be beside the point.

MR WALKER: Your Honour, certainly the records do not show that 40 years ago there were trials where so many comprehensive matters of ultimate fact were determined by so-called expert evidence. I call it so-called because to revert briefly to section 79, which is a very important part of our argument, the capacity to know whether the material, whether it is paragraph by paragraph or overall conclusions, is based upon the application of section 79 – “specialised knowledge” and expertise – to material which is not inadmissible hearsay but which is disclosed and open for examination before you ask your first question in cross-examination is fundamental for all the reasons that Justice Heydon demonstrated, with respect, in Makita.

What we have here is the consequence is that if anything survives by reason of the wrong approach now mandated to be followed by Justice Austin, the cross-examiner has to provide the witness with the opportunity to remake a report by showing the very material which should not have been used in its original making and which went to admissibility, for the reasons shown in HG. May it please the Court.

GLEESON CJ: Thank you, Mr Walker. We do not need to hear you, Mr Macfarlan.

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. The application is refused with costs.

AT 9.55 AM THE MATTER WAS CONCLUDED