Australian Securities and Investments Commission v MacDonald [2008] NSWSC 995 (22 September 2008)

Last Updated: 24 September 2008

NEW SOUTH WALES SUPREME COURT

CITATION:
Australian Securities and Investments Commission v MacDonald [2008] NSWSC 995


JURISDICTION:


FILE NUMBER(S):
1490/2007

HEARING DATE(S):
22 September 2008


EX TEMPORE DATE:
22 September 2008

PARTIES:
Australian Securities and Investments Commission (Plaintiff)
Peter Donald MacDonald (First Defendant)
Peter James Shafron (Second Defendant)
Phillip Graham Morley (Third Defendant)
Michael Robert Brown (Fourth Defendant)
Michael John Gillfillan (Fifth Defendant)
Meredith Hellicar (Sixth Defendant)
Martin Koffel (Seventh Defendant)
Geoffrey Frederick O'Brien (Eighth Defendant)
Gregory James Terry (Ninth Defendant)
Peter John Willcox (Tenth Defendant)
ABN 60 Pty Ltd (Eleventh Defendant)
James Hardie Industries NV (Twelfth Defendant)

JUDGMENT OF:
Gzell J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Mr A Bannon SC/ Mr R Beech-Jones SC/ Ms D Hogan-Doran (Plaintiff)
Mr S Finch SC/ Mr D Studdy/ Mr D Mackay (First Defendant)
Mr B Walker SC/ Mr R Lancaster/ Mr N Owens (Second Defendant)
Mr B Oslington QC/ Mr R Dick/ Mr N Bender (Third Defendant)
Mr T Bathurst QC/ Mr R Whitington QC/ Mr R Hollo/ Mr R Hardcastle (Fourth to Seventh Defendants)
Mr P Wood/ Mr M Henry (Eighth Defendant)
Mr R McHugh SC/ Mr S Nixon (Ninth Defendant)
Mr T Jucovic QC/ Mr R Scruby (Tenth Defendant)
Mr I Pike (Eleventh Defendant)
Mr A Meagher SC/ Ms K Morgan (Twelfth Defendant)

SOLICITORS:
Clayton Utz (Plaintiff)
Minter Ellison (First Defendant)
Middletons (Second Defendant)
Henry Davis York (Third Defendant)
Atanaskovic Hartnell (Fourth to Seventh Defendants)
Arnold Block Leibler (Eighth Defendant)
Blake Dawson (Ninth Defendant)
Kemp Strang (Tenth Defendant)
Baker & McKenzie (Eleventh Defendant)
Mallesons Stephen Jaques (Twelfth Defendant)


CATCHWORDS:
EVIDENCE - Admissibility and Relevancy - S 55 and s 56 of the Evidence Act 1995 - Whether evidence that is relevant against one defendant is admissible for all purposes against all defendants even if irrelevant against some defendants - What use can be made of such evidence - Whether the discretions under s 135 and s 136 of the Evidence Act to exclude or restrict the use of the evidence should be exercised on the basis of the admission of evidence irrelevant against a co-defendant

LEGISLATION CITED:
Evidence Act 1995


CASES CITED:
Silvia v Commissioner of Taxation [2001] NSWSC 562
Australian Securities and Investments Commission v Vines [2003] NSWSC 995, (2003) 48 ACSR 282
Silbermann v CGU Insurance Ltd [2003] NSWSC 1127, (2003) 48 ACSR 231
Australian Securities and Investments Commission v Rich [2004] NSWSC 1062, (2004) 213 ALR 338
Australian Securities and Investments Commission v Rich [2005] NSWSC 471, (2005) 54 ACSR 28
Seven Network Ltd v News Ltd & Ors (No 8) [2005] FCA 1348, (2005) 224 ALR 317
Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2007] NSWSC 434

TEXTS CITED:


DECISION:
Discretions not exercised.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


Gzell J

MONDAY 22 SEPTEMBER 2008

1490 of 2007 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v PETER DONALD MACDONALD & ORS

EX TEMPORE JUDGMENT

1 Various parties have sought differential rulings under s 135 and s 136 of the Evidence Act 1995 to exclude, or restrict against them, the use of expert and lay evidence. I have ruled against those objections. My rulings are challenged.

2 Section 135 is as follows:

“The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:

(a) be unfairly prejudicial to a party; or

(b) be misleading or confusing; or

(c) cause or result in undue waste of time.”

Section 136 is in the following terms:

“The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might:

(a) be unfairly prejudicial to a party; or

(b) be misleading or confusing.”

3 The typical application is framed on the basis that specific evidence is not relevant to an issue joined with that party and the court ought to exercise its discretion to exclude the evidence against that party or to restrict its use to parties other than the applicant for the ruling.

4 Relevance is a key concept in the Evidence Act. Relevant evidence in a proceeding is defined in s 55 and its admissibility is defined in s 56 as follows:

“55(1) The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding.

(2) In particular, evidence is not taken to be irrelevant only because it relates only to:

(a) the credibility of a witness; or

(b) the admissibility of other evidence; or

(c) a failure to adduce evidence.

56(1) Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding.

(2) Evidence that is not relevant in the proceeding is not admissible.”

5 It is to be noted that the term is defined in respect of a proceeding and not in respect of a party to the proceeding. Thus evidence that tends to establish the happening of an event in which A but not B was involved is relevant evidence notwithstanding that it has no relevance to issues joined in respect of B. The provisions are antagonistic to the former practice of admitting evidence against A but not against B.

6 In this proceeding there are 13 parties. Evidence that would rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding is admissible. That means that, prima facie, relevant evidence in respect of one party is admissible against all parties in the proceeding and for any purpose.

7 That does not mean that the evidence will be used against all parties. If the evidence is irrelevant to any issue affecting a party, the evidence, although admissible, cannot have a use against that party. For example, if it is alleged in the pleadings that the publisher of an announcement ought to have known that the announcement was misleading or deceptive, evidence in relation to that issue is admissible but has no use against other parties to the proceeding who were not involved in the making of the announcement.

8 I said prima facie this was the position because s 56 of the Evidence Act is subject to other provisions of the Act including the discretions to exclude evidence in Pt 3.11 and, in particular, s 135 and 136.

9 But the circumstances in which the discretions may be exercised are circumscribed. The occasion for the exercise or non-exercise of the discretions only arises if the probative value of the evidence is substantially outweighed by the danger that the evidence might be unfairly prejudicial or misleading or confusing or, in one case, might cause or result in undue waste of time.

10 One would have thought that care should be taken not to exercise the discretions liberally for that would undermine the general proposition that all evidence relevant to an issue in a proceeding is admissible for all purposes. In particular, one would not expect the discretions to be exercised merely because the evidence was irrelevant to issues joined with one party in a multi-party suit for that would mean that the general proposition central to the operation of the Evidence Act will be overruled as a matter of course once it is proposed to tender evidence affecting one party but not another.

11 The strictures that confine the exercise of the discretions in s 135 and s 136 of the Evidence Act are unlikely to arise if all that is involved is the proposed tender of evidence that is irrelevant to the issues joined with one party. If such admissible evidence cannot be used against that party, it is not unfairly prejudiced.

12 This is particularly so in cases tried without a jury. A judge may be taken to be able to exclude from determination admissible evidence that is irrelevant to that party.

13 Nor is this a case in which the non-exercise of the discretions might lead to confusion or misleader. It would be far more confusing for the court at this early stage of the proceeding to exercise one or other of the discretions in favour of each of the 13 parties.

14 Nor is any defendant seriously affected by the lack of such differential orders. Under directions made by the court, the plaintiff has been required to produce its expert reports, and affidavits and outlines of evidence of its lay witnesses, and the order in which it proposes to call its witnesses, as well as providing access to the documents upon which it intends to rely.

15 There is little authority on this issue but I draw comfort for the views I have expressed from that which exists.

16 In Silvia v Commissioner of Taxation [2001] NSWSC 562, Hamilton J considered an application by the plaintiff to exclude the admission against him of cross-defendants’ affidavits on the ground that the material was irrelevant to the plaintiff’s claim. His Honour took the view that once evidence was relevant to an issue in a proceeding it was admissible and the old practice under the common law whereby evidence was declared to be admitted or not admitted as against one party or another in a multiparty suit, had been superseded. His Honour rejected the application on the basis that it did not, at that juncture, appear that there was a danger that a particular use of the evidence might be unfairly prejudicial to the plaintiff or be misleading or confusing.

17 In Australian Securities and Investments Commission v Vines [2003] NSWSC 995, (2003) 48 ACSR 282 at [22] Austin J adverted to the significance of the statutory scheme relating admissibility to the proceeding and not to a party. His Honour said:

“It is notable that both ss 55 and 56 address the question whether evidence is admissible in a proceeding. Where a plaintiff seeks to make out separate cases against several defendants in a single proceeding, the question to which the Evidence Act provides an answer is whether evidence is admissible in the proceeding, not whether evidence is admissible to prove the plaintiff’s case against a particular defendant. The answer it gives is, that if the evidence is relevant, it is admissible. Once it is admitted, it is evidence in the proceeding, and therefore available to be used for any purpose, unless one of the exclusionary rules of the Act or any surviving general law exclusionary rule applies, or the court makes use of its statutory discretions to exclude admissible evidence or limit its use.”

18 His Honour went on to say that s 136 of the Evidence Act provides a statutory basis for continuation of the old practice of treating admissible evidence as evidence against one party but not another, but cautioned that it was available only when the court formed the view that in the absence of a limitation there was a danger that the evidence might unfairly prejudice a party or would be misleading or confusing. At [24] his Honour continued:

“In my opinion, the simple fact that evidence relevant to the plaintiff’s case against defendant A is not relevant to the plaintiff’s case against defendant B is not sufficient to establish a danger that defendant B might be unfairly prejudiced if the evidence were ruled admissible without limitation. The very fact that the evidence is irrelevant as far as defendant B is concerned points to the lack of prejudice.”

19 At [26] his Honour concluded that no additional consideration arises out of the fact that the proceeding before his Honour, as in this case, was a civil penalty proceeding.

20 In Silbermann v CGU Insurance Ltd [2003] NSWSC 1127, (2003) 48 ACSR 231, Bergin J rejected an application that proceedings by the Australian Securities and Investments Commission be heard concurrently with proceedings by directors against an insurer. In so doing her Honour, at [19], referred to Vines and said that if such an approach were adopted in concurrent hearings of the ASIC proceedings and the insurance proceedings, with the presence of allegations of fraud and dishonesty in one but not the other proceeding, the process could become even more exposed to compromise.

21 Austin J returned to Vines in Australian Securities and Investments Commission v Rich [2004] NSWSC 1062, (2004) 213 ALR 338 in determining that evidence on a voir dire in a civil proceeding without a jury was evidence in the proceeding. At [24] his Honour confirmed that he had, in Vines, held that where evidence is admitted in a proceeding in which there are several defendants, the evidence is admissible in the proceeding against all defendants, subject only to any restricting order that may be made under s 136 of the Evidence Act.

22 In Australian Securities and Investments Commission v Rich [2005] NSWSC 471, (2005) 54 ACSR 28 Austin J held certain documents to be admissible. At [27]-[28] his Honour referred to Vines as the basis for accepting the submission that if reports and minutes were admissible as admissions they were admissible in the proceeding as the reports had the degree of relevance necessary to satisfy s 55 of the Evidence Act.

23 In Seven Network Ltd v News Ltd & Ors (No 8) [2005] FCA 1348, (2005) 224 ALR 317 Sackville J applied s 136 of the Evidence Act to limit opinion evidence. But his Honour said at [21]:

“In my opinion, considerable care should be exercised before s 136 of the Evidence Act is invoked to limit the use of evidence on the ground that its use might be unfairly prejudicial to a party in a procedural sense. I agree with Mr Sheehan that the policy apparently underlining provisions such as ss 60 and 77 of the Evidence Act should not be undercut by the making of orders under s 136 as a matter of course. This is particularly so where a judge, rather than a jury, is the trier of fact, since the danger of unfairness to a party might be expected to be mitigated by the judge attributing less weight to material that cannot adequately be tested in cross examination. Even so, the circumstance may be such that the power conferred by s 136 will not only be enlivened but it will be appropriate for the court to make a direction limiting the use of otherwise admissible evidence.”

24 In Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2007] NSWSC 434 Barrett J dismissed a motion for summary dismissal of the plaintiff’s case. In dismissing the suggestion that since the reception of evidence against one defendant would stand as evidence against the other, that other would suffer from, and be prejudiced by, continual suggestions of association with the first mentioned defendant, his Honour pointed out what had been said in Vines about the application of s 136 of the Evidence Act. His Honour pointed out that the proceeding before him was not a criminal trial with a jury and a judge was capable of determining what evidence should be used against one of many defendants. At [21] his Honour said:

“The answer to this is twofold. First, there will be no jury. The facts will be found by a judge well able to distinguish the activities of one person from the activities of the other. The judge will make findings in relation to a particular defendant solely on the basis of evidence relevant to the case against that defendant. Second, while evidence that is admitted will be admitted for all purposes, any demonstrated danger of unfair prejudice arising from its use against a particular defendant will be capable of resolution pursuant to s. 136 of the Evidence Act 1995: see Australian Securities and Investments Commission v Vines [2003] NSWSC 995; (2003) 48 ACSR 282 at [24]. That, as the plaintiff submits, is something best dealt with by the trial judge in the course of the trial, should the need arise.”

25 In my view the time has not been reached in this proceeding to make orders under s 135 or s 136 of the Evidence Act. No jury is involved in the proceeding and since admitted evidence that is clearly irrelevant to any claim against a defendant will not be used against that defendant, unfair prejudice has not been established by the mere fact of irrelevance. I am perfectly capable of determining what evidence should be used against which defendant. The non-application of either provision has not been demonstrated to lead to misleader or confusion.

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LAST UPDATED:
23 September 2008