Australian Securities and Investments Commission v Geary and Flugge
[2015] VSC 137
•18 March 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2007 10081
| AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION | Plaintiff |
| v | |
| PETER ANTHONY GEARY | Defendant |
and
S CI 2007 10077
| AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION | Plaintiff |
| v | |
| TREVOR JAMES FLUGGE | Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 March 2015 | |
DATE OF RULING: | 18 March 2015 | |
CASE MAY BE CITED AS: | ASIC v Geary & Flugge | |
MEDIUM NEUTRAL CITATION: | [2015] VSC 137 | First Revision: 25 May 2015 |
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PRACTICE AND PROCEDURE – Application for proceedings to be heard at same time – r 9.12 Supreme Court (General Civil Procedure) Rules 2005.
PRACTICE AND PROCEDURE – Whether documents from concluded proceeding should be discovered – r 29.01.1 Supreme Court (General Civil Procedure) Rules 2005.
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APPEARANCES: | Counsel | Solicitors |
| S CI 2007 10081 | ||
| For the Plaintiff | Mr J P Moore, One of Her Majesty’s Counsel with Ms C E Klemis | ASIC |
| For the Defendant | Mr A Tragardh | Galbally Rolfe |
| S CI 2007 10077 | ||
| For the Plaintiff | Mr J P Moore, One of Her Majesty’s Counsel with Ms C E Klemis | ASIC |
| For the Defendant | Mr S K Dharmananda SC with Mr R F R Pinto‑Lopez | Corrs Chambers Westgarth |
EX TEMPORE (REVISED)
HIS HONOUR:
I have before me an application by the Australian Securities and Investments Commission (ASIC), for an order that S CI 2007 10081 (the Geary proceeding) and S CI 2007 10077 (the Flugge proceeding), be tried at the same time.
I am satisfied that my jurisdiction to so order is enlivened having regard to r 9.12 of the Supreme Court (General Civil Procedure) Rules 2005 (the Rules). I note that this rule is discretionary in nature.
I am satisfied that in relation to both proceedings, there are some common questions of fact arising therein and also that rights to relief claimed therein are in respect of or arise out of the same transactions.
On 6 February 2015, ASIC appeared before me and supported an application by the defendants seeking orders for the hearing of common issues at the same time prior to hearing the remaining issues separately in each proceeding.
Mr Moore QC, on behalf of ASIC, informed me that ASIC no longer supported that application, as ASIC’s thinking on the matter had changed. ASIC now sought an order that the whole of the two proceedings be heard together.
Mr Moore referred to correspondence with the legal representatives of Mr Flugge and Mr Geary, where these issues have been debated backwards and forwards. Mr Moore told me that essentially the push for some issues to be heard together and some separately, had been made by the defendants. Initially, ASIC thought there was some merit in it. Mr Moore said that the parties agreed to certain proposals to achieve that outcome which culminated in the application before me on the last occasion on 6 February 2015.
I was informed, however, that on rethinking the matter, ASIC has come to the view that although the issues in both matters in some respects were different, common evidence would still be applicable in proving certain facts or allegations and the whole proceedings should be heard together.
For example, in the Geary matter, allegations are made concerning the Tigris and the Iron Filings claims. In substance, in both the Tigris and the Iron Filings claims ASIC alleges that AWB Limited was party to an agreement whereby moneys could be obtained from the United Nations fund held on behalf of Iraq (which was created by the sale of Iraq’s oil and which was held in escrow) and used, in the Tigris case, to pay a debt owed by Iraq to Tigris. Tigris was the assignee from BHP of a debt owed to BHP by Iraq for the supply of wheat by BHP to Iraq.
In the Iron Filings claim, Iraq had alleged that there were some iron filings contained in wheat that it had received from AWB and claimed damages from AWB. Essentially, ASIC alleges that the parties agreed that by using the inland transport fee mechanism, the price of the wheat could be inflated and moneys could be obtained from the United Nations’ escrow fund and paid to Iraq through the inflated fee, for their claim.
The inland transport fee mechanism was one method whereby ASIC alleges that in order to transfer moneys to the Saddam Hussein regime from the UN escrow account, an inflated fee was added to the inland transport of wheat. Such a fee was supposedly to be paid to a trucking company and then to the regime. ASIC alleges that the whole thing was a sham; it was just a means of wrongfully obtaining money for the Saddam Hussein regime from the moneys paid into the escrow account.
As indicated above, ASIC now says that the whole of these two proceedings should be heard together. ASIC alleges that there are some issues relating to the Tigris and the Iron Filings transactions which are relevant to their case against Mr Flugge. Mr Flugge is alleged, in substance, to have known about the sham transactions, or the inland transport fee mechanism, from 1999 until he left AWB in 2002. ASIC does not allege that Mr Flugge was involved in the Tigris or Iron Filings transactions. ASIC alleges, however, that evidence relied on by ASIC in the case against Mr Geary relating to the Iron Filings and Tigris claims will be also led against Mr Flugge.
Mr Moore took me to an email that Mr Flugge allegedly received that referred to the inland transport fee mechanism being used to effect the transactions to satisfy the Tigris debt and to meet Iraq’s iron filings claim.
At this stage and in my view, the mere tendering of an email which can be easily tendered in both proceedings does not seem to me to provide a sound reason to order the proceedings be heard together.
However, I am not invited to make that decision at this stage. Mr Flugge’s position is that at this stage he opposes the order sought by ASIC. Mr Flugge says that the application should be adjourned, for reasons I will come to in a moment.
Mr Geary has indicated that he has no objection to his proceeding being heard together with Mr Flugge’s proceeding.
I return to Mr Flugge. Mr Flugge says that he has only just received a considerable quantity of discovered documents and that he would be in a much better position to discuss the extent of the common issues, which he does not object to being heard together, once his legal team have digested the material.
Mr Flugge made it clear, however, that it does not matter how cooperative he is going to be with ASIC, he will not be agreeing to the case against Mr Geary on the Tigris transaction and the Iron Filings transaction being heard at the same time as the case against him. So it seems that I will have to rule on that issue at some stage.
I may have understated the grounds upon which Mr Moore relies in support of a joint hearing of both cases. At this stage, however, until Mr Flugge has concluded his reading of the material against him, I will defer my ruling on this application.
I consider that it may be onerous for Mr Flugge to have to sit through the hearing on the Tigris and the Iron Filings claims. I find it difficult to accept that ASIC’s case — that Mr Flugge was aware of the sham transactions — is going to turn on the evidence in the Tigris claim and the Iron Filings claim. ASIC is alleging that he knew of the sham inland transport transactions for some time, and one can only assume ASIC has extensive evidence which goes well beyond the email that was shown to me relating to the Tigris claim and the Iron Filings claim.
I stand to be corrected on this matter, and if I am in error then that can be done on the next occasion. As I said previously, I propose to accede to the adjournment application. I accept that I will probably have to decide the Tigris and Iron Filings issues. It has been clearly indicated, there will be objection to those being heard in the case against Mr Flugge.
There may be other parts of the Tigris and Iron Filings transactions which might be heard together in both proceedings, but as Mr Flugge had departed from the company when they occurred, it is difficult to see at this stage how that might eventuate.
In any event, in view of ASIC’s past indecisiveness in how it proposes to run these cases, the fact that Mr Flugge has not been able to digest the large number of documents that he has been provided with (although I accept my jurisdiction is enlivened), I would not be comfortable in making an order one way or the other at this stage.
I do not want to rule against ASIC at this stage and I do not want to rule in favour of ASIC at this stage. When Mr Flugge has had the chance to read all the discovered material, obtain any further discovery, have discussions with ASIC, ASIC will have a chance to bring the application back before me.
I propose to order that ASIC’s application be adjourned to a date to be fixed. I do so without prejudice to either party to make full arguments again when it next resumes and, if I have overlooked anything, to remind me of my omissions.
Mr Flugge applies for discovery of the witness outlines provided in ASIC v Lindberg (a related AWB proceeding).[1] No authorities were referred to me about the scope of the discovery rule contained in r 29.01.1 of the Rules. ASIC submitted that the witness outlines were not relevant to these proceedings.
[1]S CI 2007 10078.
It appears to me that the Rule says nothing about the relevance of the document. In my view, the issue is whether any of the information in the documents could be information that adversely affects the party’s own case, or adversely affects another party’s case, or supports another party’s case. I would have thought that the information in the Lindberg witness outlines may well contain such information.
Mr Moore said that if I came to that conclusion, ASIC would give discovery of the witness outlines. Mr Moore confirmed that this was ASIC’s position before and is the position now.
Therefore, I will order that the Lindberg witness outlines be discovered by ASIC.
As for the costs of this application, I have some sympathy for Mr Geary and Mr Flugge, but in my opinion the costs for these hearings should be costs in the cause, and I propose to make the costs of the last hearing and the costs of today costs in the cause.
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