Australian Securities and Investments Commission v Rich

[2005] NSWSC 417

Reported Decision: 53 ACSR 752
(2005) 23 ACLC 838

New South Wales

Supreme Court

CITATION:	ASIC v Rich [2005] NSWSC 417 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	8 March to 6 April, and written submissions to 12 April 2005
JUDGMENT DATE :	5 May 2005
JURISDICTION:	Equity
JUDGMENT OF:	Austin J
DECISION:	See under heading "Conclusions"

CATCHWORDS:	EVIDENCE - admissibility of documents - scope and effect of s 1305 of the Corporations Act - whether such documents as budgets are inadmissible under the hearsay rule - requirement of authentication of documents tendered in evidence - scope and effect of business records exception to hearsay rule - effect of business records exception where document contains representations of expert opinion - scope of "unfair prejudice" under ss 135 and 136
LEGISLATION CITED:	Corporations Act 2001 (Cth) ss 9, 286, 439A, 531, 542, 1305, 1306 Evidence Act 1995 (NSW) ss 48, 55, 56, 57, 58, 59, 69, 79, 135, 136, 183
CASES CITED:	Adler v ASIC (2003) 179 FLR 1 Adler v ASIC (2003) 46 ACSR 504 Albrighton v Royal Prince Alfred Hospital [1980] 2 NSWLR 542 ASIC v Adler (2002) 41 ACSR 72 ASIC v Rich [2005] NSWSC 149 ASIC v Rich [2005] NSWSC 256 ASIC v Rich [2005] NSWSC 296 Atra v Farmers & Graziers Co-op Co Ltd (1986) 5 NSWLR 281 Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [1999] FCA 1269 Briginshaw v Briginshaw (1938) 60 CLR 336 Caratti v R (2000) 22 WAR 527 Century Medical Inc v THLD Ltd (No 3) [2000] NSWSC 428 Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 Citibank Ltd v Chiu Wah Liu [2003] NSWSC 236 Commonwealth v McLean (1996) 41 NSWLR 389 Connex Group Australia Pty Ltd v Butt [2004] NSWSC 379 Daw v Toyworld (NSW) Pty Ltd [2001] NSWCA 25 Duke Group Ltd (in liq) v Pilmer (1994) 15 ACSR 255 Dyer v R (2002) 76 ALJR 1552 Fabre v Arenales (1992) 27 NSWLR 437 Fabre v Arenales (1992) 27 NSWLR 437 Feltafield Pty Ltd v Heidelberg Graphic Equipment (1995) 56 FCR 481 Forge v ASIC (2003) 52 ACSR 1 Global Medical Imaging Management Ltd (in liq) v Australian Mezzanine Investments Pty Ltd [2003] NSWSC 431 Gordon (Bankrupt), Official Trustee in Bankruptcy v Pike (No 1) (Federal Court of Australia, unreported, 1 September 1995) Karmot Auto Spares Pty Ltd v Dominelli Ford (Hurstville) Pty Ltd (1992) 35 FCR 560 Kingham v Sutton (No 3) [2001] FCA 1117 Lee v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 305 Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd (2003) 47 ACSR 261 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 Manning v Cory & Sumner [1974] WAR 60 McVeigh (as liquidator of JAG Plastering & Carpentry Pty Ltd (Vic)) v Commissioner of Taxation [2004] FCA 653 Merrylands Bowling, Sporting & Recreation Club Ltd v P & H Property Services Pty Ltd [2001] NSWCA 358 Murray v RentWorks Ltd [2003] NSWIRComm 54 National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309 NSW Crime Commission v Rinh [2003] NSWSC 811 NT Power Generation Pty Ltd v Power and Water Authority [1999] FCA 1549 O'Meara v Dominican Fathers [2003] ACTCA 24 One.Tel Ltd (in liquidation) v Rich [2005] NSWSC 226 Ordukaya v Hicks [2000] NSWCA 180 Papakosmas v The Queen (1999) 196 CLR 297 Porter v Cook [1971] 1 NSWLR 318 R v Apostilides (1984) 154 CLR 563 R v Chin (1985) 157 CLR 671 R v Clark [2001] NSWCCA 494 R v Connell (1995) 14 ACLC 32 R v Jones [1978] 1 WLR 195 R v Lucas [1973] VR 693 R v Sing (2002) 54 NSWLR 31 R v Turner (No 17) (2002) 10 Tas R 388 Re Action Waste Collections Pty Ltd (in liq); Crawford v O'Brien [1981] VR 691 Residues Treatment and Trading Co Ltd v Southern Resources Ltd (1989) 52 SASR 54 Rich v ASIC (2004) 78 ALJR 1354 Richardson v R (1974) 131 CLR 116 Ringrow Pty Ltd v BP Australia Ltd [2003] FCA 933 Ritz Hotel Ltd v Charles of the Ritz Ltd (Nos 13, 18 & 19) (1988) 14 NSWLR 116 Roach v Page (No 11) [2003] NSWSC 907 Roach v Page (No 15) [2003] NSWSC 939 Roach v Page (No 27) [2003] NSWSC 1046 Ross McConnel Kitchen & Co Pty Ltd (in liq) v Ross (No 1) (1985) 1 NSWLR 233 RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 32 NSWLR 152 Seneviratne v R [1936] 3 All ER 36 (PC), Shaw v R (1952) 85 CLR 365 Sheahan v Northern Australian Land and Agency Co Ltd (1994) 176 LSJS 257 Smith v The Queen (2001) 206 CLR 650 Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 10) (2002) 82 SASR 53 Stankowski v Commonwealth [2003] NSWSC 122 Terranora Group Management Pty Ltd v Terranora Lakes Country Club Ltd (in liq) (unreported, Supreme Court of New South Wales, Santow J, 1 December 1997 The Duke Group Ltd (in liq) v Arthur Young (1990) 3 ACSR 420 Timms v Commonwealth Bank of Australia [2003] NSWSC 576 Tubby Trout Pty Ltd v Sailbay Pty Ltd (1992) 113 ALR 748 Valoutin v Furst (1998) 154 ALR 119 Van Reesema v Flavel (1992) 10 ACLC 291 Vitali v Stachnik [2001] NSWSC 303 Waterwell Shipping Inc v HIH Casualty and General Insurance Ltd (unreported, Supreme Court New South Wales, Giles CJ (Comm Div), 8 September 1997, BC9704168) Whitehorn v R (1981) 152 CLR 657 Young v Coupe [2004] NSWSC 546 Ziems v The Prothonotary (1957) 97 CLR 279
PARTIES:	Australian Securities and Investments Commission (P) John David Rich (D1) Mark Alan Silbermann (D4)
FILE NUMBER(S):	SC 5934/01
COUNSEL:	R B S Macfarlan QC with J P A Durack SC, N J Beaumont and J E O'Sullivan (P) D L Williams SC with M J Steele and S A Goodman (D1, D4)
SOLICITORS:	Georgina Hayden, Solicitor for Australian Securities and Investments Commission (P) Joanne Kelly, Solicitor (D1, D4)

LOWER COURT JURISDICTION:

INDEX

1. The finance directory of the I:/Drive, and “properties pages”	[9]
2. Categories 1 and 2 – Business Plan Summaries and Budgets	[19]
2.1 Relevance	[32]
2.2 Provenance	[38]
3. Category 3 – Trial Balances	[41]
3.1 Relevance	[48]
3.2 Provenance	[50]
4. Category 4 – Management Accounts (Fixed Wire)	[51]
4.1 Relevance	[55]
4.2 Provenance	[56]
5. Category 5 – Bill Run Breakdown (Sample)	[57]
5.1 Relevance	[59]
5.2 Provenance	[64]
6. Category 6 – Spreadsheet relating to Gross Margin (comparison.xls)	[65]
6.1 Relevance	[71]
6.2 Provenance	[72]
7. Category 7 – Australian Collections Profile Summaries	[77]
7.1 Relevance	[81]
7.2 Provenance	[82]
8. Category 8 – Ferrier Hodgson’s Reports to Creditors	[83]
8.1 Relevance	[84]
8.2 Provenance	[86]
9. Category 9 – E-mail from Randall to McLean	[87]
10. Category 10 – Butcher’s Paper Presentation relating to Billing	[89]
10.1 Relevance	[91]
10.2 Provenance	[92]
11. Authentication of documents	[93]
11.1 The Rusu decision	[95]
11.2 Subsequent cases responding to Rusu	[105]
11.3 The requirement to authenticate documents	[116]
11.4 The present case	[122]
11.5 Authentication and s 1305	[148]
12. Ways of adducing documentary evidence	[150]
13. Relevance	[155]
14. The hearsay rule	[165]
15. Admissibility of business records	[178]
15.1 Records belonging to or kept in the course of or for the purposes of the business of One.Tel or someone else	[180]
15.2 Representations made or recorded in the course of, or for the purposes of, the business	[195]
15.3 Representations made by persons reasonably supposed to have personal knowledge of asserted facts, or on the basis of information directly or indirectly supplied by such a person	[196]
16. Opinion evidence	[205]
17. Admissibility under s 1305	[223]
17.1 Does the court have a discretion to exclude evidence admissible under s 1305?	[229]
17.2 Ingredients of s 1305(1)	[233]
17.3 “Books”	[234]
17.4 “Kept by a body corporate”	[238]
17.5 “Kept”	[240]
17.6 The risk of “absurdly broad” application	[253]
17.7 Conclusion as to the meaning of “kept”	[256]
17.8 Are books kept by liquidators “kept by a body corporate”?	[266]
17.9 Kept “under a requirement of this Act”	[272]
17.10 The extent of the presumption under s 1305(2)	[273]
17.11 The requirement to keep financial records	[282]
17.12 Were the nine categories of documents “kept by a body corporate”	[302]
17.13 Would the documents have been “kept by a body corporate” if the narrower construction of “kept” had been adopted?	[310]
17.14 Were eight of the categories of documents kept “under a requirement of [the Corporations] Act”?	[311]
17.15 Does the presumption in s 1305(2) apply to each of the nine categories of documents?	[316]
18. Discretionary Powers under the Evidence Act	[322]
18.1 The concept of “unfair prejudice”	[325]
18.2 Prosecutorial fairness	[344]
18.3 The present case	[369]
19. Contested paragraphs of Carter Affidavits	[389]
19.1 Evidence about management accounts and trial balances	[391]
19.2 Evidence about comparison.xls	[427]
19.3 Other evidence no longer pressed	[433]
19.4 Exercise of the ss 135 and 136 discretions with respect to additional Carter evidence	[436]
20. Conclusions	[441] - 167 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

THURSDAY 5 MAY 2005

5934/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V JOHN DAVID RICH & ORS

JUDGMENT (revised on 11 May 2005 to correct typographical errors)

1 HIS HONOUR: ASIC seeks to tender 12 lever-arch folders of documents, which were exhibits to the Carter Report, an expert report held inadmissible by me in reasons for judgment published on 7 March 2005: ASIC v Rich [2005] NSWSC 149. It also proposes to tender a six-folder tender bundle.

2 The parties selected ten categories of documents from the Carter exhibits for initial tender. They hope that, the issues surrounding the tender of those documents having been thoroughly ventilated in argument, the court's decision will govern the destination of many other documents and, in that fashion, the process of decision-making on the admissibility of individual documents will be abbreviated. Subsequently, when ASIC provided additional evidence, the defendants withdrew their objection to the ninth category, leaving nine other categories in contention.

3 After publication of my reasons for judgment on the admissibility of the Carter Report, ASIC made an application (AS 56) for me to rule that my judgment was not applicable to certain parts of the Carter Report and its appendices on the ground that those parts contained calculations and analytical facts rather than expert opinion evidence. I dealt with ASIC's application, rejecting it, in ex tempore reasons for judgment delivered on 22 March 2005: ASIC v Rich [2005] NSWSC 256 (supplemented and corrected at [2005] NSWSC 296). At the same time, ASIC pressed the tender of certain evidence of Mr Carter other than the Carter Report, and I heard argument as to that material. The present reasons for judgment cover this evidence of Mr Carter. I was asked to deal with Mr Carter's evidence together with the document issues because, it was said, there are common questions about the exercise of the court's discretion under ss 135 and 136 of the Evidence Act.

4 The ten categories of documents were selected because, for the most part, they are included in ASIC's list of "Significant One.Tel Records" (AS 5), although one category of documents, liquidators' reports, is there because the documents are relevant to ASIC's claim for compensation. The 10 categories of documents, with references to their documentary sources, are as follows:

1. Business Plan Summaries (Carter Exhibits, vol A, pages 1 0001 - 1 0008)

2. Budgets (Digital and Fixed Wire) (Carter Exhibits, vol A, pages 1 0009 - 1 0039)

3. Trial Balances (Carter Exhibits, vol A, pages 2 0001 - 2 0101)

4. Management Accounts (Fixed Wire) (Carter Exhibits, vol B, pages 3 0001 – 3 0106)

5. Bill Run Breakdown (Sample) (Carter Exhibits, vol D, pages 4 0021 - 4 0037)

6. Spreadsheet relating to Gross Margin (comparison.xls) (Carter Exhibits, vol D, pages 4 0055 and 4 0056)

7. Australian Collections Profile Summaries (Carter Exhibits, vol F, pages 8 0001 - 8 0015)

8. Ferrier Hodgson's Reports to Creditors (Carter Exhibits, vol K, pages 22 0001 – 22 0148)

9. E-mail from Randall to McLean relating to cash flow accruals, attaching spreadsheet regarding new assumptions (extract only) (Merged Tender Bundle pages 1051 - 1060; the objection to this category was subsequently withdrawn)

10. Butcher's paper presentation relating to billing (Exhibit 3 to Mr Kleemann's affidavit dated 26 July 2004).

5 The issues I have been invited to address include some generally applicable legal issues, and also some generally applicable issues concerning the exercise of the court's discretion to reject evidence under s 135 or to limit its use under s 136 of the Evidence Act. Then there are issues dealing with the specifics of the nine categories of documents.

6 I have structured this judgment in the following fashion:

· first, I shall give a brief general description of ASIC's evidence regarding One.Tel's I:/Drive and properties pages, as a prelude to the provenance evidence for the nine categories of documents;

· secondly, I shall describe each of the categories of documents, their relevance according to ASIC's submissions and ASIC's provenance evidence for that category;

· thirdly, I shall deal with issues and submissions about the legal materials, under the headings: authentication of documents; ways of adducing documentary evidence; relevance; the hearsay rule; admissibility of business records; opinion evidence; admissibility under s 1305 of the Corporations Act; and the court's discretions under ss 135 and 136 of the Evidence Act;

· this will involve applying the principles ascertained under each heading to each of the nine categories of documents and reaching a conclusion in each case;

· fourthly, I shall describe and deal with the admissibility of the additional evidence of Mr Carter that ASIC wishes to adduce, and discretionary considerations relating to it.

7 As will be seen, the issues to be determined are complex. They have been addressed in the hearing over the period from 8 March to 6 April 2005 (with breaks for Easter and for other reasons). Although the parties rely on their oral submissions made during that time, I have received written submissions as well, many of them short notes.

8 Following the practice I have developed in other judgments in this case, I shall list the written submissions in order to confirm that I have taken them into account:

· AS 49 Defendants' initial selection of documents re admissibility

· AS 50 ASIC's main provenance affidavits (lever arch file)

· AS 51 ASIC's statement with respect to 10 sample documents

· AS 52 ASIC's note concerning 4 0055 and 4 0056

· AS 53 ASIC's submission in response to defendants' submissions re s 1305

· AS 54 ASIC's submission re tender of business records

· AS 55 ASIC's statement of particular representations relied upon for category 8 (shorter document)

· AS 56 Facsimile enclosing ASIC's letter and two attachments regarding Carter evidence

· AS 57 ASIC's submission in reply to DS 50

· AS 58 ASIC's response to DS 53 concerning tender of business records

· AS 59 ASIC's references in addition to those set out in DS 54, 55, 56 and 57

· AS 60 ASIC's statement of particular representations relied upon for category 8 (larger document)

· AS 61 ASIC's submission in reply to DS 58

· AS 62 ASIC's submission in reply to DS 59

· AS 63 ASIC's reply regarding Exhibit MFI 76

· [AS 64 is ASIC's draft order under s 136 in respect of exhibits to Mr Breckenridge's affidavits of 22 and 24 March 2005, and is not a submission document]

· AS 65 ASIC's note on cases relied upon by the defendants on 6 April 2005

· AS 66 ASIC's response to DS 61 concerning the defendants' "camp"

· AS 67 ASIC's submission in reply to DS 60 concerning representations relied on liquidators' reports

· AS 68 ASIC's schedule of references re tender of documents

· DS 47 Defendants' submission on s 1305

· DS 48 Defendants' overview submission concerning tender of business records

· DS 49 Document headed "Document objections"

· DS 50 Defendants' submission in reply to ASIC's statement with respect to 10 sample documents

· DS 51 Defendants' submission in reply to ASIC's submissions re s 1305

· DS 52 Defendants' submission in reply to ASIC's note re 4 0055 and 4 0056

· DS 53 Defendants' reply to ASIC's submissions re tender of business records

· DS 54 Schedule of transcript references

· DS 55 Schedule of references to assistance provided to ASIC by former employees of One.Tel

· DS 56 Defendants' summary of selective evidence references re trial balances

· DS 57 Defendants' summary of selective evidence references re "to-be-billed" reports

· DS 58 Defendants' brief overall response to ASIC's submission of 24 March

· DS 59 Defendants' submission on page 4 0021

· DS 60 Defendants' submission re ASIC's tender of representations re liquidators' reports responding to AS 60

· DS 61 Defendants' note re ASIC's assertion that Mr Holmes etc are in defendants' camp

· DS 62 Defendants' further submission in reply to AS 67.

1. The finance directory of the I:/Drive, and "properties pages"

9 ASIC relied on a description of One.Tel's computer system provided by Adrian Bannister, in his affidavit made on 28 April 2004. Mr Bannister was a senior database administrator at One.Tel during the period from September 1998 to October 2001, responsible for planning, installation and support of major internal computer systems. He said that One.Tel used the Adept accounting system for financial accounting, substantially customised for One.Tel's needs. It contained all ledgers, and detailed financial data was summarised and then purged from the system during normal month-end processing. He gave evidence explaining how data could be accessed in Adept, by using a username and password recognised by the system, and he explained how to access the general ledger, an aged creditors report, an aged debtors report and they a list of unreleased cheques. He explained that One.Tel used a separate disk drive on the file server to store administration and management files. The disk drive was referred to within the organisation as the I:/Drive or the data drive.

10 Other evidence about the I:/Drive was provided by Graham Henley and Matthew Brotherson. Mr Henley is a forensic accounting expert who assisted the Australian Federal Police and ASIC in the execution of a search warrant at the premises of One.Tel on 1 June 2001. Mr Brotherson was a systems administrator employed by One.Tel. During the course of execution of the search warrant, Mr Henley and Mr Brotherson had a conversation in which Mr Brotherson told Mr Henley that the main network storage location was the I:/Drive, which was broken down into separate directories, and that the directories relevant to the execution of the search warrant were probably the finance, administration and corporate counsel directories. Mr Henley asked Mr Brotherson to print the screen which showed the I:/Drive directories, and he later copied the three directories to a hard drive.

11 Gabriel Farago, a solicitor and director of Ferrier Hodgson, gave evidence that Ferrier Hodgson retained KPMG to assist with the extraction, analysis and preservation of the data contained on the various computer systems operated by the One.Tel Group. KPMG produced two reports, dated October 2001 and January 2002 respectively. In about October 2001, KPMG delivered to Ferrier Hodgson some semi-desktop computers containing the electronic data extracted and preserved by KPMG as explained in their reports. Mr Farago arranged for a complete copy of all the files located in the I:/Drive, which was part of the data KPMG had captured. He delivered to ASIC a hard drive containing a copy of the I:/Drive data, on 7 July 2003. This copy of the I:/Drive has been referred to in submissions as "the Ferriers I:/Drive".

12 The finance directory of the I:/Drive contains nearly 25,000 files. Counsel demonstrated the operation of the I:/Drive in court. The finance directory is structured so that, once a finance spreadsheet is displayed, a figure appearing in a particular cell on the displayed page may be linked to another document, discovered by highlighting the cell. The structure makes it plausible to infer that a document identified in this way is some form of explanation of the figure highlighted (for example, a worksheet).

13 The documents tendered by ASIC include "properties pages", about which there has been contention. In his affidavit made on 13 September 2004, Mr Bannister briefly explained properties pages. He said that Microsoft Windows automatically generates and updates "properties" information for computer files created using Windows applications such as Microsoft Excel and Microsoft Word (which were used by One.Tel staff). He continued:

"The 'properties' information includes time and date 'stamps' which automatically record when a particular file is created, modified, accessed or printed by reference to the setting of the relevant computer's internal electronic clock. The date a file is 'created' refers to the date that a file is saved under a particular name or the date that a particular file is copied. Thus the file properties may show that a file was 'created' after it was 'last modified'. A user may view the 'properties' of a file by navigating to a 'properties' page for that file…".

14 In the tendered documents ASIC usually provides two properties pages, one being the "General" page and the other being the "Statistics" page. The copies of the properties pages provided by ASIC appear to be superimposed on the first page of the document to which they relate, and this makes it plausible to infer that the properties page relates to that document. But sometimes this correlation does not appear to be established, or the properties page is illegible.

15 In the case of page 4 0055, a different kind of property page was produced, entitled "Summary", which identified the "author". Mr Bannister did not explain whether the "author" is the person who "created" the document or "modified" it or "last saved" it.

16 ASIC submitted that the properties pages are an integral part of each document in electronic form, but Mr Bannister's evidence does not go so far. What he suggests is that one "navigates" from the file to the properties pages. I infer that if one carries out the navigation correctly, the properties pages that are reached are the properties pages for the file from which one launched the navigation.

17 It seems to me that, although the "created" and "author" boxes are problematic for reasons given, and the "modified" box is unhelpful to the extent that the author of the modifications and the nature and content of the modifications are not indicated by it, the "last saved by" box is some utility for documentary tender purposes, provided there is evidence linking the properties page containing that box with the document in question. I have taken it into account in those cases where the link between the properties page and the document is apparent. But the prerequisites for tender and admissibility can be established in other ways, where the properties pages do not assist or have not been tendered.

18 After considerable argument had been heard about the properties pages, ASIC informed the court (in AS 58) that it would not press the tender of the properties pages except for categories 4 and 6, where they are said to have relevance to the dating of the documents. I have nevertheless included descriptions of all the properties pages in this judgment, because ASIC informed the court that they are an integral part of the documents and the defendants based some submissions attacking the documents on their properties pages.

2. Categories 1 and 2 - Business Plan Summaries and Budgets

19 The documents described in submissions as "business plan summaries" comprise the following:

· a single page document (1 0001) headed "Business Plan Summary - Update September 2000", which gives figures for the years 00/01 and 01/02 for tolling customers, revenue, EBITDA, EBIT and cash required/generated, for the Group and then separately for three components comprising, respectively, Australia (GSM SP, Fixed Wire, Internet and One.Card), Australia (GSM 1800), and Europe and HK;

· a single page (1 0002) with the same heading and the subheading "Australia - GSM SP, Fixed Wire, One.Net & One.Card", breaking down the figures in the first page, into GSM SP, Fixed Wire, One.Net and One.Card;

· two single page tables (1 0003 and 1 0004) headed "Cashflow" for the respective years 2000/2001 and 2001/2002, giving figures for Australia, International and GSM on a monthly basis, and their annual totals, the totals corresponding with those shown on the respective cash lines on page 1 0001;

· two pages (1 0005 and 1 0006), the first headed "One.Tel Ltd 00/01 - Budget" and the second headed "OneTel Budget", presenting monthly budget figures from July 2000 to June 2001 and a total (and half-year totals on the second page), the first page relating to revenue, digital cost of acquisition, fixed wire cost of acquisition, interconnect, OPEX and EBITDA, and the second page repeating the EBITDA figures, and then giving figures for depreciation, amortisation and EBIT;

· two pages (1 007 and 1 008), the first headed "One.Tel Ltd 01/02 - Budget" and the second headed "OneTel Budget" setting out figures in the same categories for the period from July 2001 to June 2002.

20 Pages 1 0001-1 0004 do not have any computer file path on them but they each bear the date 27/09/00, with figures that appear to signify different times on that day. There are no other markings, except for the ASIC barcodes. The four pages from 1 0005 to 1 0008 each bear a date, namely 21/09/00 (and in the case of 1 0006 and 1 0008 there is a time as well), while pages 1 0005 and 1 0007 display what appears to be a file path (the same in each case), namely "updatedbusplan.april2000v2.REAL THING".

21 The index to the Carter Exhibits (MFI 75) describes pages 1 0001 and 1 0002 as "Sept 2000 Business Plan budgeted summary for 2001 and 2002 FYs", and the descriptions for the later pages are similar, except that for pages 1 0003 and 1 0004 it is "budgeted cashflow", and for pages 1 0005 to 1 0008 it is "budgeted profit and loss".

22 ASIC contended that pages 1 0005 to 1 0008 are a break-down of some of the information appearing in the summary pages at 1 0001-2. That appears to be plausible. The tables at 1 0005 to 1 0008 appear, from the categories they display, to relate to the Australian digital and fixed wire business, and one finds correspondences between the total figures for revenue, EBITDA and EBIT in those tables, and the figures given for those categories at 1 0002 (where figures are rounded up to the nearest $m) for both the 2000/01 and 2001/02 years.

23 The documents described in submissions as "budgets" comprise the following:

· two pages and a properties page (1 0009 to 1 0011), headed "Profit and Loss - Australia (Wireline and SP)", without any legible footer, giving figures (broken down into subcategories) in the general categories of revenue, cost of goods sold and operating expenditure; and then figures for EBITDA, depreciation, amortisation, EBIT, taxes, interest and net profit; and then "EBITDA Real Thing" and "Variance from New plan"; those figures are given for each month from July 2000 to June 2001, with the months from July 2000 to November 2000 being headed "Actuals", the month of December 2000 being headed "FLASH", and the months from January 2001 to June 2001 being headed "Fcast", suggesting that the document was current as at late December 2000 and January 2001;

· ten pages and a properties page (1 0012 to 1 0022), the first page bearing the heading "Key Drivers & Assumptions – Wireline - Australia" with other headings on later pages, bearing the date 16/04/02 and the time 12:59, sequentially numbered from 1 to 10 and with the footer "Australian wireline and SP uplift-final.xls wireline", presenting financial information for each month from July 2000 to June 2001, with the first four months headed "Actual", both November and December 2000 headed "flash", and the months from January to June 2001 headed "Budget";

· nine pages and a properties page (1 0023 to 1 0032), the first page bearing the heading "Key Assumptions - Optus Service Provider" with other headings on later pages, bearing the date 16/04/02 and the time 13:31, sequentially numbered from 1 to 9 and with the footer "Australian wireline and SP uplift-final.xls service provider", presenting financial information for each month from July 2000 to June 2001, with the heading for the first four months being "Actual" and the heading for the months from December 2000 to June 2001 being "Budget" (the heading for November 2000 is obscured);

· six pages and a properties page (1 0033 to 1 0039), the first page apparently headed "CLEC Business (not included in Wireline or SP)" with other headings on later pages, bearing the date 16/04/02 and the time 13:25, sequentially numbered from 1 to 6 with the footer "Australian wireline and SP uplift-final.xls Calculations", presenting financial information for each month from July 2000 to June 2001 with the heading for the first four months being "Actuals" and for the remaining months being "Budget".

24 The first of these (1 0009 to 1 0011) is described in the Index to the Carter Exhibits as "Revised budgeted P&L for 2001 FY 'Profit & Loss'". The second (1 0012 to 1 0022) has the same description except it is "wireline" rather than "Profit & Loss". The third (1 0023 to 1 0032) is the same except it is "Service Provider" rather than "Profit & Loss", and the fourth (1 0033 to 1 0039) is the same except that it is "Calculations".

25 The properties pages of these documents bear no obvious correlation with the documents, except in the case of 1 0033 to 1 0039. In each case the entry for "last saved by" is "tholmes".

26 Page 1 0009 appears to have been prepared in early January 2001 (since it includes "flash for December"). The total on the second last line, "EBITDA Real Thing" for the year to June 2001 for Australia (Wireline and SP), is $14,411,918. This is the same figure as in the document at 1 0005 and, indeed, each of the individual monthly EBITDA figures is the same. This, in turn, suggests that the document at 1 0009 is a revised budget.

27 ASIC will contend that this was indeed a revised budget, which was used for the preparation of the March 2001 board papers. There appears to be a measure of correlation between page 1 0009 and the March 2001 board papers. For example, in the March 2001 board papers (MTB, vol 1, page 253) the budget figure for One.Tel in the column "January/February Budget $M" is 4,103. At page 1 0009, the forecasts for January and February EBITDA, when added together, amount to $4,102,548.

28 ASIC will also contend (T 3521) that the budget figures were used in the preparation of the March 2001 and January 2001 flash reports. I was taken to an affidavit by Kevin Kwan of PwC made on 8 September 2004, where he described steps he took to navigate through the I:/Drive in order to reach working papers for the March flash report (the report itself is at MTB, vol 1, page 382). By using the I:/Drive, Mr Kwan was able to move through the finance directory to "management accounts 2001" and then the subdirectory "March 2001" to come to a spreadsheet entitled "FLASH-EOM.xls". When the cell containing a figure of $50.352 million for Australian revenue for March 2001 was highlighted, the screen referred to "Financials!C21-'Final 1'D12". Cell C21 in the "Financials" document was a March 2001 revenue figure of $62.513 million, which when highlighted referred to "Word!G8".

29 Cell G8 in the Word document was the same figure of $62.513 million, adjacent to which was a breakdown of that figure into components for One.Tel, One.Card, One.Net and GSM 1800. The figure for One.Tel was $45.174 million. If that is added to the figures for One.Card and One.Net, the total for those three items is $50.352 million, the Australian revenue figure in the flash report. There was an additional figure of $12.161 million for GSM 1800, making up the total figure of $62.513 million. So it appears plausible to say that the March flash report was prepared on the basis that the Australian revenue for One.Tel would be $45.174 million.

30 When the One.Tel Australian revenue figure of $45.174 million was highlighted, the screen referred to "+I8 - 5000000". Cell I8 was the figure $50.174 million for One.Tel revenue under the heading "C/Mth Budget". When that cell was highlighted the screen referred to "Budgets!B6". The cell B6 is the "current month" figure for March 2001 of $50.174 million, adjacent to which are the monthly revenue budgets (rounded up) appearing at page 1 0009. On the face of it there appears to be a correlation between the March flash report Australian revenue and the revised budget Australian revenue for March, the correlation being that the flash report figure is the budget figure with the simple subtraction of $5 million.

31 As to the January flash report (MTB page 1379B), ASIC referred (at T 3531) to a working paper lying behind the January flash report (the paper is in the Carter Exhibits, vol J, page 19 0092), which gives the Australian revenue figure for One.Tel as $49.904 million (rounded up). The forecast Australian revenue figure for One.Tel for January 2001 on page 1 0009 is $49,903,708. In the January flash report, unlike the March report, there was no deduction of $5 million and ASIC will contend there was a straight utilisation of the budget figure.

2.1 Relevance

32 ASIC submitted (T 3440ff) that the business plan summaries and budgets are relevant to its case in three ways.

33 First, it submitted that they are relevant to its case concerning the two statements made by One.Tel to the market, in February and April 2001 respectively. The statement made on 27 February said that "One.Tel is focused and on track to becoming cash positive as forecast by June 2001". According to ASIC, the business plan summaries and budgets indicate when it was expected, as at the time of their preparation, that the company would become cash positive, and they assist in assessing whether, on 27 February, the company was in fact on track to becoming cash positive.

34 The statement made on 4 April said that the company was "tracking very well against forecasts that were initially made by management in August 2000", and was fulfilling the promises made to shareholders "to turn the business cash-positive and have a cash balance of $75m by 30 June 2001". ASIC's Fourth Further Amended Statement of Claim ("the Amended Statement of Claim") alleges (para 46) that the forecasts referred to in the announcement to the market came to be contained in the September business plan presented to the board meeting of 28 September 2000, and it alleges that, as at 4 April 2001 and at all times thereafter until 17 May, there was no reasonable factual basis for saying that One.Tel was tracking very well against those forecasts. ASIC said (T 3442-3) that the first four pages of the business plan summaries are the forecasts, the substance of which was presented to the September board meeting (as alleged at paras S42 and S43 of the Amended Statement of Claim). ASIC took the court to the September board papers (MTB, vol 1, page 3) and submitted that the figures presented to the board were in substance same as those in the business plan summaries, although there were minor variations.

35 Secondly, ASIC submitted that the budgets and business plan summaries are relevant to its allegation that the actual position of One.Tel differed from various forecasts, in the manner pleaded in paragraph S12 of the Amended Statement of Claim.

36 Thirdly, it submitted that the budgets and business plan summaries are relevant to an objective assessment of the company's financial position (T 3450). There were two limbs to this submission. First, ASIC said that a comparison of budgets and business plan summaries, showing expected results, with actual results shows that over a period of time, the company had a severely deteriorating financial position. Reference was made to paragraphs S44B-D of the Amended Statement of Claim, where it is alleged that significant contributors to One.Tel's EBITDA losses included decreases in gross margin arising from revenue and gross margin percentage shortfalls against budget, particularly in the digital and fixed-wire business unit of the Australian operations and in the international operations, and increases in operating expenses over budget in the digital and fixed wire business unit. Secondly, the budgets and business plan summaries are relevant to the assessment of the likely cash usage of the company in the period from May to December 2001, a matter relevant to the assessment of the company's financial position in the period from January to May 2001.

37 Fourthly, ASIC submitted that the budgets and business plan summaries are relevant to the allegation in the Amended Statement of Claim, at paragraph S46, that the flash reports sent to directors did not disclose that the figures for the Australian (ex-Next Generation) operations with respect to the digital and fixed-wire business were drawn from modified budget data and did not reflect actual financial performance of the business unit.

2.2 Provenance

38 The budget documents at 1 0009 to 1 0038 were located on the finance directory of the Ferriers I:/Drive. According to the Carter Exhibits index, their file path through the finance directory is through "Business Plans 01 and 02", to "Australian wireline and SP uplift-final.xls". The provenance of the business plan summaries at 1 0001 to 1 0008 is less straightforward.

39 Mr Farago of Ferrier Hodgson gave evidence, in his affidavit made on 3 May 2004, that the liquidators of One.Tel, Mr Sherman and Mr Walker, obtained the business plan summaries (1 0001 to 1 0008) from Piper Alderman, solicitors acting for Mr Silbermann and Mr Beck, in August 2001. Piper Alderman invited the liquidators to inspect One.Tel documents held by them, and inspection took place on 14 August 2001. He said the liquidators then requested a complete set of the documents inspected, and these were provided. Exhibited to Mr Farago's affidavit was a table listing One.Tel documents received and reviewed by Ferrier Hodgson. Pages 1 0001 to 1 0008 of the Carter Exhibits, also identified by their ASIC barcode numbers, appear in the list with a document location that identifies Piper Alderman. Mr Farago's evidence is that the documents so described were sourced from the documents provided by Piper Alderman to Ferrier Hodgson in August 2001.

40 Copies of documents at 1 0001 to 1 0008 were also produced to ASIC by Piper Alderman pursuant to a notice issued to Mr Silbermann under s 33 of the ASIC Law, according to an affidavit by Kieran Breckenridge, a solicitor seconded to ASIC, made on 22 March 2005. They were produced in a folder of documents labelled "One.Tel Business Plans 2001-2002".

3. Category 3 - Trial Balances

41 ASIC has tendered a bundle of documents at 2 0001-2 0101 that purport to be trial balances. Each of them is headed "TRIAL BALANCE AS AT" and then an end-of-month date is given (for June 2000, the date is incorrectly given as 31 June). In some cases two documents with somewhat different figures identify the same month. In some of them the figures are presented in A4 style, while in others they are laid out horizontally in spreadsheet style.

42 The documents may be identified for present purposes by their page numbers in the Carter Exhibits and their month-end dates, as follows:

· 2 0001-2 0008: 31 March 2000 (A4 version with 7 numbered pages)

· 2 0009-2 0014: 31 May 2000 (A4 version with 5 numbered pages)

· 2 0015-2 0019: 31 June 2000 (A4 version with 4 numbered pages)

· 2 0020-2 0028: 31 June 2000 (spreadsheet version of 8 unnumbered pages)

· 2 0029-2 0037: 30 September 2000 (spreadsheet version of 8 unnumbered pages)

· 2 0038-2 0046: 30 November 2000 (spreadsheet version of 8 unnumbered pages)

· 2 0047-2 0055: 31 December 2000 (spreadsheet version of 8 unnumbered pages)

· 2 0056-2 0058f: 31 January 2001 (spreadsheet version of 8 unnumbered pages)

· 2 0059-2 0062e: 28 February 2001 (spreadsheet version of 8 unnumbered pages)

· 2 0063-2 0071: 31 March 2000 (spreadsheet version of 8 unnumbered pages)

· 2 0072-2 0079: 31 March 2001 (spreadsheet version of 8 unnumbered pages)

· 2 0080-2 0087: 30 April 2001 (spreadsheet version of 8 unnumbered pages)

· 2 0088-2 0094b: 31 May 2001 (spreadsheet version of 8 unnumbered pages)

· 2 0095-2 0101: 31 May 2001 (spreadsheet version of 7 unnumbered pages)

43 ASIC claims that the trial balance labelled as 31 March 2000 is in fact for the month of April 2000. It will be seen that there are no trial balances for July, August and October 2000 and there appear to be two versions for each of June 2000, March 2001, and May 2001. The defendants referred (in DS 56) to evidence, particularly by Mr Reynolds, which indicates that there were two sets of trial balances for March, April and May 2001 (T 1134), and evidence by Mr Carter that the dates of some of the trial balances may not be correct (T 2693-2694).

44 There are properties pages for the trial balances for 31 March 2000, 31 May 2000, 31 June 2000 (both versions), 30 September 2000, 30 November 2000, and 31 December 2000 (both versions), but not for the other months. They appear to be correlated to the documents in the manner alleged by ASIC, except that there appears to be a discrepancy in dates for the document at 2 0020-2 0028, as the document is said to be the trial balance as at "31 June 2000" and the properties pages identify a document as at 31 July 2000. The properties pages appear to relate to a version designated "TB adept", a version that the defendants printed out and tendered for the purposes of the application. It is headed "TRIAL BALANCE AS AT 31-Jul-00". Some of the figures are different (the defendants submitted (T 3770) that 34 of the figures were different) and the totals on the defendants' tendered document are different from the totals on the document tendered by ASIC.

45 In oral submissions the defendants took me to tabs at the bottom of properties pages, which suggested that there were other versions of the trial balances not included in ASIC's tender (T 3769ff, noting in particular the reference to "TB final" at T 3774).

46 The "last saved by" line of the properties boxes tendered by ASIC is "tholmes", in all except two cases ("pminney" at 2 0008 and "nnassif" at 2 0071). The trial balances for 31 March 2000 and 31 May 2000 have what appears to be a computer file path at the top of the document adjacent to the heading, though apparently not through the I:/Drive: "C:\unzipped\TRIAL BALANCEpm2\TRIAL BALANCEpm2.xls]DUMP".

47 Only three of the documents have footers, which are as follows:

31 March 2000 - TRIAL BALANCE 2.xls, TB
31 May 2000 - TRIAL BALANCE a.xls, TB
31 June 2000 (A4 version)- TRIAL BALANCE June Ver 2.xls TB adj

3.1 Relevance

48 ASIC submitted that the trial balances are relevant in four ways. First, the trial balances are part of the material used in calculating the appropriate provision for bad or doubtful debts. This is because, when taken with other documents, they permit one to discern what the recent collection record of the company was. By looking at trial balances and debtors' ledgers from 2000, one can ascertain how long on average it was taking the company to collect its debts and to what extent it was able to collect them. Secondly, the trial balances are relevant to ascertaining the actual provisions made from time to time for bad or doubtful debts. Thirdly, they are relevant to ascertaining the liquidity position of the company at various points in time. Fourthly, the trial balances for the year 2001 are relevant to determining to what extent there was a change in realisable value of the company during that year, a matter that goes to the calculation of damages.

49 ASIC has informed the court (in AS 51) that it does not contend that the trial balance appearing at 2 0063-2 0071 accurately states the net loss for the month of March 2001, because the amount stated ($191,357,327.16) appears to fail to take into account accrued income of approximately $35.7 million. ASIC relies on the adjusted trial balance at 2 0072-2 0079 for that purpose.

3.2 Provenance

50 These documents are sourced in the Ferrier's I:/Drive, in the manner disclosed in ASIC's index to the Carter Exhibits. The file path through the Ferrier's I:/Drive is different depending upon whether the document relates to 2000 or 2001. In the former case, the file path is through "Mgtact 2000" to a specified month or "year end" as appropriate (for example, April 2000 for the document at 2 0001-2 0008), to a location which in most cases uses the words "TRIAL BALANCE", followed by symbols such as "2.xls" or "a.xls", although there are other final locations such as "Consolidation September 00.xls" or "October TV.xls". In the latter case, the file path is through "Tim" and "Administration" to various locations identified as "BS" or "Balance Sheet" for a stated month, although the May documents identify "RATA" as an intermediate step.

4. Category 4 - Management Accounts (Fixed Wire)

51 ASIC has tendered documents at 3 0001-3 0106 that purport to be management accounts for One.Tel for the months from June 2000 to May 2001. Each document is headed "MANAGEMENT ACCOUNTS - ONE.TEL P/L" and then, on a different line, "For the Month Ended" followed by the date of the last day of the month in question. In some cases two documents with somewhat different figures identify the same month. They are all in spreadsheet style rather than A4 style. Most of them are profit and loss statements (headed as such), presenting revenue by business segments, costs of goods sold, contributions by business segments, gross margin, operating expenses, profit/(loss) before interest and tax and depreciation, net profit/(loss) before tax, net profit/(loss) after tax, and net profit/(loss) after tax and dividend. Actual and budget figures are given for the month and year to date. However, some give only operating expenses.

52 The documents may be identified for present purposes by their page numbers in the Carter Exhibits and their month-end dates, and may be described as follows:

· 3 0001-3 0004: profit and loss statement for 30 June 2000 (three numbered pages plus properties page, with footer "MgtAccount One.Tel ac.XLS, Otel P&L");

· 3 0005-3 0009: profit and loss statement, probably for 31 July 2000 although the headings and subheadings are inconsistent ( three numbered pages plus a cells page and an illegible properties page, with no footer);

· 3 0010-3 0011: operating expenses, probably for 31 July 2000 although the headings and subheadings are inconsistent (a single page and an illegible properties page, with no footer);

· 3 0012-3 0016: profit and loss statement 31 August 2000 (three unnumbered pages plus a cells page and a properties page, with no footer);

· 3 0017-3 0019: operating expenses 31 August 2000 (a single page, a cells page and an illegible properties page, with no footer);

· 3 0020-3 0028: profit and loss statement 30 September 2000 (four unnumbered spreadsheet pages presented on eight pages, plus an illegible properties page, with no footer);

· 3 0029-3 0030: operating expenses 30 September 2000 (a single page and an illegible properties page, with no footer);

· 3 0031-3 0039: profit and loss statement 31 October 2000 (four unnumbered spreadsheet pages presented on eight pages, plus an illegible properties page, with no footer);

· 3 0040-3 0042: operating expenses 31 October 2000 (two unnumbered pages plus an illegible properties page, with no footer);

· 3 0043-3 0047: profit and loss statement 30 November 2000 (four unnumbered pages plus an illegible properties page, with no footer);

· 3 0048-3 0051: operating expenses 30 November 2000 (two unnumbered pages plus a cells page and an illegible properties page, with no footer);

· 3 0052-3 0060: profit and loss statement 31 December 2000 (four unnumbered spreadsheet pages presented on eight pages plus an illegible properties page, with no footer);

· 3 0061-3 0063: operating expenses 31 December 2000 (two unnumbered pages plus an illegible properties page, with no footer);

· 3 0064-3 0068: profit and loss statement 31 January 2001 (four unnumbered pages plus an illegible properties page, with no footer);

· 3 0069-3 0072: operating expenses 31 January 2001 (two unnumbered pages plus a cells page and an illegible properties page, with a footer "OPEX - MgtAccount One.Tel.XLS");

· 3 0073-3 0081: profit and loss statement 28 February 2001 (four unnumbered spreadsheet pages presented on eight pages in A4 style, plus a properties page, with no footer);

· 3 0082-3 0084: operating expenses 28 February 2001 (two unnumbered pages bearing the date 1/05/02 and the footer "OPEX - MgtAccount One.Tel.XLS", and a properties page);

· 3 0085-3 0095: profit and loss statement 31 March 2001 (five unnumbered spreadsheet pages presented on 10 pages, plus a properties page, with no footer);

· 3 0096-3 0098: operating expenses 31 March 2001 (there appear to be two versions of a two-page operating expenses document, and then an additional two-page version of the month, year-to-date and full-year figures only, each dated 25/05/02 and with the footer "OPEX - MgtAccount One.Tel.XLS", and a properties page;

· 3 0099-3 0100: two single pages each headed "STATUTORY ACCOUNTS" and then "PROFIT & LOSS - CONSOLIDATED", for 31 March 2001 and 30 April 2001 respectively, each bearing the date 25/01/02 and slightly different times, with no footer;

· 3 0101: single page headed "STATUTORY ACCOUNTS" and then "PROFIT & LOSS -" for 31 May 2001, with no date or footer;

· 3 0102-3 0106: profit and loss statement 31 May 2001 and operating expenses 31 May 2001 (two unnumbered pages (partly illegible) with no footer for the profit and loss statement, and two pages for the operating expenses bearing the date 22/05/02 and the footer "OPEX - MgtAccount One.Tel.XLS", and a properties page).

53 In some cases the properties pages seem to be correlated with the documents, but there are some discrepancies (for the documents at 3 0073-3 0081 and 3 0082-3 0084). For each of the documents with properties pages, the entry for "last saved by" is "tholmes", except for 3 0016 (nadeenj).

54 There was a substantial amount of evidence about management accounts in the cross-examination of Ms Reynolds and Mr Carter, especially the former, which has been summarised by the defendants in DS 54. Ms Reynolds indicated, for example, that there was an early version of the April management accounts on the I:/Drive but it was substantially incomplete: T 1132-1133, 1135.

4.1 Relevance

55 ASIC submitted that the management accounts are relevant to show the type of information that was available to management, on a regular basis in respect of each month. Secondly, the management accounts for 2001 show what the actual financial position was in the months of particular focus in this case, while the management accounts for 2000 are relevant to the trend of performance and place the 2001 management accounts in context. ASIC will contend that the management accounts show a consistently deteriorating financial performance. Thirdly, it is necessary to look at the actual financial performance on a month-by-month basis to form a view about the likely cash requirements for the remainder of the calendar year. Fourthly, there are specific allegations in the Amended Statement of Claim as to the misleading nature of the flash reports and their departure from actual results: Schedule, paras S44D to 46A. There are also allegations about the inaccuracy of the March board papers, bearing in mind the actual results (para S47ff), and allegations concerning EBITDA losses which draw on actual results revealed in the management accounts (paras S39 to 41).

4.2 Provenance

56 These documents are sourced in the Ferrier's I:/Drive. According to the index to the Carter Exhibits, in most cases the file path through the finance directory is through "Mgtact2001", and a stated month, to "MgtAccount One.Tel.xls" or some close variant of that title. However, from March to May 2001 onwards (except for 3 0102-3 0106) the file path is through "Tim" and "Administration" to "BS" with a stated month.

5. Category 5 - Bill Run Breakdown (Sample)

57 The document tendered by ASIC is at 4 0021-4 0037. It has 17 numbered pages, with the footer on each page, "To be billed Mar01.xls MAR542". The document has no general heading. It comprises 11 columns of words, letters and (principally) figures, with totals at various points. The column headings appear only on the first page. They are: Batch, SRC, File, Call#, Call Value, Charge#, Charge Value, Charge Credit, Calls Credit, Total Value and Total Cost.

58 Ms Reynolds gave evidence that a discussion about how a "to be billed" report was meant to operate probably came up in conversations with Ms Ashley: T 1002.

5.1 Relevance

59 Senior counsel for ASIC told the court that the relevance of this document was connected to some evidence ASIC proposed to read in an affidavit by Samantha Randall made on 26 July 2004. He informed the court that Ms Randall would provide a description of One.Tel's billing procedures, explaining that "bill run" was a term used within One.Tel for sending out a particular batch of bills to a particular subset of One.Tel customers, referable to the same day each month, and that the bill run cycle for each month was designated for those particular days in the month.

60 Ms Randall would give evidence that, in addition to preparing cash flow spreadsheets on a daily basis, she prepared and updated daily billing run inflow projections called "bill run spreadsheets". She would say she was responsible for inserting and updating both the forecast numbers and the actual numbers, and that she saved the documents electronically. She would say that the spreadsheet recorded the particular bill run cycle and the estimated time of receipt of bills by customers, and under the heading "billing run total" the forecast dollar value of the particular bill run. She would say that this information was obtained by her from the spreadsheet which, she understood, was prepared and updated by Elizabeth Ashley.

61 Senior counsel for ASIC drew attention to information in the bill run spreadsheet annexed to Ms Randall's affidavit (SJR 17), and submitted that the document provides relevant quantitative information about the extent of delays in billing, a topic raised in the pleadings and referred to in various places in the board minutes. Then he referred to the bill run breakdown to show that the total value billed on local calls for the period in question was less than the cost of the local call business, the local call business being a very substantial part of total billings. According to his submission, this document shows that the information was available, if sought, to ascertain what the mix of business was and what the profits and losses were on different types of business and whether they were changing. In his defence Mr Rich points to a change in the sales mix ("the traffic mix") as one of the matters that caused a shortage of cash, and ASIC alleges in the Amended Statement of Claim that he should have known about that change.

62 Additionally, ASIC alleges that the information in this document should have revealed to those concerned that the budget estimate, according to which the local call business would become positive near the beginning of 2001, would not be realised and losses were continuing.

63 The defendants criticised ASIC (DS 59) for what they said was a movement over time in ASIC's contentions about the relevance of the "to be billed" document. ASIC responded (AS 62) saying that the defendants' submission had misstated the position. It does not seem to me necessary to deal with this dispute in any detail, except to say that there do appear to be some plain links between 4 0021 and the summary document 4 0003, which add to the plausibility of ASIC's argument that the documents are at least potentially relevant to its contention that there was a ready means within One.Tel to monitor the sales mix from time to time.

5.2 Provenance

64 The document is sourced in the finance directory of the Ferrier's I:/Drive. The electronic version of the document is not called a "bill run breakdown", either on the face of the document or in the finance directory file path, where it appears as a Microsoft Excel worksheet which is described as "to be billed March 01.xls". The file path, according to the Carter Exhibits index, is through subfiles for "Mgtact2001", "March 01", "Revenue", and "To be billed Mar01.xls".

6. Category 6 - Spreadsheet relating to Gross Margin (comparison.xls)

65 The document tendered by ASIC is in the Carter Exhibits at 4 0055-4 0056, with a properties page at 4 0057, which appears to correlate with 4 0055. The "Summary" properties page identifies the author of 4 0055 as "tholmes". As explained below, I have decided to allow some evidence by Mr Carter, in his 29 November Reports, annexing a properties page for 4 0056, which identifies "ashleyl" adjacent to "last saved by". I shall refer to the two pages as a single document for convenience, but it is not clear that they were prepared as a single document.

66 The document at 4 0055-4 0056 is in spreadsheet style without any heading, but both pages have the footer "Comparison.xls". Nothing on the face of either page identifies the year to which the figures relate. There are some gaps on each page, suggesting that they might be incomplete.

67 4 0055 has six vertical columns of figures under three headings, "Bgt", "Liz" and "Mgt", in each case subdivided into "Jan" and "Feb". 4 0056 also has six columns of figures, but there are only two main headings, "Bgt" and "Liz", subdivided into three months each, namely May, Jan and Feb.

68 On each page, the figures entered in the vertical columns are identified by descriptions set out in a column to their left. However, there is a line of figures in 4 0055, and four rows of figures in 4 0056, that do not have any such description. On page 4 0056 there is a description "Traffic weighting (revenues)" for which there are no adjacent figures, and there are three separate lines for "Telstra" and two separate lines for "Other carriers". One of the descriptions at page 4 0056 is "ndd/iddf2m" with no other explanation. On page 4 0055 one of the lines of figures, described as "Variable Gross margin", appears to be broken down into seven other descriptions relating to such matters as "Gross Margin % Switch" and "Gross Margin % Preselect", and there are figures for all of these "sub-headings" in the "Bgt" columns but not in the "Liz" or "Mgt" columns, although there are entries in these columns for "Variable Gross margin".

69 On both pages the descriptions "Variable Gross margin", "ARPU", "Service numbers", "Revenue" and "CM" appear. In the case of "Variable Gross margin", the figures for Bgt Jan and Feb correspond, but the figures for Liz Jan and Feb are different from one another. The same is true of the "ARPU" line, the "Service numbers" line, the "Revenue" line and the "CM" line (although the CM figures at 4 0055 are for Jan only).

70 In my judgment on the Carter Report I said (at [201]) that comparison.xls was "deeply mysterious to the uninitiated".

6.1 Relevance

71 ASIC submitted that the topic of comparison.xls is the "traffic mix" mentioned in respect of category 5 above. ASIC's contention is that comparison.xls shows that a financial analyst working for One.Tel was able to form a view about the traffic mix at some time after the January and February results became available, that view being that the weighting to the less profitable or unprofitable Telstra business was significantly worse than had been budgeted for. This indicates that the means were there for others including the defendants to determine the traffic mix had they wished to do so. In his Defence (para S36(g)(v)) refers to a "shortfall in expected Gross margins in the fixed wire business of the Australian operations of the One.Tel Group which was undetected until April 2001…". According to ASIC, Mr Rich's reference to detection in April is consistent with a financial analyst having done an exercise such as this in April. But, in ASIC's view, an examination of comparison.xls shows what is involved in doing the exercise and will assist the court to form a view as to whether the exercise could have been done earlier, just as easily, if the defendants had chosen to arrange for it to be done.

6.2 Provenance

72 The two pages are located in the finance directory of the Ferrier's I:/Drive, in the file path "Liz", "Comparison.xls". I have decided to allow ASIC to read para 7 of Mr Carter's report dated 29 November 2004, for reasons given below (although I have rejected paras 10 and 11 of his report dated 21 December 2004). In para 7 Mr Carter said that, according to the properties page that he attached to his report, document 4 0056 was last modified by "ashleyl". He noted that the "Liz" subdirectory contains a large number of files that refer to a "Liz Ashley" and he gave an example (attached to his report) in which she is described as a financial analyst.

73 Mr Breckenridge gave evidence, in his affidavit of 24 March 2004, that a copy of 4 0056 was produced on behalf of Mr Silbermann in response to a notice issued to him under s 33 of the ASIC Law. It was part of a folder the spine of which bears Mr Silbermann's name, and the word "Presentations", which is crossed out. The copy of the document in that folder is stapled to two other pages. One of those pages is headed "Revenue sensitivity analysis based on actual costs and Theoretical margins", and displays figures for Telstra and other carriers as well as other matters. The other page is headed "One.Tel-Oct Management Accounts" with a subheading "Proof of Fixed Wire Gross Margin". That page has a footer, "I:\FINANCE\Tim\fixed wire margin - Oct.xls]Sheet1".

74 Mr Breckenridge's evidence on this matter does not assist me with respect to the provenance and nature of comparison.xls. There is nothing to indicate when the three pages were stapled together, or by whom. The pages have what appear to be other staple holes in the top left-hand corner. It would be unsafe to infer, in the absence of additional evidence, that they were stapled together by Mr Silbermann or that the other two pages relate to 4 0056.

75 ASIC submitted that the evidence is capable of giving rise to the conclusion that, at some time after the January and February results were available Elizabeth Ashley, a financial analyst in the employ of One.Tel, entered figures in the columns of comparison.xls headed "Liz" and put the budget figures in the columns headed "Bgt", and also the inference that those budget figures relate back to the budget figures at 1 0012-1 0021. There does seem to be a degree of correlation between 4 0055 and 1 0012-1 0021, summarised in detail in AS 52, which appears to be correct, although often, as ASIC says, the figures are only "comparable" rather than precisely the same, and some cannot be matched at all. The correspondences between the budget (and 4 0055) and the figures in 4 0056 are fewer.

76 Notwithstanding the limited level of correspondence, in my view ASIC's submission is plausible. The defendants drew attention to the fact that the "author" of one of the pages is identified in the properties page as Mr Holmes. But there is evidence that it was Ms Ashley rather than Mr Holmes who last modified the document, and it is plausible to contend that she, as a One.Tel financial analyst, entered the figures under the columns headed "Liz" and entered up some budget figures when they became available, having regard to the degree of correspondence between the two sets of figures.

7. Category 7 - Australian Collections Profile Summaries

77 There is a single page document at 8 0001 headed "Aged Debtors Summary as at 31/5/00" and a properties page for it at 8 0002 (last saved by "SUNNIEC"). Page 8 0001 gives figures that appear to be for current debtors and then debtors at 30-day intervals up to 330 days, for One.Tel, One.Net, One.Card and Wireline, and totals for each of those businesses, with a grand total of $74.16 8 million. The footer is "Aged debtors as at 310500.xls, Sheet 1". The file path on the finance directory appears to be through "Debtors" to that sub-file.

78 Additionally, ASIC's tender in this category comprises the following documents, with no properties pages:

· 8 0003: single page spreadsheet with no footer headed "Profile Summary - Base Date: 30Jun2000", listing debtors for 90+ days, and for 30 day intervals from 30 to 360 days, according to various classifications such as "Billing Problem", "Final Demand", "Slow Payer" etc;

· 8 0004-8 0006: spreadsheet headed "Collections" and "Profile Summary - Base Date: 03Jan2001" on three numbered pages each dated 4/01/01 with a footer visible only on the third page, " presenting debtors up to 180 days (possibly incomplete) by the same classifications as the first document, and three graphs;

· 8 0007: single page spreadsheet with no footer headed "Profile Summary - Base Date: 31Jan2001", presenting debtors by same classifications, up to 330 days;

· 8 0008-8 0010: spreadsheet headed "Collections" and "Profile Summary - Base Date: 02Feb2001" on three numbered pages each dated 2/02/01 with a footer on each page, " presenting debtors up to 180 days (possibly incomplete) by the same classifications as the first document, and three graphs;

· 8 0011: single page spreadsheet with no footer headed "Profile Summary - Base Date: 19Feb2001", presenting debtors by same classifications, up to 360 days;

· 8 0012: single page spreadsheet with no footer headed "Profile Summary - Base Date: 28Feb2001", presenting debtors by same classifications, up to 360 days, with the words "working copy" written above the table by hand;

· 8 0013: single page spreadsheet headed "Collections Profile Summary - Base Date: 30Mar2001", with column headings obscured and showing only some of the classifications in the first document plus some different ones such as "Card Agents", with a partially secured footer " 8 0014: single page spreadsheet with no footer headed "Collections Profile Summary - Base Date: 30APR2001", presenting debtors by classifications similar to those used in the last-mentioned document, up to 360 days, with the words "working copy" written above the table by hand;

· 8 0015: single page spreadsheet with no footer headed "Collections Profile Summary - Base Date: 28MAY2001", presenting debtors by same classifications as last-mentioned document, up to 360 days.

79 All except one of the documents (8 0013) have handwritten notes of some kind on them.

80 In his affidavit made on 3 March 2005, Craig Allsopp exhibited files which provided guidance to One.Tel staff as to the meaning and use of many of the categories of debtors used in the profile spreadsheets.

7.1 Relevance

81 ASIC submitted that these documents are relevant to doubtful debt calculation. The ascertainment of debtors from time to time, and their profile in terms of age of debts, is of relevance in assessing the appropriate provision for doubtful debts. The tendered documents arrange debtors in classifications which indicate such matters as whether a final demand had been made and whether legal action had been taken.

7.2 Provenance

82 Pages 8 0001 to 8 0002 are to be found on the Ferrier's I:/Drive through the file path identified above. The Carter Exhibits index claims that the provenance of 8 0007 and 8 0012 is through the documents obtained by Ferrier Hodgson from Piper Alderman, as described under the heading "Provenance" for 1 0001 to 1 0008 above. As to the remainder, Kim Morison, general counsel at Ernst & Young, provided an affidavit dated 25 March 2004 in which she identified various documents from the Carter Exhibits as forming part of the business records of Ernst & Young coming from identified sources, which she tabulated. The tabulated documents include the present ones.

8. Category 8 - Ferrier Hodgson's Reports to Creditors

83 There are several reports at 22 0001-22 0189 and MTB 1789-1870, some prepared when Mr Sherman and Mr Walker were administrators (that is, in the period from 29 May to 24 July 2001), and some after they became liquidators. The first set of reports are their reports to creditors as administrators, dated 12 July 2001, for One.Tel Ltd, One.Net Pty Ltd, One.Card Pty Ltd and One.Tel Shop Pty Ltd. There is a report to creditors sent to the committee of creditors dated 28 September 2001, and a second report to the committee of creditors dated 4 October 2001. Then there are annual reports to creditors made pursuant to s 508, dated 14 November 2002, 6 August 2003 and 29 June 2004 for One.Tel and various subsidiaries. I shall from time to time refer to all of these documents, compendiously, as "the liquidators' reports", although it must be remembered that the first set were prepared by them as administrators.

8.1 Relevance

84 ASIC submitted, first, that the liquidators' reports are evidence of One.Tel's recovery experience after the commencement of the administration, and that is relevant to the adequacy of provisioning for doubtful debts. Secondly, ASIC submitted that the reports are relevant to the question of realisable value of the business at the time the company went into administration. The reports contain estimates bearing on that matter. That, in turn, will be relevant to ASIC's case as to the position at earlier times, back to February 2001. Thirdly, in the report of 12 July 2001 there is a comment (Carter Exhibits, page 22 0036) relevant to the position in Europe, to the effect that the United Kingdom operations were marginally cash flow positive but the European subsidiaries were operating at a loss. Fourthly, the recoveries on sale of various parts of the business and the manner in which the liquidators sold those parts is said to be relevant to an assessment of realisable value and whether, in relation to those sales, any different position would have obtained if the sales had occurred, say, three months earlier.

85 As explained below, ASIC's explanation of the relevance of the liquidators' reports in oral submissions was substantially supplemented by AS 60, in which it particularised the representations in the reports upon which it would rely, and explained their specific relevance case-by-case.

8.2 Provenance

86 Copies of the liquidators' reports are in the Carter Exhibits. As I understand the position, it is appropriate for me to proceed for present purposes on the basis that these copies are true copies of the reports as distributed to creditors on about the dates they bear, and that they were provided to ASIC by Ferrier Hodgson, as the Carter Exhibits index asserts.

9. Category 9 - E-mail from Randall to McLean

87 This is an e-mail attaching a graph in the form of a bell curve. The bell curve indicates certain assumptions made as to when bills would be collected after they had been dispatched, showing that about 65% would be collected in the period from the second to the fourth weeks and 25% more in the ensuing eight weeks, giving rise to an inference (according to ASIC's case) that the final 10% was not expected to be collected, at least within any reasonable time. The document was therefore said to be some evidence bearing on the adequacy of provisioning for doubtful debts. It was also said to be relevant to the question whether there was, at the end of March 2001 a large amount capable of being billed but which had not been billed, comprising $40 million of unbilled data, of which $28 million was said to be about to be sent out (see One.Tel board papers, 30 March 2001, MTB 227, under heading "Cash"; Minutes of One.Tel board meeting of 30 May 2001, MTB 329B, under heading "Financial Summary"; affidavit of James Packer made 18 June 2002, para 61).

88 Ms Randall is a witness for ASIC but, at the time when the defendants objected to this document, she had not been asked to give any evidence about it. Subsequently, however, she was interviewed and a draft affidavit was prepared (marked MFI 77). Senior counsel for the defendants informed the court that, assuming Ms Randall made the affidavit as drafted, she had in that document identified or authenticated the category 9 e-mail and so the defendants would no longer press their objection to that document (T 3874).

10. Category 10 - Butcher's Paper Presentation relating to Billing

89 Senior counsel for ASIC informed the court that he proposed to read an affidavit by Geoffrey Kleemannn made on 27 July 2004. He said Mr Kleemann would say that on19 April 2001 he attended a meeting at the Sydney offices of Publishing and Broadcasting Ltd, also attended by Mr Beck, Mr Silbermann and Mr Hodgson of One.Tel, and that Mr Kleemann was accompanied by Darren Miller. Mr Kleemann says that during the course of the meeting, a presentation was given to him and Mr Miller on the subject of billing issues in One.Tel. He would say that during the course of the presentation, Mr Hodgson, Mr Beck or Mr Silbermann wrote on pieces of butcher's paper clipped to a board. He would exhibit to his affidavit copies of two pages of that butcher's paper.

90 I was taken to the two pages of butcher's paper. The first is divided into 12 boxes with various headings such as "Load", "Missing Services" and "Reports". The last box, headed "Total", has a figure of $5.9m for "Billed" and a figure of $12.9m for "To be billed", and those figures are added together to produce $18.8m. The second page has two vertical columns, headed "Billed" and "To be billed". To the left of those columns is a series of descriptions relating respectively to "Next Gen", "Fixed Line" and "One.Net". Some parts of the two columns have been completed but in some places there are question marks or dashes, some figures are circled, one is crossed out and some are connected by arrows.

10.1 Relevance

91 ASIC emphasised the totals in the box on the bottom right of the first page, "Billed $5.9m" and "To be billed $12.9m". ASIC said this was an indication of the billing position as at 19 April 2001, noting that it was a very much lower figure than the $40 million of unbilled data, alleged by Mr Beck and Mr Silbermann according to the evidence of Mr Packer and the minutes of the March board meeting, of which $28 million was said to be about to be sent out.

10.2 Provenance

92 The butcher's paper was exhibited to Mr Kleemann's affidavit, and ASIC says he will give evidence that he observed the creation of the pages at the meeting on 19 April 2001, which he attended.

11. Authentication of documents

93 The defendants contended that ASIC's provenance evidence fails to address a matter of fundamental importance in a case such as this, namely the authenticity of the nine categories of documents. According to this submission, documents do not prove themselves, and need to be authenticated, in effect as a condition precedent to relevance and to admissibility under the exception to the hearsay rule for business records. For these submissions, the defendants relied on National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309. ASIC claims that its provenance evidence, which identifies the source of the documents in the Ferriers I:/Drive or elsewhere, when considered with what is on the face of the documents themselves, is sufficient foundation for the tender of the documents, which can then be allowed to speak for themselves. It challenges Rusu to the extent that the case would impose any higher requirement of authentication.

94 In its written submission AS 51, ASIC invited the court to order that any one or more of the provisions of Part 2.2 or Part 3.2 of the Evidence Act do not apply in relation to evidence going to the authenticity of the documents tendered, on the ground that this "matter" is not genuinely in dispute. But it seems to me plain, having heard the submissions, that the defendants have an arguable case in the difficult area of authentication of documents, and it would not be appropriate to make any such order.

11.1 The Rusu decision

95 In Rusu, the plaintiff bank ("NAB") claimed that Ms Rusu stole a large sum of money from it, with assistance from Mr Mato. NAB alleged that after the alleged stealing they had significant amount of funds available to them compared with their resources prior to that time. It sought to recover its allegedly stolen money, and to assert charges and to obtain tracing orders over their assets.

96 Counsel for NAB tendered two pages (referred to in the judgment as "pages 25 and 26") of what appeared on their face to be a transaction history inquiry in relation to an account identified by number, but nothing on the face of the documents identified the bank or the customer. There was, however, evidence that pages 25 and 26 were in a bundle of documents produced by Advance Bank in response to a subpoena that specified bank records for a different period, and to the effect that Advance Bank's customer was Francis Mato. Mr Mato's full name was Peter Francis Mato. A solicitor for NAB made an affidavit attaching a schedule of payments, alleging that Mr Mato had paid a substantial sum of money into the Advance Bank account on the day after the alleged theft.

97 Bryson J rejected the tender. In doing so, he carefully distinguished between authentication of documents, relevance, the procedure for proving the contents of documents, and admissibility of representations in documents as business records notwithstanding the hearsay rule.

98 As to authentication, he said (at 312):

"Before a business record or any other document is admitted in evidence it is obviously necessary that there should be an evidentiary basis for finding that it is what it purports to be. Documents are not ordinarily taken to prove themselves or accepted as what they purport to be; there are exceptions under the common law and under statute for public registers and for many kinds of documents when certified in various ways: and see the method of proof provided in some cases by s 170 and s 171 of the Evidence Act 1995. At the simplest, the authenticity of a document may be proved by the evidence of the person who made it or one of the persons who made it, or a person who was present when it was made, or in the case of a business record, a person who participates in the conduct of the business and compiled the document, or found it among the business' records, or can recognise it as one of the records of the business."

99 I read the last quoted sentence to mean that in the case of a business record, its authenticity may be proved, at the simplest, by the evidence of a person who satisfies two conditions: namely, first, that he or she participates in the conduct of the business; and secondly, that he or she compiled the document, or found it among the records of the business, or can recognise it as one of the records of the business. As I read the passage, his Honour did not have in mind proving the authenticity of the business record by the evidence of a person unconnected with the business who has found the document among the records of the business or can recognise it as a business record. But the sentence is intended to be illustrative rather than comprehensive, as demonstrated by the words "at the simplest".

100 Bryson J held (at 313) that it was necessary to establish by evidence, other than the documents themselves, that pages 25 and 26 were a bank statement, that they were a statement of Advance Bank, and that the account to which they referred was an account of Mr Mato. He rejected the idea (at 315) that under the Evidence Act, the authenticity of documents tendered in evidence could be determined simply on the basis of the form and content of the document or on that basis taken with information about the source from which the document was produced, showing that it was produced on subpoena and by whom. He carefully analysed the Australian Law Reform Commission's Interim Report on Evidence (Report No 26, 1985), referring to various paragraphs that indicated that the Commission did not regard its Draft Bill as bringing about any such result. He noted that the Commission had addressed s 45b of the Evidence Act 1929 (SA), under which no authentication was initially required and it was enough that the document was apparently genuine, and said (at 316):

407 The same is true of the statement that other minor adjustments include a $1.8 million increase in inventory in the Ferriers trial balance compared with the I:/Drive trial balance. But in my opinion, the words "which appears to be a correction of a negative inventory balance for the One.Card entity as at March" are an expression of opinion for which, as far as I can see, the assumed or asserted facts are not identified in any of the material that ASIC wishes to read, and I would therefore reject those words.

408 These rulings also have the consequence that the file note of 24 January 2002 (Attachment 2 to the November 2004 Report), which is almost identical to the sub-paragraphs, is admissible to the same extent. The last sentence is inadmissible for the reason given below.

409 Mr Carter's statement in the trial balances table that an electronic copy of the Ferriers trial balance was sent, presumably to PwC, by Mr Pfaff of Ferriers on 8 January 2002 is not in proper form but I would allow it into evidence. But his statement that the Ferriers trial balance was originally received by ASIC in hardcopy format in December 2001 is hearsay and strictly inadmissible, although there may be no issue between the parties about it. His statements in the two tables, describing the file path locations of the two documents, constitute evidence by observation and are admissible.

410 I regard Mr Carter's statement in the first sub-paragraph that profit and loss information was used in his Report, and his statements in the third, seventh and last sub-paragraphs to the effect that he selected or relied upon the Ferriers trial balance rather than the I:/Drive trial balance for the purposes of the Carter Report, as irrelevant and therefore inadmissible, since the Carter Report is not in evidence. The same ruling applies to the statement under the heading "Conclusion" in Attachment 2. It follows that the admissible material does not include any judgment by Mr Carter preferring the Ferriers trial balance to the I:/Drive trial balance. This is consistent with the position eventually adopted by ASIC (T 3707).

411 The evidence in Attachment 3, reconciling the monthly management accounts to the trial balances sourced from Ferriers for the months of January-April, is at least partly and perhaps wholly admissible as mathematical calculations by an accountant. Attachment 3 showed the dollar amounts and differences for revenue, cost of goods sold, operating costs and EBITDA. The differences are simply mathematical calculations. There may be some matters of judgment involved in the reconciliation process and if there are, they may be admissible as expert opinion evidence under s 79.

412 A difficulty arises because several horizontal lines in Attachment 3 relating to management accounts identify "App I 10", suggesting that the management accounts figures were taken from Appendix I to the Carter Report, part I-10 of which is a PwC working paper consolidating actual earnings for the Group based on management accounts, adjusted for OPEX charge. The working paper seems to involve a level of judgment that is difficult to specify, and may well have been influenced by information gathered by Mr Carter's staff that he was eventually told to disregard. Appendix I was excluded from evidence in consequence of my decision at [2005] NSWSC 256. But in my view, Attachment 3 is properly regarded as a calculation based on assumed numbers, to be proved by other evidence such as the tender of the relevant documents. It cannot be regarded as evidence of the truth of the numbers it sets out, where all the numbers purport to be taken from sources that are to be tendered. The utility of Attachment 3 will depend upon ASIC making good the numbers by proving them through tender of the documents or in some other way. It is not necessary, in my view, to make an order under s 136 with respect to Attachment 3, but to avoid confusion I shall not allow into evidence the four references on the page to Appendix I of the Carter Report.

413 Once the numbers are recognised as assumed facts, Attachment 3 is admissible in accordance with s 79 and the Makita requirements, to the extent that it contains an expression of expert accounting opinion.

414 In the penultimate sub-paragraph of para 2 Mr Carter expressed the opinion that the differences in Attachment 3 are insignificant. No reasoning was given and there was no explanation of the word "insignificant". It seems to me probable that Mr Carter's statement was based on nothing other than a comparison of the difference figures with the total figures for each item in each month. Thus, for example, he was saying that a revenue difference of $357,148 for April is insignificant when the alternative figures for revenue for that month are in the vicinity of $50 million. If that is right, his statement is not based on any particular expertise, is of no utility when the court is in a position to make its own judgment of the matter, and is inadmissible under s 76. If Mr Carter used the word "insignificant" in some other, more technical sense, he has not explained it and therefore his statement does not comply with the Makita requirements and is inadmissible for that reason.

415 Mr Carter's evidence in the last sub-paragraph is to the effect that the trial balance e-mailed on 14 January 2002 agreed to the hardcopy trial balance received by ASIC in December 2001. In the third last sentence (words beginning "with an apology …"), Mr Carter purports to give an account of the contents of the e-mail at MFI 8/9.8. The document should be allowed to speak for itself. As I have already said, the words "has been relied upon and" in the last sentence are inadmissible. The remainder of the last sub-paragraph, though not wholly in proper form, seems to me admissible.

416 In summary, three principal features of para 2 are admissible, namely his reconciliation of the four formats of the March 2001 management accounts, his assessment of the primary difference between the two different versions of the March 2001 trial balance, and his reconciliation of the management accounts and trial balances for the four months from January to April 2001. That evidence has significant probative value and is likely to be useful. Considering the evidence in isolation, I cannot see any basis for saying that its probative value would be outweighed by any of the dangers identified in s 135, though the exercise of my discretion under that section is to be made upon consideration of Mr Carter's admissible evidence as a whole.

417 My conclusions expressed above exactly confirm the provisional rulings on para 2 that I made at T 3717.22 to T 3718.19.

Report dated 29 November 2004, para 3

418 Paragraph 3 of the 29 November 2004 Report is headed "March trial balance". In that paragraph Mr Carter noted that in the Carter Report he had stated that the trial balance found at pages 2 0063-71 of the Carter Exhibits relates to 31 March 2001 rather than 31 December 2000 as had been printed on the worksheet detailing the property pages. He gave his reasons for that view. He said that the file name for those pages was "Balance Sheet March01.xls" and its location in the finance directory of the I:/Drive was the March 2001 file directory under Mgtact 2001\March01. He added that the net loss as per the December 2000 trial balance had been $85,102,288 (Carter Exhibits page 2 0054) whereas the net loss as per the trial balance at pages 2 0063-71 was $191,375,327.

419 The trial balance in question is the one described as "the I:/Drive trial balance" in para 2, discussed above. Paragraph 3 involves an expression of opinion by Mr Carter from extraneous sources and therefore falling foul of the principles in my judgment on the Carter Report. But it also contains evidence of observation of the file path, which is admissible. Therefore I would reject the first sentence and the words "I say this because" in the second sentence. The fate of this evidence under s 135 depends on an overall assessment of Mr Carter's admissible evidence.

Report dated 21 December 2004, paras 13-15

420 Mr Carter's affidavit made on 21 December 2004 attaches a further report of the same date. ASIC wishes to read paragraphs 13-15 of that report on the subject of management accounts, and paras 10 and 11 on the subject of comparison.xls.

421 Paragraphs 13, 14 and 15 of the December 2004 Report were headed "Management accounts". In para 13 Mr Carter referred to the defendants' written submission, DS 39, in para 21 of which the defendants contended that the management accounts on which ASIC relied for many of its conclusions were not final, complete or accurate, but were recognised and dealt with by management at the time as significantly understating actual EBITDA, by reason of the disruption which One.Tel was experiencing in 2001 to its billings.

422 Paragraphs 14 and 15 constitute Mr Carter's answer to that submission. He made the point that, while billing problems might reasonably be expected to impact on cashflow, proper accounting processes would still result in a correct measure of EBITDA, because income earned but not yet billed would nevertheless be accrued or estimated and brought to account. He said that there were, on the I:/Drive, specific directories containing files relating to accounting for each month, a review of which showed that subdirectory files entitled "revenue" brought to account accrued revenue and were of the type that Mr Carter would expect to have been created to recognise revenue earned but not billed. He did not claim that these subdirectory files, which he did not specifically identify, were in fact used to accrue revenue for the purposes of the management accounts for January, February and March 2001.

423 Paragraph 13 is unobjectionable, because it simply refers to submission DS 39 and states the assumption that the submission refers to January, February and March 2001, laying the foundation for the opinions in the next two paragraphs. Paragraph 14 contains an expression of Mr Carter's expert opinion as an accountant about the proper and usual accounting treatment of earned but unbilled income in a telecommunications company such as One.Tel. That is expert opinion evidence satisfying s 79 and the Makita requirements, and therefore admissible. The fact that the point he makes may be a fairly obvious and basic one about accounting on an accrual basis does not detract from its admissibility. Paragraph 15 simply states the conclusion that Mr Carter derives from the reasoning in para 14, and is admissible on the same basis.

424 Ms Reynolds gave evidence (T 1002) that she might have spoken to Ms Ashley about how revenue was accrued in One.Tel's accounts, and that the question how a "to-be-billed report" was meant to operate probably came up in conversations with Ms Ashley. It seems to me, however, that there is no prospect that any such conversations affected the opinions expressed by Mr Carter in paras 14 and 15, because as I read them, they are simply expressions of general accounting opinion about the proper and usual way to deal with earned but unbilled revenue in a telecommunications company.

425 Sub-paragraph 14(c), which is also expert opinion evidence, does not clearly identify the detailed spreadsheets and journal entries to which it refers, although it appears that some specific files were in contemplation. In view of the evidence about Ms Reynolds' discussions with Ms Ashley, it appears to me that the exercise in sub-paragraph 14(c) is open to extraneous influence, and therefore the sub-paragraph should be rejected upon the principles set out in my judgment on the Carter Report.

426 Given the submission in DS 39 to which Mr Carter has responded, it appears to me that his expert opinion has significant probative value, and if it were considered in isolation, there would appear to be no danger that any of the consequences identified in s 135 would arise. In saying this, I do not mean to imply that I have formed the view on the validity of the submission in DS 39.

19.2 Evidence about comparison.xls

Report dated 29 November 2004, para 7

427 ASIC wishes to read the following information from para 7 of the 29 November 2004 Report:

"Attachment 8 is a copy of the properties page for the file comparison.xls, located in a subdirectory under the name of 'Liz'. That page shows that the file was last modified by "ashleyl' on 27 April 2001. Further, the 'Liz' subdirectory contains a large number of files that refer to a 'Liz Ashley', an example of which describes Ms Ashley as a 'financial analyst' and is attached as Attachment 9."

428 This is evidence of observation, other examples of which are found in para 8 of the affidavit of 23 July 2004 and paras 2 and 3 of the November 2004 Report. It is clearly admissible, subject to s 135 considerations.

Report dated 21 December 2004, paras 10 and 11

429 Paragraphs 10 and 11 of the December 2004 Report are in a part of the report headed "Margin analysis". There Mr Carter discussed some aspects of comparison.xls (the document at pages 4 0055 and 4 0056 of the Carter Exhibits). At para 8 (which is not sought to be read) he corrected some transposed figures in an analysis made in his 29 November Report and at para 9 (also not sought to be read) he referred to some workpapers reconciling the second page of comparison.xls to supporting documentation contained on the I:/Drive. Then in para 10 Mr Carter explained that the I:/Drive contains two files from which those workpapers were sourced, that those files contain spreadsheet workings that provide inputs to page 4 0056, and that he had not located any similar file supporting the data in page 4 0055. He set out the file paths for those two files, through the finance directory and the subfile "Liz" to, respectively, "National GM Jan01.xls" and "National GM Feb01.xls". A note to para 10 said that the I:/Drive contains another subfile entitled "National GMrbrevised.xls" with a last modified date of 3 May 2001, compared to a last modified date for the Feb01.xls file of 16 May 2001. Mr Carter said he believed the Feb01.xls file to be the most up-to-date February analysis and noted that it agreed with the gross margin analysis detailed in the comparison.xls spreadsheet at 4 0056.

430 In para 11 of the December 2004 Report Mr Carter said that although pages 4 0055 and 4 0056 do not bear dates on their face or refer to particular time periods, the underlying calculation of information is contained in files, within directories, that bear the names respectively of January 2001 and February 2001.

431 In my opinion paras 10 and 11 are inadmissible. Mr Carter could give evidence of observation of the file paths of the two National GM files, if it were relevant to do so. But the relevance of doing so depends upon there being a connection between those two files and comparison.xls. ASIC's evidence of such a connection is Mr Carter's own evidence in paras 10 and 11, where he said that the files contain spreadsheet workings that provide inputs to page 4 0056, and described the files as "underlying calculation information" for comparison.xls.

432 In my judgment on the Carter report I found (at [211]) that Mr Carter's reliance on comparison.xls for the opinions expressed in paragraphs 242-249 of the Carter Report involved conscious or unconscious acceptance by him of facts about the nature and status of the document, and perhaps its authorship, not self-evident in the document itself; and it was more likely than not, subject to any further evidence Mr Carter might have given if permitted to do so, that the source of the unstated facts was the evidence of Ms Ashley or Mr Holmes, or Ms Reynolds' discussions with one or both of them, information that Mr Carter had been told to disregard. My findings on that matter, and my conclusion that the Carter Report was inadmissible and ought to be excluded under s 135, entail that Mr Carter's opinions linking the two National GM files to comparison.xls are likely to have been influenced by unarticulated information supplied to him or his staff in a fashion that contravened the Makita requirements and also raised discretionary grounds for exclusion.

19.3 Other evidence no longer pressed

433 There are two other pieces of evidence by Mr Carter at ASIC initially proposed to read, but they are no longer in issue. First, ASIC sought to rely on para 13 of Mr Carter's affidavit of 8 September 2004 simply to establish that a document recently located by Mr Kwan contained the same information as one in the Carter Exhibits, but in a format that made the document easier to read. But in the course of argument, the defendants informed the court that it would not be in contention that the two documents contain the same data (although the defendants reserved their right to object to the tender of either version) (T 3687).

434 Secondly, para 10 of the 29 November 2004 Report gives Mr Carter's reasons for concluding that a document headed "Deferred payment listing for March 2001" (Carter Exhibits, page 13 0001) relates to March 2001. During the course of argument, senior counsel for the defendants drew the court's attention (at T 3688) to the fact that the author of the document (Ms Randall) had deposed in her affidavit made on 6 June 2002, para 17, that the document is the deferred payment listing created and updated by her as at 31 March 2001. He said (at T 3689) that there was no contention that the document related to March 2001.

435 In reply, ASIC elected not to press these two paragraphs (T 3732).

19.4 Exercise of the ss 135 and 136 discretions with respect to additional Carter evidence

436 In summary, the following five components of Mr Carter's affidavit evidence are admissible, notwithstanding my judgment on the Carter report:

(1) part of the evidence in para 8 of the affidavit of 23 July 2004, relating to modification of the January 2001 management accounts;

(2) part of para 2 of the November 2004 Report, principally comparing four formats of the March 2001 management accounts, comparing two versions of the March 2001 trial balances, and comparing the management accounts and trial balances for the months from January to April 2001;

(3) part of paragraph 3 of the November 2004 Report, identifying the I:/Drive trial balance as a version of the March 2001 trial balance;

(4) part of paragraphs 13-15 of the December 2004 Report, giving Mr Carter's opinion on whether disruption of billings could lead to the understatement of EBITDA;

(5) part of paragraph 7 of the November 2004 Report, giving evidence about the properties page for comparison.xls and the status of Ms Ashley.

437 It is clear that these five components of evidence meet the relevance standard of s 55 of the Evidence Act. In my opinion there is no occasion for applying s 135 to any of this evidence. The probative value of some parts of the, considered in isolation, maybe slight, as indicated above. But the probative value of other parts is significant. Some of Mr Carter's evidence may assist ASIC in its attempt to have documents admitted without calling former staff of One.Tel who may have been associated with them, but the Carter evidence is at a lower level, not itself creating, in my opinion, a danger that any of the three matters identified in s 135 might arise. And some of Mr Carter's evidence could not be described as assisting ASIC to avoid calling One.Tel witnesses, such as paras 13-15 of the December 2004 Report and para 2 of the November 2004 Report (since, in the latter case, the reconciliation of documents would be a matter for expert evidence even if One.Tel staff were called).

438 Given the limited scope of Mr Carter's admissible evidence, I do not see any basis for apprehending that the giving of this evidence will lead to undue waste of time. The leading of the evidence will be by affidavit, and the cross-examination, to the extent that it is limited to that evidence, should not take up extensive time, even if (as the defendants submitted) there are some 50 differences between the two versions of the March trial balances. As I made plain during argument, I believe it would have been tidier for ASIC to have Mr Carter prepare a fresh affidavit in dealing with the matters of evidence which ASIC now wishes to reduce, rather than for ASIC to rely on affidavit said reports prepared at an earlier stage for other purposes. But the outcome of the argument of admissibility is not evidence that I would regard as a risk of being misleading or confusing for the purposes of s 135.

439 I received extensive submissions on s 135, but it does not seem to me that the relatively limited evidence by Mr Carter that I have found to be admissible comes anywhere near attracting the exercise of the discretion conferred by that section. Nor do I see any proper basis for limiting the use of Mr Carter's affidavit evidence under s 136.

440 Consequently the five components of Mr Carter's affidavit evidence that I have found to be admissible will not be excluded or limited on discretionary grounds.

20. Conclusions

441 I have decided that all nine categories of ASIC's tender documents to which objections have been maintained are admissible, ought not to be excluded from evidence under s 135, and ought not to be subject to a limited use order under s 136. The only exception to this decision relates to some pages that are illegible, but I will allow ASIC to replace them with legible copies. Additionally, I shall allow ASIC to read the parts of Mr Carter's evidence, as just specified, and I shall not exclude that evidence under s 135 or limit its use under s 136.

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20/05/2005	-	Paragraph 45, the word "bomb" should be "bottom"; paragraph 49, the words "contended and" should be "contend"; paragraph 63, the word "to" after the word "plausibility" should be "of"; paragraph 76, the words "ended up" should be "entered up"; paragraph 89, third sentence, the word "say" after the word "Kleemann" should be "says"; paragraph 267, first sentence, the word "the" should be inserted before the words "case of liquidators first appointed..."; paragraph 297, the word "that" deleted in first line; paragraph 330, the word "allowed" in second line should be deleted; paragraph 338, the word "deciding" in seventh line should be replaced with "citing"; paragraph 348, the word "invite" in fifth line should be "inviting"; paragraph 385, the words "the present" should be deleted; paragraph 419, the word "Florence" in first sentence should be deleted; paragraph 436(4), the word "destruction" should be "disruption". - Paragraph(s) 45, 49, 63, 76, 89, 267, 297, 330, 338, 348, 385, 419, 436(4)
25/05/2005	-	. - Paragraph(s) .