Australian Securities and Investments Commission v Rich - [2006] NSWSC 826

No judgment structure available for this case.

Reported Decision:
58 ACSR 414

New South Wales

Supreme Court

CITATION: ASIC v Rich [2006] NSWSC 826
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 14 August 2006

JUDGMENT DATE :
21 August 2006

JURISDICTION: Equity

JUDGMENT OF: Austin J

DECISION: Plaintiff's reading of some affidavits/parts of affidavits held to amount to impermissible splitting of its case; other affidavits/parts of affidavits held to be permissible as evidence in reply

CATCHWORDS: EVIDENCE - evidence in reply - splitting the case - civil penalty proceeding - whether plaintiff should be permitted to adduce evidence in reply notified to defendants after it closed its case in chief but before they opened their case in defence - whether defendants' evidence under reply reasonably foreseeable during plaintiff's case in chief

LEGISLATION CITED: Corporations Act 2001 (Cth) s 1317L
Uniform Civil Procedure Rules 2005, rule 29.6

CASES CITED: Killick v R (1981) 147 CLR 565
Lawrence v R (1981) 38 ALR 1
R v Chin (1985) 157 CLR 671
R v Frost (1839) 4 St Tr (NS) 86
Re HIH Insurance Ltd (in prov liq); ASIC v Adler (2001) 40 ACSR 214
Rich v ASIC (2004) 220 CLR 129
Shaw v R (1952) 85 CLR 365

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 (P)
D L Williams SC with M J Steele (D1, D4)

SOLICITORS: Georgina Hayden, Solicitor for Australian Securities and Investments Commission (P)
Thompson Eslick (D1, D4)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

MONDAY 21 AUGUST 2006

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

JUDGMENT

1 HIS HONOUR: These reasons for judgment relate to the question whether ASIC should be permitted, after the close of the defendants' case, to adduce evidence in reply, being affidavit evidence that ASIC served on the defendants before they opened their case.

Background

2 ASIC closed its case on 9 February 2006 (T 10,431.42). On 13 February 2006 senior counsel for the defendants informed the court that his clients would be going into evidence (T 10,434.10). On the defendants' application, a substantial adjournment was granted to give them time to complete the preparation of their affidavits and documentary tender. On 5 April 2006, after the defendants had served their affidavits on ASIC, ASIC made an application for another substantial adjournment before commencement of cross-examination of the defendants. Senior counsel for ASIC submitted (T 10,458) that, as the two defendants' affidavits comprised some 744 pages together with exhibits of 8,977 pages (some of which were documents already in evidence), an adjournment was needed to permit ASIC to formulate objections to admissibility, prepare for cross-examination, make inquiries and consider evidence in reply. He proposed to serve any evidence in reply shortly before the resumption of the hearing. An adjournment was granted, as requested, to 5 June 2006, and ASIC was directed to serve any evidence in reply by 31 May.

3 During the course of argument on the adjournment application, senior counsel for the defendants made it clear that his clients would oppose any application by ASIC to adduce evidence in reply (T 10,482.16). Senior counsel for ASIC submitted that the question whether ASIC should be allowed to have a case in reply could not be determined in vacuo, and should not be addressed until particular evidence for the proposed case in reply had been identified (T 10,462.38).

4 On 2 June 2006, after ASIC had served its proposed evidence in reply, the defendants made an application for a further adjournment for a week. Senior counsel for the defendants explained to the court (T 10,512) that the defendants wished to consider, in light of the proposed evidence in reply, whether to read certain paragraphs of their affidavits; whether it was necessary or desirable to clarify the meaning of certain paragraphs of the affidavits by supplementary oral evidence in chief; whether to seek to lead additional oral evidence in chief; and whether to add documents to defendants' tender. He said the defendants also wished to put in train some enquiries in relation to the evidence in reply, including some enquiries to make sure they had all the appropriate documentation (T 10,513). The adjournment was granted, for the period sought by the defendants.

5 The defendants opened their case on 13 June 2006. Senior counsel for the defendants made an opening address, the affidavit of Mr Rich was formally read and rulings were made on objections to admissibility. There followed lengthy cross-examination and re-examination of Mr Rich, and cross-examination of Mr Silbermann, which is continuing.

6 Mr Silbermann's cross-examination was interrupted on 14 August, to hear argument on the proposed evidence in reply, so as to minimise delay at the conclusion of the defendants' case. Submissions were directed to nine of the affidavits in reply that ASIC served on the defendants at the end of May 2006. It may be necessary to hear further argument with respect to an affidavit in course of preparation, in substitution for an affidavit whose deponent is ill, and with respect to ASIC's proposed tender of documents.

7 ASIC's nine new affidavits may be organised by subject matter as follows:

(1) Telstra billing issues: affidavits of Robert Trevor Dewstow made 26 May 2006 and Gary Spratt made 25 May 2006;

(2) monitoring traffic mix: Mr Spratt's affidavit;

(3) PricewaterhouseCoopers' retainer on One.Tel's billing system: affidavits of Ian Christopher Hockings made 31 May 2006 and Emma Suzanne McMahen made 24 May 2006;

(4) continuation of executives after voluntary administration: affidavit of Luke Kenneth Holtom made 31 May 2006;

(5) Lucent issues: affidavit of Phillip John Pryke made 30 May 2006;

(6) CLEC issues: affidavit John Linton made 31 May 2006;

(7) Optus billing issues: affidavits of George Malcolm Carmichael Adams made 23 May 2006 and Allan James Robertson made 25 May 2006.

Legal principles

8 In the present proceeding ASIC seeks declarations of contravention of a civil penalty provision, namely s 180(1) of the Corporations Law, the substance of which has been preserved by the Corporations Act 2001 (Cth) in respect of events occurring in the first half of 2001. It seeks disqualification orders and compensation orders. Section 1317L of the Corporations Act requires the court to apply the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of contravention.

9 Rule 29.6 of the Uniform Civil Procedure Rules 2005 deals with the order of evidence and addresses in civil proceedings in this court. Where the "opposite party" (the defendants in this case) have elected to give evidence, then after the close of the opposite party's case, the beginning party (ASIC here) may make an address closing its case (rule 29.6(4)(c)). There is no express provision for evidence in reply, but it is established by case law that the court has a discretion to permit it.

10 As a matter of practice in the Equity Division, the plaintiff will usually serve any affidavits in reply before the commencement of the hearing, pursuant to directions of the court designed to avoid surprise and ensure that the hearing is conducted fairly and efficiently. If affidavits in reply have been served in a timely fashion, there is unlikely to be any contention that the plaintiff ought not to be permitted a case in reply, or any argument about whether the contents of affidavits in reply are limited to rebuttal or extend as well to supplementing the plaintiff's case in chief. This is because the defendants have received notice of the plaintiff's evidence and have had the opportunity, with leave, to respond to it. Often the affidavits in chief and in reply are read almost contemporaneously at the beginning of the hearing. There is no surprise or unfairness, absent unusual circumstances.

11 In the present case the usual procedure has not been followed, because the defendants, relying on their privilege against exposure to a penalty vindicated by them in the High Court (Rich v ASIC (2004) 220 CLR 129), chose not to state whether they would go into evidence or notify ASIC of their evidence until after ASIC closed its case. Inevitably, therefore, ASIC served its proposed evidence in reply to the defendants' evidence after the defendants had cross-examined ASIC's witnesses-in-chief. But, in contrast with the typical criminal cases where issues of "splitting the prosecution case" arise, ASIC served its proposed evidence in reply before the defendants opened their case, and time was given to the defendants to take ASIC's proposed evidence into account.

12 In Re HIH Insurance Ltd (in prov liq); ASIC v Adler (2001) 40 ACSR 214, a civil penalty case, the issue was whether ASIC should be permitted to read affidavits of its expert accountant in reply to the defendants' case. The issue was whether the affidavits were merely a rebuttal of the defendants' case, and therefore "strictly in reply", or were impermissible confirmation of the plaintiff's case (at [7]). Santow J (as his Honour then was) permitted ASIC to rely on one of the affidavits, which replied to the evidence of the defendants' expert, where the affidavit of the defendants' expert was filed after ASIC had closed its case. But he held that ASIC should not be permitted to rely upon an earlier affidavit of the same expert because to do so would impermissibly split ASIC's case (at [2]). His Honour referred to s 1317L and accepted that the case before him was to be treated as a civil case, so that the court's discretion was to be exercised more liberally than in a criminal case, but he found it was necessary to take into account that ASIC was acting in the public interest in what was essentially a civil prosecution, and that due regard had to be taken of the seriousness of the civil penalties involved (at [8]-[9]).

13 ASIC submitted that the court should adopt Santow J's approach in the present case. The defendants submitted that in light of the decision of the High Court in Rich v ASIC (2004) 220 CLR 129, decided after Santow J's judgment, the court's approach should be the approach taken in criminal cases, according to which the discretion to allow the prosecution to call further evidence after the close of the defence case is to be used only in exceptional circumstances (citing R v Chin (1985) 157 CLR 671; Shaw v R (1952) 85 CLR 365; Killick v R (1981) 147 CLR 565 and Lawrence v R (1981) 38 ALR 1).

14 In Rich the majority held that the defendants were not obliged to give discovery, because the case was a proceeding for the imposition of a penalty to the extent that disqualification orders were sought by ASIC, and consequently the defendants were protected by the privilege against exposure to a penalty. But this does not mean that the court equated a proceeding for a disqualification order with a criminal prosecution. On the contrary, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ referred to s 1317L (at [19]) and said it followed from this provision that "the statute itself requires the application of the body of law which has developed in relation to the privileges against penalties and forfeitures, when deciding whether the appellant should be ordered to make discovery of documents in the proceedings". In other words, the proceeding is a civil proceeding but the rules of civil procedure include the privilege against exposure to a penalty, which is therefore applicable. Section 1317L does not abrogate the privilege (at [25]).

15 It seems to me that the approach taken by Santow J in Adler is consistent with the High Court's approach in Rich. The court treats an ASIC civil penalty case in which a declaration of contravention is sought as a proceeding subject to the civil rules of evidence and procedure, but when exercising its discretion in evidentiary and procedural matters, the court has regard to the nature of the proceeding as a civil penalty proceeding and the seriousness of the consequences of granting the relief sought (including disqualification orders that have a penal effect).

16 I doubt whether this approach is substantively different from the criminal procedure, in terms of principles or application. The following principles emerge from the criminal cases:

· the general principle is that the prosecution must present its case completely before the accused is called upon for his defence, and therefore, although the trial judge has a discretion to allow the prosecution to call further evidence after evidence has been given for the defence, the prosecution should be permitted to call evidence at that stage only if the circumstances are very special exceptional and, generally speaking, not if the occasion for calling the further evidence ought reasonably to have been foreseen (R v Chin (1985) 157 CLR 671, 676 per Gibbs CJ and Wilson J; at 684 per Dawson J; Shaw v R (1952) 85 CLR 365, at 380 per Dixon, McTiernan, Webb and Kitto JJ);

· this general rule is not merely a technical rule, but an important rule of fairness (Killick v R (1981) 147 CLR 565 at 569 per Gibbs CJ, Murphy and Aickin JJ; Lawrence v R (1981) 38 ALR 1 at 3 per Gibbs CJ);

· the accused is entitled to know the case which he has to meet so that he may have adequate opportunity to determine what questions he may wish to ask in cross-examination, what evidence, if any, he may wish to call and what objections, if any, he may wish to raise in the case against him (Chin at 685 per Dawson J);

· although there is no unfair prejudice to the accused in tendering damaging evidence against him in the course of the Crown case, there will frequently be unfair prejudice if a piece of the damaging evidence is kept until his case is in progress or his case is closed (Lawrence at 23 per Brennan J);

· the general rule applies with equal force whether the Crown seeks to introduce evidence during the course of the case for the defence or after the close of the case for the defence (Lawrence at 3);

· where evidence, though in rebuttal of the accused's evidence, is relevant to prove the prosecution case and would have been covered if the prosecution case had been fully and strictly proved, and the need to give it could have been foreseen, it will generally be rejected in reply (Chin at 676, 684-5; Shaw at 379-80);

· on the other hand, if any matter arises that was not reasonably foreseeable, and of which the Crown had no warning, the matter may be answered by the Crown (Shaw at 379-380, partially rejecting the formulation by Tindal CJ in R v Frost (1839) 4 St Tr (NS) 86 at 386);

· in this respect, the test of reasonable foreseeability has replaced the older view that the matter must be one which arose ex improviso and which no human ingenuity could foresee (Cross on Evidence, 6th Australian edn by JD Heydon (2000), [17650]);

· the general rule applies where the accused has raised an alibi, and so if the details of the alibi have not been disclosed before the trial, it will generally be right to say that the occasion for calling evidence to rebut the alibi could not have been foreseen, but if details of the alibi were known before the trial, refuting evidence should be called in chief (Killick at 569-70).

· the prosecution will not be prevented from giving evidence in reply directed to an issue the proof of which does not lie on the prosecution, such as insanity, or from rebutting evidence of the accused's good character, provided the prosecution has not anticipated the raising of an issue of this kind and led evidence with regard to it (Chin at 677, 685; Shaw at 379-380);

· evidence may be given in reply to prove some purely formal matter the proof of which has been overlooked in chief (Chin at 677).

17 Generally, the same principles govern the exercise of the court's discretion in civil cases. It is said that the court applies the principles about splitting the prosecutor's case "less strictly" to a plaintiff in a civil case, to use the language of the learned editor of Cross on Evidence at [17720], citing Shaw's case at 85 CLR 383 per Fullagar J, or "more liberally", to use the language of Santow J in Adler at [9]. But in a civil penalty case in which disqualification orders are sought, once one has regard to the nature of the proceeding and the seriousness of the consequences attaching to the relief sought, and all of the considerations affecting the particular evidence sought to be adduced, it is unlikely that the injunction to be "more liberal" will have any effect on the exercise of the discretion. At any rate, I have found in the present case that the application of the principles governing the exercise of the discretion in criminal and civil cases has led me to reasonably clear conclusions, without the need to consider whether to be, or not to be, "liberal".

18 The defendants submitted a list of matters that they claimed to be relevant to the exercise of the court's discretion to permit the plaintiff in a civil penalty proceeding to adduce further evidence after it has closed its case. I accept their list as a useful statement of relevant discretionary factors, applicable in such a case as the one before me. The list is as follows:

19 These factors need to be considered by reference to the particular evidence that ASIC wishes to adduce in reply. The nature of factors (b), (d), (e), (f) and (i) is such that nothing useful can be said about them in the abstract. Factors (a), (c), (g) and (h) are amenable to some general comments. I have already commented on the significance of factor (a), in light of the decision in the Rich case.

20 As to factor (c), I have pointed out that in the present case, unlike the criminal cases cited by the defendants, ASIC served their proposed evidence in reply before the defendants opened their case, and the defendants were granted an adjournment specifically to permit them to consider the proposed evidence in reply, and to adjust their own evidentiary case in light of it. Therefore, this is not a situation where the defendants were deprived of the opportunity of meeting the plaintiff's whole case when they embarked on their own evidentiary case. Unfairness to the defendants, if any, would arise out of not knowing of the evidence in reply when they made their forensic decisions at an earlier stage, in preparing for cross-examination of ASIC's witnesses. There would not be any such unfairness if ASIC's proposed evidence were strictly in reply to the defendants' evidence, which ASIC could not have known until the defendants' affidavits and documents were served after it closed its case.

21 Factors (g) and (h) have particular weight where the proposed evidence is of limited utility - as in the case of Mr Linton's affidavit, for reasons I shall explain. Where the proposed evidence is material evidence served on the defendants before the opening of their case, and is strictly in reply, and ASIC has had no forewarning of the defendants' evidence to which the proposed evidence replies, fairness is likely to require that the evidence be permitted, even though it will add to the length of the trial. I say this in the context that counsel have estimated that the evidence in reply will occupy about 10 hearing days, if I permit ASIC to adduce all of it, in a trial of over 200 hearing days.

22 I turn now to the exercise of the court's discretion, bearing in mind these factors, with respect to the particular affidavit evidence that ASIC wishes to adduce.

(1) Telstra billing issues

23 The defendants provided the court with a written outline about the Telstra CSPA issues (DS 106), which referred to the pleadings and a substantial quantity of documentary and transcript evidence. I was taken to some of that evidence in oral submissions and I have now considered all of the matters that have been identified. However it seems to me unnecessary, for the purpose of expressing my reasons, to provide a full narrative account of the evidence.

24 In my view ASIC was on notice of the following things from the pleadings, its own evidence in chief, and cross-examination of its witnesses:

· the defendants were claiming in their Defences that the One.Tel Group had adopted the practice, consistently with normal industry practice, of withholding payment from carriers where there were billing or service disputes, and that there were deficiencies in billing data provided by Telstra (Rich Defence, paras S38B and S43);

· the 17 May board papers stated that there were "Telstra issues" regarding lack of provision of services, systematic and constant backbilling, and delay with implementation of eBill and links on line (MTB 1/293);

· the minutes record that Mr Rich told the 17 May board that the withholding of eBill had led to significant financial impacts and the loss of 80,000 Switch customers, and that negotiations were underway to investigate a commercial solution (MTB 1/330);

· the document "Major items beyond normal credit terms - as at 21 May 2001" (MTB 1/345) referred to "Telstra CSPA" which was said to be for an amount in dispute of $10 million;

· there is evidence that Mr Rich had told Mr Murdoch, in an e-mail on 23 April 2001, that he had a team reviewing the last 8 months of Telstra CDRs, and he expected to find significant over billing and customer sabotage (Annexure 4 to Mr Murdoch's affidavit made on 23 July 2004);

· there is evidence that CSPA issues, recorded in the Telstra tab of the carrier disputes.xls spreadsheet (exhibit P37-133) for a total amount of $46.8 million including "incorrect charging" of $6.2 million and "old data" of $16 million, were being handled by a team led by Mr Savva which had engaged Mr Dewstow as a consultant to assist in compiling the claim (cross-examination of Ms Ashley, T 5485);

· Ms Ashley said she was working on a system to check Telstra's Flex tape call data for errors (T 5588-5590), and a list of "Telstra dispute categories" (MFI 144, later DTB 12/5215) had been prepared;

· Ms Ashley said she attended a meeting with Mr Beck and representatives of Telstra on 10 May 2001 concerning One.Tel's claim that Telstra's tapes regularly contained old data (T 5590-3; exhibit P37-146);

· there were also documents in evidence, about which Ms Ashley was cross-examined, analysing aged flex tapes on a month-by-month basis (exhibits P37-148, P37-149), and adjusting the first January tape (MFI 147; JDR5/1806), and an e-mail from Mr Dewstow dated 3 May 2001 asking for similar adjustment records for later tapes, indicating that he was analysing payment files (MFI 150; JDR5/1805);

· in April 2001 One.Tel and Telstra exchanged lengthy letters concerning Telstra's delay in implementing eBill by insisting on security or a creditworthiness review, which suggest a substantial dispute, followed by further correspondence in May (exhibit MTB 7.4);

· on 30 April 2001 One.Tel wrote to Telstra raising issues of concern about Telstra's charging, saying that it had initiated an audit on Telstra billing (exhibit MTB 7.4);

· on 3 May 2001 One.Tel wrote to Telstra about 0BS billing data, expressing concern about tapes consistently containing billing data for calls older than 30 days (giving as an example the January ABS tapes said to contain $2.6 million attributable to call data older than 60 days), and further similar complaints were made about later tapes on 8 May and 10 May (exhibit MTB 7.4);

· on 4 May 2001 One.Tel wrote to Telstra about "critical operational issues", complaining about eBill and provisioning, and failure to implement LOLO except on a trial basis (exhibit MTB 7.4);

· on 10 May 2001 One.Tel wrote to Telstra making a complaint about 1900 charges (exhibit MTB 7.4);

· on 26 April 2001 Mr Spratt sent an e-mail to Mr Hodgson and Mr Beck on the subject "Telstra Project Plan", attaching a project outline which identified issues (MTB 9.18).

25 Generally speaking, Mr Rich's evidence (affidavit, paras 1421-1434) serves to confirm matters included in ASIC's case. He adds to this material in only limited ways. It seems to me that the main additional matters provided by Mr Rich's affidavit are:

26 In my opinion matters (a) and (b) could readily be inferred from ASIC's evidence in chief (if the evidence is accepted), in the absence of evidence from Mr Rich. The evidence that I have summarised in bullet points above implies that there were concerns over the same Telstra issues that Mr Rich identifies, and that One.Tel established a Telstra project in the fixed wire business which addressed those issues (arguably a step likely to have been taken in a meeting of the Fixed Wire team). Matter (c), the name of the project team, is of no consequence in itself. Matter (d) is considered below. I shall deal with matter (f) when considering Mr Dewstow's affidavit, but for the reasons I shall give, my conclusion is that evidence responding to that matter should not be allowed as evidence in reply.

27 Mr Rich's claim in matter (e), that the Project H team made "substantial progress" in the ways stated in para 1433, was specifically referred to by senior counsel for ASIC as a matter justifying a reply (T 13,480). But Mr Rich's assertion is a very modest claim, limited only to progress in "beginning to assemble" evidence and "to agitate a series of claims". It is not an assertion that the claims against Telstra were verified or strong or successful. Understood in that limited fashion, is again a matter readily capable of being inferred from the evidence in ASIC's case, particularly the correspondence in MTB 7 and the project outline in MTB 9.

28 This analysis suggests that Mr Rich's evidence about the Telstra CSPA issues was not new unforeseeable evidence, requiring a reply. Nevertheless ASIC wishes to reply by reading the affidavits of Mr Spratt and Mr Dewstow.

Mr Spratt's affidavit

29 Paras 1-6 of Mr Spratt's affidavit relate his employment history. In my opinion they should be allowed as part of ASIC's evidence in reply, because (for reasons given below), a small part of the substantive portion of Mr Spratt's affidavit will be permitted. Para 7 is formal.

30 In paras 8-29 of his affidavit, Mr Spratt works through paras 1421-1434 of Mr Rich's affidavit and answers Mr Rich's evidence, paragraph by paragraph. I have decided that ASIC should not be permitted to read that part of the affidavit as evidence in reply, except for para 24 (which responds to Mr Rich's para 1429). My reasoning is as follows.

31 ASIC was forewarned that the Telstra CSPA issues, which were material to ASIC's pleaded allegations, were likely to be issues in the defendants' case. It had the opportunity to address the CSPA issues and in fact it did so by tendering substantial documentation about them. No reason has been given for ASIC not adducing evidence from Mr Spratt in its case in chief, if it believed that Mr Spratt could assist in proving its pleaded case. Mr Rich's evidence does no more than collect the documentary material in a coherent narrative, provide some background and context to the documents, and make express some matters that would otherwise be left to inferences. It is reasonably foreseeable evidence.

32 Taking into account these considerations, and weighing up the other discretionary matters that I have listed, I have reached the conclusion that ASIC should not be permitted to read paras 8-23 of Mr Spratt's affidavit.

33 Para 25 responds to documentary evidence regarding customer churn. It is evidence that might have been adduced by ASIC in chief and is not evidence strictly in reply to para 1429. I shall not permit ASIC to read it.

34 Paras 26 and 27 are not evidence strictly in reply to the relevant part of Mr Rich's affidavit (para 1430). They give additional information about meetings at which Telstra was discussed, and about Mr Spratt's attitude to the disputes with Telstra. If permitted, the evidence would have very limited weight. I have decided not to permit it to be read, all things considered.

35 Para 28 responds to Mr Rich's evidence about making "substantial progress" (para 1433). My reasoning in respect of matter (e) above leads me to the conclusion that Mr Rich's evidence about substantial progress was reasonably foreseeable.

36 Para 29 responds to Mr Rich's para 1434(a). Mr Spratt's evidence is that Mr Dewstow's experience at AAPT was of no relevance to One.Tel because Telstra had subsequently made improvements to its billing system. In my opinion this question is quite remote from the matters to be decided in this case, and would open up a new evidentiary line of inquiry about Telstra's reforms to its billing systems, at so late a point in the trial as to be manifestly unfair to the defendants. I shall not permit para 29 to be read, on these discretionary grounds.

37 The evidence concerning Mr Spratt's alleged statement about Telstra's Project Firestorm (Mr Rich's para 1429 and Mr Spratt's para 24) warrants a different conclusion. It is relevant to the Telstra CSPA issues, because presumably ASIC will ask me to conclude that One.Tel's claims were not bona fide or sustainable; and if Telstra was behaving in the manner suggested by Mr Rich, its conduct might influence me to place more credence in One.Tel's claims. This evidence also goes to Mr Rich's credibility. In my opinion it truly is a matter that was not reasonably foreseeable. Senior counsel for the defendants took me to exhibit P54-431, which uses the words "Project Firestorm". But that document, although it mentions Project Firestorm, does not convey that Project Firestorm was a campaign by Telstra to damage One.Tel's business and undermine it as a competitor. The allegation that this was so was therefore one that ASIC could not reasonably have foreseen from its own documentary evidence. In my view, ASIC should be allowed to respond to Mr Rich's opening up this new matter by evidence in reply. Para 24 of Mr Spratt's affidavit is permissible evidence in reply, upon the application of the discretionary principles that I have outlined.

Mr Dewstow's affidavit

38 Paras 1-4 of Mr Dewstow's affidavit relate to his employment history and should be permitted. Para 5 is formal.

39 In paras 6-25 of his affidavit, Mr Dewstow responds to specific parts of the evidence in Mr Rich's affidavit. The first matter is Mr Rich's assertion in para 1433a that "Mr Pewstow" was retained by One.Tel as a consultant to assist in the preparation of its claim against Telstra. Mr Dewstow's evidence on this is essentially an account of his involvement with One.Tel and of the conversations he had with One.Tel executives about the tasks to be performed. He does not contradict Mr Rich's evidence in para 1433a, but instead, adds flesh to it. He clears up some confusion in the documentary evidence by saying that references to "Bob Pewstow" and "Bob Dewstow" are references to him, and that he prepared the project outline of 26 April 2001 as well as an e-mail of 3 May 2001 that is also in evidence.

40 Mr Dewstow's participation in the Telstra CSPA issues emerges from ASIC's documentary evidence, to which I have referred. It is arguable that there is some slight utility in Mr Dewstow giving evidence to clarify the misspelling of his name and to make it clear that he prepared the project outline, but both of those matters can be readily inferred from the relevant documents so that on balance, leading that evidence in reply is not justifiable. Mr Rich's claim, that Mr Dewstow was a consultant assisting in the preparation of the claim against Telstra, was a reiteration of evidence given by one of ASIC's witnesses, Ms Ashley, in cross-examination (T 5594.14). A fuller account of Mr Dewstow's role could have been given in ASIC's evidence in chief and in my view, there is no good reason for permitting that evidence to be given in reply. On the whole, my conclusion is that paras 6-12 of Mr Dewstow's affidavit should not be permitted.

41 In para 14 of his affidavit, Mr Dewstow responds to Mr Rich's claim in para 1433 that the Project H team made substantial progress in beginning to assemble evidence of misconduct and to agitate claims. For reasons I have given when dealing with Mr Spratt's affidavit, my view is that evidence on that subject is not evidence in reply and should therefore not be permitted after ASIC has closed its case.

42 In paras 15 and 16 of his affidavit, Mr Dewstow gives evidence about an e-mail from him to Mr Beck on the subject "Progress". The justification for leading this evidence in reply seems to be that it responds to Mr Rich's "substantial progress" claim. It ought not to be permitted on that basis, for reasons I have given, and in my view there is no other justification for it.

43 I shall, however, allow paras 17 and 18, along with para 13, because they are part of Mr Dewstow's account of his employment history with One.Tel. I distinguish those paragraphs from para 11, where Mr Dewstow gives evidence about his terms of engagement, not simply to establish his employment history but as part of his explanation of the scope of his consultancy, which goes beyond evidence in reply, and beyond evidence prefatory to evidence in reply.

44 In paras 19-23 of his affidavit, Mr Dewstow responds to Mr Rich's statements about particular Telstra issues, namely old CDRs, 1900 calls, eBill and provisioning. I have referred to evidence showing that all of these issues were raised in ASIC's case in chief (including but not limited to exhibit MTB 7). It was open to ASIC to supplement that evidence by affidavit evidence from Mr Dewstow and no explanation has been given for not doing so. In my view this evidence should not be permitted.

45 In para 24 of his affidavit, Mr Dewstow responds to Mr Rich's evidence about Project Firestorm (Mr Rich's affidavit, para 1429). In my view the reading of para 24 should be permitted for the same reasons that I have permitted the reading of para 24 of Mr Spratt's affidavit.

46 Para 25 of Mr Dewstow's affidavit responds to a claim by Mr Rich (para 1433c) that Allen Allen and Hemsley were retained to assist One.Tel in pursuing its claims. It has some relevance to the question whether the claims were bona fide, but it was open to ASIC to give evidence about the matter in chief, particularly as it was raised in the cross-examination of Ms Ashley (T 5485), and Mr Rich's evidence was reasonably foreseeable. Para 25 will not be permitted.

47 The result is that the reading of paras 1-7 and 24 of Mr Spratt's affidavit (as well as para 30, for reasons given under heading (2) below), and paras 1-5, 13, 17, 18 and 24 of Mr Dewstow's affidavit, will be permitted as evidence in reply, but the remainder of the evidence would amount to splitting ASIC's case and will therefore not be permitted.

(2) Monitoring traffic mix

48 In paras 1594-1603 of his affidavit, Mr Rich responded to an e-mail from Mr Howell-Davies of 14 May 2001, saying Mr Howell-Davies was not correct in his assumption that there was no tracking of margins or traffic at One.Tel. He claimed that Mr Spratt, a manager in the Fixed Wire business, had responsibilities including "monitoring the margins and traffic mix in that business". That assertion was repeated in para 1937 of Mr Rich's affidavit, where he purported to answer the question, "What financial controls were in place to identify 'the problem'?" Mr Spratt seeks to rebut Mr Rich's assertion in para 30 of his affidavit.

49 The evidence has some relevance to the assessment of Mr Howell-Davies' evidence, which goes to pleaded issues concerning cashflow and EBITDA in March and April 2001, and possibly earlier. It is also relevant to Mr Rich's credibility. My view is that Mr Spratt should be permitted to give that evidence.

50 During her cross-examination, Ms Ashley was asked whether part of Mr Spratt's job involved reviewing tariff plans with Telstra, and she said it may have done, but she did not know what he did (T 5585.40). She was asked whether the job included looking at the margins with Telstra and she said she thought he did do that. The defendants submitted that this is enough to forewarn ASIC of the issue, and that if it wished to adduce other evidence of Mr Spratt's role, it should have done so in chief.

51 I do not agree with this submission. Mr Rich's assertion goes beyond the evidence given by Ms Ashley, which was, in any event, tentative. In my view Mr Rich's evidence is new evidence given to the first time in the defendants' case, and ASIC should be given the opportunity to adduce evidence in reply to it.

52 The result is that the reading of para 30 of Mr Spratt's affidavit will be permitted as evidence in reply.

(3) PricewaterhouseCoopers' retainer on One.Tel's billing system

53 Mr Rich dealt with various aspects of PwC's consultancy role with respect to billing issues in his affidavit at paras 457-461, 1302a, 1330, 1331, 1346, 1347, 1348, 1569, 1570, 1571 and 1948. In those paragraphs he made various claims about PwC's role and the interaction between members of the One.Tel team who were working on billing issues, and the representatives of PwC. For example, in para 1346 he said that during April 2001 PwC were continuing their work on "reviewing the integrity and accuracy of the billing system to ensure that the recent problems which had been experienced were addressed as quickly as possible and did not recur". In para 1348 he referred to PwC "helping the team with the catching up in backbilling". In para 1948 he said one of PwC's tasks in 2001 was how to improve One.Tel's ability "to check and verify the accuracy of the CDRs being provided to it by Telstra and Optus".

54 ASIC wishes to read affidavits by Mr Hockings and Ms McMahen, with a view to clarifying PwC's role and partially rebutting Mr Rich's evidence by showing that the role was more qualified than he claimed. The thrust of the evidence is that the focus of PwC's work was on the control environment to minimise revenue leakage, rather than identifying backbilling opportunities.

55 I do not agree with the submission made on behalf of the defendants that much of the evidence of Mr Hockings and Ms McMahon goes to the "subtleties and nuances" of what they were retained to do, and differs with Mr Rich's evidence only in matters of emphasis (T 13,455). ASIC is concerned that there is an implication in Mr Rich's evidence that PwC's job was to look for the alleged $40 million worth of unbilled data (referring to paras 1302 and 1331: see T 13,482-3). The evidence of Mr Hockings and Ms McMahen, if accepted, would make it clear that the retainer was not so broad.

56 In para 1570 of his affidavit, Mr Rich gave evidence of a conversation with a woman called Emma from PwC, in which "PwC rep" said, according to Mr Rich, that in PwC's view the state of the billing system was consistent with what they would expect of a business at One.Tel's stage of development. ASIC wishes to give evidence from Ms McMahen, and also from Mr Hockings, with a view to showing that this was not said.

57 ASIC has read an affidavit by Mr Hockings, made on 17 January 2005, as part of its case in chief. Mr Hockings said he was the partner responsible for PwC's engagement with One.Tel, and he annexed two reports that the firm had made. The first report made some statements about PwC's instructions and the overall aim of the project. The new affidavit by Mr Hockings is, in part, a more detailed description of the nature and scope of the retainer and the work done.

58 It seems to me that the affidavits of Mr Hockings and Ms McMahen are properly evidence in reply, and ASIC should be permitted to read them. ASIC's evidence in chief gave some information about PwC's role and work, by the annexure of the reports to Mr Hockings' first affidavit. But the first affidavit does not give detail as to PwC's role, beyond what is said in the reports, because that became an issue only when it was canvassed in Mr Rich’s affidavit in a manner that ASIC says is incorrect. Further, Mr Rich has given evidence of a conversation with a PwC representative that ASIC could not be expected to anticipate. ASIC should be allowed to adduce evidence in reply, partially contradicting and partially qualifying Mr Rich's evidence as to the PwC retainer and the conversation. In my view the whole of both affidavits should be permitted as evidence in reply.

59 I was referred (T 13459-60) to a passage in the cross-examination of Mr Rich (T 12,239) relating to PwC's role. Senior counsel for the defendants submitted that it was not apparent from the cross-examination that there was any issue about the matter. In my view the cross-examination in the passage to which I was referred is consistent with ASIC's desire to adduce evidence in reply on this matter, and does not support the defendants' argument.

60 As to Mr Hockings' evidence about the conversation alleged in para 1570 of Mr Rich's affidavit, it was made clear during argument that the defendants do not allege that the "PwC rep" to whom Mr Rich referred is Mr Hockings (T 13,483). However, it seems to me relevant for ASIC to read Mr Hockings' evidence on the subject, because he was the partner in charge of the project, and Ms McMahen's evidence is to the effect that statements of the kind attributed to the PwC rep would be appropriate to be made by the senior member of the PwC team rather than by her. I disagree with the contention that this is not evidence strictly in reply, given the ambiguity of Mr Rich's affidavit as to the identity of "PwC rep".

61 The result is that the whole of the affidavits of Mr Hockings and Ms McMahen will be permitted as evidence in reply.

(4) Continuation of executives after voluntary administration

62 In para 1824 of his affidavit, Mr Rich commented on the April management accounts, saying they were prepared after he left One.Tel, during the administration of the company, after it had ceased trading and the employment of most of its staff had been terminated. The evidence bears the implication that the April management accounts were prepared by people inexperienced in the financial affairs of One.Tel.

63 ASIC wishes to rebut that implication by reading an affidavit by an accountant employed by the liquidators, Mr Holtom, who maintained employee records for One.Tel after the company was placed into administration. The thrust of his affidavit is that One.Tel continued to retain Mr Silbermann as a consultant, via his service company, after it was placed into administration, because there is an invoice from the service company for services dated mid-June 2001, and it continued to retain Mr Hodgson until 28 September 2001. The evidence does not purport to show that either Mr Silbermann or Mr Hodgson worked on the April management accounts, or otherwise to identify the work they did. But if accepted, it will establish that they were still there and could have contributed to the preparation of the management accounts. It therefore addresses the implication arising from Mr Rich's statement that "most of its staff had had their employment terminated".

64 It seems to me that this evidence is plainly evidence in reply and should be allowed. The April management accounts are potentially significant in this case. ASIC was not forewarned that Mr Rich would give evidence implying that they were prepared by novices.

65 The result is the whole of Mr Holtom's evidence will be permitted as evidence in reply.

(5) Lucent issues

66 Mr Rich gave evidence about One.Tel's negotiations with Lucent over their disputes, in paras 1091-1100 and 1490-1500 of his affidavit. As with the dispute with Telstra over CSPA issues, the dispute with Lucent over Next Generation issues is reflected in a substantial quantity of documentation in ASIC's case. An important issue, in my opinion the determinative issue in the circumstances, after all other factors have been weighed up, is whether Mr Rich's affidavit merely fleshes out the documentary evidence or adds new, substantial allegations. To the extent that it does the latter, one would expect that ASIC should be permitted to adduce evidence in reply.

67 Paras 1-3 of Mr Pryke's affidavit are not controversial. Paras 4 and 5 give some fairly general evidence about disputes and discussions between One.Tel and Lucent in 2000. They appear to be consistent with Mr Rich's evidence (paras 1091). While they are not strictly in reply, they provide context for other matters and should be permitted since, in my view other matters in the affidavit are properly evidence in reply.

68 Mr Pryke's para 6 relates to the claim by Mr Rich (para 1092) that the letter at MFI 680 (JDR 4/1510) was sent because he recalled having a conversation with Mr Pryke who was annoyed that it had been sent to his superiors. On its face the letter raises a question as to whether it was ever sent. It is addressed to "Bob Robertson" but no address is given, it purports to be copied to two others by facsimile but their facsimile numbers are not given, and it is not signed. No facsimile record of dispatch is tendered. So there appears to be a question as to whether letter was sent. Mr Rich claimed that it was sent because of his recollection of Mr Pryke's annoyance. It is appropriate for ASIC to call evidence in reply from Mr Pryke, saying he does not recall any such letter and that he denies ever expressing annoyance.

69 Senior counsel for the defendants submitted that evidence about whether the letter was sent or whether Mr Pryke was annoyed that was sent to a superior is unimportant in the overall scheme of things (T 13,465). That submission might have influenced me, in the exercise of my discretion, not to permit Mr Pryke's affidavit to be read if this was the only substantive issue that he addresses. However, as will be seen, I shall allow Mr Pryke's evidence on the other matters addressed in his affidavit. In the circumstances it seems to me that para 6 should be permitted as well.

70 Lucent's letter to One.Tel dated 6 February 2001 (exhibit MTB 9.19) identifies an amount of $23.7 million said to be unpaid, and attaches a purported reconciliation of outstanding invoices. Mr Rich's evidence is that One.Tel withheld payments totalling approximately $20 million as a result of its disputes with Lucent (para 1093). Mr Pryke's evidence (para 7) is that in his discussions with Mr Rich and Mr Beck they claimed that there were errors in invoices and overcharging, but they never suggested that Lucent's invoices for matters such as lease payments and operations and maintenance expenses (non-financed invoices which Mr Pryke says were payable by One.Tel under the agreement) were not being paid because of any other dispute or complaint. As far as I can see, Mr Rich's claim was not made in any of the documentary evidence and consequently was first asserted in the affidavit. ASIC should be allowed to reply to it.

71 Paras 8 and 9 of Mr Pryke's affidavit are consistent with Mr Rich's evidence and should be permitted as part of the context of the negotiations and background to Mr Pryke 's rebuttals.

72 As far as I can see, Mr Rich's assertion (para 1492) that the amount being claimed by One.Tel in April 2001 was between $50 million and $100 million is not reflected in the documentary evidence and is a new claim in the affidavit. ASIC should be permitted to respond to it. Therefore para 10 of Mr Pryke's affidavit should be allowed.

73 Paras 1496 and 1497 of Mr Rich's affidavit go beyond the documentary evidence because there he asserts that One.Tel reached an agreement with Lucent that it would offset its damages claims against Lucent's invoices, and gives evidence of a specific conversation between himself and Mr Wright about a draft of the letter of 23 April 2001. In fact, the letter from Lucent to Mr Rich dated 23 April 2001, signed by Mr Pryke and endorsed with agreement by Mr Rich (JDR 5/1866), is inconsistent with the alleged agreement to offset. This is because the letter assumes One.Tel's obligation to pay and merely records an agreement to defer payment until after 30 June. Mr Rich's evidence (at 1496) that One.Tel's draft of this letter did not refer to offsets at the request of Mr Pryke, because the letter was going to the United States, is new evidence in Mr Rich's affidavit and ASIC should be permitted to respond to it. Mr Pryke does so in para 11.

74 Senior counsel for the defendants drew my attention to Mr Rich's supplementary evidence (DS 100, para 12) in which he said that there was no agreement to offset but it was the intention of the One.Tel team to do so and that intention had been communicated to the representatives of Lucent with whom the negotiations were taking place. Senior counsel summarised the effect of Mr Rich's evidence by saying (T 13, 466-7):

"there was a mechanism for offsetting that occurred in the earlier letter of February, and by the time that he came to be talking, he'd known that the mechanism had been triggered, but there wasn't any express agreement that there would be offset".

75 The question whether there was an offsetting agreement was addressed in cross-examination, and Mr Rich eventually gave evidence that there was an agreement to offset in relation to Melbourne (T 12,057.30). At least to that extent, there was a new allegation legitimately to be addressed in reply. Probably the same can be said about the total effect of Mr Rich's evidence.

76 The result is that the whole of Mr Pryke's affidavit will be permitted as evidence in reply.

(6) CLEC issues

77 In his affidavit (paras 1353-4) Mr Rich gave evidence of a conversation he, Mr Keeling and Mr Silbermann had with the head of the CLEC business, Mr Linton. He referred to an e-mail from Mr Linton dated 10 April 2001 (JDR 5/1764), and gave evidence of a subsequent conversation he had with Mr Linton. In his affidavit (para 339), Mr Silbermann gave evidence of a meeting he had with Mr Linton in which, he said, he identified at least $5 million of overdue customer accounts (para 339).

78 ASIC wishes to respond to these matters by reading the affidavit of Mr Linton. I have decided that I should not permit ASIC to do so, in the exercise of my discretion.

79 Mr Linton's evidence is that he has no recollection of the meetings alleged by Mr Silbermann and Mr Rich respectively, rather than denying that they ever occurred. The utility about evidence is, in my view, outweighed by the time and effort involved in taking it.

80 In para 4 he specifically disputes Mr Silbermann's claim that pursuit of outstanding debt in the CLEC business had been the subject of very limited collections efforts historically. But he says substantially the same thing in his e-mail of 10 April 2001, which is part of the defendants' tendered materials. Assuming that the e-mail gets into evidence, there seems to me to be no adequate reason for having Mr Linton repeat what he says there by affidavit. My conclusion is reinforced by his observation in para 4 that his affidavit evidence is assisted by having read the e-mail.

81 In para 7 Mr Linton disputes Mr Rich's evidence (para 1354) that he answered "no" when Mr Rich asked him whether he had looked at the matter in detail. The ground for his disputing this is, once again, the e-mail, which is tendered by the defendants. Again it seems to me that there is insufficient utility in allowing ASIC to read Mr Linton's evidence, in view of the e-mail.

(7) Optus billing issues

82 ASIC wishes to read affidavits from Mr Robertson and Mr Adams, who were executives of Optus at the relevant time, responding to parts of the evidence Mr Silbermann and Mr Rich, in which they give evidence of discussions between representatives of One.Tel and Optus (including Mr Robertson and Mr Adams) about a dispute relating to CDRs, an arrangement for early payment of Optus commission allegedly in return for post-dated cheques, and sale of the SP subscriber base.

Dispute relating to CDRs

83 Mr Silbermann said in his affidavit (para 540) that he had a meeting with Mr Robertson and Mr Adams of Optus to discuss a dispute relating to CDRs, which had caused One.Tel to withhold payment on a mid-April invoice. Mr Silbermann said an arrangement was made that One.Tel would make a good faith payment of $2.5 million and that the parties would try to resolve the disputed amount. He said there was no threat made by Optus during the meeting.

84 After giving his employment history (para 1), Mr Robertson gives evidence (paras 2-3) that he had no recollection of attending such a meeting but if he had, he would not have said "let's try and work to a resolution of the disputed amount", because he believed there was no merit in One.Tel's complaint that Optus had failed to send it all the CDRs recording calls by One.Tel customers. In my opinion this evidence is strictly evidence in reply to Mr Silbermann's affidavit and ASIC should be permitted to rely on it. I would therefore permit ASIC to read paras 1 and 2 in the first half of the first sends of para 3 (down to "recording calls by One.Tel customers".

85 However, Mr Robertson then goes further than merely replying to Mr Silbermann's evidence, by giving discursive evidence explaining the reasons for his view that One.Tel's complaint had no substance. He annexes to his affidavit a letter he wrote to Mr Hodgson on 26 April 2001, responding to One.Tel's issues relating to CDRs delivery. This letter was received into evidence as exhibit P37-135A, on the same limited basis as other creditor communications (T 5608). It purports to answer One.Tel's CDR claim, asserting that Optus had undertaken a thoroughgoing internal investigation, and drawing attention to what the letter claims to be trends in One.Tel's customer base. Apart from relying on the reasoning in the letter, Mr Robertson in his affidavit (para 4) refers to a conversation he claims to have had with Mr Silbermann in which Mr Silbermann offered part of an overdue payment immediately and the rest afterwards. In my opinion none of this evidence is evidence in reply. It is an attempt to introduce, in a case in reply, evidence that should have been adduced in chief, if it were to be adduced at all, about the validity of One.Tel's CDR claim against Optus. Therefore I would not permit ASIC to read the remainder of para 3 or para 4 of Mr Robertson's affidavit.

86 In para 5(a), Mr Robertson responds to the last sentence of Mr Silbermann's para 540 by expressing the opinion that Mr Silbermann was referring to a January invoice which Mr Robertson annexes to his affidavit, rather than to in April invoice. This evidence seems to me to be strictly in reply to Mr Silbermann's affidavit and should be allowed, except the words "is what I referred to in the last paragraph of my letter of 26 April 2001 as 'the January invoice'. This". Those words refer to the 26 April letter which, in my view, is not truly evidence in reply.

87 In the first sentence of para 5(b) Mr Robertson gives a further reply to Mr Silbermann's para 540. Then for the rest of that sub-paragraph he explains his attitude to One.Tel's non-payment. This is not strictly evidence in reply and should not be permitted.

88 My reasoning with respect to Mr Robertson's affidavit also applies to the affidavit of Mr Adams, who also gives what is strictly a reply to para 540 of Mr Silbermann's affidavit and then goes on to give evidence or more general kind, not strictly in reply, about his attitude to the dispute with One.Tel, annexing a copy of Mr Robertson's letter of 26 April 2001. Consistently with my rulings concerning Mr Robertson's affidavit, I shall permit ASIC to read paras 1-5 of Mr Adams' affidavit, except for sub-paragraphs 5(c)(i) and (iii).

89 Mr Silbermann gave evidence (para 619) of a meeting between him and other One.Tel personnel and Mr Robertson and Mr Adams on 21 May, to discuss outstanding disputes with Optus. According to Mr Silbermann, Mr Robertson said Optus was reviewing the information One.Tel had provided and would get back to them when the review was completed.

90 Mr Robertson's evidence (para 6-7) does not deny that there was such a meeting but says he does not believe that he said the words attributed to him by Mr Silbermann. In my opinion that is strictly evidence in reply and should be permitted. It is distinguishable from Mr Linton's similar evidence because Mr Linton's affidavit relied on an e-mail which is to be tendered, were as Mr Robertson purports to give an independent recollection. For the same reasons, Mr Adams' evidence in paras 6 and 7 of his affidavit is evidence in reply and should be permitted.

Optus commission payment

91 In para 824 of his affidavit, Mr Silbermann gave evidence of a conversation he had with Mr Robertson in late March 2001 at which, he said, it was agreed that a commission payment would be made to One.Tel late in March rather than early April, and Mr Robertson asked, in return, for One.Tel to provide post-dated cheques for invoices for long-distance calls. Mr Robertson's evidence (para 8) is that he has no recollection of the conversation but thinks it unlikely that he would have asked Mr Silbermann to provide post-dated cheques, and he gives a reason for that view.

92 In my view, to allow ASIC to read para 8 of Mr Robertson's evidence would be to permit a very clear instance of splitting the case, contrary to the case law. This is because, in her affidavit made on 6 June 2002 and read by ASIC in chief, Ms Randall gave evidence (at para 33) of a conversation she had with Mr Silbermann, in which she told him Optus would not pay commission to One.Tel unless One.Tel paid Optus at the same time. Ms Randall said that Mr Silbermann replied:

"It's okay I've sorted it. Optus have agreed not to present our cheques until next week. They will give us a cheque and we will give them our cheque. We will post-date the cheques to make sure."

93 This evidence is not identical to the evidence in para 824 of Mr Silbermann's affidavit. Ms Randall said that according to Mr Silbermann, the agreement was that Optus would not present One.Tel's cheques, and Mr Silbermann decided unilaterally to post-date the One.Tel cheques to make sure they were not presented. In his affidavit, Mr Silbermann says that the post-dating of the cheques was part of the agreement between him and Mr Robertson. ASIC was not forewarned that Mr Silbermann would make this additional allegation about the agreement. Nevertheless it seems to me that if ASIC wanted to lead evidence from Mr Robertson as to the precise arrangement between him and Mr Silbermann concerning the presentation of One.Tel's cheques, the evidence should have been part of ASIC's case in chief, to balance and clarify Ms Randall's affidavit. The issue of whether there was an arrangement under which One.Tel's cheques would not be presented was raised by ASIC's evidence, and it would have been germane for ASIC to adduce further evidence in its case in chief from Mr Robertson, to the effect that he never agreed to post-dating. Mr Robertson's evidence, if adduced at all, should have been part of ASIC's case in chief. Therefore I shall not permit ASIC to read para 8 of Mr Robertson's affidavit.

Sale of SP subscriber base

94 ASIC's case in chief contained a substantial amount of evidence about the valuation of the SP customer base for the purpose of sale, for example in exhibit PWY 1 to the affidavit of Mr Yates. But this is evidence about estimates and value internally within One.Tel, not evidence about sale negotiations. As far as I am aware, ASIC's case in chief did not include evidence of statements by representatives of Optus concerning offers or the value of the asset.

95 Senior counsel for the defendants referred (at T 13,488) to the cross examination of Mr Packer (T 9,600), when it was put to Mr Packer that Mr Rich told him, "Paul O'Sullivan has also told me that Optus is interested in buying back the Optus service provider agreement. I think we can get between $40 million and $60 million for the subscriber base." Mr Packer said he had a recollection of Mr Rich bringing that up. But the proposition put by the cross-examiner was that Mr Rich said he thought One.Tel could get between $40 million and $60 million, not that anyone from Optus had made an offer or expressed a valuation opinion in that range.

96 In his affidavit (paras 1361-5), Mr Rich gave evidence of discussions with Optus about the sale of the SP subscriber base. He identified a document (JDR 5/1764A) which, he said, is a summary of offers and counter-offers made by One.Tel and Optus during the negotiations. The gist of his evidence is that just before it announced its rights offering on 17 May 2001, One.Tel was asking $53 million and Optus was offering $46 million, and Mr Frack and Mr Hodgson were saying they were confident that a deal would be done between the two figures. After the announcement of the rights offering, according to Mr Rich, Optus dropped its price to $18 million.

97 ASIC seeks to rely on the affidavits of Mr Robertson and Mr Adams to show that Optus never made an offer, and never contemplated a valuation of $46 million although a valuation in the vicinity of $20 million was considered and may had been mentioned to One.Tel during negotiations. Senior counsel for the defendants submitted that ASIC had not made this case in chief and should not be allowed to do so in reply.

98 Mr Robertson says in paras 9-11 of his affidavit that he recalls participating in some discussions about the possible sale of the customers, at which various figures were mentioned; that Optus did not make any offer for purchase at a particular price; that he did not recollect a figure of the $46 million; and that valuations within Optus were considerably below the sale price figures being referred to by One.Tel. In my opinion this evidence is strictly in reply to Mr Rich's evidence. There is no basis for suggesting that ASIC was forewarned that Mr Rich would give the evidence he did, as regards the prices contemplated by One.Tel and Optus respectively and the effect of the announcement of the rights issue. My view is that ASIC should be permitted to read paras 9-11.

99 In para 12 Mr Robertson annexes an e-mail dated 17 May 2001 from the chief executive of Optus to another Optus executive on the subject of One.Tel, which says "with you at $20 million and them at $60 million, and James [Packer] thinks we are too far apart and it's not worth considering". Mr Robertson says in his affidavit that he believes the figure of $20 million is nearer to the valuation figures that were being arrived at within Optus around that time. For the reasons given in respect of paras 9-11, my view is that para 12 and the annexed e-mail are strictly evidence in reply and ASIC should be permitted to adduce this evidence.

100 In para 13 of his affidavit, Mr Robertson refers to Mr Rich's evidence that Optus suddenly dropped its price after the announcement of the rights offer, and he purports to rebut it. That is strictly evidence in reply and should be permitted.

101 Mr Adams gives evidence in paras 8-14 of his affidavit that he recalls attending to meetings with representatives of One.Tel to discuss the possible sale of SP subscribers, and he annexes to his affidavit some handwritten notes of the meetings. Like Mr Robertson, he denies that Optus made any offer but says there was a discussion about what Optus and One.Tel thought was the value of the customer base. Mr Adams says he recalls one of the Optus representatives mentioning a figure of $6 million, and a One.Tel representative saying that figure was a long way from One.Tel's thinking. Mr Adams says there were discussions within Optus to the effect that the value of the SP customers might be in the region of about $20 million, and he concedes that this figure may have been mentioned to One.Tel. He disputes that any Optus representative suggested a value of $46 million.

102 In my view this evidence is also evidence in reply and ASIC should be permitted to rely on it, for the reasons I have given in relation to Mr Robertson. Senior counsel for the defendants submitted (T 13,471-2) that the handwritten notes indicate that there was a lengthy discussion when a whole series of permutations were being discussed of the purpose of determining value, and if that evidence is permitted, the defendants will be prejudiced because they have not been able to cross-examine relevant witnesses about it. In my view, however, the handwritten notes are relevant in reply to Mr Rich's evidence.

103 Though there was evidence about internal valuation of the SP customers within One.Tel in ASIC's case in chief, ASIC was not forewarned of the claims that Mr Rich would make, substantially to the effect that the parties were close to agreeing on a sale for a substantial amount of money prior to the announcement of the rights issue, which caused Optus to reduce its price by a very large amount. It is not unfair to permit ASIC to reply to that evidence by reading affidavits by the counterparties to the negotiations.

Conclusion as to the affidavits of Mr Robertson and Mr Adams

104 ASIC should be permitted to read the affidavit of Mr Robertson, except for

· para 3 after the words "recording calls by One.Tel customers";

· para 4;

· the words "is what I referred to in the last paragraph of my letter of 26 April 2001 as 'the January invoice'. This" in para 5(a);

· para 8.

105 ASIC should be permitted to read the affidavit of Mr Adams, except for sub-paragraphs 5(c)(i) and (iii).

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19/09/2006 - In the first sentence, after the word "further", the words "of pliers and" have been replaced with the words "reply to". - Paragraph(s) 87

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Citations

Australian Securities and Investments Commission v Rich [2006] NSWSC 826

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Farrell v Bridge [1993] NSWLEC 131 (18 August 1993) [1993] NSWLEC 1

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Australian Securities and Investments Commission v Adler and 4 Ors [2001] NSWSC 1168

CITATION:	ASIC v Rich [2006] NSWSC 826 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	14 August 2006
JUDGMENT DATE :	21 August 2006
JURISDICTION:	Equity
JUDGMENT OF:	Austin J
DECISION:	Plaintiff's reading of some affidavits/parts of affidavits held to amount to impermissible splitting of its case; other affidavits/parts of affidavits held to be permissible as evidence in reply
CATCHWORDS:	EVIDENCE - evidence in reply - splitting the case - civil penalty proceeding - whether plaintiff should be permitted to adduce evidence in reply notified to defendants after it closed its case in chief but before they opened their case in defence - whether defendants' evidence under reply reasonably foreseeable during plaintiff's case in chief
LEGISLATION CITED:	Corporations Act 2001 (Cth) s 1317L Uniform Civil Procedure Rules 2005, rule 29.6
CASES CITED:	Killick v R (1981) 147 CLR 565 Lawrence v R (1981) 38 ALR 1 R v Chin (1985) 157 CLR 671 R v Frost (1839) 4 St Tr (NS) 86 Re HIH Insurance Ltd (in prov liq); ASIC v Adler (2001) 40 ACSR 214 Rich v ASIC (2004) 220 CLR 129 Shaw v R (1952) 85 CLR 365
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 (P) D L Williams SC with M J Steele (D1, D4)
SOLICITORS:	Georgina Hayden, Solicitor for Australian Securities and Investments Commission (P) Thompson Eslick (D1, D4)