Australian Securities and Investments Commission v Schlaepfer

[2017] NSWCA 247

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Australian Securities and Investments Commission v Schlaepfer [2017] NSWCA 247
Hearing dates:	19 September 2017
Date of orders:	19 September 2017
Decision date:	28 September 2017
Before:	Meagher JA, Payne JA,Sackville AJA
Decision:	Application for leave to appeal dismissed, with costs.
Catchwords:	DEFAMATION – limitation period – primary Judge makes order extending the time for commencement of proceedings arising out of alleged slander by regulatory agency – application for leave to appeal – whether primary Judge erred in finding that plaintiff (respondent) did not learn of the slander until after expiry of the twelve month limitation period – no issue of principle
Legislation Cited:	Freedom of Information Act 1982 (Cth) Evidence Act 1995 (NSW), ss 75, 135 Limitation Act 1969 (NSW), ss 14B, 56A, 56D
Cases Cited:	Carey v Australian Broadcasting Corporation (2012) 84 NSWLR 90; [2012] NSWCA 176 Dagg v Davis [2013] NSWCA 203; (2013) 64 MVR 240 Howley v Principal Healthcare Finance Pty Ltd [2014] NSWCA 447 Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 222 Rayney v Western Australia (No 3) [2010] WASC 83 Russo v Aiello (2003) 215 CLR 643; [2003] HCA 53 Schlaepfer v Australian Securities and Investments Commission [2017] NSWSC 47
Category:	Principal judgment
Parties:	Australian Securities and Investments Commission (First Applicant) Greg Yanco (Second Applicant) Daniel Schlaepfer (First Respondent) Select Vantage Incorporated (Second Respondent) Merlito Securities Company Limited (Third Respondent)
Representation:	Counsel: Mr J Hmelnitsky SC / Mr MJ Lewis (Applicants) Mr TK Tobin QC / Mr M Polden (Respondents)   Solicitors: Ashurst Australia (Applicants) Mark O’Brien Legal (Respondents)
File Number(s):	2017/79196
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Civil Citation: [2017] NSWSC 47 Date of Decision: 15 February 2017 Before: Garling J File Number(s): 2016/302827

Judgment

1. THE COURT: On 19 September 2017, the Court heard an application for leave to appeal from an interlocutory decision of a Judge of the Common Law Division (Garling J). His Honour made an order pursuant to s 56A of the Limitation Act 1969 (NSW) (Limitation Act) extending the limitation period for the first respondent (Mr Schlaepfer) to commence an action in defamation against the applicants, the Australian Securities and Investments Commission (ASIC) and Mr Yanco. [1] Mr Yanco at the relevant times was a senior compliance officer at ASIC.

   1. Schlaepfer v Australian Securities and Investments Commission [2017] NSWSC 47 (Primary Judgment).

2. The application for leave to appeal was heard concurrently with argument on the appeal. At the conclusion of the argument the Court dismissed the application for leave to appeal, with costs. The Court stated that reasons would be delivered later. These are the Court’s reasons.

The proceedings

3. Mr Schlaepfer and two corporations of which he is the principal, namely Select Vantage Incorporated (SV) and Merlito Securities Company Limited (Merlito), commenced proceedings against the applicants in the Common Law Division on 11 October 2016. The three plaintiffs (the respondents to the applicants’ summons seeking leave to appeal) claimed damages for defamation and injurious falsehood. The claims arose out of statements allegedly made by Mr Yanco in a series of telephone conversations which took place on 21 November 2014.

4. The matter complained of in Mr Schlaepfer’s defamation claim is pleaded in par 5 of the statement of claim as follows:

“On or about 21 November 2014, the [applicants] published, in a series of telephone calls by [Mr Yanco], words of and concerning [Mr Schlaepfer], in the States and Territories within Australia, a transcript of which is set out at Annexure “A” hereto …”

Annexure A is as follows:

“1   ASIC has concerns that a particular entity is layering the market

2.   ASIC is aware that the Entity has been closed down at two brokers because of their behaviour.

3.   ASIC is aware that the Entity would be quite a payer to brokers

4.   This would be a Direct Market Access.

5.   ASIC not able to advise the name of the Entity but it is able to advise they are related to Swift Trade, [SV] and Merlito. Peter Beck is associated with Swift Trade.

6.   ASIC wants you to be aware of our concerns”

5. The particulars of extrinsic facts include the following (par 18):

“(a)   ‘Layering’ the market is a form of market manipulation whereby large numbers of orders are created, often at various price points, to create a false impression of demand or supply. These orders are then cancelled, or amended, as they move closer to trading.

(b)   Market manipulation is a criminal offence;

(c)   ASIC is responsible for investigating and prosecuting market manipulation including layering.

(d)   ‘DMA’ stands for ‘Direct Market Access’; whereby investors use a broker’s electronic trading system to access the order book of a stock exchange directly.”

6. The particulars of identification alleged, among other things, that between 2003 and 2009 Mr Schlaepfer was a trader at a firm that traded through Swift Trade Inc, a limited market dealer in Canada and that in September 2011 he became a director and president of SV (par 8).

7. The statement of claim alleges that the matter complained of was defamatory of Mr Schlaepfer (par 11). It pleads that the matter complained of conveyed a number of defamatory imputations, including that Mr Schlaepfer was such a dishonest trader that he deserved to be compared with the “disgraced Peter Beck”, the former principal of Swift Trade Inc (par 16).

8. The statement of claim alleges that Mr Yanco made the telephone calls in the course of his employment with ASIC (par 6). The telephone calls are said to have been made by Mr Yanco to:

(a)   a named director at Credit Suisse;

(b)   an unidentified executive at Citibank; and

(c)   at least one other person at a third or more unknown companies (par 7).

9. It will be seen that the Common Law proceedings were commenced nearly two years after the alleged publications. The lapse of time is not material to the cause of action founded on injurious falsehood. However the delay in commencing proceedings created a difficulty for Mr Schlaepfer’s cause of action in defamation because of s 14B of the Limitation Act, which provides as follows:

“An action on a cause of action for defamation is not maintainable if brought after the end of a limitation period of 1 year running from the date of the publication of the matter complained of.”

10. The respondents filed a motion in the Common Law proceedings pursuant to s 56A of the Limitation Act, seeking an extension of the limitation period for commencing an action in respect of the matter complained of as pleaded in par 5 of the statement of claim.

11. Section 56A of the Limitation Act provides as follows:

“(1)   A person claiming to have a cause of action for defamation may apply to the court for an order extending the limitation period for the cause of action.

(2) A court must, if satisfied that it was not reasonable in the circumstances for the plaintiff to have commenced an action in relation to the matter complained of within 1 year from the date of the publication, extend the limitation period mentioned in section 14B to a period of up to 3 years running from the date of the publication.

(3)   A court may not order the extension of the limitation period for a cause of action for defamation other than in the circumstances specified in subsection (2).”

12. Section 56D of the Limitation Act provides that an order for the extension of a limitation period, and an application for such an order, may be made under s 56A even though the limitation period has already expired.

13. The primary Judge made the orders sought by the respondents. His Honour was satisfied that it was not reasonable for the respondents in the circumstances, to have commenced proceedings for defamation within the twelve month limitation period. [2] Accordingly, s 56A of the Limitation Act required the Court to extend the limitation period. Although the order made by his Honour does not say so explicitly, the intention is clearly to extend the limitation period in respect of Mr Schlaepfer’s cause of action in defamation until 11 October 2016, the date the statement of claim was filed. [3]

    2. Primary Judgment at [96].

    3. Primary Judgment at [97].

14. The applicants’ draft notice of appeal contains two grounds, as follows:

“1 His Honour erred in holding that the limitation period prescribed in section 14B of the Limitation Act 1969 (NSW) be extended pursuant to section 56A of that Act.

2   His Honour erred in inferring matters favourable to [Mr Schlaepfer’s] state of mind in circumstances where neither he nor his advisors gave evidence.”

Background

15. Prior to 21 November 2014, Merlito had a brokerage relationship with Macquarie Securities (Australia) Ltd (Macquarie). On 21 November 2014, Macquarie terminated that relationship with immediate effect.

16. On 25 November 2014, ASIC published on its website a document entitled “ASIC Market Supervision Update Issue 53” (Update 53). Update 53 made certain statements about the respondents.

17. On 3 December 2014, the respondents’ then solicitors wrote to ASIC complaining that Update 53 contained serious allegations of criminal misconduct against SV and defamatory imputations about Mr Schlaepfer. The letter sought a correction to Update 53.

18. ASIC, through its Chief Legal Officer, denied that Update 53 was misleading or defamatory and also denied that ASIC (as the respondents alleged) had made threats to Macquarie concerning its dealings with the respondents.

19. On 15 December 2014, after further correspondence between ASIC and the respondents’ solicitors, ASIC agreed to issue a clarification to Update 53 in “Market Supervision Update Issue 54” (Update 54). In return, the respondents agreed to release ASIC from any claims arising out of Update 53. ASIC duly published the correction in Update 54.

20. Towards the end of 2014, ASIC commenced an investigation into SV and its market dealings.

21. On 15 May 2015, the respondents’ solicitors wrote to ASIC referring to the agreement reached in December 2014. The email included the following:

“My client instructs me that SV has received information to the effect that ASIC officers have made unsolicited phone calls to market participants (brokers) stating that SV and Mr Schlaepfer and their affiliates are persona non grata in Australia, that they are suspected of serious wrongdoing, and that market participants should not do business with Mr Schlaepfer or his related entities if they wish to remain in ASIC's good favour.

This, of course, is extremely damaging to SV and Mr Schlaepfer - not only from a business and financial sense, but also from a reputational point of view. It also seems to fly in the face of the agreement we reached last year.

…

Could you please confirm that ASIC and its officers have not made, and will not make, any false or defamatory statements about SV or Mr Schlaepfer or their various affiliates?”

22. ASIC responded on 18 May 2015 as follows:

“1.   We are unaware of any comments of the type alleged being made by ASIC officers. If you have any further details about these alleged comments, please let me know.

2.   It is not ASIC's role to advise on SV's entitlement to engage in business in this jurisdiction.

…”

23. Approximately one year later, on 25 May 2016, Deutsch Miller, another firm of solicitors retained by the respondents, applied under the Freedom of Information Act 1982 (Cth) (Freedom of Information Act) for the release of any written communications between ASIC and market participants in Australia and overseas concerning the respondents.

24. On 2 June 2016, ASIC informed Deutsche Miller that the investigation into SV’s trading in 2014 had been completed and there were no further issues ASIC wished to address.

25. On 24 June 2016, Deutsche Miller wrote to ASIC requesting a meeting between ASIC and Mr Schlaepfer. The letter contained the following paragraph:

“Mr Schlaepfer instructs us that he has been reliably informed that representatives of ASIC have repeatedly advised Australian Market Participants - brokers considering effecting trades on behalf of Select Vantage - that they risked being given a direction by ASIC under Market Integrity Rule 5.6.12 to cease conducting automated order processing if they were to effect trades on behalf of Select Vantage.”

26. On 30 June 2016, a Mr Shalabi, who was apparently employed by Credit Suisse, forwarded to Mr Schlaepfer an electronic copy of an email written on 21 November 2014 by Mr Couper of Credit Suisse (Couper email). The Couper email was sent to a total of nine addressees, all of whom were officers of Credit Suisse. The Couper email was as follows:

“Just took a call from Greg Yanco (ASIC head of market supervision) – NOTE – this does not involve any actions by CS [Credit Suisse].

-   ASIC have concerns about a particular Entity who is layering the market

-   ASIC is aware that the Entity has been closed down at two brokers because of their behaviour

-   ASIC is aware this entity would be quite a payer to brokers (fees)

-   This would be a DMA

-   ASIC was NOT able to advise the name of the Entity but were able to advise that they are related to Swift Trade, Select Vantage and Merlito. Peter Beck (or Bec) is associated with Swift Trade

-   ASIC wanted us to be aware of their concerns.

Can you please check if we have any clients with associations with the above entities and be aware of new clients and apply heightened diligence.

Interesting call on a Friday afternoon.”

27. On 8 July 2016, Mr Schlaepfer, while in Sydney, consulted Mr O’Brien of Mark O’Brien Legal for advice. Although the proceedings were not commenced until 11 October 2016, there was no dispute before the primary Judge that the lapse of time between 30 June 2016 and the commencement of proceedings was not unreasonable having regard to the inquiries Mr O’Brien was obliged to make. [4]

    4. Primary Judgment at [54].

28. On 5 August 2016, Mr O’Brien wrote to ASIC making a series of demands on behalf of the respondents. The letter included the following:

“Defamation

1.   On 30 June 2016 Daniel Schlaepfer first became aware of a telephone call made on Friday 21 November 2014 by Greg Yanco on behalf of ASIC to Andrew Couper, then Director of Credit Suisse Compliance Australia.”

29. On 29 August 2016, the solicitors for ASIC denied that the respondents were entitled to the relief sought on their behalf in the letter of 5 August 2016. The letter also stated that Mr Yanco denied that the conversation on 21 November 2014 was in the terms alleged in Mr O’Brien’s letter.

Primary Judgment

30. The primary Judge quoted a passage from Carey v Australian Broadcasting Corporation [5] in which Beazley JA explained the operation of s 56A of the Limitation Act as follows:[6]

“Her Honour, …, construed s 56A as imposing an onus on a plaintiff to satisfy the court that it was not reasonable in the circumstances for him or her to bring proceedings within the limitation period. Her Honour considered that s 56A did not involve the consideration of any prejudice to a defendant. Her Honour also held that s 56A did not confer a discretion. Rather, if the court was satisfied that it was not reasonable in the circumstances for the plaintiff to have commenced the action within one year, the court was required to extend the period of time in which to bring proceedings: see Ahmed v Harbour Radio Pty Ltd [2010] NSWSC 676. The same construction has been given to equivalent provisions in other jurisdictions: see Murphy v Lewis [2009] QDC 37 at [11]-[14]; Noonan v MacLennan [2010] QCA 50; 2 Qd R 537 at [15]-[18] per Keane JA; at [30] per Holmes JA and at [48] and [58] per Chesterman JA; Rayney v State of Western Australia (No 3) [2010] WASC 83 at [41] per Martin CJ. I agree with this construction of s 56A. The statutory test does not direct attention to whether it was reasonable not to have commenced proceedings. It requires the court to be satisfied it was not reasonable to have commenced an action within one year from the date of publication of the defamatory matter. This view is consistent with the preferred view given to the section in Noonan v MacLennan.”

5. (2012) 84 NSWLR 90; [2012] NSWCA 176 (Carey).

6. Carey at [55] (McColl JA and Sackville AJA agreeing). The passage is quoted in the Primary Judgment at [12].

31. The primary Judge pointed out that the test posed by s 56A is not satisfied merely by showing that it was not unreasonable to have not commenced proceedings within one year:[7]

“Ultimately, the question which the Court is asked to determine in considering whether it was ‘… not reasonable in the circumstances …’ for the action to be commenced is an evaluative process, the outcome of which will vary from case to case, and is particularly fact dependent: Carey per Beazley JA at [61].”

His Honour acknowledged that the statutory test is a difficult hurdle for a plaintiff to overcome[8] but accepted (as had the applicants) that:

“an absence of knowledge of the defamatory utterance would provide a reason why it was not reasonable to commence proceedings within one year”. [9]

7. Primary Judgment at [15].

8. Primary Judgment at [14], citing Rayney v Western Australia (No 3) [2010] WASC 83 at [41] (Martin CJ).

9. Primary Judgment at [17], citing Carey at [61].

32. The primary Judge, before recounting the facts, recorded the following: [10]

“[18] On the hearing of the Notice of Motion, both the [respondents] and the [applicants] relied upon affidavits sworn by solicitors based on information and belief. This is permissible: s 75 Evidence Act 1995.

[19]   Neither of the deponents of the affidavits were required for cross-examination. It was not suggested that either of the deponents were not recounting accurately the information with which they had been provided. Additionally, both parties relied upon correspondence written, generally between solicitors for the parties, either in formal letters or by emails as recounting accurately the circumstances at the time that the letters were written.

[20]   Notwithstanding the submissions of the [applicants], where the Court is dealing with the issues in the proceedings by reference to the civil onus, that is on the balance of probabilities, there is no reason in these proceedings to decline to accept the evidence because there are other more direct means of proving the factual circumstances relied upon.

10.    Primary Judgment at [18]-[20].

33. Section 75 of the Evidence Act 1995 (NSW) provides that:

“In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.”

34. The primary Judge identified four circumstances on which the applicants relied to support their contention that his Honour could not be satisfied that it was not reasonable for the respondents to have commenced an action within one year of the defamatory publications. Only three are relevant for the purposes of the present application. They can be summarised as follows:

(i)   In late April and early May 2015, Mr Schlaepfer believed that ASIC had made telephone calls to market participants containing defamatory statements. In the light of ASIC’s response it was incumbent on Mr Schlaepfer to make inquiries as to any other statements that ASIC may have made to market participants.

(ii)   There was no direct evidence from Mr Schlaepfer as to when he first knew, from any source, that Mr Yanco had made defamatory comments about him to market participants in November 2014 (other than to Macquarie).

(iii)   It was not until late May 2016 that solicitors acting for the respondents lodged a request under the Freedom of Information Act seeking documents recording the contents of conversations between Mr Yanco and market participants in November 2014. According to the applicants, there was no reason such an inquiry could not have been made in mid-2015.

35. The primary Judge considered that Mr Schlaepfer’s belief in April and May 2015 that ASIC had made telephone calls was not at all relevant to the reasonableness of his failure to commence proceedings within twelve months of 21 November 2014. [11] The correspondence referring to Mr Schlaepfer’s belief related to statements allegedly made later than the matter complained of in the proceedings and reflected Mr Schlaepfer’s complaint that the statements were made in breach of the 2014 agreement between ASIC and the respondents. Moreover, in view of ASIC’s response that it was unaware of any such statements it was not at all unreasonable for Mr Schlaepfer not to have pursued further inquiries. [12]

    11. Primary Judgment at [65].

    12. Primary Judgment at [66].

36. Secondly, his Honour was satisfied that Mr Schlaepfer first became aware of the Couper email on 30 June 2016. Mr O’Brien had given evidence to this effect on information and belief and the email itself showed the date it had been received. [13] His Honour was also satisfied that Mr Schlaepfer first became aware on 30 June 2016 of the telephone call to Credit Suisse. Those were Mr Schlaepfer’s instructions to Mr O’Brien and were recorded in Mr O’Brien’s letter of 5 August 2016. Mr O’Brien’s affidavit in combination with the letter demonstrated that Mr Schlaepfer became aware of the telephone calls when he received a copy of the Couper email. [14] His Honour noted that there was nothing in the email sent by Mr Shalabi to Mr Schlaepfer to indicate that there had been any previous communications between them. [15]

    13. Primary Judgment at [74].

    14. Primary Judgment at [76].

    15. Primary Judgment at [77].

37. Thirdly, in his Honour’s view, there was no basis in mid-2015 for the respondents or their lawyers to have a reasonable suspicion or expectation that ASIC or its officers would have been telephoning participants in the market place, particularly those with whom the respondents had no commercial dealings, to inform them of the information the substance of which subsequently appeared in Update 53:[16]

“After all, the purpose of putting information in Update 53 was to inform all participants in the market of particular facts and circumstances which ASIC regarded as relevant to the lawful and ordered operation of the markets.”

16. Primary Judgment at [86].

38. The primary Judge reminded himself that rejecting the applicants’ submissions did not demonstrate that the respondents had satisfied their onus of proving that it was not reasonable for them, in the circumstances, to have commenced proceedings within twelve months of the publication of the defamatory material. [17] However, his Honour accepted the respondents’ submission that the principal circumstance supporting a finding that they satisfied the statutory test was that Mr Schlaepfer first knew of Mr Yanco’s 21 November 2014 telephone call on 30 June 2016. Because the complaint related to an oral slander, it was reasonable for Mr Schlaepfer to wait until he received documentary corroboration of the telephone call. [18] There was no reason for him to make inquiries about the existence of the defamatory publication until he had some indication that it had been made. [19]

    17. Primary Judgment at [89].

    18. Primary Judgment at [91].

    19.    Primary Judgment at [92]-[93].

39. The primary Judge expressed his conclusion as follows: [20]

    20.    Primary Judgment at [95]-[96].

“[95]   In summary, I am satisfied of the following circumstances:

(a)   Mr Schlaepfer did not become aware of the oral publication of the allegedly defamatory statement by Mr Yanco to Mr Couper at any time before 30 June 2016;

(b)   there is no reason to differentiate the position of knowledge of that publication as between each of the three [respondents]. Accordingly, I am satisfied that none of the [respondents] knew of that publication before 30 June 2016;

(c)   none of the [respondents] knew of the oral publication of the allegedly defamatory statements made by Mr Yanco to an executive at Citibank, prior to the receipt by Deutsch Miller of a response by ASIC of the FOI application. Although the date is not proved in the evidence, I am satisfied that it was, on the probabilities, a time after 29 August 2016 …;

(d)   none of the [respondents], or their legal advisers, had any reason to suspect that, prior to the issue of Update 53, Mr Yanco, or any other officer of ASIC, had made allegedly defamatory statements about the [respondents] other than those which were allegedly made to Macquarie Securities (Australia) Ltd on or about 21 November 2014, or by way of Update 53;

(e)   it was not reasonable to expect that any of the [respondents] would have initiated enquiries, prior to 30 June 2016, which were intended to identify whether, and if so to what extent, or to whom, Mr Yanco or any other officer of ASIC, may have spoken to about the [respondents]; and

(f)   at no time prior to October 2016, did any legal practitioner certify, in accordance with the relevant legal professional legislation, that proceedings were in an appropriate state to be commenced. I am not satisfied that there was any earlier point in time when any such certification could have been made.

[96]   In those circumstances I am satisfied that it was not reasonable for the [respondents] in the circumstances to have commenced proceedings for defamation within the 12 month limitation period.”

Principles governing the application

40. The principles governing an application for leave to appeal from a decision to grant an extension of time for the commencement of proceedings were stated by Ward JA in Dagg v Davis [21] in uncontroversial terms:

“[13]   The decision to grant an extension of time for the commencement of the proceedings is an interlocutory decision from which leave to appeal is necessary. There are no exhaustive or rigid rules of practice or criteria governing the grant of leave to appeal (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170). Nevertheless, it has been recognised that leave should be granted only where there are substantial reasons to allow an appellate review (Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564), such as where there is an error of principle which, if uncorrected, will result in substantial injustice (Minogue v Williams (2000) 60 ALD 366; BHP Petroleum Pty Ltd v Oil Basins Ltd [1985] VR 756; Niemann v Electronic Industries Ltd [1978] VR 431; Darrell Lea (Vic) Pty Ltd v Union Assurance Society of Australia Ltd [1969] VR 401). Where there is no question of principle, leave to appeal will usually be refused (Jaycar Pty Ltd v Lombardo [2011] NSWCA 284; Zelden Sewell Henamast Pty Ltd [2011] NSWCA 56).

[14]   Moreover, in The Age Company Ltd v Liu [2013] NSWCA 26; (2013) 82 NSWLR 286, Bathurst CJ said (at [13]) that:

Generally speaking, it is only appropriate to grant leave in matters that involve issues of principle, questions of public importance or in circumstances where it is reasonably clear that an injustice has occurred by reason of error in the judgment, going beyond what is merely arguable.”

21. [2013] NSWCA 203; (2013) 64 MVR 240 at [13]-[14] (Barrett JA and Sackville AJA agreeing).

Reasoning

41. In determining whether this was a matter suitable for a grant of leave to appeal, the Court bore a number of matters in mind.

42. First, the applicants did not suggest that the primary Judge misconstrued s 56A of the Limitation Act nor that his Honour failed to refer to the relevant authorities construing the provision.

43. Secondly, the primary Judge did not reverse or fail to apply the onus cast on the respondents by s 56A of the Limitation Act. His Honour made it quite clear that the applicants had no onus of proof and that Mr Schlaepfer had to prove that it was not reasonable for him, in the circumstances, to have commenced defamation proceedings within the twelve month period. His Honour also made it quite clear that he considered the applicants’ arguments first simply as a matter of convenience and only for the purpose of determining whether their contentions should be taken into account in determining whether the respondents satisfied the statutory test.

44. Thirdly, the affidavits sworn by Mr O’Brien, which contained material based on instructions given to him by Mr Schlaepfer, were read without objection. [22] Nor was objection taken to the annexures to Mr O’Brien’s affidavits, including his letter of 5 August 2016 to ASIC. The applicants accepted that in these circumstances the affidavits and the correspondence, insofar as they were based on information and belief, were admissible pursuant to s 75 of the Evidence Act to prove the truth of the representations made by Mr Schlaepfer to Mr O’Brien and recorded by him. [23]

    22. Compare s 135(a) of the Evidence Act which empowers the Court to refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unduly prejudicial to a party. See also s 136 empowering the Court to limit the use of evidence if a particular use might be unduly prejudicial to a party.

    23. See Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 222 at [45]-[48] (Hodgson CJ in Eq).

45. Fourthly, Mr O’Brien in his first affidavit stated as follows:

“At that consultation [of 8 July 2016] I was instructed by Daniel Schlaepfer that:

a.   On 30 June 2016 he had first become aware of an email dated 21 November 2014 from Andrew V Couper, Director of Credit Suisse, to various officers and employees of Credit Suisse, a copy of which is annexed and marked ‘A’ (the Email) and that he received a copy of the email from a source at Credit Suisse who he agreed to keep confidential.

b.   The Email summarised a telephone conversation on 21 November 2014 between Greg Yanco (ASIC Head of Market Supervision) and Andrew Couper concerning, inter alia, the plaintiffs.”

46. Mr O’Brien was not cross-examined. Thus he was not asked questions about these paragraphs of his affidavit or the statement in his letter of 5 August 2016 that Mr Schlaepfer first became aware on 30 June 2016 of Mr Yanco’s telephone call to Credit Suisse on 21 November 2014.

47. Fifthly, the applicants served notices to produce on the respondents well before the scheduled hearing before the primary Judge. Apparently because the vacation intervened, the applicants did not call on the notices to produce until the outset of the hearing. Mr Tobin QC, who appeared for Mr Schlaepfer before the primary Judge, [24] produced some documents in response to the call. However, he informed the Court that because of the number of documents covered by the notices to produce and Mr Schlaepfer’s absence from Australia (he resided in Canada), more time would be required to respond fully.

    24.    Mr Tobin QC also appeared on behalf of the respondents in this Court with Mr Polden.

48. The primary Judge asked Senior Counsel for the applicants whether they wished to make a further application. This invitation clearly referred to (or included) an application to adjourn the hearing pending the respondents making a full response to the notices to produce. Senior counsel told his Honour he was content to proceed on the basis that the respondents’ answer was “not produced”.

49. It is fair to infer that the notices to produce sought production of documents evidencing, among other things, any communications between Credit Suisse or officers of Credit Suisse pre-dating 30 June 2016. By electing not to seek an adjournment and press for a full response to the notices to produce, the applicants forewent an opportunity to explore whether Mr Schlaepfer had sources of information available to him concerning the contents of the Couper email long before June 2016.

50. It was submitted that Ground 2 of the proposed notice of appeal did the “heavy lifting” in the applicants’ case. In substance, the applicants submitted that the primary Judge should not have made the critical finding that Mr Schlaepfer did not learn of Mr Yanco’s conversation with Credit Suisse until 30 June 2016. The applicants contended that his Honour should not have made that finding without Mr Schlaepfer giving evidence personally and thus exposing himself to cross-examination. It was submitted that there were some issues that could have been pursued with Mr Schlaepfer, such as whether he had any indication during the twelve month period after 21 November 2014 that ASIC may have contacted market participants other than Macquarie to express concerns about Mr Schlaepfer’s probity.

51. The applicants submitted that the question of principle justifying a grant of leave to appeal concerned the weight that should be given to evidence given in an interlocutory hearing on information and belief. The applicants referred to Howley v Principal Healthcare Finance Pty Ltd (Howley). [25]

    25. [2014] NSWCA 447.

52. In Howley the issue was whether evidence given by a solicitor on information and belief provided an explanation for the applicant’s delay in commencing workers’ compensation proceedings. McColl JA accepted that the applicant in that case was required to lead evidence appropriate to give the Court a satisfactory understanding of why it was that proceedings were not commenced in time. However, her Honour explained that this requirement: [26]

“does not mean the applicant must personally give such evidence. As the [applicant] submits, [the solicitor’s] evidence was admissible pursuant to s 75 of the Evidence Act. Accordingly the hearsay rule did not apply, and the [applicant’s] statements recited by [the solicitor] were admissible ‘to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation’: see s 59(1), Evidence Act. Provided the relevant requirements of the legislation were satisfied by the evidence, the source of that evidence was irrelevant so long as it was otherwise admissible on an interlocutory application of the kind in question … Further, the fact that the evidence was hearsay did not permit ‘the primary judge to do other than address it on its terms as reasonably understood’: Brierley v Ellis [2014] NSWCA 230; (2014) 67 MVR 282 (at [28]) per Meagher JA (Basten and Gleeson JJA agreeing).”

26.    Howley at [55] (Meagher and Barrett JJA agreeing).

53. There is nothing in Howley to suggest that the applicants’ submissions in this case raise any genuine issue of principle. Nor are the observations of Gleeson CJ in Russo v Aiello [27] , to which the applicants also referred, pertinent to the present case. His Honour’s observations were directed to a case in which a claimant for compensation was required to provide a “full and satisfactory explanation for the delay in making the claim”. Gleeson CJ’s remarks were directed to the failure of the claimant to address a matter of which he had personal knowledge, thus producing a lacuna in the explanation offered to the Court.

    27. (2003) 215 CLR 643; [2003] HCA 53 at [10]-[11].

54. The primary Judge made the critical finding of fact on the basis of evidence that, as the applicants accepted, was admissible and probative of the fact ultimately found. The evidence could have been challenged by the applicants, even in the absence of evidence from Mr Schlaepfer himself. For example, the applicants could have insisted on a full response to the notices to produce and examined the material produced with a view to challenge the truth of the instructions conveyed to Mr O’Brien. The applicants could have issued subpoenas to those entities or individuals who, so they suggested, might well have imparted information to Mr Schlaepfer long before June 2016 concerning any communications by ASIC with market participants in 2014. The applicants could also have elected to cross-examine Mr O’Brien in order to test whether Mr Schlaepfer provided Mr O’Brien with material that cast doubt on the accuracy of the instructions recorded by Mr O’Brien in his affidavit. (It is unlikely that a claim of client legal privilege, if made, would have succeeded having regard to the fact that Mr O’Brien’s affidavit disclosed otherwise privileged information.)

55. Perhaps, as the applicants submitted, there were grounds for suspicion as to whether the instructions conveyed to Mr O’Brien were entirely accurate. Perhaps these matters could have been explored further at the hearing. But none of this established that the primary Judge erred in finding, on the uncontradicted evidence before him, that Mr Schlaepfer had proven on the balance of probabilities that he was not aware of Mr Yanco’s communications with Credit Suisse until he received a copy of the Couper email on 30 June 2016.

56. The application for leave to appeal did not raise any question of principle. Nor did the applicants establish that refusing to grant leave to appeal would result in significant injustice to them.

57. For these reasons the Court dismissed the application for leave to appeal.

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Endnotes

Decision last updated: 28 September 2017