Australian Securities and Investments Commission v Sweeney
[2001] NSWSC 114
•6 March 2001
CITATION: ASIC V Sweeney [2001] NSWSC 114 CURRENT JURISDICTION: Equity FILE NUMBER(S): SC 3339/99 HEARING DATE(S): 1 March 2001 JUDGMENT DATE:
6 March 2001PARTIES :
Australian Securities & Investments Commission (P)
Charles Augustine Sweeney (D)JUDGMENT OF: Austin J
COUNSEL : M Pembroke SC with J Stevenson (P)
I Barker QC, M Oakes SC & S Gorrick (D)SOLICITORS: Jan Redfern, Solicitor for Australian Securities & Investments Commission (P)
Noel F Bracks & Company (D)CATCHWORDS: PRACTICE & PROCEDURE - plaintiff's application to stay or dismiss defendant's notice of motion to set aside orders for substituted service - whether defendant's application permits assessment of adequacy of plaintiff's evidence - proper grounds for defendant's application - whether a reasonable basis for abuse of process exists LEGISLATION CITED: Supreme Court Rules Pt 9 r 10, Pt 10 r 1A, r 2, r 2A, r 6A, Pt 11 r 8 CASES CITED: Agar v Hyde (2000) 74 ALJR 1230
Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (1981) 148 CLR 121
Brimson v Rocla Concrete Pipes Limited [1982] 2 NSWLR 937
Corporate Affairs Commission v Transphere Pty Ltd (1989) 7 ACLC 205
Laurie v Carroll (1958) 98 CLR 310
Permanent Trustee Australia Ltd v Perpetual Trustee Co Ltd (1994) 15 ACSR 722
Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1993) 113 ALR 257
Williams v Spautz (1992) 174 CLR 509DECISION: Direction confining defendant's application to a single identified point of law
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISIONAUSTIN J
TUESDAY 6 MARCH 2001
3339/99 AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION V CHARLES AUGUSTINE SWEENEY
JUDGMENT (Revised)
1 HIS HONOUR: These proceedings began by statement of claim filed on 27 July 1999. The plaintiff contends that the defendant contravened the insider trading, market manipulation and misleading conduct provisions of the Corporations Law (ss 1002G (2) (b), 998 (1) and 995 (2) respectively). The statement of claim seeks relief by way of declarations of contravention, injunctions, and a disqualification order that would prevent the defendant from managing any corporation for a specified time.
3 The orders were made in their final form on 24 November 1999. They were expressed to be made pursuant to Part 9 Rule 10 of the Supreme Court Rules. The first order said that, instead of service of the statement of claim in the manner required by the Rules, certain steps (which were set out) were to be taken for the purposes of bringing the statement of claim to the notice of the defendant. The steps were:2 It appears that the defendant, who had previously resided in Australia and had practised as senior counsel from chambers on Level 6, 169 Phillip Street in Sydney, had by July 1999 ceased to be a resident of Australia. He was in Australia briefly in that month, but departed on 26 July 1999. The plaintiff was not able to effect personal service on the defendant in Australia and was unsure of his whereabouts overseas. In November 1999 it obtained orders for substituted service, relying on an affidavit by Peter Riordan made on 19 November 1999.
· to serve a copy of the statement of claim and the supporting affidavit and orders on the barristers' clerk at level 6, 169 Phillip Street, Sydney;
· to serve those documents on Noel Bracks, a solicitor who had previously acted for the defendant;
· to post a copy of the documents to a post office box address in Auckland and also a post office box address in Vanuatu;
· to e-mail a copy of the documents to <[email protected]>;
· to arrange to call a mobile telephone number (which, according to Mr Riordan's affidavit, belonged to the defendant) and to inform the person answering, or leave a message, that this Court made orders for substituted service of the statement of claim, which would be served in the manner outlined above.
The second order said that pursuant to Part 9 Rule 10 (2), the statement of claim was taken to have been served upon the completion of the steps outlined above.
4 On 23 December 1999, the defendant filed a notice of motion seeking declarations that the statement of claim has not been duly served on him and that the Court has no jurisdiction in respect of the subject matter of these proceedings. He seeks an order that either the statement of claim, or the orders with respect to substituted service, be set aside. In doing so, he purports to proceed under Part 11 Rule 8 and Part 10 Rule 6A. He has not lodged a notice of appearance submitting to the jurisdiction of this Court, and his application of 23 December 1999 is not to be treated as voluntary submission to the jurisdiction: Part 11 Rule 8 (3).
5 Part 11 Rule 8 contemplates orders of the kind sought in the defendant's notice of motion. It is less clear that Part 10 Rule 6A has any application. It applies only where the application is ‘by a person on whom an originating process is served outside Australia’. Here the defendant has not been served, but was outside Australia when substituted service was ordered and carried out.
6 The defendant has set about gathering evidence to support his application. He has issued some 60 subpoenae, returnable at dates varying from 24 October 2000 to 13 March 2001. His entitlement to do so rests upon his limited appearance for the purposes of the application of 23 December 1999, as he has not otherwise appeared as a party to the proceedings. His subpoena to the plaintiff was challenged before Young J, who decided on 14 December 2000 to permit it to stand in part. The plaintiff has accordingly produced some 17,000 folios of documents, and has made an as yet undetermined claim for privilege in respect of a substantial bundle of documents.
7 By an amended notice of motion filed on 16 February 2001, the plaintiff seeks three orders. First, it seeks an order that the defendant's motion dated 23 December 1999 be stayed or dismissed generally. Secondly, in the event that the orders for substituted service are set aside, it seeks an order under Part 7 Rule 7 (1) extending the period of validity of the originating process until such time as is necessary to enable it to effect personal service on the defendant. Thirdly, it seeks directions for the determination of the claim to privilege with respect to documents produced on subpoena.
8 On 14 February 2001 Noel F Bracks & Company, solicitors acting for the defendant on his application, wrote to the plaintiff, saying that their client, who was then in Europe, would be prepared to make himself available at a time and place to be arranged, so that personal service could be effected. However, the offer was made on the assumption that the Commission would obtain an order extending the time for service and that personal service would be effected in accordance with the law of the place of service. The letter extensively reiterated the defendant's position on the question of service. The offer has not yet been taken up by the plaintiff.
10 The first prayer for relief in the plaintiff's application relies on Part 13 Rule 5 (1), which is in the following terms:9 I heard the plaintiff's application for the first order on 1 March 2001. These reasons for judgment are directed only to that matter. The defendant's application (if it survives at all), and the remaining two prayers for relief in the plaintiff's application (to the extent that they remain relevant), will need to be heard and determined later.
‘Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings -
(a) no reasonable cause of action is disclosed;
(c) the proceedings are an abuse of the process of the Court,(b) the proceedings are frivolous or vexatious; or
the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.’
11 The plaintiff says that the defendant's application of 23 December 1999, which is a claim for relief in the proceedings for the purposes of this rule, discloses no reasonable cause of action, and also that it amounts to an abuse of the process of the Court. Therefore, it submits, the defendant's application should be stayed or dismissed.
12 The defendant did not challenge the plaintiff's reliance on Part 13 Rule 5. There is, I note, a degree of oddity in applying the ‘no reasonable cause of action’ ground to a notice of motion. The question posed by Part 13 Rule 5 (1) (a) is whether a reasonable cause of action has been ‘disclosed’. A notice of motion does not ‘disclose’ a basis for the application, let alone a cause of action, in the way that a statement of claim can be said to do. However, it seems to me that the rule can be applied to an application by notice of motion, if it can be shown that no reasonable ground is available to support the relief sought in the notice of motion, whether ‘pleaded’ or not. This is the basis upon which the hearing on 1 March 2001 proceeded.
14 I shall first consider the defendant's general points, and then I shall set out and consider each of the 10 grounds that he has advanced.13 The parties lodged written submissions before the hearing, in response to directions given by me. Argument at the hearing concentrated on the written submissions of the defendant, which made some general points and then identified 10 separate grounds for setting aside the order for substituted service. Counsel for the plaintiff submitted that nine of the grounds could not succeed, and consequently disclosed ‘no reasonable cause of action’, and that the defendant's application as a whole was an abuse of process. However, he conceded that one of the defendant's grounds was arguable, though he would contend at the appropriate time that it was wrong. He submitted that the defendant's notice of motion should proceed only on that tenth ground, which raised a point of law as to which little or no evidence would be relevant.
Is the defendant's right to apply to set aside orders for substituted service an unqualified right?
16 I disagree. The right to make an application under Part 11 Rule 8 and Part 10 Rule 6A is subject to other provisions of the Supreme Court Rules. One of them is Part 13 Rule 5. The defendant does not submit that a ‘summary dismissal’ order under Part 13 Rule 5 cannot be made to terminate an application of the kind made by him in this case.15 The first general submission is that the defendant has an unqualified right to make an application to set aside the orders for substituted service, having regard to Part 11 Rule 8 and Part 10 Rule 6A. This right, says the defendant, carries with it the right to present argument upon any ground open to the defendant, to demonstrate that the orders should not have been made. It should, therefore, not be contemptuously ignored by the sort of pre-emptive strike the plaintiff seeks to make by its application.
How wide are the grounds for review in an application to set aside orders for substituted service?
17 The second general submission is that the review permitted by means of an application to set aside an order for substituted service is of a wide nature, as recognised by the High Court in Agar v Hyde (2000) 74 ALJR 1230, and by Young J in reasons for judgment which he delivered in the present case on 13 and 14 December 2000. The defendant says that he is entitled, on the basis of these authorities, to show that the plaintiff has insufficient prospects of success on the evidence . To do so, he needs to be able to lay bare the factual basis for the plaintiff' s case and to require production of the plaintiff's voluminous documents for that purpose.
18 In my opinion this submission misreads Agar v Hyde and Young J's judgments. Agar v Hyde was a case about service outside the jurisdiction, whereas the present case is about substituted service. In that case, the plaintiffs were rugby footballers who sued various defendants in this Court, including overseas members of the international rule-setting body. Those defendants were served outside Australia, and the plaintiffs sought leave to proceed under Part 10 Rule 2. The overseas defendants concurrently sought orders setting aside the originating process under Part 10 Rule 6A. The High Court held that the application for leave to proceed should be denied, and service of the originating process outside Australia should be set aside.
20 As to the content of the test, they said (para 57):19 Gaudron, McHugh, Gummow and Hayne JJ said that ‘on an application to set aside service, or have the court decline to exercise jurisdiction, attention might be directed to any of a number of features of the proceeding, the claims made in it, or the parties to it, in aid of the proposition that the Court should not exercise jurisdiction’ (para 55). The defendant relies on that observation. However, their Honours then articulated three common bases for setting aside service outside the jurisdiction under Part 10 rule 6A. They are, first, that the claims made in the proceedings are not of a kind described in Part 10 Rule 1A; secondly, that the Court is an inappropriate forum; and thirdly, ‘that the claims made have insufficient prospects of success to warrant putting an overseas defendant to the time, expense and trouble of defending the claims’. I note that the first two of these grounds are expressly set out in sub-paragraph (2) of Part 10 Rule 6A. Their Honours held that the test to be applied in deciding whether the claims have insufficient prospects of success is the same test as is applied in an application for summary judgment under Part 13 by a defendant served locally (para 60).
‘It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court's jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.’
21 They concluded that it was not arguable that the defendants owed the plaintiffs a duty of care. Gleeson CJ took substantially the same approach, finding that the plaintiffs did not owe the defendants the kind of duty of care upon which their claims depended, and there was no reason to suppose that evidence might emerge at the trial which would alter that position (para 9). Callinan J decided the case on a different basis.
22 In the present case, the question raised by the defendant's application is not whether to grant leave to proceed or to set aside service outside the jurisdiction, but whether to set aside orders for substituted service. However, the defendant was outside the jurisdiction when the order for substituted service was made, and has remained outside the jurisdiction since that time. Agar v Hyde is therefore relevant, though not directly applicable.
23 In my view, the defendant's submission is contrary to the actual reasoning of the majority judges and Gleeson CJ. While the majority judges acknowledged that there might be other bases for setting aside service outside the jurisdiction, they took a narrow view of the ‘insufficient prospects’ basis, by equating it with the grounds for summary judgment in favour of a defendant served locally. Nothing in the judgment supports the idea that it can ever be appropriate, in an interlocutory application of this kind, to investigate whether, on the evidence rather than the pleadings, the plaintiff has a sufficient prospect of success. The observations from paragraph 57, quoted above, point in the opposite direction. The assessment of the evidence is a matter for the final hearing, for otherwise the plaintiff would be denied the opportunity to place its case before the court in the ordinary way.
24 On 11 December 2000 Young J heard a motion to set aside the defendant's subpoena directed to the plaintiff. During the hearing of that application, his Honour formulated a separate question for determination. The question was whether Part 9 Rule 10 permits substituted service where the defendant is not personally present in Australia at the time when the proceedings are commenced or thereafter. On 13 December 2000 he delivered judgment in which he answered the separate question, ‘sometimes’. On the following day he delivered another judgment in which he upheld the subpoena in part. The defendant seeks support for his proposition, that the Court can embark on a wide review in considering whether to set aside substituted service, from the ‘Sometimes’ judgment, paras 18, 19, 20, 21, 27, 38 and 39, and from the Subpoena judgment, paras 6, 8, 9, 10 and 12.
25 In the ‘Sometimes’ judgment his Honour was dealing with the question whether substituted service may be ordered where the defendant is outside the jurisdiction. He said that the answer may vary depending upon a number of factors, such as whether common law or equitable relief was sought, whether relief by way of declaration was sought, and whether the rule about substituted service literally applies where the defendant is outside the jurisdiction. The judgment has some relevance to other points made by the defendant, but it provides no support for the proposition that the Court can embark on a wide review in considering an application to set aside substituted service. His Honour simply did not deal with the breadth of the grounds of review of an order for substituted service.
26 In the Subpoena judgment, Young J identified some matters which are examinable when a court has to consider whether it should set aside an order permitting substituted service outside the jurisdiction (para 6). He said that the question whether one should harass a person who resides outside Australia by implying an extended jurisdiction of the Court was a live issue (para 8). As I understand it, his Honour's observation refers to the question whether the law permits an order for substituted service to be made in this case, in light of cases such as Laurie v Carroll (1958) 98 CLR 310. The plaintiff concedes that this is a proper issue to be contested by the defendant.
27 Young J also observed that the applicant for an order for substituted service must make full disclosure, especially where (as in the present case) the proceedings have been issued because of an impending limitation problem (para 9). He said that a matter to be investigated is whether adequate attempts were made to serve the process outside Australia before the order for substituted service was made (para 10). I accept that these questions may properly be raised in an application to set aside an order for substituted service, but the short answer to them may be provided by examining the affidavit relied upon when the order was obtained. In the present case, for the reasons I shall explain, it cannot reasonably be said that the plaintiff failed to make full disclosure or that it failed to make adequate attempts to serve the defendant, before the order for substituted service was made.
29 I shall now turn to the 10 grounds for setting aside the order for substituted service, advanced in the defendant's submission.28 There is nothing in Young J's judgment of 14 December 2000 to support the proposition that the Court should embark on a wide-ranging factual inquiry on an application to set aside an order for substituted service. The defendant says that the plaintiff's present motion amounts to no more than a repetition of its motion to set aside the defendant's subpoena. But the issues now in contention were not dealt with by Young J in either of his judgments.
The unlikelihood of the Court granting any of the “relief” sought.
First Ground
Being unable to prove any allegation beyond reasonable doubt, ASIC is trying to do so on the balance of probabilities. Aside from the problem of seeking a declaration that crimes were committed (nearly 7 years ago), what is conspicuously lacking in the statement of claim is any allegation that the defendant intends, or is likely, or even wants, to manage a company or transgress the Corporations Law. The third order sought appears to be to restrain conduct which happened in September 1993. The declaration is sought in the absence of any justiciable controversy.
30 It is beyond contest that this Court has plenary jurisdiction to make a declaratory order concerning contravention of the Corporations Law, by virtue of ss 23 and 75 of the Supreme Court Act 1970 (NSW). In Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (1981) 148 CLR 121, the High Court expressly disagreed with the Court of Appeal of New South Wales, which had declined to grant a declaration with respect to contravention of the ‘prescribed interests’ provisions of the Companies Act 1961 (NSW). Gibbs CJ remarked that it was proper to grant a declaration in that case although it had been agreed that an injunction was not an appropriate remedy (at 125).
31 In Corporate Affairs Commission v Transphere Pty Ltd (1989) 7 ACLC 205, 209, Young J dealt with the question more fully. He observed that, while a declaration will not ordinarily be made that a defendant has committed a crime, there is jurisdiction to do so in a proper case. In his Honour's view, older cases which discouraged a statutory authority from commencing proceedings for declaratory relief are no longer applicable, in view of the changed social climate, and the Court will now grant declaratory relief at the suit of the statutory authority which exists to regulate an industry, in an appropriate case: at 214. In his Honour's view, the fact that the subject matter of the declaration is of public interest is an important consideration in favour of the granting of declaratory relief, even though the order may be of only slight utility: at 213. In that case the Court declined to make a declaratory order, because (inter alia) the declaration would affect investors who were not parties to the proceedings. That consideration is not present here. The approach taken in the Federal Court is very similar: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1993) 113 ALR 257.
32 Section 1324 (1) of the Corporations Law empowers the Court, on the application of the Commission or a person whose interests have been affected, to grant an injunction restraining a person from engaging in conduct that constitutes a contravention of the Law. Section 1324 (2) empowers the Court to grant a mandatory injunction requiring a person to do something required to be done by the Corporations Law. By s 1324 (6) (a), the power to grant an injunction restraining a person from engaging in conduct may be exercised whether or not it appears to the Court that the person intends to engage again, or continue to engage, in conduct of that kind. Obviously there will be discretionary considerations for and against the grant of injunctive relief, but there is no doubt about the power to grant the relief, as Cohen J confirmed in Permanent Trustee Australia Ltd v Perpetual Trustee Co Ltd (1994) 15 ACSR 722, 728.
33 No submissions were directed to the availability of relief by way of disqualification order under the provision that was s 230 of the Corporations Law at the relevant time. I have no reason to think that such relief could not be granted, if appropriate facts are established. Again, the grant of relief at the final hearing will depend upon discretionary considerations.
34 The present proceedings have been brought by the public regulator to enforce the corporations and securities legislation. According to s 1 (2) of the Australian Securities and Investments Commission Act 1989 (Cth), in performing its functions and exercising its powers, the plaintiff must strive to achieve various objectives, including:
· to promote the confident and informed participation of investors and consumers in the financial system;
· to administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements; and
· to take whatever action it can take, and is necessary, in order to enforce and give effect to the laws that confer functions and powers on it.
36 Thus, the Court has jurisdiction to grant relief of the kinds sought by the plaintiff in these proceedings. The granting of that relief will depend on the exercise of the Court's discretion. It cannot be said that the plaintiff is doomed to fail because of the nature of the relief that it seeks. On the contrary, it is likely that there will be persuasive discretionary considerations in favour of granting such relief, which will be taken into account at the final hearing. Therefore the defendant's first ground discloses no reasonable basis for challenging the order for substituted service.35 These provisions imply that it is appropriate for the Commission to take civil proceedings for declaratory and injunctive relief in respect of past events, even if there is no risk of repetition, where the outcome may establish that the conduct complained of was wrongful (and thereby mark the Court's and the community's disapproval of it) and may deter other wrongdoers. It is appropriate for the Court to take these matters into account in the exercise of its discretion to grant or refuse such relief.
Second GroundThis is a live issue: see “The Vrontodos” (1982) 2 Lloyds LR 241 and the “Sometimes” judgment of Young J. at para.38.The plaintiff’s failure to show that personal service in New Zealand was impracticable, or to even attempt such service.
37 In fact, the plaintiff presented evidence to the Deputy Registrar, before the orders for substituted service were made, which showed that extensive attempts had been made to serve the defendant, and that there were no additional practical steps which could reasonably be required.
38 The application for orders for substituted service relied on the affidavit of Peter Riordan made on 19 November 1999. Mr Riordan deposed that the Commission had not been able to effect service on the defendant, whose residential and business addresses were not known, but were believed to be in Auckland. He said that the Commission had made extensive efforts to locate the defendant and effect service on him. His affidavit annexed file notes and correspondence reporting these attempts. They are extensive.
40 In light of Mr Riordan's affidavit, it is just not arguable that the plaintiff failed to show that personal service on the defendant in New Zealand was impracticable, or that it had failed to attempt such service.39 The Commission retained a private investigator to assist in attempts to locate the defendant. The private investigator provided some information which the Commission pursued. Mr Riordan made contact with the defendant's son, who agreed to ask his mother to make contact, but she did not. He rang a mobile telephone number with the New Zealand prefix code, supplied by the private investigator. The defendant answered when Mr Riordan rang, but claimed he was in Copenhagen rather than New Zealand. Mr Riordan explained that he wished to make arrangements to serve the statement of claim in these proceedings. The defendant asked him how he obtained the telephone number. Mr Riordan said he could not say. The defendant said: ‘well I'm not going to assist you’, and terminated the conversation.
41 Having regard to the contents of Mr Riordan's affidavit, none of the defendant's points is arguable. I shall set out the points, and refer to the parts of Mr Riordan's affidavit which answer them.
Plaintiff’s failure to make full disclosure to the Registrar:
Third Ground
(a) It is beyond argument that upon such a significant ex parte application ASIC bore the onus of making full disclosure.
(b) It did not do so. Amongst other things, the plaintiff failed to disclose to the Court that the address given for the defendant in the process was not a current address. It failed to disclose that no attempt had been made to serve the defendant in New Zealand and that the process could not be lawfully served in New Zealand without the mandatory notice. The plaintiff failed to draw to the court’s attention the problem represented by the claim for a declaration. It failed to disclose that the then former solicitors for the defendant had informed it that they had been unable to make contact with the defendant. It failed to disclose, although each of the matters was known to it, that the defendant’s immigration records showed that he ceased to be a resident of Australia in 1996, that the defendant had spent very little time visiting Australia in 1998 and early 1999 prior to the period covered by the records (being Annexure “A” to the affidavit of Mr. Riordan sworn 19 November, 1999), that the defendant has not been listed in any phone book in Australia since 1996, that the Bar Registry which ASIC put before the Court (page 33 of Riordan’s affidavit sworn 19 November, 1999) was published in 1995 .
1. Amongst other things, the plaintiff failed to disclose to the Court that the address given for the defendant in the process was not a current address.Mr Riordan's affidavit disclosed that the defendant's address was ‘believed to be in Auckland, New Zealand’.
2. It failed to disclose that no attempt had been made to serve the defendant in New Zealand and that the process could not be lawfully served in New Zealand without the mandatory notice.
Mr Riordan's affidavit contains a substantial amount of information about attempts to serve the defendant. The attempts included an attempt to transmit the process by e-mail, and attempts to contact the defendant through his family and directly by telephone. The defendant refused to assist the Commission to make arrangements for service. Since the orders were for substituted service, there was no need to disclose to the Deputy Registrar or anyone else that the process could not be lawfully served in New Zealand without the mandatory notice.
3. The plaintiff failed to draw the Court's attention to the problem represented by the claim for a declaration.
For reasons already given, there was no such problem.
4. The Commission failed to disclose that the then former solicitors for the defendant had informed it that they had been unable to make contact with the defendant.
Mr Riordan's affidavit annexed a letter from Noel F Bracks & Company saying that they had sent facsimiles to the defendant at the only point of contact they had for him, an international facsimile number, but that they had received no response.
5. The Commission failed to disclose that the defendant's immigration record showed that he ceased to be a resident of Australia in 1996, and that he spent very little time visiting Australia in 1998 and early 1999 prior to the period covered by the records annexed to Mr Riordan's affidavit.
The records annexed to Mr Riordan's affidavit showed that in the departure card which he filled out when he left Australia on 26 July 1999, the defendant described himself as a ‘visitor or temporary entrant departing’. It was plain from the affidavit that the defendant was no longer resident in Australia and that the Commission had failed to effect service notwithstanding its extensive inquiries. In my view, the omission (if any) of further information the Commission may have had, along the lines suggested, could not have been material to the Deputy Registrar's decision.
6. The Commission failed to disclose that the defendant had not been listed in any telephone directory in Australia since 1996.
Mr Riordan's affidavit disclosed that the only point of contact available to Mr Bracks was an international facsimile number, and that the defendant's former clerk could only contact him by facsimile, and that the Bar Association had stated that its file suggested the defendant had travelled overseas for an indefinite period.
7. The Commission failed to disclose that the Bar registry which it put before the court was published in 1995.
This is true, but cannot have been material, in light of the more current information supplied in a letter from the NSW Bar Association to Mr Riordan dated 23 August 1999 and annexed to his affidavit.
Plaintiff’s failure to seek an order that the statement of claim be accompanied by a notice: see Part 10, Rule 2A, Form 13A, and judgment of Young J. at para.27.Fourth Ground
(a) The process asserts that the defendant was present within the jurisdiction at 169 Phillip St, Sydney. The plaintiff was aware that this assertion was incorrect. As a consequence, the process as issued did not include the notice to foreign defendants which is mandatory under the rules. It could in that form never have been regularly served on the defendant unless the plaintiff was able to effect personal service inside Australia.
(b) The plaintiff was fully aware before issuing that it was making an election to take its chances of doing so, but in the events, through no fault of the defendant, was unsuccessful.
(c) The plaintiff deliberately attempted to time the issue of the process for a date on which the defendant was in Australia. It was entitled to do so but it must bear the consequences of any failure of what was essentially an artifice.
42 Part 10 Rule 1A set out the cases where an originating process may be served outside Australia. Rule 2A provides that where an originating process is served outside Australia, a notice in the prescribed form must be served with the originating process. The prescribed form is Form 13A. A notice in that form was not served in the present case.
43 This was not the product of any flagrant disregard of the Supreme Court Rules by the plaintiff or the Deputy Registrar. The orders made on 24 November 1999 were, on their face, made under Part 9 Rule 10. They authorised substituted service upon the taking of specified steps, on the basis that once those steps had been taken, the originating process was deemed to have been served under Part 9 Rule 10 (2).
44 In a loose sense, what was done could be described as ‘service’ outside Australia, sufficient to permit the Court to apply Part 10 Rule 6A by analogy, as it were, in dealing with the defendant's application under Part 11 Rule 8. But the Rules strictly distinguish between an order for substituted service under Part 9 and service outside the jurisdiction under Part 10. For the purposes of the Rules, there never was any service outside Australia, although some of the steps required by the orders to be taken, were steps taken in Australia but communicated or effected abroad. Therefore Part 10 Rule 1A and Rule 2A, and Form 13A, never became applicable.
45 It is true that the statement of claim gave the defendant's address as 169 Phillip Street, Sydney. But Mr Riordan's affidavit disclosed the true circumstances with respect to the defendant's location and (so far as was known to the plaintiff) residence, and that being so, a reasonable person in the shoes of the Deputy Registrar would not have been misled by the statement of address. It was not misleading of the plaintiff to present a statement of claim in that form.
47 On 4 August 2000 the plaintiff obtained an order under Part 10 Rule 2 granting it leave to proceed against the defendant. That application assumed (perhaps for more abundant caution) that the originating process had been served on the defendant outside Australia, since otherwise the Rule would have been irrelevant. That assumption was incorrect, for the reasons I have given. But the unnecessary and incorrect step taken on 4 August 2000 does not invalidate the orders for substituted service which had been made on another basis.46 It is not true that the plaintiff made an election upon the issue of the statement of claim. Part 10 was available to be used subsequently, if invoked. So was Part 9, which was in fact invoked by the plaintiff. There was no artifice in the plaintiff's conduct in issuing the proceedings and obtaining the orders for substituted service.
48 This is the matter upon which, the plaintiff concedes, there is an arguable ground for setting aside the orders for substituted service. Some of the issues raised by this ground were discussed by Young J in his ‘Sometimes’ judgment of 13 December 2000. Laurie v Carroll is obviously an important authority to consider. But the point is one of law, as to which there is no need to garner further evidence by the issue of any subpoena or the tender of substantial documentation.
Whether in the circumstances of the case the Court has jurisdiction, the defendant not having been served personally. The issue was left open by Young J.: see judgment para.23.
Fifth Ground
Other Irregularities in the Order:
Sixth Ground
(1) The order was irregular as it provided for service on two foreign post offices and a foreign email address as part of a service order which ASIC now contends to have been an order for substituted service within Australia.
(2) These portions of the order cannot be effective orders for service outside Australia or effective for substituted service within Australia.
50 The question whether, as a proposition of law having regard to Laurie v Carroll and other cases, an order for substituted service can be made against a defendant who is outside the jurisdiction at the time of the commencement of the proceedings, the making of the order and subsequently, is another matter. It is the fifth ground, as to which there is an arguable case.49 As I understand the plaintiff's case, it does not contend that the orders made on 24 November 1999 were for substituted service within Australia. They were for substituted service, by the taking of steps specified in the orders, some of which had foreign elements. I see nothing irregular in the orders in this respect. Nor do I accept the submission that those portions of the order having foreign elements cannot be effective for substituted service under Part 9 Rule 10. There is nothing in the Rules to suggest such a limitation, and no ground for implying it.
Seventh GroundThe statement of claim the plaintiff relies upon is not the statement of claim in respect of which the order was made. The amended statement of claim has never been served either personally or by effective substituted service. The order of 25 February, 2000 did not achieve that end; was made ex parte; and, was apparently made without any supporting evidence.Amended Statement of Claim:
52 I do not mean to raise a question about the validity and efficacy of the amendment, nor to resolve that question now. The order permitting the amendment was made on 25 February 2000. By that time, the defendant's notice of motion of 23 December 1999 had been filed, and there was a solicitor acting for the defendant on that application. The order for amendment of the statement of claim provided for service by delivery of a copy to that solicitor. The facts available to me do not disclose any departure from the Rules or the requirements of procedural fairness.51 Provided that the plaintiff has complied with the orders of 24 November 1999, the statement of claim is taken to have been served under Part 9 Rule 10 (2). The question whether the statement of claim was subsequently amended is irrelevant to the defendant's application to set aside the orders for substituted service. If the defendant wishes to challenge the order granting the plaintiff leave under Part 20 Rule 1 to amend the statement of claim, the Rules provide the means for doing so.
Eighth Ground(1) The pleading the subject of the service order does not distinctly allege that the defendant had information not generally available. What it appears to allege is that one of four alternative possibilities occurred, namely that he:Pleading Bad
(2) The pleading is bad as it amounts to no more than an allegation that the defendant caused shares to be purchased based on matters of supposition. That is not an allegation that the law was breached.
(a) had been told by Onisforou of the information, “directly or indirectly”;
(b) had read or intercepted a fax directed to Onisforou;
(c) had learned in some unspecified manner of the information or part thereof; or
(d) had engaged in matters of supposition in relation to it.
54 Particulars of the information referred to in paragraph 8 of the statement of claim are given, although they are substantially altered in the amended statement of claim. In both documents, however, reliance is placed on matters of supposition relating to certain specific items of information pleaded in paragraph 6. The definition of ‘information’ in s 1002A of the Corporations Law specifically includes matters of supposition. The fact that the pleading relies on matters of supposition therefore cannot, of itself, establish that the pleading is bad.53 Paragraph 8 of the statement of claim, in both its amended and unamended forms, alleges that on 30 September 1993, the defendant came into possession of ‘information’ that was not generally available. Paragraph 8 (1) of the defendant's submission is therefore wrong.
Ninth Ground(1) The proceedings are an abuse of process, not brought to obtain the relief sought but to punish the defendant, which is the sole jurisdiction of the criminal law, with its protections, eg trial by jury, onus of proof. By these proceedings, ASIC is effectively refusing to accept the decision of the DPP not to prosecute.Proceedings an Abuse of Process
(2) Section 230 is intended to protect the public, not penalise an individual. There is no evidence the public needs protection from the defendant.
(3) The proceedings are also an abuse for the reasons outlined in the defendant’s Outline of Submissions on the privilege issue.
55 The defendant lodged some written submissions with respect to the plaintiff's claim to client legal privilege concerning documents produced on subpoena. His submission on privilege relies on two grounds, namely the allegation that the plaintiff is conducting the proceedings for extraneous and improper purposes, and an allegation of waiver. Only the first is presently relevant.
56 The defendant's submission contends that the plaintiff's decision to bring the proceedings was affected by the identity of the defendant; that other persons considerably closer than the defendant to any source of knowledge of the proposed placement of shares also purchased shares shortly before the announcement but no proceedings have been brought against them; and in the course of its conduct of the proceedings, the plaintiff has acted in such a manner as to give rise to apprehensions that the proceedings are not being pursued to enforce the law, but for some extraneous purpose. The submission then summarises a large number of factual allegations under headings relating to material facts and circumstances, improper use of customs and Telstra records, counsel's advice, the differential treatment of Mr Onisforou, and the appearance of animus towards the defendant.
57 In my opinion, the defendant's contentions as to abuse of process are not arguable, because they reflect misconceptions about the law. In the first place, it is not an abuse of process for the plaintiff to proceed by civil proceedings rather than criminal prosecution, even though the defendant would have some protections in a criminal prosecution (such as trial by jury, and a higher burden of proof) not available to him in the present proceedings. The cases that I have discussed in dealing with the defendant's first ground show that it may be appropriate to grant injunctive and declaratory relief at the suit of the Commission to deal with a contravention of a provision of the Corporations Law for which there is also a criminal sanction.
58 While it is true that s 230 (as it then was) is a provision designed to protect the public rather than to penalise an individual, it is premature to assert that there is no evidence that the public needs protection from the defendant. The questions whether s 230 is available, and if it is, whether the Court should grant relief under that section in the exercise of its discretion, will be matters for consideration at the final hearing.
60 In my view, there is no reasonable basis for contending in the present case that the plaintiff does not intend to obtain the outcome directly made available to such a plaintiff in proceedings of the present kind. There is nothing to suggest, for example, that the plaintiff does not wish to pursue the proceedings to their conclusion, or that it would discontinue them if its collateral purpose were to be fulfilled. The defendant's submissions do not even advance such a case.59 The contentions about abuse of process in the submissions on privilege are, in my view, based on a misunderstanding of Williams v Spautz (1992) 174 CLR 509. The assumption underlying the submissions seems to be that, once it be established (if it were to be) that the Commission was actuated by a motive of singling out the defendant and pursuing some extraneous, publicity-seeking purpose, the ingredients of an abuse of process would be necessarily established. But it is clear from Williams v Spautz that there is a distinction between pursuing proceedings for a collateral and improper purpose, and pursuing proceedings for the relief which the law makes available, but also with a view to obtaining thereby some benefit which will arise from successful conclusion of the litigation: see at 509, 521, 522, 525, 526 (per Mason CJ, Dawson J, Toohey J and McHugh J); 535, 537 (Brennan J), 543 (Deane J, dissenting).
Tenth Ground(1) This is an issue upon which the defendant has the right to present full argument when his motion is heard.The Adequacy of the Evidence
(2) However, having regard to para.4 of the plaintiff’s submissions, the defendant says:(3) Oddly, the outline of ASIC’s submissions does not condescend to controvert the claim in the letter of the defendant’s solicitors of 14 February 2001 which senior counsel for ASIC informed the Court was the genesis for the ASIC motion.
(a) regarding the insider trading allegation, the statement of claim in para.10 purports to directly identify how the defendant is said to have obtained the knowledge;
(b) There is no suggestion in the pleading of any other facts, matters or circumstances upon which the plaintiff relies. It is not pleaded as a circumstantial case.
(4) Nor do the ASIC submissions contend that there is any evidence to support the allegation in paragraph 8 of the Statement of Claim that “the information [concerning the proposed placement of shares with Packer and Goldsmith interests] was either communicated to the defendant directly or indirectly by Theodore Onisforou or was contained in a facsimile to Mr Onisforou which was read or intercepted by the defendant.”
(5) As the letter of 14 February points out, the evidence available to ASIC consists of the following:(6) Assuming that a fax such as was referred to in the statement of claim was actually sent to Mr Onisforou, the above evidence does not support either of the alternative allegations in the statement of claim.
(b) s.19 examination of Mr Sweeney, who denies ever having received such information from Onisforou or ever having seen or having been told of any fax containing any relevant information;
(c) s.19 examination of Onisforou, who denies ever having informed Sweeney of the information or having ever shown him any fax relating to the subject.
(7) These allegations are of the highest gravity. Their making in a pleading was sufficient to ensure the total annihilation of the defendant’s standing or ability to maintain a professional practice anywhere in the world.
(8) Ruinous allegations should not be made except where the party making them is in a position to establish their truth from admissible evidence which it expects to be available to it. It is not sufficient for a party to justify the bringing of proceedings involving allegations of this character on the basis that something might turn up in cross examination. Yet this appears to be the position which ASIC is adopting, for its outline refers (para 12) to the fact that it has not yet “presented its case or cross examined any witnesses (including the defendant) ¼ ” This is the very apologia which is impermissible. A plaintiff must not advance such devastating allegations unless it already has sufficient evidence. A plaintiff is not permitted to say that it has brought the proceedings because it hopes that after it has cross examined the defendant, its case will be sufficient. Its case must be sufficient before it is sued out. Otherwise it is an abuse of process.
(9) In any event, the assumption of the plaintiff that it has a right to call in aid the prospect of cross-examination of the defendant itself assumes that it has a prima facie case. It does not. The issue can be tested by hypothesising the presentation of the plaintiff’s evidence. Mr Onisforou would have to be called. His evidence, which is available given the s19 examination, supports the defendant’s case. No witness is available who would not support the defendant’s case. The plaintiff would presumably have to tender the transcript of the defendant’s examination. It also supports the defendant’s case.
(10) Even if the plaintiff were to submit that Mr Onisforou’s evidence should not be accepted on some critical point and such a submission were to be upheld (a courageous submission given that the plaintiff would not have been able to cross examine him), and even if the submission were upheld, the rejection of his evidence would not amount to affirmative evidence of the opposite. The plaintiff would still be left with no evidence.
(11) The defendant does not accept that the plaintiff’s “incontrovertible” facts are complete or accurate. It is a matter for argument when the defendant’s motion is heard.
62 The facts of this case show graphically what could happen if the law were otherwise. The administration of justice surely cannot require that, in an interlocutory application such as the defendant's application, there must be a detailed factual investigation, in the course of which the applicant becomes entitled to issue 60 or so subpoenae and to obtain production of 17,000 pages of documentary evidence.61 The defendant's contention that he has the right to present full argument on the adequacy of evidence when his motion is heard, is incorrect for the reasons already given. The defendant's submissions on this point assume, contrary to Agar v Hyde , that an applicant under Part 11 Rule 8 may establish insufficient prospects of success by entering into detailed matters of evidence. That, in my view, is incorrect for reasons already given. The question is not whether the plaintiff's evidentiary case is weak, as distinct from being effectively pleaded, and the plaintiff is to be deprived of its entitlement to proceed to trial only in the clearest cases: see Brimson v Rocla Concrete Pipes Limited [1982] 2 NSWLR 937.
The appropriate orders
63 For these reasons, my view is that nine of the grounds advanced by the defendant are either wholly inappropriate, or manifestly hopeless and doomed to fail, because they are based on demonstrably incorrect statements of fact or misapprehensions about relevant legal principles. Consequently, nine of the defendant's grounds disclose no reasonable ‘cause of action’ for setting aside the orders for substituted service. However, in light of counsel's concession about the tenth ground, I cannot make an unqualified order staying or dismissing the defendant's notice of motion.
64 Counsel invited the Court to make an order dismissing or staying the defendant's application save in respect of that single ground. There is no direct authority in Part 13 Rule 5 for the Court to make an order that does not dismiss or stay a claim to relief, but merely limits the grounds upon which the claim can be made. However, the Court has the power to give directions to control its own processes, as part of its inherent jurisdiction as a superior court of record: Ritchie's Supreme Court Practice (looseleaf), para [s 23.3] and cases there cited. In my opinion that is a sufficient source of power for me to make the kind of order proposed by counsel for the plaintiff.
66 The plaintiff, bearing the onus in the present application, submits that there is no conceivable way of putting the defendant's case on the application of 23 December 1999, which provides a reasonable basis for success on the application. I find that submission plausible. The defendant has had the opportunity to respond by pointing to some grounds which he would develop at the hearing of his application, and has done so. Apart from the fifth ground, none of them is a reasonable basis for the relief that the defendant's application seeks. In those circumstances, I accept the plaintiff's submission that there are no other grounds which would provide a reasonable basis for the defendant to succeed, and consequently I should make orders and directions confining the defendant's application to the fifth ground alone.65 Counsel for the defendant made it crystal clear that the grounds for setting aside the orders for substituted service, as set out in his written submission, have not been fully developed and are not necessarily exhaustive. Counsel submits that, because of the huge bulk of the documentary evidence that has been under review, he has not yet had the time to the consider all possibilities, and that in those circumstances I should not pre-empt him from putting forward new grounds. In my view, however, an enterprise which depends on the consideration of massive evidence is misconceived from the outset, because of the limited scope of the review authorised by Part 11 Rule 8 and cases such as Agar v Hyde .
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