Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd

[2008] NSWSC 814

CITATION:	ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 814
HEARING DATE(S):	5 August 2008
JUDGMENT DATE :	5 August 2008
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	Application under r 29.10 that there should be judgment in the third defendant’s favour on the plaintiff’s claim generally dismissed.
CATCHWORDS:	PROCEDURE [110] - Supreme Court procedure – Procedure under Rules of Court – Trial – Application under Uniform Civil Procedure Rules r 29.10 for judgment for third defendant generally – Test to be applied as to whether on the evidence judgment for the plaintiff could not be sustained – On this test plaintiff’s evidence to be taken at its highest.
LEGISLATION CITED:	Corporations Act 2001 (Cth) ss 180 to 182 District Court Rules 1973 Part 26 r 8 Supreme Court Rules 1970 Part 34 rr 7 & 8 Uniform Civil Procedure Rules 2005 rr 14.28(1)(c), 29.9 & 29.10
CATEGORY:	Procedural and other rulings
CASES CITED:	Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 796 Humphrey v Collyer [1946] VLR 391 Hunt v Watkins (2000) 49 NSWLR 508 Jones v Dunkel (1959) 101 CLR 298 Mailman v Ellison NSWCA 25 November 1993 unreported Metrolink Victoria Pty Ltd v Auspro Logistics Pty Ltd (2008) 49 MVR 350 Naxakis v Western General Hospital (1999) 197 CLR 269 Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187 Stephenson v Barham (1977) 136 CLR 190
PARTIES:	Australian Securities and Investments Commission (P) Sydney Investment House Equities Pty Ltd (D1) Sydney Investment House Capital Ltd (D2) Edwin James Goulding (D3) Stephen Geagea (D4) Sydney Investment House Pty Ltd (D5) Sydney Investment House (Newcastle) Pty Ltd (D6) Sydney Investment House (Beaconsfield) Pty Ltd (D7) Melbourne Investment House Pty Ltd (D8) Melbourne Investment House (Hawthorn) Pty Ltd (D9) Melbourne Investment House (Collingwood) Pty Ltd (D10)
FILE NUMBER(S):	SC 2941/06
COUNSEL:	A J McInerney & D J Barnett (P) In Person (D3) No other appearances
SOLICITORS:	Kim Turner, Solicitor (P) In Person (D3) No other appearances

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

TUESDAY, 5 AUGUST 2008

2941/06 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v SYDNEY INVESTMENT HOUSE EQUITIES PTY LTD & ORS

JUDGMENT

1 HIS HONOUR: This judgment deals with an application made by the third defendant under r 29.10 of the Uniform Civil Procedure Rules 2005 (“the UCPR”). I have in a previous judgment dealt with an application made by the third defendant under r 29.9 of the UCPR: Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 796 (“my judgment”). When that application was made by the third defendant, the plaintiff declined under r 29.9(3) to argue the question raised by the application. In my judgment I ruled that the Court had no discretion to permit the application to be argued and that pursuant to the provisions of r 29.9(5) the courses then open to the third defendant were to lead evidence or, if he wished, to make an application under r 29.10. It was, of course, equally open to the third defendant not to make such an application and simply to proceed either to call evidence or not to call evidence. If he did not call evidence, then, of course, the matter would proceed immediately to submissions as to whether or not the plaintiff’s case was in fact made out and whether orders should be made in the plaintiff’s favour upon the evidence in the proceedings.

2 Rules 29.9 and 29.10 of the UCPR provide as follows:

“ 29.9 Dismissal of proceedings on defendant’s application

(cf SCR Part 34, rule 7; DCR Part 26, rule 7; LCR Part 21, rule 5 (2)-(7))

(1) A defendant in proceedings in which the plaintiff is the beginning party may apply to the court for an order:
(a) for the dismissal of the proceedings, or
(b) for the dismissal of the proceedings to the extent to which they concern any cause of action relevant to the plaintiff’s claim for relief against that defendant,
on the ground that, on the evidence given, a judgment for the plaintiff could not be supported.


(2) Such an application may be made at any time after the conclusion of the evidence for the plaintiff in his or her case in chief.

(3) The plaintiff may argue, or decline to argue, the question raised by the application.

(4) The court may not make an order under this rule unless the plaintiff argues the question raised by the application and the defendant satisfies the court that, on the evidence given, a judgment for the plaintiff could not be supported.

(5) If the plaintiff declines to argue the question raised by the application, or if the defendant fails to satisfy the court that, on the evidence given, a judgment for the plaintiff could not be supported, the defendant:
(a) may adduce evidence or further evidence, or
(b) may make an application under rule 29.10.


(6) If fewer than all defendants apply to the court under subrule (1), the court must not deal with any such application before the conclusion of the evidence given for all parties.

29.10 Judgment for want of evidence

(cf SCR Part 34, rule 8; DCR Part 26, rule 8; LCR Part 21, rule 6)

(1) An opposite party may apply to the court to give judgment for the opposite party, either generally or on any claim for relief in the proceedings, on the ground that, on the evidence given, a judgment for the beginning party could not be supported.

(2) Such an application may be made at any time after the conclusion of the evidence for the beginning party in his or her case in chief.

(3) The court may not give judgment under this rule unless the opposite party satisfies the court that, on the evidence given, a judgment for the beginning party could not be supported.

(4) If the opposite party fails to satisfy the court that, on the evidence given, a judgment for the beginning party could not be supported, the opposite party may not adduce evidence or further evidence in the proceedings generally or on the claim for relief concerned, as the case may be, except by leave of the court.

(5) If not all opposite parties apply to the court under subrule (1), the court must not deal with any such application before the conclusion of the evidence given for all parties.”

3 In this Court those rules replaced Part 34 rr 7 and 8 of the Supreme Court Rules 1970 (“the SCR”). Those rules themselves replaced the earlier practice of this Court under the general law in relation to non suits and verdicts by direction. Rule 29.10 is generally to the same effect as Part 34 r 8. There is one important exception, namely, that the prohibition on the giving of evidence after an unsuccessful application under the rules was in the case of Part 34 r 8 absolute, whereas r 29.10(4) provides that the Court may grant leave for evidence to be given. The regime at common law was somewhat different. The Court did generally, but not necessarily, require a party who made an application for judgment on the basis that there was no case to answer to make an election before the application proceeded not to give evidence in the case of failure of the application. It is important to bear these differences in mind when considering authority on such applications.

4 After I ruled that the application under r 29.9 could not proceed further once the plaintiff had declined to argue the question raised by the application, the third defendant announced that he made an application under r 29.10. The application that he made under r 29.10 was an application that there should be judgment in his favour on the plaintiff’s claim generally. He did not make any application in relation to individual claims for relief in the proceedings either in his announcement of the application or in the written submissions which have been subsequently lodged in relation to the application.

5 I directed that the application was one which could be determined on written submissions only, subject to the right of the Court to require further submissions on any matter after receipt of the parties’ written submissions. After receiving those submissions, I did ask the parties very limited questions concerning their cases. The parties were, in fact, as recently as this morning, given an opportunity to make any further submissions that they desired to make, but have not made any further submissions.

6 On the plaintiff’s behalf it was submitted that, as the third defendant’s application was for the dismissal of the whole of the proceedings, the easiest way to resolve this application was for the plaintiff to demonstrate that there is sufficient evidence to support at least one of its claims for relief. It submitted that, if it is successful in that respect, the whole application must be dismissed. The plaintiff’s counsel have informed the Court that they are unable to find discussion of this matter in any of the authorities and I have not been able to discover any such discussion. However, it is my view that, bearing in mind the form of the rule, that that proposition is correct. The third defendant has not submitted to the contrary.

7 The third defendant’s written submissions proceeded in the first instance to make preliminary submissions which are quite misconceived, before proceeding to the substance of the application. The first of those submissions was that the application being dealt with “can only be viewed by the Court as an application for dismissal under section [sic] 29.9(2) of the Uniform Civil Procedure Rules. This must be so by the mere fact that the plaintiff is given the opportunity to respond to the application and, accordingly, must be taken to have elected to [sic] the third defendant’s application.” It is said that it flows from that that, upon the failure of the application, the third defendant would be given the opportunity to adduce further evidence. This submission completely misconceives the fact (which is really quite apparent on the face of the rules) that the applications under r 29.9 and r 29.10 are quite separate applications. Rule 29.9 applications are governed by the provisions of that rule, just as the regime applying to a r 29.10 application is governed by that rule. The application being dealt with was stated by the third defendant to be and is clearly an application under r 29.10, particularly in the context that a r 29.9 application had already been made and dealt with.

8 The second preliminary submission by the third defendant that is misguided is that “the decision by the liquidator not to either enter an appearance or file a defence on behalf of any or all of the eight named corporate defendants or give a reason for the decision not to do so is ... fatal to the plaintiff’s case”. It is patent that the liquidator’s decision not to defend on behalf of the corporate defendants flows from the fact that each of them is in liquidation and there is no leave to proceed against them. Equally, there is no obligation on the plaintiff and there is no point, in view of their status, in pursuing them in the case. It is quite erroneous to suggest that a plaintiff in circumstances such as the present must proceed (or obtain relief) against the corporate defendants as a basis for making out a case against a director of those defendants. The failure of the plaintiff to pursue and the liquidator to defend the proceedings against the corporate defendants cannot assist the third defendant on the present application.

9 Thirdly, the third defendant, rather bizarrely, asks that he should be given relief or that the Court should act in some way upon the provisions of r 14.28(1)(c) of the UCPR relating to the striking out of matter in pleadings as being an abuse of the process of the Court. It is claimed that the relevant portion of the fifth further amended statement of claim and the relief sought are equally applicable to the fourth defendant and, furthermore, that the declarations and orders sought apply to the eight corporate defendants and also to seven trusts, which are not named as parties to the proceedings. It is claimed that for the plaintiff to proceed in those circumstances amounts to an abuse of the process of the Court. That proposition is clearly quite incorrect and the submission is rejected.

10 The fourth of the preliminary points to which I have referred is “that the plaintiff’s settlement with the fourth defendant wittingly or unwittingly prejudiced the proceedings and defence of the third defendant”. The third defendant correctly observes that that settlement took place on the fourth day after the hearing commenced. The fourth defendant, against whom the proceedings had continued up to that point, was also sued as a director or a person who had acted as a director of the corporate defendants. As the settlement by the making of orders by consent against the fourth defendant involved the fourth defendant making admissions, I was asked not to deal with the effectuation of the settlement, and, indeed, I should not in any event have done so. I made an order for the separate determination of those questions, which order was subsequently modified in some regards by Hammerschlag J, who dealt with the effectuation of the settlement. In his written submissions, the third defendant raised a number of questions which he says “would cause a sense of disquiet and discomfort. This sense of disquiet and discomfort is solely caused by the plaintiff’s failure to address the issues and complexities that was [sic] bound to be caused by the settlement with the fourth defendant taking place at the same time that the plaintiff opened its case and commenced calling witnesses. The third defendant submits that the sense of disease and discomfort is of sufficient gravity to cause dismissal of the plaintiff’s case”. These submissions are without foundation. The plaintiff and, indeed, the fourth defendant were perfectly entitled to settle the litigation between them if they were minded to do so. They did settle the proceedings as between them. That has no effect upon the entitlement of the plaintiff to continue to conduct the proceedings against the third defendant, which remain on foot.

11 The third defendant commented in his written submissions about my communications with Hammerschlag J and the fact that a copy of the terms of the settlement is in the Court file, which is obviously in my Court. I should make clear in this judgment, as I have made clear several times before in the course of the proceedings, two matters relating to this. The first is that my discussions with Hammerschlag J were limited to the fact that I approached his Honour in his capacity as List Judge of the Equity Division to ask him to identify a Judge who could deal with the effectuation of the settlement between the plaintiff and the fourth defendant. I was informed by his Honour that he would do so himself. I was subsequently informed orally by his Honour that he had in fact disposed of the matter as between the plaintiff and the fourth defendant. The second is that I take it that there is a copy of the terms of settlement in the file, although I have not actually laid eyes on them. I am aware and I have seen that there is a copy in the file of the reasons for judgment which Hammerschlag J gave in disposing of the matter as between the plaintiff and the fourth defendant. I have not read those reasons for judgment and I have been careful not to discover in any way what the admissions were that were made by the fourth defendant to found the settlement between himself and the plaintiff.

12 I turn from those preliminary matters to the matters actually submitted by the third defendant in support of his application under r 29.10. In the forefront of those submissions there was a submission that the affidavit and, indeed, the other evidence of Mr Olde, the liquidator, was “tainted with bias, prejudice, and are not an accurate reflection of the complete record [held by the liquidator]”. In amplification of that submission, the third defendant submitted “that Mr Olde’s evidence is tainted by the adverse opinion that he formed about the honesty and integrity of the third defendant immediately [sic] or prior to his appointment as a liquidator of the eight corporate entities”. A further ground of bias alleged was that the final report prepared by Mr Olde “was prepared pursuant to a request by the plaintiff and upon payment of a fee of $100,000”. Detailed submissions were then made of regards in which it is said that Mr Olde’s knowledge of or reference to the records and investigations relating to the company were said to be defective. The third defendant continued in his written submissions to submit that “in light of the above list of gaps, due to omission, ignorance or dismissal of facts the Court should treat the evidence of Mr Olde with extreme caution. It should do the same with Mr Olde’s selective method as to the issue of solvency of the various corporate entities”. Equally the third defendant submitted “that Mr Olde is not an impartial witness from whose evidence the Court is able to draw comfort in making any decision in favour of the plaintiff on any of its pleadings”. In his written submissions in reply the third defendant submitted “that on any view Mr Olde is not an arm [sic] length independent witness and as such his evidence should be rejected in its entirety”.

13 The plaintiff submitted that those submissions do not form any basis upon which the third defendant’s application under r 29.10 could or should be upheld.

14 The law on the basis of which the sufficiency of the evidence should be judged on a r 29.10 application has been considered by the Court of Appeal in two decisions under the statutory regime initiated by Part 34 r 8 of the SCR and substantially continued under r 29.10. Those decisions are Mailman v Ellison NSWCA 25 November 1993 unreported and Hunt v Watkins (2000) 49 NSWLR 508. In the latter case, the judgment of the Court of Appeal was delivered by Stein JA, with whom Fitzgerald and Heydon JJA agreed. The application under consideration in that case was made under Part 26 r 8 of the District Court Rules 1973, which, although a little different in wording, was the same in substance as Part 34 r 8 of the SCR and therefore as r 29.10. Stein JA said at 510:

“Rule 8(2) speaks of whether ‘on the evidence given’ judgment for the plaintiff ‘could not be supported’. The District Court rule is in the same form as Pt 34, r 8 of the Supreme Court Rules 1970 which the Court of Appeal considered in Mailman v Ellison (Court of Appeal, 25 November, 1993, unreported). The judgment of the Court was given by Mahoney JA and concurred in by Kirby P and Sheller JA.

Mahoney JA noted that the judge at first instance had approached the application on ‘the jury basis’. That is, that the plaintiff’s case was to be dismissed ‘if the evidence adduced … was such that a verdict in his favour by a jury would, if challenged, necessarily be set aside’ (at 4). His Honour noted that the appeal had proceeded on the same basis. Although the question of the construction of r 8 was not argued, it seems that Mahoney JA accepted that the ‘jury basis’ was the proper test. I obtain this from Mahoney JA’s reference to other possible considerations, for example, credibility of the plaintiff, which poses ‘an issue which is different from the jury basis’ (at 4). Mahoney JA further noted that it was accepted in the Court of Appeal that the ‘jury test’ was to determine the appeal.

Mahoney JA observed that the trial judge had accepted that he should ‘take the plaintiff’s evidence at his highest’ to see whether a judgment for the plaintiff would satisfy the jury test. Mahoney JA said (at 12-13) that it is:

‘… important to maintain the distinction between the conclusion of fact which he might draw and the conclusion which, without error, a jury or fact-finding tribunal could make upon the evidence without the finding being set aside on appeal. I accept Mr Bennett’s submission to the effect that a finding of this kind would have been open to the jury.’

I agree with the analysis of the test by the Court in Mailman : see also the remarks of Jordan CJ in De Gioia v Darling Island Stevedoring & Lighterage Co Ltd (1941) 42 SR (NSW) 1 at 3. A jury test is appropriate, and in applying it, the plaintiff’s evidence should be taken at its highest.”

15 It has been stated in many authorities relating to the common law and both of the statutory regimes applicable in this Court that the test on an application of this sort is whether a finding in the plaintiff’s favour could be made upon the evidence as it stood, not whether or not it should be made. In the reported authorities this proposition has most recently been referred to by Kaye J in Metrolink Victoria Pty Ltd v Auspro Logistics Pty Ltd (2008) 49 MVR 350.

16 The quantum or quality of the evidence necessary for the application to be dismissed was discussed in detail by McHugh J in Naxakis v Western General Hospital (1999) 197 CLR 269. That was an appeal from a case decided in Victoria where, as I understand it, the common law rules were still in force. However, that is of no moment, because the common law and the statutory regimes do not differ in relation to the necessary quality of the evidence. McHugh said at 283:

“Furthermore, evidence given by a witness including the plaintiff in support of the claim of negligence will ordinarily have to be taken into account on a no case submission even if that evidence may appear to be contradicted or qualified, as a result of cross-examination. A jury which has heard and watched the witness give evidence may regard such apparent contradictions or qualifications as not having the weight that they might appear to have from a mere perusal of the transcript. The fact that the defendant has proved that the plaintiff has made out-of-court statements inconsistent with his or her claim does not entitle the defendant to a verdict: Barker v Charley [1962] SR(NSW) 296. Similarly, the effect of apparent concessions or qualifications by the plaintiff or other witnesses under cross-examination are matters for the jury to evaluate. The jury might reasonably conclude, for example, that the ‘contradictions’ or ‘qualifications’ were the result of confusion, or of the domination of the witness by counsel for the defendant, or of an attempt to assist the defendant, rather than a true concession or admission. Unless in cross-examination, the plaintiff or other witness withdraws his or her evidence supporting a conclusion of negligence, the trial judge will ordinarily have to regard that evidence as uncontradicted in determining whether there is a case to go to the jury. As Dixon J pointed out in Hocking v Bell (1945) 71 CLR 430 at 490:

‘There is no question in a trial that is regarded as so clearly within the exclusive province of the jury to decide as the reliance to be placed upon the evidence of a witness whom they have seen and heard. The fact must therefore be faced, that however little faith we as judges may have in all this, yet before the defendant can be entitled as a matter of law to a verdict he must so utterly destroy the plaintiff’s narrative as to place it outside the competence of a jury to give any credence to the material parts of it, a thing which in my experience I have never seen done with reference to direct oral testimony given upon a civil issue.’”

17 Although his Honour’s remarks were in respect of a negligence claim made in a jury trial, they are equally applicable to the situation here. As I have already said, even where it is a Judge not a jury, who will carry out the second process or the second stage of determining whether there should be a judgment upon the evidence, the determination by the Judge upon a r 29.10 application is only as to whether there could be a determination in the plaintiff’s favour on the evidence, taking the evidence at its highest.

18 To what degree, if any, Mr Olde’s evidence should be regarded as being tainted by bias or prejudice or to what degree his conclusions are affected by any lack of completeness of his knowledge or consideration of any relevant matter are matters upon which I should not, and do not, reach any conclusion at this stage of the proceedings, as it is likely that I shall have to pass upon them at a later stage of the proceedings, either upon the same or upon a different body of evidence.

19 However, I do make the following observations on his evidence. It has been pointed out by the plaintiff that Mr Olde has given evidence as to the basis upon which he came to conclusions as to the insolvency of the eight corporate defendants at particular times. Those were essentially those corporations’ own MYOB accounting records. Mr Olde did not blindly rely upon those records as accurate; he gave reasons for a belief that they should be taken to be substantially accurate. He expressed and did not retract a view that the companies were insolvent at the material times.

20 The third defendant ultimately made the relevant submission that, because of the qualifications that he had put forward of Mr Olde’s evidence, Mr Olde’s evidence should be completely rejected. It is quite clear that whatever is ultimately to be made of those qualifications, it is not appropriate for Mr Olde’s evidence to be completely rejected at this stage. If there were some basis upon which it should be completely rejected, for instance, that ultimately Mr Olde withdrew the opinions, then it may be that the plaintiff could not succeed upon the claim that it used to demonstrate that a prima facie case was made out against the third defendant on at least one of the plaintiff’s claims. That was the claim that the third defendant had breached ss 180 to 182 of the Corporations Act 2001 (Cth) by causing or permitting Sydney Investment House Equities Pty Ltd and/or Sydney Investment House Capital Ltd to make loans to other members of the Sydney Investment House Group in circumstances where all or some of the borrower companies were insolvent or of doubtful solvency, such that there was no realistic prospect of the loans being repaid.

21 Since Mr Olde’s evidence as to the insolvency of the companies cannot be rejected out of hand at the present time, that evidence provides a basis on which the plaintiff could succeed in obtaining judgment in its favour on the relevant claim. For that reason a conclusion cannot be reached upon the application that the Court should give judgment for the third defendant generally in the proceedings on the ground that, on the evidence given, a judgment for the plaintiff could not be supported.

22 One additional proposition that was put by the third defendant as demonstrating the inadequacy of the plaintiff’s case was based on a submission that the plaintiff must establish that the third defendant acted deliberately in causing the loss to the companies and to the investors. That proposition, as the plaintiff submits, is simply not correct and is not part of what must be established to make out a breach of the relevant sections.

23 I should add that Jones v Dunkel (1959) 101 CLR 298 was referred to by the third defendant and attention drawn to the failure of the plaintiff in its case to call various witnesses, including a large number of the investors who had put up money the loss of which is complained of. Whether or not Jones v Dunkel can ever play any part in the determination of these proceedings, it is certainly not appropriate to apply it in any way in determining the present application.

24 The third defendant made submissions concerning whether or not he would be entitled to give evidence if the present application fails. It is not appropriate to say anything about those submissions at this stage, save that the proposition that the Court has a discretion under r 29.10 as to whether or not to put the defendant to an election is not correct. The defendant referred in this regard to Humphrey v Collyer [1946] VLR 391; Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187; and Stephenson v Barham (1977) 136 CLR 190. Those references are inapposite to the present procedure in this Court. As I have already said, as I understand it, it is the common law rules which prevail in Victoria. Furthermore, although it is a New South Wales case, decided after the enactment of the SCR, the same is true of Stephenson v Barham, by reason of the fact that the Court whose procedure was under consideration was the Industrial Commission of New South Wales, where the SCR did not apply and the common law still prevailed. Under r 29.10 any question as to leave to give evidence will arise only after the application is dismissed.

25 For the foregoing reasons, the third defendant’s application under r 29.10 must fail and is dismissed.

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