Australian Securities & Investment Commission v Cycclone Magnetic Engines Inc

[2008] QSC 158

SUPREME COURT OF QUEENSLAND

CITATION:

Australian Securities & Investment Commission v Cycclone Magnetic Engines Inc & Ors [2008] 158

PARTIES:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
(applicant)
V
CYCCLONE MAGNETIC ENGINES INC
(first respondent)
AND
MICHEAL PETER NUGENT
(second respondent)
AND
ROBERT GEORGE McCLELLAND
(third respondent)
AND
STEVEN VINCENT FOSTER
(fourth respondent)

FILE NO/S:

2655/07

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

25 July 2008

DELIVERED AT:

Brisbane

HEARING DATE:

2 May 2008

JUDGE:

Daubney J

ORDER:

The objections in relation to the affidavit of Shaune Patrick Williamson sworn 26 March 2007 are upheld and I rule that:

SPW 16 is inadmissible against the Second and Fourth Respondents.(a)       

SPW 17 is inadmissible against the Second and Third Respondents. (b)       

SPW 18 is inadmissible against the Second, Third and Fourth Respondents. (c)       

SPW 19 is inadmissible against the Second, Third and Fourth Respondents.(d)       

SPW 20 is inadmissible against the Second, Third and Fourth Respondents.(e)       

CATCHWORDS:

CORPORATIONS – SUPERVISION – AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION – EXAMINATIONS – Procedural matters – Evidentiary use of information – where transcripts of examinations conducted under the Australian Securities and Investment Commission Act 2001 (Cth) are annexed to an affidavit filed in the proceedings – whether the transcripts of examination are admissible against persons other than the examinee

Australian Securities and Investment Corporation v PFS Business Development Group Pty Ltd [2006] VSC 192
Australian Securities and Investment Commission v Singapore Liaison Pty Ltd [1998] FCA 1813

Australian Securities and Investment Commission Act 2001 (Cth)

COUNSEL:

S Keim SC with E Longbottom for the applicants
J Rolls for the first and second respondents
A J H Morris QC with L Jurth for the third and fourth respondents

SOLICITORS:

Australian Securities and Investment Commission Solicitor for the Applicant
Garland Waddington for the first and second respondent
DLA Phillips Fox for the third and fourth respondent

Generally

1. The trial of this proceeding, by which the Australian Securities and Investment Commission (“ASIC”) seeks the winding up of the First Respondent, declarations that various provisions of the Corporations Act 2001 (Cth) have been contravened and orders restraining the respondents’ from engaging in certain activities, is listed to commence on 18 August 2008. Much of the evidence on which ASIC proposed to rely at trial had been put in affidavits filed in the proceeding. In the course of case management hearings, it became apparent that the Respondents would be objecting to significant parts of ASIC’s evidence. Accordingly, with a view to streamlining the trial process, directions were made requiring the parties to serve lists of their objections to evidence to be relied upon in the matter, with a view to there being a pre-trial hearing to determine those objections. That pre-trial hearing was held on 2 May 2008, in the course of which most of the objections were ruled on or resolved. There remained, however, one tranche of objections concerning the admissibility of certain statements, on which I sought further submissions from the parties, and on which I now rule.

1. The statements in question are exhibited to an affidavit of Shaune Patrick Williamson sworn 26 March 2007, and are the transcripts of examinations of certain persons conducted by the Applicant under s 19 of the Australian Securities and Investment Commission Act 2001 (Cth) (“ASIC act”)[1].

   [1] Section 19 of the ASIC act includes the following terms:

1. Section 24 of the ASIC act allows for a record of statements made at such an examination to be made and for the examinee to be required to sign such a record if it is reduced to writing.

Summary of Objections

1. The documents objected to are exhibits SPW 15 – SPW 20 of Mr Williamson’s affidavit:

(a)     SPW 15 is the record of the examination of the Second Respondent, Michael Peter Nugent, and is said to be inadmissible against both the Third and Fourth Respondents.

(b)     SPW 16 is the record of the examination of the Third Respondent, Robert McClelland, and is said to be inadmissible against the Second and Fourth Respondents.

(c)     SPW 17 is the record of the examination of the Fourth Respondent, Steven Vincent Foster, and is said to be inadmissible against the Second and Third Respondents.

(d)     SPW 18 is the record of examination of Tamara Kay Nugent and is objected to by the Third and Fourth Respondents.

(e)     SPW 19, which is the record of a further examination of Tamara Kay Nugent, is objected to by the Third and Fourth Respondents.

(f)      SPW 20 is the record of the examination of Jeffrey Norman Jackson and is objected to by the Third and Fourth Respondents.

Section 76 of the ASIC Act

1. Section 76(1), which is in Part 3 Division 9 of the ASIC Act, provides:

76(1) [Admissibility of statements at examination] A statement that a person makes at an examination of the person is admissible in evidence against the person in a proceeding unless:

(a)   because of subsection 68(3), the statement is not admissible in evidence against the person in the proceeding; or

(b)   the statement is not relevant to the proceeding and the person objects to the admission of evidence of the statement; or

(c)   the statement is qualified or explained by some other statement made at the examination, evidence of the other statement is not tendered in the proceeding and the person objects to the admission of evidence of the first-mentioned statement; or

(d)    the statement discloses matter in respect of which the person could claim legal professional privilege in the proceeding if this subsection did not apply in relation to the statement, and the person objects to the admission of evidence of the statement.

76(2) [Application where proceeding against two persons] Subsection (1) applies in relation to a proceeding against a person even if it is heard together with a proceeding against another person.

76 (3) [signed, authenticated record of examination is evidence] Where a written record of an examination of a person is signed by the person under subsection 24(2) or authenticated in any other prescribed manner, the record is, in a proceeding, prima facie evidence of the statements it records, but nothing in this part limits or affects the admissibility in the proceeding of other evidence of statements made at the examination.

1. It was not in issue before me that the signed records of examinations of particular examinees are admissible as against that examinee in this proceeding.  The objections, however, were to the effect that such signed records of examinations were not admissible against any person other than the particular examinee.

1. ASIC’s response to these objections was to the effect that, under s. 76, the written record of the examination of an examinee, when signed by that examinee, is:

·     in the proceeding, prima facie evidence of the statements it records; and

·     is admissible in evidence.

1. In respect of the examination records of persons who are not respondents in the matter, ASIC contended that:

“In accordance with s. 76 of the ASIC Act the written record of the examination of Ms Nugent [or Mr Jackson], and signed by her[him] is in the proceeding, prima facie evidence of the statements it records and is sought to be admitted on that basis.”

1. In Australian Securities and Investment Commission v Singapore Liaison Pty Ltd [1998] FCA 1813, Cooper J said:

“In my opinion, Division 9 is a code complete in itself to facilitate the evidentiary use of statements made at examinations (as defined in s5 of the Act). Sections 76 and 77 are concerned with the admissibility of the statements subject to satisfaction or non-satisfaction of the circumstances prescribed in each section. Section 78 is concerned with the weight to be given to evidence of a statement made by a person and admitted under s77 in a proceeding.”

1. His Honour then referred to the specific procedure prescribed by s 79 for the giving of notice of an intention to adduce in evidence statements made in an examination and for the objection thereto, and said:

“In my view, division 9 was intended to supplement the means available to adduce evidence of statements made in an examination as original evidence to prove the fact contained in the statement or to prove another fact in issue in the proceedings. However, to take advantage of the provisions, it is necessary to comply with the requirements of the Divisions. Otherwise, the ASIC must firstly look to the general law or some other statute to make the statements admissible against a person and secondly comply with the requisite rules of practice or procedure, whether at common law or under statute for adducing such evidence.”

1. His Honour further noted that:

“Although Division 9 provides an additional means of adducing evidence of statements made in an examination, it does not provide the only means or operate to render inadmissible such statements in all circumstances other than those provided in the division. Section 83 operates to leave the admissibility of such statements to the general law of evidence.”

1. ASIC did not seek to rely on any Commonwealth or State legislation other than the ASIC Act to justify the admission of the statements. Nor did ASIC refer to any common law authority for that purpose. Nor were the statements sought to be tendered purely for the purpose of proving that the statements had been made rather than for relying on the truth of their contents; on the contrary, ASIC’s reliance on

   
   

   s 76(3) makes it clear that ASIC would seek to rely on the contents of the statements as prima facie evidence of the statements recorded therein. Nor was it sought to be demonstrated, for example, that this is a case by which s. 77(2)(b) would render the statements admissible, that being the basis on which Hargrave J proceeded, on the facts of the case before him, in Australian Securities and Investment Corporation v PFS Business Development Group Pty Ltd.[2] Indeed, for the purposes of seeking to justify the admission of records of examination against persons other than the respective examinees, ASIC relied solely on s 76(3), contending, in effect, that a signed record of examination of any person was admissible against all of the parties in this proceeding as prima facie evidence of the statements recorded in the statement.

   [2]ASIC v PFS Business Development Group Pty Ltd [2006] VSC 192 at [93].

1. Such a contention, however, fails to appreciate the effect of sub-sections 76(1) and (2), on the one hand, and sub-section 76(3) on the other.

1. Sub-section 76(1) is concerned with the admission into evidence of a statement of a statement made in an examination, and permits such a statement to be admitted against the person who made the statement. This is subject, of course, to the various exclusions enumerated in sub-section 76(1)(a) – (d). Sub-section 76(2) permits such a statement to be admitted in evidence in a proceeding against the examinee, even if it is heard together with a proceeding against another person. Nothing in sub-section 76(2) permits the admission of the examinee’s statement in evidence in the proceeding against the other person. Sub-section 76(3) then prescribes the effect of, or weight to be ascribed to, a statement which, relevantly, is a written record of an examination signed by the examinee under sub-section 24(2), namely that it is “prima facie evidence of the statements it records”. But sub-section 76(3) does not regulate the admissibility of such a statement; the admissibility of such a statement is relevantly regulated by sub-sections 76(1) and (2).

1. Thus, in my view, whilst the signed records of the examinations of each of the Second, Third and Fourth Respondents may be admitted under sub-sections 76(1) and (2) in the cases against each of them respectively, they may not be admitted in the cases against any of the other parties. 

1. Tamara Kay Nugent and Jeffrey Norman Jackson are not parties to this proceeding, and accordingly their signed records of examination are not admissible under sub-sections 76(1) and (2). ASIC does not seek to justify the admission of either of those statements in reliance on s. 77, and no evidence for that purpose has been adduced.

1. Accordingly, I would uphold the objections and rule that:

(a)        SPW 16 is inadmissible against the Second and Fourth Respondents.

(b)        SPW 17 is inadmissible against the Second and Third Respondents.

(c)        SPW 18 is inadmissible against the Second, Third and Fourth Respondents.

(d)        SPW 19 is inadmissible against the Second, Third and Fourth Respondents.

(e)        SPW 20 is inadmissible against the Second, Third and Fourth Respondents.

19(1) [Application of section] This section applies where ASIC, on reasonable grounds, suspects or believes that a person can give information relevant to a matter that it is investigating, or is to investigate, under Division 1.

19(2) [direction to assist and appear]

ASIC may, by written notice in the prescribed form given to the person, require the person:
(a) to give to ASIC all reasonable assistance in connection with the investigation; and
(b)to appear before a specified member or staff member for examination on oath and to answer questions.