Austrialian Securities and Investments Commission v Macdonald (No 6)

[2008] NSWSC 1175

CITATION:	Austrialian Securities and Investments Commission v Macdonald (No 6) [2008] NSWSC 1175
HEARING DATE(S):	29-30 September 2008, 1-3 October 2008, 7-8 October 2008, 13-15 October 2008, 20-22 October 2008, 3-4 November 2008, 6 November 2008
JUDGMENT OF:	Gzell J
EX TEMPORE JUDGMENT DATE:	6 November 2008
DECISION:	Tender rejected.
CATCHWORDS:	EVIDENCE - Admissibility and Relevancy - Tender of documents after oral evidence concluded and plaintiff about to close its case - Whether documents relevant to what discussed at a board meeting about an announcement to the ASX - Teleconference arranged to hear aftermath of announcement - Whether notice of teleconference meeting sent to various directors and responses as to availability of peripheral relevance only
LEGISLATION CITED:	Evidence Act 1995
CASES CITED:	Australian Securities and Investments Commission v Macdonald (No 5) [2008] NSWSC 1169
PARTIES:	Australian Securities and Investments Commission (Plaintiff) Peter Donald Macdonald (First Defendant) Peter James Shafron (Second Defendant) Phillip Graham Morley (Third Defendant) Michael Robert Brown (Fourth Defendant) Michael John Gillfillan (Fifth Defendant) Meredith Hellicar (Sixth Defendant) Martin Koffel (Seventh Defendant) Geoffrey Frederick O'Brien (Eighth Defendant) Gregory James Terry (Ninth Defendant) Peter John Willcox (Tenth Defendant) ABN 60 Pty Ltd (Eleventh Defendant) James Hardie Industries NV (Twelfth Defendant)
FILE NUMBER(S):	SC 1490/07
COUNSEL:	Mr A Bannon SC/ Mr R Beech-Jones SC/ Ms D Hogan-Doran/ Ms S Pritchard / Ms J Single/ Mr A Kuklik (Plaintiff) Mr S Finch SC/ Mr D Studdy SC/ Mr D Mackay (First Defendant) Mr B Walker SC/ Mr M Holmes QC/ Mr R Lancaster/ Mr N Owens (Second Defendant) Mr B Oslington QC/ Mr R Dick/ Mr N Bender (Third Defendant) Mr T Bathurst QC/ Mr R Whitington QC/ Mr R Hollo/ Mr R Hardcastle/ Mr I Colquhoun (Fourth to Seventh Defendants) Mr P Wood/ Mr M Henry (Eighth Defendant) Mr R McHugh SC/ Mr S Nixon (Ninth Defendant) Mr T Jucovic QC/ Mr R Scruby (Tenth Defendant) Mr I Pike (Eleventh Defendant) Mr A Meagher SC/ Ms K Morgan (Twelfth Defendant)
SOLICITORS:	Clayton Utz (Plaintiff) Minter Ellison (First Defendant) Middletons (Second Defendant) Henry Davis York (Third Defendant) Atanaskovic Hartnell (Fourth to Seventh Defendants) Arnold Block Leibler (Eighth Defendant) Blake Dawson (Ninth Defendant) Kemp Strang (Tenth Defendant) Baker & McKenzie (Eleventh Defendant) Mallesons Stephen Jaques (Twelfth Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

1490/07 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v PETER DONALD MACDONALD & ORS (NO 6)

JUDGMENT

1 Following the search of the laptop of the second defendant, Peter James Shafron, described in Australian Securities and Investments Commission v Macdonald (No 5) [2008] NSWSC 1169, the plaintiff, the Australian Securities and Investments Commission (ASIC) conducted a further search in terms of the Logica protocol agreed between the parties.

2 The key word “separation” was found in one of the four document groups to which reference is made in Macdonald (No 5). The subsequent search in accordance with the Logica protocol had “separation” as one of its search terms. In addition the search of Mr Shafron’s laptop in accordance with the Logica protocol was specifically defined to locate three of the email groups to which reference is made in Macdonald (No 5).

3 Those three document groups were found together with seven other documents that ASIC sought to tender. I ruled against the tender and indicated that I would give my reasons in due course. These are my reasons for the rejection.

4 Like the four documents the subject of Macdonald (No 5), ASIC submitted that the seven documents are relevant to whether or not a discussion of a draft ASX announcement took place at the meeting of the board of directors of James Hardie Industries Ltd (JHIL), now ABN 60 Pty Ltd. ASIC claims that the seven documents show that there was discussion of the ASX announcement at the meeting and the board determined that there would be a teleconference after the announcement to discuss its reception in the market place.

5 ASIC submitted, correctly in my view, that the relevance of the seven documents must be judged in context. That context, it was submitted, was that there are minutes of the board meeting of 15 February 2001 that contain a resolution concerning the tabling and approval of a draft ASX announcement. There was contested evidence that a copy of the final announcement was sent to the non-executive directors. There is evidence that the draft minutes of the meeting were sent to the members of the board and the board approved them at its meeting of 4 April 2001.

6 It was submitted that in light of the content of the minutes of the 15 February 2001 meeting with respect to the ASX announcement and the board’s determination to have a teleconference a couple of days after the announcement to the ASX to discuss the very topic of the announcement and the subsequent confirmation of the minutes of the meeting, a high degree of relevance of the seven documents was established.

7 The seven documents and their content that ASIC regarded as significant are as follows:

8 An email of 19 February 2001 from Susan Stevenson, the personal assistant to the third defendant, Phillip Graham Morley, to, amongst others, the late Alan Gordon McGregor, the then chairman of the board of directors of JHIL, the first defendant, Peter Donald Macdonald, the fifth defendant, Michael John Gillfillan, the sixth defendant, Meredith Hellicar, the seventh defendant, Martin Koffel, the eighth defendant, Geoffrey Frederick O’Brien, the ninth defendant, Gregory James Terry and Mr Shafron. The email advised the arrangement for a teleconference call: “so that interested Directors could hear a report on the aftermath of the separation announcement” together with a response that one of the directors, Sir Selwyn Cushing, was unable to attend the meeting.

9 I have already said in relation to a similar email announcing the teleconference in Macdonald (No 5) at [11] that the email says nothing about board consideration of the terms of any announcement to the ASX and while it does refer to a report on the aftermath of the separation announcement that should not be restricted to the ASX announcement. A press conference was held on the same day and it also produced separation announcements.

10 Further, in my view, any agreement to hold a teleconference is not tied in to any discussion at the board meeting of 15 February 2001 of the terms of any ASX announcement. Any arrangement to hold a teleconference after separation of James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd from JHIL and their transfer to the Medical Research and Compensation Foundation Trust (MRCF Trust) is explicable in terms of a desire to ascertain market reaction to separation announcements generally by JHIL rather than any reaction to the particular terms of the announcement of the ASX. In my view the email is of peripheral significance only and ought not to have been admitted after all oral evidence in ASIC’s case had been heard and its case was about to be closed.

11 ASIC could have had the searches carried out at an earlier time. It had the ability in accordance with the Volante protocol from about August 2005 to provide Volante with key words and phrases for searching across the backup tapes including the laptops.

12 The response on behalf of Sir Selwyn Cushing is innocuous. It says nothing about any discussion at the 15 February 2001 board meeting. It does not relate to any agreement to hold a teleconference nor does it play any part in the calling of the conference. And it does not tie the teleconference to any discussion of the terms of any announcement to the ASX. It is of no relevance to the issues in the case and, in addition, it ought not to have been admitted into evidence at the 11th hour.

13 The second email was the same one sent to Mr Terry with the response: “Mr Terry will be on flight at that time, & will have to miss the call.” It, like the response on behalf of Sir Selwyn Cushing, lacks relevance and ought not to have been admitted so late in the proceedings.

14 The third email was the same one sent to Mr Terry with an earlier response: “Noted.” It falls into the same category as the later response on behalf of Mr Terry.

15 The fourth email was the same as the second with the same response at a slightly different time. It falls into the same response category.

16 The fifth email was the same as sent to Sir Selwyn Cushing with the response recording Sir Selwyn’s apology. It is in the same category.

17 The sixth email was the same as sent to Mr O’Brien, with the response: “I apologise that I was unable to take the call … I trust all is going well”. It falls into the same category.

18 The final email is the same as sent to Mr O’Brien with the same response as forwarded to Messrs Macdonald, Shafron and Morley. Again, it falls into the response category.

19 For the reasons with respect to the first response on behalf of Sir Selwyn Cushing, none of the emails has relevance and ought not to have been admitted into evidence so late in the proceedings.

20 It was submitted on behalf of Mr Terry that these seven emails were “fruit of the poisonous tree” in that they arose as a result of the improper search of Mr Shafron’s laptop to which reference is made in Macdonald (No 5) and, in consequence, they were also caught by s 138 of the Evidence Act 1995. I do not need to deal with this argument in light of my conclusion as to the lack of any relevance other than of a peripheral nature and the lateness of the tender.

21 I have been informed that the email to which I referred in Macdonald (No 5) at [4] was not obtained by search of Mr Shafron’s laptop but under the Logica protocol. That being so, the document should have been considered on the grounds of relevance and lateness rather than under s 138 of the Evidence Act. It falls into the same category as the emails the subject of these reasons and is rejected for the same reasons as apply to the seven documents.

22 I order that the digital content of these reasons for judgment be entered on the court record database after their inclusion in Caselaw.

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