KPMG (a firm) v Commonwealth of Australia & Anor

[2010] HCATrans 151

[2010] HCATrans 151

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M66 of 2010

B e t w e e n -

KPMG (A FIRM)

Plaintiff

and

COMMONWEALTH OF AUSTRALIA

First Defendant

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Second Defendant

Directions hearing

HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON TUESDAY, 8 JUNE 2010, AT 9.28 AM

Copyright in the High Court of Australia

MR A.C. ARCHIBALD, QC:   If it please, your Honour, I appear with MR P.H. SOLOMON for the plaintiff firm.  (instructed by Allens Arthur Robinson)

MR S.J. GAGELER, SC, Solicitor‑General of the Commonwealth of Australia:   If your Honour pleases, I appear with MR C.J. HORAN for the defendants.  (instructed by Australian Government Solicitor)

HIS HONOUR:   It is your summons for directions, I think, Mr Archibald.  Is that right?

MR ARCHIBALD:   Yes, your Honour.

HIS HONOUR:   There is, I think, nothing other than several affidavits of service.  There is no affidavit in support.

MR ARCHIBALD:   No, there is not.

HIS HONOUR:   What do you say I should do with the matter?

MR ARCHIBALD:   We say the matter is apt for the statement of a case for consideration by the Full Court.  We say it is not a matter that justifies or calls for a remitter at all.

HIS HONOUR:   There seems to be a degree of agreement that there is no need for remitter, but the Commonwealth is foreshadowing at least the possibility of demurrer.

MR ARCHIBALD:   Yes, it seems to have somewhat of a preference for it, but perhaps not entirely wedded to it.

HIS HONOUR:   It is a matter for the Commonwealth whether they put on a demurrer and that will put you to consideration of your pleading.

MR ARCHIBALD:   Yes, but at the moment it rather seems that they would say they would not demur.  What they flag is a desire that we should add to our pleading some facts so that they can demur.  We think there are probably a few facts that would be appropriate to be put before the Court on a case stated that would lie outside pleadings that would be teasing out, no doubt, of the elements of the proceeding and the causes of action in it and perhaps some related matters.

In relation to the facts that our learned friends suggest should be injected into our pleading, they really are additional facts.  They are not part of our case.  They seem to be additional facts which, no doubt, are to be connected to some further proposition.  There is no suggestion that our pleading is deficient in any way, so the facts are truly additional facts.  No doubt, analytically, the defendants would wish to confess and then avoid on the basis of the further facts.  Our position is that we would prefer that those further facts find their proper place and be part of the Commonwealth’s own pleading, no doubt in connection with their proposition, and the matter can go conveniently forward in that fashion.

The alternative view is that these facts are just evidentiary elements of our pleading of the existence of companies, but if they are of an evidentiary character then they would be disregarded on a demurrer as Sir Owen Dixon observed, I think, in South Australia v Commonwealth they should be discarded for demurrer purposes so they would not achieve their end.  So either they are evidentiary and would be discarded or they are part of the defendants’ case, not the plaintiff’s case, and should properly reside in a pleading.

We doubt at the end of the day whether it would make any difference as to the progress of the case and we do not see any difficulty in connection with formulation of a case stated.  The facts would be quite narrow and we think uncontroversial and, therefore, readily agreed.

HIS HONOUR:   Well, whichever procedural path it follows, do you offer a view about whether the Full Court should have available to it the pleadings in the actions that are mentioned in your statement of claim?

MR ARCHIBALD:   We were anticipating that the parties could satisfactorily encapsulate in some agreed facts the necessary elements of the pleadings.  We only hesitate at putting the pleadings themselves before the Court because the amended statement of claim with its annexures runs to, I think, 600 pages.  The defence is in much shorter compass, but to put the pleading, the amended statement of claim carries with it some considerable paper baggage and we would hope to avoid that.  But it perhaps emphasises the desirability of something being agreed between the parties that will satisfactorily convey the essential elements of the causes of action raised.

HIS HONOUR:   Then what course do you say should be followed this morning?

MR ARCHIBALD:   We submit that your Honour should make orders as proposed in paragraph 11 in our outline of submissions.  We contemplate about 10 days for a defence that we, by the start of July, should formulate a case and provide it to the defendants.  By mid‑July the parties should have agreed ‑ ‑ ‑

HIS HONOUR:   Yes, I like the notion that I can order parties to agree, Mr Archibald, but that does seem to be going a little far.

MR ARCHIBALD:   Yes, your Honour.  I would not even advance a proposition that there is an implicit “best endeavours” concept in there, so we are not wedded to that aspect.  But the parties should address the matters and later in July, if that is convenient to the Court, the parties would come back with the product of their endeavours, hopefully agreement, and then the matter would be ready for referral to the Full Court.

HIS HONOUR:   Yes, thank you, Mr Archibald.  Mr Solicitor, what do you say is the preferable course?

MR GAGELER:   Your Honour, the preferable course is that, one way or another, the proceeding be referred to the Full Court for an early final hearing.  So far as the precise procedure is concerned it is not often where a defendant is, in effect, offering to demur given adequate particularisation that the plaintiff seems to be reticent about its own pleading going before the Court.

HIS HONOUR:   Am I asking too much to ask why the place and time of incorporation matters, or is that ‑ ‑ ‑

MR GAGELER:   Only for this reason, your Honour, and of course we know from doing a company search what the situation is, but we need to have it before the Court in a formal way.

HIS HONOUR:   Right.

MR GAGELER:   One of the many arguments, substantive arguments, in answer to the proposition that section 50 effects an acquisition of property is to say a corporation is a creature of statute.  From the time that the corporation is brought into being with a statutory capacity to sue and be sued, a qualification on that capacity is the ability of ASIC, or one of its predecessors, to take over any cause of action.  Provisions like section 50 have been in corporations legislation since at least the 1958 code.  So there is nothing new about section 50.  The point is just to show that these companies were incorporated at various times.

HIS HONOUR:   Yes, I see.

MR GAGELER:   They have always been subject to something like section 50.

HIS HONOUR:   Yes.

MR GAGELER:   That is all.  Your Honour, we are entitled to expect the plaintiffs, particularly with their representation in this matter, to comply with Order 27.04(b) which is a requirement to have “material facts” in the statement of claim and paragraph (d)(i), that is to make sure that the pleading contains “all particulars necessary to enable” us to “plead or to define the questions for trial” and that is all we are asking.

HIS HONOUR:   Now, if we were to go down the path of demurrer, what would the Full Court have before it beyond the pleadings?  More particularly, would it have anything more than appears in the pleadings about the action which is said to constitute or be an element in the acquisition?

MR GAGELER:   Not if it were a demurrer, your Honour.

HIS HONOUR:   It would not be a document referred to in the pleading, I suspect, because if it is then it goes into the demurrer book I thought.

MR GAGELER:   Yes.

HIS HONOUR:   Where that is leading to, Mr Solicitor, is how most conveniently are the essential facts going to be presented to the Court.  If the pleading in the action pending in the Supreme Court has this volume of 600 pages, some distillation of that may be of real utility in considering the issues.  It may not.  You may say it is all beside the point, all that matters is that there is an action – one side may be saying all that matters is that there is an action brought in the name of a company by ASIC.

MR GAGELER:   That is as we understand the case that is raised by the plaintiffs.

HIS HONOUR:   Yes.

MR GAGELER:   That is the case that we are quite content to contest.

HIS HONOUR:   Yes.

MR GAGELER:   Of course, the pleading in fact relies on a statutory cause of action and a common law cause of action, or several of them, but the precise nature of the cause of action, at least as I understand the plaintiff’s case, does not matter and as concerns the defendants’ case also does not matter.

HIS HONOUR:   So there would be no separation of argument about statutory causes of action from argument about common law causes of action?

MR GAGELER:   No.

HIS HONOUR:   I am not suggesting there should be, but simply observing that there would not be.

MR GAGELER:   Yes.

HIS HONOUR:   It would be unfortunate if this descended into a pleading fight or a particulars fight.  There is, I take it, from your side at least, Mr Solicitor, no controversy or no likely controversy about place and date of incorporation of any of these entities, is there?

MR GAGELER:   Not at all.  No.

HIS HONOUR:   I am minded to say to both sides of the record, if that is so, does it really matter which document it appears in so long as it is before the Full Court if it is seen as an important matter to the argument of at least one side?

MR GAGELER:   Well, I put it as a relevant matter, your Honour.  It is not the first response necessarily.

HIS HONOUR:   No.

MR GAGELER:   If your Honour is saying we should be able to work it out, I agree.

HIS HONOUR:   You may say that.  “I could not possibly comment” is, I think, the house of cards’ response, is it not, Mr Solicitor.

MR GAGELER:   It is, your Honour.

HIS HONOUR:   But yes, the parties ought to be able to work it out.  Now, do you want me to give you a direction about filing a defence – that is to either put on a pleading or demur?  It would seem to me that, at least in theory, the plaintiff might be entitled to put you to your choice.  At that point, though, I would really wonder about the sense of approaching the litigation in that fashion.  Or would you prefer me to give you a direction fixing a time for pleading or demurring, coupled with some direction that would require the plaintiff to prepare a stated case and then bring it back at the end of July?  What course do you say would be the preferable course?

MR GAGELER:   Your Honour is proposing something along the lines of the plaintiff’s proposed directions.

HIS HONOUR:   If the plaintiff will not give you the particulars you seek, it seems to me that if we are playing this kind of game the order has to be:  “Plead or demur within a time” and so we go.  It does seem to me to be a rather odd way to conduct litigation of this kind, but one never quite knows what counsel has in their brief, does one?

MR GAGELER:   One only needs to know what the case is that one has to meet, your Honour.

HIS HONOUR:   Exactly.

MR GAGELER:   We will then plead or demur.

HIS HONOUR:   How long would you want or need?

MR GAGELER:   Two weeks, your Honour.

HIS HONOUR:   Two weeks.  We are now at 9 June so if we took you through to say close of business on Thursday, 24 June, 4.00 pm.

MR GAGELER:   Yes.

HIS HONOUR:   Then would you say that there should be any direction about the plaintiff preparing a stated case?

MR GAGELER:   In the event that we plead, yes, your Honour.

HIS HONOUR:   Well, if do not demur, I think.  You could plead and demur, I suppose, so ‑ ‑ ‑

MR GAGELER:   Yes, if we do not demur.  Yes, your Honour.

HIS HONOUR:   Yes, so if “do not demur, plaintiff to prepare draft stated case” was what was spoken of, I think, and there is advantage, I think, in the stated case rather than a special case – stated case.  Do you suggest a date, Mr Solicitor, for that?  We are at 24 June.

MR GAGELER:   Two weeks afterwards, your Honour.  The precise date I can perhaps assist with.

HIS HONOUR:   Take us through to, say, 8 July.

MR GAGELER:   Yes.

HIS HONOUR:   Then if we were to bring the matter back on for further directions during the week commencing 19 July – it may have to be an

afternoon fixture, I think, during that week, but are there times, Mr Solicitor, which from your end would be better than others?

MR GAGELER:   We will collectively accommodate whatever time your Honour has available.

HIS HONOUR:   What I would have in mind is, say, Tuesday, 20 July at – I think it will have to be 2.15 - I have commitments during the mornings of that week – or such other time as may be fixed, then deal with costs as in the proceeding.  Is there anything else from your end, Mr Solicitor?

MR GAGELER:   No, your Honour.

HIS HONOUR:   Yes.  Mr Archibald, it is of course a matter entirely for your side whether you provide the particulars sought to provoke demurrer.  I say no more about it.

MR ARCHIBALD:   Yes, your Honour.  We will speak further with our learned friends.  We are not seeking in any way to be obstructive.  I think one of the factors we have in mind is whether on reflection there really are some further facts which ought to be before the Court, such as related to features of the litigation on foot.  That we would see most aptly covered by some facts in a stated case rather than injecting artificially into a pleading further elements.  So we will look at that, speak with our friends and it may be that out of this we can, so to speak, accommodate our friend in that way and it may then be possible to proceed by demurrer, but if not then we would see the other route as likely more satisfactory.

HIS HONOUR:   If, and this is to anticipate, it were to go down the path of demurrer, I think it almost inevitable that the demurrer book would have to include the pleading.

MR ARCHIBALD:   I fear that and I suppose that is why we have been reluctant.

HIS HONOUR:   So do I fear that, but what I was then going to suggest that if, of course, the parties could agree upon whether it is an index or a short statement of summary as an addition to the pleading itself, then all the better.

MR ARCHIBALD:   Yes.

HIS HONOUR:   I simply offer that as a thought that might be borne in mind at the stage of preparing it, but somebody is going to want to see the whole of the pleading in the action at stake, I would have thought.

MR ARCHIBALD:   Yes.  Well, if we can arrive at an executive summary or index then that might accommodate both our concern and my friend’s interest.

HIS HONOUR:   Yes.  Now, the timetable I have discussed with the Solicitor, do you have any difficulty with that?

MR ARCHIBALD:   No, we have nothing to observe about that, your Honour.

HIS HONOUR:   Yes, thank you.  There will be directions as follows:

1.On or before 4.00 pm, 24 June 2010, the defendants file and serve their pleading and any demurrer to the plaintiff’s statement of claim –

It would be preferable, I think, if I expressed that rather differently.

1.On or before 4.00 pm, 24 June 2010 the defendants file and serve their answer to the plaintiff’s statement of claim, whether by way of pleading, demurrer or both.

I think that makes plain that the defendants retain their choices.

2.If the defendants do not demur to the plaintiff’s statement of claim, the plaintiff is to serve on the defendants on or before 8 July 2010 its draft of a case to be stated for the opinion of a Full Court.

3.Adjourn the matter for further directions to 20 July 2010 at 2.15 pm in Melbourne or such other time as may be fixed.

4.Costs of today to be costs in the cause.

MR ARCHIBALD:   If your Honour please.

HIS HONOUR:   Yes, thank you.  There will be directions in those terms and I will adjourn the Court.

AT 9.51 AM THE MATTER WAS ADJOURNED