The Adelaide Steamship Company Ltd v Spalvins, J.G

[1994] FCA 416

916   199

JUDGMENT No. .o~~~~~.o..,,,~,., M ........ ..

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GENERAL DIVISION	) No. SG3036 of 1994
IN THE MATTER OF THE ADELAIDE STEAMSHIP COMPANY LIMITED AUSTRALIAN COMPANY NUMBER: ACN 007870671
B E T W E E N :
THE ADELAIDE STEAMSHIP COMPANY LIMITED

Applicant

RECEIV!:;? - and -

- 6 JUL1994

F E ~ R A L COURT 0' JANIS GUNARS SPALVINS AND

AUSTRAUA OTHERS

i

... Respondents

REASONS FOR DECISION

Coram: Branson J.

By notice of motion dated 22 June 1994 the sixth and seventh respondents herein sought an order as follows:-

my reasons for so ordering.

"That all original documents of the Sixth and Seventh Respondents held by the Australian Securities Commission be delivered to the solicitor for the Sixth and Seventh Respondents within 3

days. "

Following argument on the notice of motion on 27 June 1994 I indicated that the motion would be dismissed. I now publish

The Australian Securities Commission ( "the ASC" ) holds 43

original files ("the Deloitte documents") produced to it by the sixth and/or seventh respondents following the service upon the seventh respondent of written notices pursuant to s30 of the ASC Law. Copies of the notices are annexed to the affidavit of Timothy Patrick Howes sworn on 27 June 1994 in answer to the notice of motion.

The documents required to be produced pursuant to the notices

(1) audit files of the sixth and/or seventh

respondents -

(a)	for Adsteam Finance & Investments Pty Ltd for the financial years ending 30 June 1989, 30 June 1990, and 30 June 1991
(b)	for Gourlet Cabinets (SA) Pty Ltd for the financial year ending 30 June 1989 and 30 June 1990
(c)	for Jomet Pty Ltd for the financial year ending 30 June 1989 and 30 June 1990
(d)	for Buckley & Nunn (Antiques) Pty Ltd for the financial year ending 30 June 1989 and 30 June 1990
(e)	for Caneberley Pty Ltd for the financial year ending 30 June 1989 and 30 June 1990;

(2) the "Control files" for the audit of the

Adelaide Steamship Company Limited ("Adsteam")
accounts for the financial years ending 30 June
1990 and 30 June 1991 and certain related

documents ; and

(3) documents recording communications during the period 1 July 1989 to 17 October 1991 to which the sixth and/or seventh respondents were a party concerning Adsteam's accounts or its financial position.

Such documents are a l l "books" as defined by s5(1) o f the ASC

Law.

The ASC i s authorised by subs37(5) o f the ASC Law t o retain

possession o f the Deloitte documents -

".	. . for so long as i s necessary:
( a )	...

(b) for any o f the purposes referred t o i n

paragraphs 2 8 ( a ) , (b) and ( d ) ;

(c) for a decision to be made about whether or not

a proceeding t o which the books concerned would

be relevant should be bemn: or

(d) for such a proceeding to be begun or carried on. "

Paragraphs 2 8 ( a ) , ( b ) and ( d ) o f the ASC Law are i n the

following terms:-

"A power conferred by th i s Division (other than

sections 29, 35 and 36) may only be exercised:

(a)	for the purposes of the performance or exercise o f any o f the Commission's functions and powers under a national scheme l a w o f t h i s
jurisdiction; or
(b)	for the purposes of ensuring compliance with a
national scheme l a w o f t h i s jurisdiction; or

( d ) for the purposes o f an investigation under

Division 1. "

Timothy Patrick Howes, the Acting Director or Enforcement a t the Adelaide Regional O f f i c e o f the Australian Securities Commission, by an a f f i d a v i t f i led on 27 June 1 9 9 4 i n answer t o the notice o f motion, has deposed t o being the principal

investigator of the "Adsteam Investigation" into the management, affairs and accounts of the Adsteam Steamship Company Limited and its subsidiaries. He states in paragraph 5 of his affidavit that:-

"Notwithstanding the ins t i tu t ion o f the within proceedings, the Adsteam Investigation continues a s the Commission i s considering further enforcement act iv i ty . The Deloittes documents would be relevant

t o such further enforcement ac t i v i t y and are

retained as best evidence. When the Commission has

sat is f ied i t s e l f that it and other agencies have no further need for the Deloittes documents they w i l l be returned t o Deloittes."

Mr Gray QC, senior counsel for the applicant in the

proceedings instructed by the Australian Securities

Commission, submitted that as the Adsteam investigation is not

complete, and that as further enforcement action may be taken,

it is in the public interest for the ASC to ensure maintenance

of the integrity of the Deloitte documents. He drew attention

to the statutory responsibility of the ASC, amongst other

things, to strive " t o take whatever action it can take, and i s necessary, i n order t o enforce and give e f f e c t t o national

scheme laws". (ASC Law sl(2) (g)). He pointed out that embarrassment could result if the ASC were required to show its hand more plainly as to its ongoing investigations and activities concerning the Adsteam Group. I accept that this may be so.

Mr Griffiths who appeared for the sixth and seventh

respondents accepted that the ASC had obtained the Deloitte documents lawfully. He submitted, however, that the necessity for the ASC to retain the Deloitte documents has passed. He drew attention to the fact that the ASC has held the Deloitte documents for a long time, has filed and served a complicated statement of claim in this matter by reference to the Deloitte documents and has obtained an expert report based on such documents. He further drew attention to s80 of the ASC Law which provides for copies of documents to be admissible in evidence in proceedings. He did not, however, challenge the statements in paragraph 5 of Mr Howes' affidavit.

Mr Griffiths submitted that the words "for so long as is

necessary" in subs37(5) of the ASC Law were to be understood in the context of this application as meaning "for so long as the ASC reasonably needs the Deloitte documents" for any of the purposes mentioned in the subsection. He submitted that

the Deloitte documents for these proceedings to be carried on,	it is no longer necessary for the ASC to retain possession of
or for any other purpose or reason referred to in subs37(5) of the ASC Law. It is not clear to me that subs37(5) is properly to be interpreted in this way. It is an equally open construction, in my view, that at least so far as paragraph 37(5) (d) is concerned, the words refer to the time necessary for "such a proceeding to be begun and carried on". That is, that paragraph 37(5)(d) authorises the ASC to retain possession of the Deloitte documents in the circumstances of these proceedings for the time that is necessary for these proceedings to be carried on.
However, I need not determine the above issue of construction. Mr Gray called in aid paragraph 37(5) (b) of the ASC Law and paragraph 5 of Mr Howes' affidavit. He submitted that the ASC could not guarantee the integrity of the Deloitte documents if it relinquished its possession of them. It can be seen from the statement of claim herein that very large sums of money are in issue in these proceedings. The relief sought, if obtained, could have a profound impact on all respondents, not merely the sixth and seventh respondents. In my view there is reason to think that the further enforcement proceedings which the ASC is considering may, if such proceedings eventuate, be of similar significance to the persons, whoever they may be, who may be affected thereby. I do not consider that it would
be reasonable in the circumstances to place the ASC effectively in the hands of the solicitors for the sixth and
seventh respondents so far as the ongoing security of the Deloitte documents is concerned. I conclude that it is necessary for the ASC to retain possession of the Deloitte documents for the purposes referred to in each of paragraphs 28(a), (b) and (d) of the ASC Law.
In the circumstances I doubt that I have the power to order the ASC to deliver the Deloitte documents to the solicitors for the sixth and seventh respondents. If I do have the power I consider that it would be an inappropriate exercise of my discretion to so order. My reason for so concluding are set out below.
First, however, I should mention a further argument advanced by Mr Gray. Mr Gray argued that any challenge to the power of the ASC to retain the documents should have been made in separate proceedings against the ASC. Technically Mr Gray may be correct in this submission. However, the ASC has had, and has taken the opportunity to place before the Court the material and the submissions upon which it wishes to rely in opposition to the application. I do not consider that it has been disadvantaged by any technical deficiency in the way in which the issue has been brought before the court.
Moreover, as I have understood the effect of Mr Griffiths' submissions, he has not sought a ruling that the ASC is not
entitled to the documents. Rather he sought to persuade the court to exercise the discretionary power contained in Order
33 rule 13 to make orders for "the attendance of any person
and production by him of any document or thing specified or described in the order". Mr Griffiths also drew attention to the wide discretionary powers of the court pursuant to Order
10. It was as a matter relevant to the exercise by the court
of its discretionary powers under either or both of Orders 10 and 33 that, as I understood him, Mr Griffiths argued that the ASC has no ongoing need for the documents, and that by contrast his clients have a most pressing need for the documents.
As is mentioned above I do not accept that the ASC has no ongoing need for the documents. In considering the exercise of my discretion (on the assumption that I have such a discretion) I must weigh up the public interest in the ASC retaining possession of the Deloitte documents against the interest of the sixth and seventh respondents in regaining possession of their own documents.
I accept that the sixth and seventh respondents would be assisted in the preparation of their defence in these proceedings by their solicitors assuming possession of the
Deloitte documents. I accept that copies of the documents may
not reproduce all notations made on the originals - e.g. by pencil or highlighter. However, the ASC has agreed to make the Deloitte documents available in Adelaide or Sydney for inspection as necessary by the sixth and seventh respondents and their solicitors and/or to allow the creation on behalf of the sixth and seventh respondents of a copy set of documents which agree in all regards with the Deloitte documents. In the circumstances I do not consider that it would be an appropriate exercise of my discretion pursuant to either Order 33 rule 13 or Order 10 to require the ASC now to give up possession of the documents to either the solicitors for the sixth and seventh respondents or the court for the purpose of the court's making them available to such solicitors.
The position may be different at some later time. Further, at a later time the ASC may be in a position to disclose with greater frankness the now situation with respect to the Adsteam investigation. It is for this reason that I have ordered that the costs of the notice of motion should be reserved.
The inconvenience to the sixth and seventh respondents which may result from their solicitors not having possession of the documents, may have significance in respect of the ongoing conduct of the proceedings. All parties have liberty to apply
pursuant to orders made by O'Loughlin J on 13 May 1994. I certify that this and the true copy of the Reasons 8 preceding pages are a

for Decision of Justice

Branson. / G A

Associate &&

Counsel for the Applicant Mr T Gray Q.C., with

M r R Whitington

Solicitors for the Applicant Australian Securities

Commission

Counsel for the fourth

and fifth Respondents Mr A Fairbank

Solicitors for the fourth

and fifth Respondents Phillips Fox

Counsel for the sixth

and seventh Respondents

Solicitors for the sixth

and seventh Respondents Mallesans Stephen

Jaques

Hearing Date 27 June 1994