Zarro, P. v Australian Securities Commission

[1992] FCA 308

Re: PASQUAL ZARRO; MICHELLE GAY ZARRO; DOUGLAS CHALMERS BURGESS; HAROLD
WALLACE WOODS; SPRING COIL PTY LTD; TRENGATE PTY LTD; POINTBLANK PTY LTD;
WESTPAC BANKING CORPORATION
And: AUSTRALIAN SECURITIES COMMISSION
No. Q G3018 of 1991
FED No. 308
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Lockhart(1) Ryan(2) and Gummow(3) JJ.

CATCHWORDS

Practice and Procedure - Stay of proceedings - whether stay appropriate where public interest immunity attaches to documents relevant to defence - principles to be applied when reviewing discretion of primary Judge.

HEARING

SYDNEY

#DATE 25:5:1992

Counsel for the Applicants : R.N. Chesterman QC

S. Couper and G. O'Grady

Solicitors for the Applicants : McLaughlin Gordon and Lennon

Counsel for the Respondent : J. Griffin QC and G. Egan

Solicitors for the Respondent : R.A. Chapman, Solicitor

ORDER

THE COURT ORDERS THAT:

1. Leave to appeal from the judgment of Drummond J. on 16 March 1992 be refused.

2. The applicants pay the costs of the respondent of the motion for leave to appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicants seek leave to appeal from the interlocutory judgment of a Judge of the Court (Drummond J.) given on 16 March 1992 dismissing an application by the applicants to stay so much of the proceeding brought by Australian Securities Commission ("the ASC") as relied on what is described in the appeal papers as "Particular 30". This appeal is closely related to and consequential upon the outcome of another appeal in this matter brought by the applicants against the judgment of the learned primary Judge upholding a claim made by the ASC that certain documents are protected from disclosure to the applicants on the grounds of public interest immunity. I have prepared reasons for judgment with respect to that appeal and have expressed in those reasons the opinion that leave to appeal should be granted, but that the appeal should be dismissed. It is therefore necessary to consider this second motion for leave to appeal because it is based on the assumption that the first motion or the first appeal will be dismissed.

1. The facts and the relevant curial history of this proceeding are set out in my other reasons for judgment and are to be treated as incorporated in these reasons.

2. Having upheld the claim of the ASC in relation to public interest immunity the primary Judge refused to stay the proceeding in so far as it related to the issues raised by Particular 30.

3. Counsel for the applicants submitted that leave to appeal ought to be granted, and relied upon the same arguments as were advanced with respect to the first appeal. The Court heard argument on this motion for leave to appeal as if it were the hearing of the appeal itself, as it did with the first appeal.

4. Counsel for the applicants argued that the denial to the applicants of the right to inspect the documents the subject of the claim for public interest immunity (which is assumed to be a valid claim for present purposes) substantially increases their difficulty in resisting the case brought against them by the ASC with respect to Particular 30. It was submitted that the documents are relevant, not only to so much of Particular 30 as relates to Pacific Commerce Finance ("PCF"), but also to the other financiers particularised in Particular 30. It is said that this is so because the ASC has said that it will not seek to prove that any particular representation was fraudulent, but will rely upon the cumulative effect of none of the representations having come to fruition as proving fraud. If with respect to PCF the applicants can show that the representations were true or were believed to be true then, so it is argued, the ASC's case must be seriously weakened.

5. It was submitted that the basis on which the primary Judge found that the documents are immune from production has a temporal limitation. When the investigation of the ASC results in a prosecution or when a decision is made not to prosecute or when the investigation is at the stage when the documents are shown to the relevant officers of PCF, it is submitted that production of the documents will cease to be inimical to the investigation and should therefore be open to inspection.

6. It was argued by counsel for the applicants that as the ASC is the prosecutor in this case and the investigative body it is entirely within its control when the stage is reached that production of the documents will not be inimical to the investigation. The case alleged in Particular 30 was said not to be an integral part of the case against the applicants but was added at a late stage in the proceeding and raises separate and discrete bases for a claim for relief against the applicants. In these circumstances it was submitted that there is no reason why that case cannot be litigated separately. It was argued that it is unfair to the applicants to compel them to resist a case, whilst depriving them of the means of resisting it or of making enquiries to find the means of resisting it. The unfairness was said to be exacerbated by the fact that the ASC is in possession of the relevant documents. The remedies sought against the applicants are punitive as well as financial.

7. The appeal challenges the exercise of discretion of the primary Judge and must therefore be approached by this Court according to the well-established principles enunciated in a number of decisions of the High Court. For present purposes it is sufficient to quote the comments of Dixon, Evatt and McTiernan JJ. in House v R (1936) 55 CLR 499 at 504-5:
   

"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the Judges composing the appellate court consider that, if they had been in the position of the primary Judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."

See in particular the judgment of Sir Frederick Jordan in In Re The Will of F.T. Gilbert (Deceased) (1946) 46 SR(NSW) 318 at 323, a passage since followed by Full Courts and single Judges throughout Australia. See also Australian Broadcasting Commission v Parish (1980) 29 ALR 228 at 248 and the cases there cited; National Mutual Holdings Pty Limited v The Sentry Corporation (1988) 19 FCR 155 at 160-161.

1. In my opinion it has not been demonstrated that the primary Judge erred in exercising his discretion. Nothing has been established which suggests that his Honour acted upon a wrong principle. The applicants seek to challenge the particular exercise of discretion in this case by the primary Judge; and in essence are seeking to have this Court on appeal take a different course by exercising its discretion without the necessary foundation being laid that an error of principle was made by his Honour. I would refuse to grant leave to appeal from the judgment of the primary Judge.

2. As full argument was heard by us on the hearing of the motion for leave to appeal, I shall say something briefly about the exercise of discretion by the primary Judge. It must follow, from his Honour's finding that the relevant documents ought not to be disclosed on the ground of public interest immunity, that the applicants are deprived of access to the documents in question. In exercising his discretion the primary Judge was plainly aware of the effect his ruling would have on the proceeding. Although in due course circumstances may change and some of the documents presently shielded from scrutiny by the applicants by reason of his Honour's order may cease to be immune from disclosure, this is in the realm of conjecture rather than established fact. Certainly so far as the documents which may disclose the identity of "informers" are concerned, they are likely to remain under the shield of public immunity protection for a considerable time and probably after the conclusion of this proceeding including the hearing with respect to the issues raised by Particular 30. This class of documents appears to be a substantial class of the documents presently protected by order of the primary Judge.

3. Also it appears from his Honour's reasons that he did consider the question whether the ASC's case with respect to the issues raised under Particular 30 (or at least that part of it which concerned PCF) could be excised from the other issues for separate trial without prejudice to the presentation of the ASC's case. Although finding that it was capable of being severed, in the exercise of his discretion his Honour concluded that it should not be severed.

4. If leave to appeal were to be granted by the Court it is clear in my view that the appeal would fail.

5. I would refuse leave to appeal with costs.

JUDGE2

I have had the advantage of reading in draft the reasons for judgment of Lockhart J on the application for leave to appeal from the interlocutory judgment pronounced herein on 16 March 1992 refusing a partial stay of these proceedings. For the reasons given by Lockhart J, I agree that leave to appeal should be refused with costs.

JUDGE3

I have had the advantage of reading the Reasons for Judgment by Lockhart J. I agree, for the reasons given by his Honour, that leave to appeal should be refused, with costs.