Citation: ASIC v Adler & 4 Ors [2001] NSWSC 1168
Court: Supreme Court of New South Wales, Equity Division
Date: 14 December 2001
Judge(s): Santow J
Background
ASIC brought civil penalty proceedings against several defendants, including Rodney Adler and related parties, in the context of the collapse of HIH Insurance. The proceedings involved, among other things, allegations about the valuation of an asset called "Planet Soccer," which had been acquired for US$25 million.
Both parties relied on expert valuation evidence. ASIC's expert was Mr Paul Carter, and the defendants' expert was Mr Paul Woods. The defendants' expert filed an additional affidavit on 7 December 2001, after ASIC had closed its case on 6 December 2001, correcting a figure from his earlier affidavit. ASIC then sought to rely on two further affidavits from Mr Carter: one dated 28 November 2001 (filed before the defendants' late affidavit) and one dated 11 December 2001 (filed in direct response to it).
The question before Santow J was whether permitting ASIC to rely on either or both of those Carter affidavits would amount to an impermissible splitting of ASIC's case.
Legal Issues
- Whether ASIC, having closed its case, could rely on the Carter affidavit dated 28 November 2001 without impermissibly splitting its case
- Whether ASIC could rely on the Carter affidavit dated 11 December 2001 as a legitimate reply to the defendants' late expert evidence
- What standard governs case splitting in civil penalty proceedings under the Corporations Act, and how ASIC's public interest obligations affect the exercise of the court's discretion
Decision
Santow J held that the applicable standard was the civil, not criminal, test for case splitting, consistent with section 1317L of the Corporations Act, which requires civil rules of evidence and procedure to apply to civil penalty proceedings. However, his Honour noted that ASIC's obligation to act in the public interest as a prosecuting regulator was a relevant consideration in how the court exercised its discretion, requiring a greater level of stringency than in ordinary civil litigation, though still less than in criminal cases.
On the Carter affidavit of 28 November 2001, Santow J found that ASIC could not rely on it. That affidavit addressed matters that were part of ASIC's case in chief and could have been included before ASIC closed its case. Permitting it would amount to impermissible case splitting.
On the Carter affidavit of 11 December 2001, Santow J reached the opposite conclusion. That affidavit was filed in direct response to the defendants' late Woods affidavit of 7 December 2001, which introduced a corrected valuation figure not reasonably foreseeable from the defendants' earlier evidence. ASIC had been entitled to base its forensic choices on the defendants' known case at the time it closed. The late correction by the defendants' own expert warranted a genuine right of reply.
Santow J emphasised that the rule against case splitting is grounded in fairness, not technicality, and that permitting the 11 December Carter affidavit caused no unfairness to the defendants. The result was consistent with the more liberal approach applicable in civil proceedings, tempered by the seriousness of civil penalties and ASIC's prosecutorial obligations.
Orders Made
- ASIC may not rely on the Carter affidavit dated 28 November 2001, as doing so would impermissibly split its case.
- ASIC may rely on the Carter affidavit dated 11 December 2001 (with specified parts omitted, as identified in the court's orders), insofar as it constitutes rebuttal of the Woods affidavit filed 7 December 2001.
Key Takeaways
- In civil penalty proceedings under the Corporations Act, the civil rules of evidence and procedure apply to questions of case splitting, by virtue of section 1317L. The criminal standard does not govern.
- A plaintiff that has closed its case may call evidence in reply only where that evidence is "strictly in reply" to the defendant's case, rather than evidence that confirms the plaintiff's own case or addresses matters that could have been led earlier.
- ASIC's status as a public interest regulator is a relevant consideration in the court's exercise of discretion on such procedural questions. The court does not apply the full strictness of the criminal rule, but it does require a greater degree of rigour than would apply in purely private civil litigation.
- Reasonable foreseeability is the operative test: where a defendant introduces new expert material after the plaintiff has closed its case, and that material was not reasonably foreseeable from the defendant's earlier evidence, the plaintiff is entitled to reply to it without that reply constituting impermissible splitting.
- The rule against case splitting reinforces the rule in Browne v Dunn: parties are expected to put their full case to opposing witnesses, and a failure to do so cannot ordinarily be remedied by later affidavits once the case has closed.
Legislation and Cases Referenced
Legislation:
- Corporations Act, section 1317L
Cases:
- ASC v AS Nominees Limited (1995) 13 ACLC 1,822
- Australian Securities and Investments Commission v ABC Fund Managers Ltd [2001] VSC 92
- R v Chin (1985) 157 CLR 671
- Williams v Keelty (2001) 39 ACSR 127
- Browne v Dunn (1894) 6 R 67 (HL)
- Shaw v R (1952) 85 CLR 365