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District Court 1 August 2023

R v Bigatton (No 2)

[2023] NSWDC 290

Fraud & dishonesty
SETTING ASIDE SUBPOENA LEGITIMATE FORENSIC PURPOSE

Citation: R v Bigatton (No 2) [2023] NSWDC 290
Court: District Court of New South Wales
Date: 1 August 2023
Judge(s): Newlinds SC DCJ

Background

The accused faces trial on two counts arising from alleged involvement in the BitConnect scheme, an investment scheme that operated across multiple jurisdictions. One count charges him with operating an unregistered managed investment scheme under the Corporations Act 2001. ASIC investigated the scheme's Australian activities, while the FBI investigated activities in the United States, leading to a separate prosecution and a guilty plea by an associated individual, Glen Arcaro, in California.

Shortly before trial, the accused issued subpoenas to both ASIC and the Commonwealth Director of Public Prosecutions (CDPP) seeking communications between ASIC and the FBI, particularly those relating to the FBI's investigation and the Arcaro plea agreement. Both ASIC and the CDPP applied by notice of motion to have those subpoenas set aside, arguing the documents had no legitimate forensic purpose in the proceedings.

A previous application raising related issues had been considered by Bennett SC DCJ, who reached a different conclusion at first instance. This decision proceeded on fresh evidence and different submissions.

Legal Issues

  • What is the applicable test for setting aside a subpoena on the ground that it lacks legitimate forensic purpose?
  • Whether communications between ASIC and the FBI concerning the BitConnect scheme and the Arcaro plea agreement could have any legitimate forensic purpose in the accused's trial.
  • Whether a scheme can, as a matter of law, be both a managed investment scheme (capable of registration under the Corporations Act) and a Ponzi scheme simultaneously, and whether that question affected the subpoena's legitimacy.
  • Whether anticipated claims for legal professional privilege and public interest immunity over the documents should factor into the setting-aside decision.
  • What weight to give to the earlier decision by Bennett SC DCJ on a substantially similar application.

Decision

Issue 1: The applicable test

The court applied the test from Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145, which both parties accepted as the correct standard (at [6]-[8]). A subpoena will be set aside if it has no potential to assist a party on a legitimate forensic purpose; absent such a purpose, it must be treated as issued for a purpose extrinsic to the litigation and therefore an abuse of process (at [9]). The court noted that labels such as "fishing expedition" are now to be avoided in favour of this formulation.

Issue 2: Legitimate forensic purpose

The accused's defence includes the argument that a scheme cannot simultaneously be a managed investment scheme and a Ponzi scheme, such that an obligation to register could never have arisen. The court found this raised a live, real and bona fide legal dispute between the parties (at [35]). If that argument is accepted at trial, documents revealing FBI lines of inquiry into whether the scheme was a Ponzi scheme could assist the accused in cross-examining ASIC witnesses about unexplored investigative avenues (at [36]-[37]). On that basis, the court was satisfied there was a reasonable basis, beyond mere speculation, to infer the documents could provide relevant forensic assistance (at [37]).

Issue 3: The Ponzi scheme legal question

The court expressly declined to resolve, at this interlocutory stage, whether a scheme can as a matter of law be both a managed investment scheme and a Ponzi scheme. That question is reserved for determination at trial, whether in the form of directions to the jury, on receipt of evidence, or on a separate application (at [31]). The court offered a tentative, non-binding observation that the answer may not be binary, and that whether a scheme is a Ponzi scheme will always involve questions of evidence and may depend on the promoter's intention at the time registration was required (at [32]-[34]).

Issue 4: Privilege and public interest immunity

The court held that anticipated claims for legal professional privilege or public interest immunity over parts of the produced documents are matters to be dealt with at the point of production, not at the stage of determining whether to set aside a subpoena (at [38]). Only in cases where it is overwhelmingly obvious that all documents sought would attract a successful privilege claim might that factor warrant setting aside; this was not such a case (at [38]).

Issue 5: The earlier decision of Bennett SC DCJ

The court found the substance of the present application was the same as the one previously considered by Bennett SC DCJ, but noted the matter was put on different evidence and different submissions (at [40]-[41]). A material change in circumstances is not a prerequisite to rehearing the same application; rather, it is a discretionary factor. The court took the earlier decision into account in the exercise of its discretion but was not dissuaded from dismissing the applications, given its conclusion that a legitimate forensic purpose had been established on the material before it (at [41]).

Orders Made

  • The notice of motion filed 26 July 2023 on behalf of ASIC is dismissed.
  • The notice of motion filed 26 July 2023 on behalf of the CDPP is dismissed.

Key Takeaways

  • The District Court confirmed that the Blacktown City Council formulation governs subpoena challenges: the question is whether the subpoena has any potential to assist a party on a legitimate forensic purpose, and analogies to fishing expeditions are to be avoided (at [6]-[9]).
  • A subpoena targeting communications between regulatory and law enforcement agencies is not automatically without legitimate forensic purpose merely because the documents would be inadmissible as evidence of the facts they contain; potential utility for cross-examination planning can be sufficient (at [29], [37]).
  • Where a genuine legal dispute exists between the parties that, if resolved in the accused's favour, would make the subpoenaed documents relevant, that is enough to defeat an application to set aside on the ground of no legitimate forensic purpose (at [35]).
  • Anticipated claims for privilege or public interest immunity over produced documents do not, without more, establish that a subpoena lacks legitimate forensic purpose; those claims are ordinarily addressed at the production stage (at [38]).
  • The absence of a material change in circumstances since an earlier, substantially identical application was decided does not bar a court from reconsidering that application, though it remains a relevant discretionary consideration (at [41]).

Legislation and Cases Referenced

Legislation
- Corporations Act 2001 , ss 601EE(5), 1311(1)
- District Court Rules 1973, r 53.23

Cases
- Australian Securities & Investment Commission v Dunjey [2023] FCA 361
- Australian Securities & Investment Commission v Marco (No 13) [2023] FCA 83
- Attorney General (NSW) v Chidgey (2008) 182 A Crim R 536
- National Australia Bank v Norman (2009) 180 FCR 243.
- R v Bigatton [2022] NSWDC 144
- Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145
- United States of America v Glenn Arcardo, US District Court, Southern California, 21 CR 2542 - TWR