Australian Securities and Investments Commission v Ludgates Corporate and Investment Advisory Services Pty Ltd [2004] FCA 1689 (7 December 2004)

Last Updated: 1 March 2005

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Ludgates Corporate and Investment Advisory Services Pty Ltd [2004] FCA 1689

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v LUDGATES CORPORATE AND INVESTMENT ADVISORY SERVICES PTY LTD (IN LIQ) AND ORS
NSD 3037 of 2003

ALLSOP J
7 DECEMBER 2004
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 3037 of 2003

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION APPLICANT
AND:	LUDGATES CORPORATE & INVESTMENT ADVISORY SERVICES PTY LTD (in liq) FIRST RESPONDENT BENJAMIN PAUL WHITEHOUSE SECOND RESPONDENT JENNIFER MARTINE SISSON THIRD RESPONDENT
JUDGE:	ALLSOP J
DATE OF ORDER:	7 DECEMBER 2004
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The hearing dates commencing on 31 January 2005 be vacated.

2. The second respondent himself, or through his retained solicitor on the record, on or before 11 February 2005, file and serve an affidavit stating whether or not these proceedings are to be defended and if they are, whether on a represented basis or not.

3. The matter be stood over for hearing to commence Monday, 30 May 2005 at 10.15 am in Sydney, subject to variation of the venue to be decided in due course.

4. Leave be granted to the second respondent to approach my associate in chambers for a return date in January of any cross-claim against any insurer.

5. The matter be stood over for video-link directions to Tuesday, 22 February 2005 at 10.30am (Sydney time), 9.30 am Brisbane Time.

6. The second respondent to pay the applicant's costs of the notice of motion.

7. The question of indemnity costs for this notice of motion be reserved.

8. The third respondent's costs be her costs in the cause.

9. The costs of the directions hearing of 22 February 2005 be paid by the second respondent.

10. Grant leave to the second and third respondents to file and serve prior to 22 February 2005 any affidavits in answer to the applicant's case.

11. Liberty to apply on 3 days’ notice.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 3037 of 2003

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION APPLICANT
AND:	LUDGATES CORPORATE & INVESTMENT ADVISORY SERVICES PTY LTD (in liq) FIRST RESPONDENT BENJAMIN PAUL WHITEHOUSE SECOND RESPONDENT JENNIFER MARTINE SISSON THIRD RESPONDENT

JUDGE:	ALLSOP J
DATE:	7 DECEMBER 2004
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 This is a motion brought by notice of motion, dated 2 December 2004 and filed on 3 December 2004, to vacate a hearing date in this matter in which the trial is to commence on 31 January 2005. That trial date was referred to and has been referred to by me in past occasions and is referred to in the notice of motion as a provisional trial date. That is, it is only provisional in the sense that I gave leave to the respondents to bring notices of motion to vacate the date. The proceedings involve causes of action brought by the Australian Securities and Investments Commission, in effect, on behalf of various investors who are said to have lost a significant amount of money in three investment schemes, which, it is said, were run by the first corporate respondent and in connection with the running of which the second and third respondents had an involvement.

2 It is unnecessary to set out in any detail the allegations in the statement of claim. The allegations will require proof from 17 named investors, who have been called, together with a body of expert material. There are, in effect, 17 cases in respect of the various investment schemes that were apparently contributed to by these investors. The causes of action arise from the duties and obligations said to have been owed by various respondents under the then s 851 of the Corporations Law and now s 945A of the Corporations Act 2001 (Cth). In short summary, these investments should never, on the applicant's case, have been sold, as it were, to these investors whose interests it is said were sacrificed in imprudent and deeply unwise circumstances.

3 That description of the nature of the complaints highlights the significant public interest in the expeditious resolution of this case and cases like it. The first respondent, the corporate respondent, is in liquidation and is not taking any part in these proceedings. The second and third respondents were once associated in an accounting partnership, out of which it is said the first respondent conducted itself. The second and third respondents have now fallen out. Up to a point earlier this year, a Queensland solicitor who on a number of occasions attended directions hearings before me represented the second and third respondents. From those directions hearings, it can be stated that that former solicitor assisted in the conduct of the matter and in particular in relation to the production of documents and in the relation to discovery.

4 By the end of 2003, the applicant served all the current lay statements upon the respondents. Since that time, on the second respondent's own evidence, he has not looked at any of those statements. His explanation for that is that his financial pressures have been such as to require him to devote the totality of his available time to any funds to relieve the extreme pressure of creditors, being the Australian Taxation Office and others, as well as paying for the legal fees.

5 As to the conduct of the matter, his answer was that he left it to his lawyers. This is a most unsatisfactory explanation as to the conduct of the litigation. It is simply not good enough, in my view, to blame a former solicitor when a professional businessperson such as the second respondent understands the most serious allegations that are made against him and they are embodied, at least in part, in a number of witness statements of people to whom it is said he with others wrongly induced to involve themselves in these investments.

6 During the course of 2003 and 2004, a significant body of documentation has been disclosed and discovered. From the evidence before me, I can take it that Mr Whitehouse has barely even begun, if he has taken any step whatsoever, to familiarise himself with his own records that are deployed in this case against his interests. The previous solicitor, who has been attending to the matter on behalf, initially, of the second and third respondents, and more latterly of the second respondent, has ceased to act. He has not been paid and has a lien on the papers. To overcome this, the applicant has made available, at no doubt significant cost to it, all documents which it would understand to be in the former solicitor's possession to the respondents.

7 There are insurers in the background, as I understand it, although it is not strictly relevant to the running of this suit. Previous insurers now indemnify the third respondent, at least to the extent of the carriage of the matter. The detail of that is not a matter to concern me. Some months ago, the question of the response of the various policies was raised with me in Court and I indicated to the former solicitor for the respondents that steps ought to be taken promptly to deal with any insurer if the Court process was to be used. I indicated then and I have indicated today that subject to understanding something more about the issues, which might be said to be unusual, it would plainly be part of the one matter that is the one controversy that was before the Court.

8 Any defence, of course, that would rely upon any provision of the Insurance Contracts Act 1984 (Cth) would raise a matter under a law of the Parliament for the purposes of s 39B(1A)(c) of the Judiciary Act 1903 (Cth). No steps, I gather, have been taken other than continued negotiation with the insurer. I do not know what the basis of the insurer's present non-responsive attitude is. The future may disclose that.

9 The matter is set down for 31 January 2005. Primary consideration that attends the exercise of discretion for me today is balancing the interests of all parties, including the investors and the public interest, in the prompt and expeditious resolution of these proceedings, together with ensuring that justice is done to Mr Whitehouse. It would be only a small step for me to simply say that Mr Whitehouse is the author of his own misfortune and can begin his case at the end of January. Mr Stack, counsel for the applicant, has, in effect, put that to me in submissions and, if I may say so with respect to Mr Stack, there is great force in his submissions.

10 Giving all due leeway to Mr Whitehouse, I think what has occurred in this case reflects a significant measure of denial by Mr Whitehouse. I think that denial of the reality of what he is facing has in the past couple of weeks at least been faced up to. It needs to be. He has a choice. He either defends this case, or he doesn't. There are very serious allegations made about his personal and professional conduct. It is unfortunate for him, however these matters will need to be ventilated and dealt with. It is in the interest of the investors and the public interest that they be dealt with not only expeditiously, but also ensuring that Mr Whitehouse has such opportunity as he says he needs to meet those allegations. Thus, notwithstanding the temptation to accede to the submissions of the applicant, perfectly properly made that Mr Whitehouse's difficulties are of his own making, I do propose to give Mr Whitehouse some more time.

11 I had intended to begin the trial in February by hearing the lay witness statements, and then adjourn. I think in all the circumstances there is a risk that that could be productive of injustice. I say that for the following reasons. Mr Whitehouse was not the only person to speak to these investors. If he had been then there might well be much to be said for the proposition that he would be able to spend the next six to eight weeks deciding what he wanted to cross-examine those people about. However, not only will he be required to do that, he will be required to find out from those who did speak to some of these investors, what they said and whether the investors' affidavits and statements are correct. It goes without saying that all this should have been done previously.

12 Mr Stack gave me a helpful outline of the case this morning by way of what might be said to be a mini-opening. Having taken that clear enunciation of the likely scope of the case into account, I think in all the circumstances it is probably a case where justice to all parties, and the minimisation of costs to all parties will be brought about by the case beginning, and to the extent the Court is able to, simply running to its end without interruption.

13 The orders I make are as follows:

1. The hearing dates commencing on 31 January 2005 be vacated.
2. The second respondent himself or through his retained solicitor on the record on or before 11 February 2005 file and serve an affidavit stating whether or not these proceedings are to be defended and if they are, whether on a represented basis or not.
3. The matter be stood over for hearing to commence Monday, 30 May 2005 at 10.15 am in Sydney, subject to variation of the venue to be decided in due course.
4. Leave be granted to the second respondent to approach my associate in chambers for a return date in January of any cross-claim against any insurer.
5. The matter be stood over for video-link directions to Tuesday, 22 February 2005 at 10.30am (Sydney time), 9.30 am Brisbane Time.
6. The second respondent to pay the applicant's costs of the notice of motion.
7. The question of indemnity costs for this notice of motion be reserved
8. The third respondent's costs be her costs in the cause.
9. The costs of the directions hearing of 22 February 2005 be paid by the second respondent.
10. Grant leave to the second and third respondents to file and serve prior to 22 February 2005 any affidavits in answer to the applicant's case.
11. Liberty to apply on 3 days’ notice.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.

Associate:

Dated: 17 December 2004

Counsel for the Applicant:	Mr D R Stack
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Second Respondent:	Mr P Bickford
Solicitor for the Second Respondent:	Mullins Lawyers
Solicitor for the Third Respondent:	Clayton Utz
Date of Hearing:	7 December 2004
Date of Judgment:	7 December 2004