Case: ASIC v Burke [2000] NSWSC 694
Outcome: cited
It is not a necessary consequence of an order appointing a receiver that the receiver should deal with or liquidate the assets in question. The interlocutory and protective character of orders made under s 1323 must be borne in mind when defining the powers of the receiver. The appointment of a receiver has rightly been described as 'an extraordinary step' ASIC v Burke [2000] NSWSC 694 at [8] (Austin J). However depending upon the nature of the powers conferred on the receiver it may be less drastic than a freezing order which can only be varied by order of the Court. The interlocutory history of this case has already demonstrated that circumstances not contemplated when the original interim freezing orders were made have required their variation from time to time. I accept, with respect, the observation made by Austin J in Burke at [8]: 'Without wishing to lay down any general rules, it appears to me that the extraordinary step of appointing a receiver may be justified, even though Mareva Orders are in place, in a case where there is real doubt about the existence and location of assets such as investments, and about the number and identity of claimants and the nature of their claims, and additionally the defendants are engaged in business activities which entail that any Mareva Orders must allow assets to be turned over in the course of business. Where these circumstances exist in combination, and especially where there are allegations of serious fraud involved, the Court may conclude ...that the Mareva Orders are not enough to ensure that the assets are preserved and protected, and indeed identified and brought in for the benefit of investors.' The decision was cited with approval by Santow J in ASIC v Adler (supra) at 268-269. 30 Section 1323 does not make any express provision for the nature of the evidence on which the Court may act in making orders under it. Applications made under the section have an interlocutory character albeit there are no other specific proceedings to which they may relate. The section does not require concluded findings of fact about liability or whether assets have been dissipated. For the reasons already canvassed the Court, in making orders under s 1323 , engages in a risk assessment and management process. The logic of the section assumes that the Court will not always have before it evidence of the kind that would be necessary and admissible in proceedings to establish definitively the nature and extent of the assets of the persons under investigation and their liability to aggrieved persons. Nor will it necessarily have before it evidence of the kind that would establish definitively that dissipation of assets has occurred or is likely to occur or that flight is imminent. 31 The logic of s 1323 requires the Court to be able to act on evidence which might not be admissible in civil or criminal proceedings leading to a definitive determination of the rights and liabilities of the parties. Hearsay evidence may therefore be received and acted upon, not as proof of the truth of its content but as evidence of the existence of a risk or possibility that gives rise to the necessity for or desirability of a protective order. It is not necessary, in this context, to consider whether the proceedings are interlocutory for the purposes of the exception to the hearsay rule under s 75 of the Evidence Act 1995 (Cth) albeit that that exception is no doubt informed by similar considerations. Evidence may be received of the opinion of a suitably qualified person who has had the opportunity to review extensive documentation collected in the course of an investigation and to offer an overview of it for the benefit of the Court. In such a case the opinion or overview should be supported by reference to the relevant documentation and factual material. The opinion is received not for the determination of any ultimate issue of liability but as probative of the risk which the Court must assess in determining whether to make an order under the section. These considerations are relevant to the admissibility of some of the affidavit evidence which has been relied upon in this case. 32 Specific objection has been taken on behalf of the second defendant to the use of transcripts of examinations conducted under s 19 of the ASIC Act. It was submitted that pursuant to s 68(3) of the ASIC Act such transcripts are not admissible in evidence against the person who has signed the record in a proceeding for the imposition of a penalty. It was submitted that the present proceedings are, in truth, proceedings for the imposition of a penalty. This is on the basis that if interlocutory in nature, then they are interlocutory in respect of proceedings not yet commenced but which will inevitably be penalty proceedings. 33 Accepting that there is a possibility that penalty proceedings may be taken against one or more of the defendants in this case that does not, in my opinion, render the present application an application for the imposition of a penalty or an application incidental to such proceeding. As already noted, evidence may be relied upon of a hearsay or opinion character in these proceedings which might not be admissible in penalty proceedings. The same is true for s 19 transcripts. 34 It was submitted for the second defendant that because ASIC seeks an order that the reasonable costs of the receivers and managers whose appointment it seeks should be payable from the collective assets of the defendants, that fact itself gives the present application the character of a penalty proceeding. In my opinion however, the submission is misconceived. An order for the payment of costs out of the collective assets of the defendants would not of itself amount to the imposition of a penalty. Although it may effectively deprive defendants of some of their property that imposition is not by way of punishment for any contravention of the law. 35 Objection was also taken to the admissibility against the second defendant of transcripts of examinations of other parties conducted under s 19 of the ASIC Act. In this respect s 77 of the ASIC Act was relied upon. That section provides: 'Where direct evidence by a person (the absent witness ) of a matter would be admissible in a proceeding, a statement that the absent witness made at an examination of the absent witness and that tends to establish that matter is admissible in the proceeding as evidence of that matter: (a) if it appears to the court or tribunal that: (i) the absent witness is dead or is unfit, because of physical or mental incapacity, to attend as a witness; or (ii) the absent witness is outside the State or Territory in which the proceeding is being heard and it is not reasonably practicable to secure his or her attendance; or (iii) all reasonable steps have been taken to find the absent witness but he or she cannot be found; or (b) if it does not so appear to the court or tribunal unless another party to the proceeding requires the party tendering evidence of the statement to call the absent witness as a witness in the proceeding and the tendering party does not so call the absent witness.' It was submitted for the second defendant that ASIC has not adduced evidence in respect of the matters set out in s 77(a) and that therefore the s 19 transcripts of those parties that are not parties to the proceeding may only be tendered if the conditions set out in par (a) are set out. Counsel for ASIC on the other hand submitted that the second defendant had not required ASIC to call any absent witness as a witness in the proceeding and that therefore the condition of admissibility under s 77(b) of the Act was satisfied. Given the urgency with which the application has been made, it is perhaps a little unrealistic to require advance notice by the second defendant of the requirement that any absent witness whose s 19 transcript is relied upon be called as a witness in the proceeding. In my opinion, however, the transcripts of the examinations conducted under s 19 can be relied upon as tending to establish the possibility that circumstances exist which give rise to the necessity or desirability of a protective order. What is in evidence here is the fact that the statement was made in the course of a s 19 examination. The fact that the statement was made, rather like the hearsay evidence referred to earlier, may support an inference that circumstances exist that make a protective order necessary or desirable. It is not necessary to rely upon such evidence for the purpose of establishing the truth of the statement made.