Stitched up by a subpoena side-step – methods for obtaining transcripts of ASIC examinations

Transcripts of ASIC examinations can be very useful to claimants in investigating possible avenues of recovery, or assisting to build a case.

This week’s TGIF considers the case of TW McConnell Pty Ltd v SurfStitch Group Ltd (administrators appointed) (No 2) [2018] NSWSC 1149 and the different methods by which claimants may obtain transcripts of examinations carried out by ASIC to help with investigating avenues of recovery and bolster proceedings for recovery.

BACKGROUND

TW McConnell Pty Ltd is the Lead Plaintiff in a shareholder class action against SurfStitch Group Ltd (administrators appointed). As part of that proceeding, the Lead Plaintiff alleges that the company’s former CEO, was involved in the company’s alleged contravention of various provisions of the Corporations Act 2001 (Cth).

In 2016 and 2017, the former CEO was examined by ASIC under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth). In such an examination, the privileges against self-incrimination and exposure to a penalty are abrogated, meaning a person being examined must answer a question even if it tends to expose them to criminal prosecution or a civil penalty.

The Lead Plaintiff initially sought copies of the examination transcripts under s 25 of the ASIC Act, which gives ASIC discretion to provide transcripts in certain circumstances. After ASIC refused access, the Lead Plaintiff had a subpoena to ASIC issued, requiring that ASIC produce the transcripts.

THE ISSUE

ASIC produced the transcripts to the Court in answer to the subpoena, but the former CEO opposed the Lead Plaintiff having access to them on the basis that they would reveal material that might incriminate or provide a basis for civil penalty proceedings against him.

THE DECISION

Stevenson J held that the Lead Plaintiff was entitled to inspect the transcripts. His Honour acknowledged that it was a possibility that access to the transcript might expose the former CEO to conviction or a penalty, but held that to be “a consequence of the abrogation of privilege effected by” the ASIC Act.

However, his Honour also noted that it remained to be seen what use the Lead Plaintiff might make of the transcripts. Accordingly, his Honour granted access, although confining it for the time being to the Lead Plaintiff’s lawyers.

THE SUBPOENA ‘SIDE-STEP’

Stevenson J also made it clear that the Court’s power to issue a subpoena (and ASIC’s obligation to comply with it) are in no way affected by provisions in the ASIC Act relating to ASIC’s discretion to refuse access to transcripts. His Honour noted that a litigant could effectively ‘side step’ the process provided for under the ASIC Act.

The decision is significant for parties to existing litigation as its application opens opportunities (albeit strictly controlled by the Court) for parties to build their case by reference to evidence given without the protection of self-incrimination privilege.