ASIC v Rich

HIS HONOUR : ASIC seeks to tender 12 lever-arch folders of documents, which were exhibits to the Carter Report, an expert report held inadmissible by me in reasons for judgment published on 7 March 2005: ASIC v Rich [2005] NSWSC 149. It also proposes to tender a six-folder tender bundle.

The parties selected ten categories of documents from the Carter exhibits for initial tender. They hope that, the issues surrounding the tender of those documents having been thoroughly ventilated in argument, the court's decision will govern the destination of many other documents and, in that fashion, the process of decision-making on the admissibility of individual documents will be abbreviated. Subsequently, when ASIC provided additional evidence, the defendants withdrew their objection to the ninth category, leaving nine other categories in contention.

After publication of my reasons for judgment on the admissibility of the Carter Report, ASIC made an application (AS 56) for me to rule that my judgment was not applicable to certain parts of the Carter Report and its appendices on the ground that those parts contained calculations and analytical facts rather than expert opinion evidence. I dealt with ASIC's application, rejecting it, in ex tempore reasons for judgment delivered on 22 March 2005: ASIC v Rich [2005] NSWSC 256 (supplemented and corrected at [2005] NSWSC 296). At the same time, ASIC pressed the tender of certain evidence of Mr Carter other than the Carter Report, and I heard argument as to that material. The present reasons for judgment cover this evidence of Mr Carter. I was asked to deal with Mr Carter's evidence together with the document issues because, it was said, there are common questions about the exercise of the court's discretion under ss 135 and 136 of the Evidence Act.

The ten categories of documents were selected because, for the most part, they are included in ASIC's list of "Significant One.Tel Records" (AS 5), although one category of documents, liquidators' reports, is there because the documents are relevant to ASIC's claim for compensation. The 10 categories of documents, with references to their documentary sources, are as follows: 1. Business Plan Summaries (Carter Exhibits, vol A, pages 1 0001 - 1 0008) 2. Budgets (Digital and Fixed Wire) (Carter Exhibits, vol A, pages 1 0009 - 1 0039) 3. Trial Balances (Carter Exhibits, vol A, pages 2 0001 - 2 0101) 4. Management Accounts (Fixed Wire) (Carter Exhibits, vol B, pages 3 0001 – 3 0106) 5. Bill Run Breakdown (Sample) (Carter Exhibits, vol D, pages 4 0021 - 4 0037) 6. Spreadsheet relating to Gross Margin (comparison.xls) (Carter Exhibits, vol D, pages 4 0055 and 4 0056) 7. Australian Collections Profile Summaries (Carter Exhibits, vol F, pages 8 0001 - 8 0015) 8. Ferrier Hodgson's Reports to Creditors (Carter Exhibits, vol K, pages 22 0001 – 22 0148) 9. E-mail from Randall to McLean relating to cash flow accruals, attaching spreadsheet regarding new assumptions (extract only) (Merged Tender Bundle pages 1051 - 1060; the objection to this category was subsequently withdrawn) 10. Butcher's paper presentation relating to billing (Exhibit 3 to Mr Kleemann's affidavit dated 26 July 2004).

The issues I have been invited to address include some generally applicable legal issues, and also some generally applicable issues concerning the exercise of the court's discretion to reject evidence under s 135 or to limit its use under s 136 of the Evidence Act. Then there are issues dealing with the specifics of the nine categories of documents.

I have structured this judgment in the following fashion: · first, I shall give a brief general description of ASIC's evidence regarding One.Tel's I:/Drive and properties pages, as a prelude to the provenance evidence for the nine categories of documents; · secondly, I shall describe each of the categories of documents, their relevance according to ASIC's submissions and ASIC's provenance evidence for that category; · thirdly, I shall deal with issues and submissions about the legal materials, under the headings: authentication of documents; ways of adducing documentary evidence; relevance; the hearsay rule; admissibility of business records; opinion evidence; admissibility under s 1305 of the Corporations Act; and the court's discretions under ss 135 and 136 of the Evidence Act; · this will involve applying the principles ascertained under each heading to each of the nine categories of documents and reaching a conclusion in each case; · fourthly, I shall describe and deal with the admissibility of the additional evidence of Mr Carter that ASIC wishes to adduce, and discretionary considerations relating to it.

As will be seen, the issues to be determined are complex. They have been addressed in the hearing over the period from 8 March to 6 April 2005 (with breaks for Easter and for other reasons). Although the parties rely on their oral submissions made during that time, I have received written submissions as well, many of them short notes.

Following the practice I have developed in other judgments in this case, I shall list the written submissions in order to confirm that I have taken them into account: · AS 49 Defendants' initial selection of documents re admissibility · AS 50 ASIC's main provenance affidavits (lever arch file) · AS 51 ASIC's statement with respect to 10 sample documents · AS 52 ASIC's note concerning 4 0055 and 4 0056 · AS 53 ASIC's submission in response to defendants' submissions re s 1305 · AS 54 ASIC's submission re tender of business records · AS 55 ASIC's statement of particular representations relied upon for category 8 (shorter document) · AS 56 Facsimile enclosing ASIC's letter and two attachments regarding Carter evidence · AS 57 ASIC's submission in reply to DS 50 · AS 58 ASIC's response to DS 53 concerning tender of business records · AS 59 ASIC's references in addition to those set out in DS 54, 55, 56 and 57 · AS 60 ASIC's statement of particular representations relied upon for category 8 (larger document) · AS 61 ASIC's submission in reply to DS 58 · AS 62 ASIC's submission in reply to DS 59 · AS 63 ASIC's reply regarding Exhibit MFI 76 · [AS 64 is ASIC's draft order under s 136 in respect of exhibits to Mr Breckenridge's affidavits of 22 and 24 March 2005, and is not a submission document] · AS 65 ASIC's note on cases relied upon by the defendants on 6 April 2005 · AS 66 ASIC's response to DS 61 concerning the defendants' "camp" · AS 67 ASIC's submission in reply to DS 60 concerning representations relied on liquidators' reports · AS 68 ASIC's schedule of references re tender of documents · DS 47 Defendants' submission on s 1305 · DS 48 Defendants' overview submission concerning tender of business records · DS 49 Document headed "Document objections" · DS 50 Defendants' submission in reply to ASIC's statement with respect to 10 sample documents · DS 51 Defendants' submission in reply to ASIC's submissions re s 1305 · DS 52 Defendants' submission in reply to ASIC's note re 4 0055 and 4 0056 · DS 53 Defendants' reply to ASIC's submissions re tender of business records · DS 54 Schedule of transcript references · DS 55 Schedule of references to assistance provided to ASIC by former employees of One.Tel · DS 56 Defendants' summary of selective evidence references re trial balances · DS 57 Defendants' summary of selective evidence references re "to-be-billed" reports · DS 58 Defendants' brief overall response to ASIC's submission of 24 March · DS 59 Defendants' submission on page 4 0021 · DS 60 Defendants' submission re ASIC's tender of representations re liquidators' reports responding to AS 60 · DS 61 Defendants' note re ASIC's assertion that Mr Holmes etc are in defendants' camp · DS 62 Defendants' further submission in reply to AS 67. 1. The finance directory of the I:/Drive, and "properties pages"

ASIC relied on a description of One.Tel's computer system provided by Adrian Bannister, in his affidavit made on 28 April 2004. Mr Bannister was a senior database administrator at One.Tel during the period from September 1998 to October 2001, responsible for planning, installation and support of major internal computer systems. He said that One.Tel used the Adept accounting system for financial accounting, substantially customised for One.Tel's needs. It contained all ledgers, and detailed financial data was summarised and then purged from the system during normal month-end processing. He gave evidence explaining how data could be accessed in Adept, by using a username and password recognised by the system, and he explained how to access the general ledger, an aged creditors report, an aged debtors report and they a list of unreleased cheques. He explained that One.Tel used a separate disk drive on the file server to store administration and management files. The disk drive was referred to within the organisation as the I:/Drive or the data drive.

Other evidence about the I:/Drive was provided by Graham Henley and Matthew Brotherson. Mr Henley is a forensic accounting expert who assisted the Australian Federal Police and ASIC in the execution of a search warrant at the premises of One.Tel on 1 June 2001. Mr Brotherson was a systems administrator employed by One.Tel. During the course of execution of the search warrant, Mr Henley and Mr Brotherson had a conversation in which Mr Brotherson told Mr Henley that the main network storage location was the I:/Drive, which was broken down into separate directories, and that the directories relevant to the execution of the search warrant were probably the finance, administration and corporate counsel directories. Mr Henley asked Mr Brotherson to print the screen which showed the I:/Drive directories, and he later copied the three directories to a hard drive.

Gabriel Farago, a solicitor and director of Ferrier Hodgson, gave evidence that Ferrier Hodgson retained KPMG to assist with the extraction, analysis and preservation of the data contained on the various computer systems operated by the One.Tel Group. KPMG produced two reports, dated October 2001 and January 2002 respectively. In about October 2001, KPMG delivered to Ferrier Hodgson some semi-desktop computers containing the electronic data extracted and preserved by KPMG as explained in their reports. Mr Farago arranged for a complete copy of all the files located in the I:/Drive, which was part of the data KPMG had captured. He delivered to ASIC a hard drive containing a copy of the I:/Drive data, on 7 July 2003. This copy of the I:/Drive has been referred to in submissions as "the Ferriers I:/Drive".

The finance directory of the I:/Drive contains nearly 25,000 files. Counsel demonstrated the operation of the I:/Drive in court. The finance directory is structured so that, once a finance spreadsheet is displayed, a figure appearing in a particular cell on the displayed page may be linked to another document, discovered by highlighting the cell. The structure makes it plausible to infer that a document identified in this way is some form of explanation of the figure highlighted (for example, a worksheet).

The documents tendered by ASIC include "properties pages", about which there has been contention. In his affidavit made on 13 September 2004, Mr Bannister briefly explained properties pages. He said that Microsoft Windows automatically generates and updates "properties" information for computer files created using Windows applications such as Microsoft Excel and Microsoft Word (which were used by One.Tel staff). He continued: "The 'properties' information includes time and date 'stamps' which automatically record when a particular file is created, modified, accessed or printed by reference to the setting of the relevant computer's internal electronic clock. The date a file is 'created' refers to the date that a file is saved under a particular name or the date that a particular file is copied. Thus the file properties may show that a file was 'created' after it was 'last modified'. A user may view the 'properties' of a file by navigating to a 'properties' page for that file…".

In the tendered documents ASIC usually provides two properties pages, one being the "General" page and the other being the "Statistics" page. The copies of the properties pages provided by ASIC appear to be superimposed on the first page of the document to which they relate, and this makes it plausible to infer that the properties page relates to that document. But sometimes this correlation does not appear to be established, or the properties page is illegible.

In the case of page 4 0055, a different kind of property page was produced, entitled "Summary", which identified the "author". Mr Bannister did not explain whether the "author" is the person who "created" the document or "modified" it or "last saved" it.

ASIC submitted that the properties pages are an integral part of each document in electronic form, but Mr Bannister's evidence does not go so far. What he suggests is that one "navigates" from the file to the properties pages. I infer that if one carries out the navigation correctly, the properties pages that are reached are the properties pages for the file from which one launched the navigation.

It seems to me that, although the "created" and "author" boxes are problematic for reasons given, and the "modified" box is unhelpful to the extent that the author of the modifications and the nature and content of the modifications are not indicated by it, the "last saved by" box is some utility for documentary tender purposes, provided there is evidence linking the properties page containing that box with the document in question. I have taken it into account in those cases where the link between the properties page and the document is apparent. But the prerequisites for tender and admissibility can be established in other ways, where the properties pages do not assist or have not been tendered.

After considerable argument had been heard about the properties pages, ASIC informed the court (in AS 58) that it would not press the tender of the properties pages except for categories 4 and 6, where they are said to have relevance to the dating of the documents. I have nevertheless included descriptions of all the properties pages in this judgment, because ASIC informed the court that they are an integral part of the documents and the defendants based some submissions attacking the documents on their properties pages. 2. Categories 1 and 2 - Business Plan Summaries and Budgets

The documents described in submissions as "business plan summaries" comprise the following: · a single page document (1 0001) headed "Business Plan Summary - Update September 2000", which gives figures for the years 00/01 and 01/02 for tolling customers, revenue, EBITDA, EBIT and cash required/generated, for the Group and then separately for three components comprising, respectively, Australia (GSM SP, Fixed Wire, Internet and One.Card), Australia (GSM 1800), and Europe and HK; · a single page (1 0002) with the same heading and the subheading "Australia - GSM SP, Fixed Wire, One.Net & One.Card", breaking down the figures in the first page, into GSM SP, Fixed Wire, One.Net and One.Card; · two single page tables (1 0003 and 1 0004) headed "Cashflow" for the respective years 2000/2001 and 2001/2002, giving figures for Australia, International and GSM on a monthly basis, and their annual totals, the totals corresponding with those shown on the respective cash lines on page 1 0001; · two pages (1 0005 and 1 0006), the first headed "One.Tel Ltd 00/01 - Budget" and the second headed "OneTel Budget", presenting monthly budget figures from July 2000 to June 2001 and a total (and half-year totals on the second page), the first page relating to revenue, digital cost of acquisition, fixed wire cost of acquisition, interconnect, OPEX and EBITDA, and the second page repeating the EBITDA figures, and then giving figures for depreciation, amortisation and EBIT; · two pages (1 007 and 1 008), the first headed "One.Tel Ltd 01/02 - Budget" and the second headed "OneTel Budget" setting out figures in the same categories for the period from July 2001 to June 2002.

Pages 1 0001-1 0004 do not have any computer file path on them but they each bear the date 27/09/00, with figures that appear to signify different times on that day. There are no other markings, except for the ASIC barcodes. The four pages from 1 0005 to 1 0008 each bear a date, namely 21/09/00 (and in the case of 1 0006 and 1 0008 there is a time as well), while pages 1 0005 and 1 0007 display what appears to be a file path (the same in each case), namely "updatedbusplan.april2000v2.REAL THING".

The index to the Carter Exhibits (MFI 75) describes pages 1 0001 and 1 0002 as "Sept 2000 Business Plan budgeted summary for 2001 and 2002 FYs", and the descriptions for the later pages are similar, except that for pages 1 0003 and 1 0004 it is "budgeted cashflow", and for pages 1 0005 to 1 0008 it is "budgeted profit and loss".

ASIC contended that pages 1 0005 to 1 0008 are a break-down of some of the information appearing in the summary pages at 1 0001-2. That appears to be plausible. The tables at 1 0005 to 1 0008 appear, from the categories they display, to relate to the Australian digital and fixed wire business, and one finds correspondences between the total figures for revenue, EBITDA and EBIT in those tables, and the figures given for those categories at 1 0002 (where figures are rounded up to the nearest $m) for both the 2000/01 and 2001/02 years.

The documents described in submissions as "budgets" comprise the following: · two pages and a properties page (1 0009 to 1 0011), headed "Profit and Loss - Australia (Wireline and SP)", without any legible footer, giving figures (broken down into subcategories) in the general categories of revenue, cost of goods sold and operating expenditure; and then figures for EBITDA, depreciation, amortisation, EBIT, taxes, interest and net profit; and then "EBITDA Real Thing" and "Variance from New plan"; those figures are given for each month from July 2000 to June 2001, with the months from July 2000 to November 2000 being headed "Actuals", the month of December 2000 being headed "FLASH", and the months from January 2001 to June 2001 being headed "Fcast", suggesting that the document was current as at late December 2000 and January 2001; · ten pages and a properties page (1 0012 to 1 0022), the first page bearing the heading "Key Drivers & Assumptions – Wireline - Australia" with other headings on later pages, bearing the date 16/04/02 and the time 12:59, sequentially numbered from 1 to 10 and with the footer "Australian wireline and SP uplift-final.xls wireline", presenting financial information for each month from July 2000 to June 2001, with the first four months headed "Actual", both November and December 2000 headed "flash", and the months from January to June 2001 headed "Budget"; · nine pages and a properties page (1 0023 to 1 0032), the first page bearing the heading "Key Assumptions - Optus Service Provider" with other headings on later pages, bearing the date 16/04/02 and the time 13:31, sequentially numbered from 1 to 9 and with the footer "Australian wireline and SP uplift-final.xls service provider", presenting financial information for each month from July 2000 to June 2001, with the heading for the first four months being "Actual" and the heading for the months from December 2000 to June 2001 being "Budget" (the heading for November 2000 is obscured); · six pages and a properties page (1 0033 to 1 0039), the first page apparently headed "CLEC Business (not included in Wireline or SP)" with other headings on later pages, bearing the date 16/04/02 and the time 13:25, sequentially numbered from 1 to 6 with the footer "Australian wireline and SP uplift-final.xls Calculations", presenting financial information for each month from July 2000 to June 2001 with the heading for the first four months being "Actuals" and for the remaining months being "Budget".

The first of these (1 0009 to 1 0011) is described in the Index to the Carter Exhibits as "Revised budgeted P&L for 2001 FY 'Profit & Loss'". The second (1 0012 to 1 0022) has the same description except it is "wireline" rather than "Profit & Loss". The third (1 0023 to 1 0032) is the same except it is "Service Provider" rather than "Profit & Loss", and the fourth (1 0033 to 1 0039) is the same except that it is "Calculations".

The properties pages of these documents bear no obvious correlation with the documents, except in the case of 1 0033 to 1 0039. In each case the entry for "last saved by" is "tholmes".

Page 1 0009 appears to have been prepared in early January 2001 (since it includes "flash for December"). The total on the second last line, "EBITDA Real Thing" for the year to June 2001 for Australia (Wireline and SP), is $14,411,918. This is the same figure as in the document at 1 0005 and, indeed, each of the individual monthly EBITDA figures is the same. This, in turn, suggests that the document at 1 0009 is a revised budget.

ASIC will contend that this was indeed a revised budget, which was used for the preparation of the March 2001 board papers. There appears to be a measure of correlation between page 1 0009 and the March 2001 board papers. For example, in the March 2001 board papers (MTB, vol 1, page 253) the budget figure for One.Tel in the column "January/February Budget $M" is 4,103. At page 1 0009, the forecasts for January and February EBITDA, when added together, amount to $4,102,548.

ASIC will also contend (T 3521) that the budget figures were used in the preparation of the March 2001 and January 2001 flash reports. I was taken to an affidavit by Kevin Kwan of PwC made on 8 September 2004, where he described steps he took to navigate through the I:/Drive in order to reach working papers for the March flash report (the report itself is at MTB, vol 1, page 382). By using the I:/Drive, Mr Kwan was able to move through the finance directory to "management accounts 2001" and then the subdirectory "March 2001" to come to a spreadsheet entitled "FLASH-EOM.xls". When the cell containing a figure of $50.352 million for Australian revenue for March 2001 was highlighted, the screen referred to "Financials!C21-'Final 1'D12". Cell C21 in the "Financials" document was a March 2001 revenue figure of $62.513 million, which when highlighted referred to "Word!G8".

Cell G8 in the Word document was the same figure of $62.513 million, adjacent to which was a breakdown of that figure into components for One.Tel, One.Card, One.Net and GSM 1800. The figure for One.Tel was $45.174 million. If that is added to the figures for One.Card and One.Net, the total for those three items is $50.352 million, the Australian revenue figure in the flash report. There was an additional figure of $12.161 million for GSM 1800, making up the total figure of $62.513 million. So it appears plausible to say that the March flash report was prepared on the basis that the Australian revenue for One.Tel would be $45.174 million.

When the One.Tel Australian revenue figure of $45.174 million was highlighted, the screen referred to "+I8 - 5000000". Cell I8 was the figure $50.174 million for One.Tel revenue under the heading "C/Mth Budget". When that cell was highlighted the screen referred to "Budgets!B6". The cell B6 is the "current month" figure for March 2001 of $50.174 million, adjacent to which are the monthly revenue budgets (rounded up) appearing at page 1 0009. On the face of it there appears to be a correlation between the March flash report Australian revenue and the revised budget Australian revenue for March, the correlation being that the flash report figure is the budget figure with the simple subtraction of $5 million.

As to the January flash report (MTB page 1379B), ASIC referred (at T 3531) to a working paper lying behind the January flash report (the paper is in the Carter Exhibits, vol J, page 19 0092), which gives the Australian revenue figure for One.Tel as $49.904 million (rounded up). The forecast Australian revenue figure for One.Tel for January 2001 on page 1 0009 is $49,903,708. In the January flash report, unlike the March report, there was no deduction of $5 million and ASIC will contend there was a straight utilisation of the budget figure. 2.1 Relevance

ASIC submitted (T 3440ff) that the business plan summaries and budgets are relevant to its case in three ways.

First, it submitted that they are relevant to its case concerning the two statements made by One.Tel to the market, in February and April 2001 respectively. The statement made on 27 February said that "One.Tel is focused and on track to becoming cash positive as forecast by June 2001". According to ASIC, the business plan summaries and budgets indicate when it was expected, as at the time of their preparation, that the company would become cash positive, and they assist in assessing whether, on 27 February, the company was in fact on track to becoming cash positive.

The statement made on 4 April said that the company was "tracking very well against forecasts that were initially made by management in August 2000", and was fulfilling the promises made to shareholders "to turn the business cash-positive and have a cash balance of $75m by 30 June 2001". ASIC's Fourth Further Amended Statement of Claim ("the Amended Statement of Claim") alleges (para 46) that the forecasts referred to in the announcement to the market came to be contained in the September business plan presented to the board meeting of 28 September 2000, and it alleges that, as at 4 April 2001 and at all times thereafter until 17 May, there was no reasonable factual basis for saying that One.Tel was tracking very well against those forecasts. ASIC said (T 3442-3) that the first four pages of the business plan summaries are the forecasts, the substance of which was presented to the September board meeting (as alleged at paras S42 and S43 of the Amended Statement of Claim). ASIC took the court to the September board papers (MTB, vol 1, page 3) and submitted that the figures presented to the board were in substance same as those in the business plan summaries, although there were minor variations.

Secondly, ASIC submitted that the budgets and business plan summaries are relevant to its allegation that the actual position of One.Tel differed from various forecasts, in the manner pleaded in paragraph S12 of the Amended Statement of Claim.

Thirdly, it submitted that the budgets and business plan summaries are relevant to an objective assessment of the company's financial position (T 3450). There were two limbs to this submission. First, ASIC said that a comparison of budgets and business plan summaries, showing expected results, with actual results shows that over a period of time, the company had a severely deteriorating financial position. Reference was made to paragraphs S44B-D of the Amended Statement of Claim, where it is alleged that significant contributors to One.Tel's EBITDA losses included decreases in gross margin arising from revenue and gross margin percentage shortfalls against budget, particularly in the digital and fixed-wire business unit of the Australian operations and in the international operations, and increases in operating expenses over budget in the digital and fixed wire business unit. Secondly, the budgets and business plan summaries are relevant to the assessment of the likely cash usage of the company in the period from May to December 2001, a matter relevant to the assessment of the company's financial position in the period from January to May 2001.

Fourthly, ASIC submitted that the budgets and business plan summaries are relevant to the allegation in the Amended Statement of Claim, at paragraph S46, that the flash reports sent to directors did not disclose that the figures for the Australian (ex-Next Generation) operations with respect to the digital and fixed-wire business were drawn from modified budget data and did not reflect actual financial performance of the business unit. 2.2 Provenance

The budget documents at 1 0009 to 1 0038 were located on the finance directory of the Ferriers I:/Drive. According to the Carter Exhibits index, their file path through the finance directory is through "Business Plans 01 and 02", to "Australian wireline and SP uplift-final.xls". The provenance of the business plan summaries at 1 0001 to 1 0008 is less straightforward.

Mr Farago of Ferrier Hodgson gave evidence, in his affidavit made on 3 May 2004, that the liquidators of One.Tel, Mr Sherman and Mr Walker, obtained the business plan summaries (1 0001 to 1 0008) from Piper Alderman, solicitors acting for Mr Silbermann and Mr Beck, in August 2001. Piper Alderman invited the liquidators to inspect One.Tel documents held by them, and inspection took place on 14 August 2001. He said the liquidators then requested a complete set of the documents inspected, and these were provided. Exhibited to Mr Farago's affidavit was a table listing One.Tel documents received and reviewed by Ferrier Hodgson. Pages 1 0001 to 1 0008 of the Carter Exhibits, also identified by their ASIC barcode numbers, appear in the list with a document location that identifies Piper Alderman. Mr Farago's evidence is that the documents so described were sourced from the documents provided by Piper Alderman to Ferrier Hodgson in August 2001.

Copies of documents at 1 0001 to 1 0008 were also produced to ASIC by Piper Alderman pursuant to a notice issued to Mr Silbermann under s 33 of the ASIC Law, according to an affidavit by Kieran Breckenridge, a solicitor seconded to ASIC, made on 22 March 2005. They were produced in a folder of documents labelled "One.Tel Business Plans 2001-2002". 3. Category 3 - Trial Balances

ASIC has tendered a bundle of documents at 2 0001-2 0101 that purport to be trial balances. Each of them is headed "TRIAL BALANCE AS AT" and then an end-of-month date is given (for June 2000, the date is incorrectly given as 31 June). In some cases two documents with somewhat different figures identify the same month. In some of them the figures are presented in A4 style, while in others they are laid out horizontally in spreadsheet style.

The documents may be identified for present purposes by their page numbers in the Carter Exhibits and their month-end dates, as follows: · 2 0001-2 0008: 31 March 2000 (A4 version with 7 numbered pages) · 2 0009-2 0014: 31 May 2000 (A4 version with 5 numbered pages) · 2 0015-2 0019: 31 June 2000 (A4 version with 4 numbered pages) · 2 0020-2 0028: 31 June 2000 (spreadsheet version of 8 unnumbered pages) · 2 0029-2 0037: 30 September 2000 (spreadsheet version of 8 unnumbered pages) · 2 0038-2 0046: 30 November 2000 (spreadsheet version of 8 unnumbered pages) · 2 0047-2 0055: 31 December 2000 (spreadsheet version of 8 unnumbered pages) · 2 0056-2 0058f: 31 January 2001 (spreadsheet version of 8 unnumbered pages) · 2 0059-2 0062e: 28 February 2001 (spreadsheet version of 8 unnumbered pages) · 2 0063-2 0071: 31 March 2000 (spreadsheet version of 8 unnumbered pages) · 2 0072-2 0079: 31 March 2001 (spreadsheet version of 8 unnumbered pages) · 2 0080-2 0087: 30 April 2001 (spreadsheet version of 8 unnumbered pages) · 2 0088-2 0094b: 31 May 2001 (spreadsheet version of 8 unnumbered pages) · 2 0095-2 0101: 31 May 2001 (spreadsheet version of 7 unnumbered pages)

ASIC claims that the trial balance labelled as 31 March 2000 is in fact for the month of April 2000. It will be seen that there are no trial balances for July, August and October 2000 and there appear to be two versions for each of June 2000, March 2001, and May 2001. The defendants referred (in DS 56) to evidence, particularly by Mr Reynolds, which indicates that there were two sets of trial balances for March, April and May 2001 (T 1134), and evidence by Mr Carter that the dates of some of the trial balances may not be correct (T 2693-2694).

There are properties pages for the trial balances for 31 March 2000, 31 May 2000, 31 June 2000 (both versions), 30 September 2000, 30 November 2000, and 31 December 2000 (both versions), but not for the other months. They appear to be correlated to the documents in the manner alleged by ASIC, except that there appears to be a discrepancy in dates for the document at 2 0020-2 0028, as the document is said to be the trial balance as at "31 June 2000" and the properties pages identify a document as at 31 July 2000. The properties pages appear to relate to a version designated "TB adept", a version that the defendants printed out and tendered for the purposes of the application. It is headed "TRIAL BALANCE AS AT 31-Jul-00". Some of the figures are different (the defendants submitted (T 3770) that 34 of the figures were different) and the totals on the defendants' tendered document are different from the totals on the document tendered by ASIC.

In oral submissions the defendants took me to tabs at the bottom of properties pages, which suggested that there were other versions of the trial balances not included in ASIC's tender (T 3769ff, noting in particular the reference to "TB final" at T 3774).

The "last saved by" line of the properties boxes tendered by ASIC is "tholmes", in all except two cases ("pminney" at 2 0008 and "nnassif" at 2 0071). The trial balances for 31 March 2000 and 31 May 2000 have what appears to be a computer file path at the top of the document adjacent to the heading, though apparently not through the I:/Drive: "C:\unzipped\TRIAL BALANCEpm2\TRIAL BALANCEpm2.xls]DUMP".

Only three of the documents have footers, which are as follows: 31 March 2000 - TRIAL BALANCE 2.xls, TB 31 May 2000 - TRIAL BALANCE a.xls, TB 31 June 2000 (A4 version)- TRIAL BALANCE June Ver 2.xls TB adj 3.1 Relevance

ASIC submitted that the trial balances are relevant in four ways. First, the trial balances are part of the material used in calculating the appropriate provision for bad or doubtful debts. This is because, when taken with other documents, they permit one to discern what the recent collection record of the company was. By looking at trial balances and debtors' ledgers from 2000, one can ascertain how long on average it was taking the company to collect its debts and to what extent it was able to collect them. Secondly, the trial balances are relevant to ascertaining the actual provisions made from time to time for bad or doubtful debts. Thirdly, they are relevant to ascertaining the liquidity position of the company at various points in time. Fourthly, the trial balances for the year 2001 are relevant to determining to what extent there was a change in realisable value of the company during that year, a matter that goes to the calculation of damages.

ASIC has informed the court (in AS 51) that it does not contend that the trial balance appearing at 2 0063-2 0071 accurately states the net loss for the month of March 2001, because the amount stated ($191,357,327.16) appears to fail to take into account accrued income of approximately $35.7 million. ASIC relies on the adjusted trial balance at 2 0072-2 0079 for that purpose. 3.2 Provenance

These documents are sourced in the Ferrier's I:/Drive, in the manner disclosed in ASIC's index to the Carter Exhibits. The file path through the Ferrier's I:/Drive is different depending upon whether the document relates to 2000 or 2001. In the former case, the file path is through "Mgtact 2000" to a specified month or "year end" as appropriate (for example, April 2000 for the document at 2 0001-2 0008), to a location which in most cases uses the words "TRIAL BALANCE", followed by symbols such as "2.xls" or "a.xls", although there are other final locations such as "Consolidation September 00.xls" or "October TV.xls". In the latter case, the file path is through "Tim" and "Administration" to various locations identified as "BS" or "Balance Sheet" for a stated month, although the May documents identify "RATA" as an intermediate step. 4. Category 4 - Management Accounts (Fixed Wire)

ASIC has tendered documents at 3 0001-3 0106 that purport to be management accounts for One.Tel for the months from June 2000 to May 2001. Each document is headed "MANAGEMENT ACCOUNTS - ONE.TEL P/L" and then, on a different line, "For the Month Ended" followed by the date of the last day of the month in question. In some cases two documents with somewhat different figures identify the same month. They are all in spreadsheet style rather than A4 style. Most of them are profit and loss statements (headed as such), presenting revenue by business segments, costs of goods sold, contributions by business segments, gross margin, operating expenses, profit/(loss) before interest and tax and depreciation, net profit/(loss) before tax, net profit/(loss) after tax, and net profit/(loss) after tax and dividend. Actual and budget figures are given for the month and year to date. However, some give only operating expenses.

The documents may be identified for present purposes by their page numbers in the Carter Exhibits and their month-end dates, and may be described as follows: · 3 0001-3 0004: profit and loss statement for 30 June 2000 (three numbered pages plus properties page, with footer "MgtAccount One.Tel ac.XLS, Otel P&L"); · 3 0005-3 0009: profit and loss statement, probably for 31 July 2000 although the headings and subheadings are inconsistent ( three numbered pages plus a cells page and an illegible properties page, with no footer); · 3 0010-3 0011: operating expenses, probably for 31 July 2000 although the headings and subheadings are inconsistent (a single page and an illegible properties page, with no footer); · 3 0012-3 0016: profit and loss statement 31 August 2000 (three unnumbered pages plus a cells page and a properties page, with no footer); · 3 0017-3 0019: operating expenses 31 August 2000 (a single page, a cells page and an illegible properties page, with no footer); · 3 0020-3 0028: profit and loss statement 30 September 2000 (four unnumbered spreadsheet pages presented on eight pages, plus an illegible properties page, with no footer); · 3 0029-3 0030: operating expenses 30 September 2000 (a single page and an illegible properties page, with no footer); · 3 0031-3 0039: profit and loss statement 31 October 2000 (four unnumbered spreadsheet pages presented on eight pages, plus an illegible properties page, with no footer); · 3 0040-3 0042: operating expenses 31 October 2000 (two unnumbered pages plus an illegible properties page, with no footer); · 3 0043-3 0047: profit and loss statement 30 November 2000 (four unnumbered pages plus an illegible properties page, with no footer); · 3 0048-3 0051: operating expenses 30 November 2000 (two unnumbered pages plus a cells page and an illegible properties page, with no footer); · 3 0052-3 0060: profit and loss statement 31 December 2000 (four unnumbered spreadsheet pages presented on eight pages plus an illegible properties page, with no footer); · 3 0061-3 0063: operating expenses 31 December 2000 (two unnumbered pages plus an illegible properties page, with no footer); · 3 0064-3 0068: profit and loss statement 31 January 2001 (four unnumbered pages plus an illegible properties page, with no footer); · 3 0069-3 0072: operating expenses 31 January 2001 (two unnumbered pages plus a cells page and an illegible properties page, with a footer "OPEX - MgtAccount One.Tel.XLS"); · 3 0073-3 0081: profit and loss statement 28 February 2001 (four unnumbered spreadsheet pages presented on eight pages in A4 style, plus a properties page, with no footer); · 3 0082-3 0084: operating expenses 28 February 2001 (two unnumbered pages bearing the date 1/05/02 and the footer "OPEX - MgtAccount One.Tel.XLS", and a properties page); · 3 0085-3 0095: profit and loss statement 31 March 2001 (five unnumbered spreadsheet pages presented on 10 pages, plus a properties page, with no footer); · 3 0096-3 0098: operating expenses 31 March 2001 (there appear to be two versions of a two-page operating expenses document, and then an additional two-page version of the month, year-to-date and full-year figures only, each dated 25/05/02 and with the footer "OPEX - MgtAccount One.Tel.XLS", and a properties page; · 3 0099-3 0100: two single pages each headed "STATUTORY ACCOUNTS" and then "PROFIT & LOSS - CONSOLIDATED", for 31 March 2001 and 30 April 2001 respectively, each bearing the date 25/01/02 and slightly different times, with no footer; · 3 0101: single page headed "STATUTORY ACCOUNTS" and then "PROFIT & LOSS -" for 31 May 2001, with no date or footer; · 3 0102-3 0106: profit and loss statement 31 May 2001 and operating expenses 31 May 2001 (two unnumbered pages (partly illegible) with no footer for the profit and loss statement, and two pages for the operating expenses bearing the date 22/05/02 and the footer "OPEX - MgtAccount One.Tel.XLS", and a properties page).

In some cases the properties pages seem to be correlated with the documents, but there are some discrepancies (for the documents at 3 0073-3 0081 and 3 0082-3 0084). For each of the documents with properties pages, the entry for "last saved by" is "tholmes", except for 3 0016 (nadeenj).

There was a substantial amount of evidence about management accounts in the cross-examination of Ms Reynolds and Mr Carter, especially the former, which has been summarised by the defendants in DS 54. Ms Reynolds indicated, for example, that there was an early version of the April management accounts on the I:/Drive but it was substantially incomplete: T 1132-1133, 1135. 4.1 Relevance

ASIC submitted that the management accounts are relevant to show the type of information that was available to management, on a regular basis in respect of each month. Secondly, the management accounts for 2001 show what the actual financial position was in the months of particular focus in this case, while the management accounts for 2000 are relevant to the trend of performance and place the 2001 management accounts in context. ASIC will contend that the management accounts show a consistently deteriorating financial performance. Thirdly, it is necessary to look at the actual financial performance on a month-by-month basis to form a view about the likely cash requirements for the remainder of the calendar year. Fourthly, there are specific allegations in the Amended Statement of Claim as to the misleading nature of the flash reports and their departure from actual results: Schedule, paras S44D to 46A. There are also allegations about the inaccuracy of the March board papers, bearing in mind the actual results (para S47ff), and allegations concerning EBITDA losses which draw on actual results revealed in the management accounts (paras S39 to 41). 4.2 Provenance

These documents are sourced in the Ferrier's I:/Drive. According to the index to the Carter Exhibits, in most cases the file path through the finance directory is through "Mgtact2001", and a stated month, to "MgtAccount One.Tel.xls" or some close variant of that title. However, from March to May 2001 onwards (except for 3 0102-3 0106) the file path is through "Tim" and "Administration" to "BS" with a stated month. 5. Category 5 - Bill Run Breakdown (Sample)

The document tendered by ASIC is at 4 0021-4 0037. It has 17 numbered pages, with the footer on each page, "To be billed Mar01.xls MAR542". The document has no general heading. It comprises 11 columns of words, letters and (principally) figures, with totals at various points. The column headings appear only on the first page. They are: Batch, SRC, File, Call#, Call Value, Charge#, Charge Value, Charge Credit, Calls Credit, Total Value and Total Cost.

Ms Reynolds gave evidence that a discussion about how a "to be billed" report was meant to operate probably came up in conversations with Ms Ashley: T 1002. 5.1 Relevance

Senior counsel for ASIC told the court that the relevance of this document was connected to some evidence ASIC proposed to read in an affidavit by Samantha Randall made on 26 July 2004. He informed the court that Ms Randall would provide a description of One.Tel's billing procedures, explaining that "bill run" was a term used within One.Tel for sending out a particular batch of bills to a particular subset of One.Tel customers, referable to the same day each month, and that the bill run cycle for each month was designated for those particular days in the month.

Ms Randall would give evidence that, in addition to preparing cash flow spreadsheets on a daily basis, she prepared and updated daily billing run inflow projections called "bill run spreadsheets". She would say she was responsible for inserting and updating both the forecast numbers and the actual numbers, and that she saved the documents electronically. She would say that the spreadsheet recorded the particular bill run cycle and the estimated time of receipt of bills by customers, and under the heading "billing run total" the forecast dollar value of the particular bill run. She would say that this information was obtained by her from the spreadsheet which, she understood, was prepared and updated by Elizabeth Ashley.

Senior counsel for ASIC drew attention to information in the bill run spreadsheet annexed to Ms Randall's affidavit (SJR 17), and submitted that the document provides relevant quantitative information about the extent of delays in billing, a topic raised in the pleadings and referred to in various places in the board minutes. Then he referred to the bill run breakdown to show that the total value billed on local calls for the period in question was less than the cost of the local call business, the local call business being a very substantial part of total billings. According to his submission, this document shows that the information was available, if sought, to ascertain what the mix of business was and what the profits and losses were on different types of business and whether they were changing. In his defence Mr Rich points to a change in the sales mix ("the traffic mix") as one of the matters that caused a shortage of cash, and ASIC alleges in the Amended Statement of Claim that he should have known about that change.

Additionally, ASIC alleges that the information in this document should have revealed to those concerned that the budget estimate, according to which the local call business would become positive near the beginning of 2001, would not be realised and losses were continuing.

The defendants criticised ASIC (DS 59) for what they said was a movement over time in ASIC's contentions about the relevance of the "to be billed" document. ASIC responded (AS 62) saying that the defendants' submission had misstated the position. It does not seem to me necessary to deal with this dispute in any detail, except to say that there do appear to be some plain links between 4 0021 and the summary document 4 0003, which add to the plausibility of ASIC's argument that the documents are at least potentially relevant to its contention that there was a ready means within One.Tel to monitor the sales mix from time to time. 5.2 Provenance

The document is sourced in the finance directory of the Ferrier's I:/Drive. The electronic version of the document is not called a "bill run breakdown", either on the face of the document or in the finance directory file path, where it appears as a Microsoft Excel worksheet which is described as "to be billed March 01.xls". The file path, according to the Carter Exhibits index, is through subfiles for "Mgtact2001", "March 01", "Revenue", and "To be billed Mar01.xls". 6. Category 6 - Spreadsheet relating to Gross Margin (comparison.xls)

The document tendered by ASIC is in the Carter Exhibits at 4 0055-4 0056, with a properties page at 4 0057, which appears to correlate with 4 0055. The "Summary" properties page identifies the author of 4 0055 as "tholmes". As explained below, I have decided to allow some evidence by Mr Carter, in his 29 November Reports, annexing a properties page for 4 0056, which identifies "ashleyl" adjacent to "last saved by". I shall refer to the two pages as a single document for convenience, but it is not clear that they were prepared as a single document.

The document at 4 0055-4 0056 is in spreadsheet style without any heading, but both pages have the footer "Comparison.xls". Nothing on the face of either page identifies the year to which the figures relate. There are some gaps on each page, suggesting that they might be incomplete.

4 0055 has six vertical columns of figures under three headings, "Bgt", "Liz" and "Mgt", in each case subdivided into "Jan" and "Feb". 4 0056 also has six columns of figures, but there are only two main headings, "Bgt" and "Liz", subdivided into three months each, namely May, Jan and Feb.

On each page, the figures entered in the vertical columns are identified by descriptions set out in a column to their left. However, there is a line of figures in 4 0055, and four rows of figures in 4 0056, that do not have any such description. On page 4 0056 there is a description "Traffic weighting (revenues)" for which there are no adjacent figures, and there are three separate lines for "Telstra" and two separate lines for "Other carriers". One of the descriptions at page 4 0056 is "ndd/iddf2m" with no other explanation. On page 4 0055 one of the lines of figures, described as "Variable Gross margin", appears to be broken down into seven other descriptions relating to such matters as "Gross Margin % Switch" and "Gross Margin % Preselect", and there are figures for all of these "sub-headings" in the "Bgt" columns but not in the "Liz" or "Mgt" columns, although there are entries in these columns for "Variable Gross margin".

On both pages the descriptions "Variable Gross margin", "ARPU", "Service numbers", "Revenue" and "CM" appear. In the case of "Variable Gross margin", the figures for Bgt Jan and Feb correspond, but the figures for Liz Jan and Feb are different from one another. The same is true of the "ARPU" line, the "Service numbers" line, the "Revenue" line and the "CM" line (although the CM figures at 4 0055 are for Jan only).

In my judgment on the Carter Report I said (at [201]) that comparison.xls was "deeply mysterious to the uninitiated". 6.1 Relevance

ASIC submitted that the topic of comparison.xls is the "traffic mix" mentioned in respect of category 5 above. ASIC's contention is that comparison.xls shows that a financial analyst working for One.Tel was able to form a view about the traffic mix at some time after the January and February results became available, that view being that the weighting to the less profitable or unprofitable Telstra business was significantly worse than had been budgeted for. This indicates that the means were there for others including the defendants to determine the traffic mix had they wished to do so. In his Defence (para S36(g)(v)) refers to a "shortfall in expected Gross margins in the fixed wire business of the Australian operations of the One.Tel Group which was undetected until April 2001…". According to ASIC, Mr Rich's reference to detection in April is consistent with a financial analyst having done an exercise such as this in April. But, in ASIC's view, an examination of comparison.xls shows what is involved in doing the exercise and will assist the court to form a view as to whether the exercise could have been done earlier, just as easily, if the defendants had chosen to arrange for it to be done. 6.2 Provenance

The two pages are located in the finance directory of the Ferrier's I:/Drive, in the file path "Liz", "Comparison.xls". I have decided to allow ASIC to read para 7 of Mr Carter's report dated 29 November 2004, for reasons given below (although I have rejected paras 10 and 11 of his report dated 21 December 2004). In para 7 Mr Carter said that, according to the properties page that he attached to his report, document 4 0056 was last modified by "ashleyl". He noted that the "Liz" subdirectory contains a large number of files that refer to a "Liz Ashley" and he gave an example (attached to his report) in which she is described as a financial analyst.

Mr Breckenridge gave evidence, in his affidavit of 24 March 2004, that a copy of 4 0056 was produced on behalf of Mr Silbermann in response to a notice issued to him under s 33 of the ASIC Law. It was part of a folder the spine of which bears Mr Silbermann's name, and the word "Presentations", which is crossed out. The copy of the document in that folder is stapled to two other pages. One of those pages is headed "Revenue sensitivity analysis based on actual costs and Theoretical margins", and displays figures for Telstra and other carriers as well as other matters. The other page is headed "One.Tel-Oct Management Accounts" with a subheading "Proof of Fixed Wire Gross Margin". That page has a footer, "I:\FINANCE\Tim\fixed wire margin - Oct.xls]Sheet1".

Mr Breckenridge's evidence on this matter does not assist me with respect to the provenance and nature of comparison.xls. There is nothing to indicate when the three pages were stapled together, or by whom. The pages have what appear to be other staple holes in the top left-hand corner. It would be unsafe to infer, in the absence of additional evidence, that they were stapled together by Mr Silbermann or that the other two pages relate to 4 0056.

ASIC submitted that the evidence is capable of giving rise to the conclusion that, at some time after the January and February results were available Elizabeth Ashley, a financial analyst in the employ of One.Tel, entered figures in the columns of comparison.xls headed "Liz" and put the budget figures in the columns headed "Bgt", and also the inference that those budget figures relate back to the budget figures at 1 0012-1 0021. There does seem to be a degree of correlation between 4 0055 and 1 0012-1 0021, summarised in detail in AS 52, which appears to be correct, although often, as ASIC says, the figures are only "comparable" rather than precisely the same, and some cannot be matched at all. The correspondences between the budget (and 4 0055) and the figures in 4 0056 are fewer.

Notwithstanding the limited level of correspondence, in my view ASIC's submission is plausible. The defendants drew attention to the fact that the "author" of one of the pages is identified in the properties page as Mr Holmes. But there is evidence that it was Ms Ashley rather than Mr Holmes who last modified the document, and it is plausible to contend that she, as a One.Tel financial analyst, entered the figures under the columns headed "Liz" and entered up some budget figures when they became available, having regard to the degree of correspondence between the two sets of figures. 7. Category 7 - Australian Collections Profile Summaries

There is a single page document at 8 0001 headed "Aged Debtors Summary as at 31/5/00" and a properties page for it at 8 0002 (last saved by "SUNNIEC"). Page 8 0001 gives figures that appear to be for current debtors and then debtors at 30-day intervals up to 330 days, for One.Tel, One.Net, One.Card and Wireline, and totals for each of those businesses, with a grand total of $74.16 8 million. The footer is "Aged debtors as at 310500.xls, Sheet 1". The file path on the finance directory appears to be through "Debtors" to that sub-file.

Additionally, ASIC's tender in this category comprises the following documents, with no properties pages: · 8 0003: single page spreadsheet with no footer headed "Profile Summary - Base Date: 30Jun2000", listing debtors for 90+ days, and for 30 day intervals from 30 to 360 days, according to various classifications such as "Billing Problem", "Final Demand", "Slow Payer" etc; · 8 0004-8 0006: spreadsheet headed "Collections" and "Profile Summary - Base Date: 03Jan2001" on three numbered pages each dated 4/01/01 with a footer visible only on the third page, " http://ausydkpi01/au/collmain.htm ", presenting debtors up to 180 days (possibly incomplete) by the same classifications as the first document, and three graphs; · 8 0007: single page spreadsheet with no footer headed "Profile Summary - Base Date: 31Jan2001", presenting debtors by same classifications, up to 330 days; · 8 0008-8 0010: spreadsheet headed "Collections" and "Profile Summary - Base Date: 02Feb2001" on three numbered pages each dated 2/02/01 with a footer on each page, " http://ausydkpi01/au/collmain.htm ", presenting debtors up to 180 days (possibly incomplete) by the same classifications as the first document, and three graphs; · 8 0011: single page spreadsheet with no footer headed "Profile Summary - Base Date: 19Feb2001", presenting debtors by same classifications, up to 360 days; · 8 0012: single page spreadsheet with no footer headed "Profile Summary - Base Date: 28Feb2001", presenting debtors by same classifications, up to 360 days, with the words "working copy" written above the table by hand; · 8 0013: single page spreadsheet headed "Collections Profile Summary - Base Date: 30Mar2001", with column headings obscured and showing only some of the classifications in the first document plus some different ones such as "Card Agents", with a partially secured footer "http://ausydkpi01/scripts/broker.[obscured]=prog.Invprofilesummary1.sas&_SERVICE=default&_debug=0&_Date=Drilldown30MAR"; · 8 0014: single page spreadsheet with no footer headed "Collections Profile Summary - Base Date: 30APR2001", presenting debtors by classifications similar to those used in the last-mentioned document, up to 360 days, with the words "working copy" written above the table by hand; · 8 0015: single page spreadsheet with no footer headed "Collections Profile Summary - Base Date: 28MAY2001", presenting debtors by same classifications as last-mentioned document, up to 360 days.

All except one of the documents (8 0013) have handwritten notes of some kind on them.

In his affidavit made on 3 March 2005, Craig Allsopp exhibited files which provided guidance to One.Tel staff as to the meaning and use of many of the categories of debtors used in the profile spreadsheets. 7.1 Relevance

ASIC submitted that these documents are relevant to doubtful debt calculation. The ascertainment of debtors from time to time, and their profile in terms of age of debts, is of relevance in assessing the appropriate provision for doubtful debts. The tendered documents arrange debtors in classifications which indicate such matters as whether a final demand had been made and whether legal action had been taken. 7.2 Provenance

Pages 8 0001 to 8 0002 are to be found on the Ferrier's I:/Drive through the file path identified above. The Carter Exhibits index claims that the provenance of 8 0007 and 8 0012 is through the documents obtained by Ferrier Hodgson from Piper Alderman, as described under the heading "Provenance" for 1 0001 to 1 0008 above. As to the remainder, Kim Morison, general counsel at Ernst & Young, provided an affidavit dated 25 March 2004 in which she identified various documents from the Carter Exhibits as forming part of the business records of Ernst & Young coming from identified sources, which she tabulated. The tabulated documents include the present ones. 8. Category 8 - Ferrier Hodgson's Reports to Creditors

There are several reports at 22 0001-22 0189 and MTB 1789-1870, some prepared when Mr Sherman and Mr Walker were administrators (that is, in the period from 29 May to 24 July 2001), and some after they became liquidators. The first set of reports are their reports to creditors as administrators, dated 12 July 2001, for One.Tel Ltd, One.Net Pty Ltd, One.Card Pty Ltd and One.Tel Shop Pty Ltd. There is a report to creditors sent to the committee of creditors dated 28 September 2001, and a second report to the committee of creditors dated 4 October 2001. Then there are annual reports to creditors made pursuant to s 508, dated 14 November 2002, 6 August 2003 and 29 June 2004 for One.Tel and various subsidiaries. I shall from time to time refer to all of these documents, compendiously, as "the liquidators' reports", although it must be remembered that the first set were prepared by them as administrators. 8.1 Relevance

ASIC submitted, first, that the liquidators' reports are evidence of One.Tel's recovery experience after the commencement of the administration, and that is relevant to the adequacy of provisioning for doubtful debts. Secondly, ASIC submitted that the reports are relevant to the question of realisable value of the business at the time the company went into administration. The reports contain estimates bearing on that matter. That, in turn, will be relevant to ASIC's case as to the position at earlier times, back to February 2001. Thirdly, in the report of 12 July 2001 there is a comment (Carter Exhibits, page 22 0036) relevant to the position in Europe, to the effect that the United Kingdom operations were marginally cash flow positive but the European subsidiaries were operating at a loss. Fourthly, the recoveries on sale of various parts of the business and the manner in which the liquidators sold those parts is said to be relevant to an assessment of realisable value and whether, in relation to those sales, any different position would have obtained if the sales had occurred, say, three months earlier.

As explained below, ASIC's explanation of the relevance of the liquidators' reports in oral submissions was substantially supplemented by AS 60, in which it particularised the representations in the reports upon which it would rely, and explained their specific relevance case-by-case. 8.2 Provenance

Copies of the liquidators' reports are in the Carter Exhibits. As I understand the position, it is appropriate for me to proceed for present purposes on the basis that these copies are true copies of the reports as distributed to creditors on about the dates they bear, and that they were provided to ASIC by Ferrier Hodgson, as the Carter Exhibits index asserts. 9. Category 9 - E-mail from Randall to McLean

This is an e-mail attaching a graph in the form of a bell curve. The bell curve indicates certain assumptions made as to when bills would be collected after they had been dispatched, showing that about 65% would be collected in the period from the second to the fourth weeks and 25% more in the ensuing eight weeks, giving rise to an inference (according to ASIC's case) that the final 10% was not expected to be collected, at least within any reasonable time. The document was therefore said to be some evidence bearing on the adequacy of provisioning for doubtful debts. It was also said to be relevant to the question whether there was, at the end of March 2001 a large amount capable of being billed but which had not been billed, comprising $40 million of unbilled data, of which $28 million was said to be about to be sent out (see One.Tel board papers, 30 March 2001, MTB 227, under heading "Cash"; Minutes of One.Tel board meeting of 30 May 2001, MTB 329B, under heading "Financial Summary"; affidavit of James Packer made 18 June 2002, para 61).

Ms Randall is a witness for ASIC but, at the time when the defendants objected to this document, she had not been asked to give any evidence about it. Subsequently, however, she was interviewed and a draft affidavit was prepared (marked MFI 77). Senior counsel for the defendants informed the court that, assuming Ms Randall made the affidavit as drafted, she had in that document identified or authenticated the category 9 e-mail and so the defendants would no longer press their objection to that document (T 3874). 10. Category 10 - Butcher's Paper Presentation relating to Billing

Senior counsel for ASIC informed the court that he proposed to read an affidavit by Geoffrey Kleemannn made on 27 July 2004. He said Mr Kleemann would say that on19 April 2001 he attended a meeting at the Sydney offices of Publishing and Broadcasting Ltd, also attended by Mr Beck, Mr Silbermann and Mr Hodgson of One.Tel, and that Mr Kleemann was accompanied by Darren Miller. Mr Kleemann says that during the course of the meeting, a presentation was given to him and Mr Miller on the subject of billing issues in One.Tel. He would say that during the course of the presentation, Mr Hodgson, Mr Beck or Mr Silbermann wrote on pieces of butcher's paper clipped to a board. He would exhibit to his affidavit copies of two pages of that butcher's paper.

I was taken to the two pages of butcher's paper. The first is divided into 12 boxes with various headings such as "Load", "Missing Services" and "Reports". The last box, headed "Total", has a figure of $5.9m for "Billed" and a figure of $12.9m for "To be billed", and those figures are added together to produce $18.8m. The second page has two vertical columns, headed "Billed" and "To be billed". To the left of those columns is a series of descriptions relating respectively to "Next Gen", "Fixed Line" and "One.Net". Some parts of the two columns have been completed but in some places there are question marks or dashes, some figures are circled, one is crossed out and some are connected by arrows. 10.1 Relevance

ASIC emphasised the totals in the box on the bottom right of the first page, "Billed $5.9m" and "To be billed $12.9m". ASIC said this was an indication of the billing position as at 19 April 2001, noting that it was a very much lower figure than the $40 million of unbilled data, alleged by Mr Beck and Mr Silbermann according to the evidence of Mr Packer and the minutes of the March board meeting, of which $28 million was said to be about to be sent out. 10.2 Provenance

The butcher's paper was exhibited to Mr Kleemann's affidavit, and ASIC says he will give evidence that he observed the creation of the pages at the meeting on 19 April 2001, which he attended. 11. Authentication of documents

The defendants contended that ASIC's provenance evidence fails to address a matter of fundamental importance in a case such as this, namely the authenticity of the nine categories of documents. According to this submission, documents do not prove themselves, and need to be authenticated, in effect as a condition precedent to relevance and to admissibility under the exception to the hearsay rule for business records. For these submissions, the defendants relied on National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309. ASIC claims that its provenance evidence, which identifies the source of the documents in the Ferriers I:/Drive or elsewhere, when considered with what is on the face of the documents themselves, is sufficient foundation for the tender of the documents, which can then be allowed to speak for themselves. It challenges Rusu to the extent that the case would impose any higher requirement of authentication.

In its written submission AS 51, ASIC invited the court to order that any one or more of the provisions of Part 2.2 or Part 3.2 of the Evidence Act do not apply in relation to evidence going to the authenticity of the documents tendered, on the ground that this "matter" is not genuinely in dispute. But it seems to me plain, having heard the submissions, that the defendants have an arguable case in the difficult area of authentication of documents, and it would not be appropriate to make any such order. 11.1 The Rusu decision

In Rusu , the plaintiff bank ("NAB") claimed that Ms Rusu stole a large sum of money from it, with assistance from Mr Mato. NAB alleged that after the alleged stealing they had significant amount of funds available to them compared with their resources prior to that time. It sought to recover its allegedly stolen money, and to assert charges and to obtain tracing orders over their assets.

Counsel for NAB tendered two pages (referred to in the judgment as "pages 25 and 26") of what appeared on their face to be a transaction history inquiry in relation to an account identified by number, but nothing on the face of the documents identified the bank or the customer. There was, however, evidence that pages 25 and 26 were in a bundle of documents produced by Advance Bank in response to a subpoena that specified bank records for a different period, and to the effect that Advance Bank's customer was Francis Mato. Mr Mato's full name was Peter Francis Mato. A solicitor for NAB made an affidavit attaching a schedule of payments, alleging that Mr Mato had paid a substantial sum of money into the Advance Bank account on the day after the alleged theft.

Bryson J rejected the tender. In doing so, he carefully distinguished between authentication of documents, relevance, the procedure for proving the contents of documents, and admissibility of representations in documents as business records notwithstanding the hearsay rule.

As to authentication, he said (at 312): "Before a business record or any other document is admitted in evidence it is obviously necessary that there should be an evidentiary basis for finding that it is what it purports to be. Documents are not ordinarily taken to prove themselves or accepted as what they purport to be; there are exceptions under the common law and under statute for public registers and for many kinds of documents when certified in various ways: and see the method of proof provided in some cases by s 170 and s 171 of the Evidence Act 1995. At the simplest, the authenticity of a document may be proved by the evidence of the person who made it or one of the persons who made it, or a person who was present when it was made, or in the case of a business record, a person who participates in the conduct of the business and compiled the document, or found it among the business' records, or can recognise it as one of the records of the business."

I read the last quoted sentence to mean that in the case of a business record, its authenticity may be proved, at the simplest, by the evidence of a person who satisfies two conditions: namely, first, that he or she participates in the conduct of the business; and secondly, that he or she compiled the document, or found it among the records of the business, or can recognise it as one of the records of the business. As I read the passage, his Honour did not have in mind proving the authenticity of the business record by the evidence of a person unconnected with the business who has found the document among the records of the business or can recognise it as a business record. But the sentence is intended to be illustrative rather than comprehensive, as demonstrated by the words "at the simplest".

Bryson J held (at 313) that it was necessary to establish by evidence, other than the documents themselves, that pages 25 and 26 were a bank statement, that they were a statement of Advance Bank, and that the account to which they referred was an account of Mr Mato. He rejected the idea (at 315) that under the Evidence Act, the authenticity of documents tendered in evidence could be determined simply on the basis of the form and content of the document or on that basis taken with information about the source from which the document was produced, showing that it was produced on subpoena and by whom. He carefully analysed the Australian Law Reform Commission's Interim Report on Evidence (Report No 26, 1985), referring to various paragraphs that indicated that the Commission did not regard its Draft Bill as bringing about any such result. He noted that the Commission had addressed s 45b of the Evidence Act 1929 (SA), under which no authentication was initially required and it was enough that the document was apparently genuine, and said (at 316): "It does not seem possible that, after addressing s 45b, the Law Reform Commission could have contemplated adoption of its principles without explicitly indicating that it was recommending this large change."

There were, in his Honour's view, some indications in the Evidence Act that were inconsistent with a wide general presumption of authenticity. He referred (at 316) to s 152, which deals with authentication in the case of documents more than 20 years old produced from proper custody, and s 144(1)(b), which refers to "a document the authority of which cannot reasonably be questioned".

His Honour expressed the opinion (at 313) that authenticity is to be distinguished from relevance. In the case before him, it was plain that the documents would be relevant if they were shown to be authentic and it was the evidence of authenticity that was lacking. He referred (at 313) to s 58(1) of the Evidence Act, which says that if a question arises as to the relevance of a document or thing, the court may examine it and may draw any reasonable inference from it, including an inference as to its authenticity or identity. He said that the question of authenticity is not a question as to the relevance of documents within s 58(1), which "treats authenticity as part of the material on which relevance may be determined".

While there was some evidence with respect to compliance with s 69, this evidence was "vehemently unsatisfactory" as a means of proof of the records of Advance Bank (at 317), and (at 318) he was not satisfied on the balance of probabilities that pages 25 and 26 were what they were alleged to be.

I have set out his Honour's reasoning in detail because it appears to me to be an important and persuasive analysis. His Honour's reasoning shows that the Australian Law Reform Commission did not intend general abolition of the requirement to authenticate documentary evidence, and identifies indications in the Evidence Act that the authentication requirement has been generally preserved. The judgment carefully distinguishes the concept of authentication from the concepts of ways of adducing evidence, admissibility on the ground of relevance, admissibility of hearsay representations in business records, and the facilitation of proof of matters in issue. Specifically, on his Honour's approach to s 69 does not override the requirement to authenticate. The concepts are distinguished from one another in the Evidence Act, which allocates different chapters to ways of adducing evidence (Chapter 2), admissibility (Chapter 3) and proof (Chapter 4), but the conceptual distinctions are sometimes overlooked in practice. 11.2 Subsequent cases responding to Rusu

Rusu was approved in Daw v Toyworld (NSW) Pty Ltd [2001] NSWCA 25. The appellant had brought proceedings for damages for a workplace injury. One of the grounds of appeal was that the trial judge had erred in placing reliance on a set of clinical notes of unknown origin. Heydon JA (with whom Priestley and Sheller JJA agreed) rejected this ground because it had not been shown that the trial judge placed reliance on this material, and no objection to its admissibility had been taken at the trial. But his Honour added (at [46]): "… if the document was of unknown origin, it could have been objected to as unauthenticated and irrelevant. The Evidence Act 1995 does not permit documents to authenticate themselves save in limited circumstances [citing Rusu ])."

Although Heydon JA referred to a document of "unknown origin" (echoing the facts before him), the principle that documents cannot authenticate themselves, save in limited circumstances, is not confined to a document the origin of which is, strictly, unknown. In Rusu itself, it was known that the two pages have been produced by Advance Bank in answer to a subpoena, but there was still insufficient evidence to authenticate them.

Rusu was cited with approval in Kingham v Sutton (No 3) [2001] FCA 1117 at [127] (Goldberg J) and in Citibank Ltd v Chiu Wah Liu [2003] NSWSC 236 at [3] (Hamilton J). In NSW Crime Commission v Rinh [2003] NSWSC 811, Hidden J (at [14]) drew attention to the important distinction between authenticity of records and accuracy of records. He distinguished Rusu , while not disagreeing with it, on the ground that the argument before him, relating to some casino records, was concerned with their accuracy rather than authenticity.

However, an aspect of Bryson J's reasoning was criticised in the fifth edition (2002) of Uniform Evidence Law by Stephen Odgers SC, at page 140 (see now sixth edition (2004) page 183). After quoting his Honour's observation that the question of authenticity is not a question as to the relevance of documents within s 58(1), the author inferred that on Bryson J's approach the court may not draw reasonable inferences from a document as to its authenticity. He suggested that such view is inconsistent with the intention behind s 58(1) and its legislative history.

Odgers' criticism was taken up by Madgwick J in Lee v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 305. The question was whether an applicant for review of a decision by the Migration Review Tribunal had applied within time. That depended upon whether the Minister had discharged the onus of proving that notification of his decision had been sent by registered mail to the applicant at a certain time. There were two pieces of evidence relied upon by the primary judge, Hely J. The first was affidavit evidence as to the Department's database, which contained information recorded by a named officer, representing that a notification letter had been sent to the applicant in Australia on a certain date by registered mail. The second was a note by an unnamed author scanned into the database on the following day, according to which an unnamed person at Australia Post had said that the letter of the previous day was in the Australia Post delivery centre. One of the arguments advanced by the applicant was that the note was inadmissible as a business record, having regard to Rusu .

Hely J held that the note was admissible under s 69 notwithstanding that the person who made the note and the person in Australia Post who supplied the information were unknown. He said (at [18]): "Section 69(2)(b) applies as I am satisfied that the notation was made in the course of, and for the purposes of, the respondent's business on the basis of information directly supplied by a person from Australia Post who might reasonably be supposed to have had personal knowledge of a certain fact …".

The Full Federal Court held that the affidavit evidence was sufficient to establish the date on which the notification letter was sent, and it was unnecessary to rely on the note. But Madgwick J went on to consider the admissibility of the note. He described Rusu as "controversial NSW authority", citing the passage in the fifth edition of Odgers referred to above, and continued (at [25]): "In Rusu , his Honour may have meant no more than that there may be cases in which, as a matter of fact, no inference as to authenticity of a document may be properly drawn from the document itself. If he meant to say more than that, it is by no means clear to me that the way is open for a court to read some unexpressed limitation into a grant of power to courts: such grants are generally very liberally construed [citing authorities for that general proposition]. Such an approach may be particularly apt where, as here, the provision aims at putting another nail in the coffin of unmeritorious technicality in litigation and s 135 provides ample safeguards against possible abuse of the section."

Without referring to Madgwick J's remarks in Lee , the Court of Appeal of the Australian Capital Territory considered Rusu in O’Meara v Dominican Fathers [2003] ACTCA 24. There the appellant sued the operators of a university residential college for personal injury when she fell off a balcony after drinking. A question on the appeal was whether a hospital report, supported by evidence by a pharmacologist, which showed a high blood alcohol concentration should have been allowed into evidence. It was argued that the hospital report did not prove itself, and as there was no evidence of the nature of the tests that were performed, how they were performed or who supervised them, the report was not authenticated in the manner required by Rusu and should have been rejected. Gyles and Weinberg JJ held that in light of the evidence of the pharmacologist, the report had been properly received in evidence, relying specifically on s 146. However, on the general requirement of authentication they referred to Rusu and said (at [85]): "In that case, his Honour appeared to hold that the fact that a bank had produced copy bank statements on subpoena did not prove that they were bank statements of the relevant account that was identified on them, and that further proof of authenticity was required. We have considerable doubt as to the applicability of that decision to the present circumstances. Admissibility of evidence is to be judged on the balance of probabilities (s 142), with the benefit of the inferences to which we have already referred (s 183), with the facilitating provisions of s 48 and (in the present case) s 146, dealing with evidence produced by processes, machines and other devices. Rusu may also be at odds with the thrust of the judgments in Albrighton v Royal Prince Alfred Hospital [1980] 2 NSWLR 542, per Hope JA at 547-550 and Hutley JA at 565-571, although the text of the legislation there in question differed from the Evidence Act. Albrighton does not seem to have been cited to Bryson J in Rusu ."

In Albrighton there were issues about the admissibility of hospital records as business records, but there are does not seem to have been an issue about the authentication of the documents. Authenticating evidence was given by a hospital administrator, as Hutley JA explained in his judgment (at 565ff). The issues in the Court of Appeal related to such questions as whether the authenticating evidence should have been taken in the absence of the jury, and whether it should have been rejected because it contained medical opinions expressed by persons who may have been unqualified, or because it contained unintelligible or ambiguous entries. I can see no inconsistency between Albrighton and Rusu on these matters.

In my opinion, the suggestion that Rusu may be at odds with Albrighton relates to Bryson J's unwillingness, in the case before him, to draw inferences as to authenticity from the face of the document and circumstances of its production. Hope JA emphasised (at 548) that in deciding questions of admissibility under the business records provisions then in force (Evidence Act, 1898 (NSW), Part IIC), the court was entitled to draw inferences from the form or content of the document and other matters from which inferences may lawfully be drawn. The Court of Appeal was prepared to allow inferences as to the expertise of persons making statements noted in records, to be drawn from the form and content of the tendered document itself: at 548 per Hope JA; 568 per Hutley JA.

It therefore seems to me that the point made about Rusu in O'Meara is essentially the same as the criticism made by Madgwick J in Lee and by Mr Odgers, namely that authentication may be established by inferences, including inferences from the form and contents of the document tendered. 11.3 The requirement to authenticate documents

It would be absurd, according to Bryson J in Rusu (at 315), for the law to dispense on a general basis with the need to prove the authenticity of a document, for that would "put the court entirely in the hands of whatever a document which a party chose to tender purported to be, subject to whatever opportunity another party had of overcoming its apparent effect". On the other hand, it is important not to set the bar too high for the authentication of documents, because if too much is demanded, the authentication requirement will fight against the policy underlying the business records provisions which, as Hope JA remarked in Albrighton (at 548), is "of great importance in the search for truth". That policy recognises that any significant organisation depends for its efficiency upon the keeping of proper records, to be used and relied upon in the everyday carrying on of the activities of the business and therefore likely to be accurate, and "likely to be a far more reliable source of truth than memory" ( Albrighton , at 548-549 per Hope JA; see also Australian Law Reform Commission, Interim Report on Evidence (Report No 26, vol 1), at [709]). It is reflected in the terms of s 69, which makes hearsay representations in business records admissible without requiring evidence from their authors.

The law responds to these competing concerns in a commonsense way, bearing in mind the distinction between authentication and the weight or probative value of the documents. In Rusu , Bryson J did not deny that inferences may be drawn from the document itself, relevant to the question of authenticity. Apart from s 58(1), there is express statutory authority to do so in s 183, when a question arises about the applicability of a provision of the Evidence Act. But Rusu insists on the need for authenticity to be established, and asserts that authentication cannot be achieved solely by drawing inferences from the face of the document where there is no other evidence to indicate provenance. The other cases do not deny these propositions, in my opinion.

Hidden J's reasoning in Rinh , distinguishing between authenticity and accuracy, identifies part of a wider distinction, between matters of authenticity going to the adducing of evidence, and matters going to the credibility and weight of documentary evidence once it has been authenticated and judged admissible. Authentication is about showing that the document is what it is claimed to be, not about assessing, at the point of the adducing of the evidence, whether the document proves what the tendering party claims it proves. As I shall explain, some of the defendants' criticisms of the tendered documents, made under the rubric of authentication, are better seen, upon analysis, as going to credibility and weight.

Although a simple way of authenticating a document is by evidence from its creator, or someone who superintends the maintenance of business records that include it, Rusu does not lay down that authentication by such means is necessary. On the other hand, Rusu establishes that there must be something more than the mere tender of the document itself, where the tender is contested. Thus, in the present case ASIC would not, apart from the effect of s 1305(2), be able to tender the Carter Exhibits or its Merged Tender Bundle without any evidentiary support whatever. But ASIC does not purport to do so. It has provided an enormous quantity of provenance evidence, designed to trace the tendered documents back to a source such as the Ferriers I:/Drive or documents acquired from liquidators or solicitors.

If, hypothetically, ASIC tenders a document which on its face, purports to be a budget for the One.Tel Group for 2001, and adduces provenance evidence showing that the document was printed out from a computer hard-drive copied by the liquidators from One.Tel's hard-drive, and establishes a file path through the finance directory to a subfile called "Budget 2001", the court would be able to conclude on the balance of probabilities (see s 142) that the document had been adequately authenticated. Such evidence does not show who created the document (although the properties page, if in evidence, might assist in that respect), or how the document was used within the organisation, or even whether it is the only version or might have been a draft. But it is sufficiently well authenticated to be received, provided it is properly tendered under s 48 and is admissible. There is evidence, not confined to inferences from the document itself, showing on the balance of probabilities (see s 142) that the document came from One.Tel's financial records where it was classified as a 2001 budget, which is what it purports to be.

The business records policy is supplemented by the idea that, once a document is in evidence, it is open to the other party to give evidence to contradict, undermine or explain the document: see Albrighton at 570 (para 103), per Hutley JA; Australian Law Reform Commission, Interim Report on Evidence (Report No 26, vol 1), at [705]. Thus, it is open to the other party to challenge the accuracy of the document (as in NSW Crime Commission v Rinh ) or to seek to show that was only a draft and was never treated as final or relied on. It is thought fair to cast the tactical burden of proof of such matters on the other party once the authenticity of the document has been established - that is, once it has been shown to the requisite evidentiary standard that the document is what it purports to be. 11.4 The present case

In my opinion ASIC's evidence, and a perusal of the documents themselves, provide sufficient grounds to authenticate each category of documents to the extent required by these principles.

The defendants made two general submissions about authentication that I should consider before addressing the authentication of particular categories.

First, they submitted that the fundamental problem with all categories of documents was that ASIC had brought forward no one who was involved in the creation or keeping of the documents who could verify that they were final and operative documents as they existed at any particular point of time, as opposed to merely some drafts or scenarios on variable assumptions. This submission raises discretionary considerations, considered later in this judgment. But the requirement to authenticate a document is not a requirement to produce a witness involved in the creation or keeping of the document. Other means of authentication may suffice.

Secondly, they emphasised the importance of the documents to ASIC's case and the fact that this is a civil penalty proceeding in which allegations are being made of serious misconduct, giving rise to the considerations enunciated by the High Court in Briginshaw v Briginshaw (1938) 60 CLR 336. Important though these considerations are for other purposes, including the exercise of the court's discretion to exclude evidence or limit its use, and the assessment at the end of the final hearing of whether ASIC has proved its case to the requisite standard, I do not regard them as affecting the limited, "scientific" question whether documents have been adequately authenticated.

The business plan summaries (category 1) each have headings which indicate broadly the nature of the documents. A perusal of the content confirms that they appear to be business projections of various kinds. Each bears a date. They were produced by the solicitors acting for Mr Silbermann and Mr Beck, voluntarily and under a s 33 notice, and in the latter case in a folder of documents labelled as One.Tel business plans.

The budgets (category 2) are not headed "budget" but on their face they present financial information on a monthly basis and the figures given for later months are in columns with headings that indicate they are forecasts or budget numbers. They are located in the finance directory of the I:/Drive, which is an electronic repository of financial information relating to One.Tel. Their file path identifies the documents as business plan documents. The defendants' objections relate principally to the absence of evidence as to how they were created, who created them, how they were used and whether they might be merely drafts. For the reasons I have given, it is not necessary for ASIC to address those matters in order to authenticate the documents.

The defendants submitted that in a company as large as One.Tel, there are often various versions of documents such as business plan summaries and budgets, with different assumptions plugged into them. They identified what they said were anomalies, which they illustrated as follows.

First, ASIC's index described pages 1 0001 and 1 0002 as the "September Business Plan Budget Summary for the 2001 and 2002 Financial Years". But the heading of the document tendered is in fact different. The heading refers to an "update" without clarifying what is updated and in particular, whether the update is in respect of actual results or something else. I do not agree with this submission. It seems to me plausible to say that the two "Business Plan Summary" pages provide budget or forecast information, bearing in mind their apparent correlation with the two cashflow pages and the four more detailed pages which bear budget headings. I do not regard the word "update" as inconsistent with that conclusion.

Secondly, the defendants submitted that there is nothing in the budgets and business plan summaries to indicate the assumptions made in their preparation and whether those assumptions had been varied from other assumptions, or subsequently were maintained. They said there is nothing to indicate whether the documents are drafts or who prepared them. It is not clear whether the information on the documents includes opinions or if it does, who is the author of those opinions. There is nothing to say how the documents were used internally at One.Tel.

Assuming these points about the documents are true, it does not follow that they have not been authenticated. They are authenticated by such evidence about their nature and provenance as will give rise to the inference that they are what ASIC claims they are. Once they are adduced in evidence, it is open to the defendants to show that they have no probative value, for example by establishing that they were drafts not acted upon or that they were based on assumptions or scenarios not widely held within the company. But the law does not overload the authenticity requirement by including within it an obligation for the tendering party to rebut all such possibilities. Issues going to the ultimate probative value of the documents cannot be assessed at the present stage. They do not bear on authentication.

Thirdly, pages 1 0001-3 bear different printout times, raising the question as to whether they are different documents or parts of the same document. But on the other hand, the figures for cash at 1 0001, rounded up, appear to correlate with the figures in the two cashflow pages.

Fourthly, as mentioned above, the footer at 1 0005 and 1 0007 is called "updatedbusplan.april2000v2.REAL THING". The defendants searched the copy of the finance directory of the Ferriers I:/Drive supplied to them in July 2003. They tendered a single page document they had discovered in that fashion (Exhibit R1 (10/3/05)). It appears on its face to be printout of a page in the finance directory at "Budgets", showing the files available within that file path. There appeared to be 15 files which include the title "updatedbusplan.april2000v2", ten of which also include the words "REAL THING", with nine of those ten having additional words in their titles identifying either individuals or subject matter.

However, it is relevant that copies of the documents at 1 0001 to 1 0008 were in a folder labelled "Business plans" produced on behalf of Mr Silbermann in response to a s 33 notice. It would be setting the standard of authentication at too high a level to require ASIC to show, in the case of each document, that it is unique and not simply one of several versions. The question whether a particular document is one of several versions should be addressed in light of all the evidence, including such evidence as the defendants may choose to adduce.

The trial balances (category 3) are all headed trial balances and end-of-month dates are specified. They are located in the finance directory of the I:/Drive and their file paths indicate that they are trial balance or monthly balance sheet documents. The fact that no trial balances are tendered for July, August and October 2000 does not bear on the authenticity of the documents that are tendered. The fact that a trial balance which is really for the month of April 2000 is incorrectly labelled 31 March 2000 (if it be so) does not prevent ASIC from authenticating the document. That is a matter to be decided once all the evidence has been adduced. The fact that ASIC wishes to prove by other evidence that some information in the document at 2 0063-2 0071 is incorrect, does not affect the authenticity of the document (or its admissibility).

The fact that there are two versions for some months (apparently June 2000, March 2001 and May 2001, though there is other evidence that there were two versions for March, April and May 2001, as noted in DS 50.4), containing different figures, may well present difficulties in the evaluation of the evidence, unless the matter is cleared up by other evidence. Even more acute difficulties might arise if the prospect materialises (as indicated in submissions) that there are other (perhaps many other) versions of trial balances not yet placed before the court. But these matters do not prevent the authentication of the versions are tendered by ASIC. As I have said, the requirement to authenticate does not mean that the tendering party must establish that the tendered document is the sole version. By parity of reasoning, it does not require the tendering party to prove that one of two versions is the correct one, or that there are no other versions. There may be some significance in the presence of two versions for a particular month, emerging when all the evidence has been considered.

In DS 53 the defendants set out a table of the trial balance documents, comparing asserted dates with dates "modified", for documents where properties pages were attached. The "modified" dates were later than the asserted dates. The defendants submitted that the court could not confidently draw an inference that the document in its tendered form was available within One.Tel at any particular time. That may prove to be a difficulty for ASIC, to be assessed in light of all of the evidence in final submissions. In some cases the "modified" date is well before the appointment of voluntary administrators and in other cases the modified date is at a crucial time, a fact that may itself prove significant. But these are matters going to probative value rather than authentication.

The management accounts (category 4) are all headed as management accounts for One.Tel, for specified months. On the face of the documents, they purport to be either profit and loss statements or statements of operating expenses, presenting financial information in various clearly stated categories. Some of them have footers indicating their character as management accounts. They are located in the finance directory of the I:/Drive and their file paths also indicate their character as management accounts.

In DS 50 the defendants noted that the finality and accuracy of the 2001 management accounts was in issue, and they claimed that the documents were drafts. This contention is not a barrier to authentication, for reasons I have given with respect to the budgets and business plans summaries. Nor is the contention that there various versions of the management accounts for some months, for reasons I have given with respect to the trial balances. The fact that the April and May management accounts were prepared only after the appointment of administrators, if it be true, may affect their probative value but is not an obstacle to authenticity.

In DS 53 the defendants drew attention to the "modified" dates in properties boxes, noting that they were later than the asserted dates of the documents. This is the same submission as they made in relation to the trial balances, and I reject it for the same reason. They also noted that according to the properties boxes, the documents for 30 June 2000 and 28 February 2001 were "modified" on 7 May 2001, and the document for 31 May 2001 at 3 0104 was "modified" prior to 31 May 2001. The defendants submitted that these anomalies mean that the court cannot be satisfied that the documents are what they are asserted by ASIC to be. It seems to me that the anomalies, if they are not explained by other evidence, will affect and possibly destroy the probative value of the documents in question, but they do not go to the authenticity of the documents. One is reminded of the Australian Law Reform Commission's observations about the analogous question of admissibility of hearsay representations in business records, in its Interim Report (Report No 26, vol 1) at [705], to the effect that errors can occur in written records but on the whole, they are more reliable than memory and the correct approach is to leave it to the party against whom the evidence is led to challenge it.

The sample "bill run breakdown" (category 5) has no general heading and nothing on its face to indicate that it is a "bill run breakdown". But the footer on each page, "to be billed" with the month of March 2001 identified, provides some guidance as to the nature of the document, when combined with the column headings. The document is located through a file path which moves through management accounts 2001 to March 2001 and revenue. In my opinion the evidence as a whole is sufficient to authenticate the document, although I agree with the defendants that the precise nature of the document is not evident on its face, and ASIC will have to make its case for the significance of the document by recourse to inferences and other evidence.

Comparison.xls (category 6) remains, for me, a mysterious document, as I said in my judgment on the Carter Report. It has about it an air of incompleteness and, although the headings and line descriptions give some indication of the subject matter, they are quite uninformative. ASIC's case for the relevance of the document seems to depend on the court inferring (or, more precisely, concluding that the inference is possible) that it was a completed calculation rather than a draft "work in progress", and that the figures in the "Liz" columns are actual figures as distinct from forecasts or "scenarios".

These uncertainties mean that ASIC has fallen well short, at this stage, of establishing the case it wishes to develop about comparison.xls. But they do not mean that ASIC has failed to authenticate the two pages, as pages prepared within One.Tel and exhibiting calculations about "traffic mix". They are found through a file path on the Ferriers I:/Drive identifying "Liz", in circumstances where there are grounds for inferring that "Liz" identifies Elizabeth Ashley, who was a financial analyst at One.Tel. It is relevant to authentication that a copy of each of the two pages was found in a lever-arch folder of documents labelled with Mr Silbermann's name and produced to ASIC by his solicitors, and that Mr Silbermann was One.Tel's finance director. I am satisfied, having regard to these matters and the evidence as a whole (as summarised earlier), that the authenticity of 4 0055 and 4 0056 has been established on the balance of probabilities.

As to the collections profile summaries, my view is that pages 8 0001-8 0002 are authenticated by a perusal of the documents, which are clearly headed, and by recourse to the footer and file path, through debtors. The documents at 8 0007 and 8 0012 do not have file paths but they were produced by the solicitors for Mr Silbermann and Mr Beck as part of a file retained, I infer, by Mr Silbermann. Again, authentication is assisted by perusal of the documents themselves, which have clear headings. The other collections profile summaries were produced by Ernst & Young from their business records. But there is a link with One.Tel's financial records, provided by Mr Allsopp's evidence exhibiting what appears to be a kind of manual to assist One.Tel staff to enter up information of the kind set out in the documents.

In my judgment on the Carter exhibits, I expressed the view that it could not be inferred from the documents themselves that they record the totality of the Australian trade debtors at One.Tel at particular times: at [232] and [236]. But that does not mean that the evidence has failed to authenticate the documents. I have decided, on balance, that the collections profile summaries have been adequately authenticated.

There is no issue about the authentication of the liquidators' reports, in the sense of "authentication" that I have found to be correct. As to the butcher's paper, my view is that the documents will be adequately authenticated by Mr Kleemann's affidavit, once it has been read. Mr Kleemann's evidence is the simplest kind of authentication, evidence by a person who saw the document created. Obscurity of meaning and lack of clarity about the time period are not obstacles to authentication. Nor is the fact that Mr Kleemann, who will be made available for cross-examination, will give no evidence in chief about the content of the document in his affidavit.

In summary, my view is that all categories of documents have been adequately authenticated. 11.5 Authentication and s 1305

As Bryson J's judgment makes clear, while the general requirement to authenticate documents has not been abrogated by statute, there are special statutory provisions that do so. One of these is s 1305(2). If, contrary to my decision, any of the categories of documents have not been properly authenticated, they are nevertheless admissible under s 1305(1), and are within s 1305(2), for reasons I shall explain.

However, it is appropriate, first, to consider whether evidence of the contents of the documents may be adduced under the Evidence Act. That requires investigation of ways of adducing evidence of the contents of the documents, relevance, hearsay, the admissibility of business records, and the opinion rule. 12. Ways of adducing documentary evidence

The Evidence Act draws a distinction between ways of adducing evidence and admissibility of evidence. Ways of adducing documentary evidence are addressed in Part 2.2, a central component of which is the abolition of the common law "original document" rule (s 51) and facilitation of the process of adducing evidence of the contents of a document where something other than the original document is tendered (s 48).

Section 48 permits evidence of the contents of a "document in question" (defined in s 47(1)) to be adduced by various methods, which include tendering a copy (s 48(1)(b)), tendering a document produced from electronically-stored information (s 48(1)(d)) and tendering a document that forms part of the records kept by a business and purports to be a copy of the document in question (s 48(1)(e)).

In Rusu , Bryson J observed (at 314) that the effect of s 48(1), when a copy of a document is tendered to prove its contents, is that admissibility is in the same position as if the tendering party had tendered the original document in question. He said that s 51 had not abolished or affected the need to prove that the document tendered is the document it purports to be, and s 48(1) had not authorised the adducing of evidence merely by tendering a document in the absence of any evidence establishing what the document was, for s 48(1) merely prescribes the means of adducing evidence of the contents of documents and leaves untouched the need to establish their authenticity.

With only the exceptions noted below, all of the nine categories of documents in issue in this case are tendered under either s 48(1)(b) or s 48(1)(d). It seems to me unnecessary to determine whether all or any of the documents are also tendered under s 48(1)(e). However, my decision on the admissibility of hearsay representations under the business records provision, s 69 (see below), implies that ASIC is in a position to make the tender of the documents under s 48(1)(e) as well.

The exceptions are the illegible pages that I have identified from time to time in my description of the documents. I assume that the originals are not also illegible. The tendered documents are not copies for the purposes of s 48(1)(b), or documents produced from electronically stored information for the purposes of s 48(1)(d) or business records for the purposes of s 48(1)(e), because of their illegibility. They have not been properly adduced in evidence. They are also inadmissible on the ground of irrelevancy. I understand that ASIC intends to substitute the illegible pages with legible copies. If that occurs, the objection based upon their illegibility will, of course, be removed. 13. Relevance

The admissibility of evidence of the contents of the documents in question is governed by Chapter 3 of the Act. The first question to address is whether that evidence is relevant in the proceeding. The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding: s 55(1).

The importance of the words "could rationally affect" was emphasised by the Australian Law Reform Commission in its Interim Report (Report No 26, 1985), at paragraph 641: "The definition requires a minimal logical connection between the evidence and the 'fact in issue'. In terms of probability, relevant evidence need not render a 'fact in issue' probable, or 'sufficiently probable' - it is enough if it only makes the fact in issue more probable or less probable than it would be without the evidence - ie it 'affects the probability'. The definition requires the judge to ask 'could' the evidence, if accepted, and affect the probabilities."

Courts have given the definition of relevance a broad interpretation. For example, in Smith v The Queen (2001) 206 CLR 650, Kirby J at [45] noted that for reasons of legal policy, it was undesirable "to set the hurdle of relevance to high", particularly bearing in mind "the respective functions of the judge and jury in a trial by jury and … the fact that questions of relevance often have to be ruled upon before the judge knows all of the issues that may become relevant in the trial". After citing Kirby J's observations, Mr Odgers expresses the view (S Odgers, Uniform Evidence Law , 6th edition, 2004, at 163) that although Kirby J's judgment in Smith was a dissenting judgment, the judgment of the majority in the High Court did not adopt a significantly narrower view of the test of relevance.

If the court is in any doubt as to the question of relevance, on the ground that relevance depends on making some other finding (including a finding of authenticity), the court may employ s 57(1)(b), by making a finding of provisional relevance. Indeed, it has been said that, when evidence is tendered in a non-jury case going to a matter in issue, the trial judge should admit the evidence subject to relevance, and rule on its effect at the conclusion of the case: Merrylands Bowling, Sporting & Recreation Club Ltd v P & H Property Services Pty Ltd [2001] NSWCA 358, at [35] per Rolfe AJA (Hodgson JA and Young CJ in Eq agreeing); see also Century Medical Inc v THLD Ltd (No 3) [2000] NSWSC 428 at [23] per Rolfe J.

ASIC relied on these principles concerning relevance as part of its answer to the criticism that it was seeking to tender documents the meaning and significance of which could not be understood in the absence of evidence by someone who created or used them. ASIC's argument was that it was sufficient that the interpretation of the documents advanced by it was a possible interpretation. I generally agree with ASIC that this is the correct approach to the question of relevance, although there is a question, unnecessary to decide in this case, whether the criterion of relevance is satisfied by a merely theoretical or hypothetical possibility that has no practical plausibility about it. But the defendants' objection is not only or primarily a relevance objection. The defendants' complaint about the absence of evidence from a One.Tel witness was principally directed towards authentication and s 135. As far as authentication is concerned, the question is not whether the document could be, but whether it is what ASIC says it is. The facts relied upon for that purpose must be proved on the balance of probabilities, under s 142, which requires the court to have regard to the importance of the evidence and the gravity of the matters alleged.

Earlier in this judgment, I set out ASIC's submissions concerning the relevance of each of the nine categories of documents. I have reached the conclusion that ASIC's contentions in relation to each category of documents are sufficient to cross the threshold of relevance prescribed by s 55. It is not necessary, in my opinion, to rely on provisional relevance under s 57. It is unnecessary to give further elaboration of my conclusions as to relevance, except as regards category 8.

ASIC's made brief oral submissions as to the relevance of liquidators' reports (T 3576-7), summarised above. Later, ASIC identified in writing the representations on which it intended to rely, in respect of each of the categories of documents. A separate list of representations for category 8 was produced (AS 55) but it was quite brief and not wholly informative. On the defendants' application, I gave directions for ASIC to produce a more complete statement of the representations upon which it would rely. ASIC's response, AS 60, listed well over 100 separate representations in a document 60 pages long. The document identified the representations and purported to explain their relevance. Consequently ASIC's full statement of the relevance of the liquidators' reports is now quite long. In DS 60 the defendants made objections to the tender of some of the representations in the reports, on grounds relating to relevance, hearsay coupled with the non-availability of s 69 of the Evidence Act and s 1305 of the Corporations Act, and opinion not falling within any exceptions to s 76. The defendants also submitted that the court should exclude much of the evidence of representations in the liquidators' reports under s 135.

It is appropriate to deal with the defendants' relevance objection here. According to the defendants, ASIC's case is based upon the proposition that the liquidation of One.Tel was inevitable, and that the defendants' default was that they failed to take steps that would have led to liquidation commencing earlier than it in fact occurred. Once that is understood, said the defendants, it can be seen that evidence establishing the consequences of the company being placed in administration (for example, the falling due of loan facilities, cessation of the business, costs of external administration and the like) is irrelevant, because those consequences would have arisen in any event. The position would be different, they said, if ASIC's case were that the defendants' breach of duty led to the liquidation of the company in circumstances where that consequence was not inevitable. The defendants identified 12 representations in ASIC's list that, they said, were irrelevant on this reasoning. ASIC responded to the defendants' submissions in AS 67, not denying the defendants' description of the way it put its case but arguing for the relevance of the representations.

In my opinion the representations identified by the defendants satisfy the criterion of relevance that I have set out. Broadly, the subject matter of the 12 representations is that serious, identified consequences flow from placing a company in external administration. It will be open to ASIC to submit that the consequences would not have been as severe (in respect of such matters as the number and value of trade creditors and the amount of dividends to unsecured creditors) if the defendants had discharged their duty by acting to place the company in external administration three months earlier than the external administration began. Part of the evidence to support that contention is evidence showing what the consequences of placing the company in external administration in fact were. If ASIC can show that the consequences of the external administration were quantitatively worse than they would have been if the company had been placed in external administration three months earlier, that evidence could be relevant, in the statutory sense, to the specific content of the defendants' duty during that three-month period and to the length of any disqualification order.

Under s 56, relevant evidence is admissible unless otherwise provided by the Act. Of the exclusionary rules contained in Chapter 3 of the Evidence Act, only two are presently relevant, namely the hearsay rule (and the exception to it for business records) and (perhaps) the opinion rule. 14. The hearsay rule

In the language of Chapter 2 of the Act, ASIC wishes to adduce evidence of the contents of various documents in question. When one reaches the hearsay rule concerning admissibility, there is a shift in the statutory language. Section 59(1) speaks about evidence of a previous representation, and requires the court to identify the fact that the person intended to assert by the representation (called "an asserted fact"). It is plain from s 69 that a person may make a representation in a document. The link between these concepts and Chapter 2 seems to be that evidence of the contents of a document, adduced in the manner prescribed by s 48(1), may be or may include evidence of a representation by a person about an asserted fact. Consequently, some or all of the contents of a document, although adduced in evidence in accordance with s 48(1), may be inadmissible as hearsay, unless an exception to the hearsay rule is available.

Evidence is inadmissible as hearsay, under s 59(1), if it is evidence of a previous representation made by a person and is adduced to prove the existence of the asserted fact. "Previous representation" is defined in the Dictionary to the Act to mean a representation made otherwise than in the course of giving evidence in the proceeding in which evidence of the representation is sought to be adduced. Given the breadth of this definition, a tender made for the purpose of adducing evidence of the contents of a document is very likely to attract the hearsay rule, if the evidence is adduced to prove the truth of a fact contained in the document. But a documentary tender does not necessarily attract the hearsay rule. The document may be tendered as a thing, rather than to adduce evidence of its contents. And even where the tender is for the purpose of adducing evidence of the contents, there are occasions when the hearsay rule is not attracted.

In AS 51 ASIC submitted that all the documents in categories 1-7 and 10 are admissible as original evidence, not tendered for a hearsay purpose. ASIC contended that in each case the fact that the documents came into existence is itself relevant, and the documents demonstrate the availability upon reasonable inquiry of relevant financial information within One.Tel's records. On the basis of that submission, ASIC invoked s 60, according to which the hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of the fact intended to be asserted by the representation.

I agree with ASIC's submission as to the relevance (or potential relevance to the standard required by s 55) of the fact that the documents came into existence, as demonstrating the availability on reasonable inquiry of financial information relevant to the discharge of the defendants' duty of care. However, if one examines the way in which ASIC has presented the relevance of the documents, summarised above under the heading "Relevance" in respect of each of the categories, it is reasonably plain that ASIC sees the principal relevance of each category of documents (perhaps with the exception of category 6) as being or including the representations of fact or opinion contained in them. Thus: · in respect of the statements to the market in February and April 2001, ASIC wishes to rely on the budget and business plan documents to establish what the forecast was, so as to determine whether there was any breach of duty of care in Mr Rich authorising statements to the effect that ASIC was on track; · ASIC will look to the trial balance documents as the foundation for inferences as to the company's recent collection record and for other matters going to the truth of the facts asserted in those documents; · it will look to the management accounts to show what the actual financial position was in the relevant months so as to establish that the financial position was deteriorating; · it will rely on the "to be billed" document to show the profitability of the local call business and the sales mix, and to establish that information about those matters was accessible to Mr Rich; · Comparison.xls seems to be in a different category, for the relevance of that evidence is said to be to show that a financial analyst within One.Tel was able to form a view about the traffic mix notwithstanding Mr Rich's assertion that it was undetected until April, although even there, ASIC seems to rely to a degree on the credibility of the assessments made in the document; · the collection profile documents are relevant to the question whether appropriate provision was made for doubtful debts; and · the butcher's paper is relevant to show the billing position as at 19 April 2001.

In these circumstances, it would not be accurate to say, in terms of s 60, that the evidence of previous representations is admitted, if the court admits the evidence, because it is relevant for a purpose other than proof of the facts intended to be asserted by the representations. It is not a matter of the tendering party's purpose in tendering the documents, but rather the reason of relevance accepted by the court when the evidence is admitted. In my view, therefore, s 60 will not apply to ASIC's tender of the documents. I note that if s 60 applied to ASIC's tender of documents, it would probably be appropriate, under s 136, to limit the use of the evidence to the ground of relevance upon which the tender was based, an outcome that would be very disadvantageous to ASIC: see my judgment on the Carter Report, [2005] NSWSC 149 at [262] and the cases there cited.

It is, therefore, necessary to identify the representations upon which ASIC wishes to rely in its tender of each category of documents, and to assess whether they are "previous representations" tendered to prove the existence of the facts they asserted, hence falling within the hearsay rule stated in s 59. ASIC concedes that it wishes to rely upon the liquidators' reports in category 8 for hearsay purposes (AS 51, para 7).

In AS 51 ASIC stated the particular representations upon which it would rely if its submission based on s 60 were to fail, as it has. For categories 3-7 and 10 ASIC relies on the documents as constituting representations of the matters it claims to be relevant: in summary, what the financial position and performance of the relevant business was in the times stated (categories 3 and 4), the amounts actually to be billed in a particular bill run (category 5), the financial performance of the Australian fixed wire business and its applicable budget (category 6), the collections position with respect to debtors (category 7) and the amount of additional billable but unbilled revenue at the time (category 10).

For the purposes of s 59, the representations identified by ASIC in respect of categories 1-7 and 10 are plainly "previous representations" as defined. ASIC seeks to prove the existence of the facts asserted by those representations. It is prevented from doing so by virtue of the hearsay rule, and (putting s 1305 aside for the time being) it needs to overcome the hearsay rule by relying on s 69. The same position is conceded to be true in relation to the representations in category 8.

Categories 1 and 2 are in a different position. In AS 51 ASIC said it relies on these documents as original evidence and not for a hearsay purpose. It contended, having regard to ss 58 and 183, that the court may infer from the whole of the documents that they are the business plans and budgets described in the index to the Carter Exhibits. Alternatively, ASIC submitted that the whole of the contents of the documents, and in particular the headings, are admissible hearsay representations that the documents are as described in AS 49.

ASIC submitted (T 3449) that the business plan summaries and budgets (categories 1 and 2) are relevant in relation to its allegations concerning the statements to the market made on behalf of One.Tel in February and April 2001. It contended that the contents of these documents are not hearsay, because they are tendered for the purpose of indicating what were the business plans and budgets rather than to prove whether the contents of the documents were accurate. As an alternative basis for admissibility, ASIC submitted that the business plan summaries carry an inference that the preparer of the documents bona fide estimated that the business operations would proceed in the manner referred to in the summary plans, and the evidence of the preparer's state of mind is admissible under the exception to the hearsay rule found in s 72.

ASIC drew an analogy (T 3543) with a hypothetical case of misleading and deceptive conduct under s 52 of the Trade Practices Act, brought by a purchaser of a business against the vendor. Suppose the purchaser gives evidence that the vendor handed over a document which he described as a budget for the business prepared in the previous year, which contained figures for monthly projections, and that the vendor said "We have achieved these monthly figures and so the budget predictions have been fulfilled". To make out his case, the purchaser will wish to tender the budget document and give evidence of the vendor's statements. In tendering the budget, the purchaser does not seek to prove the truth of its contents or that the person who made the budget estimates bona fides believed that the figures would be achieved. He is tendering the document to explain and give content to the vendor's representations. The vendor might have said, "We achieved X dollars turnover in March, Y in April etc", but he has taken a shorthand way by saying, "We achieved the figures in this document". ASIC submitted that the present case is closely similar because one of its allegations is that Mr Rich referred publicly to being on track in respect of budget estimates, and ASIC tenders the budget so as to explain that representation.

It is not necessary for me to resolve this question because, for reasons I shall give, if categories 1 and 2 are tendered for a hearsay purpose, the representations contained in them are nevertheless admissible under s 69 (and also under s 1305). In my opinion, however, ASIC's contention would be correct if its tender of the documents was limited to proving the non-hearsay matters it has stipulated. But it seems to me, having regard to ASIC's statement of the relevance of categories 1 and 2, set out above, that ASIC will wish (and perhaps need) to use categories 1 and 2 as evidence of the truth of the budgetary and business plan facts asserted by representations in the documents, relevantly to its pleaded case, in a fashion going beyond those limited non-hearsay purposes. It is more probable than not that the hearsay rule will be attracted.

Thus, given that evidence of the contents of the documents in categories 3-8 and 10, and probably also categories 1 and 2, attracts the hearsay rule, the evidence is inadmissible unless it falls within an exception to that rule. The only relevant exception (apart from s 1305, considered later) is the business records exception, found in s 69, to which I now turn. 15. Admissibility of business records

The relevant parts of s 69, for present purposes, are as follows: "(1) This section applies to a document that: (a) either: (i) is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business; or (ii) at any time was or formed part of such a record; and (b) contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business. (2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made: (a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact; or (b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact." "(5) For the purposes of this section, a person is taken to have had personal knowledge of a fact if the person's knowledge of the fact was or might reasonably be supposed to have been based on what the person saw, heard or otherwise perceived (otherwise than a previous representation made by a person about the fact)."

In the present case, s 69 will create an exception to the hearsay rule, to permit evidence to be given of the representations made in ASIC's documents, if: (1) the documents formed part of the records belonging to or kept by One.Tel or someone else in the course of or for the purposes of their business, at any time; and (2) the documents contained representations made or recorded in the course of, or for the purposes of, the business; and (3) the representations were made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted facts, or were made on the basis of information directly or indirectly supplied by such a person. 15.1 Records belonging to or kept in the course of or for the purposes of the business of One.Tel or someone else

The word "records" is not defined in the Act. The concept is a broad one, said to include "a history of events in some form which is not evanescent" ( R v Jones [1978] 1 WLR 195, at 199), although it connotes the idea that information is kept in an organised form accessible in the usual course of business ( Karmot Auto Spares Pty Ltd v Dominelli Ford (Hurstville) Pty Ltd (1992) 35 FCR 560, at 565) and generally it connotes documents truly regarded as internal records in respect of the company's business ( Atra v Farmers & Graziers Co-op Co Ltd (1986) 5 NSWLR 281, at 288).

In Roach v Page (No 15) [2003] NSWSC 935, the question was whether an article in the journal of association of mushroom growers was admissible as a business record. Sperling J held that the article was not a record of a business. He said: "5. The records of a business are the documents (or other means of holding information) by which activities of the business are recorded. Business activities so recorded will typically include business operations so recorded, internal communications, and communications between the business and third parties. 6. On the other hand, where it is a function of the business to publish books, newspapers, magazines, journals (including specialised professional, trade or industry journals) such publications are not records of the business. They are products of the business, not a record of its business activities. Similarly, publications kept by a business such as journals or manuals (say, for reference purposes) are not records of the business."

The distinction between the records of the business and the products of the business has been applied in other cases: Murray v RentWorks Ltd [2003] NSWIRComm 54, at [41], [45] per Glynn J; Roach v Page (No 27) [2003] NSWSC 1046, at [9]-[11], per Sperling J. in the latter case it was held that publication on a website of information extolling the virtues of a business is not a record of a business, because it is not a recording of business activities in the course of carrying on the business. While there is good reason for the courts to treat records of business activities made in the course of carrying on a business as reliable and therefore admissible as business records, the same thinking does not extend to advertisements or documents produced for public relations purposes, which should be received with healthy scepticism.

With the exception of category 8, the categories of documents tendered by ASIC could not be described as products of One.Tel's business. One.Tel was a telecommunications company. It was not in the business of producing financial documents about itself.

As to the eighth category (liquidators' reports), the original reports might arguably be seen as the products of the liquidators' business rather than as business records. There is an analogy with RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 32 NSWLR 152, where Giles J held that for the purposes of Part IIC of the Evidence Act 1898 (NSW), a report commissioned by a company in the course of conducting an investigation for which it was paid was not a record of a business. But in my opinion, there are two grounds for concluding that the copies of their reports retained by the liquidators were business records.

First, there is an analogy between the liquidators' reports and the reports made by a company to the United States Securities & Exchange Commission, held to be records of the business in Ritz Hotel Ltd v Charles of the Ritz Ltd (Nos 13, 18 & 19) (1988) 14 NSWLR 116, at 122. McLelland J said that the reports to the SEC were records of the business because the relevant statute required such records to be made as a necessary incident of the carrying on of the business. Equally, statute required the administrators/liquidators of One.Tel to prepare the liquidators' reports as a necessary incident to carrying on the business of external administration of the company.

Secondly, the copies of their reports retained by the liquidators on file were, in my opinion, records, just as the file copies of business letters sent by a company to a third party are records of the company's business. Hence, in the R W Miller case Giles J observed that the concept of a record of a business extends to such things as copies of letters written as part of the conduct of the business, and he expressed the opinion that a loss assessor's file copy of a report prepared for a client would be a business record of the loss assessor, though the original report would not be a business record of the client.

In the present context, the records of the activities of the business of a large company include regular or recurring activities in the financial management of the company's affairs, such as preparing budgets and forecasts, trial balances, monthly management accounts, ongoing financial calculations for a particular purpose such as the profiling of debtor payments, and specific, non-recurring financial tasks such as preparation of a breakdown showing revenue and costs for local call business, or a document showing the "traffic mix" in local calls. The records of the business of a company in administration or liquidation also include, in my opinion, records kept by the administrator or liquidator about the company's affairs, including copies of his or her reports to creditors.

A document may be a record of a business even if it is a draft, or otherwise appears to be a document produced "along the way" to completion of a final document: Timms v Commonwealth Bank of Australia [2003] NSWSC 576 at [17]; NT Power Generation Pty Ltd v Power and Water Authority [1999] FCA 1549, at [9].

Clause 1 of Part 2 of the dictionary to the Evidence Act defines references to a business as including references to "a profession, calling, occupation, trade or undertaking". It is clear that One.Tel was, in this sense, carrying on one or more businesses before the commencement of voluntary administration. The administrators and liquidators of One.Tel were carrying on a business in the pursuit of their profession as external administrators of One.Tel, after their appointment as voluntary administrators and then as liquidators, and they were also at relevant times carrying on One.Tel's business.

As I shall explain, there is some controversy as to the whether the word "kept" in s 1305 of the Corporations Act means "maintained systematically" or "retained or held". In the present context, since it has been held that documents received from a third party may be admissible business records if retained in the course of or for the purposes of a business ( Roach v Page (No 15) [2003] NSWSC 939, at [5]; The Duke Group Ltd (in liq) v Arthur Young (1990) 3 ACSR 420; Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 10) (2002) 82 SASR 53 (decisions on s 45A of the Evidence Act 1929 (SA); cf Ross McConnel Kitchen & Co Pty Ltd (in liq) v Ross (No 1) (1985) 1 NSWLR 233 (a decision on the Evidence Act 1898 (NSW)), "kept" appears to have the latter meaning in s 69. This is confirmed by Beazley J's judgment in Feltafield Pty Ltd v Heidelberg Graphic Equipment (1995) 56 FCR 481, holding that a "one-off" record of a meeting was a business record, and rejecting the idea (at 483) that a business record must be part of systematic record-keeping involving more than a single document.

In my opinion ASIC's evidence establishes that, putting three categories to one side for the time being, the categories of documents were kept in the course of One.Tel's business. That conclusion is a simple one where the documents in question are located on the Ferriers' I:/Drive, having regard to the provenance evidence about the Ferriers' I:/Drive set out above. It is an appropriate conclusion to draw where the documents were documents that on their face related to One.Tel's financial affairs and were produced by the solicitors for Mr Silbermann and Mr Beck, particularly given the labels on the lever-arch folders which the documents were found.

The three categories requiring special comment are categories 7, 8 and 10. In category 7, some of the documents came from Piper Alderman and can be inferred to be copies of documents kept in the course of One.Tel's business, for the reason just given. Other documents were obtained from Ernst & Young. Ms Morison's evidence does not enable me to say that those documents belonged to or were kept by One.Tel, but plainly enough to documents were kept by Ernst & Young and, indeed, Ms Morison says they are business records of Ernst & Young.

As to category 8, the evidence at least shows that copies of the reports were kept by the liquidators. Because the liquidators were at all times the agents of One.Tel, it seems to me appropriate also to conclude that the copies of the reports were kept by One.Tel in the course of its business, while liquidators continued to carry on business.

The evidence about category 10 indicates that the butcher's paper never belonged to One.Tel and was never kept by the company. The notes were made in the offices of PBL. They were exhibited to an affidavit made by the chief financial officer of PBL. In my opinion the evidence shows that they are business records of PBL, admissible on that basis. 15.2 Representations made or recorded in the course of, or for the purposes of, the business

Given my findings with respect to authentication, it is appropriate to conclude that the representations made in categories 1-8 and 10 were made or recorded in the course of the business of One.Tel or (in the case of category 10) PBL. 15.3 Representations made by persons reasonably supposed to have personal knowledge of asserted facts, or on the basis of information directly or indirectly supplied by such a person

It is not necessary, under s 69(2), to show that the person making the representation, or supplying information on the basis of which the representation is made, actually had personal knowledge of the asserted facts. It is enough that the person "might reasonably be supposed to have had" that personal knowledge. It appears from such cases as NT Power Generation Pty Ltd v Power and Water Authority [1999] FCA 1549 that this requirement may be inferred from the document itself.

In The Duke Group Ltd (in liq) v Arthur Young (1990) 3 ACSR 420, 429-430, Perry J held, with respect to the Evidence Act 1929 (SA), that it was unnecessary for the party tendering a business record to identify its author. Under s 69 what has to be shown is that the previous representation contained in the business record was made by, or on the basis of information directly or indirectly supplied by, "a person" falling within the description in s 69(2). Not only does the statutory provision extend beyond authors to other persons with knowledge, and permit representations to be made on the basis of information indirectly supplied; it is enough that the court is able to conclude, on the balance of probabilities, that the representations in the document were made by, or on the basis of information supplied by, someone (not necessarily identified) falling within one of the alternative descriptions in s 69(2). Thus, in Lee v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 305, Hely J (at [18]) held that s 69(2)(b) was satisfied, in the case of a note scanned into the defendant's computer system, where neither the author of the note nor the person who provided the information noted were identified. It was enough that the unknown person providing the information (that is, information that a letter was at the Australia Post delivery centre) to the unknown person who recorded it, was from Australia Post. The Full Federal Court upheld Hely J's decision.

The defendant submitted that, with very few exceptions, ASIC tendered its documents without any direct evidence as to any representation having been made by a person with personal knowledge of the asserted fact, or on the basis of information supplied by such a person. In light of the principles just stated, that presents no difficulty. The defendants said I should not readily infer that the documents were created with the requisite personal knowledge, in circumstances where ASIC had made a forensic decision to tender documents without any evidence of such matters. But the question to be addressed at this stage (in contrast with the discretionary question considered later) is whether, on the balance of probabilities, the requirements of s 69 have been met, a matter not affected by ASIC's alleged forensic decision.

In my opinion, in light of the authorities, once documents are traced to the Ferriers I:/Drive, it can be inferred that the representations in them were made by a person who might reasonably be supposed to have had personal knowledge of the asserted facts. In my opinion that inference is assisted by the "last saved by" boxes where they are available and designate a person such as Mr Holmes or Ms Ashley, recognised in the evidence as employees of One.Tel with significant financial knowledge. But properties boxes are not essential for this inference to be made. It can be made upon a review of the nature of the document and its location in the I:/Drive.

In my opinion the same inference is available with respect to the collections profile summaries produced by Ernst & Young, having regard to the nature and content of those documents on their face.

As far as the documents retained by Piper Alderman are concerned, my view is that an inference can be drawn that the documents were retained by Mr Silbermann or Mr Beck and the documents were therefore regarded as having some significance; that in turn supports the inference that the representations in them were made by a person who might reasonably be supposed to have had personal knowledge of the asserted facts.

The nature and content of the liquidators' reports clearly enables the inference to be drawn that the representations in them were made on the basis of information directly or indirectly supplied by persons who might reasonably be supposed to have had personal knowledge of the asserted facts.

In the case of the butcher’s paper, Mr Kleemann's evidence will establish that the representations on the paper were made by one of the One.Tel representatives at the meeting, each of whom might reasonably be supposed to have had personal knowledge of the asserted facts.

My conclusion is that each of the categories of documents is admissible evidence under s 69. 16. Opinion evidence

Where s 69 applies to a tender of documents, the effect is only that the hearsay rule does not apply. The section does not declare the evidence to be admissible per se . Therefore it seems appropriate to inquire whether evidence falling within s 69 is rendered inadmissible by some other exclusionary rule. That is the effect of s 56(1), and of the structure of Chapter 3, which sets up the general inclusionary rule that relevant evidence is admissible and then, in separate parts, articulates various exclusionary rules and exceptions to them (and see also the Introductory Note to Chapter 3).

A statement of opinion in a document may be an asserted fact for the purposes of s 59 and s 69. That is the effect of Ringrow Pty Ltd v BP Australia Ltd (2003) 130 FCR 569. In that case Hely J held that s 69 applied to two valuation reports that had been tendered for a hearsay purpose. He noted that the Commonwealth precursor to s 69 had defined "fact" to include "opinion", and he observed that there was no express specification in the Evidence Act that "asserted fact" includes "asserted opinion" (at 572). Nevertheless he held that: · s 69 is meant to have a facilitative effect and to be construed broadly (at 572); · the hearsay rule and its exceptions are capable of applying to opinion evidence (at 573); · since, at least in some contexts, "fact" may include an opinion (without statutory extension), s 69 is capable of operation even if the asserted fact is an opinion in relation to a matter of fact (at 573).

In Young v Coupe [2004] NSWSC 546, White J said (at [13]) that he thought he should follow Ringrow. Although an aspect of Hely J's reasoning has been criticised (S Odgers, Uniform Evidence Law (6th ed, 2004) at [1.3.2860]), I shall also proceed on the basis that Ringrow is correct in holding that documentary opinion evidence may constitute a representation of an asserted fact and therefore be exposed to the hearsay rule, but also protected from it if s 69 applies. In light of Ringrow , I would not support the suggestion in Cross on Evidence, Australian Edition (JD Heydon, Butterworths, looseleaf), para [46,855], that the hearsay rule might not exclude "asserted opinions", with the consequence that the business records exception would not be relevant to them.

On that basis, it in may happen that hearsay representations in a document are not rendered inadmissible by the hearsay rule because of s 69 (or some other exception to the hearsay rule), although the representations are evidence of opinions tendered to prove the existence of facts about existence of which the opinions were expressed. The question then arising is whether evidence of the opinions is inadmissible under s 76, unless one of the exceptions to the opinion rule applies, or is protected from the operation of the opinion rule because of the application of s 69.

In two cases courts appear to have assumed that evidence exempted from the hearsay rule might be excluded by the opinion rule, though in neither of the cases was this held to have occurred. One of the cases is Terranora Group Management Pty Ltd v Terranora Lakes Country Club Ltd (in liq) (unreported, Supreme Court of New South Wales, Santow J, 1 December 1997), where his Honour raised the question whether the exception to the hearsay rule for interlocutory evidence, contained in s 75, operated to protect the evidence from exclusion under the opinion rule in s 76. He expressed the view that s 76 was applicable where the opinion-giver relied upon hearsay as the factual substratum of his or her opinion. The other is Connex Group Australia Pty Ltd v Butt [2004] NSWSC 379. There White J held that the hearsay rule did not apply to a file note recording conversations, because the exception to the hearsay rule in s 64(3) was applicable. He then saw it as appropriate to consider whether the evidence was inadmissible under the opinion rule in s 76, and decided that the opinion rule did not apply because the evidence was lay opinion evidence falling within s 78. Additionally, it has been asserted (S Odgers, Uniform Evidence Law (6th ed, 2004), at [1.3.780] footnote 65) that evidence of a previous representation in the form of an opinion as to the existence of fact may be caught by both the hearsay and opinion rules.

On the other hand, Hely J's judgment in Ringrow appears to proceed on the basis that if the valuation evidence before the court was protected by s 69, it was admissible without recourse to the opinion rule and its exceptions. Further, in several cases courts appear to have proceeded on the basis that s 69 was in principle available to render admissible tendered documents containing expressions of opinion: Stankowski v Commonwealth [2003] NSWSC 122 (O'Keefe J) (psychiatrist's report); Waterwell Shipping Inc v HIH Casualty and General Insurance Ltd (unreported, Supreme Court New South Wales, Giles CJ (Comm Div), 8 September 1997, BC9704168) (shipping survey report); NT Power Generation Pty Ltd v Power and Water Authority [1999] FCA 1549 (Mansfield J) (various opinions including views of Ernst & Young in relation to affairs of the company).

The issue is one of substantial general importance. If the opinion rule were to apply on the shoulders of s 69, there would be large scope for its application. Documents containing "opinions", in the broad sense meaning inferences from observed facts (see ASIC v Rich [2005] NSWSC 149 at [261]), are commonplace in business records and in practice, they are frequently admitted in evidence. One immediately thinks, for example, of financial statements, which are replete with opinions on matters such as provisions (although, of course, financial statements of bodies corporate are admissible under s 1305). Documents about contracts and negotiations and business transactions are also likely to be full of opinion material.

Essentially business records are prepared as internal records in the course of or for the purposes of the business. It is most unlikely that those expressing opinions in business records would attend to the requirements of s 78 or s 79, let alone with the precision required by Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. It would not occur to the people creating those documents that they should set out to justify their opinions in the same way that an expert would do in preparing a written report for a court hearing. In those circumstances, to apply the opinion rule to business records that meet the requirements of s 69 would be substantially to undermine, if not to negate, the implementation of the policy underlying the business records provisions, asserted so forcefully by Hope JA in Albrighton (at 548-549) and by the Australian Law Reform Commission in its Interim Report on Evidence at [709]. Courts would be prevented from having access to substantial components of the records of businesses so as to assess them for what they are, on the ground that they do not satisfy requirements which their authors would not have regarded as relevant. As Brownie AJ remarked in a somewhat different context ( Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd (2003) 47 ACSR 261 at [23]), "it does not seem apt in this context to draw a lawyerly distinction between the way a witness might or might not be permitted to give opinion evidence in court with the way in which a company officer routinely reports to his superiors".

Section 69(2) plainly spells out the consequence of its application, namely that the hearsay rule does not apply to the document so far as it contains the hearsay representation. The section does not say that the representation is admissible. That, and the overall structure of Chapter 3, appears to leave the way open for s 76 to be applied. Indeed, one commentator has said it is "clear" that s 76 is intended to operate in relation to both hearsay evidence of opinion and in-court evidence in the form of an opinion (S Odgers, Uniform Evidence Law (6th ed, 2004) at [1.3.4060].

However, s 59 operates to exclude out-of-court representations of opinion as well as of fact, having regard to the decision in Ringrow . It seems plausible to say (as ASIC submitted in AS 67) that, s 59 having had that effect, the opinion rules in ss 76 to 79 operate on opinion evidence given in court.

Support for the view that the opinion rules in ss 76 to 79 are confined to evidence of opinions given by witnesses in court, leaving s 59 and its exceptions to deal with out-of-court hearsay representations of fact and opinion, may be found in ss 78 and 79, both of which appear to envisage a witness presenting evidence in which the basis of the opinion is articulated, something that is unlikely to occur when opinions are expressed in the records of a business in the course of or for the purposes of the business. This construction avoids the undermining of the business records policy. It also avoids the tension that would otherwise arise between the opinion rules and s 69(2)(b), which allows the hearsay rule to be overcome, inter alia , where a previous representation of fact or opinion was made on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have personal knowledge of the asserted fact. In contrast, the opinion rules require that the previous representation of opinion be based on what the person saw, heard or otherwise perceived (s 78) or that it be based on specialised knowledge (s 79). Confining the opinion rules to evidence given in court is consistent with their rationale. It is appropriate to require a witness giving an opinion in an adversary context to comply with the relatively strict requirements of s 78 or 79, because of the risk of bias or influence, while opinions expressed in business records created for non-litigious purposes are treated as generally reliable.

I agree with ASIC that an interpretation of the opinion rules which confines them to the evidence of witnesses in court receives some support (though it is limited) from extrinsic materials concerning the enactment of the Evidence Act. In its Final Report, Evidence (Report No 38, 1987), the Australian Law Reform Commission presented its recommendations (at [150]) in terms of the taking of "expert testimony", and said (at [151]) that the Interim Bill would have enabled "an expert to give opinion evidence". The relevant part of the Interim Report on Evidence (Report No 26, 1985) is headed (page 193) "The Expert Witness Exception", and para [362] is headed "Expert Testimony Based on Inadmissible Evidence". Additionally, this construction appears to accord with the common law, under which the opinion rule was stated in terms of a "witness" being precluded from giving an opinion ( Cross on Evidence , looseleaf Australian edition, at [29005]), while an out-of-court opinion was excluded by the hearsay rule (op. cit. at [31025]).

In their submissions the defendants drew attention to a passage in Cross on Evidence (JD Heydon, looseleaf Australian edition), at [46,855], in which the learned author refers to an undated letter from the Minister of Justice to the Chairman of the Senate Standing Committee on Legal and Constitutional Affairs, in which the Minister said that the opinion rules, then in draft, "determine whether evidence of an opinion (whether in a business record or not) is admissible". Assuming (without deciding) that it is appropriate to have regard to such material as an aid to statutory interpretation, I would not regard the Minister's statement as of any assistance. As the learned author of Cross points out, the underlying idea in the statement appears to be that the hearsay rule applies only to "asserted facts" not "asserted opinions", a view now inconsistent with Ringrow .

My preferred construction of the opinion rules has important consequences for the present case. The defendants identified approximately 40 passages in the various liquidators' reports, describing the representations identified by ASIC in those passages as "estimates" (see DS 60, at [46]). They made submissions designed to show that "estimates" of net realisable value made by the liquidators, particularly in their report as administrators dated 12 July 2001, were an important component of ASIC's case on quantum of damages. ASIC wishes to rely on the liquidators' estimates of net realisable value as part of its calculations to show that there was a deterioration in the net realisable value of One.Tel's assets in the period between 28 February and 29 May 2001, of $92 million.

According to the defendants' submission, once ASIC decided to base its damages case on valuations of the likely realisable value of the company's net assets as at 29 May, compared with the position as at 28 February, it would have been reasonable to expect ASIC to adduce evidence from appropriately qualified experts who would give reasoned opinions as to the realisable value, as at the different dates, of important asset classes, such as the spectrum licences for which One.Tel was said to have paid more than $500 million in early 2000, One.Tel's portfolio of trade debtors, One.Tel's subscriber base which was said to have been acquired at a cost of over $100 million, the company's plant and equipment, and its overseas subsidiaries. The defendants criticised ASIC for relying simply on the tender of the liquidators' reports, without proffering any such experts' reports (I should note that the Carter Report, if it had been admissible, would not have filled this gap).

The defendants then submitted that the estimates in the report of 12 July 2001 were inadmissible on various grounds. First, they said the estimates were irrelevant because, in the absence of articulation of their factual basis or reasoning process or identification of the relevant expertise of the persons expressing opinions, the estimates could not sensibly be assigned any probative value. I disagree with this submission. The report of 12 July 2001 was produced by Mr Sherman and Mr Walker in discharge of their statutory duty as administrators. That status gives it a degree of presumptive probative value. There is an analogy here with some observations in McVeigh (as liquidator of JAG Plastering & Carpentry Pty Ltd (Vic)) v Commissioner of Taxation [2004] FCA 653, where Finkelstein J (at [6]) followed what was said by Tadgell J in Re Action Waste Collections Pty Ltd (in liq); Crawford v O'Brien [1981] VR 691, in relation to evidence by a liquidator. After outlining the role and statutory responsibilities of a liquidator, Tadgell J said, in a passage approved by Finkelstein J, that it would be contrary to common sense not to presume that the liquidator had complied with his obligations to obtain the company's financial records and examine them.

Secondly, the defendants submitted that the estimates are hearsay (that is true) and that they do not fall within s 69 because they are not records of any business, and s 69 does not apply to statements of opinion rather than asserted fact. I have given my reasons for disagreeing with that submission. In my view s 69 applies to the representations in the liquidators' reports.

Next, the defendants submitted that the estimates in the report of 12 July were inadmissible by operation of s 76 and did not satisfy the requirements for admissibility of expert opinions set out in s 79 as explained in Makita . It is not necessary for me to reach a conclusion on this submission because, in my opinion, the liquidators' out-of-court opinions are admissible under s 69 (and also s 1305) and s 76 does not apply to them. To express a firm view on whether the reports comply with s 79, it would be necessary for me to work through each of the estimates and assess them in light of the principles stated in my judgment on the Carter Report, [2005] NSWSC 149. It is not a matter to be resolved by a general, overall assessment. I have decided not to express any view. 17. Admissibility under s 1305

ASIC contends that all nine categories of documents are admissible in evidence under s 1305 of the Corporations Act, independently of the provisions of the Evidence Act. Section 1305 is as follows: "(1) A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. (2) A document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1)."

Those provisions are supplemented by ss 1306(5) and 1306(6), under which, if a book that is required by the Act to be kept or prepared is kept or prepared by recording or storing matters by means of a mechanical, electronic or other device, a written reproduction of the matter so recorded or stored is prima facie evidence of that matter.

Section 1305 was introduced into Australian Corporations legislation upon the enactment of the Companies Act and Codes of 1981. The Explanatory Memorandum to the Companies Bill 1981 said (at [1200]): "This is a new provision based on s-sec 156(3) of the Ontario Business Corporations Act. It is an evidentiary provision that is intended to expedite legal proceedings where books are to be introduced in evidence. This provision obviates the need to call witnesses to prove that books are books of the corporation when this fact is not in question or to prove transactions recorded in books when these matters are not in dispute."

The Explanatory Memorandum's reference to the Ontario legislation does not shed light on the scope of s 1305. The Ontario provision is located with provisions about corporate books and records of the kind that are maintained in an ongoing way, but it is not clear that the Ontario provision was confined to "regularly maintained" corporate books.

Where it applies, s 1305 allows a document properly tendered to become prima facie evidence of any matter stated in it, regardless of whether the stated matter offends an exclusionary rule of the Evidence Act, such as the hearsay rule or the opinion rule. Subsection (2), where applicable, avoids the need to prove the authenticity of the document, unless the presumption is rebutted. Where information is recorded on a computer hard-drive, s 1306(5) permits the tender of a printout of the recorded information. Thus s 1305, if applicable, gives ASIC a "fast track" to admissibility of its tendered documents.

On ASIC's case, s 1305(2) is one of those statutory provisions identified by Bryson J in Rusu that dispense with the need to prove the authenticity of documents - or, more precisely, allow authenticity to be established by an abbreviated means which relies upon the appearance of the document in question. If ASIC's submissions are correct, s 1305 mandates a departure from the general approach of courts described by Bryson J. Given these large consequences, it is incumbent on the court to approach the task of statutory construction with a degree of scepticism towards wide interpretation. In the present case, I have moved from that starting point to be persuaded, by the reasoning in modern case law, that ASIC's submissions are correct, and consequently that all nine categories of documents are admissible under s 1305. 17.1 Does the court have a discretion to exclude evidence admissible under s 1305?

I received conflicting submissions as to whether the court has a discretion under s 135 of the Evidence Act to refuse to admit into evidence documents rendered admissible by s 1305(1). The defendants submitted that s 1305(1) does not deprive the court of its discretion under s 135, because s 1305 only renders the documents in question "admissible", rather than "to be admitted", and s 135 allows the court to exclude admissible evidence. ASIC drew attention to the wording of s 1305(1), which says that the document is not only admissible but is also prima facie evidence of matters stated or recorded in it. In ASIC's admission, this must mean that a document meeting the requirements of s 1305(1) is necessarily evidence in the proceeding and cannot be excluded on discretionary grounds.

It would be surprising if Parliament had intended to require that evidence be admitted against a party in all circumstances, including circumstances where to do so would or might be unfairly prejudicial to the party, or misleading or confusing, or would or might cause or result in undue waste of time (the grounds for excluding evidence under s 135). In my opinion s 1305(1) does not purport to achieve this result. It addresses two matters: first, whether the document is admissible evidence; and secondly, the weight as evidence of the document's contents, once the document has been admitted into evidence . The second matter is premised on an assumption, namely that, the document having been rendered admissible by s 1305(1), the court has in fact admitted it into evidence. Section 1305(1) says nothing about that intermediate step. It is at the intermediate step that the discretion to exclude evidence under s 135 arises for consideration. Hence, the presence of the discretion to exclude evidence is compatible with the terms of s 1305(1).

This construction does not, as ASIC submitted, "frustrate the clear legislative policy behind s 1305". No sensible legislative policy would demand that evidence that is unfairly prejudicial to a party, or misleading or confusing, or would result in undue confusion or waste of time, must be admitted. Contrary to ASIC's submission, it is not relevant to the question of construction of s 1305 that the plaintiff is the corporate regulator, or that the defendants are former executive directors who were (allegedly) exceptionally well placed to know the true position. The question whether these matters are relevant to the exercise of the discretion under s 135, once it is established to be available, is considered later.

My construction of s 1305 on this point is supported by s 5E(1) of the Corporations Act, according to which the Corporations Act is not intended to exclude or limit the concurrent operation of any law of a State. 17.2 Ingredients of s 1305(1)

Section 1305(1) applies to the nine categories of documents if they are · "books"; · "kept by a body corporate", ie One.Tel, and · so kept "under a requirement of [the Corporations] Act". The meaning of the latter two requirements is controversial. 17.3 "Books"

The term "book" is defined in s 9 of the Corporations Act, to include (a) a register; (b) any other record of information; (c) financial reports or financial records, however compiled, recorded or stored; and (d) a document.

The expression "financial report" is defined in s 9 to mean the annual financial report or a half-year financial report prepared under Chapter 2M. "Financial records" are defined to include: (a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and (b) documents of prime entry; and (c) working papers and other documents needed to explain: (i) the methods by which financial statements are made up; and (ii) adjustments to be made in preparing financial statements.

"Financial statements" are the annual and half-year financial statements required under the Act. The word "document" is defined in the Acts Interpretation Act 1901 (Cth), s 25, as in force on 1 November 2000, which applies to the Corporations Act, s 5C(1). "Document" is defined to include (relevantly to the present case) any paper or other material on which there is a writing, and any article or material from which writings are capable of being reproduced with or without the aid of any device.

None of the nine categories of primary documents tendered by ASIC is a "register", but they are all records, either in physical or electronic form, of financial information, either historical or projected, and are therefore "books" within paragraph (b) of s 9. It is not necessary for me to decide, in order to determine whether the nine categories of documents are "books" for the purposes of s 1305, whether they are financial records. But the question is significant to the assessment of whether they are kept under a legal requirement of the Corporations Act, and will be addressed in that context. The copies of the primary documents which ASIC wishes to tender are "documents" within paragraph (d) of the definition of "books". 17.4 "Kept by a body corporate"

The word "kept" is not defined in the Corporations Act but the expression "body corporate" is defined to include a body corporate that is being wound up. One.Tel is a body corporate, but the liquidators of One.Tel are not.

There are two aspects of the meaning of these words, in the context of the present case: first, when is a document "kept"; and secondly, is a document kept by the company's liquidator under a requirement of the Corporations Act a document kept "by [the] body corporate"? 17.5 "Kept"

ASIC submits that the word "kept" means retained, and it says that eight of the nine categories of documents (excluding the liquidators' reports) were "kept" by One.Tel because they were stored on the I:/Drive or were otherwise in the possession of the company. The defendants' submission is that a book is "kept" for the purposes of s 1305 only when it is maintained or used to record or store information systematically.

I was taken to dictionary definitions of the verb "keep". For example, The New Shorter Oxford English Dictionary includes, in the many meanings of the word, both to "maintain or cause to continue in a specified condition" and to "retained in one's possession or control", alternative definitions that correspond with the contentions of the defendant and ASIC respectively. The dictionary definitions only serve to confirm that the word is ambiguous and (to use the words of Asprey JA in Porter v Cook [1971] 1 NSWLR 318 at 319) "can bear a wide variety of meanings according to the subject matter of that which is alleged to be kept". In the decided cases there is a line of authorities supporting each of the contending approaches.

In Residues Treatment and Trading Co Ltd v Southern Resources Ltd (1989) 52 SASR 54, the question was whether a company's annual report was admissible under s 550 of the Companies Code, a predecessor provision not materially different from s 1305. Perry J of the Supreme Court of South Australia held that, though parts of an annual report were required by statutory Corporations legislation to be prepared, the annual report was not a book "kept" by the company, and therefore not admissible under s 550 (though it was held to be admissible on another basis). He said (at 77), without referring to other decided cases: "… the word 'kept' does not simply mean a document which is retained by a corporation. It seems to me that it is an essential part of the quality of a document which is said to come within the scope of [the section], that it should be in the nature of a document or record which is in some way maintained by the corporation in a systematic or periodic fashion."

These observations were followed and applied by the Federal Court in Tubby Trout Pty Ltd v Sailbay Pty Ltd (1992) 113 ALR 748 at 753-4, where Drummond J held that a letter dealing with credit arrangements between a company and another company was not a book kept by a body corporate for the purposes of s 1305(1) of the Corporations Law (materially identical to the present provision) because it was not in the nature of a document or record maintained by the company in a systematic or periodic fashion.

In Sheahan v Northern Australian Land and Agency Co Ltd (1994) 176 LSJS 257 it was held that certain contracts of sale of land were not business records and were not admissible under s 1305 of the Corporations Law. Without referring to Residues Treatment or Tubby Trout , Olsson J (with whom Mohr and Nyland JJ agreed) said of s 1305: "What is manifestly in contemplation is that class of document which is brought into existence, by or on behalf of a company, and maintained in its custody by virtue of an express obligation to do so imposed by the Corporations Law itself."

On the other hand, there is a line of cases preferring the wider construction that books are kept by a body corporate if the body corporate has charge or custody of them, or retains them. In Duke Group Ltd (in liq) v Pilmer (1994) 15 ACSR 255, Mullighan J of the Supreme Court of South Australia had to consider whether monthly management accounts and the annual report of a company were admissible under s 1305 of the Corporations Law. I shall consider his reasoning with respect to the management accounts later. As to the annual report, his reasoning (at 270-273) was that, although the Corporations Law at the time required the directors rather than the company itself to prepare the company's financial statements and the directors' report, the company had the statutory obligation to send copies of the documents to its members and to furnish to a member a copy of its most recent financial statements. It could not discharge those statutory obligations unless it had kept (ie retained) the financial statements and reports. He held that the word "kept" in s 1305 was to be given its wider meaning, and therefore that the annual report was admissible under s 1305. He did not refer to Sheahan's case but he quoted Perry J's observations in Residues Treatment , and said (at 272): "With respect, I disagree. There is no reason, in my view, to attribute such a restrictive meaning to the word 'kept'. In its ordinary meaning it includes the narrow meaning given to it by Perry J but it includes the well understood wider meanings of 'keep' of which 'kept' is of the past participle, namely 'to have in stock', 'to have the charge or custody of': The Macquarie Dictionary , 2nd revision; or 'to guard, defend, protect, preserve, save', 'to take care of, to look after': Shorter English Oxford Dictionary ."

In R v Connell (1995) 14 ACLC 32, White J in the Supreme Court of Western Australia held that accounting records of a company were admissible under s 1305 of the Corporations Law. Having decided that s 1305(2) created a presumption that a document purporting to be a book kept by body corporate was kept under a requirement of the Corporations Law, his Honour dealt with a submission that his decision would lead to the absurd result that any piece of paper in the possession of a body corporate, whatever its nature, would be prima facie evidence of its truth. He rejected that submission by preferring Perry J's narrower construction of "kept" in Residues Treatment to the wider construction that had been adopted by Mullighan J in Duke Group .

In Valoutin v Furst (1998) 154 ALR 119, Finkelstein J had to decide whether a company's financial statements and its annual report were admissible under s 1305. He held that they were admissible under the section, and expressly preferred the view of Mullighan J in Duke Group to the view of Perry J in Residues Treatment (without referring to Sheahan , Tubby Trout or Connell ). He observed (at 128): "In deciding which of these decisions is to be preferred it must be remembered that since the last century the narrow traditional common law view of the admissibility of business records has been the subject of statutory modification to facilitate the admission of those records in almost every common law jurisdiction. This is because the common law rules were recognised as an inhibition to the proper administration of justice in both the civil and the criminal courts. Thus, there is no warrant for giving a provision such as s 1305 a narrow construction especially when the admissibility of a document under the section is only on a prima facie basis and will often give way to other conflicting evidence. In my view there is no reason why the word 'kept' should be given the restrictive meaning preferred by Perry J. I agree with Mullighan J that the word should be given its ordinary meaning which includes 'to maintain' and 'to retain'."

In Caratti v R (2000) 22 WAR 527, the Full Court of the Supreme Court of Western Australia held that cashbooks, wage records and other documents described as "farm books" of companies, prepared by an accountant, were admissible under s 1305. Malcolm CJ (with whom Kennedy and Anderson JJ agreed) referred to the observations in Residues Treatment , Tubby Trout , Duke Group , Connell and Valoutin about the meaning of "kept", and held that on either view, the farm books were clearly "kept". But (at 546) he expressed, obiter , his preference for the wider construction and said he considered the more restrictive construction adopted by Perry J in Residues Treatment to be wrong.

In R v Turner (No 17) (2002) 10 Tas R 388, Blow J of the Supreme Court of Tasmania formulated several questions for determination, to assist his eventual assessment of whether various categories of documents of a fish processing company were admissible under s 1305. One of the questions was whether s 1305 applied to all books retained in the custody of a body corporate under a requirement of the Act, or only books required to be maintained in a systematic fashion. After carefully considering Residues Treatment , Tubby Trout , Sheahan , Duke Group , Connell , Valoutin and Caratti , he held (at 395-396): "The fact that s 1305 and its predecessors involve a departure from the common law is one factor weighing in favour of a narrow interpretation of 'kept'. It could also be argued that Parliament intended 'kept' in s 1305 to be understood in the same way as 'keep' in s 286(1), which imposes the obligation to keep written financial records that correctly record and explain a company's transactions, financial position, and financial performance, and would enable true and fair financial statements to be prepared and audited. However I think that those factors are outweighed by the requirement of the Acts Interpretation Act 1901 (Cth), s 15AA, to prefer a construction that would promote the purpose or object underlying the Act to one that would not. Like Malcolm CJ, I agree with the views expressed by Finkelstein J in Valoutin …. Further, the wider approach gives the word 'kept' its ordinary meaning, as Mullighan J pointed out in Duke Group …. For these reasons, I consider that s 1305 applies to all books retained in the custody of a corporation under a requirement of the Corporations Act or the Corporations Law, and not just to books that are the subject of a requirement that they be maintained in a systematic fashion."

I regard the reasoning and conclusions of Blow J in Turner as particularly persuasive. While, with respect, I do not share his view that the wider construction of the word "kept" accords with its ordinary meaning (because in my opinion, the word is ambiguous and may be used in the wider or the narrower sense, depending on the context), it does seem to me that the wider construction is more consistent with the purpose and object of s 1305, as revealed by the Explanatory Memorandum quoted above.

In Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd (2003) 47 ACSR 261, Brownie AJ noted (at [30]) the difference of judicial opinion "in the past" as to what the expression "kept" meant. He explained that the debate had not been re-litigated in the case before him, but instead, the questions in contention related whether the financial records were kept in fact and whether the presumption in subsection (2) applied. Nevertheless, it is plain from his judgment that Brownie AJ agreed with the wider construction of the word "kept" and the general approach taken by Blow J in Turner .

In Timms v Commonwealth Bank of Australia [2003] NSWSC 576, at [25], Barrett J briefly referred to and applied Brownie AJ's analysis of s 1305. 17.6 The risk of "absurdly broad" application

An argument against the wider construction is that, when it is combined with the wider view of the operation of s 1305(2) (discussed below), the result is that s 1305 is given a very wide field of operation - indeed, a field of operation contended by the defendants (like the defendant in Connell ) to be absurdly broad. According to the defendants, the wider construction would mean that "any letter, file note, e-mail or handwritten note dealing in some way with a financial matter will become prima facie evidence of everything which is asserted in it (whether that assertion be first, second or third hand hearsay and whether or not the source of the assertion is even identified), merely by it being shown that the letter came from the custody of a corporation".

The desire to avoid such breadth of scope seems to have influenced White J in Connell to prefer the narrow construction of the word "kept". Mulligan J's espousal of the wider construction of "kept", in the Duke Group case, was combined with a narrow construction of the scope of the presumption in subsection (2), and also a narrow view of the meaning of "accounting records". But the breadth of operation, in combination, of the wider views of the word "kept" and the concept of "accounting records", and of the operation of subsection (2), does not appear to have deterred Malcolm CJ from adopting all three of the wide views.

Blow J specifically confronted this problem in Turner . After referring to Duke Group , Connell and Caratti , and a submission that the wider construction would mean that any document with writing on it found in the possession of a company would be presumed to be a document or book kept under the requirements of the Act, his Honour continued (at 397-8): "However that submission overlooks the requirement that the document must purport to be a book kept by a body corporate. There needs to be something on the face of the document to satisfy this requirement before s 1305(2) can operate. Thus, for example, a folder full of invoices received by a company, labelled on its spine with the name of the company and the word 'invoices', would be a document purporting to be a book kept by a body corporate. On the other hand, to take the fact situation in Sheahan ... as an example, a document purporting to be a contract of sale, showing on its face no sign of having been retained in the custody of a corporation, would not be a 'document purporting to be a book kept by a body corporate'." 17.7 Conclusion as to the meaning of "kept"

Both sides made submissions purporting to derive enlightenment about the meaning of the word "kept" from other sections of the Corporations Act. Thus, ASIC referred to s 286(2), which requires that financial records be retained for seven years, and submitted that it could not seriously be denied that a financial record retained under that requirement is a book kept by a body corporate under a requirement of the Corporations Act, for the purposes of s 1305(1). But the argument is less than compelling. If "kept" means maintained in a systematic or periodical fashion, a requirement to retain a book is not a relevant requirement. And the converse is arguable: rather than using the words interchangeably, s 286 seems to distinguish between keeping and retaining financial records, perhaps suggesting they are different concepts.

The defendants contended that the narrower construction of the word "kept" gains support from the wording of s 1306, in which (in their contention) the keeping of books is treated as involving regular entries in a written or electronic record. In my opinion, s 1306 does not assist in the proper construction of s 1305(1). Section 1306 refers to books being "kept or prepared", rather than simply kept. While the focus of attention of s 1306 is upon the recording and storing of information in such a book, and the reproduction of information, it does not say or imply, in my view, that information may only be "kept or prepared" where there is a process of recording and storing involved. Indeed, in the Duke Group case Mullighan J (at 272) thought that statutory provisions drawing a distinction between "kept" and "prepared" supported the wider construction of the word "kept" (a view that I find, with respect, to be no more compelling).

I respectfully agree with Mullighan J that a comparison of s 1305 with other parts of the Act where the word "kept" appears serves to show that "the legislature has use the words 'keep' and 'kept' with different shades of meaning to suit the definitions of the various obligations imposed in the section" (at 271-2). Although an investigation of other uses of the same words in the same statute is often helpful, here it is not.

ASIC urged me to prefer the wider construction on the ground that the narrow construction involves reading into the section words that are not there. I disagree. It is clear enough from the dictionary definitions that the word "kept" may in some contexts have the narrower meaning, without the addition of other words. This is simply a case of use of an ambiguous word without any strong contextual guidance as to which meaning was intended.

On balance, however, I have decided that there are two reasons for preferring the wider construction of the word "kept": the authorities and the legislative purpose. A negative reason that appears to have influenced White J, namely that the concern that the wider construction would lead to an excessively wide or even absurd operation of s 1305 has been addressed, in my view persuasively, by Blow J in Turner , and has therefore effectively been removed as an incentive to adopt Perry J's narrower construction.

As to the authorities, there is no decision on the construction of the word "kept" that would be binding on me, sitting as a judge at first instance in this Court. It would be an exaggeration to say, as ASIC did in its written submissions, that there is now a "long and consistent line of authority" in favour of the wider view. However, in my view the prevailing judicial opinion is now firmly in favour of the wider construction first taken by Mullighan J in Duke Group .

As to legislative purpose, the observations of Finkelstein J in Valoutin , to the effect that the section was a response to narrow common law rules that inhibited the proper administration of justice, and therefore the section should not be narrowly construed, have been consistently supported in later cases. In the circumstances, this is an important consideration.

The defendants submitted that the rationale of s 1305 is as follows. There is a core set of "books" which all corporations are required to "keep" in order to comply with s 286. This select group of financial records is so fundamental to the financial administration of the corporation that it is made a criminal offence not to keep them. Such fundamental records are inherently likely to be reliable evidence of the matters recorded in them, and therefore it is reasonable to provide for them to be prima facie evidence of those matters. But (on this submission) there is no justification for extending that effect beyond the core of fundamental records, and certainly no justification for extending its to every piece of paper found in the possession of the company.

The defendants' submission articulates a legislative purpose considerably narrower than the one supported in Valoutin , Caratti , Turner and Linfox Transport. According to the judges in those cases, the legislative purpose was to facilitate the admission of financial records and other books of companies over a more broadly defined field. It seems to me that the risk of oppressive or unfair operation, which is at the heart of the concern about giving s 1305 an excessively broad operation, is addressed by preserving the court's discretion to exclude evidence under s 135, as well as by insisting (as Blow J did in Turner ) that there must be something on the face of the document to satisfy the requirement that it purports to be a book kept by a body corporate. I therefore reject the defendants' submission.

I shall therefore approach the application of s 1305 in the present case on the basis that "kept", when used in s 1305(1) and (2), has the wider construction adopted by Mullighan J - that is, a document is "kept" for the purposes of s 1305 if it is retained or held (and is therefore "kept", a fortiori, if it is maintained systematically and periodically). 17.8 Are books kept by liquidator "kept by a body corporate"?

The second aspect of the words "kept by a body corporate" relates to whether a document kept by the liquidators of a body corporate under a requirement of the Act is a document kept "by" the body corporate. "Body corporate" is defined in s 9 to include a body corporate that is being wound up. A body corporate in voluntary administration is, a fortiori , also a body corporate for the purposes of s 1305.

To make the analysis applicable to the present case, attention must be given to the case of liquidators first appointed as voluntary administrators. Upon the appointment of administrators, the administrators obtain control of the company's business, property and affairs (s 437A) and when performing functions or exercising powers as administrators, they are taken to be acting as the company's agent (s 437B). The powers of the officers of the company are suspended under s 437C. The administrators are required by s 439A to convene a meeting of creditors and distribute a report to the creditors, and one of the options for the creditors used to resolve at their meeting that the company be wound up. If they do so, the administrators become liquidators under a deemed creditors' voluntary winding up, by virtue of s 446A. On their appointment as liquidators, the powers of the directors of the company cease by virtue of s 495(2).

Section 531 obliges a liquidator to keep "proper books" in which he or she must cause to be made entries or minutes of proceedings at meetings and such other matters as are prescribed, and creditors and contributories have the right to inspect those books unless the court otherwise orders. Regulation 5.6.01 prescribes, as the matters to be recorded, all matters that are required to give a complete and correct record of the liquidator's administration of the company's affairs. Under s 542(1), where a company has been wound up, all books of the company and of liquidator that are relevant to affairs of the company at or subsequent to the commencement of the winding up are, as between the contributories of the company, prima facie evidence of the truth of all matters purporting to be recorded in those books. By s 542(2), once the company has been wound up, the liquidator must retain the books referred to in subsection (1) for a period of five years, except in the special circumstances set out in s 542(3).

Is it correct to say that, for the purposes of s 1305, documents kept by the liquidators in that capacity are kept by the body corporate to which they have been appointed; and if it is, are they kept by the body corporate "under a requirement of [the Corporations] Act"?

When performing their functions and exercising their powers as such, liquidators occupy the position of agent of the company: AR Keay, McPherson's Law of Company Liquidation (4th edition, 1999), page 288, and cases there cited. If, therefore, the liquidators take some authorised step in carrying on the business of the company, that step is binding on the company as principal, just as if it had been taken by or on behalf of the company's board of directors prior to commencement of the voluntary administration. It would have been a step taken by the company as principal.

In my opinion the same consequences flow when the liquidators take a step in the administration of the affairs of the company, since in doing so they are acting as the company's agent. The liquidators' keeping of reports to creditors prepared by them in their capacity as liquidators or administrators, by retaining them, is conduct by them as agent for the company. It follows that the reports are kept by the body corporate, and therefore those documents are books kept by a body corporate for the purposes of s 1305. Clearly, they are books kept under requirements of the Act, namely the requirements set out above which oblige liquidators to keep and retain such documents. 17.9 Kept "under a requirement of this Act"

There are two issues about these words: first, whether s 1305(2) creates a presumption that documents purporting to be books kept by a body corporate are books kept by a body corporate under a requirement of the Corporations Act; and secondly, whether documents such as the ones tendered by ASIC are "financial records" recording and explaining One.Tel's transactions, financial position and performance and therefore required to be kept under s 286 of the Act. 17.10 The extent of the presumption under s 1305(2)

If the tendered material is a document purporting to be a book kept by a body corporate, s 1305(2) says that, unless the contrary is proved, the document is taken to be a book kept as mentioned in s 1305(1). Section 1305(1) refers to a book "kept by a body corporate under a requirement of this Act". Does subsection (2) mean that any document purporting to be a book kept by a body corporate (in the wide sense of "kept" discussed above) is presumed to be a book kept under a requirement of the Act?

In the Duke Group case it was submitted that a company's monthly management accounts should be taken to be books kept under the Corporations legislation, because of subsection (2). Mullighan J rejected that argument. He said that the effect of subsection (2) was to deem a document that purported to be a book kept by a body corporate to be, indeed, a book kept by a body corporate. But in his Honour's view, subsection (2) did not deem the document to be kept under a requirement of the legislation. He said (at 264): "The words 'as mentioned in subsection (1)' in subsection (2) cannot be understood to mean that a book is deemed to be kept under a requirement of the Law. If that was so, any document within the definition of a book kept by a company would be deemed to be kept under a requirement of the Law."

In Connell , the defendant argued that subsection (2) did not apply to deem a company's accounting records to be kept under a requirement of the legislation, relying on Mullighan J's observations in Duke Group . White J disagreed (at 34) with Mullighan J's construction of subsection (2). He said that Mullighan J's construction did not give proper effect to the words of subsection (2), "kept as mentioned in subsection (1)".

In Caratti , Malcolm CJ held that the "farm books" were kept by the relevant company under the requirement found in the predecessor to s 286, and it was therefore unnecessary for him to deal with the effect of s 1305(2). However, he referred to the difference of opinion between Mullighan J and White J and said (at 547) that the construction adopted by White J commended itself as appropriate to achieve the legislative purpose of facilitating the admissibility of business records.

In Turner , one of the questions for determination was whether s 1305(2) operated to deem a document not only to be a book, and to have been kept by a body corporate, but also to have been so kept under a requirement of the Act. Blow J referred to Duke Group , Connell and Caratti and preferred the views of Malcolm CJ and White J to the view of Mullighan J on this point. He rejected a submission that the presumption that a document was kept under a requirement of the Act could be rebutted by evidence of the subjective intention of the company's officers in keeping it (at 399), saying that a document was to be regarded as kept under a requirement of the Act even if no-one meant to keep it and no-one had adverted to any requirement of the Act.

It was submitted (at 398) that, while there is logic in presuming something to be what it purports to be unless the contrary is proved, it is illogical to presume, in the absence of evidence to the contrary, that it has a quality that it does not purport to have - that is, when a book purports to be a book kept by a body corporate, it is one thing for there to be a rebuttable presumption that that is so, but it is quite another thing for there to be a further rebuttal presumption that its keeping was under a requirement of the Corporations Act. Blow J dealt with the submission in this way (at 398): "However Parliament no doubt has the power to create legislative presumptions that particular documents have a particular quality that they do not purport to have. Perhaps clear language is needed to create such a presumption, but the language of s 1305(2) clearly supports such an interpretation, as White J explained in Connell … I do not think such an interpretation produces an illogical or absurd result. The purpose of s 1305 was to facilitate the tendering of documentary evidence to overcome the difficulties and injustices referred to by Finkelstein J in Valoutin . If s 1305(2) is interpreted as the Crown submits it should be, then the section would permit any document that purports to have come from a company's files or records to be tendered as proof of its contents without formal proof unless an objection based on s 1305(2) is taken. I see nothing illogical or absurd about that result."

In the Linfox Transport case, Brownie AJ agreed with Blow J's statement of the effect of s 1305(2), and in particular, with the need to construe provisions such as s 1305 facilitatively and widely. In the case before him, there was no plan or instruction that the monthly sales reports for the Western Australian branch be retained, but Brownie AJ applied the observation of Blow J that a document should prima facie be regarded as kept under a requirement of the Act, even if no-one meant to keep it and no-one adverted to any requirement of the Act.

None of these cases is binding on me, and the opinions expressed in Caratti and Linfox Transport are obiter . But it is clear that Mullighan J's observations on this point are out of step with the views expressed in the later cases. Further, it seems to me that Mullighan J's view does not give full effect to the words "kept as mentioned in subsection (1)", which in my opinion refer both to the keeping of the book by the body corporate, and the keeping of the book under a requirement of the Act. That construction promotes the legislative purpose. As the Explanatory Memorandum to the original provision stated, the purpose of s 1305 is to expedite legal proceedings by obviating the need to call witnesses to prove that the books are books of the corporation or to prove the transactions recorded in the books. That purpose is achieved only if the deeming effect is, subject to proof to the contrary, comprehensive.

The presumption created by subsection (2) can be rebutted by proof to the contrary. If it appears, having regard to the nature of any particular document, that there is no requirement of the Corporations legislation for such a document to be kept by a body corporate, the presumption is rebutted. 17.11 The requirement to keep financial records

The principal source of statutory obligation to keep books is now s 286 of the Corporations Act, which came into force in July 2001. The effect of the transitional provisions, especially ss 1399 and 1400, is that one assumes that the Corporations Act was in force at all relevant times but that its content is identical with the content of the corresponding provision of the former Corporations Law. Here, the transition presents no difficulty because the present s 286 is identical with its predecessor, s 286 of the Corporations Law except for amendments made in December 2001 to reflect the Commonwealth Criminal Code.

Section 286(1) obliges a company to keep written financial records that correctly record and explain its transactions and financial position and performance, and would enable true and fair financial statements to be prepared and audited. A provision of this kind has been part of the Corporations legislation for many years, but before 1998 the section spoke of "accounting records" and "accounts" rather than "financial records" and "financial statements". The expression "financial records" is defined in an inclusive fashion in s 9, as noted above. The definition of "accounting records" in the early legislation was similar. Since the definition is inclusive, and the matters listed do not form a single class (for example, invoices cannot be said to fall within the same class as working papers prepared for financial statements), this is not a case for the application of the ejusdem generis principle of statutory interpretation: Pearce & Geddes, Statutory Interpretation in Australia (5th edition, 2001), at [4.22].

A question has arisen in the cases as to whether "financial records" ("accounting records" in the earlier cases) extend beyond documents of prime entry such as the cashbook and journal, to "derivative" documents that have been prepared using judgment or prediction, and involving the interpretation of financial data.

In Van Reesema v Flavel (1992) 10 ACLC 291 the appellant was charged with failing to take reasonable steps to secure compliance, by a company of which he was a director, with provisions about the keeping of accounting records, that were the predecessors of s 286 of the Corporations Act. The company had not kept any books or accounting records during its life. The appellant contended that it had been unnecessary to do so because the company had not entered into any transactions requiring books of account. But when the liquidator of the company drew his attention to some transactions that the company had entered into, the appellant created a journal, a profit and loss account and a balance sheet. The judge below found that the company should have kept a general ledger and a general journal, and the offences were proved in respect of failure to keep those books, but there had been no need for the company to keep a cashbook or a creditors' ledger. On appeal, it was argued that the section did not require that a general ledger and journal be kept, given the limited nature, scope and number of the transactions that the company had entered into.

The Full Court of the Supreme Court of South Australia dismissed the appeal. King CJ (with whom Bollen and Prior JJ agreed) cited some observations on a differently worded predecessor provision by Burt J in Manning v Cory & Sumner [1974] WAR 60, at 62. Burt J had said: "The evident policy … is that the accounts should disclose or exhibit the financial position of the company at all times and at any time. They must be such as to enable one to say at any point of time where, in a financial sense, the company is, and it is not enough that they be such as to enable a competent accountant by producing a set of accounts long after the happening of the events to which they, i.e. the cheque butts, receipts and so on relate, to say where it has been and to establish the fact that it is then insolvent and unable to carry on. The whole policy of the section is to prevent this from happening, that is to say to prevent its officers from flying the company blind and upon its crash, and without having any information capable of sustaining the opinion, from then saying that he thought that he had more altitude."

Applying these observations to a statutory provision similar to the present s 286, King CJ held that a general ledger and journal that explained the company's transactions were amongst the minimum accounting records required. The fact that the source materials had been retained did not discharge the company's obligation. It was not enough that accounting records had been prepared after the commencement of liquidation, because the statutory obligation implied that accounting records "should be kept on a regular basis so as to disclose the financial position of the company 'at all times and at any time'."

In the Duke Group case, Mullighan J held (at 263) that the monthly management accounts of the company were not accounting records required to be kept under the predecessor of s 286 or otherwise, and therefore they were not admissible under s 1305, although they were admissible on another ground. Counsel in that case submitted, referring to Van Reesema v Flavel , that the statutory obligation could not be discharged merely by keeping a general ledger, and there needed to be records that would explain the financial position of the company at any time, so as to avoid the company "flying blind"; and that, while the method adopted for discharging the obligation was a matter for the subjective commercial judgment of the company, once the company chose to produce monthly management accounts as a means of discharging its obligation, those accounts were kept pursuant to the obligations imposed by the statute.

Mullighan J rejected that argument. He said that the Corporations legislation, by distinguishing between "accounting records" and "accounts", drew a distinction between primary accounting records and documents such as management accounts, which are "derivative" records which interpret the primary records and entail judgments as to such matters as depreciation and amortisation (at 263). In his Honour's opinion, the Corporations legislation did not require a company to keep records of an interpretative or judgmental kind, as such records are "accounts" rather than "accounting records". The statutory requirement that the accounting records must correctly "explain" the company's transactions and financial position merely meant that those records must be made in a way that revealed relevant and appropriate information.

In Caratti , Malcolm CJ held that the farm books, which contained operational summaries for the Caratti farming business, were accounting records required to be kept under the predecessor of s 286, even though they were derivative rather than primary records and their preparation involved matters of interpretation and judgment. He held that the purpose of preparation of the farm books was to disclose the financial position of the company, with respect to wages and fuel expenses, from time to time and therefore they were records of the kind described by Burt J in Manning v Cory . He rejected Mullighan J's view that the "accounting records" are the company's primary records, and that reports and other documents that are derivative and judgmental are "accounts". He observed (at 546) that Mullighan J's view had ignored the inclusive nature of the definitions of "books" and "accounting records", had ignored the object and purpose of s 1305, and had strained the language of the predecessor of s 286 by excluding derivative records from its ambit. He said that documents of prime entry could not properly explain the financial position of the company, and more was required. The wages and fuel summaries in the farm books had been "regularly maintained for the very purpose of disclosing the financial position of the company and as being necessary to explain its financial position".

In the Linfox Transport case, Brownie AJ had to consider whether documents of a company based in Sydney, entitled monthly sales reports, were financial records required to be kept under s 286 and therefore admissible under s 1305. The documents were derived from a computer system programmed to provide sales figures for Western Australia on a daily basis. Monthly totals of those figures were then transferred into a standard format document entitled "monthly sales reports" which had blank spaces to permit an officer of the company to insert comments. When those comments were incorporated into the document, it was sent to the company's head office in hard form. The general purpose of the comments was to explain what were described as "variances" between actual sales figures and budgeted figures, or between the present year and previous year. Brownie AJ followed Caratti , holding that the hardcopy reports containing comments were financial records, as they were part of the company's system of recording information of a financial nature reflecting the company's need to keep itself informed about financial matters at various branches including the Western Australian branch.

Once again, none of the previous decisions is binding on me as to this point, but the weight of judicial observations is against Mullighan J's view. In addition to the reasons advanced in Caratti and Linfox Transport , which I accept, there are some other considerations that lead me to reject Mullighan J's approach.

First, the shift of statutory language from "accounting records" and "accounts" to "financial records" and "financial statements" seems to me to work against Mullighan J's view. Such documents as budgets, business plans and trial balances are readily described as records of a "financial" kind, even if one might have some hesitation about calling them "accounting records".

Secondly, paragraph (c) of the definitions extends to "other documents needed to explain" the methods by which financial statements are made out and adjustments to be made in preparing financial statements, matters that, in my opinion, inevitably involve questions of judgment.

Thirdly, it is significant, as Blow J pointed out in Turner , that the definition of "financial records" is inclusive. Indeed, it seems to me that the purpose of the definition is to make it clear that the expression extends to the documents listed, for in the absence of such an extension it might be argued that "financial records" are simply high-level corporate documents excluding primary records.

The inclusive nature of the definition permits the concept of "financial records" to be shaped by reference to the legislative purpose of s 286. Section 286 requires the company to keep written financial records that correctly record or explain its transactions, financial position and performance, and would enable true and fair financial statements to be prepared and audited. It seems to me that the financial records necessary to achieve these matters will go beyond the records expressly identified in paragraphs (a), (b) and (c) of the definition, in the case of any large business enterprise. The farm books in Caratti and the monthly sales reports in Linfox Transport are examples. Documents of these kinds are "financial records" because they are documents created as part of the process by which the company discharges its statutory obligation under s 286. On this view, a document is a financial record if the company uses it for any of the purposes identified by s 286: for example, to record the company's financial position or to facilitate the preparation or auditing of annual or half-yearly financial statements.

With respect, Mullighan J's approach does not adequately take into account the scale and complexity of financial systems, recording and reporting in a large business enterprise. Recording and explaining the transactions, financial position and performance of a large business enterprise will involve much more than the preservation of documents of prime entry and the maintenance of a cashbook, general ledger and journal. It will involve, with the aid of computers, a variety of strategies designed to keep track of such matters as sales, cost of sales, cash, debtors, creditors, and banking and financial arrangements. The company's strategies will be likely to include, as essential parts of the process of providing explanations which enable directors and management to understand the company's financial position and performance, the preparation of snapshot reports on a regular basis and when needed, and assessments of actual figures against projections made in various ways (for example, in budgets and business plans).

The defendants submitted that financial "records" are concerned with historical facts or transactions, not with projections. They referred to dictionary definitions to the general effect that a record is an account of some fact or event serving to preserve the memory of it. I disagree with this submission. Under the definitions relied on by the defendants, one can "record" a set of projections such as a budget or business plan. The fact or event recorded is the making of the projections. In my opinion the critical question under s 286 is whether the document fits into the process of recording and explaining the company's transactions, financial position or performance and enabling true and fair financial statements to be prepared and audited. A financial record is a record prepared by the company as part of this process of recording and explaining, a process that may well involve preparation of projections and assessments of historical figures against those projections.

I do not mean to say that a company (or company of at least a certain size) must always prepare particular kinds of documents such as budgets or business plans or trial balances or sensitivity analyses of key variables. Section 286 leaves it open to a company to select the most efficacious system of recording and explaining in its particular circumstances. In Caratti , the farm books were held to be accounting records, and in Linfox Transport the monthly sales reports were held to be financial records, without any finding in either case that preparation of records of that precise nature would be necessary to comply with the statutory requirement. What was significant was that these documents were in fact prepared and kept, in circumstances where the court could infer that they were used as part of the process of recording and explaining, and therefore understanding, the company's transactions, financial position and financial performance and enabling the preparation and auditing of financial statements.

It is possible that in the case of some documents, the court would not be in a position to conclude that they are financial records in this sense in the absence of evidence as to how and why they were created and how they were used. But for many documents, inferences sufficient to warrant their classification as financial records will be available to be drawn from inspection of the documents themselves. For example, one can readily infer from a document entitled "business plan" or "budget" which sets out projections on a periodical basis that it was prepared for use as a point of reference against which to assess the company's actual figures and therefore to understand the company's financial position and performance. It would not be necessary, for the purpose of classifying the document as a financial record, for the tendering party to adduce evidence that the document was in fact used in this manner. To require such evidence, in effect on a voir dire before tender, would run counter to the legislative purpose of s 1305.

The defendants submitted that a narrower construction should be taken because s 286(1) creates a criminal offence (and, since December 2001, an offence of strict liability). But the construction of "financial records" adopted in the prevailing cases, and followed here, is entirely consistent with the criminal consequences of breach of s 286. It would be confusing and bizarre, and therefore most undesirable in a criminal provision, if companies were placed in the position that the only records they were required to keep in order to discharge their statutory obligation under s 286(1) were records excluding all judgment, interpretation and prediction -records which, in the case of a business enterprise of any complexity, could not of themselves serve to discharge the obligation. 17.12 Were the nine categories of documents "kept by a body corporate"?

The first question is whether, on the evidence before me and in light of my conclusion as to the meaning of "kept", it is appropriate to conclude that at the time ASIC obtained the various categories of documents they were "kept by a body corporate". ASIC must establish the facts necessary for admissibility on the balance of probabilities, the standard prescribed by s 142 of the Evidence Act.

ASIC's provenance evidence purports to identify the source of each category of documents. But the defendants submitted that ASIC's evidence falls short of showing the court how and by whom the documents were kept within One.Tel. They contrasted the present case with Caratti , where there was evidence (at 544-5) that the farm books were prepared by in-house accountants and staff in the course of their employment on the instructions of a person who was the directing mind and will of the company, in order to show in summary form certain aspects of the company's financial affairs. They also contrasted the present case with Linfox Transport , where there was detailed evidence as to how the monthly sales reports were prepared, who prepared them, and for what purpose. According to the defendants, the present case is closer to the Duke Group case, where it was not known who prepared the monthly management accounts, nor what use was made of them by the company (see Caratti at [134] per Malcolm CJ).

While it is helpful to consider by analogy the facts of other cases, the question must be determined upon analysis of the facts of the present case. In my opinion, it is appropriate to conclude that documents located on the Ferriers I:/Drive were kept by One.Tel, for two reasons. First, being located on the copy of the I:/Drive retained by One.Tel's liquidators, they were retained by the company's agent. Secondly, ASIC's provenance evidence, summarised under heading 1 of this judgment, shows that the Ferriers I:/Drive was derived by KPMG from I:/Drive files originally copied from One.Tel's computer system, and therefore files kept by One.Tel.

The documents produced by Piper Alderman were, when held by the solicitors, in the possession of their clients, Mr Silbermann and Mr Beck. They were executive directors of One.Tel and it is appropriate to infer, where they had possession of documents relating to the financial affairs of the company, they had possession in their capacity as its agents. Therefore the documents produced by their solicitors were documents that were retained on behalf of One.Tel and so "kept by a body corporate".

The conclusions I have so far expressed cover categories 1-6 and some of category 7 (collections profile summaries). The evidence does not positively establish that those collection profile summaries that were obtained from Ernst & Young were kept by One.Tel for the purposes of s 1305(1). The evidence establishes no more than that they were kept by Ernst & Young, without showing the capacity in which Ernst & Young's kept them and in particular, without showing whether Ernst & Young was One.Tel's agent in doing so. However, for reasons I shall explain later, s `1305(1) applies to those documents by virtue of the presumption created by s 1305(2).

The copies of the liquidators' reports (category 8), that were provided by the liquidators to ASIC, had been in the possession of the liquidators before they were handed over, and they were therefore kept by the liquidators. For the reasons I have given, the liquidators kept the documents as agents of One.Tel (or the relevant subsidiary, where the report relates to a subsidiary entity). The documents were therefore kept by a body corporate for the purposes of s 1305(1).

The butcher's paper (category 10) was not kept by One.Tel, but the evidence indicates, in my view, that it was kept by another body corporate, Publishing and Broadcasting Ltd. The butcher's paper documents were created at a meeting held at PBL and they were exhibited to the affidavit of PBL's chief financial officer, Mr Kleemann. It is reasonable to infer that the documents had either been kept by PBL at its offices, or kept by Mr Kleemann as PBL's agent.

In summary, all of the documents tendered by ASIC, except some of the collection profile summaries in category 7, are in fact books kept by a body corporate and therefore the tender falls within s 1305(1). 17.13 Would the documents have been "kept by a body corporate" if the narrower construction of "kept" had been adopted?

If the word "kept" was confined to documents maintained in a systematic or periodic fashion, some (but not all) of the documents in the first seven categories would be "kept by a body corporate" in the requisite sense. The budgets and business plan summaries, trial balances, management accounts and those collection profile summaries found in the Ferriers I:/Drive or produced by Piper Alderman, all appear on their face to have been maintained systematically and periodically. In my opinion the liquidators' reports are in the same category. The same cannot be said of the butcher's paper, and contents of the butcher's paper would tend to rebut the presumption created by s 1305(2), if the issue was whether the documents were maintained systematically and periodically. In the case of the other collections profile summaries, and categories 5 and 6, the position appears to be that they are not shown to have been, or not to have been, maintained systematically and periodically, and so if s 1305(2) applies to them, there is nothing to rebut the presumption and the documents are admissible under s 1305(1). 17.14 Were eight of the categories of documents kept "under a requirement of [the Corporations] Act"?

The next question is whether, in the present case, the documents were kept by the body corporate that kept them, under a requirement of the Corporations Act. I have held that s 286 is capable of applying to documents that are derivative from documents of prime entry, and contain matters of judgment and interpretation, and projections. Whether the documents tendered by ASIC are within s 286 depends upon whether they are documents recording or explaining the transactions, financial position and financial performance of the body corporate and would enable true and fair financial statements to be prepared and audited. Those are matters that can be inferred from the content of the documents themselves.

In my opinion the contents of the documents in categories 1-4 (business plan summaries, budgets, trial balances and management accounts), which I have summarised in some detail earlier in this judgment, are sufficient to establish that they are financial records for the purposes of s 286. On their face, they purport either to provide financial information with respect to, or provide financial projections of a kind that would assist to explain, One.Tel's financial position and performance. The same is true, in my view, of the collections profile summaries (category 7).

The lack of evidence about the sample "Bill run breakdown" (category 5) and the difficulty one has in ascertaining from the face of the document just what it is purporting to do, leads to some uncertainty as to whether the s 286 criteria can be seen to be satisfied from a perusal of the document. That is even more so for comparison.xls (category 6). In both cases, therefore, I would not hold that they have been positively shown to have been documents kept by a body corporate under a requirement of the Act, but for two matters. The first is that both of these documents were kept in the Ferriers I:/Drive, by the liquidators, who had a statutory obligations to retain them as books of the company under s 542, and they were acting as One.Tel's agent. Secondly, as I shall explain, the admissibility of those documents is assisted by s 1305(2).

Clearly the copies of the liquidators' reports were kept by the liquidators under the requirements of the Corporations Act. Finally, as to the butcher's paper, the question is not whether One.Tel was required to keep it, because One.Tel did not have possession of it. The question is whether it was kept by PBL under a requirement of the Act. Although the converse is arguable, it seems to me unlikely that the butcher's paper explained the financial position or performance of PBL.

In summary, all categories of documents kept by bodies corporate, except category 10, were kept "under a requirement of the Act". 17.15 Does the presumption in s 1305(2) apply to each of the nine categories of documents?

An alternative way of reaching the conclusion that the documents in the present case were kept by a body corporate under a requirement of the Act would be to apply the presumption in s 1305(2) and hold that the contrary has not been proved. That step is necessary for the application of s 1305(1) in the case of the collections profile summaries held by Ernst & Young. The presumption arises where a document purports to be a book kept by a body corporate, and it need not purport to be a book kept under a requirement of the Act. According to Blow J in Turner , there needs to be something on the face of the document to show that it purports to be kept by a body corporate, such as a label bearing the name of the company. ASIC did not dispute Blow J's construction of subsection (2), but contended that the documents plainly satisfy this requirement.

In my opinion, s 1305(2) applies to categories 1-7. The documents purport to the books kept by One.Tel. In each case this is evident from the face of the documents. They are printouts of electronic records. In some cases they identify One.Tel by name and in other cases they provide financial information identified in such a fashion as to imply the identity of the company, as shown in my descriptions of the documents given earlier in this judgment. In the case of the "Bill run breakdown" the footer, which identifies a file path taking one to the I:/Drive, is sufficient to satisfy Blow J's requirement. In the case of comparison.xls one has both the footer and properties pages identifying the "author" of one of the pages (an employee of One.Tel at the relevant time) and the person who last saved the other page (also employee of One.Tel at the relevant time).

There is no basis for holding that the presumption arising under s 1305(2) has been rebutted for any of the documents in categories 1-7. If anything, the evidence of the content of the documents tends to reinforce the presumed conclusion. In the case of the collections profile summaries held by Ernst & Young, the fact that the documents came from this third-party source rather than the company does not rebut the presumption that the documents were kept by One.Tel under a requirement of the Act, in circumstances where other similar documents have been shown to have come from the possession of two of the executive directors of the company and the documents have the appearance of internal corporate financial records.

A somewhat different analysis applies to the category 8 documents. On their face, they purport to have been prepared by administrators who are now liquidators, who have statutory duty to keep them. In doing so, the liquidators are acting as agent for the company. This is enough, my opinion, to warrant the conclusion that on their face, the category 8 documents purport to be kept by a body corporate. Therefore the presumption in s 1305(2) applies, and obviously has not been rebutted.

As to the butcher's paper, however, there is nothing on the face of the pages to indicate that they are documents purporting to be kept by the body corporate that kept them, namely PBL.

It seems to me, therefore, that all of the categories of documents tendered by ASIC are admissible under s 1305(1), except for the butcher's paper (category 10), which is admissible under s 69. For all of the documents other than the butcher's paper and the collections profile summaries held by Ernst & Young, it has been shown that in fact the documents were kept by One.Tel or by its liquidators on its behalf under a requirement of the Corporations Act, and in the case of the collections profile summaries held by Ernst & Young, the presumption in s 1305(2) applies and has not been rebutted. 18. Discretionary Powers under the Evidence Act

The defendants submitted that, if I were to decide (as I have) that the nine categories of documents are strictly admissible, I should nevertheless exclude them from the evidence in this case under s 135 of the Evidence Act. Section 135 empowers the court to "refuse to admit evidence its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time."

Alternatively, it was submitted that the court should impose a limitation on the use that could be made of the evidence constituted by the contents of the documents under s 136, which empowers the court to do so "if there is a danger that a particular use of the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing."

I received a large quantity of written and oral submissions as to the exercise of discretions. Some of the submissions were, perhaps inevitably, repetitious and overlapping. Rather than deal with the submissions one by one, I have endeavoured to extract the key propositions and themes, which I shall address. I have tried to take into account the many specific points about documents that have been made, said to bear on my discretion, but I shall not enumerate them. 18.1 The concept of "unfair prejudice"

Submissions were made by both parties as to the grounds on which the court might exercise its discretion to exclude evidence or limit its use. Some attention was paid to the concept of "unfair prejudice" and in particular, whether it would be unfairly prejudicial to the defendants to admit ASIC's documents as business records or under s 1305 without ASIC producing any witness who would give evidence as to the creation of the documents, their meaning and how they were used within One.Tel. That raised a general question, namely whether there is "unfair prejudice" when hearsay representations are allowed into evidence on some statutory ground and the person making the representations is not produced for cross-examination.

In its Interim Report on Evidence , the Australian Law Reform Commission explained the concept of "unfair prejudice" in quite a narrow way. The Commission said (Report No 26 (1985), vol 1, para 644): "By risk of unfair prejudice is meant the danger that the fact-finder may use the evidence to make a decision on an improper, perhaps emotional, basis, i.e. on a basis logically unconnected with the issues in the case. Thus evidence that appeals to the fact-finder's sympathies, arouses a sense of horror, provides an instinct to punish, or triggers other mainsprings of human action may cause the fact-finder to base his decision on something other than the established propositions in the case. Similarly, on hearing the evidence the fact-finder may be satisfied with a lower degree of probability that would otherwise be required."

These remarks suggest that the court would be likely to exclude or limit the use of evidence on the ground of unfair prejudice only in jury trials, since presumably the judge would trust himself or herself not to be improperly influenced by the emotional matters identified by the Commission. But since the enactment of the Commission's recommendations, there have been reported cases indicating that "unfair prejudice" has a broader meaning, extending to various kinds of procedural prejudice to the party against whom evidence is tendered, as well as the dangers of misuse of evidence by the tribunal of fact contemplated by the Commission.

The Evidence Act altered the common law rules of evidence on a number of matters, including the common law rules concerning hearsay. On the whole, the statutory amendments had the effect, where they altered the common law, of rendering admissible evidence that would have been inadmissible at common law. In a number of decisions, courts have excluded or limited the use of evidence on the ground of unfair prejudice because the evidence was hearsay evidence rendered admissible by the Evidence Act, in circumstances where the party against whom the evidence was admitted would (they held) be prejudiced by not having the opportunity of challenging the veracity of the evidence in cross examination.

For example, in Gordon (Bankrupt), Official Trustee in Bankruptcy v Pike (No 1) (Federal Court of Australia, unreported, 1 September 1995) there was an issue as to whether an aircraft was beneficially owned by the bankrupt, the respondent claiming that it was owned by other parties. The Trustee tendered the transcript of examination of the bankrupt under oath in which the bankrupt gave evidence that he had owned an aircraft of the type in question. The bankrupt was not to be called to give evidence. Beaumont J excluded the transcript, although it was admissible under the exception to the hearsay rule in s 63, on the ground that the evidence would be unfairly prejudicial for the purposes of s 135 because the party against whom the evidence would have been admitted would be unable to cross-examine the maker of representation on a crucial issue.

In Commonwealth v McLean (1996) 41 NSWLR 389 the plaintiff's wife gave a hearsay account of events as relayed to her by the plaintiff (who had given evidence without referring to those events). The trial judge held that the evidence was admissible under s 64 and he declined to excluded under s 135. The Court of Appeal (Handley and Beazley JJA, Santow AJA concurring), while deciding the matter on another basis, commented (at 401): "A party against him such evidence is tendered must be free to challenge any link in the chain, or the chain as a whole. It would be unfairly prejudicial with in s 135(a) for evidence to be tendered against the party who could not contest it."

Those decisions were reviewed by the High Court in Papakosmas v The Queen (1999) 196 CLR 297. The case dealt with s 66 of the Evidence Act, which removed, subject to conditions, the common law limitations on the use of recent complaint evidence of sexual assault for a hearsay purpose. On appeal after conviction, the appellant unsuccessfully contended that the trial judge should have limited the use of recent complaint evidence under s 136, because there was a danger of unfair prejudice since the evidence was self-serving there was a risk that it had been concocted. Only McHugh J dealt with the principles governing the exercise of the court's discretions under ss 135, 136 and 137. After referring to the decisions in Gordon and McLean , he said (at 326): "It is unnecessary to express a concluded opinion on the correctness of these decisions, although I am inclined to think that the learned judges have been too much influenced by the common law attitude to hearsay evidence, have not given sufficient weight to the change that the Act has brought about in making hearsay evidence admissible to prove facts in issue, and have not given sufficient weight to the traditional meaning of 'prejudice' in the context of rejecting evidence for discretionary reasons."

Later (at 327) he said: "Sections 135, 136 and 137 contained powers which are to be applied on a case by case basis because of considerations peculiar to the evidence in the particular case. It may be proper for appellate courts to develop guidelines for exercising the powers conferred by the sections so that certain classes of evidence are usually excluded or limited. But those sections confer no authority to emasculate provisions in the Act to make them conform with common law notions of relevance or admissibility."

I take McHugh J's view to be that where hearsay representations are rendered admissible by statute, there is no unfair prejudice for the purposes of s 135 simply because the maker of the representations is not available to be cross-examined. It is true, as Sperling J pointed out in Roach v Page (No 11) [2003] NSWSC 907 at [46]-[47]), that McHugh J's remarks were an obiter opinion expressed by a single judge, who did not hold that Gordon or the Court of Appeal's in McLean were wrong. Nevertheless, they have the weight to be given to carefully considered observations by a judge of the High Court.

In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [1999] FCA 1269, Goldberg J accepted the tender of some invoices and declined to apply s 135. He pointed out (at [28]) that, while the discretion to exclude evidence on grounds of prejudice is well-known to the criminal law, it is less relevant in a civil context particularly with a judge sitting alone. Nevertheless, in his Honour's view, unfair prejudice may arise from procedural considerations in a civil case, such as where an opposing party is significantly prejudiced by hearsay evidence because he or she is unable to cross-examine on a crucial issue, or is prevented from properly challenging its reliability. However, he quoted McHugh J's remarks in Papakosmas , evidently with approval, suggesting that the cases of procedural unfair prejudice that he had in mind would involve something more than mere unavailability for cross-examination of the person making admissible hearsay representations.

In Ordukaya v Hicks [2000] NSWCA 180 the plaintiff brought an action in negligence against the 92-year-old defendant, who was unable to give evidence. The trial judge admitted her statutory declaration into evidence, under s 64. On appeal, the plaintiff contended that the statutory declaration should have been excluded under s 135(a) because he had been deprived of the opportunity to cross-examine the defendant. After citing the Law Reform Commission's explanation of "unfair prejudice" and McHugh J's remarks in Papakosmas , as well as the Court of Appeal's remarks in McLean , Sheller JA (with whom Mason P and Meagher JA agreed) said (at [38]): "The purpose of s 64 is to remove the obstacle of the hearsay rule in cases like the present where a party, due to age and ill-health, is unable to give evidence and may suffer great injustice as a consequence. Inevitably the removal of the hearsay rule as an obstacle to admitting the statement carries with it prejudice to the other party. One such prejudice is that the witness whose statement is put in evidence cannot be cross-examined."

He referred to one of the justifications for excluding hearsay evidence, namely the "irresponsibility" of the maker of the representation, who statement is made neither on oath nor subject to cross-examination. He noted that this "irresponsibility" is permitted by the Evidence Act to occur, when hearsay evidence is permitted. But he observed (at [39]) that such "irresponsibility" did not make the prejudice to the plaintiff unfair to the point of outweighing material of high probative value such as the statutory declaration, and therefore it was not necessary for him to decide whether the "irresponsibility" involved in adduction of hearsay evidence could ever amount to unfair prejudice justifying exclusion under s 135.

Mason P agreed with Australian Safeway Stores and said (at [4]) that ss 135 and 136 have conferred a very wide discretion upon trial judges, and having regard to "the broad language of those sections, the notion that evidence might 'be unfairly prejudicial to a party' should not be confined beyond that which emerges on a fair reading of the sections in context".

McHugh J's observations were applied by Heydon JA (with whom Bell J agreed) in the Court of Criminal Appeal of New South Wales in R v Clark [2001] NSWCCA 494. The case concerned the exception to the hearsay rule for evidence of contemporaneous representations by a person about his or her state of mind, conferred by s 72. In rejecting a submission that the evidence should have been excluded under s 135 or s 137, his Honour said (at [164]), before citing McHugh J's remarks in Papakosmas : "… if the impossibility of challenging the veracity of hearsay statements by non-witnesses were generally to justify, or were often to be a significant factor in justifying, a decision to exclude evidence in the court's discretion under s 135 or by reason of a finding of 'unfair' prejudice under s 137, the result would be to write the hearsay exceptions out of the Act to a large extent. That outcome would be contrary to the legislative intention …".

In Vitali v Stachnik [2001] NSWSC 303 at [22], Barrett J referred to McHugh J's judgment in Papakosmas , and also to Australian Safeway Stores and Ordukaya v Hicks , and extracted from those cases "approval of the notion that inability to cross-examine on material sought to be introduced is not of itself unfairly prejudicial, at least in civil proceedings where there is no jury, even though that inability may well be a very relevant consideration in the Court's decision as to the weight it should ultimately afford to the evidence". In Roach v Page (No 11) , Sperling J disagreed with Barrett J's statement of principle. It seems to me, however, that Barrett J's observations are consistent with what was said in the cases upon which he relied, and also with Heydon JA's observations in Clark . In saying so, I take Barrett J to be saying that inability to cross-examine is not of itself sufficient to establish unfair prejudice for the purposes of s 135, rather than that inability to cross-examine is never relevant for the purposes of that section.

In Roach v Page (No 11) , Sperling J concluded (at [74]), after carefully analysing the cases, that s 135 cannot be used to exclude evidence that is admissible under the Evidence Act merely because it is hearsay and therefore of inherently less reliable quality. But in his Honour's view, there is scope for the application of s 135 in relation to hearsay evidence covered by a statutory exception if there is an additional factor, for example, where the maker of the representation is not to be called.

I respectfully agree with this view except for the last part of it. As I read the cases, the fact that the maker of an admissible hearsay representation is not to be called is not, of itself, sufficient to justify the exclusion of the evidence. I agree with Sperling J that "whether the maker of the representation will be called as a witness is a relevant consideration", but not that it is, alone, a sufficient consideration to warrant exclusion.

The rejection of the proposition that the exclusion of evidence is justified merely because the person who made admissible hearsay representations is not available for cross-examination does not mean that "unfair prejudice" has the limited meaning described by the Law Reform Commission. It was recognised in both Australian Safeway Stores and Ordukaya v Hicks that unfair prejudice may arise not only out of the danger of mistakes by the tribunal of fact but also by virtue of procedural unfairness, and the possibility was left open by Mason P ( Ordukaya at [7]) that "substantive" unfairness of other kinds may be relevant. The s 135 discretion is, as McHugh J said in Papakosmas , a discretion to be applied case by case on the basis of the facts and circumstances of the particular case. That means, as Einstein J pointed out in Global Medical Imaging Management Ltd (in liq) v Australian Mezzanine Investments Pty Ltd [2003] NSWSC 431, at [20], that the court carries out a balancing exercise in the execution of which there is considerable flexibility. There are many examples of the application of s 135 by courts upon a review of the facts of the instant case: e.g. R v Sing (2002) 54 NSWLR 31; Ringrow Pty Ltd v BP Australia Ltd [2003] FCA 933; ASIC v Rich [2005] NSWSC 149.

In the present case, therefore, a danger of unfair prejudice in allowing the documents into evidence will not be established simply by showing that there are witnesses who would be able to explain the documents and their use, and in so doing, make themselves available for cross-examination. The case law to which I have referred is reinforced by a practical consideration, in a case where there is an enormous volume of financial documentary evidence. It is generally desirable, in such a case, to rely on the documentary evidence without oral supplementation in the interests of keeping the trial within manageable bounds. This is not to say, of course, that it is justifiable to do so where there is a danger of unfair prejudice to the other party. But as the cases show, there must be an element of unfairness going beyond the sheer fact that a party seeks to tender evidence in a permissible fashion without calling witnesses who will be exposed to cross-examination. 18.2 Prosecutorial fairness

The defendants contended that s 135 should be liberally applied given that: · this is a civil penalty proceeding in which a very serious allegations with profound personal consequences are made against the defendants; · the defendants suffer the usual disadvantages of a subject being prosecuted by the Crown which underpin traditional notions of prosecutorial fairness; · the nature, meaning and reliability of the tendered documents is fundamental to ASIC's case, and yet the documents are obscure and sometimes contradictory, and there are concerns that they may be drafts; · ASIC has made a forensic decision not to call witnesses who were involved in the preparation of, or otherwise had familiarity with, the documents in question; and · the effect of receiving the documents into evidence will be to inflict on the defendants the burden of attempting to explain what the documents are, how they were prepared, and how they were used, in circumstances where the documents do not "speak for themselves".

Elaborating on the last point, the defendants submitted that it would be unfair to permit ASIC to tender an ambiguous or obscure document together with a "theory" as to what it is and then challenged the defendants to prove that it was something else. This is particularly so, in the defendants' submission, when ASIC has had extensive access to the former finance staff of One.Tel to identify and explain documents to them, have taken statements or affidavits from those persons, and have chosen not to call them as witnesses but to rely instead on the raising of "inferences" from the tender of obscure, ambiguous and problematic documents. The defendants contended that it would be forensically unfair to put them in a position where they would bear the de facto onus of explaining what all the documents tendered by ASIC really were, in circumstances where ASIC had made a forensic decision not to call any witnesses involved in their creation.

All these considerations are relevant to be taken into account in the exercise of the court's discretion, and I have done so. But the defendants sought to give them an additional significance by connecting these submissions to the concept of prosecutorial fairness. Their submissions were developed orally at the hearing and in DS 58, to which ASIC replied orally and in AS 61, supplemented by AS 65.

It is necessary to take some care over what is meant by "prosecutorial fairness" in this context. It is one thing to say that ASIC, charged with the general responsibility of acting the public interest, must act fairly and with probity in pursuing relief in a civil penalty proceeding. Santow J may have had nothing more than that in mind when he said, in ASIC v Adler (2002) 41 ACSR 72 at [1] that a civil penalty proceeding of the kind he was dealing with "invokes requirements for prosecutorial fairness" as well as a standard of proof commensurate with the gravity of the allegations. That only a general proposition was in contemplation seems to be confirmed by the remarks of Giles JA on appeal, Adler v ASIC (2003) 46 ACSR 504 at [674]-[675]. It is quite another matter to assert that, when it conducts a civil penalty proceeding, ASIC is subject to duties analogous to the specific duties of prosecutorial fairness that exist in the criminal arena.

In the present case the defendants seek to invoke considerations of "prosecutorial fairness" as part of their submissions that the court should use its discretion under s 135 to exclude the tendered documents, rather than to establish and enforce a specific duty. They submitted that, by seeking to tender obscure documents and inviting the court to draw inferences, when it has witnesses available who could readily clarify the documents but it has chosen not to call them, ASIC is not only likely to cause unfair prejudice to the defendants and calculated to "force" them into evidence; in addition, its conduct is said to be "a violation of the long-standing principles of fairness which bind the Crown in the prosecution of its subjects" (DS 58, para [1]).

Those "long-standing principles of fairness" are said to entail the following: · like any prosecutor, ASIC should have no interest other than to assist the court in the attainment of justice and, in particular, it has no legitimate interest in "winning" for its own sake (citing Whitehorn v R (1981) 152 CLR 657, at 663, 675; Richardson v R (1974) 131 CLR 116, at 119; R v Apostilides (1984) 154 CLR 563, at 577); · "witnesses essential to the unfolding of the narratives on which the prosecution is based must, of course, be called by the prosecution, whether in the result the effect of their testimony is for or against the prosecution": Seneviratne v R [1936] 3 All ER 36 (PC), quoted with approval by Fullagar J in Ziems v The Prothonotary (1957) 97 CLR 279, at 293; Whitehorn v R (1981) 152 CLR 657, at 663, 674; · the prosecution must "refrain from deciding whether to call a material witness by reference to tactical considerations" ( Whitehorn v R (1981) 152 CLR 657, at 663), because the Crown's duty to act with fairness and with the single aim of establishing the truth denies it the right to pick and choose between independent and apparently credible witnesses for merely tactical reasons ( R v Lucas [1973] VR 693, 697); · "… it is the duty of prosecuting counsel not to try and shut out any evidence which the jury could reasonably regard as credible and which could be of importance to the accused's case" ( R v Lucas , at 705); · "the prosecution should present its case completely and not split its case by calling evidence in reply to the defence case where it could have anticipated that the defence would raise such an issue, or by introducing evidence during cross-examination on the defence case”: Halsbury's Laws of Australia , para 130-13695; Shaw v R (1952) 85 CLR 365; R v Chin (1985) 157 CLR 671, at 676.

Although they said that the failure to fulfil these duties, where they apply, can constitute a denial of natural justice leading to a miscarriage of justice and rendering judgment in the proceedings likely to be set aside on appeal, the defendants contended that in the present case, the court should act under s 135 to protect the defendants from the unfair prejudice that ASIC's failure to discharge its duties creates.

Of course, the present proceeding is a civil penalty proceeding rather than a criminal proceeding. Citing observations by the Australian Law Reform Commission in its report, Principled Regulation: Federal Civil & Administrative Penalties in Australia (Report No 65, 2002, at para [2.47]), the defendants submitted that civil penalty proceedings are a hybrid between the criminal and civil law. They are like criminal proceedings in that: · they are concerned with public wrongs rather than the vindication of rights and duties between subjects, so that judgment against the defendant involves public opprobrium and condemnation; · they are concerned with moral culpability and not merely conduct causing damage; · they attract the privilege against exposure to a penalty, leading to procedural protections such as the absence of any obligation to give discovery; · they may lead to the imposition of a pecuniary penalty; · unless constrained by considerations of fairness, they could become an unequal and oppressive contest between the power of the State and its subjects.

They are like civil proceedings in that: · the burden of proof is on the balance of probabilities under s 1322; · the trial is before a judge alone; · the civil law of evidence and procedure apply under s 1317L.

This last point is worth particular note. Section 1317L says: "The Court must apply the rules of evidence and procedure for civil matters when hearing proceedings for: (a) a declaration of contravention; or (b) a pecuniary penalty order."

In the present case ASIC does not seek a pecuniary penalty order, but it seeks various declarations of contravention, and so the section is applicable.

The defendants submitted that the similarities between criminal and civil penalty proceedings are sufficiently strong, particularly having regard to the "penal" characteristics of civil penalty proceedings, that ASIC should be treated as occupying the position of "prosecutor" and be held to be subject to the principles of prosecutorial fairness, or principles analogous to them.

While rejecting any suggestion of unfair behaviour on its behalf, ASIC contended that the court was bound by authority to reject the defendants' submission. I agree with this submission.

In Adler v ASIC (2003) 179 FLR 1, Giles JA, with whom Mason P and Beazley JA agreed, noted at [671] that one of the grounds of appeal was that the trial judge erred in failing to take account of the unexplained failure of ASIC to call a particular witness, a failure that was alleged to amount to a breach of rules akin to the rules of prosecutorial fairness. After referring to the submissions in support of the ground of appeal, Giles JA noted (at [677]) that a Crown Prosecutor should call all available material witnesses, not because of a duty imposed by law but because this was part of the description of the functions of a Crown Prosecutor, who represents the State and must act with fairness and detachment with the objective of establishing the whole truth (citing Whitehorn , Richardson, Apostilides and Dyer v R (2002) 76 ALJR 1552 at [11]). He continued (at 678): "However, it has not been suggested that when the State engages in civil litigation as it frequently does, its representative's functions have a similar content, or that failure to call a material witness can lead to reversal of a judgment in the State's favour because of miscarriage of justice. The concepts have been developed in the particular circumstances of criminal proceedings. By declaring that these proceedings are to be conducted as civil proceedings, the legislature has plainly declined to pick up the concepts. It was no doubt for this reason that Mr Williams' submissions were in terms of 'rules akin to those of procedural fairness', but once it is recognised not only that the proceedings are not criminal proceedings, but also that they are by prescription civil proceedings, the basis for some analogous rules is hard to see. In my opinion, Mr Williams' submission in this respect should not be accepted."

This amounts to the considered rejection, by the Court of Appeal acting unanimously as part of the ratio of its decision, of the very argument advanced on behalf of the defendants in the present case, in its specific application to the question whether ASIC has a duty in civil penalty proceedings to call a particular witness. The fact that Giles JA went on to determine that "even if rules analogous to the rules of prosecutorial fairness applied" there was no unfairness or miscarriage of justice (at [681]), is beside the point. It would be incorrect to say that his Honour's decision that ASIC was not subject to any obligation of procedural fairness somehow turned on his finding that there was no unfairness in ASIC's conduct.

It follows that ASIC has no legal obligation in the present case to call witnesses to explain the documents it wishes to tender. The admissibility of ASIC's documents is to be determined, under s 1317L, by applying the rules of evidence for civil matters. It must also follow that I am not at liberty, for the purpose of exercising my discretion under s 135, to take into account that ASIC has some form of obligation in the present case to call witnesses to explain its documents. That would be, as ASIC submitted, to circumvent the binding conclusion in Adler .

The defendants submitted that the rationale underlying the notion of prosecutorial fairness applies where ASIC brings a civil penalty proceeding, because ASIC is an agency of the Crown pursuing a public purpose, and its access to the financial and investigatory resources of the State creates an imbalance that is capable of being oppressive. In my opinion that submission seeks to re-open the point resolved by the Adler case, and I am not at liberty to accept it. The same is true of the defendants' submission that considerations of prosecutorial fairness are not "rules of evidence and procedure" for the purposes of s 1317L, but are part of the fundamental right of a defendant to a fair trial.

The defendants submitted that the Court of Appeal's reasoning is inconsistent with two later decisions of the High Court which, they said, emphasise that the traditional protections for defendants in the judicial process are matters of substance. They also called in aid some later decisions of other courts. I disagree. In my opinion, the later decisions in the High Court and elsewhere do not provide any basis for departing from the Adler decision.

In Rich v ASIC (2004) 78 ALJR 1354 the High Court held, by majority, that the present civil penalty proceeding has a punitive rather than a protective purpose, because the defendants are exposed to disqualification orders if ASIC's case against them is established; and that being so, the proceeding exposes the defendants to a penalty and they are protected by privilege from any obligation to give discovery. In their joint judgment Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ referred to s 1317L, saying that the section requires the application of the body of law that has developed in relation to the privilege against exposure to a penalty, presumably because the privilege is part of the rules of evidence and procedure for civil matters. It was not suggested that the privilege leads to any qualification to the civil law rules about admissibility of documents, or that there is some special duty to call witnesses not found in the normal civil rules of procedure.

In Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 the High Court held that the standard of proof in proceedings alleging the commission of offences under the Customs Act 1901 (Cth) and the Excise Act 1901 (Cth) was proof beyond reasonable doubt, even where the proceeding was for pecuniary penalties rather than a criminal prosecution, and notwithstanding statutory provisions to the effect that a prosecution was to be in accordance with the usual practice and procedure of the court in civil cases. In my opinion the statutory scheme before the High Court in that case was so different from Part 9.4B of the Corporations Act that the decision is no direct assistance. Hayne J noted that the Corporations legislation provides for recovery of civil penalties on proof of the requisite matter to the civil standard of proof (referring to s 1332).

In Forge v ASIC (2003) 52 ACSR 1 one the issues was whether the primary judge should have drawn the attention of the appellants (who were unrepresented at the trial) to their rights to elicit evidence and make submissions on the issue of penalty. McColl JA (with whom Handley and Santow JJA agreed) noted (at [11]) that the duties of a judge in a civil proceeding are different from those of a judge presiding at a criminal trial, in that in the civil context there is no requirement to point to arguments or evidence that may assist the defendant to make out his or her case. She noted, however, (at [12]) that the requirement of s 1317L to apply the civil rules of evidence and procedure in civil penalty proceedings does not deny the fact that civil penalty proceedings may bear the character of both civil and criminal proceedings, citing Rich v ASIC , especially the judgment McHugh J at [41]. The Court of Appeal held that in the final stage of a civil penalty proceeding when the question of penalty is addressed, the resemblance of such a proceeding to the sentencing process in a criminal trial is sufficiently close that it is incumbent on the primary judge to draw the defendants' attention to their right to elicit evidence and make submissions (at [425]), and incumbent upon ASIC to draw the court's attention to the applicable principles of law (at [426]).

The defendants submitted that Forge is an example of the courts starting to work through the implications of the High Court's decision in Rich and the manner in which trials are likely to be affected by the "new law" emerging from the High Court's decision (T 3882). They submitted that Forge rejects the dichotomy between civil and criminal proceedings and shows that special procedural protections are needed for defendants in civil penalty proceedings notwithstanding the statutory obligation in s 1317L to apply civil rules of procedure.

Developing that theme, the defendants also referred to some observations by Bergin J in One.Tel Ltd (in liquidation) v Rich [2005] NSWSC 226. There her Honour observed that some statutory amendments to the civil penalty proceedings had been made at a time when it was understood that proceedings for declarations of contravention with consequential disqualification and pecuniary penalty orders were protective rather than penal. She said that the High Court had put an end to that understanding in Rich . She then observed (at [76]) that "the development of procedures in the court to reflect and accommodate that new position is evolving".

Bergin J found that under the civil penalty proceedings there was a real possibility that the privilege against exposure to a penalty might be circumvented or rendered nugatory by the company bringing a compensation proceeding before ASIC commenced a civil penalty proceeding, and suggested that an amendment might be needed to ensure that this did not occur. She added (at [78]): "Pending such amendment, the Court is able to adjust its procedures to ensure that a trial in which a corporation seeks a compensation order under s 1317H is fair to defendants who may be the subject of subsequent penalty proceedings brought by ASIC reliant upon the contraventions of the civil penalty proceedings as proved in the compensation proceedings."

The Forge and One.Tel cases do not deal with prosecutorial fairness, and in no way call into question the holding in Adler , which I am bound to follow. There is some scope for development of the civil rules of procedure, which the court must apply under s 1317L, to reflect the privilege against exposure to a penalty which a defendant in civil penalty proceedings has where a pecuniary penalty or disqualification order is sought. Forge is an illustration of this process. But neither case countenances the establishment by judicial fiat of some parallel system of evidence for the admissibility of documents in civil penalty proceedings, given that admissibility is governed by legislation applicable to all civil trials and the court is instructed by statute to apply the civil rules. And if the civil rules say, as they do, that documentary evidence may be tendered in certain circumstances without calling a witness to explain it, the court cannot use its statutory discretions to undermine the law of admissibility by creating what is in substance a general exception to the law, creating a new rule rather than exercising the discretion in the instant case. 18.3 The present case

ASIC made the following allegations, and urged the court to take them into account in exercising any discretion it had under s 135: (a) the defendants have had full access to the electronic and hardcopy financial records of One.Tel over a very long period, pursuant to orders made by the Court in April 2003, and they have also had possession of interview records and statements of relevant One.Tel employees including Mr Holmes, Ms Ashley, Ms Randall and Mr Nassif; (b) the defendants are persons who were responsible for the finances of One.Tel at relevant times, and are therefore exceptionally well placed to know the true position with respect to the tendered documents; and (c) the former One.Tel executives who might have been called by ASIC to prove the documents were potentially hostile witnesses.

As to matter (b), ASIC referred to the board papers for the directors' meetings of 28 September 2000 and 24 November 2000, and the minutes of those meetings. Those documents show that it was Mr Rich who took the board through the executive summaries of the company's financial position, which extensively referred to One.Tel's budget. ASIC submitted that as finance director, Mr Silbermann can be assumed to have been intimately familiar with the budget. ASIC submitted that it was open to the defendants to adduce evidence as to the provenance of ASIC's documents or their creation or use within One.Tel, but they chose not to do so. It contended that, therefore, a strong Jones v Dunkel inference arose against them.

As to matter (c), ASIC submitted that the present proceeding involves criticism of the accuracy and sufficiency of the financial information supplied to One.Tel's board of directors by the defendants. ASIC said it is therefore likely that senior financial finance executives of One.Tel (such as Mr Holmes), or those associated with the provision for doubtful debts (such as Mr Basman) might fear that their conduct would be criticised, and would thus be potentially hostile witnesses. ASIC also submitted (AS 57) that the defendants were seeking to force ASIC to call high-level employees of One.Tel with whom they were closely associated for many years and who could be expected to be sympathetic to the defendants' interests. It said the fact that these persons might have been prepared to supply information voluntarily to ASIC when ASIC had the power to force them to do so should not be taken to detract from this contention.

ASIC submitted that a person involved in the preparation of such material has a reason for not co-operating or giving reliable evidence, citing Fabre v Arenales (1992) 27 NSWLR 437, at 450. There Mahoney JA observed that a Jones v Dunkel inference may not arise if a witness has a reason for not telling the truth or refusing to assist, and the party who may call him is aware that this is the case. The passenger in a motor vehicle sought damages from the driver and owner when the vehicle crashed and she was injured. But the driver and passenger were both attempting to escape from the police after they had been involved in a criminal offence. His Honour said that if the driver had been a witness rather than a party to the proceeding, it would have been arguable that no Jones v Dunkel inference would be drawn from the fact that he was not called to give evidence on behalf of the defendant, because if called, he would have been asked in effect to admit a serious crime.

The defendants contended that matter (a) was not in point, as it is incumbent upon ASIC to prove its case. I agree with them on this. It is also relevant that the material supplied to the defendants by the liquidators appears to have been extensive, with no obvious key to navigating through it, so I should not assume that they have had the pleasure to consider, since July 2003, the significance of each of the 10 categories of documents that have been identified.

As to matter (b), the defendants challenged ASIC's submission that they were exceptionally well placed to know the true position. They said the One.Tel was a large, multinational corporation with several levels of intermediate management and a large finance staff. To say that the defendants were responsible for the finances of One.Tel is not to imply that they could reasonably be expected to be acquainted with the minutiae of all its financial records. They could not be expected to be acquainted with such questions as whether the version of the monthly trial balance sought to be tendered by ASIC was a final version, whether the 2001 fixed wire management accounts which (according to the defendants) were never sighted or approved by them were properly finalised, and whether the calculations in comparison.xls were the simple ones.

I agree with the defendants that I should not to infer, for the purpose of exercising my discretions, that they knew and understood, or were in a position to know and understand, the nature and significance of the tendered documents. However, I think a more limited inference is appropriate. I would infer, solely for the purpose of the exercise of my discretions at this stage, that in their respective positions, the two defendants were closely familiar with One.Tel's financial position and performance on an ongoing basis. But I ought not to infer, at this stage, familiarity with any particular document.

As to matter (c), the defendants responded that: (i) ASIC has produced no evidence that Mr Holmes, Mr Basman, Ms Ashley or Ms Nassif are unavailable to be called as witnesses or that they have in fact been hostile to ASIC's case; (ii) there is evidence before the court that Mr Holmes , Mr Basman, Ms Ashley and Ms Nassif have co-operated with ASIC and its accounting advisers in the past, Mr Basman attending a voluntary interview and answering questions, and Mr Holmes providing extensive assistance of a formal and informal nature (the defendants particularised this evidence in DS 55, ASIC responded in AS 59); (iii) statements by Mr Holmes were provided by ASIC to the Director of Public Prosecutions as part of the brief for it to consider criminal proceedings; (iv) another witness who will give evidence, Mr Packer, was also a target of ASIC's investigation and the subject of criticism internally by ASIC investigators; (v) there is no evidence to support ASIC's assertions that Mr Basman, One.Tel's collections manager, was associated with the provision for doubtful debts or that Mr Holmes was involved in provision of information to the board of directors in a way that "might" cause him to fear criticism, as ASIC has asserted; (vi) ASIC's submission does not deal with the fact that there are other witnesses who could attest to the nature and meaning of documents that ASIC seeks to tender, including Ms Yarrow, Ms Nassif and Ms Ashley (the last of whom has provided an affidavit); (vii) Mahoney JA's observation in Fabre v Arenales is not analogous, because his Honour had in mind a case where there were facts to explain why the witness was not called, and further, that decision is unhelpful to the court in deciding whether the grounds for excluding evidence under s 135 are present.

The contention between the parties on this point, which came to be called ASIC's assertion that Mr Holmes, Mr Basman and Ms Ashley are in the defendants' "camp", led to further written submissions, in DS 61 and AS 63. My view is that there is no occasion to make a Jones v Dunkel inference unfavourable to ASIC from its failure to call these witnesses, in circumstances where the case is essentially a documentary case and ASIC wishes to have the documents speak for themselves, and plausibly submits that oral supplementary evidence would add considerably to the length of the trial. Nor would it be appropriate to draw any Jones v Dunkel inference from the fact that the defendants have not chosen to give any evidentiary explanation of the documents, bearing in mind that this is a civil penalty proceeding in which the defendants have been careful not to go into evidence in the hearing generally, for understandable reasons. I note that I do not derive any assistance from Fabre v Arenales , a case where the party who might have called the witness had not had the opportunity to take statements in the manner that ASIC has.

More importantly, I agree with the defendants that ASIC's submission that these witnesses might fear that their conduct would be criticised or were in the defendants' "camp" is not supported by evidence, and that such evidence as there is suggests a willingness on the part of these witnesses to co-operate with ASIC. I think it would be unsafe to accept the submissions made by ASIC on these matters from the bar table, given the evidentiary circumstances. In reaching this conclusion, I accept ASIC's submission that speculation about the position of other witnesses such as Mr Packer and Mr Werner does not assist. In those circumstances my view is that ASIC's position does not amount to an explanation for not calling the witnesses. There is, however, another explanation for not doing so, also advanced by ASIC, and that is that ASIC has made a forensic decision to conduct its case in reliance on documents rather than oral evidence, so far as possible, in an attempt to keep the hearing within reasonable bounds.

Particular submissions were made as to the exercise of discretion in respect of category 8. As I have explained, the admissibility of the liquidators' reports means that there will be evidence before the court of estimates and other opinions that may not comply with the requirements of s 79 and Makita . The defendants took me in some detail to particular representations in the reports, to show that they would be unfairly prejudiced by the admission of this material. But I am not satisfied that this would be so. The evidence will be assessed for what it is. To the extent that it does not comply with the requirements for expert witness opinion evidence, its weight may be reduced. The liquidators are available for cross-examination. In balancing out probative value against danger of unfair prejudice, it is appropriate to take into account the very large cost and time that would be involved in obtaining expert valuation reports for all the estimates covered by the liquidators' reports. In all the circumstances, I am not persuaded that, while I accept that the defendants will be prejudiced by the admission of this evidence, there is a danger of unfair prejudice. For the same reasons, I would not limit the use of the evidence on the "unfair prejudice" ground.

That leaves for assessment the defendants' fundamental point that it is unfair for ASIC to tender ambiguous documents with a theory as to their significance, without calling witnesses to explain the documents and their use in circumstances where it is open to ASIC to do so, and where the consequence of not doing so is to give the defendants the de facto onus of explaining the documents. The question to be assessed requires a weighing up of the probative value of each particular document against the danger that the evidence might be unfairly prejudicial to the defendants. The court's discretion is available to be exercised if that danger is present and sufficient weight, even if the court is not convinced that admitting the evidence will in fact lead to unfair prejudice.

As to probative value, I have observed during the course of this judgment that the submissions made by the defendants against the authenticity of the documents and their admissibility under s 69 and s 1305 often went to weight or probative value rather than to authenticity or admissibility. Where documents are ambiguous or obscure or there are several versions of them, or reason to suspect that they may be drafts, there are obvious issues of probative value. Concerns of those kinds arise with respect to some of ASIC's documents, for reasons I have given, especially with the "to be billed" document (category 5) and comparison.xls (category 6), and where there are multiple versions of trial balances. But it would be unwise at this stage in the hearing to conclude that the probative value of any particular document will be slight or non-existent, when all of the evidence is in. ASIC's submissions have, as I have noted, drawn attention to the interrelationships of documents with one another. It may well be, once the trial is concluded, that obscurities and deficiencies about particular documents will have been overcome. In some cases a firm view can be taken about the lack of probative value of evidence at the point of deciding on admissibility, but this is far from being such a case.

Here it is relevant, in my opinion, that the documents are admissible under s 69 and s 1305 in circumstances reflecting a legislative policy, described above, about the reliability of business documents when compared with the memory of witnesses, and an assessment that it is not unfair to provide by statute for the admissibility of such documents, even though the effect of doing so is to cast the forensic burden of explanation on the other party. In the last analysis, I do not see in the present circumstances any case of unfairness of prejudice beyond the combination of that general position and some particular deficiencies in certain documents (which, however, do not render those documents inadmissible). The admission of the documents will, as is normally the case, cause prejudice to the defendants as the persons against whom the evidence is admitted. They are not then required to go into evidence to respond to that evidence. They can attack the evidence in submissions, along the lines of the submissions they made on authenticity and admissibility. Such submissions may prove to be powerful, at least in respect of some of the documents, if ASIC's case is not assisted by the course of other evidence. I do not regard the outcome as unfair.

Doing my best to exercise my discretion in the present case, my conclusion is that there is no danger of unfair prejudice to the defendants substantially outweighing the probative value of ASIC's documentary evidence, for the purposes of s 135. For the same reasons, I am not persuaded that there is a danger that ASIC's use of the evidence might unfairly prejudice the defendants, sufficiently to warrant an order under s 136 limiting the use to be made of the evidence.

The defendants also invited the court to exercise its discretion to exclude the documentary evidence or limit its use on the ground that its probative value is substantially outweighed by the danger that the evidence may be misleading or confusing, or to exclude it because of the danger that its receipt will cause or result in an undue waste of time. In DS 50 the defendants pointed to evidence that there are several versions of the trial balances for March, April and May 2001, noting, in particular, the evidence of Ms Reynolds (at T 1134). They submitted that the court is likely to end up with all of the various versions tendered, and no witness to explain how there came to be different versions, or which is likely to be the most reliable, and that will lead to an extensive and problematic forensic exercise addressed to the issue of which (if any) version is the final one. They also referred to the "to be billed" document, saying that the nature and meaning of the document do not appear on its face and ASIC simply has a hypothesis about what the document is.

I have commented on the probative value of the evidence when dealing with the unfair prejudice ground. The matters that have been drawn to my attention give rise to very real concern that substantial time will be taken up during the course of the hearing and in preparation of the final judgment in sorting out precisely what weight is to be given to such difficulties. However, having now considered the documents in detail and heard extensive submissions about them, it does not seem to me that there is a danger that the evidence might be misleading or confusing, as opposed to obscure and difficult. It is relevant to take into account, on this issue, the fact that this is a trial before a judge alone, assisted by senior counsel supported by substantial legal teams, all of whom have experience in commercial matters.

For the same reason, it does not seem to me to be justifiable in the present case to make an order limiting the use to be made of any of ASIC's documentary evidence on the ground that there is a danger that a particular use of it might be misleading or confusing.

As to the danger of undue waste of time, there will doubtless be further time taken up in final submissions on the significance of the documents that I allow into evidence, and there may also be substantial evidence about them, if the defendants decide to lead evidence at the hearing or the documents are the subject of cross-examination of ASIC's witnesses. But on the evidence before me now, it would be unwarranted and premature to make a judgment that the time taken up in dealing with these documents would be an "undue waste". It may be, when all the evidence is assessed, that some or all of these documents, difficult though they may be, serve to prove ASIC's case. If that eventuates, the time spent in assessing them would not have been an undue waste of time. To act now, pre-emptively, under s 135(c), would deprive ASIC of the benefit of that possible outcome. I do not believe that there is such a danger of undue waste of time, as opposed to the inevitable consumption of time, as to call for discretionary intervention.

For these reasons I have decided it is inappropriate to exercise my discretions under s 135 or 136 in respect of ASIC's documentary tender. 19. Contested paragraphs of Carter affidavits

AS 56 is a submission document by ASIC foreshadowing its application that certain parts of Mr Carter's affidavits (specified in attachment A) and parts of the appendices to the Carter Report (specified in attachment B) be allowed into evidence notwithstanding my overall decision to exclude the Carter Report but having regard to para [390] of my judgment on the Carter Report ( ASIC v Rich [2005] NSWSC 149). I have dealt with attachment B ( ASIC v Rich [2005] NSWSC 256 and 296), but I have deferred my decision on attachment A because Mr Carter's evidence is relevant to the tender of some of the categories of documents, and there are common issues about s 135.

While formally maintaining its submission that all of the evidence identified in attachment A to AS 56 is admissible, ASIC accepted that my judgment with respect to attachment B is generally applicable also to attachment A. That is correct, in my opinion. However, ASIC contended that some of the paragraphs identified in attachment A could and should be allowed into evidence consistently with my judgment on attachment B. ASIC identified a number of paragraphs, which I have grouped under three headings, namely "evidence about management accounts and trial balances", "evidence about comparison.xls" and "other evidence no longer pressed". 19.1 Evidence about management accounts and trial balances Affidavit of 23 July 2004, para 8

In his affidavit made on 23 July 2004, Mr Carter reviewed some additional documents supplied by ASIC and said whether they had caused him to change the opinions expressed in his previous reports. In para 8 he referred to para 315 of the Carter Report (that part of para 8 is not pressed, as the Carter Report is not in evidence) and then he said that: "… for January 2001 management accounts, I note that the 'I:/Drive' details the last modification date of the file to be 11 April 2001 [footnote to file path to One.Tel management account spreadsheet]. However, all but three (being insignificant [footnote]) of the individual general ledger account reconciliations were last modified by 22 March 2001 [footnote to file path to reconciliations]. The preparation of the reconciliations is the last substantive step for the finalisation of the management accounts." The footnote to the word "insignificant" referred to an account for accrued expenses, the debtors clearing account and the fixed assets clearing account.

Paragraph 8 tends to substantiate an assertion that the January management accounts were finalised no earlier than 22 March, and may assist to support an inference that the January management accounts relied on by ASIC are not merely drafts.

There is an element of judgment involved in describing some general ledger account reconciliations as insignificant. This opinion is expressed as part of a supplement to the Carter Report, which I have found to be inadmissible because it does not satisfy the Makita requirements, and I have held that if I were wrong as to Makita , I would exclude the whole of the Report under s 135. Assessed in that context, Mr Carter's expression of opinion about the insignificance of certain account reconciliations, without any further reasoning or definition of terms, does not meet the Makita standard and should be excluded. I suggested in argument (T 3672, T 3685) that this was just an expression of the kind of self-contained opinion that a forensic accountant might form, as a matter of judgment, when reviewing accounting information, and did not bear the risk that the opinion might be based upon some information that should have been excluded. On reflection, however, I think the concerns that led me to reject the Carter Report as a whole extend to such an expression of opinion in this particular context.

Mr Carter's evidence that the preparation of reconciliations is the last substantive step before finalisation of the management accounts seems to be evidence about One.Tel's practice, likely to have been influenced by his and his staff's discussions with personnel from One.Tel, and therefore inadmissible on the reasoning expressed in my Carter Report judgment. ASIC invited me to read the last sentence of para 8 as a statement of general accounting practice, but the sentence refers to " the management accounts", which can only mean One.Tel's management accounts (probably the monthly accounts for the January-April 2001 period), rather than management accounts of companies in general. The sentence is inadmissible under the reasoning expressed in my Carter Report judgment.

Mr Carter's evidence about modification dates is admissible as non-expert evidence of observation. I reached that conclusion at T 3674.37.

The probative value of Mr Carter's evidence about modification dates is slight, and is the sort of evidence that might readily be adduced in another fashion, for example by one of the provenance deponents who is "untainted" by prior involvement in the investigation, or by counsel demonstrating the file path in court. It is not appropriate to exercise my discretion under s 135 on a piecemeal basis, but only after all of the evidence potentially to be given by Mr Carter's affidavits has been identified. Report dated 29 November 2004, para 2

Mr Carter's affidavit of 29 November 2004 annexed a further report, which responded to criticism of the Carter Report that had emerged during the course of cross-examination. In my judgment on the Carter Report, I rejected ASIC's application to read this affidavit: [2005] NSWSC 149 at [182]-[183]. ASIC now seeks to read paras 2 and 3 (and also part of 7 with respect to comparison.xls, and 10 with respect to the deferred payments listing, each considered below).

Paragraph 2 is in fact a series of sub-paragraphs and some tables, headed "Differences between versions of accounts and trial balances". Mr Carter began by noting that there were exhibited to the Carter Report four different formats or styles of presentation of profit and loss information with respect to the March 2001 management accounts for the digital and fixed wire business. He said he had compared the profit and loss information of all four formats and that it agreed, and he set out some notes to substantiate that conclusion, in the form of a table comparing the four formats.

The management accounts table identified the location of the hardcopy management accounts in the Carter Exhibits (they are found from 3 0085 to 3 0099), their sources, and their locations in the I:/Drive. Then there was a column headed "formats" describing what the documents purported to be, a column headed "reference in Report" which identified where the particular form of document was referred to in the Carter Report (ASIC informed the court that it did not wish to read that column), and finally a column headed "analysis notes" which reported on Mr Carter's analysis and his reconciliation of the various formats with one another.

Paragraph 2 went on to say that there were two different versions of the March 2001 trial balance (called "the I:/Drive trial balance" and "the Ferriers trial balance"), and there followed a table setting out an analysis of the differences and the basis for Mr Carter's selection of the Ferriers trial balance rather than the I:/Drive trial balance for the purposes of his Report.

The trial balances table identified the hardcopy documents in the Carter Exhibits (2 0063-71 and 2 0072-79), their sources and their location on the I:/Drive. Then, adjacent to each version, were the some comments, amplified in narrative form in further sub-paragraphs after the table. There it was explained that on 24 January 2002 Mr Carter's staff prepared a file note comparing the I:/Drive trial balance with the Ferriers trial balance. Mr Carter considered the primary difference to be (he said) that accrued income totalling $35.7 million had not been taken up in the I:/Drive trial balance. He noted some other minor adjustments. He said that, based on the analysis in the file note, he decided to rely on the Ferriers trial balance.

He went on to set out, in an attachment, a reconciliation of the monthly management accounts to the trial balances (sourced from Ferriers) for January, February, March and April 2001, and expressed the opinion that the differences between trial balance profit and loss amounts and management accounts was insignificant.

In the final sub-paragraph of para 2, Mr Carter noted that on 8 January 2002, when PwC received electronic copies of the March, April and May 2001 trial balances, they observed that the May 2001 trial balance did not agree with the hardcopy that ASIC had previously received. PwC made an inquiry with Ferrier Hodgson and on 14 January 2002 Ferriers e-mailed another May 2001 trial balance with an apology for previously sending an incorrect file. Mr Carter said that the trial balance e-mailed on 14 January 2002 agreed with ASIC's hardcopy trial balance, and that was the version that he relied upon in the Carter Report.

In my opinion some of this evidence is admissible. I shall consider, first, the evidence that the profit and loss information in all four formats agrees, and the table reporting that various totals reconcile. This is partly the kind of mathematical evidence by an accountant to which I referred in my judgment on the admissibility of the Carter Report ([2005] NSWSC 149 at [390]), and partly expert opinion evidence by an accountant. In my view, it is more probable than not, judging from the text of para 2 and the documents to which it refers, that the reconciliation did not take into account any material extraneous to the documents themselves. Therefore para 2 satisfies the Makita standard by setting out the facts upon which the opinions are based and the expert's reasoning process, and, being an opinion about accounting reconciliation, is based on Mr Carter's expert knowledge. In the circumstances, it is not plausible to say that Mr Carter's reconciliation of the four formats of management accounts would be open to be influenced by the knowledge he obtained while assisting ASIC's investigation, and was later told to disregard.

The evidence has a reasonable degree of probative value. It is likely to be useful, and possibly even necessary, to have an expert accountant's reconciliation of these four versions of the March 2001 management accounts, given the significant role that the management accounts play in ASIC's case and the particular importance of the month of March 2001. I see no basis for a contention that there is a danger that this evidence, considered in isolation, might be unfairly prejudicial to the defendants, or misleading or confusing, or cause or result in undue waste of time. Of course, as I have mentioned, s 135 is to be applied to Mr Carter's admissible evidence as a whole.

I turn, next, to the evidence about the differences between the two versions of the March 2001 trial balance. Mr Carter's statement of the differences between the two trial balances is, in my view, admissible expert opinion evidence for the same reasons as his opinion reconciling the versions of the management accounts is admissible. Once again, it appears from the text of para 2 that Mr Carter bases his opinion on the two versions of the trial balances themselves, rather than extraneous material. The statement of net loss for each of the two versions is simply lifted from the balance sheet line at the bottom of each document, and that requires no particular expertise, but the statement that the primary difference between the two trial balances relates to accrued income that was not taken up in the I:/Drive trial balance, totalling $35.7 million, involves the exercise of judgment based on accounting expertise. But it appears from para 2 itself that it is judgment based on the analysis of the documents rather than extraneous factors.

The same is true of the statement that other minor adjustments include a $1.8 million increase in inventory in the Ferriers trial balance compared with the I:/Drive trial balance. But in my opinion, the words "which appears to be a correction of a negative inventory balance for the One.Card entity as at March" are an expression of opinion for which, as far as I can see, the assumed or asserted facts are not identified in any of the material that ASIC wishes to read, and I would therefore reject those words.

These rulings also have the consequence that the file note of 24 January 2002 (Attachment 2 to the November 2004 Report), which is almost identical to the sub-paragraphs, is admissible to the same extent. The last sentence is inadmissible for the reason given below.

Mr Carter's statement in the trial balances table that an electronic copy of the Ferriers trial balance was sent, presumably to PwC, by Mr Pfaff of Ferriers on 8 January 2002 is not in proper form but I would allow it into evidence. But his statement that the Ferriers trial balance was originally received by ASIC in hardcopy format in December 2001 is hearsay and strictly inadmissible, although there may be no issue between the parties about it. His statements in the two tables, describing the file path locations of the two documents, constitute evidence by observation and are admissible.

I regard Mr Carter's statement in the first sub-paragraph that profit and loss information was used in his Report, and his statements in the third, seventh and last sub-paragraphs to the effect that he selected or relied upon the Ferriers trial balance rather than the I:/Drive trial balance for the purposes of the Carter Report, as irrelevant and therefore inadmissible, since the Carter Report is not in evidence. The same ruling applies to the statement under the heading "Conclusion" in Attachment 2. It follows that the admissible material does not include any judgment by Mr Carter preferring the Ferriers trial balance to the I:/Drive trial balance. This is consistent with the position eventually adopted by ASIC (T 3707).

The evidence in Attachment 3, reconciling the monthly management accounts to the trial balances sourced from Ferriers for the months of January-April, is at least partly and perhaps wholly admissible as mathematical calculations by an accountant. Attachment 3 showed the dollar amounts and differences for revenue, cost of goods sold, operating costs and EBITDA. The differences are simply mathematical calculations. There may be some matters of judgment involved in the reconciliation process and if there are, they may be admissible as expert opinion evidence under s 79.

A difficulty arises because several horizontal lines in Attachment 3 relating to management accounts identify "App I 10", suggesting that the management accounts figures were taken from Appendix I to the Carter Report, part I-10 of which is a PwC working paper consolidating actual earnings for the Group based on management accounts, adjusted for OPEX charge. The working paper seems to involve a level of judgment that is difficult to specify, and may well have been influenced by information gathered by Mr Carter's staff that he was eventually told to disregard. Appendix I was excluded from evidence in consequence of my decision at [2005] NSWSC 256. But in my view, Attachment 3 is properly regarded as a calculation based on assumed numbers, to be proved by other evidence such as the tender of the relevant documents. It cannot be regarded as evidence of the truth of the numbers it sets out, where all the numbers purport to be taken from sources that are to be tendered. The utility of Attachment 3 will depend upon ASIC making good the numbers by proving them through tender of the documents or in some other way. It is not necessary, in my view, to make an order under s 136 with respect to Attachment 3, but to avoid confusion I shall not allow into evidence the four references on the page to Appendix I of the Carter Report.

Once the numbers are recognised as assumed facts, Attachment 3 is admissible in accordance with s 79 and the Makita requirements, to the extent that it contains an expression of expert accounting opinion.

In the penultimate sub-paragraph of para 2 Mr Carter expressed the opinion that the differences in Attachment 3 are insignificant. No reasoning was given and there was no explanation of the word "insignificant". It seems to me probable that Mr Carter's statement was based on nothing other than a comparison of the difference figures with the total figures for each item in each month. Thus, for example, he was saying that a revenue difference of $357,148 for April is insignificant when the alternative figures for revenue for that month are in the vicinity of $50 million. If that is right, his statement is not based on any particular expertise, is of no utility when the court is in a position to make its own judgment of the matter, and is inadmissible under s 76. If Mr Carter used the word "insignificant" in some other, more technical sense, he has not explained it and therefore his statement does not comply with the Makita requirements and is inadmissible for that reason.

Mr Carter's evidence in the last sub-paragraph is to the effect that the trial balance e-mailed on 14 January 2002 agreed to the hardcopy trial balance received by ASIC in December 2001. In the third last sentence (words beginning "with an apology …"), Mr Carter purports to give an account of the contents of the e-mail at MFI 8/9.8. The document should be allowed to speak for itself. As I have already said, the words "has been relied upon and" in the last sentence are inadmissible. The remainder of the last sub-paragraph, though not wholly in proper form, seems to me admissible.

In summary, three principal features of para 2 are admissible, namely his reconciliation of the four formats of the March 2001 management accounts, his assessment of the primary difference between the two different versions of the March 2001 trial balance, and his reconciliation of the management accounts and trial balances for the four months from January to April 2001. That evidence has significant probative value and is likely to be useful. Considering the evidence in isolation, I cannot see any basis for saying that its probative value would be outweighed by any of the dangers identified in s 135, though the exercise of my discretion under that section is to be made upon consideration of Mr Carter's admissible evidence as a whole.

My conclusions expressed above exactly confirm the provisional rulings on para 2 that I made at T 3717.22 to T 3718.19. Report dated 29 November 2004, para 3

Paragraph 3 of the 29 November 2004 Report is headed "March trial balance". In that paragraph Mr Carter noted that in the Carter Report he had stated that the trial balance found at pages 2 0063-71 of the Carter Exhibits relates to 31 March 2001 rather than 31 December 2000 as had been printed on the worksheet detailing the property pages. He gave his reasons for that view. He said that the file name for those pages was "Balance Sheet March01.xls" and its location in the finance directory of the I:/Drive was the March 2001 file directory under Mgtact 2001\March01. He added that the net loss as per the December 2000 trial balance had been $85,102,288 (Carter Exhibits page 2 0054) whereas the net loss as per the trial balance at pages 2 0063-71 was $191,375,327.

The trial balance in question is the one described as "the I:/Drive trial balance" in para 2, discussed above. Paragraph 3 involves an expression of opinion by Mr Carter from extraneous sources and therefore falling foul of the principles in my judgment on the Carter Report. But it also contains evidence of observation of the file path, which is admissible. Therefore I would reject the first sentence and the words "I say this because" in the second sentence. The fate of this evidence under s 135 depends on an overall assessment of Mr Carter's admissible evidence. Report dated 21 December 2004, paras 13-15

Mr Carter's affidavit made on 21 December 2004 attaches a further report of the same date. ASIC wishes to read paragraphs 13-15 of that report on the subject of management accounts, and paras 10 and 11 on the subject of comparison.xls.

Paragraphs 13, 14 and 15 of the December 2004 Report were headed "Management accounts". In para 13 Mr Carter referred to the defendants' written submission, DS 39, in para 21 of which the defendants contended that the management accounts on which ASIC relied for many of its conclusions were not final, complete or accurate, but were recognised and dealt with by management at the time as significantly understating actual EBITDA, by reason of the disruption which One.Tel was experiencing in 2001 to its billings.

Paragraphs 14 and 15 constitute Mr Carter's answer to that submission. He made the point that, while billing problems might reasonably be expected to impact on cashflow, proper accounting processes would still result in a correct measure of EBITDA, because income earned but not yet billed would nevertheless be accrued or estimated and brought to account. He said that there were, on the I:/Drive, specific directories containing files relating to accounting for each month, a review of which showed that subdirectory files entitled "revenue" brought to account accrued revenue and were of the type that Mr Carter would expect to have been created to recognise revenue earned but not billed. He did not claim that these subdirectory files, which he did not specifically identify, were in fact used to accrue revenue for the purposes of the management accounts for January, February and March 2001.

Paragraph 13 is unobjectionable, because it simply refers to submission DS 39 and states the assumption that the submission refers to January, February and March 2001, laying the foundation for the opinions in the next two paragraphs. Paragraph 14 contains an expression of Mr Carter's expert opinion as an accountant about the proper and usual accounting treatment of earned but unbilled income in a telecommunications company such as One.Tel. That is expert opinion evidence satisfying s 79 and the Makita requirements, and therefore admissible. The fact that the point he makes may be a fairly obvious and basic one about accounting on an accrual basis does not detract from its admissibility. Paragraph 15 simply states the conclusion that Mr Carter derives from the reasoning in para 14, and is admissible on the same basis.

Ms Reynolds gave evidence (T 1002) that she might have spoken to Ms Ashley about how revenue was accrued in One.Tel's accounts, and that the question how a "to-be-billed report" was meant to operate probably came up in conversations with Ms Ashley. It seems to me, however, that there is no prospect that any such conversations affected the opinions expressed by Mr Carter in paras 14 and 15, because as I read them, they are simply expressions of general accounting opinion about the proper and usual way to deal with earned but unbilled revenue in a telecommunications company.

Sub-paragraph 14(c), which is also expert opinion evidence, does not clearly identify the detailed spreadsheets and journal entries to which it refers, although it appears that some specific files were in contemplation. In view of the evidence about Ms Reynolds' discussions with Ms Ashley, it appears to me that the exercise in sub-paragraph 14(c) is open to extraneous influence, and therefore the sub-paragraph should be rejected upon the principles set out in my judgment on the Carter Report.

Given the submission in DS 39 to which Mr Carter has responded, it appears to me that his expert opinion has significant probative value, and if it were considered in isolation, there would appear to be no danger that any of the consequences identified in s 135 would arise. In saying this, I do not mean to imply that I have formed the view on the validity of the submission in DS 39. 19.2 Evidence about comparison.xls Report dated 29 November 2004, para 7

ASIC wishes to read the following information from para 7 of the 29 November 2004 Report: "Attachment 8 is a copy of the properties page for the file comparison.xls, located in a subdirectory under the name of 'Liz'. That page shows that the file was last modified by "ashleyl' on 27 April 2001. Further, the 'Liz' subdirectory contains a large number of files that refer to a 'Liz Ashley', an example of which describes Ms Ashley as a 'financial analyst' and is attached as Attachment 9."

This is evidence of observation, other examples of which are found in para 8 of the affidavit of 23 July 2004 and paras 2 and 3 of the November 2004 Report. It is clearly admissible, subject to s 135 considerations. Report dated 21 December 2004, paras 10 and 11

Paragraphs 10 and 11 of the December 2004 Report are in a part of the report headed "Margin analysis". There Mr Carter discussed some aspects of comparison.xls (the document at pages 4 0055 and 4 0056 of the Carter Exhibits). At para 8 (which is not sought to be read) he corrected some transposed figures in an analysis made in his 29 November Report and at para 9 (also not sought to be read) he referred to some workpapers reconciling the second page of comparison.xls to supporting documentation contained on the I:/Drive. Then in para 10 Mr Carter explained that the I:/Drive contains two files from which those workpapers were sourced, that those files contain spreadsheet workings that provide inputs to page 4 0056, and that he had not located any similar file supporting the data in page 4 0055. He set out the file paths for those two files, through the finance directory and the subfile "Liz" to, respectively, "National GM Jan01.xls" and "National GM Feb01.xls". A note to para 10 said that the I:/Drive contains another subfile entitled "National GMrbrevised.xls" with a last modified date of 3 May 2001, compared to a last modified date for the Feb01.xls file of 16 May 2001. Mr Carter said he believed the Feb01.xls file to be the most up-to-date February analysis and noted that it agreed with the gross margin analysis detailed in the comparison.xls spreadsheet at 4 0056.

In para 11 of the December 2004 Report Mr Carter said that although pages 4 0055 and 4 0056 do not bear dates on their face or refer to particular time periods, the underlying calculation of information is contained in files, within directories, that bear the names respectively of January 2001 and February 2001.

In my opinion paras 10 and 11 are inadmissible. Mr Carter could give evidence of observation of the file paths of the two National GM files, if it were relevant to do so. But the relevance of doing so depends upon there being a connection between those two files and comparison.xls. ASIC's evidence of such a connection is Mr Carter's own evidence in paras 10 and 11, where he said that the files contain spreadsheet workings that provide inputs to page 4 0056, and described the files as "underlying calculation information" for comparison.xls.

In my judgment on the Carter report I found (at [211]) that Mr Carter's reliance on comparison.xls for the opinions expressed in paragraphs 242-249 of the Carter Report involved conscious or unconscious acceptance by him of facts about the nature and status of the document, and perhaps its authorship, not self-evident in the document itself; and it was more likely than not, subject to any further evidence Mr Carter might have given if permitted to do so, that the source of the unstated facts was the evidence of Ms Ashley or Mr Holmes, or Ms Reynolds' discussions with one or both of them, information that Mr Carter had been told to disregard. My findings on that matter, and my conclusion that the Carter Report was inadmissible and ought to be excluded under s 135, entail that Mr Carter's opinions linking the two National GM files to comparison.xls are likely to have been influenced by unarticulated information supplied to him or his staff in a fashion that contravened the Makita requirements and also raised discretionary grounds for exclusion. 19.3 Other evidence no longer pressed

There are two other pieces of evidence by Mr Carter at ASIC initially proposed to read, but they are no longer in issue. First, ASIC sought to rely on para 13 of Mr Carter's affidavit of 8 September 2004 simply to establish that a document recently located by Mr Kwan contained the same information as one in the Carter Exhibits, but in a format that made the document easier to read. But in the course of argument, the defendants informed the court that it would not be in contention that the two documents contain the same data (although the defendants reserved their right to object to the tender of either version) (T 3687).

Secondly, para 10 of the 29 November 2004 Report gives Mr Carter's reasons for concluding that a document headed "Deferred payment listing for March 2001" (Carter Exhibits, page 13 0001) relates to March 2001. During the course of argument, senior counsel for the defendants drew the court's attention (at T 3688) to the fact that the author of the document (Ms Randall) had deposed in her affidavit made on 6 June 2002, para 17, that the document is the deferred payment listing created and updated by her as at 31 March 2001. He said (at T 3689) that there was no contention that the document related to March 2001.

In reply, ASIC elected not to press these two paragraphs (T 3732). 19.4 Exercise of the ss 135 and 136 discretions with respect to additional Carter evidence

In summary, the following five components of Mr Carter's affidavit evidence are admissible, notwithstanding my judgment on the Carter report: (1) part of the evidence in para 8 of the affidavit of 23 July 2004, relating to modification of the January 2001 management accounts; (2) part of para 2 of the November 2004 Report, principally comparing four formats of the March 2001 management accounts, comparing two versions of the March 2001 trial balances, and comparing the management accounts and trial balances for the months from January to April 2001; (3) part of paragraph 3 of the November 2004 Report, identifying the I:/Drive trial balance as a version of the March 2001 trial balance; (4) part of paragraphs 13-15 of the December 2004 Report, giving Mr Carter's opinion on whether disruption of billings could lead to the understatement of EBITDA; (5) part of paragraph 7 of the November 2004 Report, giving evidence about the properties page for comparison.xls and the status of Ms Ashley.

It is clear that these five components of evidence meet the relevance standard of s 55 of the Evidence Act. In my opinion there is no occasion for applying s 135 to any of this evidence. The probative value of some parts of the, considered in isolation, maybe slight, as indicated above. But the probative value of other parts is significant. Some of Mr Carter's evidence may assist ASIC in its attempt to have documents admitted without calling former staff of One.Tel who may have been associated with them, but the Carter evidence is at a lower level, not itself creating, in my opinion, a danger that any of the three matters identified in s 135 might arise. And some of Mr Carter's evidence could not be described as assisting ASIC to avoid calling One.Tel witnesses, such as paras 13-15 of the December 2004 Report and para 2 of the November 2004 Report (since, in the latter case, the reconciliation of documents would be a matter for expert evidence even if One.Tel staff were called).

Given the limited scope of Mr Carter's admissible evidence, I do not see any basis for apprehending that the giving of this evidence will lead to undue waste of time. The leading of the evidence will be by affidavit, and the cross-examination, to the extent that it is limited to that evidence, should not take up extensive time, even if (as the defendants submitted) there are some 50 differences between the two versions of the March trial balances. As I made plain during argument, I believe it would have been tidier for ASIC to have Mr Carter prepare a fresh affidavit in dealing with the matters of evidence which ASIC now wishes to reduce, rather than for ASIC to rely on affidavit said reports prepared at an earlier stage for other purposes. But the outcome of the argument of admissibility is not evidence that I would regard as a risk of being misleading or confusing for the purposes of s 135.

I received extensive submissions on s 135, but it does not seem to me that the relatively limited evidence by Mr Carter that I have found to be admissible comes anywhere near attracting the exercise of the discretion conferred by that section. Nor do I see any proper basis for limiting the use of Mr Carter's affidavit evidence under s 136.

Consequently the five components of Mr Carter's affidavit evidence that I have found to be admissible will not be excluded or limited on discretionary grounds. 20. Conclusions

I have decided that all nine categories of ASIC's tender documents to which objections have been maintained are admissible, ought not to be excluded from evidence under s 135, and ought not to be subject to a limited use order under s 136. The only exception to this decision relates to some pages that are illegible, but I will allow ASIC to replace them with legible copies. Additionally, I shall allow ASIC to read the parts of Mr Carter's evidence, as just specified, and I shall not exclude that evidence under s 135 or limit its use under s 136.