ASIC’s comments are “extremely concerning,” the top legal body says
The Law Council of Australia said that it finds the comments made by the Australian Securities and Investments Commission’s (ASIC) enforcement chief on client privilege and the conduct of litigation “extremely concerning.”
In an Australian Financial Review report last week, Daniel Crennan QC, was quoted saying that what parties concerned in actions “should not be doing is engaging in years of litigation, using an asymmetry of funding to engage in endless interlocutory stoushes with ASIC and then look to settle on the courthouse steps.”
He also said that it’s unfortunate that there is a “long history” in Australia of parties taking steps to “either slow down or interfere with the natural course of litigation.” The report paints a regulator that’s become stricter on people wasting resources.
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“In appropriate circumstances it's better off for society and better off for the use of public funds for large finance entities in appropriate circumstances to make admissions early, move to the penalty phase early and move on. Particularly when there has been a systematic failure,” Crennan said.
Arthur Moses SC, Law Council president, said that the comments are troubling particularly because of ASIC’s status as a “model litigant.”
“The potential consequences for a person faced with criminal or civil proceedings brought by ASIC are extremely serious, including loss of their liberty or their livelihood. There is a presumption of innocence. It is entirely appropriate for any defendant to rely on the rights and protections developed over centuries to ensure the proceedings ASIC is bringing against them are conducted fairly,” Moses said. “It is concerning that ASIC as the regulator would make such statements, as there is a real risk these may put undue pressure on parties not to contest proceedings or raise legitimate issues for determination by a court.”
Moses said that Australia’s courts are well-equipped to deal with time-wasting tactics and unreasonable rejections of settlement.
“They have, and use, mechanisms to ensure that matters are resolved as justly, quickly and cheaply as possible consistent with respecting the parties’ legal rights,” Moses said. “If ASIC believes there are concerns in a particular case about the conduct of the litigation, the appropriate person for ASIC to raise these concerns with is the judicial officer conducting the matter, not by making broad statements to the media which may be read as veiled threats to litigants and business.”
Moses said that the ASIC’s conduct may influence parties not to contest legitimate claims, as well as erode confidence in the judicial system and litigation process.
“I am also concerned that implicit in the comments that have been attributed to the deputy chair of ASIC are what appears to be a criticism of our courts in the management of these cases,” Moses said. “Whether those comments were made by the deputy chair, and if so, whether that was his intention, is not clear. However, what is clear is that these types of comments should not be made because unfair and incorrect inferences can be drawn from such comments. That is why there is the need for careful language by the regulator when making statements. Our courts are leaders when it comes to the efficient case management of proceedings.”
The Law Council reminded the ASIC that commercial litigation often involves complex and intricate legal and factual issues and transactions.
“In some cases there may be legitimate reasons for extended discovery, interlocutory proceedings or trial preparation. These processes are critical to ensure the time and resources of the court are not subsequently wasted,” Moses said.
The Law Council also took issue with the ASIC’s indication that it would not accept last-minute settlements.
“There may be cases where settlements arise at a late hour, with all parties engaging in good faith, due to the complex nature of some commercial litigation. The suggestion that these would be rejected by ASIC could be seen as demonstrative of the very bullish conduct ASIC is suggesting is objectionable,” Moses said. “Importantly, as a party to proceedings, the concerns and obligations that ASIC has raised are just as applicable to the regulator.”
The Law Council said that the ASIC, the legal profession, and the courts have common duties to promote the administration of justice.
“This will become even more pertinent in light of the Banking Royal Commission’s recommendation that ASIC should adopt an approach to enforcement that takes, as its starting point, the question of whether a court should determine the consequences of a contravention,” Moses said. “Threats to parties for exercising their legal rights have no place in our justice system, especially from a regulator entrusted with the important role of promoting the rule of law. These statements are unhelpful at best, and at worst, risk undermining business and public confidence in Australia’s justice system and regulator.”