THE corporate regulator has been given the all-clear to run its second civil penalty case against former AWB chief executive Andrew Lindberg over the Iraq kickbacks scandal, after the Victorian Court of Appeal unanimously said the trial judge's decision to halt it was wrong.
The strongly worded decision represents an emphatic victory for the Australian Securities and Investments Commission, which weathered three high-profile losses in three state courts in December.
The appeals court said Justice Ross Robson's decision to permanently halt ASIC's second case was ''wrong and substantial injustice would be done by leaving the decision unreversed''.
Court of Appeal president Chris Maxwell, Justice Mark Weinberg and Justice Peter Buchanan drew attention to the public interest in allowing authorities such as ASIC to pursue allegations of wrongdoing. They said imposing a permanent stay was ''a drastic step'' and should be done only in exceptional circumstances.
''It is one thing to refuse a late application for amendments in a proceeding set down for imminent trial,'' the judges said. ''It is quite another to prevent a party from ever litigating a claim, especially when that party is a public authority acting in the public interest.''
They said Justice Robson ''mistook the facts in important respects and failed to take into account material considerations'', that he did not appreciate ''significant distinctions'' between the issues in the two cases, and he wrongly characterised ASIC's conduct as unreasonable.
They said that in deeming ASIC's actions unreasonable, the judge ''gave insufficient attention to the public interest in the adjudication of allegations of significant wrongdoing in the conduct of an Australian company's foreign business''.
The decision enables ASIC to raise allegations about Mr Lindberg's actions over the Tigris transaction, Project Rose and the Volcker inquiry, which probed corruption in the UN's oil-for-food program.
ASIC's first case alleges Mr Lindberg knew or ought to have known about the illicit payment of $US225 million to Iraq in breach of UN sanctions, and by doing nothing he brought the company into disrepute, causing it commercial damage.
In November, three weeks after the trial of the first case began, the regulator initiated a second case in which it alleged Mr Lindberg misled the board about the kickbacks, the secret Tigris deal, the lack of rigour in AWB's internal investigation, and that he did not tell fellow directors about the serious nature of Volcker's allegations against the company.
The cases are now likely to be heard together later this year or in early 2011. The parties return to court for directions on February 24.
Justice Robson had criticised ASIC for ''not joining the dots'' earlier about Mr Lindberg's alleged failure to inform the board.
But the appeals court exonerated ASIC investigators, saying the regulator had provided a satisfactory explanation and the evidence of ASIC's senior investigator, Brendan Caridi, was ''clear, cogent and consistent'', mostly unchallenged, and ''was in no respect misleading''.
In the lower court, Mr Caridi highlighted ASIC's limitations, saying time and resources were wasted when it was forced to transfer its investigators to a federal police-led taskforce in 2007.
ASIC split from the taskforce in August 2007, and months later it launched civil penalty proceedings against six former AWB officers, including Mr Lindberg.
Mr Caridi had also said ASIC relied initially on the findings of commissioner Terence Cole, QC, who said there was not enough evidence to pursue Mr Lindberg in either criminal or civil penalty proceedings. ASIC later decided he was wrong.
The appeals court said the trial judge overlooked the fact that evidence given to the Cole inquiry was not in a form that a prosecutor such as ASIC could rely on in court.
In December, in the same week that Justice Robson halted ASIC's second case, ASIC failed in a seven-year battle against former One.Tel boss Jodee Rich, and it lost against Fortescue Metals and its founder, Andrew Forrest, over public disclosures. It plans to appeal in both cases.
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