FEDERAL COURT OF AUSTRALIA

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285

ORDERS

THE COURT ORDERS THAT:

Privilege Applications

Mills

1.    On or before 4PM on 21 March 2019, the Seventh Respondent (Mills) is to file and serve on the Applicant copies of the following of his sworn affidavits filed in this proceeding and presently sealed (Mills Affidavits):

(a)    14 November 2017 filed pursuant to paragraph 24 of the search order made by Justice Beach on 26 October 2017 (Search Order);

(b)    11 July 2018 filed pursuant to paragraph 24 of the Search Order; and

(c)    11 July 2018 filed pursuant to order 3 of the orders made by Justice Beach on 19 February 2018 (as varied by order 1 of the orders made by Justice Beach on 16 March 2018) (Discovery Order).

2.    This Court grants a Certificate under section 128A(7) of the Evidence Act 1995 (Cth.) (Act) in the form of Annexure A to this order (128A Certificate) in respect of the Mills Affidavits and of the documents either referred to in and/or exhibited to any of and identified by him in the Mills Affidavits as being subject to claims of privilege (Mills Documents).

3.    On or before 4PM on 21 March 2019, Mills is to provide inspection of the Mills Documents to the Applicant's solicitors.

Hanhwa Parties

4.    The Second Respondent and the Eighth Respondent's (together, Hanhwa Parties) application (Hanhwa Parties Privilege Application) seeking an order that they be relieved of the obligation to provide inspection to the Applicant of the documents referred to in exhibit KL-2 to the Affidavit of Kichang Lee sworn 4 October 2018 (Hanhwa Documents) on the grounds of privilege be refused.

5.    On or before 4PM on 21 March 2019, the Hanhwa Parties are to provide inspection of the Hanhwa Documents to the Applicant's solicitors.

Meneses Parties

6.    The First Respondent and the Sixth Respondent’s (together, Meneses Parties) application (Meneses Parties Privilege Application) seeking an order that they be relieved of the obligation to provide inspection to the Applicant of the documents referred to in the Part 2 of each of their Lists of Documents filed in this proceeding dated 20 June 2018 and 9 July 2018 (Meneses Documents) on the grounds of privilege be refused.

7.    On or before 4PM on 21 March 2019, the Meneses Parties are to provide inspection of the Meneses Documents to the Applicant's solicitors.

Further orders and costs

8.    On or before 4PM on 13 March 2019, Mills, the Hanhwa Parties and the Meneses Parties are to file and serve any submissions they wish to rely upon regarding:

(a)    the making of any further orders in relation to Mills' application seeking an order that he be permitted to not provide inspection to the Applicant of the Mills Documents, or otherwise that he be provided the 128A Certificate (Mills Privilege Application); and

(b)    the costs of the Mills Privilege Application, the Hanhwa Parties Privilege Application and the Meneses Parties Privilege Application.

(Respondents’ Submissions)

9.    On or before 4PM on 18 March 2019, the Applicant file and serve submissions it wishes to rely upon in response to the Respondents' Submissions.

10.    Costs be reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

VID 1157 of 2017

CERTIFICATE UNDER SECTION 128A OF THE EVIDENCE ACT 1995

This Court certifies under section 128A of the Evidence Act 1995 of the Commonwealth that the information disclosed in the following affidavits is information to which subsection 128A(8) of that Act applies:

1.    Affidavit of Craig John Mills affirmed on 14 November 2017 pursuant to the search order made by Justice Beach on 26 October 2017 (Search Order) including any exhibits or annexures thereto;

2.    Supplementary Affidavit of Craig John Mills affirmed on 11 July 2018 pursuant to the Search Order including any exhibits or annexures thereto; and

3.    Affidavit of Craig John Mills affirmed on 11 July 2018 pursuant to order 3 of the orders made by Justice Beach on 19 February 2018 (as varied by order 1 of the orders made by Justice Beach on 16 March 2018) including any exhibits or annexures thereto.

[A copy of each of the affidavits and their exhibits / annexures is to be attached to this certificate, and duly authenticated by the court or its proper officer.]

Dated:

(affix seal)

_______________________________

Justice O’Callaghan

Note    Subsection 128A(8) of the Evidence Act 1995 provides as follows:

(8)    In any proceeding in an Australian court:

(a)    evidence of information disclosed by a relevant person in respect of which a certificate has been given under this section; and

(b)    evidence of any information, document or thing obtained as a direct result or indirect consequence of the relevant person having disclosed that information;

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence concerned.

 

REASONS FOR JUDGMENT

O’CALLAGHAN J:

SUMMARY OF OUTCOME

1    Significant parts of these reasons are, unless otherwise ordered, confidential to the respondents. Those parts of the reasons are redacted in the version of the reasons to be provided to the applicant and to be made publicly available. Separate confidential versions are to be provided to the Meneses and Lee Parties, with those parts of the reasons confidential to the other party redacted.

2    I summarise the substance of the outcome of my reasons below, as follows (adopting defined terms appearing below).

3    First, the claims to Privilege by the Meneses and Lee Parties are refused, and the documents in respect of which Mr Meneses claims Privilege, and the documents in respect of which Mr Lee claims Privilege, are to be made available to Directed’s solicitors for inspection.

4    Secondly, I shall cause Mr Mills to be given a certificate pursuant to s 128A(7) of the Evidence Act 1995 (Cth) (Evidence Act) in respect of the whole of the evidence contained in or exhibited to his affidavit dated 14 November 2017 and his two further affidavits, each dated 11 July 2018.

5    I shall hear the parties as to the precise form of orders, including as to costs, that should be made in light of the following reasons.

INTRODUCTION

6    The applicant (Directed) made an application on 19 February 2018 to Justice Beach (who is the docket judge for this proceeding) to obtain access to various documents seized during the execution (the search) of a search and seizure order that his Honour made on 26 October 2017 (the search order), and which was executed at four locations the next day.

7    The documents to which Directed sought access were identified as “Listed Things”, as defined in the search order.

8    On 19 February 2018, Justice Beach ordered that Directed’s application be dealt with in the context of the respondents making their discovery, and that any respondent who or which sought to make claims of privilege with respect to any of the documents seized during the search, or otherwise to be discovered, could do so. His Honour also ordered that any of the respondents who wished to make claims of privilege in relation to discovery, or in relation to Directed’s application, should file and serve any affidavits and submissions setting out, with reference to each document or category of documents, the grounds of objection.

9    There is thus no formal interlocutory application before me in respect of the privilege issues, which a judge other than the docket judge is required to deal with, for the obvious reason that the application involves the prospect (realised in this case) of the court inspecting documents in respect of which claims to privilege are made.

10    For reasons which are explained below, the hearing of Directed’s applications and of the various claims to privilege made by the relevant respondents, although they commenced in October 2018, were not completed until last month. During the ensuing period, the parties filed numerous submissions and affidavits in support of their competing positions. In the end, for reasons which I trust these reasons make obvious, it was not necessary to refer to most of the affidavit material. The written submissions were extensive and detailed oral submissions were made by all parties over the course of the four days.

11    I will now briefly describe the parties and the roles they play.

MENESES PARTIES

12    The first respondent, OE Solutions Pty Ltd (OE Solutions), and the sixth respondent, Mr Johnny Meneses (together, Meneses Parties) resist inspection by Directed of 111 documents which they claim are subject to the privilege against self-incrimination (PSI) and 3031 documents which they claim are subject to the privilege against exposure to civil penalties (PCP) (Meneses Documents).

13    Of the Meneses Documents, all but 583 were seized during the search.

LEE PARTIES

14    The eighth respondent, Ryan (Kichang) Lee, and the second respondent, Hanhwa Aus Pty Ltd (Hanhwa Aus), (together, Lee Parties) resist inspection of certain documents by Directed on the basis that 39 documents are subject to PSI. They oppose Directed’s application substantially for the same reasons as the Meneses Parties.

MILLS

15    The seventh respondent, Craig Mills, resists inspection by Directed of documents exhibited to his confidential affidavits (made pursuant to the usual procedure outlined in the search order), on the basis that the documents are subject to Privilege, but ultimately does not resist production provided that the court causes to grant him a certificate under s 128A(7) of the Evidence Act.

16    The written submissions relied on by Directed used the following additional definitions, which I adopt:

    the Relevant Documents refer to the Meneses Documents, the Mills Documents and the Lee Documents;

    the Relevant Respondents refer to Meneses, OE Solutions, Mills, Lee and Hanhwa Aus;

    the Privilege means PSI and PCP.

QUESTIONS (AND ANSWERS)

17    Although the parties differed about the order in which the issues are to be determined, the issues should be approached in the order that I set out below. For reasons that I will explain shortly, in light of the view that I have formed about the critical anterior questions (namely questions 1 and 2 below), it is unnecessary to decide a number of the other questions.

18    The questions, and the answers reflecting the conclusions that I have reached for the reasons set out later, are as follows:

(1)    Whether the party claiming privilege has demonstrated that each of the Relevant Documents is properly a document of the relevant individual, and not a corporation.

Answers:

(a)    In the case of the Meneses’ parties: No;

(b)    In the case of the Lee parties: No;

(c)    In the case of Mr Mills: The question does not arise.

(2)    Whether a person who is a single director of a company with no employees can claim privilege against self-incrimination in respect of documents belonging to that company, notwithstanding s 187 of the Evidence Act.

Answer: No, no such exception to s 187 should be recognised.

(3)    Whether the evidence enables the court to determine which documents were seized and which were “independently” discovered.

Answer: Yes.

(4)    Whether different legal principles apply to those two categories of documents.

Answer: Unnecessary to decide.

(5)    In respect of documents seized during the search:

(a)    whether Mr Mills may rely on the provisions of s 128A of the Evidence Act; and

(b)    whether, at common law, the Lee Parties and the Meneses Parties, having elected not to file an affidavit under the provisions of s128A of the Evidence Act, can rely upon the Privilege at common law, and if so, what principles apply.

Answer: As to (a): Mr Mills will be granted a certificate under s 128A(7) of the Evidence Act.

As to (b): Unnecessary to decide.

(6)    Does each of the Relevant Documents have a real and appreciable tendency to incriminate Meneses, Mills or Lee for a criminal offence or expose them to a civil penalty?

Answer: Yes.

DIRECTED’S CLAIMS IN THIS PROCEEDING

19    Directed is an Australian automotive electronics products and solutions developer, specialising in the distribution of in-vehicle electronics, hardware, telematics and emerging technologies. It provides tailored in-vehicle hardware and telematics solutions, with applications to safety, diagnostics, navigation and infotainment.

20    Directed has an extensive network of trade, fleet and original equipment accounts throughout Australia and New Zealand.

21    Directed’s customers include, among many others, Isuzu, Hino, Daimler Truck & Bus and Mercedes Benz.

22    The fifth respondent, Hanhwa Hightech Co Ltd (Hanhwa Hightech Korea) and the twelfth respondent, Leemen Co Ltd (Leemen Korea), both South Korean companies (together the Hanhwa Korea Entities), have since 2009 manufactured and supplied audio visual units and accessories or component parts to Directed for supply by Directed to its customers.

23    Directed contends that the supply to it from the Hanhwa Korea Entities was by way of an agreement between them constituted predominantly by conduct over an extended period.

24    Directed commenced this proceeding in October 2017.

25    When the search occurred, Mr Meneses was, as he had been since 2009, employed by Directed as Business Development Manager. His job was to liaise with Hanhwa Hightech Korea to obtain the manufacture and supply of specialised components, products and equipment for supply by Directed to its customers.

26    One of Mr Meneses’ primary contacts at Hanhwa Hightech Korea was Mr Lee, who currently lives in Australia. Mr Lee is a director of the second, third and fourth respondents, Hanhwa Aus, Hanhwa Hightech Australia Pty Ltd and Leemen Aus Pty Ltd (Hanhwa Aus Entities). Mr Lee is also a director of Hanhwa Hightech Korea and a shareholder of Leemen Korea.

27    Mr Mills is a former employee of Directed. He was employed at Directed as Project and Production Manager from 1 June 2009 to March 2017. He reported directly to Mr Meneses, and also worked closely with Mr Meneses and Hanhwa Hightech Korea and its associated entities and employees to source and develop products for supply by Directed to its customers.

28    In about 2010, Mr Meneses told Mr Siolis, a director of Directed, that he had found a new supplier to supply some of the products incorporated into Directed’s products. That new supplier was OE Solutions.

29    Directed alleges that, many years later, in October 2017, two Directed employees approached Mr Siolis and told him that Mr Meneses had been lying to him for years about certain matters concerning the business. They suggested that he look into who owned OE Solutions. Directed also alleges that they said that Mr Meneses was planning on taking the business of Directed and that he was working with Mr Lee in a building in Brooklyn in Melbourne’s west (the Brooklyn premises).

30    Mr Siolis then conducted a company search of OE Solutions. It showed that Mr Meneses was its sole director and shareholder.

31    Directed alleges that is has uncovered a range of wrongful conduct by the respondents, and brings multiple actions against them (described below).

32    The alleged wrongful conduct includes the allegation that it has uncovered on its systems an electronic copy of a contract dated 12 May 2012 between OE Solutions (executed by Mr Meneses) and Hanhwa Hightech Korea (executed by Mr Lee’s father, Youn Sung Lee) which evidences an agreement by Hanhwa Hightech Korea to pay to OE Solutions secret commissions.

33    On 21 May 2012, Directed alleges that the contract was emailed by Mr Lee from ryan@leemen.net to Mr Meneses at Johnny.Meneses@directed.com.au, his Directed email address.

34    The moment he read it, Mr Meneses replied:

“Ryan, Please ONLY send this info to my home email ONLY!!!!!!!!!!!!”

35    The contract is on Hanhwa Hightech Korea letterhead, addressed to OE Solutions (attention Mr Johnny Meneses) and expressed to be accepted by OE Solutions. It provides as follows:

Dear Johnny Meneses,

This is to confirm that with effective from the date of 1 July 2009, it is understood that OE Solution (sic) will provide the following services to Hanhwa high-tech Co., (sic) Ltd.

1.    Co-ordination for the on-going business with Directed Electronics & Hanhwa.

2.    Control and developing new business with Hanhwa.

It is agreed that charge for such service of buyer orders including Directed will be supported by OE Solutions will be 3% of the shipped order amount per shipment payable upon completion of the shipment. Also Hanhwa agrees the remittance to OE Solutions service charge agreed between OE Solutions and Hanhwa after shipment for buyer orders as below account no.

Name: Johnny Meneses Band swift: WPACAU2S

Band name: WESTPAC BANK

Address: 203 Boundary Rd braeside (sic) Vic 3195 Australia

Account: 548527.

36    Directed alleges that the third paragraph of that signed agreement evidences the agreement by Hanhwa Hightech Korea to pay, and by OE Solutions to accept, secret commissions.

37    As discussed below, given that the agreement is with OE Solutions, Directed contends that all documents concerning the performance of the contract and payments made under it belong to OE Solutions, not Mr Meneses in any personal capacity.

38    Directed alleges that in the period from 2009 to 2017, OE Solutions and/or Mr Meneses received approximately $3.6m in secret commissions from Hanhwa Hightech Korea.

39    Directed alleges that both Mr Meneses and Mr Mills were directly involved in the sourcing, supply, ordering, invoicing and payment of the products from the supplier Kenmarco to OE Solutions as well as their on-supply by OE Solutions to Directed.

40    Directed alleges that in the period from 2010 to 2017, OE Solutions and/or Mr Meneses received a mark-up of approximately 88% (about $1.2m) on goods they supplied to Directed via OE Solutions.

41    The following summary of the allegations is adapted from Directed’s written submissions dated 22 October 2018:

(a)    Messrs Meneses and Mills had been acting in concert with Mr Lee working on exploiting opportunities for the development and sale of products by them and/or entities in which they were involved to the exclusion of Directed and without advising Directed of their actions in this regard;

(b)    One such diverted opportunity concerned a Directed product known as the “SuperDAVE”, which it intended to supply to Isuzu (the SuperDAVE opportunity):

(i)    In about February 2015, the SuperDAVE opportunity was introduced by Directed to the Hanhwa Aus and Hanhwa Korea Entities and from February 2015 to March 2017, Directed worked with Hanhwa entities and Isuzu on this opportunity.

(ii)    In March 2017, Mr Meneses told the directors and other employees of Directed that the SuperDAVE opportunity was not going ahead, that Isuzu would continue purchasing the existing DAVE unit from Directed and that the Directed staff should stop work on the SuperDAVE opportunity and “box everything up”.

(iii)    However, from about April 2016 the Hanhwa Korea Entities, the Hanhwa Aus Entities, and Messrs Lee, Meneses and Mills (while Messrs Meneses and Mills were still employed by Directed), without the knowledge of the directors of Directed, pursued the SuperDAVE opportunity for their benefit to the exclusion of Directed.

(iv)    On 30 June 2017, Messrs Lee and Meneses (while still employed by Directed) had a meeting with Isuzu and made a presentation on behalf of the Hanhwa Aus Entities to Isuzu on the SuperDAVE and the Hanhwa Navigation Software.

(v)    Notwithstanding that on 26 July 2017 Mr Meneses sent an email to the directors of Directed attaching a medical certificate representing that he was suffering from a medical condition as a result of major surgery and certifying that he would be unfit for work from 20 July 2017 to 8 September 2017, he travelled with Mr Shanks of Isuzu to Korea between 21 and 25 August 2017 to further the business of the Hanhwa Korea Entities and the Hanhwa Aus Entities and to win the contract for them to supply the SuperDAVE to Isuzu to the exclusion of Directed.

(vi)    On 24 August 2017, Colin Muir of Isuzu New Zealand emailed Meneses at his Hanhwa Email Address wanting to discuss when Isuzu in New Zealand could get access to the SuperDAVE, as they wanted to launch it on the new F and N series trucks the next year. Mr Meneses responded on 25 August 2017 stating “Thanks for your email. My situation is very difficult at the moment and very confidential. I am still at Directed for now. Will call you soon to discuss”.

(vii)    On 6 October 2017, while Mr Meneses was still employed by Directed, a Supply Agreement between Hanhwa Aus and Isuzu was signed on behalf of Hanhwa Aus by Mr Meneses as a purported director and secretary of Hanhwa Aus and Mr Lee as a director of Hanhwa Aus.

(c)    Further, since about April 2016, the Hanhwa Korea Entities, the Hanhwa Aus Entities, and Messrs Lee, Meneses and Mills have been involved in the development of an AV unit and a telematics unit referred to as the “RA 7000” or the “Safety Screen”, which they promoted to Directed’s customers in Australia and New Zealand in the period from April 2016 to 27 October 2017, including to Isuzu for use in association with the SuperDAVE, and to Mercedes for use in its Sprinter buses.

(d)    Further, in the period October 2016 to October 2017 the Hanhwa Korea Entities, the Hanhwa Aus Entities, and Messrs Lee, Meneses and Mills met with and exchanged email correspondence with representatives of a company called Polstar in relation to the design and supply of navigation software for installation in the SuperDAVE and the RA 7000 for supply to Isuzu and Mercedes (Hanhwa Navigation Software):

(i)    In the period from October 2016 to October 2017, the Hanhwa Korea Entities, the Hanhwa Aus Entities, and Messrs Lee, Meneses and Mills:

 developed the Hanhwa Navigation Software for sale or licence by Hanhwa Aus to Isuzu for use in relation to the SuperDAVE;

 developed and tested the Hanhwa Navigation Software, (including using assistance and information unwittingly provided by one of Directed’s employees who believed such work was for the potential benefit of Directed, not for the benefit of the Hanhwa Aus and Hanhwa Korea Entities);

 promoted, offered for licence and entered agreements to license the Hanhwa Navigation Software to Isuzu for use in relation to the SuperDAVE; and

 installed the Hanhwa Navigation Software in SuperDAVE units sold by Hanhwa Aus to Isuzu.

(e)    As to the allegations of dual employment, Directed alleges that:

(i)    from at least 9 May 2016, Mr Meneses had a Hanhwa email address which he used to conduct business for and on behalf of and for the benefit of the Hanhwa Korea Entities and the Hanhwa Aus Entities;

(ii)    from at least 9 May 2016, Mr Mills knew Mr Meneses had a “Leemen” email address which he used to conduct business for and on behalf of and for the benefit of the Hanhwa Aus and Hanhwa Korea Entities;

(iii)    from at least 4 August 2016, Mr Mills had a Hanhwa email address and a separate Hanhwa mobile phone number;

(iv)    since at least August 2016, the Hanhwa Aus Entities, and Messrs Lee, Meneses and Mills had worked at and/or carried on business from the Brooklyn premises, noting that:

Mr Meneses had a dedicated office, desk, chair and computer at the Brooklyn premises, and files and Hanhwa business cards at the Brooklyn premises;

Mr Meneses was named on promotional documents as the Australian contact person for the Hanhwa Aus Entities business in Australia;

the business cards represented that Mr Meneses held the position of OEM Director of the Hanhwa Aus Entities and recorded his mobile phone number on the business cards as 0400 686 246, being his Directed mobile number; and

the Hanhwa business cards recorded the Hanhwa Aus postal address as PO Box 939 Braeside, Victoria, which was the same postal address Mr Meneses used on OE Solutions invoices he had caused to be issued to Directed for many years.

(v)    In August 2016, Mr Meneses purchased, and was subsequently reimbursed by the Hanhwa Aus Entities, an Isuzu Truck for the purposes of testing electronic devices for supply by Hanhwa Aus to Isuzu.

(vi)    Between 22 May 2017 and 24 October 2017, Mr Meneses made 83 calls from Brooklyn from his mobile telephone with the number 0400 686 246.

(f)    Throughout 2016 and 2017 Meneses made offers of employment to employees of Directed to seek to entice them to work for Hanhwa Aus Entities.

(g)    Further, insofar as confidential information is concerned:

(i)    Mr Meneses provided Directed confidential information to Mr Lee when there was no business reason to do so; and

(ii)    Messrs Meneses and Mills sent Directed confidential information in relation to its products and customers including product pricing and sales and profit information and sales forecast information to their private email addresses when there was no business reason to do so.

42    As noted above, the search order was executed on 27 October 2017 at the Brooklyn premises and at the homes of Messrs Meneses, Mills and Lee.

43    During the search:

(a)    a digital image made of Directed’s entire files and folders relating to its finance, marketing, sales, service, production and testing was found on a computer at Mr Meneses’ home; and

(b)    hard copy files of Directed’s confidential information in relation to its products and customers, including product pricing and sales and profit information, were found on Messrs Mills and Meneses’ desks at the Brooklyn premises.

44    Directed alleges that until as late as 27 October 2017, Mr Meneses continued to:

(a)    give directions to employees of Directed and to manage the business affairs of Directed;

(b)    send and receive emails to and from his Directed email address which recorded his mobile phone with the number 0400 686 246;

(c)    allow Directed to pay for all costs and charges associated with the use of his mobile phone with the number 0400 686 246;

(d)    receive his salary from Directed; and

(e)    claim and receive reimbursement of expenses which he represented were incurred in furthering the business of Directed, including:

(i)    on 26 September 2017, Mr Meneses sent an email from his Directed email address to Mr Siolis advising them that he would be in New Zealand from 3-5 October 2017 to visit Hino, Fuso, Isuzu and Mercedes. Mr Meneses claimed $4,554.82 for the travel to and from New Zealand and marketing expenses in relation to this trip to New Zealand and was reimbursed the costs and expenses by Directed;

(ii)    Mr Meneses also submitted an Expense Reimbursement Claim Form to Hanhwa Aus for $4,097.27 for the travel to and from New Zealand and marketing expenses in relation to this trip to New Zealand on 3-5 October 2017;

(iii)    these claimed expenses were paid to him by Hanhwa Aus on 16 October 2017.

45    Directed pleads the following causes of action:

Against Mr Meneses

(1)    breaches of his employment agreement;

(2)    breaches of his fiduciary obligations to his employer;

(3)    breaches of ss 182 and 183 of the Corporations Act 2001 (Cth) (Corporations Act);

(4)    inducing breach of contract with respect to the agreement between Hanhwa Korea and Directed;

(5)    accessorial liability with respect to the unlawful conduct of Mills including under ss 79, 182 and 183 the Corporations Act;

(6)    contraventions of s 18 of the Australian Consumer Law (ACL) with respect to certain representations made to Isuzu and Hino;

(7)    copyright infringement pursuant to s 36 of the Copyright Act 1968 (Cth) (Copyright Act) with respect to the reproduction of certain documents without the licence of Directed; and

(8)    receiving secret commissions.

Against Mr Mills

(1)    breaches of his employment agreement;

(2)    breaches of his fiduciary obligations to his employer;

(3)    breaches of ss 182 and 183 of the Corporations Act;

(4)    accessorial liability with respect to the unlawful conduct of Mr Meneses including under ss 79, 182 and 183 the Corporations Act; and

(5)    copyright infringement pursuant to s 36 of the Copyright Act with respect to the reproduction of certain documents without the licence of Directed.

Against Mr Lee

(1)    accessorial liability with respect to Mr Meneses’ and Mr Mills’ breaches of their employment agreements or contraventions of statutory duties under the Corporations Act;

(2)    inducing breach of contract with respect to the agreement between Hanhwa Korea and Directed;

(3)    accessorial liability with respect to the unlawful conduct of Meneses and Mills including under ss 79, 182 and 183 the Corporations Act;

(4)    contraventions of s 18 of the ACL with respect to certain representations made to Isuzu;

(5)    involvement in s 18 ACL contraventions with respect to certain representations made by Meneses to Hino; and

(6)    copyright infringement pursuant to s 36 of the Copyright Act with respect to the reproduction of certain documents without the licence of Directed.

Against OE Solutions

(1)    accessorial liability with respect to Mr Meneses’ breaches or contraventions of his statutory duties under the Corporations Act;

(2)    involvement in those contraventions;

(3)    knowing participation in and assistance to Mr Meneses’ breach of his fiduciary obligations; and

(4)    inducing Mr Meneses to breach his employment contract.

Against Hanhwa Aus

(1)    accessorial liability with respect to Messrs Meneses’ and Mills’ breaches of their employment agreements or contraventions of their statutory duties under the Corporations Act;

(2)    inducing breach of contract with respect to the agreement between Hanhwa Korea, Leemen Korea and Directed;

(3)    accessorial liability with respect to Mr Meneses’ and Mr Lee’s contraventions of s 18 of the ACL;

(4)    accessorial liability with respect to the unlawful conduct of Meneses and Mills including under ss 79, 182 and 183 the Corporations Act;

(5)    copyright infringement pursuant to s 36 of the Copyright Act with respect to the reproduction of certain documents without the licence of Directed.

QUESTION 1

46    Question 1 is whether Mr Meneses and Mr Lee established that each of the Relevant Documents is properly their own document and not a document of OE Solutions or Hanhwa Aus.

47    This question is critical because the privilege against self-incrimination is not available to a corporation. Section 187 of the Evidence Act relevantly provides:

Abolition of the privilege against self-incrimination for bodies corporate

(1) This section applies if, under a law of the Commonwealth or in a proceeding in a federal court, a body corporate is required to:

(a) answer a question or give information; or

(b) produce a document or any other thing; or

(c) do any other act whatever.

(2) The body corporate is not entitled to refuse or fail to comply with the requirement on the ground that answering the question, giving the information, producing the document or other thing or doing that other act, as the case may be, might tend to incriminate the body or make the body liable to a penalty.

48    Similarly, the penalty to self-exposure to penalty is also not available to a corporation. As Nettle J explained in Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375 at 392, [56]-[57]:

In [Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477] the majority held that the privilege against self-incrimination is not available to a corporation as a basis for resisting a statutory requirement for the production of documents. Subsequently, in [Trade Practices Commission v Abbco Ice Works Pty Ltd (1994) 52 FCR 96] the majority of the Full Court of the Federal Court held that, as the result of denying the privilege against self-incrimination to corporations, it should be accepted that corporations are also denied the benefit of the privilege against self-exposure to penalty. More recently, in [Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission Daniels (2002) 213 CLR 543], Gleeson CJ, Gaudron, Gummow and Hayne JJ stated that, consistently with what was said in Abbco, it should now be recognised that neither the privilege against self-incrimination nor the privilege against self-exposure to penalty any longer applies to corporations.

Nothing that has occurred since Daniels suggests that there is any need to revisit the availability to corporations of either privilege. To the contrary, the extent of corporate crime and misfeasance in contemporary society is such that the considerations which informed the result in Caltex are at least as compelling today as they were then or when Daniels was decided.

(Footnotes omitted).

49    The hearing of this application took place over four separate days - 26 October, 19 November and 11 December 2018 and 11 February 2019. That is hardly a desirable state of affairs, but it was brought about by the fact that the application was initially set down for hearing on an estimate of 1 day only. After that, the disparate hearing days were largely the product of the need to find dates to accommodate a significant number of busy counsel and the court.

50    On day 3, counsel for Mr Meneses and OE Solutions applied for an adjournment to enable them to put on further (confidential) evidence to justify the claims to Privilege and, in particular, to explain why the documents in respect of which Privilege is claimed were documents that were in the power, possession or control of Mr Meneses in his own capacity, or were not documents brought into existence by the corporation, or otherwise documents of the corporation.

51    I granted the adjournment over the opposition of Directed.

52    Mr Meneses and OE Solutions now seek to rely on a confidential affidavit of Mr Meneses sworn on 29 January 2019. Directed says that I should not grant the necessary leave, because the time has long since passed for evidence to be put on; the trial is set down for December; and Mr Meneses and OE Solutions should not be permitted to “test the waters” with the court on an issue as critical as this one, and then seek to proffer additional evidence only when I made it clear that I regarded the existing evidence about the question to be insufficient.

53    There is a deal of force in what counsel submitted in that regard, but, on balance, and given the lack of substantial prejudice to the applicant, I will grant to Mr Meneses and OE Solutions leave to rely on Mr Meneses’ 29 January 2019 affidavit.

54    Mr Lee also seeks to rely on a further affidavit sworn 25 January 2019. I grant the same leave to him.

55    Before turning to the affidavit, the recitation and consideration of which will be included in a version of these reasons confidential to the respondents, I note that although Mr Lee contends (see below) that if a document is found on corporate premises, and not, say, at the home of a director, that may be a basis for concluding that the document is in the power, possession or control of the company. That argument is not open to Mr Meneses because, as he swears, OE Solutions does not, and never has had, its own separate business premises. The OE Solutions business has always been conducted from his family home.

56    All parties claiming Privilege accepted that the onus is upon them to establish the claim. See, by way of example only, SZHWY v Minister for Immigration and Citizenship (2007) 159 FCR 1 at 14, [62].

57    I turn now to recite the content of the confidential affidavits.

Mr Meneses’ 29 January affidavit

Paragraphs 58 – 98 [redacted]

99    I will accordingly order that the documents be provided for inspection.

MR LEE

100    Mr Lee relies on a confidential affidavit sworn 25 January 2019.

101    It is in these terms:

Paragraphs 102 – 104 [redacted]

105    I will accordingly order that the 39 documents be produced for inspection.

QUESTION 2

106    Question 2 is whether a person who is a single director of a company with no employees can claim privilege against self-incrimination in respect of documents belonging to that company, notwithstanding s 187 of the Evidence Act.

107    The Meneses and Lee Parties submit that if their respective companies are directed to produce documents only the director (Mr Meneses in the case of OES, and Mr Lee in the case of Hanhwa Aus) can comply with such a direction, and that will inevitably involve the director incriminating himself.

108    Directed submits that “sole director, sole shareholder” companies are in no different position, and that no exception is to be carved out of s 187.

109    Messrs Meneses and Lee contend that as they are the sole directors (and in Mr Meneses’ case the sole shareholder) of OE Solutions and Hanhwa Aus, respectively, the companies should be relieved from their obligation to produce documents for inspection because they are the only people able to affirm their respective companies’ List of Documents; and to require OE Solutions or Hanhwa Aus to make discovery of documents would tend to incriminate them.

110    I do not accept that proposition.

111    In my view, I should follow the decision of Brereton J in In the Matter of Kala Capital Pty Ltd (No 2) [2012] NSWSC 1293 at [19], in which his Honour approved what Mason P said in R v Ronen (2004) 62 NSWLR 707.

112    The judgment of Brereton J, delivered ex tempore though it may have been, is a detailed exposition of the applicable principles. It is worth setting the relevant passages out in full:

[11] The next matter with which I shall deal is the objection on the grounds that the order requires production of documents that would require the applicant to incriminate himself.

…

[18] Before returning to that in more detail, I shall address the argument that Mr Lee is entitled to take that objection in respect of documents to be produced by his corporate ‘alter egos’, for want of a better word, namely, Archirox and Arten Atelier. In this respect, it is said that they are one-person companies, in that he is the sole shareholder and director in each. Although there is some evidence that one of those companies has another employee, I shall proceed on the basis that they are, for all intents and purposes, one-person companies.

[19] In this country, two cases have to some extent addressed this argument, but neither in a way that concludes it. In Microsoft Corporation v CX Computer Pty Ltd [2002] FCA 3; (2002) 116 FCR 372, Lindgren J in the Federal Court was not satisfied that it was impossible or impracticable for the company’s list of documents to be verified by an individual other than the sole director who set up a claim of self-incrimination. In R v Ronen [2004] NSWCCA 67; (2005) 64 NSWLR 707, the Court of Criminal Appeal was satisfied that there were persons other than the accused with sufficient control over the subpoenaed documents, and thus with the capacity to ensure that the companies complied with their legal obligations to comply with the subpoenas, so that the issue and service of the subpoenas did not derogate from the accused’s privilege against self-incrimination.

[20] However, in the course of that judgment, Spigelman CJ referred to a number of decisions in the United States of America relevant to so-called one-person companies. In Braswell v United States 487 US 99 (1988), 109 - 110, Rehnquist CJ, delivering the opinion of the court, said that the custodian’s act of production was not deemed a personal act, but rather, the act of the corporation, and “any claim of Fifth Amendment privilege asserted by the agent would be tantamount to a claim of privilege by the corporation - which of course possesses no such privilege” - a situation analogous with that previously in this jurisdiction. In Environment Protection Authority v Caltex Refining Company Proprietary Limited [1993] HCA 74; (1993) 178 CLR 477, McHugh J (at 542) referred to the result in Braswell without disapproval.

[21] The majority judgment in Braswell, as Spigelman CJ mentioned in Ronen, considered the implications of a conclusion that an individual entitled to claim privilege in fact produced records as the custodian for the company. The court said that in a criminal prosecution against the custodian, the government could not introduce into evidence before the jury the fact that the subpoena was served upon, and the corporation's documents were delivered by, one particular individual, the custodian. To that observation the court appended (at 118 (footnote 11)):

We leave open the question whether the agency rationale supports compelling a custodian to produce corporate records when the custodian is able to establish, by showing for example that he is the sole employee and officer of the corporation, that the jury would inevitably conclude that he produced the records.

[22] As Spigelman CJ further pointed out, it was argued in subsequent cases that there was an exception in the case of a corporation with a sole owner, director, officer and employee. In the United States, that argument has been consistently rejected: by the Second Circuit in Matter of Grand Jury Subpoenas 959 F 2d 1158 (2d Cir 1992); by the Fourth Circuit in United States v Stone 976 F 2d 909 (4th Cir 1992) cert denied, 507 US 1029 (1993); and, by the New York District Court in United States v Moseley 832 F Supp 56 (WDNY 1993).

[23] In United States v Stone, the United States Court of Appeals’ Fourth Circuit rejected the submission, on the following basis:

Ashford is a one-man operation; however, it is still a corporation, a state law-regulated entity that has a separate legal existence from Wujkowski shielding him from its liability. The business could have been formed as an unincorporated sole proprietorship and production of its business records protected by the privilege against self-incrimination ... Wujkowski chose the corporate form and gained its attendant benefits, and we hold, in accord with the decisions of sister circuits, that he cannot now disregard the corporate form to shield his business records from production.

[24] That was applied in United States v Moseley, and a similar result was suggested in obiter dicta of Rand J in the Supreme Court of Canada in Klein v Bell [1955] 2 DLR 513, 523 - 524.

[25] In Ronen, Spigelman CJ left open the position in Australia of a one-person company (at [79]). In reaching that conclusion, his Honour gave considerable emphasis to the accusatorial nature of criminal proceedings, and the inappropriateness, absent statutory authority, of making any order that has the effect that an accused against whom an indictment has been presented must do something calculated to assist the preparation or presentation of the Crown case (at [67]).

[26] That concern does not operate in the present circumstances. Mason P also addressed the United States cases (at [109] and following). His Honour, on the assumption that the appellants were the only proper officers of their respective corporations, said that it did not follow that the issue of the subpoenas was oppressive as regards them:

On the assumption made, the appellants are presented with the option of appointing a proper officer to cause the subpoena to be answered. This step would involve no incriminatory admission. Nor, in my view would it involve a step that impinged upon the appellants’ right to put the Crown to proof of guilt without requiring them to assist in the process. It stems from their antecedent relationship with corporations that, in all probability, they brought into being. It is an aspect of their continuing duties as officers of the corporations (if they choose to remain such) to ensure that the corporations obey corporate legal obligations. If those duties are burdensome or inappropriate, the respondents can step aside from a managerial role. It is not oppressive to offer them this choice, or some milder choice such as the appointment of a “proper officer” (if there is presently no such officer who does not fear self-incrimination).

[27] Subsequently, his Honour reached the following conclusions:

[112] The command of the subpoenas is addressed to the corporations. As legal entities they have independent duties to comply. “Corporate existence implies amenability to legal process” (Wilson (at 374)). If it were shown to be the case (and it has not been thus far) that there is no-one with custody or possession of the records who could lawfully answer the call of the subpoena on the corporations’ behalf without risk of testimonial self-incrimination, then the corporations must still take steps to comply. This may mean the appointment of a receiver. Or it may mean that a “proper officer” with nothing to fear by way of self-incrimination has to be appointed (cf United States v Barth 745 F 2d 184 (2d Cir 1984) at 189, cert denied 470 US 1004; Re Two Grand Jury Subpoenae Duces Tecum 769 F 2d 52 (2d Cir 1985); Re Two Grand Jury Subpoenae Duces Tecum 793 F 2d 69 (2d Cir 1986) at 74; Braswell (at 116)).

[113] For reasons already given, it is not to the point for the appellants to say that they are the present directing minds of the various corporations and that they personally would have to set in train the steps to “outsource” the performance of the duty falling on the corporations. To adapt the language of Lumbard J speaking for the court in Re Two Grand Jury Subpoenae Duces Tecum 793 F 2d 69 (2d Cir 1986) at 74: “... It is the duty of the [companies], not the [Supreme Court] or the [prosecution], to identify an appropriate custodian to produce subpoenaed documents. If no one may act as custodian without incriminating himself or herself, the firm is required to produce the subpoenaed records by supplying a new agent who has had no previous connection with the firm”.

[114] At the end of the day, the oppression argument is an attempt by the appellants to frustrate the subpoenas by suggesting that they trench upon the appellants’ rights. This is to shift the proper focus of inquiry. The corporations are not free to select an individual to be their proper officer “‘… who because he fears self-incrimination may thus secure for the corporation the benefits of a privilege it does not have’. Such a result would effectively permit the corporation to assert on its own behalf the personal privilege of its individual agents” (United States v Kordel 397 US 1 (1969) at 8).

[28] Kirby J agreed with both Spigelman CJ and Mason P.

113    Brereton J concluded (at [29]):

Essentially for the reasons enunciated in United States v Stone and by Mason P in Ronen, I am of the view that in this context the sole director of a one-person corporation is not entitled to object to the production of documents by that corporation on the basis that it would be incriminatory of that director. The production is by the person as an agent of the company, not on his or her own behalf. If the director fears self-incrimination, then it is open to him or her to take steps to have the company appoint some other proper officer for the purpose of compliance with the order for production.

(Emphasis added).

114    The Meneses and Lee parties sought to rely on a number of other cases which they contended were to the contrary, but they are not to the point. As counsel for Directed submitted, the cases concern the right to claim the privilege against self-incrimination in entirely different contexts, including when an individual is required to make and file a witness statement, or plead a defence. See, by way of example, Griffin v Panzer (2004) 137 FCR 209 at 227-231.

115    They also contended that I should give less weight to the decision of Brereton J because it was delivered ex tempore. I do not accept that submission. The decision, it seems to me, with respect, is not only well reasoned, and founded on the judgment of Mason P in R v Ronen (2004) 62 NSWLR 707, but it is, in my view, correct.

116    Counsel for the Meneses Parties conceded that the high water mark of their case in this regard was a decision in the context of the Fair Work Act 2009 (Cth), Devine Marine Group Pty Ltd v Fair Work Ombudsman [2013] FCA 442.

117    That case involved an appeal from an interlocutory order made by a Federal Magistrate in which the Magistrate had ordered that the first respondent, Devine Marine (a company) make discovery of certain documents.

118    In declining to order discovery, it is clear that Lander J did so because to do so would be inconsistent with the “no costs” jurisdiction under the Fair Work Act. As his Honour said (at [71]):

It is not enough, in my opinion, to say that Devine Marine could comply with the orders by employing another person to act as the proper officer without inquiry into the cost to Devine Marine in making such an appointment. That cost would bear upon the question of fairness, because the FWO claims that the jurisdiction being exercised is a “no costs” jurisdiction …

119    In my view, Directed is correct to say that the case is readily distinguishable from the facts of this case.

120    For those reasons, for the reasons given by Brereton J in In the Matter of Kala Capital Pty Ltd (No 2) [2012] NSWSC 1293, the answer to question 2 is no.

CONCLUSION FOLLOWING FROM QUESTIONS 1 AND 2

121    The claims to Privilege by the Meneses and Lee Parties must therefore be refused, and the 3,135 documents in respect of which Mr Meneses claims Privilege, and the 39 in respect of which Mr Lee claims Privilege, must be made available to Directed’s solicitors for inspection.

QUESTION 3

122    Question 3 is whether each of the Relevant Documents is a document seized during the search or is an “independently” discovered document and whether the evidence enables the court to determine which documents were seized and which were independently discovered.

123    Having read the relevant affidavit material, although the question has no relevance given the view I take with respect to question 1, I am satisfied that the answer to the question is yes.

QUESTIONS 4 AND 5

124    Those questions are unnecessary to decide.

QUESTION 6

125    Question 6 is whether, if at common law the Relevant Respondents can claim the Privilege in respect of seized documents, each of the Relevant Documents has a real and appreciable tendency to incriminate Messrs Meneses, Mills or Lee for a criminal offence or expose them to a civil penalty.

126    This question is unnecessary to decide with respect to Mr Meneses and Mr Lee, but it is with respect to Mr Mills.

127    In my opinion, in respect of the privilege against self-incrimination, this is a clear case where the very seriousness of the allegations made mean that the Relevant Documents have a real and appreciable tendency to incriminate Messrs Meneses, Mills or Lee.

128    In the case of civil penalty privilege, the avowed object of significant parts of the proceeding, summarised above, is the infliction of penalties.

129    As Finkelstein J explained in ASIC v Mining Projects Group Ltd (2007) 164 FCR 32 at [9]-[10]:

In the case of self-incrimination privilege the defendant must establish that the provision of information or the production of documents in the civil case leads to a real and appreciable risk of a criminal prosecution before the privilege can be invoked … That will not be difficult to show when, as here, the proceeding is aimed at proving that the directors engaged in conduct which would establish, or go a long way toward establishing, that they had also committed criminal acts.

The manner in which penalty privilege is to be claimed depends upon the type of proceeding in which the claim is made. In R v Associated Northern Collieries [1910] HCA 61; (1910) 11 CLR 738, Isaacs J drew attention (at 742) to the “inherent distinction between a civil action to prevent or redress a civil injury on the one hand, and a civil action to recover a penalty on the other. In the latter case the whole and avowed object of the proceeding is the infliction of the penalty” … In an action to recover a penalty it is not necessary for the defendant to establish that there is a risk he will be subjected to a penalty by providing information to the plaintiff. The plaintiff is seeking the information for that very purpose. It does not matter that in the proceeding the plaintiff also claims other relief …

(Most case citations omitted).

(Emphasis added)

130    Mr Mills falls into a different category than Messrs Meneses and Lee, because the documents in respect of which he claims Privilege are documents in respect of which Mr Mills claimed privilege during the search of his premises. He relies on three confidential affidavits, one dated 14 November 2017, and two others, each dated 11 July 2018.

131    I have read those affidavits and I have inspected the exhibits, but it is not necessary to set out or discuss, in a confidential part of these reasons or otherwise, any part of it or them, in light of the agreed position that was reached (see below).

132    Sub-sections 128A(6), (7) and (8) of the Evidence Act provide:

(6)    If the court is satisfied that:

(a)    any information disclosed in the privilege affidavit may tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law; and

(b)    the information does not tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and

(c)    the interests of justice require the information to be disclosed;

the court may make an order requiring the whole or any part of the privilege affidavit containing information of the kind referred to in paragraph (a) to be filed and served on the parties.

(7)    If the whole or any part of the privilege affidavit is disclosed (including by order under subsection (6)), the court must cause the relevant person to be given a certificate in respect of the information as referred to in paragraph (6)(a).

(8)    In any proceeding in an Australian court:

(a)    evidence of information disclosed by a relevant person in respect of which a certificate has been given under this section; and

(b)    evidence of any information, document or thing obtained as a direct result or indirect consequence of the relevant person having disclosed that information;

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence concerned.

133    At the end of the hearing it was common ground that, provided I was satisfied that there was a real and appreciable risk of criminal prosecution, which I am, then I should proceed to grant a certificate under s 128A(7) of the Evidence Act.

134    Accordingly, I shall cause Mr Mills to be given a certificate in respect of the whole of the evidence contained in or exhibited to his three confidential affidavits.

CONCLUSION

135    I am conscious that I have not addressed every argument raised by counsel. I have not, for example, addressed Directed’s submission that because Directed already has in its possession documents implicating the Meneses Parties in, among other things, the payment of secret commissions, the production of further documents will not subject them to “further jeopardy”. But, in the view I have taken, it is unnecessary to decide that question. That said, it would be difficult to form the requisite opinion in circumstances where I have not seen all of the more than 3000 documents in respect to which a claim for Privilege is made.

136    I will hear the parties about the orders now to be made.

Associate:

Dated:    6 March 2019

SCHEDULE OF PARTIES