FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Mining Projects Group Limited [2007] FCA 1620

PRACTICE AND PROCEDURE – civil penalty proceeding – pleadings – request for further and better particulars of defence – whether self-incrimination or penalty privilege apply to pleadings – whether privilege waived by filing a defence – extent of waiver – discovery – witness statements and affidavits obtained by plaintiff – whether protected from inspection by litigation privilege

Corporations Act 2001 (Cth) ss 180, 181, 183, 206C, 1041H, 1043A, 1317G

Customs Act 1901 (Cth) s 255

Crimes Act 1958 (Vic) ss 81, 82, 191, 399

Evidence Act 1995 (Cth) ss 117, 119

A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union (2005) 226 ALR 247

Accident Insurance Mutual Holdings Ltd v McFadden (1993) 31 NSWLR 412

Adler v Australian Securities and Investments Commission (2003) 179 FLR 1

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1998) 81 FCR 526

Australian Competition and Consumer Commission v FFE Building Services Ltd (2003) 130 FCR 37

Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 2) [2007] ATPR 42-157

Bayeh v New South Wales (1999) 108 A Crim R 364

Birrell v Australian National Airlines Commission (1984) 1 FCR 526

Bishopsgate Investment Management Ltd (in prov liq) v Maxwell [1993] Ch D 1

Boileau v Rutlin (1848) 2 Ex 665 [154 ER 657]

Bridal Fashions Pty Ltd v Comptroller-General of Customs (1996) 17 WAR 499

Buckmaster v Meiklejohn (1853) 8 Ex 634 [155 ER 1506]

Chadwick v Chadwick (1852) 22 LJ Ch 329 [20 LTR 272]

Chief Executive Officer of Customs v Camile Pty Ltd (2004) 58 ATR 163

Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543

Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477

Green v Weaver (1827) 1 Sim 404 [57 ER 630]

Hadgkiss v Construction, Forestry, Mining and Energy Union (2005) 146 IR 106

Interchase Corporation Ltd (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 Qd R 141

J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 1) (1992) 38 FCR 452

Kennedy v Lyell (1883) 23 Ch D 387

Lee v Read (1842) 5 Beav 381 [49 ER 625]

Mayor of Derby County Borough v Derbyshire County Council [1897] AC 550

Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority [2002] 4 VR 332

Naismith v McGovern (1953) 90 CLR 336

Propend Finance Pty Ltd v Commissioner of Australian Federal Police (1995) 58 FCR 224

Public Transport Authority of Western Australia v Leighton Contractors Pty Ltd [2007] WASCA 151

Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328

R v Associated Northern Collieries (1910) 11 CLR 738

R v Davis [1993] 1 WLR 613

R v Stinchcombe [1991] 3 SCR 326

R v Ward [1993] 1 WLR 619

Rank Film Distributors Ltd v Video Information Centre [1982] AC 380

Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation (1979) 42 FLR 204

Registrar, Court of Appeal (NSW) v Craven (1994) 126 ALR 668

Reid v Howard (1995) 184 CLR 1

Rich v Australian Securities and Investments Commission (2004) 220 CLR 129

Rio Tinto Zinc Corp v Westinghouse Electric Corp [1978] AC 547

Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 14 NSWLR 132

Robinson v Kitchin (1856) 21 Beav 365 [52 ER 900]; 8 De G M & G 88 [44 ER 322]

Sorby v The Commonwealth (1983) 152 CLR 281

Southern Equities Corporation Ltd v West Australian Government Holdings Ltd (1993) 10 WAR 1

Trade Practices Commission v Ampol Petroleum (Victoria) Pty Ltd (1994) 52 FCR 578

Trade Practices Commission v Sterling (1979) 36 FLR 244

Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96

Visy Industries Holdings Pty Ltd v Australian Competition and Consumer Commission [2007] FCAFC 147

Wheeler v Le Marchant (1881) 17 Ch D 675

Whitehorn v R (1983) 152 CLR 657

IN THE MATTER OF MINING PROJECTS GROUP LIMITED (formerly Yamarna Goldfields Limited)

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MINING PROJECTS GROUP LIMITED (formerly Yamarna Goldfields Limited), BRYAN JOHN FROST AND RICHARD REVELINS

VID 8 of 2007

FINKELSTEIN J

25 OCTOBER 2007

MELBOURNE

In the matter of Mining Projects Group Limited (formerly Yamarna Goldfields Limited)

THE COURT ORDERS THAT:

1.                  The plaintiff’s application for further and better particulars of the second and third defendants’ defences is dismissed.

2.                  The defendants’ application to inspect the witness statements and affidavits that the plaintiff has procured from third parties is dismissed.

3.                  There be no order as to costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

In the matter of Mining Projects Group Limited (formerly Yamarna Goldfields Limited)

REASONS FOR JUDGMENT

1                     In this action, which is still in its interlocutory phase, the plaintiff, Australian Securities and Investments Commission, seeks various forms of relief in respect of alleged contraventions of the Corporations Act 2001 (Cth).  The defendants are Mining Projects Group Limited (MPG), a minerals exploration company, and two of its directors, Mr Frost and Mr Revelins.  ASIC contends that in breach of s 1041H MPG made misleading public announcements about the mineralisation and exploration potential for uranium mining at Niue Island in the South Pacific.  The nub of the complaint is that the potential was overstated.  The directors are alleged to have knowingly procured the breach and thereby contravened ss 180 and 181, the directors’ duties sections.  There are also claims that the directors engaged in insider trading (s 1043A) and improperly used company information (s 183).  The only relief sought against MPG is a declaration that it contravened s 1041H.  But ASIC seeks the imposition of pecuniary penalties against the directors (s 1317G) and an order that they be disqualified from managing a corporation (s 206C).  Two procedural disputes have arisen:  one, raised by ASIC, concerns the pleadings and the other, in which the defendants make the complaint, is about discovery.  The resolution of each dispute is affected by this being a civil action in which penalties are sought.

2                     The pleading dispute arises in the following way.  ASIC has delivered a detailed statement of claim.  Each defendant has filed a defence.  ASIC contends that the defences are deficient in several respects and seeks orders for the provision of further and better particulars.  The directors say that if their pleadings are deficient (a matter which is in dispute) they cannot be compelled to provide any further information because of penalty privilege or the privilege against self-incrimination.

3                     The primary object of a defence is to inform the plaintiff what parts of the statement of claim are admitted, what parts are denied and on what grounds and facts the defendant intends to rely to defeat the claim.  The defence should contain, in summary form, the material facts upon which the defendant will base his defence but not the evidence by which those facts are to be proved.  Taken together, the statement of claim and defence define the issues to be tried and enable the parties to know what evidence they must call.  A properly pleaded case will ensure an efficient trial that brings into focus the precise issues that are in dispute and will prevent the injustice that comes about when a party is taken by surprise. 

4                     By the defence that each director has delivered: (i) certain facts are admitted; (ii) some facts are denied; (iii) other facts are confessed but their effect is avoided by the assertion of further facts that may answer them; and (iv) a positive case in answer to the various claims is set up.  The directors have gone into great detail in relation to categories (iii) and (iv) – much more detail than one usually encounters in an action to recover penalties.  They have also provided particulars of many of the allegations.  No part of the defence, however, amounts to an allegation of the truth of the facts therein:  Boileau v Rutlin (1848) 2 Ex 665 [154 ER 657].  The statements in the defence are only to be treated as statements outlining the case which each director wishes to raise for resolution by the court:  Buckmaster v Meiklejohn (1853) 8 Ex 634 [155 ER 1506].

5                     When going into the detail they did in their respective defences the directors were mindful of penalty privilege.  Each of their defences opens with a statement that the director “claims and reserves his right to claim penalty privilege in the proceeding.”  No such statement was made by MPG for it is accepted that a corporation cannot claim the benefit of penalty privilege (Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96) or self-incrimination privilege (see Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477).  That MPG cannot claim the benefit of either privilege may not be of much assistance to ASIC if it successfully attacks the company’s defence.  If MPG’s defence is defective and it is required to provide further information, it may not be able to satisfy that requirement if the only source of its information is the director defendants and they are entitled to remain silent. 

6                     The pleading dispute raises two issues.  The first is whether either privilege would ordinarily relieve the directors from any obligation to provide further details of their defence.  Assuming the privileges can be relied upon, the second issue is whether the directors have waived, in whole or in part, their right to assert either privilege by filing detailed defences.

7                     By way of introduction, it is necessary to say a word or two about each privilege.  Each privilege operates to excuse a person from being compelled to answer any question or produce any document if doing so would have the tendency in one case to expose that person either directly or indirectly to a criminal charge and in the other to a penalty.  Though often said to be analogous and based on the same rationale, the privileges are quite distinct.  The privilege against self-incrimination is a “fundamental… bulwark of liberty” (Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328, 340) that “protects personal freedom, privacy and human dignity” (Caltex Refining 178 CLR 477, 500) and is “deeply ingrained in the common law” (Sorby v The Commonwealth (1983) 152 CLR 281, 309).  It applies in curial proceedings, including procedures related to curial proceedings, and non-curial proceedings:  Pyneboard 152 CLR 328, 340-341; Sorby 152 CLR 281, 309.  By contrast, the penalty privilege is different in several fundamental respects.  The penalty privilege is not a substantive rule of law: Rich v Australian Securities and Investments Commission (2004) 220 CLR 129, 142 and 179.  It is merely a procedural rule that applies in curial proceedings to require the plaintiff to prove his case without any assistance from the defendant:  Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543, 559. 

8                     In view of the claims made by ASIC, each privilege is engaged.  Penalty privilege is engaged because ASIC seeks orders for pecuniary penalties under s 1317G and non-pecuniary penalties under s 206C (an order to disqualify a person from managing a corporation is a penalty for the purposes of the privilege: Rich 220 CLR 129, 147).  Self-incrimination privilege is also engaged.  ASIC’s allegations of insider trading and breach of directors’ duties suggest that the directors are exposed to criminal charges being laid.  The kinds of charges available include obtaining property by deception, obtaining financial advantage by deception and fraudulently inducing persons to invest money:  Crimes Act 1958 (Vic) ss 81, 82 and 191 respectively. 

9                     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: Rio Tinto Zinc Corp v Westinghouse Electric Corp [1978] AC 547, 574; Rank Film Distributors Ltd v Video Information Centre [1982] AC 380, 392; Sorby 152 CLR 281, 290 and 294.  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. 

10                  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) 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”.  See also Mayor of Derby County Borough v Derbyshire County Council [1897] AC 550, 552; Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation (1979) 42 FLR 204, 207.  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:  Birrell v Australian National Airlines Commission (1984) 1 FCR 526, 530.  In civil actions where no claim for a penalty is made the defendant must show that providing the information requested would tend to subject him to a penalty in separate proceedings before he can rely on the privilege. 

11                  The circumstances in which penalty privilege may be claimed are not settled.  In the past penalty privilege has been raised to prevent a plaintiff obtaining an order for discovery of documents or the administration of interrogatories:  see eg Naismith v McGovern (1953) 90 CLR 336, 341-342.  It is clear, however, that the privilege has a wider scope.  It will operate, for example, to prevent an order being made for the provision of witness statements (Australian Competition and Consumer Commission v FFE Building Services Ltd (2003) 130 FCR 37) or for the production of documents on subpoena (Caltex Refining 178 CLR 477, 560).  In Refrigerated Express 42 FLR 204, 207-208 Deane J said that the privilege operates to prevent a plaintiff obtaining any information that will assist in establishing the defendant’s liability to a penalty.

12                  That the rule has a wider application than merely preventing a plaintiff from obtaining discovery or interrogatories reflects the broad object of penalty privilege.  In Daniels Corporation 213 CLR 543, 559 Gleeson CJ, Gaudron, Gummow and Hayne JJ said that penalty privilege “serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it.”  That is, the plaintiff must prove his case without any assistance from the defendant:  Abbco Iceworks 52 FCR 96, 129; Rich 220 CLR 129, 142.  So it has been held that although in a civil action a defendant is required to deliver a defence he cannot be compelled to make any admissions in relation to the matters alleged against him.  That is, penalty privilege operates to relieve a defendant from the need to deliver a defence that complies with the pleading rules if the rules would override the privilege.  To the extent that pleading rules purport to impose such an obligation they must give way to the privilege:  Hadgkiss v Construction, Forestry, Mining and Energy Union (2005) 146 IR 106, 111-112; A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union (2005) 226 ALR 247, 251.

13                  There is a potential problem if, as in this case, a defendant wishes to run a positive case.  Ordinarily a positive case must be raised in the defence.  Whether it must be raised in a defence in a civil action to recover a penalty is by no means clear.  The view I favour is that there can be no such requirement as it would be inconsistent with the privilege.  On the other hand, if a defendant who wishes to run a positive case is required to plead his case that can be accommodated while maintaining the privilege.  What should occur is that the defendant should be entitled to rely on the privilege until the plaintiff’s case is concluded.  If at that point the defendant decides to run a positive case he can deliver an amended defence that will outline his case.  In an exceptional case the judge may grant a short adjournment to allow the plaintiff time to prepare, if he is otherwise taken by surprise.  In most cases that will not be necessary.  By the time the plaintiff has closed his case the nature of the defence will usually be apparent.  That is the experience of those who prosecute criminal cases.  The advocate who runs a civil penalty proceeding should be equally adept at dealing with the defendant and his witnesses without knowing in advance every word they are about to say. 

14                  Nothing that I have said is inconsistent with Bridal Fashions Pty Ltd v Comptroller-General of Customs (1996) 17 WAR 499.  That was an action to recover a civil penalty under the Customs Act 1901 (Cth). Section 255 of the Customs Act provides that an averment of the facts alleged in a statement of claim is prima facie evidence of those facts.  Each defendant delivered a defence which, apart from pleading a limitations defence and dealing with a few mechanical matters, merely denied the remaining 507 paragraphs of the statement of claim.  An application was made to strike out the defence on the basis that it did not comply with the pleading rules.  A master held that the corporate defendant was required to deliver a proper defence, but the other defendant, the director, was not under a like obligation because of self-incrimination privilege.  The company appealed to the Full Court.  The grounds of appeal and the Full Court ruling on them are not relevant to the issue at hand.  There was also an appeal by the plaintiff.  One of the plaintiff’s principal arguments was that the penalty privilege applied only to discovery and interrogatories but not to pleadings.  The Full Court observed that a defence to a Customs Act prosecution had to take s 255 into account.  The Full Court pointed out (at 516) that “it would not be open to the defendant simply to put the plaintiff to the proof of the allegations in the statement of claim, as a defence drawn in such terms would not enable the defendant to lead any evidence whatever in order to negate the impact of the operation of s 255(1).”  The Full Court said that while it would admittedly be possible for a defendant simply to deny the allegations against him, such a defence would be of no benefit for it would not avoid a judgment.   In other words “the practical effect” of s 255 was to require the defendant to plead and run an affirmative case.  The Full Court went on to say (at 517):  “Should the defendant set up an affirmative case [in its defence] it would not incriminate itself.  In the circumstances, the privilege has no practical application in the pleading of a defence to the statement of claim in a Customs prosecution.  Accordingly, the privilege against self-exposure to a penalty or self-incrimination does not preclude [the defendant] from pleading in the ordinary way to the allegations in the statement of claim.” 

15                  Properly understood, the point made by the Full Court is a narrow one.  In a Customs Act case neither penalty privilege nor self-incrimination privilege is of any use to a defendant because, if either privilege is claimed and no positive case is run, the defendant will suffer an adverse judgment.  For that reason, a positive plea could not be incriminating; it could only be exculpatory. 

16                  What the Full Court said will apply only where the plaintiff’s case can be proven by averment.  The Full Court’s analysis was not intended to, and in any event does not, apply across the board.  The reason is that both penalty privilege and self-incrimination privilege protect not only against the risk of exposure to penalty or incrimination by direct evidence but also by indirect or derivative evidence.  Disclosing a positive case at the pleadings stage will often provide the plaintiff with an opportunity to follow leads and open up fresh fields of inquiry.  A defendant cannot be required to provide information that may be the basis of an investigation that may lead to the discovery of real evidence:  Reid v Howard (1995) 184 CLR 1, 6-7.  If a defendant is required to plead a positive case there is a risk of that happening:  Chief Executive Officer of Customs v Camile Pty Ltd (2004) 58 ATR 163, 169. 

17                  In any event even if, contrary to my view, Bridal Fashions stands for the proposition that a positive defence can never incriminate a defendant or expose him to a penalty, it says nothing about when the defence must be delivered.  On my alternative approach a defendant can rely on the privilege up to the point he decides to go into evidence.  It is only at that moment, if the defendant elects to run a positive case, that he must give up the privilege and file a defence that outlines the case he intends to run. 

18                  The second issue in the pleading dispute is waiver.  As to penalty privilege, Bray on Discovery (1885), 337-338 and Phipson on Evidence (14^th ed, 1990), para 20-53 both state that penalty privilege may be waived expressly by contract and impliedly by conduct (see also Green v Weaver (1827) 1 Sim 404, 427-432 [57 ER 630, 639-640]).  That is entirely consistent with principle and accords with the nature of the privilege:  see eg Daniels Corporation 213 CLR 543, 559; Rich 220 CLR 129, 179.

19                  The position is not so clear as regards self-incrimination privilege.  This privilege is a substantive rule of law which operates to protect fundamental rights.  Nonetheless, the privilege is not unqualified.  It can be abrogated by statute:  Sorby 152 CLR 281, 309; Pyneboard 152 CLR 328, 341.  Because it is a personal privilege, it may also be waived:  Reid 184 CLR 1, 5 and 12.  What is not clear is what conduct will amount to a waiver. 

20                  It is self evident that self-incrimination privilege will be waived when a person who is entitled to claim the privilege voluntarily gives up information.  The waiver will only operate to the extent of the information that has been provided.  A person would also lose the privilege if he goes into the witness box to give evidence at his criminal trial.  The various statutes that make a defendant a competent witness in a criminal trial provide that if he gives evidence he can be cross-examined in relation to the charge the subject of the trial:  see eg Crimes Act 1958 (Vic) s 399.  He can, however, claim the privilege in relation to other offences.

21                  According to 8 Wigmore on Evidence (revised edition, 1961) §2275, self-incrimination privilege may also be waived by contract or other binding pledge.  Bray on Discovery (1885), 337-338 and Phipson on Evidence (14^th ed, 1990), para 20-53 take the opposite view, stating that self-incrimination privilege may not be waived by contract: see generally K Grevling, “Contracting Out of the Privilege Against Self-Incrimination” in F D Rose (ed), Consensus Ad Idem 28, 45-50.  In reality, the position in England is uncertain.  There is at least one nineteenth century case which arguably holds that the privilege can be excluded by agreement (Robinson v Kitchin (1856) 21 Beav 365, 370 [52 ER 900, 902]; 8 De G M & G 88, 91-92 [44 ER 322, 324] (affirmed on appeal on other grounds)).  Two other cases may be interpreted as authority for the same proposition:  Green (1827) 1 Sim 404; Chadwick v Chadwick (1852) 22 LJ Ch 329 [20 LTR 272]).  There is, however, contrary authority:  see Lee v Read (1842) 5 Beav 381, 385 [49 ER 625, 627].  Recent authority has cast doubt on the correctness of the cases that support waiver by contract, both generally and as they apply to self-incrimination privilege:  see Rank Film [1982] AC 380, 413-414 and 422; Bishopsgate Investment Management Ltd (in prov liq) v Maxwell [1993] Ch D 1, 34, 54, 66 and 71.  Lee v Read has also been questioned: Bishopsgate [1993] Ch D 1, 37 and 51.  The cases have left open for future argument what the correct position is: Rank Film [1983] AC 380, 421; Bishopsgate [1993] Ch D 1, 37. 

22                  Despite the uncertainty in England about the ability to contract out of the privilege, Australian authorities have not been hesitant to take a great leap forward.  The cases have taken what once would have been an unorthodox view, namely that a person may impliedly waive self-incrimination privilege by his conduct.  I say unorthodox because it is novel to say the least that self-incrimination privilege can be waived unintentionally or inadvertently.   In Accident Insurance Mutual Holdings Ltd v McFadden (1993) 31 NSWLR 412, 423, Kirby P indicated that self-incrimination privilege may be waived in the same way as legal professional privilege (that is, expressly or by implication).  He did, however, go on to say (at 423-424) that “[i]t will be rare that a person is taken to have waived all rights and privileges in respect of any prosecution for any offence arising out of circumstances only generally defined.  The point of difficulty will be presented by the definition of the subject matter of the waiver.”  In Registrar, Court of Appeal (NSW) v Craven (1994) 126 ALR 668, Kirby P elaborated on his view about implied waiver.  He said (at 685-686): “a witness may waive the privilege against self-incrimination.  Waiver can be express and implied… If a witness intentionally discloses privileged material then the privilege is lost.  For example, if the witness has in earlier court proceedings answered the same questions, he or she is not entitled, by claiming the privilege against self-incrimination, to refuse to answer the same questions when put.  I will not elaborate upon the ways in which there can be an implied waiver as this case does not turn upon it.”  In Bayeh v New South Wales (1999) 108 A Crim R 364, 370, Ireland J said that “[w]aiver of [self-incrimination] privilege may be express or implied; it may be deliberate or inadvertent”. 

23                  There is some suggestion locally that these cases have gone much too far.  In Accident Insurance 31 NSWLR 412, Clarke JA doubted there could be an implied waiver of self-incrimination privilege.  Although he declined to provide a definitive view, he said (at 432) that “[i]n principle it would seem to me that [the making of earlier statements] could not constitute a waiver of a right to decline to provide self-incriminating answers to questions put during the course of a trial.  If it were otherwise it would… constitute an enormous infringement of an ancient and fundamental right of all citizens.”  In my respectful opinion this view accords more closely with the rationale for self-incrimination privilege.

24                  On the question of waiver, ASIC contends that the directors have waived each privilege by providing information in their respective defences which they were not obliged to provide.  It may be accepted, indeed it was not disputed, that the directors have waived each privilege as regards the admitted and asserted “facts”.  But, in my opinion, the waiver is confined to what appears in the defences.  First of all, what is conceded in each defence is not that the “facts” asserted or admitted are true “facts”.  The defences do no more than relieve ASIC of the need to prove those “facts”.  Second, there was no intention to waive privilege beyond what appears in each defence.  The prefatory qualification makes each director’s intention clear.  Third, at least as regards self-incrimination privilege, I do not accept that it can be waived by the mere admission of some facts (other than, of course, the admitted  facts).  In Accident Insurance 31 NSWLR 412,Clark JA said that a defendant making a statement before trial could not constitute a waiver of a right to decline to answer questions put to him during the trial.  He explained (at 432) that if “it were otherwise it would mean that persons who had made admissions to police could be taken to have waived the right to remain silent.”  With respect, I agree with Clarke JA, subject to one qualification.  A person who has made a statement before trial can be compelled to repeat that statement in court:  Craven 102 ALR 668, 685-686.  Putting the qualification aside, in my opinion a defendant who admits a particular fact in his defence does not thereby waive his right to claim the privilege for all other facts.  That is to say, the waiver goes no further than what has been admitted or asserted:  Accident Insurance 31 NSWLR 412, 424.  There is nothing unfair in this result.  By way of contrast, it has been said in relation to legal professional privilege that partial disclosure in court of privileged material might result in unfairness and the interests of justice rightly demand that there should be full disclosure.  However, this rule cannot be carried over into pleadings, the purpose of which is merely to put the parties on notice about the scope of the trial. 

25                  The result is that ASIC is not entitled to require the directors to provide further particulars of their defences.

26                  The second dispute concerns discovery.  The defendants seek an order that ASIC make available for inspection the witness statements and affidavits it has obtained from third parties for use in relation to this action.  While the affidavits are in a form that would enable them to be filed, I have been told that ASIC has not yet decided whether they will be used.  ASIC contends that the defendants cannot inspect the witness statements and affidavits because they are covered by legal professional privilege.  The branch of this privilege that is relied upon is colloquially referred to as “litigation privilege”. 

27                  Litigation privilege covers communications passing between a legal adviser (or client) and a third party if made for the dominant purpose of use in, or in relation to, litigation then existing, or anticipated or in contemplation:  Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority [2002] 4 VR 332, 335.  A brief description of the privilege is found in Trade Practices Commission v Sterling (1979) 36 FLR 244.  In a passage that has been frequently cited, Lockhart J sets out various categories of communications covered by legal professional privilege.  Litigation privilege was described in the following way (at 246): 

“(e)     Communications and documents passing between the party’s solicitor and a third party if they are made or prepared when litigation is anticipated or commenced, for the purposes of the litigation, with a view to obtaining advice as to it or evidence to be used in it or information which may result in the obtaining of such evidence. 

 (f)       Communications passing between the party and a third person (who is not the agent of the solicitor to receive the communication from the party) if they are made with reference to litigation either anticipated or commenced, and at the request or suggestion of the party’s solicitor; or, even without any such request or suggestion, they are made for the purpose of being put before the solicitor with the object of obtaining his advice or enabling him to prosecute or defend an action.” [Citations omitted]

28                  The rationale for litigation privilege is that the communications to the solicitor are the brief in the litigation and the communications by the solicitor are for the purposes of preparing the brief:  Mitsubishi Electric [2002] 4 VR 332, 336; Wheeler v Le Marchant (1881) 17 Ch D 675, 684-685; Trade Practices Commission v Ampol Petroleum (Victoria) Pty Ltd (1994) 52 FCR 578, 586-587.  The communications protected by litigation privilege include affidavits prepared for litigation (Southern Equities Corporation Ltd v West Australian Government Holdings Ltd (1993) 10 WAR 1), unsigned or signed proofs of evidence (Kennedy v Lyell (1883) 23 Ch D 387, 404; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1998) 81 FCR 526, 562-564) and draft pleadings (Propend Finance Pty Ltd v Commissioner of Australian Federal Police (1995) 58 FCR 224, 236-237).

29                  There is an unusual aspect to litigation privilege.  It concerns the limited ambit of the requirement for confidentiality.  In this case ASIC has not identified the witnesses from whom the statements and affidavits have been obtained.  Nor has it explained the relationship, if any, that exists between ASIC and those parties.  According to the evidence it is unlikely that the third parties are under any obligation to keep confidential the information they have provided to ASIC.  Indeed, each of them has a copy of his affidavit or statement (as the case may be) and has not been asked to restrict its publication. 

30                  It is clear (or at least it seems to be clear) that an essential aspect of litigation privilege is that the communication in issue must be confidential.  The unusual aspect is that the obligation of confidence need not bind the third party.  The consensus in the cases is that it is sufficient if the communication be confidential only in the hands of the legal adviser.  What does this mean for the third party?  One line of cases holds that unless the third party is under some obligation of confidence, he can be compelled to disclose his witness statement.  For example, in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 1) (1992) 38 FCR 452 French J said (at 457):  “The confidentiality which attends [the taking of witness statements] is of a limited character.  There is nothing to stop a prospective witness who has given a statement to a solicitor from announcing that fact and the content of his statement to the world at large.  In the ordinary course, neither the solicitor nor his client could do anything to prevent such disclosure.”  To a similar effect are observations of McLelland J in Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 14 NSWLR 132.  The question that arose in that case was whether a witness, a medical practitioner, could be cross-examined about the contents of communications between the witness and a representative of the plaintiff concerning the preparation of the witness’ affidavit.  McLelland J said (at 134) that in a situation where the independent witness does not owe a duty of confidentiality to the party, “the question whether a claim for protection from disclosure of the communications on the basis of legal professional privilege should be upheld would … depend on whether the disclosure sought is, on the one hand, from the party or his solicitor or representative, in which case the claim should succeed, or, on the other hand, from the independent witness, in which case the claim should fail.”

31                  More recently, however, a different view has been taken by two appellate courts:  Interchase Corporation Ltd (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 Qd R 141 and Public Transport Authority of Western Australia v Leighton Contractors Pty Ltd [2007] WASCA 151.  In both cases it was held that the witness statement was privileged in the hands of the witness and that this was so whether or not the witness was under an obligation of confidence to the party taking the statement.  On the other hand, the cases also decided that the privilege only protects the precise communications between the witness and the legal adviser.  The rationale is to keep secret what was said by the legal adviser.  The witness is otherwise entitled to disclose to the world the facts that had been disclosed to the legal adviser. 

32                  In the Federal Court, the point is covered by the Evidence Act 1995 (Cth).  Section 119 provides that evidence shall not be adduced if it results in the disclosure of a confidential communication between a client or lawyer and a third party if the communication was made for the dominant purpose of the client being provided with legal services.  Section 117 provides that a communication will be confidential if made in circumstances where either the person who made it or the person to whom it was made was under an obligation not to disclose its contents.  Leighton Contractors [2007] WASCA 151 decided that the effect of those sections in that “only one of the participants to the communication must be under a duty not to disclose” the communication (at [30]).  In almost all cases that duty will fall on the legal adviser.

33                  If the matter were at large there might be a basis for holding that information provided to a regulatory authority for the purpose of prosecuting a civil proceeding for a penalty is not confidential.  The view I find attractive is that such information is public property to be made available to the defendant so that it can be used to ensure that justice will be done:  R v Stinchcombe [1991] 3 SCR 326, 333.  That is, I would hold that a regulatory body that brings a civil proceeding to recover a penalty is under an obligation similar to that owed by a prosecutor to an accused.  Prosecutors are under a duty of disclosure.  The principal purpose for the duty is to ensure that the accused is aware not only of the case in chief for the prosecution but also of all other evidence that bears on his guilt or innocence.  In discharge of that duty the prosecutor is required to deliver to the accused, among other things, all witness statements, notes of interviews with witnesses, evidence from experts and so on:  see eg Attorney-General (UK), Disclosure of Information to the Defence in Cases to be Tried on Indictment (1982) 74 Cr App R 302; R v Ward [1993] 1 WLR 619; Stinchcombe [1991] 3 SCR 326; R v Davis [1993] 1 WLR 613; Whitehorn v R (1983) 152 CLR 657.

34                  But the matter is not at large.  In Adler v Australian Securities and Investments Commission (2003) 179 FLR 1 Giles JA, who delivered the judgment of the New South Wales Court of Appeal, rejected a submission that ASIC was required to act with the same degree of fairness and detachment as a prosecutor.  Giles JA said (at 151) that the duties of prosecutors “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.”  In Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 2) [2007] ATPR 42-157 Heerey J dealt with the same point in short order.  He said (at 47,046): “This is a civil proceeding.  These documents are either discoverable or not in accordance with the law relating to discovery and legal professional privilege.  That law confers rights on all litigants, whether they are model ones or not.”  This reasoning was affirmed on appeal:  Visy Industries Holdings Pty Ltd v Australian Competition and Consumer Commission [2007] FCAFC 147, [112].

35                  A lay person might be forgiven for thinking that in the present context the distinction between civil and criminal proceedings is somewhat artificial and that in both kinds of proceedings the regulatory authority or prosecutor (as the case may be) is under a duty to ensure that the decider of facts (judge or jury) is best placed to arrive at the proper and just result.  Perhaps the reason courts have rejected this approach is that in a criminal proceeding a conviction may result in imprisonment whereas in a civil penalty proceeding the worst that can happen is that the defendant’s career is ruined or his life is wrecked. 

36                  For the foregoing reasons each application will be dismissed.  There will be no order for costs.  I will hear the parties on what further direction should be given to prepare the case for trial. 

Associate:

Dated:         25 October 2007