FEDERAL COURT OF AUSTRALIA

Hogan v Australian Crime Commission (No 4) [2008] FCA 1971

PAUL HOGAN v AUSTRALIAN CRIME COMMISSION and ANOR

NSD 373 of 2006

EMMETT J

22 DECEMBER 2008

SYDNEY

REASONS FOR JUDGMENT

1                     This proceeding has had a chequered history.  It is concerned with claims of legal professional privilege in respect of documents seized pursuant to summonses and notices issued under the Australian Crime Commission Act 2002 (Cth) (the Commission Act).  The documents were in the custody of the respondents, the Australian Crime Commission (the Commission) and its Chief Executive Officer.  

2                     The proceeding was commenced in February 2006 by Mr Anthony Stewart, shortly after he became aware of the seizure of the documents.  Mr Stewart is an adviser to the present applicant, Mr Paul Hogan.  Mr Hogan was joined as an applicant in May 2006 and Mr Stewart ceased to be a party in July 2006.  Mr Hogan has continued thereafter as the only applicant.  In the current form of the application, which was filed on 3 November 2008, Mr Hogan claims relief on the basis that, for some time, copies of a number of documents in respect of which he claims legal professional privilege (the Disputed Documents) were in the custody of the Commission or its officers and were examined to a greater or lesser extent by officers of the Commission. 

3                     In July 2006, I published interim conclusions to the effect that, prima facie, the Disputed Documents were the subject of legal professional privilege, in that they appeared to have been brought into existence for the predominant purpose of either requesting or providing legal advice in relation to the affairs of Mr Hogan: see A3 v Australian Crime Commission (No 2) [2006] FCA 929.  I did so after inspecting the Disputed Documents, which were not made available for inspection by counsel for the respondents.  At that stage, the respondents maintained that the claimed privilege did not exist because, they said, the Disputed Documents had been brought into existence in furtherance of fraud or the commission of offences (the Cox & Railton Exception): see R v Cox & Railton (1884) 14 QBD 153.  

4                     Following the determination of a related proceeding, NSD 1477 of 2006 (the Related Proceeding), which was concerned with the legality of the notices and summonses pursuant to which the Disputed Documents were seized, a dispute arose concerning discovery by the respondents in relation to the Cox & Railton Exception.  After considerable disputation, the respondents ultimately abandoned the assertion that the Disputed Documents were subject to the Cox & Railton Exception and agreed to deliver up to Mr Hogan all copies of the Disputed Documents still in their possession.  

5                     Mr Hogan accepts that the respondents no longer have any copies of the Disputed Documents in their possession.  However, he contends that officers of the Commission who have had access to the Disputed Documents should be restrained from any further involvement in any investigation into his affairs by the Commission or its officers.  The respondents oppose the making of such orders. 

6                     The other issue is costs.  The respondents have intimated that they would submit to an order for costs in the proceeding from the time when Mr Hogan became a party to the proceeding.  However, Mr Hogan asks for the costs of the proceeding from the time of its commencement and also asks that the costs be ordered on the indemnity basis.  In addition, Mr Hogan seeks to be indemnified by the respondents in respect of an order for costs made against him following an application for access to material on the Court’s file, which was made by media interests, and which Mr Hogan opposed.

SUBSTANTIVE RELIEF

7                     Mr Hogan seeks further substantive relief of two kinds.  First, he asks for an order that the respondents identify to him and to the Court which of the respondents, their officers, employees and agents, and any external advisers to any of those persons, has had access to any of the Disputed Documents.  Secondly, Mr Hogan asks for an order that the respondents ensure that all such persons are no longer involved, in any capacity, in:

·                    the investigation being conducted by the Commission that is known as Operation Wickenby, in so far as that investigation concerns Mr Hogan, whether by himself or by his servants or agents, and whether alone or with other persons; or

·                    any further or additional investigation by or on behalf of the respondents involving allegations against Mr Hogan similar to the allegations that are the subject of Operation Wickenby.

8                     Mr Hogan accepts that, if the Court were not disposed to grant the second kind of relief claimed, there would be no utility in granting the first.  The respondents say that, in any event, they have already identified to Mr Hogan and the Court all persons who have relevantly had access to any of the Disputed Documents. 

9                     Mr Hogan contends that the relevant test to be applied in determining whether relief such as that claimed should be granted is whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice requires that the relief claimed should be granted in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice: see Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2007] NSWSC 350 at [42] and Garde-Wilson v Corrs Chambers Westgarth [2007] VSC 235.  He says that the public interest in upholding the integrity of the principle of legal professional privilege, irrespective of any complexity and difficulty that might be encountered in doing so, justifies the grant of the relief claimed: see ACCC v George Western Foods Ltd (2003) 129 FCR 298 at [28], [29], [52] and [53]. 

The Commission’s Dealings with the Disputed Documents

10                  Prior to their return to Mr Hogan, the Disputed Documents were dealt with by the Commission and its servants and agents as follows:

·                    In late 2005 the Disputed Documents were identified and collected from the offices of two accounting firms pursuant to notices and summonses under the Commission Act..

·                    In late 2005 or early 2006, they were scanned electronically into an internal database of the Commission.  That scanning was undertaken by administrative support staff of the Commission, who did not consider the contents of any material being scanned but simply processed the Disputed Documents and returned them to the relevant investigator.

·                    The Disputed Documents were read by members of the Commission’s investigative team in preparation for conducting examinations and progressing their investigation.

·                    On 7 March 2006, following the commencement of this proceeding, the Commission gave an undertaking to the Court to seal the Disputed Documents and all copies of the Disputed Documents in the Commission’s possession were then sealed up.  

·                    All copies of the Disputed Documents on the database were deleted in early 2006 in connection with the introduction of a new data base.

·                    The Commission has identified all copies of the Disputed Documents in its custody and has either destroyed the copies or returned them to Mr Hogan or to the persons who produced them and taken steps to remove from its records all information that was derived from, or reproduced the contents of, any of the Disputed Documents. 

11                  No documents, such as file notes, referring to, or reproducing, the contents of the Disputed Documents were created for the purposes of the Commission’s investigation.  Further, none of the Disputed Documents was shown to any witness in the course of examinations conducted by officers of the Commission in connection with Operation Wickenby, although other documents originally the subject of this proceeding, but in respect of which privilege was later waived, were shown to witnesses.

12                  The only persons known to have had access to any of the Disputed Documents are as follows:

·                    Ian Andrew, Adrian Clutterbuck and Stephen Sciberras, who are members of the Commission’s investigative team investigating the affairs of Messrs Hogan and Stewart and their associate, Mr John Cornell.

·                    David Hellings, Dean Wheeler, Ruth Geary, Cathy Jay and George Hambezos, officers of the Australian Taxation Office (the ATO), who were seconded to the Commission and who assisted in culling documents obtained pursuant to the relevant notices and summonses; Ruth Geary, Cathy Jay and George Hambezos have had no subsequent access to any of the documents.

·                    Harry Constandaras and Steven Kassing, officers of the ATO, who were seconded to the Commission until late 2007 or early 2008.

·                    Raelene Sharp, Andrew Adams, Kate Deakin and Anthony Boardman, lawyers employed by the Commission, who have had the conduct of this proceeding.

13                  It is theoretically possible that officers of the Commission other than those identified above could have had access to a database maintained by the Commission that contained the Disputed Documents, prior to their deletion from the database.  However, for the reasons set out below, it would be very difficult to determine the identity of any other person who might have gained access to the Disputed Documents. 

14                  The database consists of several components each of which sends records of events to an audit log, known as an infrastructure log.  The infrastructure log is generated once a month and is a very long text file that would run into many thousands of pages if it were to be printed.  It consists of a chronological listing, timed to parts of a second, of every event within the database across the Commission nationally.  The infrastructure log is not available to ordinary users of the database, and can only be accessed by the system administrators. 

15                  Once a document has been deleted from the database, the database treats the document as if it did not exist and all metadata for the document, including audit events, are stripped from the database.  Accordingly, the only way to search for information about a document that was previously on the database, once it has been deleted, is for the Commission’s system administrators to search the infrastructure logs. 

16                  There are only three system administrators within the Commission, throughout Australia, who could undertake such searches, in order to determine whether any person other than those named above had access to any of the Disputed Documents on the database.  The system administrator would be required to spend up to several weeks searching for relevant information in the infrastructure logs.  If one or more of them was required to undertake such searches for more than a week, difficulties would be created in ensuring the smooth running of the Commission’s national networks. 

17                  In circumstances where authority was required for access to the database, there is no justification for requiring the Commission to go to the inconvenience and expense of endeavouring to ascertain whether any person other than those identified above may have had unauthorised access to any of the Disputed Documents. 

18                  Operation Wickenby involves several investigations, each of which has a case officer assigned to it.  Mr Ian Andrew has been a team leader for the investigation under Operation Wickenby into the affairs of Messrs Hogan, Stewart and Cornell.  Mr Andrew has been responsible for oversight of the investigation concerning Messrs Hogan, Stewart and Cornell since its inception in early 2005.  That involved coordinating intelligence, reviewing the investigation on a daily and weekly basis and delegating tasks to other members of the team assigned to the investigation.  The other members of the team have been Messrs Clutterbuck and Sciberras.  Mr Clutterbuck joined the investigation in March 2005 and Mr Sciberras in August 2005.  Mr Andrew has also acted as team leader for other Wickenby investigations and in 2007 was acting head of investigations for all of Operation Wickenby. 

19                  As indicated above, in preparation for conducting examinations and progressing the investigation in connection with Operation Wickenby prior to March 2006, members of the Commission’s investigative team read some of the Disputed Documents to assess whether they were relevant.  None of the Disputed Documents was considered relevant at that stage. However, knowledge of the contents of the Disputed Documents informed the investigation generally, in that the knowledge contributed to the investigative team’s understanding of Mr Hogan and Mr Stewart’s business affairs. 

20                  Except for the purposes of identifying documents to be quarantined, destroyed or returned pursuant to orders made by the Court, neither Mr Andrew nor any other member of the team has had access to any of the Disputed Documents since 7 March 2006.  Mr Andrew has no independent recollection of having seen any of the Disputed Documents.  To the extent that he saw any of them prior to 7 March 2006, he has no independent recollection of their contents.  He asserts that any review that he may have made of the Disputed Documents plays no role in the present conduct of the investigation, does not contribute to his current thought processes relating to the investigation and will play no role in the future conduct of the investigation.  Neither Mr Clutterbuck nor Mr Sciberras has any recollection of reviewing the Disputed Documents and, to the extent that either of them may have reviewed the Disputed Documents, neither has any independent recollection of the Disputed Documents or their contents. 

The Commission’s Recordkeeping Regime

21                  Procedures are maintained within the Commission to ensure that proper records are maintained against the contingency of an officer’s leaving or being reassigned.  First, the Commission has in place an Information Management Plan.  Paragraph 3.2 of the Information Management Plan states principles said to be unique to the Commission, including the following:

·                    information generated and obtained by staff and secondees in the course of their work is an asset of the Commission and does not belong exclusively to any individual team, task force or group;

·                    all information of value to the Commission is registered and stored in a secure, designated record keeping system.

Paragraph 10 of the Information Management Plan asserts that the ebb and flow of secondees and other employees in and out of the Commission requires the development of integrated processes to capture, develop and retain Commission knowledge.  Paragraph 10 asserts that failure to implement sound information management practices through the Information Management Plan is said to heighten the risk of loss of corporate memory or unavailability of required information.

22                  The Commission has also published a Policy and Procedures Manual.  Volume 5 deals with Corporate Services.  Section 2 of Volume 5 deals with Record Keeping and Section 3 deals with Creation, Storage and Disposal of Records. 

23                  Paragraph 4.1 of Section 2 of the Volume 5 of the Policy and Procedures Manual deals with record keeping systems and provides that all of the Commission’s records must be created and maintained within one of the Commission’s preferred record keeping systems or as specified or agreed by the Commission’s Information and Communications Technology Steering Committee.  Paragraph 4.1 further states that records should not be maintained in personal folders, email accounts, email archives, hard drives or temp docs, which do not contain record keeping functionality to ensure that records will be captured and maintained.  Paragraph 4.2 provides that all managers and supervisors of Commission employees are responsible for monitoring staff under their supervision to ensure that they understand and comply with the Commission’s record keeping policies and procedures for the creation and maintenance of records and for supporting and fostering a culture within each work group that promotes good record keeping practices. 

24                  Paragraph 8.1 of Section 3 of Volume 5 of the Policy and Procedures Manual provides that all managers and team leaders of Commission employees are responsible for:

·                    ensuring that staff are aware of the importance to the Commission of correctly creating and capturing records relating to business activity in an appropriate record keeping system;

·                    ensuring that staff are aware to the extent necessary of the legislation relating to the correct disposal of Commonwealth records that impacts on their work; and

·                    monitoring staff under their supervision to ensure that they understand and comply with the Commission’s record keeping policies and procedures for the creation, capture, sentencing, disposal, transferring and storage of records.

Mr Andrew acknowledged that he has accepted these responsibilities and has endeavoured to discharge them as a manager and team leader.

25                  The Commission has also implemented the Police Realtime Online Management Information System (PROMIS) to provide a central repository for recording and managing Commission operational information and activities.  Paragraphs 1.1 and 1.2 of the PROMIS Business Rules provide that all information and documents must be entered into the relevant PROMIS case logs.  Mr Andrew confirmed that there is a case log for the investigation involving Messrs Hogan, Stewart and Cornell.  The PROMIS Business Rules specify the information that must be entered in PROMIS.  Under paragraph 2.2 of the Business Rules, that information includes operational administrative information as well as operational information.  Paragraph 3.2 of the Business Rules provides that a team leader and a case officer are to be assigned to each case.  When a PROMIS team is assigned to a case, the team leader for that team is automatically assigned by PROMIS as the team leader for the case.  The case officer for a PROMIS case will be the case officer assigned to the operational project.  Team leaders and case officers are ultimately responsible for the data entered in their cases.  Team leaders and case officers are to ensure that team members comply with the Business Rules and all related policy and procedure documents for the use of PROMIS. 

26                  Paragraph 3.2 of the PROMIS Business Rules provides that, where a case officer or team leader is reassigned or departs the Commission prior to the case being finalised, a new case officer or team leader is to be appointed and the case reassigned within PROMIS.  A team leader may reassign the case officer in PROMIS, or a request may be submitted to systems support.

27                  Paragraph 4.3 of the PROMIS Business Rules provides that case notes are to be used to record all activities undertaken by team members during the course of an operation or project, including operational decisions, meetings and interviews.  However, case notes are not to be the primary method for recording the content of operational information obtained in the course of the operation or project.  Such information may be the subject of an information report.  Case notes are designed to record a single action or inquiry.  A separate case note entry is to be created for each action.  However, a case note entry is not to be updated as a continuous record over the life of the operation or project.  Mr Andrew confirmed there are full case notes maintained for the investigation relating to Messrs Hogan, Stewart and Cornell.

28                  Paragraph 4.6 of the PROMIS Business Rules provides that all documents generated by a team in the course of an operation or project must be added to the case log.  Provision is made for the form in which copies of affidavits, warrants, notices, summonses, statements, surveillance device, authorisations and disseminations are uploaded to the case log.  Mr Andrew confirmed that this paragraph has been complied with in relation to the investigation concerning Messrs Hogan, Stewart and Cornell. 

29                  Paragraph 4.11 of the PROMIS Business Rules requires all major incidents or developments to be brought to the attention of senior management by marking the record, usually a case note entry, as “management significant” when it is created in PROMIS.  A similar notation is to be used to alert the team leader, case officer or team members of incidents that may have an impact on the tactical course of an operation.  Mr Andrew confirmed that that requirement has been complied with in relation to the investigation concerning Messrs Hogan, Stewart and Cornell.

30                  Paragraph 4.17 of the PROMIS Business Rules deals with reassigned or departing officers.  Prior to their reassignment or departure from the Commission, operations managers or their delegates must ensure that:

·                    officers finalise all outstanding PROMIS tasks;

·                    all cases where the departing officer is team leader or case officer are reassigned;

·                    the status of all cases where the departing officer is team leader or case officer has been updated to reflect the current circumstances of the operation or project;

·                    a case note details all outstanding matters and any other relevant matters or issues that require knowledge for the continuing management of the case.

In addition, the operations managers must advise all relevant agencies of the reassignment and complete log entries regarding such advice.  Mr Andrew said that the preparation of a case note would be possible if any member of the investigative team relating to the affairs of Messrs Hogan, Stewart and Cornell was reassigned but that the case note would be very difficult and very long. 

31                  Thus, the Commission has in place comprehensive arrangements designed to minimise the risk of loss of corporate memory in relation to an investigation by reason of an officer’s leaving or being reassigned. 

Whether the Investigative Team Should be Restrained

32                  I concluded in the Related Proceeding that no officer of the Commission engaged in unlawful conduct in connection with the obtaining of any of the Disputed Documents from third parties: see MM v Australian Crime Commission [2007] FCA 2026.  Further, Mr Hogan does not suggest that the Commission has engaged in any unlawful or improper conduct in relation to the Disputed Documents.  While the Commission has exercised exorbitant powers conferred by the Commission Act, which override the rights of private individuals to privacy in relation to their own affairs, the Commission has not exceeded its powers.  The consequence of the lawful exercise of those powers has been that documents that may be the subject of legal professional privilege have been given to the Commissioner and have been seen by officers of the Commission.  The question is whether that, of itself, is sufficient to justify the Court’s intervention in the performance by the Commission of its investigative duties and powers in the manner now sought by Mr Hogan. 

33                  It is fair to conclude that no specific use has been made of any of the Disputed Documents by the Commission or any of its officers.  Further, all copies of the Disputed Documents have been returned to Mr Hogan and the Commission retains nothing that records any part of their contents.  In addition, the likelihood that any of the relevant officers would recall any significant detail from the Disputed Documents is slight. 

34                  However, Mr Hogan contends that the Commission has nevertheless obtained an advantage from the Disputed Documents, in that it gained an insight into how Mr Hogan and his associates conduct his business affairs.  While the initial assessment made in respect of the Disputed Documents was that they were not relevant, the Disputed Documents could nevertheless prove be of use in furthering the Commission’s investigation into the affairs of Messrs Hogan, Stewart and Cornell.  The significance of the Disputed Documents to the investigation might increase as and when further information concerning their activities came to light from other sources either in Australia or overseas.  Further, the Disputed Documents could be of assistance to the Commission in relation to the investigation of persons referred to in the Disputed Documents other than Messrs Hogan, Stewart and Cornell.  

35                  The orders sought by Mr Hogan would have the result that a number of officers of the Commission would be unable to continue to work on Operation Wickenby in relation to the affairs of Mr Hogan.  Messrs Andrew, Clutterbuck and Sciberras, the officers who have thus far been investigating Mr Hogan’s affairs, have been so engaged for several years.  If they were no longer permitted to work on Operation Wickenby, a certain amount of the collective cumulative knowledge of the activities of Mr Hogan and Mr Stewart may be lost.

36                  Against that, Mr Hogan says that it would be possible to replace the current investigative team and that, having regard to the recordkeeping regime described above, the only prejudice to the Commission would be a time delay, while a new team familiarises itself with the records of the investigation to date.  Mr Hogan suggests that that would be no longer than three to four months.  He says that that prejudice does not outweigh the need for justice to be seen to be done, in so far as the Commission has gained an advantage from having had access to the Disputed Documents. 

37                  Mr Andrew indicated his preference that the investigative team not be replaced.  He expressed concerns about the loss of collective cumulative knowledge if the present team were no longer permitted to continue with the current investigation.  Mr Hogan suggests that those concerns are not realistic, given the high level of record maintenance outlined above.  Thus, he says, other investigators could be seconded from the ATO to take over the investigation into the affairs of Messrs Hogan, Stewart and Cornell presently being undertaken by Messrs Andrew, Sciberras and Clutterbuck.  The induction of a new team could be overseen by Mr Andrew before he finally foregoes supervision of the investigation. 

38                  While Mr Hogan accepts that Mr Andrew was doing his best to be truthful in the evidence he gave to the Court, he contends that the Court should conclude that Mr Andrew has an understandable reluctance to countenance replacement of the investigative team and therefore has a bias against such a course.  Mr Hogan contends that, in the light of Mr Andrew’s obvious reluctance to contemplate replacing the investigative team, the Court should discount his evidence concerning the difficulty and delay in getting a new team “up to speed”.  Mr Andrew did not see any need to take precautions against the possibility of the orders now sought by Mr Hogan.  His reasoning was that he saw no need to do so because the investigators are constantly recording their activities. 

39                  Clearly enough, in the light of the recordkeeping regime that I have described, competent secondees from the ATO, assisted by Mr Andrew during a hand over period, may well not take an unduly long time before they would be ready to continue the investigation.  Given that the investigation has been under way since the early part of 2005 and in the absence of any suggestion that some imminent steps or developments could be prejudiced or delayed by a change of investigators, it may be that the delay in question, whether it be three or four months or longer, would not be very significant. 

40                  On the other hand, the advantage that the investigative team have gained from access to the Disputed Documents is ephemeral in the extreme.  Of course, if there had been any impropriety in connection with the Commission’s gaining access to the Disputed Documents, the ephemeral nature of the advantage may be irrelevant.  The principle of legal professional privilege is very important and should not be abrogated, except by clear statutory intervention.  Further, it is clear that the Commission Act does not abrogate legal professional privilege, notwithstanding that the exercise of powers under the Commission Act may, in some circumstances, make it difficult for the privilege to be asserted (see MM v Australian Crime Commission [2007] FCA 2026).

41                  However, in circumstances where there has been no impropriety and no aspersion is cast by Mr Hogan on the conduct of the Commission and its officers in connection with the summonses and notices pursuant to which the Disputed Documents were produced, the ephemeral nature of the advantage that has been gained by the Commission is a very relevant factor.  I consider that the balance weighs in favour of refusing the further relief now claimed by Mr Hogan.  He has already achieved a considerable measure of success in the proceeding, in so far as the Disputed Documents are no longer available to the Commission and its officers.  The only remaining question, therefore, is that of Mr Hogan and Mr Stewart’s costs of the proceeding

COSTS

42                  There have been four phases in the conduct of the proceeding.  The first concerned the question of whether the Disputed Documents were brought into existence predominantly for the purposes of obtaining or giving legal advice.  During part of that phase, before Mr Hogan was joined as an applicant, Mr Stewart was the only applicant.  The second phase was concerned with the issue of whether, even if the Disputed Documents were brought into existence for such purposes, the Cox & Railton Exception applied so as to exclude privilege.  The third phase involved the question of confidentiality in relation to the Disputed Documents and the identity of Messrs Hogan and Stewart and the question of media access to material on the Court’s file (see P v Australian Crime Commission [2008] FCA 1336).  The fourth phase has been concerned with the substantive relief claimed by Mr Hogan.

43                  Mr Hogan claims, primarily, an order that the respondents pay the costs of the proceeding, both of Mr Hogan and of Mr Stewart, on the indemnity basis from the time of its commencement.  Alternatively, he claims an order that the respondents pay those costs on the party and party basis up to 21 July 2006 and thereafter on the indemnity basis.  In addition, he seeks an order that the respondents indemnify him in respect of the costs order that I made in favour of the media interveners. 

44                  This proceeding was commenced on 23 February 2006.  On 7 March 2006, the Commission gave undertakings to the Court that the Disputed Documents be sealed up pending the determination by the Court as to whether the claim for legal professional privilege could be established.  Having regard to the likely extent of the evidentiary enquiry that would be involved in the issue as to the application of the Cox & Railton Exception, the Court endeavoured, as a matter of case management, to avoid that enquiry by considering the privilege question on a prima facie basis.  Had Mr Hogan and Mr Stewart been unable to establish, even on a prima facie basis, that the Disputed Documents had been brought into existence for the predominant purpose of either requesting or providing legal advice in relation to the affairs of Mr Hogan, the need for an enquiry into the Cox & Railton Exception would have been obviated. 

45                  The prima facie conclusion that was reached in relation to the privilege question was not a final determination.  The Commission had no opportunity to make submissions on that question.  Indeed, as I have said, counsel for the Commission had not seen the Disputed Documents.  The interlocutory hearing that led to the prima facie conclusions of 21 July 2006 was conducted over several days in May and July 2006.  Mr Hogan was added as an applicant on 11 May 2006.  The Related Proceeding was commenced on 3 August 2006, following a directions hearing on 2 August.  Thereafter, directions hearings were conducted involving both proceedings, which were managed in parallel.  On 17 November 2006 a further amended application was filed in this proceeding, in which Mr Stewart was no longer named as an applicant.  The proceeding was dismissed in so far as it was brought by Mr Stewart. 

46                  Focus then shifted to the Related Proceeding.  Directions hearings in relation to the Related Proceeding were conducted on a number of occasions during 2006 and 2007, with a final hearing on 28 November 2007.  On 19 December 2007, I ordered that the Related Proceeding be dismissed with costs (see MM v Australian Crime Commission [2007] FCA 2026).  An appeal was instituted by notice of appeal filed by Mr Hogan on 25 January 2008.  That appeal was discontinued on 2 May 2008. 

47                  In the meantime, disputation concerning discovery continued in this proceeding.  On 8 June 2007, Mr Hogan filed an application for discovery in relation to the Commission’s contentions concerning the Cox & Railton Exception.  An amended notice of motion was filed on 9 August 2007, when orders were made requiring the Commission to conduct enquiries and produce a list of documents concerning inferences said to support the Cox & Railton Exception.  On 7 December 2007, Mr Hogan filed a further motion seeking further and better discovery in relation to the Cox & Railton Exception.  Affidavits were filed in support of the discovery motion.

48                  On 8 April 2008, the Commission’s solicitors wrote to Mr Hogan’s solicitors making an offer of settlement, without admissions.  The settlement included orders that:

·                    all originals and copies of identified Disputed Documents held by the respondents be returned to Mr Hogan within seven days;

·                    the Commission take all reasonable steps to remove from its records and destroy any information that was derived from or reproduced the contents of any of the Disputed Documents;

·                    the proceeding be otherwise dismissed;

·                    there be no order as to costs.

That offer was not accepted by Mr Hogan.

49                  On 17 April 2008 directions were given for hearing of the application for further discovery in relation to the Cox & Railton Exception.  On 19 May 2008, the application for further and better discovery was heard and at the conclusion of the hearing orders were made requiring the Commission to file an affidavit by 1 July 2008 detailing the steps that had been taken in relation to discovery. 

50                  However, on 1 July 2008, the Commission’s solicitors requested the Court to relist the matter for orders finally disposing of the proceeding, including abandonment of the contentions concerning the Cox & Railton Exception.  On 4 July 2008, orders were made by consent for return of the Disputed Documents and the deletion of reference to them from the Commission’s records.  The orders for discovery that had been made on 19 May 2008 were vacated.

51                  On 14 July 2008, Mr Hogan filed an application for orders relating to confidentiality.  That motion and an application for access to Court documents by media interests were heard on 20 August 2008 and I published reasons for my conclusions in relation to those matters on 29 August 2008: see P v Australian Crime Commission [2008] FCA 1336.  On 3 October 2008, I made an order than Mr Hogan pay 40% of the media interests’ costs of their application: see P v Australian Crime Commission (No 3) [2008] FCA 1520.

52                  Notwithstanding that the Disputed Documents had been returned, Mr Hogan indicated that he wished to continue to prosecute his claim for substantive relief dealt with earlier in these reasons.  That marked the beginning of the fourth phase of the proceeding.

53                  The first question that arises in relation to costs is concerned with the first part of the first phase, when Mr Stewart was the only applicant.  Clearly, Mr Stewart has failed in relation to any assertion made on his behalf that he was entitled to legal professional privilege in respect of any of the Disputed Documents.  However, it is also clear enough that, perhaps on the basis of a misconception, Mr Stewart was asserting Mr Hogan’s privilege in relation to the Disputed Documents.  Mr Hogan should have been joined as an applicant from the beginning.  The costs involved in dealing with Mr Stewart’s claim are minimal.  On the other hand, very little of the costs involved in the proceeding from its commencement until the time of Mr Hogan’s joinder have been thrown away.  Accordingly, I consider that it is appropriate to deal with costs on the basis that the applicant’s costs of the proceeding from its commencement are Mr Hogan’s costs of the proceeding.

54                  The first phase of the proceeding is very much linked to the second phase.  As I have said, the Commission had only a limited part to play in relation to the question of whether the Disputed Documents were prima facie privileged, in so far as they were brought into existence predominantly for the purposes of giving or receiving legal advice.  Nevertheless, the Commission made no concession in that regard.  On the other hand, the Commission vigorously propounded the application of the Cox & Railton Exception.  Considerable costs were incurred in relation to the question of discovery on that issue. Mr Hogan was successful in relation to that issue. 

55                  While Mr Stewart claimed legal professional privilege in respect of a small number of the Disputed Documents, the essential question from the outset was whether Mr Hogan was entitled to legal professional privilege in respect of the vast majority of the Disputed Documents.  My interim conclusions were published on 21 July 2006.  Between that time and July 2008, the Commission maintained its contention that the Disputed Documents were subject to the Cox & Railton Exception and resisted attempts by Mr Hogan to obtain orders for discovery in relation to that question.  However, in July 2008, the Commission abandoned reliance on the Cox & Railton Exception and subsequently consented to orders requiring delivery up of the Disputed Documents to Mr Hogan or his solicitors.  To that extent, the Commission might be considered to have capitulated.  Such capitulation could, in some circumstances, give rise to an inference that the Commission acted unreasonably in disputing Mr Hogan’s claims to legal professional privilege in the first place. 

56                  It is not clear why the Commission’s contentions concerning the application of the Cox & Railton Exception were abandoned.  Mr Hogan contends that, in circumstances where the contentions were abandoned without explanation, an inference should be drawn that there never was any sound basis for advancing the contention in the first place.  That, he says, is a justification for indemnity costs.  First, Mr Hogan points to the evidence that the Commission had formed the view, by no later than March 2006, that none of the Disputed Documents was considered relevant and that, therefore, no documents such as file notes referring to or reproducing the contents of the Disputed Documents were created.  He says that, therefore, the Court should conclude that the Commission had no reasonable, or any, basis for persisting with its contentions concerning the Cox & Railton Exception.  Mr Hogan contends that, in circumstances where the Commission had determined that the Disputed Documents were irrelevant, it was unreasonable for the Commission to have subjected him to the costs of prosecuting the proceeding. 

57                  I do not consider that the mere abandonment of a position is, of itself, sufficient to give rise to an inference that it was unreasonable to have adopted the position in the first place.  The Commission filed material in support of its contentions on the Cox & Railton Exception, although not all of that material was made available to Mr Hogan and his legal advisers.  I am not persuaded that an inference should be drawn merely from the abandonment of the contentions that the Commission did not have any rational basis for advancing the contentions.  Accordingly, I do not consider that a case for indemnity costs has been established.

58                  Nevertheless, Mr Hogan has been successful in the proceeding in obtaining the first part of the relief claimed, namely, a determination that the Disputed Documents should be returned to him and that the Commission should remove any records relating to the contents of any of the Disputed Documents.  Mr Hogan should therefore have his costs of the first and second phases of the proceeding.  The costs would include the costs incurred from the commencement of the proceeding, notwithstanding that Mr Hogan did not become an applicant until some time after commencement of the proceeding. 

59                  Mr Hogan was unsuccessful in claiming orders for confidentiality under s 50 of the Federal Court of Australia Act 1976 (Cth) and in resisting the application by the media interests for access to material.  Costs orders were made in favour of the media interests against Mr Hogan and Mr Hogan seeks to be indemnified by the Commission on the basis that they are costs fairly incurred in the proceeding.  However, the Commission neither supported nor opposed the respective stances taken by Mr Hogan and the media interests.  I do not consider that there is any justification for ordering the Commission to indemnify Mr Hogan in respect of the costs orders made against him in favour of the media interests. 

60                  Mr Hogan has been unsuccessful in seeking additional substantive relief in the fourth phase of the proceeding.  It was not unreasonable for Mr Hogan to require some evidence of the Commission’s dealing with the Disputed Documents and to consider his position in the light of that evidence.  On the other hand, having considered the evidence, he pursued, unsuccessfully, the further substantive relief to which I have referred.

61                  In the result, I consider that it is appropriate to order the respondents to pay Mr Hogan’s costs of the proceedings, save for the costs relating to the further substantive relief.  There should be no order as to the costs of that phase of the proceeding.  While I do not consider that it is appropriate to order the Commission to indemnify Mr Hogan in respect of the costs order made in favour of the media interests, I consider that that phase of the proceeding was sufficiently incidental to the first and second phases to entitle Mr Hogan to have his own costs of that phase paid by the Commission.  That is to say, but for the stance adopted by the Commission in relation to the Disputed Documents, Mr Hogan would not have been involved in a dispute with the media interests.

CONCLUSION

62                  There should be no further substantive orders in the proceeding.  The Commission should pay Mr Hogan’s costs save for the costs of the argument concerning further substantive relief.  I propose to direct the parties to bring in short minutes to reflect my conclusions. 

Associate:

Dated:         22 December 2008