FEDERAL COURT OF AUSTRALIA

John Holland Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2011] FCA 368

THE COURT ORDERS THAT:

1.    The second respondent be granted leave to amend its defence in accordance with the proposed re-amended defence exhibited to the Affidavit of Timothy Kucera, sworn 14 March 2011, as Exhibit TRK-3, subject to the deletion of paragraph 4 thereof.

2.    The fifth respondent be granted leave to amend his defence in accordance with the proposed re-amended defence exhibited to the Affidavit of Timothy Kucera, sworn 14 March 2011, as Exhibit TRK-4.

3.    The second and fifth respondents be granted leave to file and rely on the following affidavits:

3.1    Affidavit of Timothy Terence Hayes, sworn 21 February 2011;

3.2    Affidavit of Paul Royston Arthur Baker, sworn 13 March 2011; and

3.3    Affidavit of Manda Louise Ormsby, sworn 22 March 2011.

4.    The applicant file and serve any further affidavits dealing with matters arising out of the amended defences by 20 April 2011.

5.    The parties have liberty to apply on two days’ notice.

6.    The second and fifth respondents pay the applicants’ costs of and incidental to the second and fifth respondents Notice of Motion filed 15 March 2011.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

APPLICATION TO AMEND DEFENCE AND PRE-TRIAL DIRECTIONS

1    By Notice of Motion filed 15 March 2011 the second and fifth respondents apply for orders permitting them to amend their defences in this proceeding and allowing them to rely upon affidavits filed by other parties in the proceedings, as well as orders considering the time within which the applicant should file any affidavits in reply.

THE POSITION OF THE APPLICANT

2    Subject to three issues, the applicant does not object to leave being granted to the second and fifth respondents to file amended defences in the forms that they propose.

3    The three issues that the applicant raises are as follows:

1.    the purported withdrawal of an admission by the second respondent without leave or explanation in its proposed amended defence;

2.    the fifth respondent’s waiver of the penalty privilege that it had previously claimed in the proceeding; and

3.    the consequential orders which should, as a matter of fairness to the applicant, flow from the granting of leave.

WITHDRAWAL OF ADMISSION

4    The second respondent purports by its proposed amended defence to withdraw an admission made by it in paragraph 4 of its current amended defence. Order 18 Rule 1(2) of the Federal Court Rules requires a party to obtain the leave of the Court to withdraw an admission. No such leave has been sought. However, at the hearing of the Notice of Motion, counsel for the respondents sought leave to withdraw the admission.

5    Having heard from counsel for these respondents orally, I formed the view that the respondents should not be given leave to withdraw the admission made. It appears that counsel who now appears for the second and fifth respondents has recently been instructed in the matter and has formed a view different from that previously adopted by counsel who settled the current pleading. In those circumstances, as indicated at the hearing, it is inappropriate for the Court now to grant leave for the admission to be withdrawn.

6    I therefore rule that so much of the proposed amended defence as contains a withdrawal of the admission currently made in paragraph 4 should not be permitted.

WAIVER BY FIFTH RESPONDENT

7    The fifth respondent now seeks by the proposed amended defence to do two things that it had not previously done in the conduct of the proceedings and the pleadings filed. First, the fifth respondent seeks to claim penalty privilege. It failed expressly to do so in the defence filed on 23 April 2010. Secondly, this respondent seeks to plead a positive defence by now admitting or denying various matters pleaded in the amended statement of claim, and by making contrary assertions of fact: see proposed [2], [7], [8], [9(a)], [19], [22], [23] and [31] of the proposed amended defence of the fifth respondent.

8    The applicant contends that the fifth respondent, by not having expressly claimed the penalty privilege in the current defence, should be taken by conduct to have waived the penalty privilege.

9    In my view, however, the directions and process by which the fifth defendant had earlier filed its defence is such that there is some ambiguity as to whether or not the fifth respondent should be taken to have elected, in effect, not to claim the penalty privilege. In those circumstances I consider that it is not now inconsistent with the earlier position pleaded by the fifth respondent and not unfair for the fifth respondent now to positively claim the penalty privilege in the proposed defence.

10    The applicant further submits that if the Court should take a different view (as the Court does), then the effect of the proposed amended defence is that the fifth respondent has, to the extent to which he has admitted or denied any fact, or positively pleaded any contrary fact, waived the penalty privilege. The applicant submits that in these circumstances the fifth respondent should, to the extent to which he is found to have waived the penalty privilege, be required to provide discovery and witness statements in the proceeding, in the ordinary way and along the lines of the pre-trial directions already in place.

11    The fifth respondent, however, submits that by pleading a positive case it still retains its right to the penalty privilege and is not obliged to do anything further by way of disclosure of documents or the filing of witness statements of evidence that would go to the positive case pleaded. Counsel for the fifth respondent expressly submitted that all the fifth respondent has done in the proposed defence is set out a case so that the applicant is apprised of it before trial and so that the fifth respondent is not prevented from running such a positive case at trial. Counsel submits this does not mean that the penalty privilege is otherwise lost.

12    The circumstances in which the penalty privilege and a related privilege against selfincrimination have come to be recognised as part of the law of Australia by the High Court of Australia and applied in practical settings, are discussed in Australian Securities and Investments Commission v Mining Projects Group Ltd [2007] FCA 1620; (2007) 164 FCR 32 by Finkelstein J, and may, for present purposes, be outlined as follows:

    a corporation cannot claim the benefit of penalty privilege or self-incrimination privilege: see [5];

    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. While often said to be analogous and based on the same rationale, the privileges are quite distinct. The privilege in self-incrimination is deeply ingrained in the common law. By contrast the penalty privilege is not a substantive rule of law but merely a procedural rule that applies in curial proceedings to require the plaintiff to prove his case without any assistance from the defendant: at [7];

    a penalty privilege is engaged in a case where a competent authority seeks orders for pecuniary penalties. Self-incrimination privilege is engaged where the allegations made suggest that a defendant is exposed to criminal charges being laid: see [8];

    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 will lead to a real and appreciable risk of the criminal prosecution before the privilege can be invoked: at [9];

    the manner in which penalty privilege is to be claimed depends upon the type of proceeding in which the claim is made. In an action to recover a penalty it is not necessary for the defendant to establish that there is a risk he or she 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. 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 or her to a penalty in separate proceedings before he or she can rely on a privilege: see [10];

    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. It is clear, however, the privilege has a wider scope. It will operate, for example, to prevent an order being made for the provision of witness statements or for the production of documents on subpoena: see [11].

13    Having regard to these general principles, in ASIC v Mining Projects Group, at [13], Finkelstein J noted that there is a potential problem if a defendant wishes to run a positive case because ordinarily the positive case must be raised in the defence. His Honour however considered that it was by no means clear whether it must be raised in a defence in a civil action to recover a penalty. His Honour favoured the view 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. In this regard, his Honour noted, at [13]:

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    On this basis there is no requirement that a defendant such as the fifth respondent in this proceeding should be obliged to plead the positive case that the fifth respondent now wishes to plead in order to ensure that the applicant is not taken by surprise at the hearing. Consistent with what Finkelstein J says at [13], the defendant who wishes to run a positive case may do so while maintaining the privilege.

15    However, Finkelstein J at [14] considered whether Bridal Fashions Pty Ltd v Comptroller-General of Customs (1996) 17 WAR 499, which involved an action to recover a civil penalty under the Customs Act 1901 (Cth), was inconsistent with this view. Section 255 of the Customs Act provided that an averment of the facts alleged in a statement of claim is prima facie evidence of those facts. In that case 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. The Full Court considered that “the practical effect” of s 255 was to require a defendant to plead and run an affirmative case if it wished to avoid a judgment. At 517 the Full Court said:

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.

Finkelstein J said at [15] that, 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    Finkelstein J considered, at [16], that what the Full Court said will apply only where the plaintiff’s case can be proved by averment and its analysis was not intended to, and does not, apply across the board. His Honour noted that 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 pleading stage will often provide the plaintiff with an opportunity to follow leads and open up fresh fields of enquiry. 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. If a defendant is required to plead a positive case, there is a risk of that happening.

17    Finkelstein J, at [17], considered that, in any event, even if contrary to his 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 the alternative approach suggested by Finkelstein J, 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 and outline the case he intends to run.

18    The alternative approach suggested by Finkelstein J tends to suggest that if a defendant or respondent elects to file a defence and run a positive case, then there may still be a question of waiver of the penalty privilege or the self-incrimination privilege.

19    As to penalty privilege, Finkelstein J at [18] considered that penalty privilege may be waived expressly by contract and impliedly by conduct and cited authority for that proposition.

20    As to the self-incrimination privilege, which is not directly relevant in the case currently before the Court, his Honour considered the position was not so clear, because this privilege is a substantive rule of law which operates to protect fundamental rights. Nonetheless the privilege is not unqualified, can be abrogated by statute and may also be waived. What is not clear is what conduct will amount to waiver.

21    In ASIC v Mining Projects, ASIC contended on the pleadings that the directors had waived each privilege by providing information in their respective defences which they were not obliged to provide. Finkelstein J, at [24], considered it could be accepted, and was not disputed, that the directors had waived each privilege as regards the admitted and asserted “facts”, but in his Honour’s opinion, the waiver was 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”. His Honour considered that 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 made each director’s intention clear. At least as regards selfincrimination privilege, Finkelstein J did not accept that it could be waived by the mere admission of some facts (other than admitted facts).

22    At [24] Finkelstein J considered that, generally speaking, 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. His Honour recognised that the purpose of the pleading was merely to put the parties on notice about the scope of the trial.

23    In the circumstances of ASIC v Mining Projects, the result of the finding of Finkelstein J was that ASIC was not entitled to require the directors to provide further particulars of their defence.

24    I would adopt the first, rather than the alternative, approach suggested by Finkelstein J in ASIC v Mining Projects Group in relation to the proposed amendment of the defence of the fifth respondent. It seems to me that, properly analysed, it is open to the fifth respondent to plead a positive case without thereafter being obliged to provide the applicant with a statement of the evidence that he proposes to give or discover documents relating to that positive case. This is consistent with the ultimate finding of Finkelstein J in ASIC v Mining Projects Group, that ASIC was not entitled to further particulars of the defence setting out a positive case.

25    In these circumstances I uphold the fifth respondent’s submissions and rule that the amendment of the defence of the fifth respondent, in accordance with its proposed amended defence, in order to plead a positive case, does not carry with it the consequence that the penalty privilege to which the fifth respondent is entitled is waived such that it is now obliged to file witness statements prior to trial or give discovery.

CONCLUSION AND ORDERS

26    In these circumstances the Court would order:

1.    The second respondent be granted leave to amend its defence in accordance with the proposed re-amended defence exhibited to the Affidavit of Timothy Kucera, sworn 14 March 2011, as Exhibit TRK-3, subject to the deletion of paragraph 4 thereof.

2.    The fifth respondent be granted leave to amend his defence in accordance with the proposed re-amended defence exhibited to the Affidavit of Timothy Kucera, sworn 14 March 2011, as Exhibit TRK-4.

3.    The second and fifth respondents be granted leave to file and rely on the following affidavits:

3.1    Affidavit of Timothy Terence Hayes, sworn 21 February 2011;

3.2    Affidavit of Paul Royston Arthur Baker, sworn 13 March 2011; and

3.3    Affidavit of Manda Louise Ormsby, sworn 22 March 2011.

4.    The applicant file and serve any further affidavits dealing with matters arising out of the amended defences by 20 April 2011.

5.    The parties have liberty to apply on two days’ notice.

6.    The second and fifth respondents pay the applicants’ costs of and incidental to the second and fifth respondents Notice of Motion filed 15 March 2011.

Associate:

Dated:    12 April 2011