FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Whitebox Trading Pty Ltd; In the Matter of Whitebox Trading Pty Ltd (No 3) [2017] FCA 429

ORDERS

THE COURT ORDERS THAT:

1.    By 24 July 2017, the defendants file and serve a list of all objections to affidavits filed by the plaintiff and intended to be read and relied upon by it at the liability hearing provisionally fixed to commence on 4 September 2017 and a separate list of all objections to documents or things which the plaintiff intends to tender at that hearing, such lists to specify with precision the material to which objection is taken and to state briefly, in respect of each such objection, the ground of the objection.

2.    The defendants pay the plaintiff’s costs of and incidental to the argument as to whether the Court should make any order or direction requiring the defendants to notify objections to the plaintiff’s evidence and, if so, as to the terms thereof.

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

REASONS FOR JUDGMENT

FOSTER J:

1    In this proceeding, Australian Securities and Investments Commission (ASIC) claims that the first defendant, Whitebox Trading Pty Ltd (Whitebox) and the second defendant, Mr Boshoff, who is the sole director and principal of Whitebox and who is primarily responsible for its trading strategies and activities, caused National Australia Bank Limited (NAB) on five successive serial expiry trading days between 19 April 2012 and 18 October 2012 to trade index arbitrage positions in the period leading up to the conclusion of the opening single price auction on the Australian Securities Exchange (ASX) by placing, or causing to be placed, and then cancelling or amending, orders for securities listed on the ASX (XJO Securities) and orders on ASX 24 for quarterly ASX SPI 200 Index Futures next to expire. ASIC excepts Mr Boshoff from these allegations in respect of 16 August 2012. ASIC claims that Whitebox and Mr Boshoff contravened s 1041A and s 1041B of the Corporations Act 2001 (Cth) (Act) by causing NAB to undertake this index arbitrage trading because such trading was likely to have the effect of creating artificial prices for trading XJO Securities on the ASX and had, or was likely to have, the effect of creating, or causing the creation of, a false or misleading appearance with respect to the market for XJO Securities on the ASX, and was also likely to have the effect of creating, or causing the creation of, a false or misleading appearance with respect to the price for trading XJO Securities on the ASX.

2    In addition, ASIC claims that Mr Boshoff contravened s 180(1) of the Act in that, as a director of Whitebox, he failed to discharge his duties to Whitebox with the requisite degree of care and diligence by reason of his conduct in causing or otherwise permitting Whitebox, in the course of Whitebox causing NAB to undertake index arbitrage trading on the ASX and on ASX 24 in 2012, to place and cancel orders for XJO Securities in the period referred to at [1] above and to place and amend orders for XJO Securities in the period referred to at [1] above, all of which conduct was likely to have the effect specified at [1] above.

3    ASIC seeks declarations pursuant to s 1317E of the Act against both defendants in respect of each contravention, orders for pecuniary penalties pursuant to s 1317G of the Act against both defendants in respect of each contravention, injunctive relief pursuant to s 1101B of the Act and banning orders against both defendants. ASIC also relies upon s 21 and s 23 of the Federal Court of Australia Act 1976 (Cth) as bases for the relief which it claims.

4    On 15 April 2016, I ordered that the question of whether the defendants, or either of them, had contravened the Act as alleged in the Originating Process filed on 18 March 2016 be determined separately from and in advance of any hearing as to whether any relief should be granted and, if so, the terms of such relief.

5    On 8 March 2017, I ordered that all questions of liability in the proceeding be provisionally fixed for a four week period commencing on 4 September 2017.

6    At the Case Management Hearing held on 8 March 2017, questions arose as to the scope of the privilege which has become known as “penalty privilege”. As at 8 March 2017, ASIC had filed and served all of the evidence upon which it intended to rely at the liability hearing and was pressing the Court to make an order requiring the defendants to file and serve all evidence upon which they intended to rely at that hearing subject always, of course, to Mr Boshoff’s entitlement to claim penalty privilege in relation to some or all of that evidence. ASIC also pressed the Court to make an order or direction requiring the defendants to notify in the usual way in advance of the commencement of the liability hearing all of their objections to ASIC’s evidence. In its Written Submission subsequently filed, ASIC suggested that the Court should require the defendants to notify their objections by 24 July 2017.

7    On 8 March 2017, I declined to make any order or direction against either defendant requiring them, or either of them, to file and serve evidence. Mr Boshoff cannot be compelled to file and serve his evidence in the form of witness’ statements or affidavits before ASIC closes its case. On 8 March 2017, I took the view that, notwithstanding that Whitebox cannot claim penalty privilege, I would not require it to file and serve its evidence until I had a better understanding of the extent to which Mr Boshoff intended to claim penalty privilege. Upon reflection, I may need to reconsider that view and to do so soon. Mr Boshoff may choose to file some or all of his evidence at an earlier time if he considers that it is in his interests to do so. The appropriate way to manage the liability hearing (including the timing of the defendants’ evidence and the manner and form in which it is to be adduced) is to be kept under review and will be considered further at the next Case Management Hearing.

8    Towards the end of the case management hearing held on 8 March 2017, I heard brief argument directed to the question of whether I should make an order or direction requiring both defendants to notify ASIC of their objections to ASIC’s evidence and, if so, when such notification should be given. The defendants opposed the making of any such order or direction on the ground that it would destroy or impermissibly trespass upon the penalty privilege which Mr Boshoff is entitled to claim. At the conclusion of oral argument in relation to that question, both parties wished to have an opportunity to supplement the oral submissions which they had already made by a short Written Submission. That opportunity was given to the parties. ASIC filed a Written Submission on 15 March 2017 and the defendants filed a Written Submission on 20 March 2017. The defendants also relied upon a Written Submission dated 8 March 2017 which had been provided to the Court and to ASIC on that day and which I marked as “MFI-1”.

9    The question presently before the Court, therefore, is whether I should order or direct the defendants to notify their objections to ASIC’s evidence and, if so, by what date I should do so.

10    In their Written Submission in Reply, at pars 16–18, the defendants submitted as follows:

16.    It is not in dispute that the Court has no power to make an order which infringes the privilege. The defendants submit that any order for the notification by the defendants of objections prior to the hearing would necessarily infringe the privilege and therefore be beyond power.

17.    In the alternative, if the Court concludes, contrary to the defendants’ submissions, that it has power to make an order, any such order would need, at the very least, to be subject to the defendants not being required to notify objections which might tend to:

a.    Lead to a train of inquiry for the discovery by ASIC of evidence against the defendants, or form the basis of investigations that would disclose evidence against the defendants; or

b.    Disclose the factual defences intended to be taken by the defendants.

The practical difficulties inherent in such an order are obvious, and illustrate why no order should be made at all.

18.    Further, if contrary to the submissions above, the Court makes an order for the defendants to notify objections prior to the hearing, the Court should, as a matter of discretion, take into account the extent of the burden on the defendants to prepare for a hearing making serious allegations against them and the fact that, in the ordinary course of events, the closer to trial that objections are formulated, the better informed they will be by the preparation for the hearing. Accordingly, it is submitted that no order should be made but that if, contrary to that submission, an order is to be made, objections should not be required to be notified any earlier than 1-2 weeks prior to the hearing.

11    As already mentioned (at [6] above), ASIC submitted that, in the circumstances of the present case, six weeks’ notice of the defendants’ objections to its evidence was a reasonable period of notification.

12    In this case, if no order or direction for the notification of objections is made, the last opportunity for the defendants to take an objection to the whole or part of the evidence of a particular witness called by ASIC or to the whole or part of a document sought to be tendered by ASIC will be when that witness is called to give evidence or when the particular document is sought to be tendered, as the case may be. In this case, unless the defendants are required to give advance notice of their objections, because the evidence of all of the witnesses to be called by ASIC is in writing in the form of affidavits, objections to the evidence of each witness will be notified, argued about and ruled upon when the witness enters the witness box or immediately before he or she does so. This was the practice of the Courts in Australia for most of the last century but, in civil cases, is now generally regarded as antiquated and a waste of the time and resources of the Court and of the litigants in cases where the evidence-in-chief of a witness has been reduced to writing.

13    The defendants resist the making of any order or direction for the notification of objections. If the Court upholds that stance, then the process of dealing with objections in this case will be as described at [12] above.

14    The defendants’ fallback position is that, should I not accept their primary argument, then I should order that objections be notified by a date which is no earlier than 21 August 2017 which is two weeks before the commencement of the hearing. The difference between ASIC’s position (notification six weeks before trial) and the defendants’ fallback position is one of timing only.

15    What objections (if any) will be taken to the evidence of any particular witness or to the tender of any particular document or thing is a forensic and strategic decision to be made by Counsel for the party opposing the tender of the particular evidence after due consultation within that party’s camp and after due consideration by those concerned. It is rare that every available objection is taken. The Court never requires a party to take any objections although, of course, the Court always retains the power to reject inadmissible evidence of its own motion or to limit the use of evidence of its own motion.

16    Subject to the tendering party being given leave to call additional evidence, the rejection of evidence to which objection is taken may have significant consequences for the tendering party’s case and thus the outcome of the litigation overall. This consequence is generally regarded as something which should be avoided if the problem with the evidence is merely technical and not substantive—hence, the practice of notifying objections before trial. Such notification enables evidence which is probative but currently inadmissible ultimately to be admitted provided that the barriers to its admissibility have been removed.

17    In this case, the defendants contend that many (or, at least, some) objections that would be notified by them in the event that they are compelled to notify their objections before witnesses are called, will have the potential to assist ASIC to prove its case because, by reason of such notification, ASIC will be alerted to gaps in its proof and to weaknesses in its evidentiary case, gaps and weaknesses which ASIC would then seek to repair and which it may successfully remedy if it has sufficient time. In this way, so the defendants submit, Mr Boshoff’s entitlement to the privilege will be infringed and lost.

18    Therefore, in order successfully to resist the making of an order or direction requiring them to notify their objections to ASIC’s evidence, the defendants will need to persuade me that the privilege amounts to an absolute prohibition upon the Court’s directing a defendant who is a natural person to provide any forensic assistance whatsoever to the plaintiff in a penalty proceeding regardless of whether doing so has anything to do with compelling that defendant to provide proof against himself or herself.

Consideration

19    In this Court, the leading authority on the nature and scope of penalty privilege is the decision of the Full Court (Emmett, Hely and Jacobson JJ) in Australian Competition and Consumer Commission v FFE Building Services Ltd (2003) 130 FCR 37 (FFE). In that case, the Australian Competition and Consumer Commission (ACCC) claimed, amongst other relief, pecuniary penalties pursuant to s 76 of the Trade Practices Act 1974 (Cth) against two natural persons, Vito Fodera and James Bell, alleging that those two individuals were knowingly concerned in, or were party to, alleged contraventions of s 45 of the Trade Practices Act by four corporations.

20    Prior to the hearing of the proceeding, a single judge of the Court had directed the ACCC to file and serve statements of evidence of all of its proposed witnesses. The ACCC then requested that the Court make an order requiring not only the corporate respondents but also the individual respondents (Messrs Fodera and Bell) to file and serve statements of evidence from all of the witnesses proposed to be called in their respective cases. The ACCC proffered an undertaking, through its Counsel, that, if witness’ statements were provided by the respondents who were natural persons, those statements would not be tendered in the ACCC’s case in chief nor used to support an argument that a particular individual respondent had a case to answer.

21    It was accepted by all parties that it would be appropriate for the Court to order the corporate respondents to file and serve statements of evidence from all of the witnesses who those respondents proposed to call in their respective cases. Presumably, such an order was, in fact, made. The individual respondents, Messrs Fodera and Bell, opposed the making of any such order against them, or either of them. They argued that, to require them to serve witness’ statements in advance of the hearing would be inconsistent with their right to refuse to provide information that might tend to expose them to a penalty.

22    At 39–40 [8], the Court said:

The Commission accepted that the individual respondents have a right to remain silent, even though the proceeding is a civil action and not a prosecution for a criminal offence. The Commission accepted, therefore, that the individual respondents should not be compelled to provide information that might tend to expose them to a penalty. However, the Commission says that the proposed direction does not contravene this principle because the question of whether or not the individual respondents decide to give evidence is for them to determine. The only effect of the direction to provide statements would be that the Commission would have advance notice of the evidence likely to be given on behalf of the individual respondents.

23    In FFE, the primary judge declined to adopt the course proposed by the ACCC. However, he did so, not because he thought that he had no power to require the individual respondents to do that which the ACCC had requested, but rather because, as a matter of comity, he should follow the decision of another judge of this Court (Sackville J in Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (1999) 163 ALR 465 (Amcor)) in preference to contrary authority in the Victorian Court of Appeal (Sidebottom v Commissioner of Taxation (Cth) (2003) 6 VR 302 (Sidebottom)).

24    AT 40–41 [12]–[14], under the heading “General principles”, the Full Court said:

The privilege against self-incrimination protects an individual from making a disclosure that may lead to incrimination or to the discovery of real evidence of an incriminating nature: R v Sorby (1983) 152 CLR 281 at 310. Further, a respondent in a proceeding that is solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents that may assist in establishing his or her liability to the penalty: Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat & Livestock Corporation (No 2) (1979) 42 FLR 204; Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 at 336.

The privilege of refusing to answer questions or provide information on the ground that the answers or the information might tend to expose the party to the imposition of a pecuniary penalty:

•    is not confined to discovery and interrogatories;

•    is available at common law;

•    is distinct from the privilege against exposure to conviction for a crime (Pyneboard (at 337)).

The rationale for the privilege is that an applicant must prove its own case and should not get any assistance from the respondent in proving its case: Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 129; Daniels Corp International Pty Ltd v Australian Competition and Consumer Commission (2002) 77 ALJR 40 at 47 [31]. The privilege can only be abrogated by statute: Reid v Howard (1995) 184 CLR 1. As the privilege is not subject to judge-made exceptions or qualifications, it cannot be abridged or undermined in consequence of a court accepting undertakings proffered by the applicant designed to avoid or diminish the danger that provision of the information would expose the respondent to a penalty. By requiring an individual respondent, prior to the closure of an applicant’s case, to file statements of evidence proposed to be given by witnesses to be called by that respondent, such a respondent would be exposed to the risk that indirect or derivative evidence, being evidence obtained by using the material disclosed in the statement as a basis of investigation, could be tendered against the respondent. The provisional disclosure of information may set in train a process that may lead to the imposition of a penalty or may lead to the discovery of real evidence in support of the imposition of a penalty: Reid v Howard at 6.

25    The Full Court then considered the decision of Sackville J in Amcor and also the Victorian decision of Sidebottom. At 41 [15], the Court observed that, in Amcor, Sackville J had held that there is no reason to think that the scope of penalty privilege is any narrower than the scope of the privilege against self-incrimination. At 41 [16], the Full Court noted that Sackville J had also said in Amcor that, to require individual respondents to file witness’ statements before the commencement of the trial, was not consistent with the rationale underlying the privilege against exposure to penalties. At 41 [17], the Full Court then extracted certain passages from the judgment of Sackville J in Amcor (at 469–470 [17]–[19]). The Full Court said:

Sackville J’s reasoning for refusing the Commission’s application included the following (at 469-470 [17]–[19]):

The orders sought by the [Commission] would require the individual respondents to file their statements of evidence in advance of the trial on pain of foregoing the opportunity of giving evidence at the trial and of placing themselves at risk that the court would draw adverse inferences against them. Moreover, at least in this case, they would run the risk that their statements of evidence would provide the [Commission] with “leads” that would result in other evidence adverse to them being adduced in the very proceeding in which penalties are sought …

In my opinion, if the orders sought by the [Commission] were made, the “election” facing the individual respondents would neither be unconstrained nor free. The individual respondents would not be compelled by an order of the court to make statements or provide information that would expose them to a penalty. In this sense, the case is different from an order requiring the production of documents or the filing of an affidavit disclosing specific information. But if they wish to avoid adverse forensic consequences in the penalty proceedings, they would have little choice but to file statements of evidence. By taking that course they would expose themselves, to the risk that their own words would materially assist the [Commission] to make out the case against them. To require the individual respondents to make this invidious choice is not, in my opinion, consistent with the rationale underlying the privilege against exposure to penalties.

(Emphasis in original.)

26    The question in Sidebottom which confronted the Victorian Court of Appeal was the same question which had been determined by Sackville J in Amcor and also the same question being considered by the Full Court in FFE. That question was whether the Court should make a direction requiring an individual (non-corporate) defendant in a proceeding for the imposition of a pecuniary penalty to file and serve witness’ statements. In Sidebottom, the Court of Appeal took the view that there was a difference of substance between requiring such a party to provide discovery and to answer interrogatories, on the one hand, and requiring such a party to provide statements of witnesses to be called in that party’s case. In the latter case, the Court took the view that such an order does not involve compulsion because no-one is compelled to put forward witnesses if he or she chooses not to go into evidence or chooses not to call a particular witness.

27    At 42–43 [21]–[23], the Full Court referred to the decision of the primary judge in FFE. The Court then moved on at 43 [24] to determine the case then before it.

28    At 43 [25], the Court observed that the question which it had to decide was a question of the general law of Australia and not one of the construction of a statute. The Full Court said that the question before it concerned the content of the privilege against being required to furnish information that might tend to result in the imposition of a penalty. The Court then observed that the decision of the Victorian Court of Appeal in Sidebottom was inconsistent with the approach taken by a number of judges at first instance in this and other Courts. At 43 [26], the Full Court stated that it would not follow the decision of the Victorian Court of Appeal in Sidebottom. At 43 [27], the Court commenced its explanation of the reasons for that conclusion.

29    At 43–44 [27]–[30], the Full Court said:

It is common ground that, by furnishing statements, Fodera and Bell might provide information that would enable the Commission to improve its case. However, the Commission points to the undertaking that it has proffered and says that the consequence of the undertaking is that it would not be able to make any use of statements filed that would be inconsistent with the rationale for the privilege. However, the existence of the undertaking cannot be determinative of the question. Either the privilege is infringed by the proposed direction or it is not. If the privilege is infringed, then the undertaking does not justify infringement. The respondent cannot be required to surrender a privilege in return for protection different from that which the law provides. In point of principle, if the decision in Sidebottom were correct, a court would be entitled (subject to discretionary considerations) to give a direction for the filing of witness statements by individual respondents in penalty proceedings whether or not an undertaking of the kind proffered in the present case is or is not given.

The decision in Sidebottom rests on the premise that an order for the provision of witness statements before trial does not oblige the individual respondent to provide information, hence the cases which decide that orders for discovery or interrogatories will not be made in proceedings for the recovery of a penalty have no application. Any information which the respondent provides in consequence of an order for the provision of witnesses statements, according to the decision in Sidebottom, is as a result of the respondent’s choice to give evidence; any forensic disadvantage which accrues to the respondent from the provision of witnesses’ statements is also merely the result of that choice.

While there would be no direct compulsion on Fodera and Bell to file statements pursuant to the directions sought by the Commission, the practical consequence of the direction may be that they will be compelled to file statements in order to preserve the option to which they are entitled, to decide after the Commission’s case is closed, to go into evidence. If they are compelled either to file statements before the commencement of the trial or to be precluded from going into evidence, there is a practical compulsion imposed on them, in order to preserve the option that the law gives to them, to file statements. That is inconsistent with the privilege.

We agree with the observations of Sackville J, quoted above, that the “election” which individual respondents face as a result of an order for the provision of witnesses’ statements is neither unconstrained nor free and the “choice” with which a respondent is confronted may be more apparent than real.

30    The Court then moved to consider the significance of the ACCC’s proposed undertaking and rejected the offer of such an undertaking as a satisfactory solution to the problem confronting the Court.

31    At 44–45 [32]–[34], the Full Court said:

For the reasons we have already given, the privilege cannot be abrogated or undermined because the Commission proffers undertakings designed to replicate the protection otherwise afforded by the privilege. As the action is one for the imposition of a penalty, the court declines to make any order “for the provision of information” by an individual respondent without there being any obligation on the respondent to show otherwise than from the nature of the proceedings that there is a real or appreciable risk of self-exposure: Refrigerated Express at 208. Hence it is unnecessary to endeavour to isolate and examine the forensic advantage(s) which may accrue(s) to a party from the provision of witness statements in advance of the trial.

However, it may readily be inferred that such forensic advantage may accrue to the Commission if only because the Commission sees its interests, as the party seeking a penalty, as being furthered by an obligation to provide the statements. Pretrial disclosure of the evidence to be called by an individual respondent may assist the Commission to improve its case against that respondent, albeit leave of the court would be required if the Commission sought to expand its case in chief as a result of “leads” obtained from the statements. The undertakings proffered by the Commission would not preclude the Commission from seeking leave. Whether leave would be granted is a different question. But the possibility that it might be granted indicates that the respondent is at risk of exposing himself to a penalty by reason of the provision of information in advance of the trial. It is not a matter of mistrusting the Commission or the court. Circumstances might arise where it would be proper to permit such evidence to be adduced by the Commission notwithstanding that it was obtained as a result of “leads” obtained from the statements. As Deane J said in Reid v Howard it is obvious that a person who has to rely on a refusal to exercise a judicial discretion is in a less secure position than one who, by relying on the privilege, can avoid providing the information in the first place.

It is true that, at some stage of the proceedings, a respondent must elect whether or not to go into evidence. But an election which is preserved until after the Commission closes its case is quite different from one which is brought forward to a time before the case is closed. Once it is acknowledged that circumstances may arise before the case is closed under which supplementary evidence may be adduced, even though it was obtained from the respondent’s “leads”, it is plain that the privilege is so weakened that it is either impermissibly abrogated or substantially undermined.

32    Here, the defendants submitted that the privilege operates to excuse an individual defendant from “… providing any assistance to the plaintiff in limine; that is, without inquiry into the actual extent to which the assistance sought to be ordered might provide the plaintiff with a forensic advantage in proving its case and without any specific claim of privilege being made” (par 13 of their Written Submission in chief dated 8 March 2017). In support of that proposition, the defendants cited Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at 147–148 [39] and FFE at 44 [32]. The proposition that it is not appropriate to enquire into the actual extent of the prejudice to a defendant is supported by both passages cited and is correct. However, neither of the quoted passages supports the proposition that the privilege excuses the defendant from providing any assistance to the plaintiff. The observations made by the Full Court in FFE which are relied upon by the defendants here, in particular, at 44 [32] and at 44–45 [33], are directed to the making of an order requiring the defendant to “provide information” (eg by producing documents as part of discovery; answering interrogatories; providing witness’ statements; and pleading positive defences).

33    The defendants also submitted (correctly) that the plaintiff who seeks the imposition of a pecuniary penalty must prove its case and every element of it without being entitled to any assistance from the defendant. This principle derives from a similar principle which is fundamental to Australian criminal law.

34    In MacDonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612 (MacDonald), at 615 [10], Spigelman CJ said:

The test [for the application of penalty privilege] is whether there is a likelihood or, indeed, a non-fanciful risk that, either directly or derivatively, compliance may assist the [plaintiff] to establish any part of its case which could result in the imposition of a penalty.

35    President Mason made similar observations at 623 [63] in MacDonald.

36    The defendants in the present case argued that requiring them to notify their objections to ASIC’s evidence might:

(a)    Enable ASIC to improve its case;

(b)    Provide ASIC with an opportunity to make enquiries and gather evidence with which to prove its case;

(c)    Provide ASIC with leads which would result in other evidence adverse to the defendants being adduced; and

(d)    Lead to the provision of information to ASIC which might well disclose the factual defences which are intended to be taken by the defendants, including, of course, Mr Boshoff.

37    ASIC submitted that, when the remarks of the Full Court in FFE at 40–41 [12]–[13] and [14] are considered in the context in which they were made, the Full Court had in mind circumstances where the provision of information by a defendant could be used either directly against him or her or could form the basis of investigations that could disclose evidence against that defendant. The danger identified by the Full Court was that a defendant might be placed at risk of providing proof against himself or herself. ASIC then contended:

The provision of evidentiary objections do not create any such danger where those objections have no evidentiary status and could not rationally be characterised as placing the defendants in a position in which they were required to provide proof against themselves.

38    ASIC also argued that, in FFE, the Full Court did not refer to assistance in a general and undefined way. The assistance must logically be referable to “proving the plaintiff’s case” (at 40 [13]). The defendant must be compelled to provide information that can be used as evidence or that creates a train of inquiry for the discovery of such evidence that is to be adduced against the defendant.

39    The above propositions advanced by ASIC are, as submitted by ASIC, supported by the authorities from which the Full Court derived the concept of “assistance”. Those authorities are referred to at pars 16 and 17 of ASIC’s Written Submission.

40    The submissions made by ASIC to which I have referred at [37]–[39] above are correct and I accept them.

41    The only case found by the parties where a superior Court has considered whether it should make an order or direction requiring an individual defendant to notify his or her objections to the plaintiff’s evidence prior to the commencement of the hearing of a case in which a pecuniary penalty is sought is Australian Securities and Investments Commission v Vines (2003) 176 FLR 106 (Vines), a decision of Austin J. In that case, his Honour confirmed such a direction which had previously been made. He held that doing so did not infringe the defendants’ penalty privilege. The defendants in the present case argued that Vines is wrong, that his Honour’s reasoning is flawed and that, in any case, it is distinguishable from the present case.

42    It is, therefore, necessary to say something about Vines.

43    In Vines, the Court had made a direction requiring the defendants to notify objections to the plaintiff’s tendered documents and affidavits by a date well before the trial. Subsequently, the defendants applied to have that direction set aside upon the basis that it infringed their privilege against exposure to a penalty. Justice Austin declined to vacate the direction concerning notification of objections.

44    At 109 [8], Austin J observed that the underlying judicial concern in giving effect to the privilege against self-incrimination in the criminal context is to protect the defendant from being compelled to give incriminating evidence or to provide information that may lead to the discovery of incriminating evidence. At 110 [15], his Honour referred to the concern of the Courts to protect individuals from being compelled, by direct or derivative evidence, to convict themselves out of their own mouths.

45    At 112–113 [20]–[25], his Honour considered the Full Court’s decision in FFE. His Honour said:

The defendants in the present case have placed particular reliance on the recent decision of the Full Federal Court in the FFE Building Services case. There the Full Court upheld the trial judge’s decision, declining to direct the respondents to file statements of evidence before the commencement of the hearing. The trial judge had followed earlier decisions in the Federal Court, including the Amcor Printing decision, although he expressed a preference for the reasoning of Phillips JA in the Sidebottom case. I expressed a preference for the Federal Court approach in my judgment in Rich, delivered after the first instance decision but before the appeal judgment in FFE Building Services.

In FFE Building Services (at [13]) the court (Emmett, Hely and Jacobson JJ) said that “the rationale for the privilege is that an applicant must prove its own case and should not get any assistance from the respondents in proving its case”. The defendants relied on this statement as immunising them from giving any forensic assistance to the plaintiff, regardless of whether, in doing so, they might provide evidence or leads that could be used against themselves. But the authorities relied upon by the court for this proposition were Burchett J’s conclusions in Abbco, and at [31] of the joint judgment in Daniels. Properly understood, those authorities qualify the proposition about forensic assistance by tying the privilege to immunity from providing proof against oneself.

This limitation to the “forensic assistance” proposition is evident in the court’s reasoning (at [14] and [27]-[33]). A direction requiring a respondent to file statements of evidence prior to closure of the applicant’s case would expose the respondent to the risk that the applicant would use the material disclosed as the basis of further investigation, which might produce indirect or derivative evidence that could be tendered against the respondent. The court said it was common ground that, by furnishing statements before the trial, the respondents might provide information that would assist the applicant to prove its case. But this alone was not the basis for the court’s decision. The critical issue for the court was that, although the direction sought by the applicant would not oblige the respondents to provide information, it would have the practical consequence that they would be compelled to file statements in order to preserve their option to go into evidence after the conclusion of the applicant’s case. The vice in the direction sought by the applicant was not that compliance would assist the applicant’s case, but that the direction would create a practical compulsion on the respondents to provide information and thereby expose themselves to the risk of setting in train a process that may lead to the discovery of real evidence in support of the applicant’s case.

In the present case it has not been suggested that the direction to notify objections to the plaintiff’s expert evidence would lead to a chain of inquiry that would produce evidence of conduct exposing the defendants to a penalty. Indeed, the plaintiff concedes that if notification of any particular objection would have this consequence in fact, the privilege would be available. The notification of objections might lead to the plaintiff tendering additional evidence, but it would only be evidence to overcome the deficiencies exposed by the objections.

It would not be open to the defendants to withhold their objections to the admissibility of the plaintiff’s evidence until the close of the plaintiff’s case, for by that time the evidence would have been tendered and its admissibility would have been ruled upon. In the present case the question is only one of timing. Should the defendants be directed to do something before the trial which they will have to do, if they do it at all, early in the plaintiff’s presentation of its case at the hearing?

In my opinion the privilege against exposure to a penalty does not prevent the court from directing the defendants to notify their objections to the expert evidence before the trial. While I accept that the direction is likely to assist the plaintiff in the preparation and presentation of its case, the provision of forensic assistance is not, per se, prohibited by the privilege, for the reasons I have given. There is nothing inherent in the process of notifying objections to the admissibility of evidence that would connect that process to the provision of evidence tending to prove conduct exposing the defendants to a penalty, or providing leads for the discovery of real evidence to that effect.

46    In the present case, the defendants attacked Vines. As I have already mentioned, they also sought to distinguish it. They submitted that the notification by the defendants of their objections to ASIC’s evidence in the present case would have the consequences which I have summarised at [36] above. The defendants then argued that, if the above proposition is accepted, Vines is distinguishable because, in Vines, both the judge and ASIC accepted that the privilege would operate to allow the defendants to decline to notify objections if such notification would lead to a chain of inquiry that would produce evidence of conduct exposing the defendants to a penalty. In other words, so the submission went, it was accepted by the judge and by ASIC in Vines that the question of whether the privilege might be infringed in any given case concerning pre-trial notification of objections depended upon the potential for such notification to lead to the relevant chain of inquiry, that potential being a question of fact and judgment in every case.

47    The defendants also argued that Vines is wrong. They submitted that Austin J had taken too narrow a view of penalty privilege in light of the authorities referred to by them at pars 29 to 31 of their Written Submission in chief. The defendants also submitted that the Court did not have to speculate, in the present case, about to the potential for the penalty to be infringed when it is tolerably clear that ASIC is pressing for early notification of objections so that it can repair any deficiencies in its evidence.

48    Finally, the defendant submitted that the issue which Austin J determined in Vines was not merely one of timing.

49    ASIC countered these submissions by strongly defending the reasoning of Austin J in Vines. ASIC submitted that his Honour did not make the errors which the defendants suggest he made. On the contrary, so ASIC submitted, Austin J had carefully analysed the relevant authorities (at 109–113 [7]–[25]) and rejected the argument which the defendants now seek to make that Mr Boshoff’s entitlement to claim penalty privilege absolves both of them from providing any assistance whatsoever in relation to the conduct of the proceedings against either of them. His Honour concluded that such a proposition divorced the rule from its rationale and was too wide.

50    ASIC also submitted that the potential consequences relied upon by the defendants as the basis for their submissions that an order or direction requiring them to notify objections in the present case would inevitably lead to the destruction of Mr Boshoff’s entitlement to the privilege were nothing more than bald assertions with no explanation as to why they should be accepted by the Court.

51    There is no doubt that Vines, if it is not distinguishable, provides a complete answer to the defendants’ arguments in the present case. I do not think that Vines is distinguishable from the present case. This is because I do not accept that the order sought by ASIC in the present case is at all likely to produce the consequences feared by the defendants.

52    Nor do I think that the decision and the reasoning in Vines is wrong. Accordingly, I see no reason not to follow Vines and I propose to do so.

53    The provision by the defendants of their objections to ASIC’s evidence in the present case could not impinge upon Mr Boshoff’s entitlement to claim penalty privilege. By providing those objections, the defendants will be required only to identify those aspects of ASIC’s evidence that they contend should be ruled inadmissible in accordance with the rules of evidence. As a matter of law and practicality, notifying material to which objection is taken says nothing about the evidence which the defendants might wish to adduce in this proceeding nor does it provide a chain of inquiry that might lead to ASIC discovering evidence which it does not already have available to it implicating the defendants in the contraventions with which they are charged.

54    Similarly, if the defendants object to the whole or part of an expert’s report upon the basis that critical underlying facts are not otherwise proven, the notification of such an objection does not provide evidence inculpating the defendants or, specifically, Mr Boshoff, nor would it provide a chain of inquiry that might lead to such inculpation. It is true that the notification of such an objection would alert ASIC to any problems of admissibility that may exist with the relevant experts’ report and, in a very general sense, allow ASIC to shore up its evidentiary case by adducing admissible evidence to prove the necessary underlying facts. It is difficult to conceive of a likely circumstance where, in the course of and as a result of seeking to solve a problem of admissibility of evidence, ASIC would be permitted to lead probative and admissible evidence of a character different in substance from that which it already has brought forward with the consequence that the privilege will be infringed. I am simply not convinced that there is any real risk that the notification of objections prior to the commencement of the liability hearing in the present case has any real prospect of infringing the privilege.

Conclusions

55    For all of the above reasons, I propose to make an order requiring the defendants to notify their objections to ASIC’s evidence prior to the commencement of the liability hearing. I prefer the date suggested by ASIC (24 July 2017) because it is a date which will provide sufficient time for ASIC to consider the admissibility of evidence to which objection is taken and also to consider the appropriate response which it should make to such objection. Contrary to the submissions made by the defendants, I do not think that there is any real advantage in waiting until later for the reason suggested by the defendants, namely, that the defendants will be in a better position to direct their objections in a more focussed way. The defendants are represented by experienced Senior and Junior Counsel and solicitors and have so far shown at all relevant times in this proceeding a very detailed grasp of the issues in this case and of the evidence which ASIC intends to adduce in order to prove its case.

56    Therefore, I propose to make an appropriate order requiring objections to be notified by no later than 24 July 2017. In my view, the Court has power to make the order sought and, in the exercise of its discretion, should do so.

57    Before leaving the matter, I should mention a submission made by the defendants upon which they relied in support of their primary position that no order at all should be made. That submission was that the notification of objections well before the commencement of the trial would not only enable ASIC to address questions of admissibility but also would enable ASIC to reformulate its case because there would be sufficient time available to it for that purpose. In a matter such as this, given that ASIC has had a great deal of time to formulate its case and to prepare its evidentiary case, it is highly unlikely that it would be allowed to recast that case at this or any later time. While any attempt to recast ASIC’s case would have to be considered on its merits at the time such attempt is made, I am of the view that the prospect of such a thing happening, for present purposes, should be regarded as fanciful. I do not consider that the possibility that the notification of the defendants’ objections to ASIC’s evidence might lead to a substantial alteration in the case which ASIC will seek to make to be a relevant matter to take into account in deciding the present question.

58    The defendants did not explain in its submissions why, if an order was made against Whitebox alone, such an order would infringe Mr Boshoff’s entitlement to invoke the penalty privilege. That is, the defendants’ submissions assumed that such a consequence would naturally flow from such an order and proceeded to address the present question upon the basis that there was no difference of substance between the position of Whitebox and the position of Mr Boshoff. Because I have not accepted the defendants’ submissions in relation to the question of whether objections should be notified, the need to separately consider and address the position of each defendant has not become necessary. However, it must at all times be remembered that it is only Mr Boshoff who is entitled to claim penalty privilege. Whitebox is not entitled to do so. It is not self-evidently correct to say that the making of an order of the kind now sought by ASIC against Whitebox would inevitably impinge upon Mr Boshoff’s entitlement to invoke the penalty.

59    The considerations to which I have referred at [58] above will be relevant to any reconsideration of the decision which I made on 8 March 2017 not to order either defendant to file evidence and participate in other pre-trial steps. It may well be that there is good reason to subject Whitebox to an order requiring it to do those things or, at least, some of them.

60    There will be orders accordingly.

Associate:

Dated:    27 April 2017