FEDERAL COURT OF AUSTRALIA

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 4) [2019] FCA 453

ORDERS

THE COURT ORDERS THAT:

1.    The first, second, sixth and eighth respondents pay the costs of the applicant in respect of the applications.

2.    The applicant and the seventh respondent bear their own costs of the application.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    On 6 March 2019, I delivered reasons and made orders to refuse privilege claims by the second and eighth respondents (the Lee Parties, or Hanhwa Parties), and the first and sixth respondents (the Meneses Parties) in respect of certain documents of which the applicant (Directed) sought inspection: Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285 (the privilege decision). These reasons should be read with the privilege decision.

2    The parties were then invited to make submissions as to costs. All parties have filed written submissions, and I will deal with the matter on the papers.

The findings in the privilege decision

3    The Meneses Parties resisted inspection by Directed of 111 documents which they claimed were subject to the privilege against self-incrimination and 3031 documents which they claimed were subject to the privilege against exposure to civil penalties. Mr Meneses was the sole director and employee of the first respondent.

4    The Lee Parties resisted inspection of certain documents by Directed on the basis that 39 documents were subject to the privilege against self-incrimination. They opposed Directed’s application substantially for the same reasons as the Meneses Parties.

5    The seventh respondent, Mr Mills, resisted inspection by Directed of documents exhibited to his confidential affidavits on the basis that the documents were subject to privilege, but ultimately he did not resist production provided that the court caused a certificate to be granted to him under s 128A(7) of the Evidence Act 1995 (Cth) (the Evidence Act).

6    I considered the following questions (and gave the following answers):

(1)    Whether the party claiming privilege had demonstrated that each of the relevant documents was properly a document of the relevant individual, and not a corporation.

Answer:

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

(b)    in the case of the Lee Parties: No;

(c)    in the case of Mr Mills: The question did not arise.

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

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

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

Answer: Yes.

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

Answer: Unnecessary to decide.

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

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

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

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

As to (b): Unnecessary to decide.

(6)    Whether each of the relevant documents had a real and appreciable tendency to incriminate Messrs Meneses, Mills or Lee for a criminal offence or expose them to a civil penalty.

Answer: Yes.

Costs principles

7    The awarding of costs is, of course, at the discretion of the court and may be awarded with respect to different parts of the proceeding or in specified proportions: s 43 of the Federal Court of Australia Act 1976 (Cth). Usually, in the exercise of this discretion, it is ordered that the costs should follow the event: see Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322 at [241] and Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3]. The court must use its discretion “in the way that best promotes the overarching purpose of the civil procedure provisions of the FCA Act and Rules”: see Specsavers Pty Ltd v Optical Superstore Pty Ltd (No 4) [2012] FCA 652 at [25]. In some cases, the “event” may be contestable, especially where separate issues have fallen in different ways: Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322 at [241].

Parties’ submissions

Meneses Parties

8    The Meneses Parties submit that they should only pay Directed’s costs of and incidental to the application from the date of the hearing on 26 October 2018, and that Directed should pay the Meneses Parties’ costs of and incidental to the application accrued before that date, citing Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3]:

Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion in awarding costs. The exercise of the Court’s discretion is not without principles or practices; it must be exercised judicially (Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [305] per Bennett, Besanko and Beach JJ). The ordinary rule is that costs follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues (Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; Les Laboratoires Servier at [297] to [298] and [303]).

9    The Meneses Parties submit that, prior to October 2018, Directed’s primary case was that the privilege against self-incrimination and privilege against self-exposure to a civil penalty could not be claimed in respect of pre-existing documents. They also submit that Directed raised a new ground at the hearing of 26 October 2018, (the “no increased jeopardy” submission); that “the full scope of that ground was later abandoned”; and that Directed shifted its position again at the 11 December 2018 hearing, because “[u]ntil then, [Directed] had not seriously contended that the Meneses Parties had failed to establish the ‘real and appreciable risk’ required to make good Mr Meneses’ claims to privilege.”

10    Thus the Meneses Parties submit:

[G]iven the number of discrete issues which were raised by Directed OE, and which were the subject of expansive submissions both written and oral, and given the fact that only one of those issues, which was raised after approximately a year’s worth of submissions, was successful, Directed OE should only have its costs which relate to the success on that one discrete issue.

Lee Parties

11    The Lee Parties submit that Directed’s costs be:

(a)    costs in the cause between it and the [Lee Parties] with respect to the claims for relief arising from the allegations made in part B section H of the Amended Statement of Claim dated 22 November 2018 (the secret commission claim); alternatively,

(b)    discounted so that Directed recover 50% of their costs of the [privilege decision] whatever the outcome of that trial.

12    Their primary contention is that, because the privilege decision is “inextricably linked” to the secret commission claims, which are the subject of the primary proceeding in this matter before Beach J, “Directed’s costs of the [privilege decision] should abide the outcome of the secret commission claim against the [Lee Parties].”

13    They also submit that the multiple days over which the privilege dispute took place was in part the result of Directed repeatedly changing its position, advancing much the same argument as the Meneses Parties in this respect and concluding:

[It] is entirely conceivable that the Privilege Dispute could have been disposed of in 2 days instead of 4, and, adopting a crude but likely accurate calibration, approximately half the volume of written submissions would have been required to be prepared and drawn.

14    They further submit that I should take into account the complexity of the privilege dispute, the lack of “binding precedent” and the fact that there was:

authority supporting both positions in the form of In the Matter of Kala Capital (No. 2) [2012] NSWSC 1293 relied upon by Directed, and those relied upon by the Respondents, including Devine Marine Group v Fair Work Ombudsman [2013] FCA 442; meaning it was necessary for the Court to essentially determine on which side of the argument these circumstances fell.

Mr Mills

15    Mr Mills seeks his costs of and incidental to the determination of his objection to the production of documents on grounds of privilege arising out of the orders made by Beach J on 19 February 2018. He submits that:

[he] was not seeking an indulgence from the Court or the exercise of a discretion in his favour. On the contrary, [his] claims of privilege are the exercise of substantive rights: Reid v Howard (1995) 184 CLR 11 at 11 (Toohey, Gaudron, McHugh and Gummow JJ) in relation to the privilege against self-incrimination.

16    He further submits that because his privilege claims were vigorously opposed by the applicant (up until the last day of hearings), requiring attendance at court for four days over several months and detailed written submissions, and that because he has been fully vindicated by the privilege decision, the ordinary rule that costs follow the event is appropriate. He also says that the applicant opposed his claim to the protection of the privilege at all points until the last day of the hearings, including on the basis that it did not apply to things seized during execution of the search order, and that there was no real and appreciable risk of prosecution or civil penalty provisions being imposed on Mr Mills.

Directed

17    As to the Meneses Parties and the Lee Parties, Directed submits that it has been wholly successful and there are no special circumstances to justify deviating from the usual rule, citing Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]; Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 (McHugh J) and 120-123 (Kirby J); Seven Network Ltd v News Ltd (2009) 182 FCR 160 at 403; State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [6]-[7]; and Gondarra v Minister for Families, Housing, Community Services and Indigenous Affairs [2014] FCA 139 at [6].

18    Further, it submits, because the respondents resisted inspection on the basis of privilege, and chose to rely on their common law rights, they bore the onus to make out the claims, which they failed to discharge.

19    Directed also submits that it informed the Meneses Parties that corporations could not claim the privilege by letter dated 16 November 2017, and that the Meneses’ Parties first written submissions, dated 19 December 2017 (and made available to the Lee Parties), recognised the centrality of the “corporations issue”. It further notes that the Lee Parties, having failed in their sole director argument, only produced sealed affidavits to attempt to identify which documents were those of the corporation or those of the individual at the end of the third day.

20    In response to the Meneses Parties’ submission that Directed should only recover costs for the issue on which it ultimately succeeded, Directed submits that, as a general rule, a party with a single cause of action, or which seeks a single outcome, is under an obligation to bring forward all alternative arguments and propositions which might yield success, and, if successful, that party should be regarded as having succeeded, and thus be entitled to costs, citing GG v Australian Crime Commission (No 2) [2010] FCAFC 63 at [5] per Downes, Jessup and Tracey JJ. Directed also submits that justice may not be served if parties are dissuaded from canvassing all issues which might be material to the decision in the case, by the risk of adverse costs orders, citing Dodds Family Investment Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271 at [28] per Gummow, French and Hill JJ.

21    As to the Lee Parties’ submission that Directed’s costs should be linked to the costs in the secret commission claims, Directed submits, among other things, that the submission also ignores that the relevant “event” was the Lee Parties’ assertion of privilege.

22    As to Mr Mills, Directed submits that while Mr Mills followed the procedure set out in s 128A of the Evidence Act, his primary position was to rely on the position at common law. Directed submits that he changed his position only on the last hearing day, when it became apparent that the common law privilege position might fail. Directed also claims to have never resisted providing a certificate to Mr Mills, provided the court was satisfied that his evidence made out the grounds.

23    Directed submits that Mr Mills’ attempt to prevent Directed from inspecting relevant documents failed, and that he should consequently pay Directed’s costs.

Consideration

24    In my view, as to the Meneses and Lee Parties, Directed should have its costs of the applications. The onus was on the parties claiming privilege to make good their claims, and for the reasons I gave, they did not do so because they did not satisfy me that they had demonstrated that each of the relevant documents was a document of the relevant individual. It was always necessary for them to have done so. And, in circumstances where Directed necessarily could never have known whether they had done that or not, the fact that Directed may have been seen to have given more emphasis to other submissions from time to time during the (protracted) hearing, it seems to me, is beside the point.

25    In my view, Directed has been wholly successful in respect of the Meneses Parties, and there are no special circumstances to justify deviating from the usual rule.

26    For the same reason, I do not accept the Lee Parties’ submission that Directed’s costs should be costs in the cause between it and the Lee Parties with respect to the secret commission claims or that they be discounted so that Directed recover 50% of their costs of the privilege decision whatever the outcome of that trial. The fact of the matter is that, on the view I took of it, the privilege claims failed.

27    The position as to Mr Mills is different. There is merit in the respective contentions that Mr Mills and Directed make. On the one hand, it is the case that Mr Mills sought to rely on the common law and adopted submissions made by the other respondents in that regard. And it is true that it was only on the fourth day that counsel for Mr Mills made it clear that his client in fact had no objection to Directed inspecting the documents, provided that he was given a certificate under s 128A. On the other hand, Mr Mills was successful in obtaining the orders he sought under s 128A. On balance, in my view, the fairest result in those circumstances is that Mr Mills and Directed should bear their own costs in relation to Mr Mills’ claim for privilege.

Associate:

Dated:    2 April 2019

SCHEDULE OF PARTIES