FEDERAL COURT OF AUSTRALIA

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 6) [2020] FCA 64

ORDERS

THE COURT ORDERS THAT:

1.    Within 7 days, the parties are to file orders by agreement giving effect to the reasons for judgment or, if no agreement is reached, written submissions (of no more than five pages) as to the form of final relief to be ordered.

2.    Within 14 days, each party file and serve written submissions (of no more than ten pages) on costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    The application by the First Respondent (OE Solutions) and the Sixth Respondent (Mr Meneses) (together, the Meneses Parties) to be relieved from the obligation to produce documents for inspection by the Applicant (Directed) on the grounds of the privilege against self-incrimination and the privilege against self-exposure to penalties:

(a)    in relation to OE Solutions, is dismissed; and

(b)    in relation to Mr Meneses:

(i)    is dismissed in respect of the documents enumerated in categories P1A, P1B and P2 of Part 2 of the Meneses Parties’ Lists of Documents filed on 18 December 2019 and 6 January 2020 (List of Documents); and

(ii)    is granted in respect of the documents enumerated in categories P3 and P4 in Part 2 of the List of Documents.

2.    OE Solutions is required to produce for inspection by the parties in this proceeding, including Directed, the documents enumerated in categories P1A, P1B, P1C, P1D and P2 of Part 2 of the List of Documents (Producible Documents).

3.    Pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth), Mr John Lindholm of KPMG Australia (KPMG) is appointed, without any requirement to file security, until further order as receiver of the Producible Documents (Receiver), in accordance with the powers in the Schedule of Powers or such further or other powers as the Court thinks fit.

4.    The Receiver is entitled to:

(a)    remuneration for work done pursuant to these orders by him and the staff of KPMG acting under his supervision to be calculated in accordance with the usual hourly rates charged by the firm as set out in the consent to act as receiver dated 3 December 2019 (being Annexure ABW-1 to the Affidavit of Anthony Watson sworn 19 December 2019) (Remuneration); and

(b)    reasonable costs and expenses (including without limitation legal expenses) properly incurred by him in the performance of his duties and the exercise of his powers and any matters arising from, relating to, incidental to and in connection with the performance of his duties and the exercise of his powers pursuant to these orders (Costs and Expenses).

5.    Directed will, in the first instance, pay the Remuneration and Costs and Expenses of the Receiver referred to in Order 4 above, with the question of whether they should form part of the costs in the proceeding reserved to the trial judge.

6.    Liberty to apply.

Schedule of Powers

In this Schedule:

Independent Solicitor means Mark Andrew Schofield or Kenneth Chai (or both), being independent solicitors appointed pursuant to the search order made in this proceeding on 26 October 2017 and subsequent variations thereof.

Independent Computer Expert means Justin Geri or Edgar Zayas (or both), being independent computer experts appointed pursuant to the search order made in this proceeding on 26 October 2017 and subsequent variations thereof.

Producible Documents has the meaning given to that term in paragraph 2 of these Orders

1.    The Receiver has the power to:

(a)    instruct the Independent Solicitor and Independent Computer Expert to:

(i)    produce the Producible Documents for inspection to the parties in this proceeding; and

(ii)    upon request, provide copies of the Producible Documents to the parties in this proceeding or permit copies of the Producible Documents to be made by the parties in this proceeding;

(b)    do all things necessary or convenient to be done for or in connection with, or as incidental to the matters referred to in sub-paragraph (a) above.

2.    In order to enable him properly to discharge his functions and exercise his powers under these orders, the Receiver may obtain independent legal advice as he deems appropriate.

TABLE OF CONTENTS

REASONS FOR JUDGMENT

ANDERSON J:

Introduction and summary

1    This decision addresses objections by the sixth respondent and cross-claimant, Johnny Meneses (Mr Meneses), to the production of certain documents on the grounds of his privileges against self-incrimination and self-exposure to penalties. Mr Meneses is the sole director and shareholder of the first respondent, OE Solutions Pty Ltd (OE Solutions).

2    This proceeding was commenced in October 2017. Shortly afterwards, on the ex parte application by the applicant (and now first cross-respondent), Directed Electronics OE Pty Ltd (Directed), a judge of this Court (docket judge) made a search order directed to seven named individuals and corporations, including Mr Meneses and OE Solutions (together, the Meneses parties). The order made specific provision for the preservation of claims to privilege against production.

3    In accordance with the terms prescribed by the docket judge, the search order was executed under the supervision of an independent lawyer at various properties, including the residence of Mr Meneses (Aspendale Gardens property). A solicitor acting on behalf of Mr Meneses (and his wife and son) consented to the search order being executed, subject to the right to claim privilege over any documents taken.

4    The documents seized from the Aspendale Gardens property remain in the hands of the independent lawyer and an independent computer expert. Copies of those documents are also in the possession of Norton Rose Fulbright (NRF), a firm of solicitors that acted for both of Mr Meneses and OE Solutions at the time of obtaining the documents, but now only act for Mr Meneses in his personal capacity.

5    Orders were made by the docket judge to the effect that any claims for privilege in respect of documents taken pursuant to the search order could be made in the context of discovery. Subsequently, in the course of making discovery, Mr Meneses objected to the production of certain documents on the grounds of his privileges against self-incrimination and self-exposure to penalties.

6    As will be detailed below, a judge of this Court (primary judge) refused Mr Meneses’ privilege claims and ordered that the documents seized be made available to Directed’s solicitors for inspection. However, the primary judge’s decision was overturned on appeal and Mr Meneses’ privilege claims have been remitted to me for re-determination.

7    After the remitter of the privilege claims, the Meneses parties filed a new list of documents verified by an affidavit of Mr Meneses. The list of documents divided the documents over which Mr Meneses claimed privilege into seven categories by reference to: (i) the purpose for which the document was created; and (ii) the subject matter of the document. This process resulted in categories labelled as “P1A”, “P1B”, “P1C”, “P1D”, “P2”, “P3” and “P4”.

8    The Meneses parties do not oppose an order that OE Solutions produce the documents in categories P1C and P1D to Directed, and I will make such an order. My conclusion in respect of the remaining categories, as explained in detail throughout these reasons, is as follows.

9    Having reviewed the sample documents from which the Court was to determine the merits of Mr Meneses’ privilege claims, I accept that the production of all the documents over which Mr Meneses claimed privilege would have a real and appreciable tendency to prove, directly or indirectly, that Mr Meneses has committed an offence arising under Australian law or a foreign law, or otherwise expose Mr Meneses to the imposition of a civil penalty.

10    As the documents in categories P3 and P4 were, at the time that search order was executed, in Mr Meneses’ sole “control” (which is defined by the Federal Court Rules 2011 (Cth) (Rules) as meaning “possession, custody or power”), Mr Meneses is entitled to rely on the privileges to resist production of those documents. Accordingly, no order should be made requiring production of the documents in those categories.

11    On the other hand, the documents in categories P1A, P1B and P2 were in the “control” of both Mr Meneses and OE Solutions at the time the search order was executed. Mr Meneses is entitled to refuse production of those documents on the grounds of the privileges claimed. However, as the privileges claimed by Mr Meneses are not available to a corporation, OE Solutions, being a legal entity separate from Mr Meneses, is required to produce those documents as part of discovery in this proceeding.

12    In this context, the parties disputed whether the Court could make an order compelling NRF (who now only acts for Mr Meneses) to produce copies of the relevant documents to Directed. Mr Meneses argued that such an order would impermissibly compel him to participate in the production of the documents in contravention of his privilege not to do so. My view is that OE Solutions is entitled to request that NRF return to it the documents that were in OE Solutions’ control. However, there is an alternative method of production that is preferable in the circumstances of the present case.

13    Given OE Solutions is essentially a one person company, and that person (Mr Meneses) is entitled to rely on the privileges to resist production of the documents, the preferable way for the production of documents in categories P1A, P1B, P1C, P1D and P2 to occur is for a receiver to be appointed over those documents for that discrete purpose. The receiver will then be empowered to instruct the independent lawyer and independent computer expert to produce the documents for inspection by the parties in the proceeding, including Directed.

Background

This proceeding

14    Directed is an Australian automotive electronics developer and supplier. It specialises in the development and distribution of in-vehicle electronics, hardware, telematics and emerging technologies.

15    This proceeding was commenced by Directed in October 2017 against various respondents, including the Meneses parties. The other respondents included:

(a)    the second respondent, Hanhwa Aus Pty Ltd (Hanhwa Aus);

(b)    the third respondent, Han Hwa Hightech Australia Pty Ltd (Han Hwa Hightech Aus);

(c)    the fourth respondent, Leemen Aus Pty Ltd (Leemen Aus);

(d)    the fifth respondent, Hanhwa Hightech Co., Ltd (Hanhwa Korea);

(e)    the eighth respondent, Kichang (Ryan) Lee (Mr Lee);

(f)    the twelfth respondent, Leemen Co. Ltd (Leemen Korea),

(collectively, Hanhwa parties).

16    Hanhwa Aus, Han Hwa Hightech Aus and Leemen Aus are companies incorporated pursuant to the Corporations Act 2001 (Cth) (Corporations Act), while Hanhwa Korea and Leemen Korea are companies incorporated pursuant to the laws of South Korea.

17    Directed alleges that, at all relevant times, Mr Meneses was an employee of Directed, having commenced his employment in May 2009. Mr Meneses was employed as Directed’s Business Development Manager, and had been acting as its General Manager.

18    An affidavit made in support of the search order deposes to a number of facts supporting the allegations that Directed makes in the proceeding against Mr Meneses. Those allegations may be summarised as follows. Since 2009, Directed had acquired components, products and equipment from Hanhwa Korea. In 2010, Mr Meneses identified a new supplier for some of the products which Directed required and, from about that time onwards, Directed purchased products from OE Solutions. OE Solutions has its registered office at the Aspendale Gardens property.

19    Directed alleges that, over a period of years, OE Solutions rendered invoices to Directed, which it paid, for the supply of products which OE Solutions acquired from one of Directed’s existing suppliers, Kenmarco Industries Pty Ltd (Kenmarco). In substance, Directed alleges that Mr Meneses dishonestly arranged for his own company, OE Solutions, to be an intermediary in the supply of goods by Kenmarco to Directed, and dishonestly charged marked-up prices to Directed.

20    Directed alleges a range of other wrongful conduct by Mr Meneses and the other respondents to the proceeding. The allegations include that OE Solutions and Hanhwa Korea entered into a written agreement dated 12 May 2012 under which Hanhwa Korea agreed to pay secret commissions to OE Solutions. Directed alleges that Hanhwa Korea paid into the bank account of Mr Meneses not less than $1.096 million in secret commissions between 2009 and 2016.

21    The claims against Mr Meneses are extensive and include breaches of duties under ss 182 and 183 of the Corporations Act, which are civil penalty provisions: ibid, s 1317E. The claims against Mr Meneses also include breaches of fiduciary duties, breaches of contractual obligations, inducing breach of contract, infringement of copyright, contraventions of s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth), and accessorial liability for the contraventions of the Corporations Act by the seventh respondent to the proceeding, Craig Mills (who is alleged to have been employed for certain periods by Directed, Han Hwa Hightech Aus and Hanhwa Aus).

22    It is convenient to extract part of the allegations pleaded against Mr Meneses. Section H of the Further Amended Statement of Claim dated 5 August 2019 (FASOC) (the relevance of which will be discussed further below) alleges that Mr Meneses had engaged in certain “Secret Commissions Conduct”. That section of the FASOC relevantly contained the following allegations:

PART B - UNLAWFUL CONDUCT

H.     Secret Commissions

H.1.     Secret Commissions Conduct

31.     During and until shortly after Meneses' employment with Directed OE, Hanhwa Korea, Leemen Korea and Hanhwa Aus, at the direction of Ryan Lee, secretly and dishonestly:

(a)     engaged Meneses through OE Solutions to work on developing new business opportunities for Hanhwa Korea, Hanhwa Aus and Leemen Korea;

(b)     by themselves and/or through their associates made payments to Meneses to induce Directed OE to purchase products and components from Hanhwa Enterprise and/or Hanhwa Korea and Leemen Korea to the exclusion of alternative suppliers;

Particulars

(i)     The Applicant refers to and relies upon the matters set out in Section 2 of Schedule 1 Particulars;

(ii)     In paragraph 31 of their Amended Defence filed 21 December 2018, the Hanhwa Parties allege that:

(A)     Secret Commission payments made between 21 July 2009 and 26 November 2009 were made by Nan-Shik Min. Nan- Shik Min is a shareholder of Hanhwa Korea, has made an affidavit of documents in this proceeding on behalf of Leemen Korea and is the wife of Y S Lee. It is to be inferred, that insofar as those payments were made by Nan- Shik Min, she did so at the request and on behalf of Hanhwa Enterprise;

(B)     Secret Commission payments made between 22 December 2009 and 21 May 2012 were made by Hanhwa Enterprise.

(C)     These are the best particulars Directed OE can currently give.

(iii)     The Applicant further refers to the following payments made by Hanhwa Aus to OE Solutions:

(A)     22 September 2017 – $61,033.50;

(B)     24 October 2017 - $50,416.30;

(C)     20 November 2017 - $50,416.30;

In respect of A, B and C, on 22 June 2017, Ryan Lee sent an email to Meneses at the Meneses Hanhwa Email Address, copied to the Meneses Personal Email Address, advising that outstanding commissions of $150,000 for the period January 2017 to June 2017 would be paid by Hanhwa Aus, rather than Hanhwa Korea. (HAN.001.033.7469 - Confidential)

(iv)     Further particulars may be provided prior to trial. These are the best particulars the Applicant is currently able to give.

(c)     provided to Meneses and/or OE Solutions in equity a shareholding of 40% in Hanhwa Aus;

Particulars

The Applicant refers to and relies upon the particulars to paragraph 3 above.

(Secret Commissions Conduct).

32.    Meneses acted dishonestly in that he:

(a)     knew the purpose of the payments made and shareholding provided pursuant to the Secret Commissions Conduct;

(b)     accepted the payments and shareholding;

(c)     kept the payments and shareholding secret from Directed OE; and

(d)     procured Directed OE to purchase products from Hanhwa Enterprise and/or Hanhwa Korea and Leemen Korea to the exclusion of alternative suppliers.

Particulars

The Applicant refers to and relies upon the particulars to paragraph 31 above.

…

23    Directed alleges that OE Solutions is liable as an accessory to Mr Meneses’ breach of statutory duties, as a knowing participant in dishonest breaches of fiduciary duties, and for inducing Mr Meneses to breach his contractual obligations to Directed. The underlying conduct alleged to give rise to the causes of action against the Meneses parties includes diverting commercial opportunities, copying and misusing confidential information, engaging in employment by a competitor whilst employed by Directed, and soliciting Directed’s employees to leave their employment and to commence work for Han Hwa Hightech Aus.

24    Mr Meneses has made a cross-claim in the proceeding against Directed and its two directors. Mr Meneses alleges that in May 2009 he and those two directors entered into an agreement to carry on the business of selling in-vehicle electronic products and components in common for mutual profit, and seeking, amongst other relief, declarations that shares in Directed are held on trust for him as to a one third share and that the business was conducted as a partnership.

25    Prior to the dispute over Mr Meneses’ privilege claims, there had been two interlocutory decisions of the docket judge, both of which are irrelevant for current purposes: Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd [2018] FCA 142 and Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 2) [2018] FCA 1097.

26    The trial in this proceeding commenced on 9 December 2019 before the docket judge. As at the date of this decision, the trial is part-heard and is due to resume in May 2020.

Claims of privilege

27    As described at the start of these reasons, in October 2017, and on the ex parte application of Directed, the docket judge made a search order directed to seven named individuals and corporations, including the Meneses parties. In addition, the order was directed to “any other person or entity in occupation or at” four identified premises. The order provided that those to whom the order was directed should permit the persons who were defined in the order as the “search party” to enter the premises and to search for and inspect “listed things”, which were described in the order. The order also provided that the persons to whom the order was directed should permit: an independent lawyer to remove the listed things; and an independent computer expert to search computers, make copies of any hard drives, and remove any hard drives from the premises. The premises that were identified in the order included the Aspendale Gardens property. A title search obtained on 23 October 2017 recorded that Mr Meneses and Elisa Jenny Meneses were joint proprietors of that property.

28    The search order was executed at, amongst other properties, the Aspendale Gardens property. Mr Meneses was not present at the time, as he was overseas. Mr Meneses’ son was present. Subsequently, Mr Meneses’ wife arrived at the property. Mr Meneses’ wife and son obtained legal advice and then, through their lawyer, consented to the search order being executed, subject to a reservation of the right to claim privilege over any documents taken. The independent lawyer and the independent computer expert, who assisted in the execution of the search order, took away hard copy documents and certain computers and hard drives.

29    Orders were subsequently made by the docket judge to the effect that any claims for privilege in respect of documents taken pursuant to the search order could be made in the context of giving discovery. The Meneses parties made discovery by filing a joint list of documents verified by an affidavit of Mr Meneses. In the affidavit, Mr Meneses stated that the certain documents were in his control, either personally or in his capacity as sole director of OE Solutions. The Meneses parties objected to production of certain documents on the grounds of privilege against self-incrimination and the penalty privilege. These documents included documents taken from the Aspendale Gardens property pursuant to the search order.

30    Directed challenged the Meneses parties’ privilege claims and also claims to privilege made by certain other parties. The docket judge referred the challenges to the primary judge for hearing and determination.

Determination by the primary judge

31    The primary judge determined that the Meneses parties’ claims to privilege should be refused: Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285 (Primary Judgment). (The primary judge’s determination in relation to the other parties claiming privilege is irrelevant for present purposes.) The primary judge ordered that Mr Meneses and OE Solutions provide inspection of the relevant documents to the solicitors for Directed. In his reasons for judgment, the primary judge addressed six questions. Relevantly, questions 1, 2 and 6 and the answers to those questions were as follows:

(a)    Question 1 was whether the party claiming privilege had demonstrated that each of the relevant documents was properly a document of the relevant individual. In respect of the Meneses parties, the primary judge answered this question: “No”;

(b)    Question 2 was whether a person who is a single director of a company with no employees (as was the case with Mr Meneses in respect of OE Solutions) could claim privilege against self-incrimination in respect of documents belonging to that company, notwithstanding s 187 of the Evidence Act 1995 (Cth) (Evidence Act). The primary judge answered this question: “No, no such exception to s 187 should be recognised”; and

(c)    Question 6 was whether each of the relevant documents had a real and appreciable tendency to incriminate the relevant individual respondents or expose them to a civil penalty. The primary judge answered this question, “Yes”.

Appeal to the Full Court

32    The Meneses parties applied for leave to appeal from the judgment of the primary judge. The application for leave to appeal was argued with full argument as if on appeal. Central to the Meneses parties’ proposed grounds of appeal was the contention that the primary judge erred in framing questions 1 and 2. There was no challenge by Directed to the primary judge’s conclusion in relation to question 6 (whether the relevant documents had a real and appreciable tendency to incriminate the relevant individual respondents or expose them to a civil penalty).

33    On 1 November 2019, the Full Court held that the primary judge erred in his consideration of the privilege claims: Meneses v Directed Electronics OE Pty Ltd [2019] FCAFC 190 (Full Court Judgment) at [11], [149]-[155] and [158] per Moshinsky, Wheelahan and Abraham JJ. The Full Court also dismissed Directed’s amended notice of contention, which is irrelevant to detail for current purposes: ibid at [11] and [156]-[157]. The Full Court subsequently held that Directed pay the Meneses parties’ costs of the application for leave to appeal and the appeal, but that the costs of the application before the primary judge be reserved: Meneses v Directed Electronics OE Pty Ltd (No 2) [2019] FCAFC 200 (Full Court Costs Judgment).

34    The Full Court Judgment explained the primary judge’s errors as follows:

[149]     … in our respectful opinion the primary judge erred in his consideration of the Meneses parties’ claims based on Mr Meneses’s reliance on privilege against self-incrimination and the penalty privilege. First, in framing and answering question 1, the primary judge directed attention to whether the relevant documents were documents “of” Mr Meneses, or “of” a company. However, in our view, the correct question, at this stage of the analysis, was whether the relevant documents were in the control of OE Solutions. Rule 20.16 of the Federal Court Rules provides that a party gives discovery by serving a list of documents in accordance with r 20.17, which requires (inter alia) that a list must describe each document in the party’s control for which privilege from production is claimed, and the grounds of the privilege. The term “control” in relation to a document is defined in the Dictionary as meaning “possession, custody or power”. In B v B [1978] Fam 181 Dunn J stated that for the purposes of the corresponding 1964 English rule, O 24:

… “possession” means “the right to the possession of a document.” “Custody” means “the actual, physical or corporeal holding of a document regardless of the right to its possession,” for example, a holding of a document by a party as servant or agent of the true owner. “Power” means “an enforceable right to inspect the document or to obtain possession or control of the document from the person who ordinarily has it in fact.”

[150]     Part of the difficulty in the present case is that the Meneses parties’ lists of documents did not indicate whether the documents identified were in the control of OE Solutions or Mr Meneses or both. … the affidavits verifying the lists of documents simply stated that the documents identified in Part 2 were in the control of Mr Meneses, either personally or in his capacity as sole director of OE Solutions. In this respect the lists of documents did not strictly comply with the relevant rules. In any event, the correct question was whether the relevant documents (being the documents in respect of which the privileges were claimed) were in the control of OE Solutions. In respect of the documents that were taken from the Aspendale Gardens property, it seems likely that at least some of the documents were in the power of OE Solutions, in that the company had an enforceable right to obtain possession of the documents. (They may also have been in its possession or custody.) It may be that, in considering whether the documents were documents “of” Mr Meneses or a company, the primary judge had in mind whether the documents were in the control of a company. However, it is not clear whether this is the case. Further and in any event, for several of the categories of documents identified in Mr Meneses’s confidential affidavit, the primary judge concluded that the documents were documents of Directed OE or the Hanhwa parties, rather than OE Solutions. However, in the context of considering whether an order for production should be made against OE Solutions, the correct enquiry was to determine whether that company had control of the relevant documents.

[151]     Secondly, in answering question 1, the primary judge focused on whether the nature of the documents themselves gave rise to privilege, rather than whether the act of production of the documents would give rise to a real and appreciable risk of the relevant kind. For example, in relation to categories 1 and 2, the primary judge concluded that he could not be satisfied that any of the documents in these categories “are capable of attracting Privilege” (at [69]). A similar conclusion was reached in relation to the documents in the other categories. This indicates that the primary judge focused attention on the nature of the documents themselves rather than the act of production, which is central to a claim based on the privilege against self-incrimination or the penalty privilege in a context such as this.

[152]     Thirdly, and relatedly, the primary judge ordered Mr Meneses (in addition to OE Solutions) to produce the relevant documents. Given the primary judge’s finding (in response to question 6) that the relevant documents had a real and appreciable tendency to incriminate Mr Meneses or to expose him to a civil penalty, we assume that the order was directed to Mr Meneses in his capacity as agent for OE Solutions. However, in light of the discussion of the principles set out earlier in these reasons, we do not consider it open to order an individual who is himself or herself at risk of prosecution or the institution of proceedings for a civil penalty to produce the relevant documents on behalf of a company. This would require that individual to undertake an act of self-incrimination or self-exposure to penalties. To the extent that the US cases suggest that an act of production by a director of a company is merely an act as agent for the company, those cases do not reflect Australian law.

35    The Full Court continued to observe that, despite the ability of Mr Meneses to claim privilege over the documents where relevant, this did not mean that an order for production could not be made against OE Solutions (assuming that there were relevant documents in its control). The Full Court explained as follows:

[153]    … The privilege against self-incrimination and the penalty privilege are available only to natural persons and not to corporations. Thus, OE Solutions cannot rely on the privileges to resist production of documents that are in its control. As the privileges are against self-incrimination and self-exposure to penalties (see [90] above), OE Solutions cannot resist production on the basis that production of documents by the company would expose Mr Meneses to a real and appreciable risk of prosecution or institution of proceedings for a civil penalty. Nor can Mr Meneses complain about the production of documents by OE Solutions on the ground that the production of documents by the company might incriminate him or expose him to a penalty. However, in circumstances where OE Solutions is essentially a one-person company and that person (Mr Meneses) is entitled to rely on the privileges to resist production of the documents, it is necessary to consider mechanisms by which OE Solutions could produce the documents (other than by Mr Meneses doing so on its behalf). These mechanisms include the appointment of a receiver of the company for the purposes of producing the relevant documents on behalf of the company: see [R v Ronen (2004) 62 NSWLR 707] at [79] per Spigelman CJ; [Re Australian Property Custodian Holdings Ltd (in liq) (recs and mgrs apptd) (controllers apptd) (No 2) (2012) 93 ACSR 130] at [159] per Robson J. We consider that a receiver could be appointed by the Court in circumstances such as this pursuant to the power conferred by s 57 of the Federal Court of Australia Act 1976 (Cth): see also s 23 of the Federal Court of Australia Act and see, generally, The University of Western Australia v Gray (No 6) [2006] FCA 1825 at [64]-[66], [71]-[74] per French J (as his Honour then was). It is important and necessary that such a mechanism exist; otherwise, a one-person company such as OE Solutions would be effectively immune from producing documents in its control notwithstanding that it is not entitled to claim the privilege against self-incrimination or the penalty privilege.

36    The Full Court accordingly determined that the Meneses parties’ privilege claims required re-determination by a single judge of the Court because this would require that “an essential anterior enquiry of a factual nature [] be conducted, namely the identification of which documents were within OE Solution’s control”: ibid at [155].

Remitter of privilege determination

37    Mr Meneses’ privilege claims were remitted to me for re-determination. For this purpose, I listed a case management hearing between the parties on 22 November 2019. Given the commencement of the trial by the docket judge was approaching (in December 2019), a critical concern that I shared with the parties was the need to develop a protocol, including the sampling of documents, that would enable the Court to efficiently re-determine the privilege claims.

38    After granting the parties time to consult regarding the appropriate case management orders, I made orders on 29 November 2019 that set down a hearing on 28 January 2020 and required the filing of evidence and submissions. The order also contemplated a protocol (as discussed further below) by which the Court would determine the merits of the privilege claims. The order further contemplated the filing by Directed of an application for the appointment of a receiver over OE Solutions, in accordance with the approach suggested by the Full Court: Full Court Judgment at [153]. Directed filed such an application on 19 December 2019.

39    On 20 January 2020, shortly prior to the hearing, OE Solutions filed a notice that it had terminated its retainer with NRF in the proceeding, and had not appointed another lawyer to represent it. Given that Mr Meneses, but not Directed, already had the opportunity to make submissions based on the changed factual matrix, I granted Directed leave to file supplementary written submissions on the relevance, if any, of the termination of the retainer by OE Solutions.

40    On 28 January 2020, I heard the parties in relation to the re-determination of Mr Meneses’ privilege claims. Mr Meneses was represented by Dr McNicol AM QC and Mr McRobert of counsel. Directed was represented by Mr Wise QC and Ms Hickey of counsel.

41    Before turning to my determination of the Mr Meneses’ privilege claims, it is necessary to explain the material and certain concepts underpinning the claims.

List of documents

Mr Meneses’ affidavits

42    Mr Meneses has sworn six affidavits in this proceeding supporting lists of documents discovered by the Meneses parties, and his privilege claims in respect of certain documents.

43    The following three affidavits were sworn prior to the hearings before the primary judge and the Full Court:

(1)    affidavit sworn 20 June 2018 (June 2018 Affidavit), which annexed a list of documents (First List of Documents);

(2)    affidavit sworn 9 July 2018 (July 2018 Affidavit), which annexed a supplementary list of documents; and

(3)    affidavit sworn 25 October 2018, which made a minor amendment to the First List of Documents.

44    After the Full Court’s decision, in which the Full Court criticised aspects of the affidavits above (see Full Court Judgment at [150], as extracted above at [34]), the following three affidavits of Mr Meneses were filed on behalf of the Meneses parties:

(1)    open affidavit sworn 18 December 2019 (Open December 2019 Affidavit), which referred to the June 2018 Affidavit and July 2018 Affidavit, and annexed a list of documents;

(2)    confidential affidavit sworn 18 December 2019 (Confidential December 2019 Affidavit); and

(3)    affidavit sworn 6 January 2020 (January 2020 Affidavit), which annexed a supplementary list of documents.

45    These affidavits form the basis of Mr Meneses’ privilege claims. For simplicity, I will collectively refer to these affidavits below as the “list of documents”.

Categories of documents

46    Each document discovered by the Meneses parties was allocated by the list of documents to particular groups of documents. There were three levels of grouping.

47    The first level of grouping was into one of the following three “Parts”:

(a)    Part 1, being documents in Mr Meneses’ control over which he does not claim privilege from production;

(b)    Part 2, being documents that are in the control of either or both of the Meneses parties, over which Mr Meneses claims privilege from production; and

(c)    Part 3, being documents that have been but are no longer in the control of Mr Meneses.

48    The second level of grouping was in relation to the documents in “Part 2”, which was split further into the following two parts:

(a)    Part 2A, being documents created, received or kept in the course of the business of OE Solutions; and

(b)    Part 2B, being documents not created, received or kept in the course of the business of OE Solutions (and physically located at Mr Meneses’ home at the time of the search of those premises on 27 October 2017).

49    Parts 2A and 2B of the list of documents indicated, in respect of each document, the basis on which Mr Meneses claimed privilege from production by reference to the codes “PSI” and “PCP”. Mr Meneses explained in the Open December 2019 Affidavit that:

(a)     “PSI” means that I claim privilege on the basis that there is a real and appreciable risk that the information in the documents may tend to prove, directly or indirectly, that I have committed an offence arising under an Australian law or a law of a foreign country or may set in train a process which may lead to incrimination or may lead to the discovery of evidence of an incriminating character; and

(b)     “PCP” means that I claim privilege on the basis that there is a real and appreciable risk that the information in the documents may tend to prove that I am liable to a civil penalty or otherwise expose me to the imposition of a civil penalty.

50    The third level of grouping was in relation to the documents in Part 2A and Part 2B, which were further divided into seven categories (categories “P1A”, “P1B”, “P1C”, “P1D”, “P2”, “P3” and “P4”) (each a Category and collectively the Categories), as now described:

Protocol to determine privilege claims

51    Given the amount of the documents over which Mr Meneses claimed privilege, and the urgency in which the privilege claims were to be re-determined, I expressed to the parties at the case management hearing on 22 November 2019 that I wished for the Meneses parties, in consultation with Directed, to design a streamlined regime that would enable the Court to most efficiently re-determine Mr Meneses’ privilege claims.

52    After the case management hearing, I made orders on 29 November 2019 requiring certain steps by the parties prior to the hearing of the re-determination of the privilege claims. Those orders relevantly included the following:

6.    By 4pm on 9 January 2019, the Meneses Parties, after consultation with Directed (but not in any manner that would require the Meneses Parties to act inconsistently with the maintenance of the Privilege Claims), are to file and serve a document which specifies the protocol by which the Court is to finally determine the merits of the Privilege Claims (Protocol). For the purpose of facilitating the most efficient consideration of the Privilege Claims by the Court, the Protocol must at least:

(a)     group the documents the subject of the Privilege Claims (Disputed Documents) into categories of documents with similar characteristics (each a Category);

(b)     identify, by reference to the List of Documents, which Disputed Documents comprise each Category; and

(c)     for each Category, identify at most five documents from which the Court may determine the merits of the Privilege Claims for that Category.

53    On 9 January 2020, the Meneses parties filed a document entitled “Privilege Claims (Protocol)” (Protocol) in accordance in the above order. The Protocol acknowledged the grouping of documents into the Categories described above. It then described the particular manner by which the Court would re-determine the privilege claims:

C.     The Samples

15.     The Confidential Affidavit identifies at most five documents from which the Court may determine the merits of the privilege claims for that category. Those documents have been selected on the basis that they are representative of the types of documents that are comprised in that category and it is intended that a ruling in respect of all documents in a category will be made based on the description of that category in the Confidential Affidavit, the sample documents provided and the submissions made by the parties.

16.     Copies of the sample documents have not been provided to the applicant, and the applicant has not been involved in their selection, because to do so would require Mr Meneses to act inconsistently with the maintenance of his privilege claims.

54    In accordance with the Protocol filed by the Meneses parties, Mr Meneses’ Confidential December 2019 Affidavit exhibits up to five documents that are representative of each of the Categories. These documents are referred to below as the “sample documents”.

Partial controversy regarding the Protocol

55    The parties were not required to agree on the terms of the Protocol. Rather, my orders required the Meneses parties to file the Protocol after consultation with Directed. Correspondence between the solicitors prior to the hearing reveals that Directed objected to aspects of the Protocol. Although the parties ultimately accepted the Protocol was the ultimate basis for the re-determination of the privilege claims, it is necessary to refer to some aspects of the correspondence between the solicitors.

56    The solicitors for Directed, after being provided with a draft version of the Protocol, expressed to the solicitors for the Meneses parties that they took no issue with the classification and proposed protocol for determination of the documents classified as the “OES Documents” and the categorisation of them in Categories P1A, P1B, P1C and P1D. The same correspondence expressed assent to the documents in Category P2, but this assent was later retracted by Directed prior to the hearing. The solicitors for Directed disputed, however, that the documents in Categories P3 and P4 were appropriately classified as “OES Documents” (that is, documents created, received and kept in the course of OE Solutions’ business). This was because, in Directed’s submission, those documents were relevant to the conduct of OE Solutions. The Meneses parties responded that the documents in Categories P3 and P4 had been appropriately classified as “OES Documents”.

57    Shortly prior to the hearing, Directed served on Mr Meneses, and filed with the Court, a large folder (Directed’s Hand Up Folder) that contained a categorised table of all the documents in dispute (Directed’s Table of Documents). With one exception, the table comprised a consolidation of information previously provided by the Meneses parties regarding the documents in dispute. This included information such as, where relevant, a document identification number, the title and date of the document, the sender and recipient of the document, the basis for the claim of privilege over that document and the Category to which the Meneses parties had allocated that document.

58    The novel aspect of Directed’s Table of Documents was that the documents categorised in Categories P3 and P4 by the Meneses parties had instead been classified by Directed into six, more detailed, categories; namely, “SuperDAVE Conduct”, “Polstar Conduct”, “ICL Conduct”, “Dual Employment Conduct”, “RA7000 Conduct” and “Unascertainable”. Directed’s position was that these revised categories more accurately reflected the nature of the documents.

59    Upon being served with Directed’s Table of Documents, the solicitors for Mr Meneses expressed dissatisfaction with the fact that Directed’s Table of Documents was not expressly contemplated by my previous orders, and that Directed had not referred to it in its written submissions. Directed explained that the table was necessary because, amongst other reasons, the lists of documents in Mr Meneses’ Open December 2019 Affidavit and January 2020 Affidavit (unlike those in his June 2018 Affidavit and July 2018 Affidavit) did not provide the details of the sender, recipient or subject line of communications.

60    Notwithstanding the filing of Directed’s Table of Documents, which, in certain respects, adopted categories different to those adopted by the Protocol, Directed did not argue that I should depart from the Protocol to determine the merits of Mr Meneses’ privilege claims. Directed’s Table of Documents was instead used by Directed at the hearing as, first, an aide-memoire and, second, as a means to present particular documents to the Court to provide context to the sample documents. I will refer to these documents as “explanatory documents”.

Explanatory documents

61    The primary purpose in Directed taking me to the explanatory documents was to assist the determination as to whether or not the sample documents in Categories P2, P3 and P4 were created, received or kept in the course of OE Solutions’ business. Counsel for OE Solutions did not object at the hearing to this use of the explanatory documents.

62    The first set of explanatory documents was a bundle of documents including:

(a)    emails between Mr Meneses and Mr Lee (who is alleged to be the sole shareholder and director of Hanhwa Aus and Leemen Aus, the co-director of Han Hwa Hightech Australia and the co-manager and part-owner of Hanhwa Korea) between 12 April 2017 and 22 June 2017; and

(b)    invoices of OE Solutions addressed to Hanhwa Aus dated 21 September 2017, 23 October 2017 and 21 December 2017 respectively. These documents were collectively tendered as “Exhibit 1”.

63    The second set of explanatory documents were documents that were included in Directed’s Hand Up Folder that I was taken to by Directed in the course of the hearing. The day after the hearing, Directed, in accordance with my direction, filed an index to, and copies of, these documents. These documents were collectively tendered as “Exhibit 2”.

64    Directed also took me to two documents which are alleged by Directed to be agreements entered into by Mr Menses on behalf of OE Solutions under which secret commissions were paid (collectively, the Hanhwa Agreements). The first alleged agreement is on the letterhead of “Han Hwa Enterprise Company” and is dated 1 July 2009. The text of the agreement is as follows:

Attn: MR JOHNNY MENESES

OE SOLUTIONS PTY LTD

[Street address omitted]

ASPENDALE VIC

AUSTRALIA

Dear Johnny Meneses,

This is to confirm that with effective from the date of 01.July. 2009, it is understood that OE Solution will provide the following services to Hanhwa Co.:

1. Co-ordination for the on-going business with Directed Electronics & Hanhwa.

2. Control and developing new business with Hanhwa.

It is agreed that charge for such service of buyer orders including Directed will be supported by OE Solutions will be 3% of the shipped order amount per shipment payable upon completion of the shipment.

Also Hanhwa agrees the remittance to OE Solutions service charge agreed between OE Solutions and Hanhwa after shipment for buyer orders as below account no.

Name: Johnny Meneses

Band swift: [omitted]

Band name: WESTPAC BANK

Address: 203 Boundary Rd braeside Vic 3195 Australia

Account: [omitted]

Accepted by                     Very Truly

OE SOLUTIONS PTY LTD             HANHWA ENTERPRISE CO.

(Errors in original.)

65    The second alleged agreement is on the letterhead of Hanhwa Korea and is dated 12 May 2012. The text of the agreement is in similar terms to the first alleged agreement:

Attn: MR JOHNNY MENESES

OE SOLUTIONS PTY LTD

[Street address omitted]

ASPENDALE VIC

AUSTRALIA

Dear Johnny Meneses,

This is to confirm that with effective from the date of 01.July. 2009, it is understood that OE Solution will provide the following services to Hanhwa high-tech Co., Ltd.

1. Co-ordination for the on-going business with Directed Electronics & Hanhwa.

2. Control and developing new business with Hanhwa.

It is agreed that charge for such service of buyer orders including Directed will be supported by OE Solutions will be 3% of the shipped order amount per shipment payable upon completion of the shipment.

Also Hanhwa agrees the remittance to OE Solutions service charge agreed between OE Solutions and Hanhwa after shipment for buyer orders as below account no.

Name: Johnny Meneses

Band swift: [omitted]

Band name: WESTPAC BANK

Address: 203 Boundary Rd braeside Vic 3195 Australia

Account: [omitted]

Accepted by                     Very Truly

OE SOLUTIONS PTY LTD             HANHWA HIGHTECH CO., LTD

(Errors in original.)

Summary of materials considered

66    To summarise the discussion above, the parties accepted that the means by which I was to re-determine the merits of Mr Meneses’ privilege claims was by reference to each Category of documents set out in the Protocol. The merits of the privilege claims in respect of each of those Categories was to be determined by reference to the sample documents for each Category exhibited to Mr Meneses’ Confidential December 2019 Affidavit. However, for the purposes of characterising the nature of the sample documents, and identifying who had control of those documents as at the time the search order was executed, I had regard to, in addition to the parties’ submissions, the following material:

(a)    the pleadings filed in the proceeding, being:

(i)    Directed’s FASOC;

(ii)    the Meneses parties’ Defence to the FASOC dated 30 September 2019 (Mr Meneses’ Statement of Cross-Claim dated 16 March 2018, as referred to above at [24], was not brought to my attention by the parties as relevant to the matters for determination); and

(iii)    the Hanhwa parties’ Defence to the FASOC;

(b)    the Open December 2019 Affidavit;

(c)    the Confidential December 2019 Affidavit;

(d)    the January 2020 Affidavit;

(e)    Exhibit 1;

(f)    Exhibit 2; and

(g)    the Hanhwa Agreements.

Relevant principles

67    This decision traverses various intersecting areas of law. This section sets out a summary of the relevant legal principles under the following headings:

(a)    Discovery and control of documents;

(b)    Search orders;

(c)    Privileges against self-incrimination and self-exposure to penalties; and

(d)    Appointment of a receiver.

Discovery and control of documents

68    A party has the obligation in discovery to disclose all documents which are, or have been, in its control, even if it is not the owner or sole owner of the documents; and prima facie the party is obliged to produce all such documents for the inspection of the other party: rr 20.14(1)(c) and 20.17(2) of the Rules; B v B (Matrimonial Proceedings: Discovery) [1978] Fam 181 (B v B) at 187 per Dunn J.

69    Rule 20.16 of the Rules provides that a party gives discovery by serving a list in accordance with r 20.17, which requires that the list must, amongst other things, describe “each document in the party’s control for which privilege from production is claimed and the grounds of the privilege”. See also r 20.02 of the Rules. However, where multiple parties control discoverable documents, the fact that a party might claim the privilege for self-incrimination does not affect the obligation of the other parties to produce the documents for inspection: Full Court Judgment at [90], citing Rochfort v Trade Practices Commission [1982] HCA 66; 153 CLR 134 at 145 per Mason J.

70    The term “control” in relation to a document is defined in the Dictionary to the Rules as meaning “possession, custody or power”. In a passage adopted in the Full Court Judgment at [149], Dunn J stated in B v B at 186 that

… “possession” means “the right to the possession of a document.” “Custody” means “the actual, physical or corporeal holding of a document regardless of the right to its possession,” for example, a holding of a document by a party as servant or agent of the true owner. “Power” means “an enforceable right to inspect the document or to obtain possession or control of the document from the person who ordinarily has it in fact.”

71    In addition, a person (including a company) will also have “power” over a document where the person has an actual and immediate ability to inspect it, even though the document is the property of, or is held by, another person: Taylor v Santos (1998) 71 SASR 434 (Taylor v Santos) at 438 per Doyle CJ, cited in Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 8) [2014] FCA 376 at [17] per Besanko J. A person will not have such an ability if the person is only able to inspect the document if a third person agrees to permit inspection, or otherwise agrees to refrain from preventing inspection: Taylor v Santos at 438. See also Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 (Lonrho) at 635-6 per Lord Diplock, with Lord Edmund-Davies, Lord Fraser of Tullybelton, Lord Russel of Killowen and Lord Keith of Kinkel agreeing.

72    The meaning of “custody” was considered by Mason J in Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited [1979] HCA 67; 143 CLR 499 at 532 by reference to the definition given by the Shorter Oxford English Dictionary: “Safe keeping, protection; charge, care, guardianship”. See also City of Swan v McGraw-Hill Companies Inc [2014] FCA 1271; 226 FCR 462 at [7] per Rares J. Wigney J observed in Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160; 306 ALR 414 at [117] that a company director who has physical possession of books and records of the company has custody of them for the purposes of discovery.

Search orders

73    This Court has power under Div 7.5 of the Rules to make a search order. Rule 7.42 describes the purpose of a search order as follows:

7.42    Search order

The Court may make an order (a search order), in any proceeding or in anticipation of any proceeding in the Court, with or without notice to the respondent, for the purpose of securing or preserving evidence and requiring a respondent to permit persons to enter premises for the purpose of securing the preservation of evidence that is, or may be, relevant to an issue in the proceeding or anticipated proceeding.

74    The express statutory power to make a search order under Div 7.5 of the Rules does not diminish the inherent, implied or statutory jurisdiction of the Court to make a search order: r 7.44.

75    The Full Court considered various authorities to discern the nature of the search order made by the docket judge in the present case: Full Court Judgment at [79]-[83]. The key observations by the Full Court in respect of the search order were as follows:

(a)    the search order differed from a search warrant. The search order did not give the search party authority to enter the Aspendale Gardens property, or to search and remove “listed things” against the will of the occupants or any other person entitled to possession of the listed things. The search order instead authorised entry, search, and the removal of listed things only with the permission of the persons to whom the order was directed;

(b)    there are a number of features of the search order made in the present case which indicate that, as r 7.42 of the Rules contemplates, its purpose was the preservation of evidence, and not the immediate discovery and production of documents:

(i)    the search order provided for an opportunity to seek legal advice, and to ask the Court to vary or discharge the order;

(ii)    the listed things, computers and computer hard drives were to be removed into the custody of an independent lawyer and an independent computer expert;

(iii)    the search order made specific provision for the preservation of claims to privilege against self-incrimination and the penalty privilege by permitting any things the subject of such a claim to be gathered and handed to the independent lawyer in a sealed envelope or container, which the independent lawyer was then required to deliver to the Court; and

(iv)    the order provided that, before the return date of the order, the respondents might, in the presence of the independent lawyer, inspect any thing removed from the premises, make copies of the same, and provide the independent lawyer with a signed list of things that were the subject of claims for privilege, or confidentiality, and which should not be inspected by Directed;

(c)    the production to the independent lawyer of listed things upon the basis that they were subject to claims for privilege, and that the independent lawyer should thereafter deliver those things to the Court, was tantamount to production to the Court pending resolution of the claims to privilege; and

(d)    the things were sealed and placed in the custody of the Court pending resolution of the claims to privilege. This Court’s Search Orders Practice Note provides that, on the return date of the search order, the Court will consider a number of issues, including any claim of privilege by the respondent. In these ways, the search order provided for a number of safeguards and mechanisms to enable claims for privilege to be preserved, and then later identified and advanced.

Privileges against self-incrimination and self-exposure to penalties

76    The Full Court also undertook an extensive analysis of the principles relevant to the privileges against self-incrimination and self-exposure to penalties: Full Court Judgment at [84]-[148]. Based on that analysis, the key principles for current purposes are as follows:

(a)    the privileges claimed by Mr Meneses to resist production of the documents are the common law privilege against self-incrimination and the penalty privilege. The corresponding statutory privilege under s 128 of the Evidence Act does not arise for present purposes;

(b)    the privilege of an individual against self-incrimination is a deeply entrenched common law right not to answer questions or produce documents or things where there would be a tendency to expose the individual to a criminal charge. Although a privilege against self-incrimination maybe abridged by statute, it has been generally accepted that it is without real exception;

(c)    the privilege against self-incrimination protects an individual not only from self-incrimination directly under a compulsory process, but also from making disclosure that may lead to incrimination or to the discovery of real evidence of an incriminating character;

(d)    neither of the privileges is available to a corporation such as OE Solutions: s 187 of the Evidence Act;

(e)    a natural person cannot complain that a corporate defendant’s compliance with an order or requirement to produce documents or information might tend to incriminate him or her;

(f)    a corporate defendant cannot invoke privilege on the grounds that an order or requirement to produce documents or information might tend to incriminate a natural person, such as a director. Thus, a corporate defendant may be required to provide documents and information which may tend to incriminate its officers;

(g)    although a corporate defendant cannot refuse to comply with a direction for the filing of evidence on the basis that its evidence may incriminate other natural person defendants or expose them to a penalty, the corporate defendant will not breach such a direction if it fails to file a statement or an affidavit from a witness where that witness claims privilege. That is to say, compliance is not required if the only source of the information is the director defendants and they are entitled to remain silent. If the corporate defendant has other sources of information available from which it can comply with the direction, then it must do so; and

(h)    the relevant enquiry is whether an order directed to the corporate defendant will require a natural person to incriminate himself or herself.

Appointment of a receiver

77    The Full Court raised the possibility of the appointment by the Court of a receiver over OE Solutions for the purposes of the production of the relevant documents on behalf of OE Solutions: Full Court Judgment at [153] (as extracted above at [34]). For this proposition, the Full Court cited R v Ronen [2004] NSWCCA 67; 62 NSWLR 707 at [79] per Spigelman CJ and Re Australian Property Custodian Holdings Ltd (in liq) (recs and mgrs apptd) (controllers apptd) (No 2) [2012] VSC 576; 93 ACSR 130 at [159] per Robson J. Directed duly made an application for the appointment of a receiver on 19 December 2019.

78    This Court has a broad discretion under s 57(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) to appoint a receiver by interlocutory order:

Receivers

(1)     The Court may, at any stage of a proceeding on such terms and conditions as the Court thinks fit, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient so to do.

79    In addition, s 23 of the FCA Act provides the Court with power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, as the Court thinks appropriate.

80    The appointment of a receiver can occur on occasions beyond an insolvency context. For example, as was recognised by French J in University of Western Australia v Gray (No 6) [2006] FCA 1825 (Gray) at [74], a receiver can be appointed where the relevant body is effectively paralysed by internal dissension or where, for one reason or another, those charged with its management are unable to be identified or, if identified, are unable to act for one reason or another.

81    As explained by French J in Gray at [71], the circumstances in which the Court has power to order the appointment of a receiver are not closed:

The power of the Court to appoint a receiver is statutory. It has its origins, however, as an equitable remedy. An order in the nature of an equitable remedy can be made under s 23 of the [FCA Act]. The class of circumstances in which such power may be exercised is not closed. Nor are the purposes for which a receiver may be appointed and the powers and conditions attaching to such an appointment. There may be many circumstances of considerable diversity which would warrant such an order and it is important that the discretion not be unnecessarily confined by any particular line of cases to which it has been applied.

Privilege claims

82    Mr Meneses has agreed to the production of the documents in Categories P1C and P1D. However, he resists production of the documents in categories P1A, P1B, P2, P3 and P4 (Disputed Documents) on the basis of his claims of privileges against self-incrimination and self-exposure to penalties. I will now determine the merits of those claims.

Would production of the relevant documents give rise to a real and appreciable risk of the relevant kind?

83    The first question is whether the production of the Disputed Documents would give rise to a real and appreciable risk of the incrimination of Mr Meneses in a criminal offence or expose him to a civil penalty.

84    Although it was unnecessary for the primary judge to determine this question with respect to Mr Meneses (because his Honour had refused the privilege claim on another basis), the primary judge expressed that this was a clear case where the seriousness of the allegations meant that the relevant documents had a real and appreciable tendency to incriminate Mr Meneses (amongst others): Primary Judgment at [125]-[127]. There was no challenge to the primary judge’s conclusion in relation to this finding: Full Court Judgment at [9] and [49]. Nevertheless, given:

(a)    this finding by the primary judge was, in respect of Mr Meneses, obiter;

(b)    the Full Court criticised one aspect of the test applied by the primary judge (Full Court Judgment at [151]); and

(c)    the entirety of Mr Meneses’ privilege claims have been remitted to me for re-determination (Full Court Judgment at [155] and [158]),

it is necessary for me to form my own view, by reference to the sample documents, as to whether production of the Disputed Documents would give rise to a real and appreciable risk of the relevant kind.

85    The broad allegations made against Mr Meneses in this proceeding were summarised above. In substance, Directed alleges that Mr Meneses dishonestly arranged for his own company, OE Solutions, to be an intermediary in the supply of goods by Kenmarco to Directed, and dishonestly charged marked-up prices to Directed.

86    I have read Mr Meneses’ Confidential December 2019 Affidavit and reviewed each of the sample documents for Categories P1A, P1B, P2, P3 and P4. Having regard to that review, I am satisfied that the production of the Disputed Documents would give rise to a real and appreciable risk of prosecution or institution against Mr Meneses of criminal proceedings or proceedings for a civil penalty.

Who had control of the documents at the time the search order was executed?

87    It is common ground that Mr Menses had control of the Disputed Documents at the time the search order was executed. The next question to be determined is whether OE Solutions also had control (that is, “possession, custody or power”) of the Disputed Documents at the same time.

Categories P1A and P1B

88    The Protocol characterised the documents in Categories P1A and P1B as follows:

(a)    Category P1A comprises documents (relating to various subject matter) that were at Mr Meneses’ home at the time of the search and which were obtained by the search party and taken away by the independent solicitor; and

(b)    Category P1B comprises documents relating to a particular subject matter that were at Mr Meneses’ home during the search but which were not obtained by the search party. Mr Meneses later provided these documents to NRF as part of the discovery process and they were included in his list of documents.

89    In the Open December 2019 Affidavit, Mr Meneses deposes to the documents in Categories P1A and P1B being, at the time the search order was executed, in the joint control of himself and OE Solutions. Mr Meneses moreover accepts that the documents in Categories P1A and P1B were created, received or kept in the course of OE Solutions’ business. In this regard, the description in the list of documents of the documents in these Categories make plain that these documents relate to the purchasing, ordering, storage, sale of, payment for and accounting for the stock that OE Solutions purchased from Kenmarco and sold to Directed.

90    Having considered the relevant material, in particular the sample documents for Categories P1A and P1B, I am satisfied that the documents falling within those Categories are documents that were created, received or kept in the course of the business of OE Solutions by Mr Meneses. The documents in these Categories were stored or kept at the registered office and sole place of business of OE Solutions at the Aspendale Gardens property.

91    As such, I am satisfied that the documents in Categories P1A and P1B were in the “power” of OE Solutions, in that the company had an enforceable right to obtain possession of them without the need to obtain the consent of anyone else. I am accordingly satisfied that the documents in Categories P1A and P1B were within the “control” (as that term is defined in the Rules) of both Mr Meneses and OE Solutions as at the time the search order was executed.

Category P2

92    The Protocol characterised documents in Category P2 as concerning documents relating to the alleged “Secret Commissions Conduct” set out in Section H of the FASOC (as relevantly extracted at [22] above).

93    In the Open December 2019 Affidavit, Mr Meneses deposes to the documents in Category P2 being, at the time the search order was executed, in his control, but not in the control of OE Solutions. In particular, Mr Meneses contends that the documents falling within Category P2 were not created, received or kept in the course of any business conducted by OE Solutions.

94    Directed disputes this characterisation. It contends that the documents in Category P2 are properly characterised as documents of OE Solutions. Directed accordingly submits that OE Solutions had “power” over (and therefore “control” of) these documents. The basis for Directed’s characterisation starts with Directed discerning from the list of documents filed on behalf of the Meneses parties that the documents in Category P2 included:

(a)    66 documents which were Mr Meneses’ bank statements for the account into which the secret commission payments were allegedly made pursuant to the Hanhwa Agreements; and

(b)    41 documents which were emails between Mr Meneses and representatives of the Hanhwa parties which, according to Directed, “presumably” detailed the calculation of the secret commission payments made pursuant to the Hanhwa Agreements.

95    Given the centrality of the Hanhwa Agreements to these documents, it was accordingly necessary, in Directed’s submission, for the Court to have regard to the Hanhwa Agreements for the purpose of informing the nature of the sample documents in Category P2.

96    The text of the Hanhwa Agreements were set out above at [64]-[65]. On their face, they are contractual agreements entered into by OE Solutions. This follows from the identity of the addressee (Mr Johnny Meneses of OE Solutions Pty Ltd), the party described in the execution block, and the content of the obligations described in the agreements, which required OE Solutions to provide certain services to the counterparty.

97    As OE Solutions is clearly a contractual party on the face of the Hanhwa Agreements, Directed argues, broadly, that any documents created, received or kept:

(a)    in the course of the activities contemplated by these agreements; or

(b)    relating to the calculation of, or correspondence about, payments made by the Hanhwa parties to OE Solutions in performance of obligations under the agreements,

are documents created, received or kept by OE Solutions in performing its contractual obligations under the Hanhwa Agreements, and therefore documents created, received or kept in the course of OE Solutions’ business.

98    I accept Directed’s submission. Having read and considered the relevant materials, in particular the Hanhwa Agreements and the pleadings (most importantly, section H of the FASOC), my view, having regard to the sample documents, is that the documents in Category P2 are documents that were created, received or kept by OE Solutions in the course of its business.

99    Contrary to Mr Meneses’ submission, the fact that the Hanhwa Agreements were not performed precisely accordingly to their terms does not transform those documents from being properly characterised as connected with OE Solutions’ business. In particular, the fact that (as alleged by Mr Meneses):

(a)    during Mr Meneses’ employment with Directed, OE Solutions received no payments from the Hanhwa parties,

(b)    OE Solutions did not issue any relevant invoices to the Hanhwa parties;

(c)    bank statements relied upon by Directed show that payments that Directed characterises as “secret commissions” were not paid to OE Solutions’ bank account, but were instead paid to the home mortgage account of Mr Meneses and his wife;

(d)    those payments were not later transferred from the mortgage account to OE Solutions; and

(e)    OE Solutions did not declare any assessable income from these activities,

does not exclude the possibility that these activities were conducted pursuant to OE Solutions’ contractual obligations, and therefore in the course of OE Solutions’ business. As Directed submits, it may be that these activities are simply consistent with the nature of the secret and illegal conduct that Mr Meneses is alleged to have engaged in.

100    It is unnecessary, and indeed inappropriate, for me to form a conclusive view on whether (and, if so, how) Mr Meneses engaged in the alleged “Secret Commissions Conduct”. Directed pleads that Hanhwa Korea, Leemen Korea and Hanhwa Aus, at the direction of Mr Lee, secretly and dishonestly engaged Mr Meneses through OE Solutions. (In response, the Meneses parties have not pleaded to this allegation on the basis that Mr Meneses claims the relevant privileges.) Whether this allegation by Directed is correct, or whether there is an alternative explanation of the facts, is a matter to be determined by the docket judge after hearing all the evidence at trial.

101    My immediate task is confined to determining whether OE Solutions had control over the documents in Category P2 at the time the search order was executed. For this purpose, the central question is whether OE Solutions had power over those documents. To answer this question, I must take the sample documents for that Category, as informed by the pleadings and other relevant documents (such as the Hanhwa Agreements), at face value.

102    On their face, the contractual arrangements under the Hanhwa Agreements are clear. OE Solutions was to provide certain services to the counterparty. The terms of the agreements indicate that, although it was OE Solutions to provide the services, any payments in consideration for those services were to be paid into a personal bank account of Mr Meneses. At face value, this appears to be a payment direction by OE Solutions. This is not inconsistent with the conclusion that subsequent activities were undertaken by Mr Meneses (on behalf of OE Solutions) pursuant to OE Solutions’ obligations under the agreements.

103    As the documents in Category P2 were created, received or kept by OE Solutions in the course of performing its obligations under the Hanhwa Agreements, my view is that OE Solutions has power over those documents, in the sense that it has an enforceable right to inspect those documents or to obtain possession of those documents from any person who has them. It follows that the documents in Category P2 were within the control of OE Solutions at the time the search order was executed.

104    Mr Meneses also had control of the documents in Category P2 at the same time. I am accordingly satisfied that the documents in Category P2 were within the “control” (as that term is defined in the Rules) of both Mr Meneses and OE Solutions as at the time the search order was executed.

Categories P3 and P4

105    The Protocol characterised the documents in Category P3 as concerning documents relating to the business of Directed, and the documents in Category P4 as concerning documents relating to the business or one or more of the Hanhwa parties. As a result, Mr Meneses contends that the documents in Category P3 were not created, received or kept in the course of OE Solutions’ business and, as such, were not within the “control” of OE Solutions. Directed again disputes this characterisation.

106    Directed submits that the documents in Categories P3 and P4 must, by inference, relate to actions of OE Solutions. If this were not so, Directed submits that the documents would not be relevant to this proceeding and would not be subject to privilege claims by Mr Meneses. Directed highlights its allegation that, pursuant to the Hanhwa Agreements, the coordination and new business development for the Hanhwa parties was carried out by Mr Meneses through OE Solutions. Directed alleges that this resulted in Mr Meneses (on behalf of OE Solutions) engaging in the conduct alleged in sections H, J, JA, L, N, NA, O, P, Q, R, U of the FASOC (which need not be detailed for current purposes). As such, Directed contends that the documents in Categories P3 and P4 (save for some minor exceptions) relate to the wrongful conduct of OE Solutions and, as such, are documents within the “power”, and therefore “control”, of OE Solutions.

107    Conversely, Mr Meneses submits that the wrongful conduct alleged in FASOC, as identified above, does not involve OE Solutions. Mr Meneses observes that the conduct that allegedly diverted an opportunity to the Hanhwa parties was pleaded by Directed to have been undertaken by Mr Meneses in his capacity as an employee of Directed. Mr Meneses accordingly submits that the evidence does not support the proposition that this alleged conduct of Mr Meneses was done on behalf of, or through, OE Solutions.

108    It is unnecessary to express a view on the particular capacity in which Mr Meneses undertook the conduct exhibited in the documents in Categories P3 and P4. This is because, contrary to Directed’s submission, it does not inherently follow from the fact that documents are relevant to this proceeding, and that Mr Meneses is entitled to claim privilege from production of the document, that OE Solutions has an enforceable right to inspect the document or to obtain possession of the document from any person who has it. Rather, there is a class of relevant documents that, upon production, may tend to incriminate Mr Meneses (or expose him to penalties), but which are, at least at face value, not properly characterised as documents of OE Solutions.

109    Having read and considered the relevant materials, my view, having regard to the sample documents, is that the documents in Categories P3 and P4 are not documents that were created, received or kept by OE Solutions in the course of performing its obligations under the Hanhwa Agreements or otherwise in the course of undertaking its business. The documents in these Categories appear to be documents which relate to the businesses of Directed and the Hanhwa parties respectively, and, on their face, do not have any apparent connection with OE Solutions. Of course, the docket judge may characterise these documents differently after the completion of the trial. But, at this interlocutory stage, I am, on the basis of the evidence currently available, not prepared to infer that the documents in these Categories are evidence of OE Solutions’ participation in the wrongful conduct alleged.

110    Consistent with matters deposed to by Mr Meneses in his Open December 2019 Affidavit, I am satisfied that the documents in Category P3 and P4 were within the “control” (as that term is defined in the Rules) of Mr Meneses as at the time the search order was executed, but not in the “control” of OE Solutions.

Conclusion on control of the Disputed Documents

111    For the reasons expressed above, I have found that documents in Categories P1A, P1B and P2 were in the control of both Mr Meneses and OE Solutions at the time the search order was executed. However, the documents in Categories P3 and P4 were only in the control of Mr Meneses at that time, and not in the control of OE Solutions.

Production of documents

112    Mr Meneses is not personally required to produce any of the Disputed Documents because: (i) those documents were in his control (solely or with OE Solutions) at the time of the execution of the search order; and (ii) production of those documents would give rise to a real and appreciable risk of the relevant kind. However, OE Solutions is, subject to the resolution of the issues below, required to produce the documents in Categories P1A, P1B and P2 (and the Categories not in dispute—P1C and P1D) because: (i) those documents were in its control at the time of the execution of the search order; and (ii) the relevant privileges are not available to it.

113    The hard copy documents seized from the Aspendale Gardens property currently remain in the possession of the independent lawyer, and copies of the electronic documents seized from the Aspendale Gardens property are in the possession of the independent computer expert. Copies of the hard copy documents and electronic documents are also in the possession of Mr Meneses’ solicitors, NRF. There is accordingly three sources from which OE Solutions may obtain copies of the documents that it is required to produce—the independent solicitor, the independent computer expert and NRF.

114    In these circumstances, Directed seeks an order of the Court:

(a)    appointing a receiver to OE Solutions; and

(b)    empowering the receiver to instruct either:

(i)    the independent lawyer and independent computer expert (collectively, independent parties); or

(ii)    NRF,

to produce the relevant documents for inspection by the parties to this proceeding (and also permit those parties to make copies of those documents).

115    Mr Meneses objects to the Court making an order requiring the independent parties or NRF to directly or indirectly produce the relevant documents to Directed. Although Mr Meneses accepts that he could not prevent a separate legal entity (such as OE Solutions) producing the relevant documents to Directed, he contends that, because production by one of these means cannot occur without the cooperation of Mr Meneses, he cannot be compelled to so cooperate because that would infringe upon his privileges against self-incrimination and against self-exposure to a penalty. Before considering the merits of this argument, it is necessary to outline two key authorities raised by the parties.

Key authorities

Griffin

116    Griffin v Sogelease Australia Ltd & Ors [2003] NSWCA 158; 57 NSWLR 257 (Griffin) involved proceedings instituted against, amongst other parties, a husband and wife, namely Mr Griffin and Mrs Griffin. After the plaintiffs (collectively, Sogelease) sought an order for discovery, Mr Griffin took from his study all of the personal papers of his and Mrs Griffin and provided the documents to his solicitors (Mrs Griffin had separate solicitors). There was no suggestion that Mr Griffin had taken these documents without Mrs Griffin’s consent.

117    The trial judge held that Mrs Griffin had legal title to her documents and was therefore entitled to their return from Mr Griffin’s solicitors. The documents accordingly remained within the “power” of Mrs Griffin (within the meaning of the relevant court rules) with the consequence that she had an obligation to discover or to produce them for inspection. The trial judge made an order that Mr Griffin (by himself and his solicitors) produce the relevant documents to Mrs Griffin and her solicitors. Mr Griffin appealed and argued that the trial judge’s order infringed his privilege against self-incrimination.

118    Tobias JA, with whom Meagher JA and McColl JA agreed, considered the general principles regarding the privilege against self-incrimination as follows:

[30]     … objection to the production of documents based on the privilege against self-incrimination is available to any person who, by compulsory process, is required to produce the relevant documents. Thus, Mason J, Wilson J and Dawson J in Sorby made the point (at 310) that:

“the privilege protects the witness not only from incriminating himself directly under a compulsory process, but also from making a disclosure which may lead to incrimination or to the discovery of real evidence of an incriminating character.” (emphasis added)

This passage was cited with approval by Deane J in Reid v Howard (1995) 184 CLR 1 at 7.

[31]     Accordingly, the vice against which the privilege protects a person from self-incrimination is the requirement to compulsorily produce the offending documents. Of course, apart from the privilege being abridged by statute, it may be waived by a person voluntarily producing the documents in question but, as Toohey J, Gaudron J, McHugh J and Gummow J observed in Reid (at 12), statute and waiver aside, it has generally been accepted that the privilege is without “real exception”. In the same case, Deane J (at 5) pointed out that subject to the privilege being overridden or modified by the legislature, or waived by the person entitled to claim it, it was otherwise “unqualified”. In particular, his Honour said (at 5) that “it should not be modified by judicially devised exceptions or qualifications”. See Vasil v National Australia Bank Ltd (1999) 46 NSWLR 207 at 216–221.

[32]     It is thus clear that the privilege against self-incrimination is not susceptible, as Deane J pointed out in Reid (at 8), to being overridden by the courts in the interests of justice in the circumstances of a particular case. Thus, his Honour observed (at 8) that:

“privilege is not subject to judge-made exceptions or qualifications and, in the absence of statutory authority, cannot properly be disregarded or overridden by the courts either to meet the exigencies of hard cases or at all.”

[33]     To like effect is the following passage from the joint judgment of Toohey J, Gaudron J, McHugh J and Gummow J in Reid (at 17):

“Quite apart from the difficulties which the orders of the Supreme Court present for the administration of justice, to which reference has already been made, it is inimical to the administration of justice for a civil court to compel self-incriminatory disclosures, while fashioning orders to prevent the use of the information thus obtained in a court vested with criminal jurisdiction with respect to the matters disclosed. Nor is justice served by the ad hoc modification or abrogation of a right of general application, particularly not one as fundamental and as important as the privilege against self-incrimination.”

119    Having regard to these principles, the New South Wales Court of Appeal held that the trial judge should not have made the order compelling Mr Griffin (or his solicitors) to produce the relevant documents to Mrs Griffin. Tobias JA explained his conclusion (with which Meagher JA and McColl JA agreed) as follows:

[34]    With respect, it is my opinion that what [the trial judge] did in the present case infringed these principles. By ordering Mr Griffin to produce the relevant documents to Mrs Griffin or her solicitors he was requiring their production by compulsory process, that is, by order of the court. Although Mr Griffin was not required to produce the documents directly to Sogelease he was indirectly required to do so for, once they were in the possession of Mrs Griffin or her solicitors, she was obliged, by the order for discovery against her, to list the documents and produce them for inspection. In my opinion, such an order was impermissible and constituted, without statutory warrant, a justified abrogation of Mr Griffin's rights.

120    Based on Griffin, Mr Meneses argues that it is not open for this Court to order the production of the relevant documents to a receiver because Mr Meneses may, based on the privileges against self-incrimination and self-exposure to penalties, resist their production. As discussed further below, Mr Meneses contends that a direction to the independent parties or NRF to produce the documents would amount to compelling Mr Meneses to participate in his own incrimination. In response, Directed submits that the facts of Griffin are distinguishable from those in the present case, and that Mr Meneses’ reliance on Griffin is accordingly misplaced.

Sadie Ville

121    In Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (A Firm) (No 3) [2018] FCA 1107; 357 ALR 695; 128 ACSR 625 (Sadie Ville), the applicant, Sadie Ville Pty Ltd (as trustee for the Sadie Ville Superannuation Fund) (Sadie Ville) had purchased shares in Hastie Group Ltd (Hastie). Hastie subsequently went into liquidation. The first respondent, Deloitte Touche Tohmatsu (Deloitte), a firm that was structured as an Australian partnership of individuals, was the auditors of Hastie for many years prior to its collapse. Initial reporting in the wake of Hastie’s collapse raised questions about the role of its auditors.

122    Sadie Ville alleged that Deloitte contravened various provisions of the Corporations Act, the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law. The court made orders for discovery in the proceedings. Deloitte was required to give discovery, however it relied on the privileges against self-incrimination and self-exposure to penalties to resist production of certain documents.

123    Moshinsky J accepted that, in respect of the partners of Deloitte who were directly involved in the relevant engagements with Hastie, production of the documents in question would give rise to a real and appreciable risk of prosecution for contravention of the Corporations Act. Accordingly, insofar as the claim for privilege was made by or on behalf of those partners, his Honour considered the claim to be made out.

124    Moshinsky J held, however, that, in circumstances where other partners of Deloitte had possession, custody or power in respect of the relevant documents, and production of the documents would not give rise to a real and appreciable risk of prosecution or the institution of pecuniary penalty proceedings against them, there was no proper basis not to order production by those partners. His Honour explained this conclusion as follows:

[117]     It may be said that ordering the partners who were not directly involved in the relevant engagements to produce the documents would undermine the privilege claimed by the partners who were directly involved. While this may be true as a matter of practical effect, it is important to emphasise that the privilege is against self-incrimination (or self-exposure to a penalty). The partners who were directly involved in the relevant engagements should not be required to produce documents in circumstances where (as described above) production would give rise to a real and appreciable risk of prosecution against them. However, in circumstances where other partners have possession, custody or power in respect of the documents, and production of the documents would not give rise to a real and appreciable risk of prosecution or the institution of pecuniary penalty proceedings against them, there is no proper basis not to order production by those partners.

[118]     I have given consideration to whether [Deloitte] as a partnership can claim the privileges and whether this affects the analysis. Given that [Deloitte] as a partnership could not itself be prosecuted for an offence against any of the relevant provisions, the privilege against self-incrimination does not arise. While it would seem to be possible to bring a pecuniary penalty proceeding against two or more partners in the partnership name, for the reasons given above any such proceeding would be out of time. Thus, considering the matter from the perspective of the partnership does not take things any further.

[119]     Accordingly, I consider it appropriate to make an order that the partners of [Deloitte] other than those directly involved in the relevant engagements produce the [relevant documents].

125    Directed submits that Sadie Ville illustrates the proposition that the fact that some parties might claim the privileges against self-incrimination or self-exposure to penalties does not affect the obligation of the other parties in discovery to produce the documents for inspection. Applying this proposition to the present case, Directed submits that, in respect of documents over which OE Solutions had control at the relevant time, OE Solutions is required to produce such documents, even if Mr Meneses need not do so.

126    In response, Mr Meneses submits that the facts of Sadie Ville are distinguishable from those in the present case. Written submissions filed on his behalf explained this submission (at least in respect of the documents held by NRF) as follows:

In [Sadie Ville], the other partners of the firm could produce the documents without the cooperation of those partners who had valid privilege claims. That is not possible here because the documents in categories P1A, P1B, P2, P3 and P4 are held by Mr Meneses’ (through his solicitors) and he cannot be compelled to provide them to a receiver to enable OE Solutions to produce them to Directed. The appropriate analogy would be if the partners with privilege claims in the Sadie Ville case had placed all copies of the relevant documents into the hands of their solicitors, such that both they and the partnership had control of the documents but the other partners could not produce them without the cooperation of the partners with privilege claims

Production by the independent parties

127    Mr Meneses argues that an order requiring the independent parties—that is, the independent solicitor or the independent computer expert—to directly or indirectly produce the relevant documents to Directed would fundamentally undermine the safeguards and mechanisms under the search order to enable Mr Meneses’ claims for privilege to be preserved, and then later identified and advanced.

128    Critical to this argument is the basis upon which the relevant documents came to be possessed by the independent parties. Mr Meneses had the right to refuse entry to his premises (although to do so might amount to a contempt). It was only through the permission granted by his solicitor, Hazel Brasington (Ms Brasington) of NRF, that the search party could enter the Aspendale Gardens property and seize the relevant documents. That permission was only granted by Ms Brasington subject to the express reservation of Mr Meneses’ right to claim privilege over the documents seized.

129    The reservation of Mr Meneses’ claim to privilege, in the submission of Mr Meneses, continues to attach to the documents possessed by the independent parties. Thus, for the Court to now compel one of the independent parties to directly or indirectly provide the relevant documents to Directed would be to disregard the reservation of privilege made on Mr Meneses’ behalf. In Mr Meneses’ submission, it would be inimical to the administration of justice for such a fundamental right to be abrogated.

Consideration

130    As Mr Meneses submits, the search order made by the docket judge expressly contemplated a claim of privilege over any documents seized. For instance, paragraph 22 of the search order provided the following:

INSPECTION

22.     Prior to the Return Date, you or your lawyer or representative shall be entitled, in the presence of the independent lawyer, to inspect any thing removed from the premises and to:

(a)     make copies of the same; and

(b)     provide the independent lawyer with a signed list of things which are claimed to be privileged or confidential and which you claim ought not to be inspected by the applicant.

131    Before granting access to the Aspendale Gardens property, Ms Brasington conveyed that Mr Meneses (and his wife and son) reserved the right to claim privilege over any of the documents taken. Although Ms Brasington only expressed that reservation on behalf of those individuals, I reject Mr Meneses’ submission that, when the relevant documents were seized from the Aspendale Gardens property, it was only those individuals (and not OE Solutions) that granted permission to production (subject to any privilege claims). It should be recalled that the Aspendale Gardens property was the only place of business by OE Solutions and, moreover, that submission is inconsistent with the subsequent retention of NRF by OE Solutions shortly after the execution of the search order, as detailed further below.

132    The search order provided safeguards to enable Mr Meneses’ claims for privilege to be preserved, and then later identified and advanced. The Full Court Judgment explained the purposes of these safeguards in the following passage:

[83]     The production to the independent lawyer of listed things upon the basis that they were subject to claims for privilege, and subject to the terms of the search order that required that they be sealed, and that the independent lawyer should thereafter deliver those things to the Court, was tantamount to production to the Court pending resolution of the claims to privilege: see C plc v P at [13]-[14] and the first instance ruling referred to therein from which there was no appeal. The procedure largely corresponds to the first of the three stages of production of documents under subpoena referred to in National Employers’ Mutual General Association Ltd v Waind [1978] 1 NSWLR 372 at 381. One difference in the procedures is that under the search order, the things are sealed and placed in the custody of the Court pending resolution of the claims to privilege. The Search Orders Practice Note provides at [2.17] that on the return date of the search order, the Court will consider a number of issues, including any claim of privilege by the respondent. In these ways, the search order provided for a number of safeguards and mechanisms to enable claims for privilege to be preserved, and then later identified and advanced. Were it not for these safeguards and protections, the search order would be liable to be set aside. In these circumstances, the consent to the search of premises, and to the removal of things into the custody of the independent lawyer and the independent computer expert with an express reservation of the right to claim privilege by the solicitor acting for Mr Meneses, his wife, and son (see paragraph 10 of the affidavit of the independent lawyer set out at [21] above) did not give rise to any inconsistency such as to amount to a waiver of privilege to resist an order for production of documents to Directed OE or to the Court upon discovery, or otherwise: see Eizenberg v Eizenberg [2008] VSC 322 at [25], [31]-[34] per Hargrave J, citing Mann v Carnell (1999) 201 CLR 1.

133    In the present case, the hard copy documents seized from the Aspendale Gardens property were shortly afterwards provided by the independent lawyer to the Court. However, on 1 November 2017, the docket judge ordered that the independent lawyer retrieve those documents from the Court. Although the documents seized were, from that point forward, in the possession of the independent parties, and not the Court, the Full Court’s observations remain applicable. The documents seized were placed in the custody of the independent parties pending resolution of any claims to privilege.

134    If, in the circumstances of the present case (and prior to determining the merits of Mr Meneses’ resistance to production), the Court were to order that the documents over which he claimed privilege be distributed, either directly or indirectly, by the independent parties to other parties to the litigation, then such an order would undoubtedly subvert the protections contemplated by the search order, and also defeat the reservation of the right to claim privilege made on Mr Meneses’ behalf. Given the conditions upon which the search party were entitled to enter the Aspendale Gardens property, such an order by the Court would amount, in substance, to compelling Mr Meneses to participate in his own incrimination. This would be antithetical to his right at common law to object to the production of documents based on the privilege against self-incrimination. This, however, was not the circumstances of the present case.

135    The flaw in Mr Meneses’ current resistance to an order requiring production of the relevant documents by the independent parties is that Directed seeks such an order only once the merits of that resistance has been determined. In the present case, that determination critically involves deciding whether or not the documents seized were in the control of OE Solutions at the time the search order was executed. Once the Court has determined (as I have done above) whose control the documents were in at the relevant time, the functions of the safeguards and mechanisms under the search order have been served. In other words, for the Court to determine these matters, and then direct production of the documents that were in OE Solutions’ control at the time of execution of the search order, would not undermine Mr Meneses’ reservation of his right to claim privilege over the documents seized. This is because, as stated by the Full Court, Mr Meneses cannot prevent the production by a third party of documents that tend to incriminate him. The third party in the present case just happens to be a company of which Mr Meneses is sole shareholder and director.

136    Griffin is not an appropriate analogue to the present case. In that case, the order of the trial judge impermissibly required Mr Griffin to participate in his own incrimination by the production by his solicitors of the relevant documents to Mrs Griffin. In the present case, once it is determined (as it has been) that certain documents were in the control of OE Solutions at the time of the execution of the search order, Mr Meneses would not be participating in the production of the relevant documents by the independent parties. Even if some of those documents were also in the control of Mr Meneses at the relevant time, an order of the Court would only require the participation of OE Solutions, not Mr Meneses personally.

137    Without more, such an order would be artificial in practice given Mr Meneses is the only human actor through which OE Solutions may act. That is why Directed argues that the appointment of a receiver is just and convenient in the circumstances of the present case. Before considering this further, it is useful to address the separate repository of the relevant documents, being NRF.

Production by NRF

138    Mr Meneses further submits that an order directing his solicitors, NRF, to directly or indirectly provide copies of the relevant documents to Directed would impermissibly infringe his privileges against self-incrimination and self-exposure to penalties. In Mr Meneses’ submission, such a direction would be substantially to the same effect as the order impugned in Griffin. Just as the trial judge in Griffin was not entitled to order that Mr Griffin’s solicitors provide documents to Mrs Griffin’s solicitors, so this Court was not entitled, as the argument went, to order that Mr Meneses’ solicitors provide the relevant documents either directly or indirectly to Directed.

139    To address this submission, it is necessary to outline NRF’s role in the proceeding to date. On 31 October 2017, four days after the search order was executed at the Aspendale Gardens property, NRF filed notices that it was acting in the proceeding on behalf of (in addition to Mr Meneses’ son) both Mr Meneses and OE Solutions. On the same day, NRF, with the permission of the Court, took copies of the documents seized and held by the independent lawyer. NRF later obtained copies of the electronic documents held by the independent computer expert. When NRF obtained these documents from the independent parties, it was acting on behalf of, relevantly, both Mr Meneses and OE Solutions.

140    NRF later prepared various documents filed by the Meneses parties in the proceeding, including their Defence to Directed’s FASOC. NRF also acted for both Meneses parties in respect of privilege claims by Mr Meneses. NRF was on the record as acting for the Meneses parties before the primary judge, and then the Full Court. Additionally, the filing of the submissions by NRF in advance of this hearing occurred pursuant to orders contemplating that those submissions were being filed on behalf of both Mr Meneses and OE Solutions.

141    As recounted above, OE Solutions filed a notice about a week prior to the hearing that it had terminated its retainer with NRF, and that it was no longer represented in the proceeding. No representative of OE Solutions appeared at the hearing (and r 4.01(2) of the Rules provides that a corporation must not proceed in the Court other than by a lawyer). Counsel for Mr Meneses was unable to provide a sufficient explanation for OE Solutions’ late termination of its retainer with NRF, and I have not otherwise received one. Directed’s submission was that “[t]he termination of NRF’s retainer by Mr Meneses appears to be a misguided and cynical attempt to frustrate any order of the court appointing a receiver to obtain inspection of those documents from NRF”. Directed submits that the apparent design of the termination by OE Solutions’ retainer with NRF (presumably upon instructions given by Mr Meneses) is to bring the facts of the present case closer to those in Griffin.

142    Mr Meneses submits that NRF now holds copies of the relevant documents solely on his behalf. According to Mr Meneses, if a receiver were to be appointed over the relevant documents controlled by OE Solutions, the receiver could not produce the relevant documents unless Mr Meneses, through NRF, provides those documents to the receiver. Mr Meneses argues that he cannot be compelled to do so and that NRF, which must act on his instructions, cannot provide the documents to the receiver without his consent. Mr Meneses contends that Griffin recognises that production of the documents by NRF would be as agent for Mr Meneses and would constitute production by him personally. According to Mr Meneses, NRF cannot be compelled to do so because he claims the privileges over the documents.

Consideration

143    As a general rule, where a solicitor receives documents from a client in the course of a retainer, those documents remain in the ownership of the client, and the solicitor is required to return those documents to the client upon termination of the retainer: Wentworth v de Montfort (1988) 15 NSWLR 348 at 355 per Hope JA (with Samuels and Mahoney JJA agreeing); Leica Geosystems Pty Ltd v Koudstaal (No 3) [2014] FCA 1129; 109 IPR 1; 245 IR 422 at [84] per Collier J; see also Dal Pont GE, Lawyer’s Professional Responsibility (6th ed, Thomson Reuters, 2017) (Lawyer’s Professional Responsibility) at [3.230]; but note Champion v Rohrt [2016] VSCA 215 at [59] per Santamaria and McLeish JJA. An exception to this rule is where the documents are subject to a lien because costs are owed by the client to the solicitor: see, for example, White v Bini [2003] FCA 669 at [6] per Finkelstein J and Coshott v Coshott [2015] FCA 1284 at [18] per Buchanan J; see generally Ch 16 of Lawyer’s Professional Responsibility. There is no suggestion in the present case that the relevant documents are subject to a lien.

144    The requirement for a solicitor to return the documents of the client upon termination of the retainer is further reflected in the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 (Solicitor’s Rules). Those rules are made under Pt 9.2 of the Legal Profession Uniform Law (see, for Victoria, Sch 1 to the Legal Profession Uniform Law Application Act 2014 (Vic)). Conduct consisting of a contravention of the “Uniform Rules”, which include the Solicitor’s Rules, is capable of constituting “unsatisfactory professional conduct” or “professional misconduct”: s 298(b) of the Legal Profession Uniform Law. Moreover, each principal of a law practice is responsible for ensuring that reasonable steps are taken to ensure that the legal services provided by the practice are provided in accordance with such rules: see ss 34-35 of the Legal Profession Uniform Law.

145    Rule 14 of the Solicitor’s Rules provides as follows:

14.     Client documents

14.1     A solicitor with designated responsibility for a client’s matter, must ensure that, upon completion or termination of the law practice’s engagement:

14.1.1      the client or former client, or

14.1.2     another person authorised by the client or former client,

is given any client documents, (or if they are electronic documents copies of those documents), as soon as reasonably possible when requested to do so by the client, unless there is an effective lien.

14.2     A solicitor or law practice may destroy client documents after a period of 7 years has elapsed since the completion or termination of the engagement, except where there are client instructions or legislation to the contrary.

“Client documents” are defined in the Solicitor’s Rules as meaning “documents to which a client is entitled”. See also r 15, which provides an exception to a solicitor’s lien in respect of “essential documents” of the client.

146    NRF accordingly has an obligation to, upon request, return the documents to which OE Solutions, its former client, is entitled. Is OE Solutions now entitled to the relevant documents over which it had control at the relevant time (either solely or concurrently with Mr Meneses)?

147    As a first matter, I do not accept the submission by Mr Meneses that, when NRF obtained copies of the seized documents from the independent parties, it was only Mr Meneses personally (and not OE Solutions) who had provided those documents to the firm. The evidence does not support such an inference. Of course, Mr Meneses was the only human actor through which OE Solutions could instruct NRF to obtain the copies from the independent parties. Nevertheless, given OE Solutions had already retained NRF by that time, I find that the documents were obtained by NRF with the permission of both Mr Meneses and OE Solutions.

148    Second, my view is that the fact that NRF’s remaining client, Mr Meneses, now claims privilege from the production of the relevant documents in NRF’s possession does not alter the position that NRF is required to provide OE Solutions’ documents back to its former client. It is convenient to illustrate by reference to a hypothetical, but relevant, example.

149    Client A and client B appear at an early stage to have a common interest in a contentious matter. Both clients decide to retain the same solicitor in relation to that matter, and the clients jointly provide to the solicitor the sole copies of a bundle of documents that are within the “control” of both clients in the relevant sense. Client B later decides to terminate its retainer, and obtains alternative legal representation. Then, other parties to the litigation seek discovery of the bundle of documents in the possession of the solicitor. Client A views that the documents are incriminatory to itself, and claims privilege against self-incrimination to resist production. However, the documents are not incriminatory to client B, and client B is accordingly required to produce the documents within its “control”. For this purpose, it requests that its former solicitor return the bundle of documents.

150    This is undoubtedly an unenviable position for the solicitor. The solicitor’s former client wants to obtain documents over which its current client claims privilege from production. Nonetheless, it follows from the nature of the former relationship between the solicitor and client B, and the responsibilities that attached to that relationship, that the solicitor is, as a general rule, required to return the bundle of documents (or at least a copy of them) to client B.

151    The act by the law firm of returning the documents to client B does not, in my view, require the participation or consent of client A in the relevant sense. Client A may employ practical resistance to the production of the documents by directing the law firm to not provide the documents to client B. However, this does not negate the obligation of the law firm to its former client. That obligation remains enforceable as against the law firm notwithstanding that client A (or any other clients of the firm) may object to production.

152    The circumstances described in this example (which broadly reflects the circumstances in the present case) differ from those in Griffin. Once Mr Griffin had gathered all the documents in his study, he provided the documents to solicitors who acted for him alone. His solicitors did not also act for Mrs Griffin, who engaged separate solicitors. Thus, Mr Griffin’s solicitors owed no obligations to Mrs Griffin. They only ever acted for Mr Griffin and were accordingly entitled to resist production of the documents on their client’s behalf.

153    As for Sadie Ville, although the ultimate outcome in that case (i.e. that resistance to the production of the relevant documents in dispute was unwarranted) aligns with the outcome in the present case in respect of the relevant documents held by NRF, the facts in Sadie Ville provide only an imperfect analogy with the present case. One aspect of differentiation is that the circumstances in which the person holding the relevant documents (Deloitte in Sadie Ville and NRF in the present case) came to possess those documents are clearly different. Relatedly, the obligation of NRF to produce the documents in the present case arises from its duties to a former client; a feature not applicable to Deloitte in Sadie Ville.

154    Notwithstanding these reservations, there is some similarity between Sadie Ville and the present case in that, for the purposes of determining whether a particular order of the Court would undermine a privilege claim, the Court was required to draw a division between parties of a similar class. The relevant class in Sadie Ville were the partners of Deloitte. Some partners of Deloitte (who were directly involved in the engagement with Deloitte’s client) were entitled to resist production of the relevant documents but some partners (who were not directly involved in the engagement) were required to produce the documents. Moshinsky J held that, in doing so, the production of documents did not undermine the privilege claimed by the former partners. In contrast, the Court in the present case is required to draw a division between two clients of a law firm. For the reasons indicated above, my view is that production by one client would not undermine the privilege claimed by another client. This is ultimately because, as expressed by Moshinsky J in Sadie Ville at [117], “it is important to emphasise that the privilege is against self-incrimination (or self-exposure to a penalty)”.

155    For these reasons, the Court is entitled to make an order directing NRF to produce copies of the relevant documents to its former client, OE Solutions. In my view, such an order would not infringe Mr Meneses’ right to his privileges against self-incrimination and self-exposure to penalty.

156    Although such an order is permissible, my ultimate view is that it is undesirable, and unnecessary, in the circumstances of the present case to direct such an order to NRF. Given that the relevant documents are also in the possession of the independent parties, my view is that it is preferable to require those parties to produce the relevant documents to OE Solutions rather than NRF. To do so avoids the potential situation of NRF being compelled by the Court to act inconsistently with the wishes of a current client. It would also enable the independent parties to fulfil the primary purpose for which the documents came into their possession; to preserve the evidence seized from the Aspendale Gardens property pending determination of the merits of any claims of privilege.

Appointment of receiver

157    The Full Court raised the possibility of the appointment by the Court of a receiver over OE Solutions for the purposes of the production of relevant documents on behalf of the company: Full Court Judgment at [153] (see extracted above at [35]). The relevant principles governing such an appointment were summarised above at [77]-[81]. Pursuant to s 57(1) of the FCA Act, the Court may appoint a receiver “in any case in which it appears to the Court to be just or convenient so to do”.

158    Directed filed an interlocutory application seeking the appointment of a receiver over OE Solutions on 19 December 2019 (receivership application). An affidavit of Anthony Brooke Watson, a Partner at K&L Gates, solicitors for Directed, was filed in support of the application.

159    The receivership application seeks the appointment of John Lindholm (Mr Lindholm) of KPMG Australia as receiver and manager of any documents in the control of OE Solutions in accordance with the powers prescribed in the schedule to the receivership application, or such further or other powers as the Court deems fit. The application further addresses the remuneration for the work done by, or on behalf of, Mr Lindholm pursuant to the proposed order of the Court.

160    In the circumstances of the present case, as considered in detail above, my view is that, for the following reasons, it is just and convenient to appoint a receiver to OE Solutions for the purpose of producing the relevant documents.

161    I have found that the documents in Categories P1A, P1B and P2 were within the control of OE Solutions at the relevant time. OE Solutions is therefore required to produce those documents (and the agreed documents in Categories P1C and P1D) for inspection by Directed. OE Solutions is, however, essentially a one-person company. It can only act through its sole director and shareholder, Mr Meneses. Where Mr Meneses is entitled to rely on the privileges to resist production of the documents, the appointment of a receiver enables an independent party to take control of the company for the discrete purpose of producing the relevant documents.

162    The appointment of a receiver to OE Solutions will accordingly protect Mr Meneses from having to participate in any steps that would require him to produce documents that tend to incriminate him or expose him to penalties. Moreover, given the preferable course is to require the independent parties to produce the documents to the receiver, the repository of the documents held by NRF will remain unaffected by any order of the Court.

163    The appointment of a receiver will also overcome any potential delay in the production of documents to Directed. This is important given issues as to privilege have been in dispute for more than two years and that, upon commencement of the trial on 9 December 2019, the docket judge observed that the applicant could not close its case until the merits of Mr Meneses’ resistance to production of the Disputed Documents were determined.

164    My view is that it is appropriate to appoint a receiver over OE Solutions to act as an intermediary between the independent parties and Directed (and other parties to the litigation), rather than direct the independent parties to directly produce the relevant documents to Directed (and those other parties). This approach formally acknowledges that the relevant documents are those in the control of OE Solutions, and that the independent parties are entitled to act on the instructions of OE Solutions.

Scope of receiver’s powers

165    The schedule to the receivership application prescribed the scope of the receiver’s powers as proposed by Directed. As drafted, the schedule contemplated that the receiver would instruct NRF to produce the relevant documents and, upon request, provide copies of the documents. However, as explained, the preferable course is for the relevant documents to be produced by the independent parties, not NRF. The order of the Court will need to address this alternative approach.

Conclusion

166    For the reasons set out above, I propose to order that:

(a)    Mr Lindholm be appointed, on the terms proposed by Directed, as receiver and manager (Receiver) of the documents in Categories P1A, P1B, P1C, P1D and P2 (Producible Documents); and

(b)    the Receiver has the power to instruct the independent parties to:

(i)    produce the Producible Documents for inspection by the parties in this proceeding; and

(ii)    upon request, provide copies of the Producible Documents to the parties in this proceeding.

167    For the purposes of finalising this interlocutory aspect of the proceeding, I direct that:

(a)    within 7 days, Directed and Mr Meneses are to file orders by agreement giving effect to these reasons for judgment or, if no agreement is reached, written submissions (of no more than five pages) as to the form of final relief to be ordered; and

(b)    within 14 days, Directed and Mr Meneses file and serve written submissions (of no more than ten pages) on costs. These submissions should address (amongst any other relevant matter) the costs of the application before the primary judge, which were reserved for my determination by the Full Court: Full Court Costs Judgment at [7]-[8].

Associate:

Dated:        7 February 2020

SCHEDULE OF PARTIES