FEDERAL COURT OF AUSTRALIA

Spotlight Pty Ltd v Mehta [2020] FCA 1422

ORDERS

THE COURT ORDERS THAT:

1.    The claims of penalty privilege asserted by the first and second respondents be dismissed.

2.    The claims of privilege against self-incrimination by the first and second respondents be upheld in respect of producing documents that are listed in Part 2 of each of their current existing discovery lists of documents (filed 30 July 2020 and 4 September 2020 respectively) such that neither be required to produce those documents.

3.    The claims of privilege against self-incrimination by the first and second respondents be upheld in respect of listing documents in Part 3 of their discovery lists of documents, such that neither be required to describe documents that would otherwise be required to be listed and their current whereabouts explained in accordance with r 20.17 of the Federal Court Rules 2011 (Cth).

4.    The costs of and incidental to the privilege adjudication to which this judgment relates be costs in the cause.

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

REASONS FOR JUDGMENT

BROMWICH J:

1    This is an adjudication of privilege claims based on self-incrimination and penalty privilege by two of the four respondents in this matter. The first respondent is Mr Anuj Mehta and the second respondent is Mr Vivian D’Lima. For convenience, Mr Mehta and Mr D’Lima, when identified collectively, will be referred to in these reasons as the respondents, despite there being additional respondents to the substantive proceeding. The applicant is Spotlight Pty Ltd, who opposes anything less than full compliance with the standard discovery order that was made by the docket judge, Justice O’Callaghan, on 19 June 2020. The substantive proceeding is listed for trial to commence on 30 November 2020. The respondents seek to be exempt from their discovery obligations in the substantive proceeding as a result of the privilege claimed.

Key events in the substantive proceeding leading to this adjudication

2    The relevant discovery order was made on 19 June 2020. The sequence of events following the making of that order and leading to the current adjudication is as follows. This timeline is in part derived by July 2020 correspondence between the parties, provided openly to the docket judge:

(1)    On 17 July 2020, the solicitors for Mr D’Lima wrote to the solicitors for Spotlight, advising that he had no documents to discover;

(2)    On the same day, 17 July 2020, the solicitors for Spotlight responded to that letter, referring to r 20.16 of the Federal Court Rules 2011 (Cth) and order 1 of the discovery orders made on 19 June 2020 and then made the following observations:

At the previous directions hearing on 19 June 2020, you sought an order that only the applicant provide discovery for the reason that your client did not intend to produce any documents, apparently on the basis that your client intended to rely upon the privilege against self-incrimination. You will recall the view expressed by his Honour, namely that the orthodox position is for the discovery order to be made in respect of all parties. Any party seeking to claim privilege from production is then entitled to assert that privilege at the time of making discovery, in accordance with the Rules.

Despite his Honour’s remarks, you have made no attempt to set out the documents in your client’s control for which privilege from production is claimed and the grounds of the privilege. Instead, you simply state that your client has no documents to discover. No doubt your client has numerous documents in his control that are directly relevant to the issues raised in the pleadings, and of which he is aware. These would include, for instance, your client’s bank statements recording the payments he received from Mr Duncan Vincent, emails and text messages between your client and Mr Vincent and Mr Anuj Mehta regarding their fraudulent scheme, documents created for the purpose of your client’s regular meetings with Mr Vincent and Mr Mehta to determine the amount of their secret commissions, and text messages between your client and Peter Elliott from CH Pallets Pty Ltd regarding the sale of Spotlight’s pallets for cash. Doubtless there are further documents in your client’s control that would fall within the scope of rule 20.14. It is incumbent on him to list those documents. A failure to do so is a breach of a court order, a matter which he should take very seriously. It is entirely inadequate simply to state that your client has no documents to discover by correspondence.

Accordingly, we require your client to provide a list of documents in accordance with the Rules by no later than 4:00pm on Tuesday, 21 July 2020. If we do not receive your client’s discovery in accordance with the Rules, we will have the matter listed before his Honour.

(3)    On 21 July 2020, Mr D’Lima swore a discovery affidavit with an accompanying list of documents (subsequently filed on 4 September 2020);

(4)    On 21 July 2020, the solicitors for Spotlight wrote to the solicitors for Mr D’Lima, asserting that his list of documents still failed to comply with the Rules and pressing for compliance by 23 July 2020. That correspondence included the following:

Regrettably, your client’s list of documents still fails to comply with the Rules. It suggests that your client has no documents in his control, other than certain bank statements (over which he claims privilege from production). The list of documents fails to list, for instance, any emails or text messages between your client and Mr Vincent and Mr Anuj Mehta regarding their fraudulent scheme, documents created for the purpose of your client’s regular meetings with Mr Vincent and Mr Mehta to determine the amount of their secret commissions, or invoices issued by your client to the Vincent Group Pty Ltd in respect of those commissions. We know that such documents exist, given we already have several of them. Please confirm whether your client now claims not to have any such documents in his control, given section 254 of the Crimes Act 1958 (Vic).

Further, and in any event, rule 20.17 of the Rules provides that the list of documents must describe “each document that has been, but is no longer in the party’s control, a statement of when the document was last in the party’s control and what became of it” (such documents to be listed in part 3 of the list of documents). If your client now claims to have no documents falling within the scope of rule 20.14 of the Rules in his control, then it follows in light of what is said above that there must be such documents that have been, but are no longer, in his control. Notwithstanding, your client’s list of documents does not include a part 3.

(5)    On 23 July 2020, the solicitors for Mr D’Lima responded, asserting that he had made discovery according to law. The letter stated that the listed documents furnished did not include disclosure of the description of documents, or category of documents, that had been but were no longer in his control because they could have a real tendency to expose him to the imposition of a civil penalty or conviction for a crime. Further, it was asserted that such documents could be used as a basis for investigation, or further investigation, by a regulator or prosecutor. Mr D’Lima’s solicitors therefore claimed privilege against self-incrimination and penalty privilege citing authorities that are among those discussed below;

(6)    On 27 July 2020, Mr Mehta swore an affidavit with an amended list of documents (subsequently filed in the Court on 12 August 2020), as detailed below.

(7)    On 27 July 2020, the solicitors for Spotlight wrote a single letter addressed to each respondent’s solicitors, referring to the discovery orders made on 19 June 2020, the lists of documents dated 21 July 2020 (by Mr D’Lima) and 27 July 2020 (by Mr Mehta), and again referring to the docket judge’s approach as described in their 17 July 2020 letter reproduced at [2(2)] above.

(8)    On 28 July 2020, Mr D’Lima’s solicitors wrote to Spotlight’s solicitors, asserting that their earlier letter dated 23 July 2020 clearly set out the basis for why he had made discovery according to law, referring to relevant authorities and demanding that they be provided with the relevant authorities for the contrary propositions contended.

(9)    On 3 August 2020, the docket judge ordered that any respondent who objects to, or seeks dispensation from, compliance with r 20.17(2)(b) of the Rules on the grounds of privilege:

(a)    prepare an affidavit setting out, with reference to each document or category of documents, the grounds of objection (privilege objection affidavit) and furnish it to his Honour’s chambers in a sealed envelope; and

(b)    file and serve on each other party any written submissions they wish to rely upon in support of their objections.

His Honour also ordered that:

(c)    Spotlight file and serve any material, including any written submissions, upon which it intends to rely in answer to any objections notified by a privilege objection affidavit and any supporting submissions; and

(d)    any application in relation to any such objections be heard and determined by another judge on a date not before 21 August 2020.

3    Privilege objection affidavits were sworn by both Mr D’Lima and Mr Mehta and submissions furnished on behalf of each of them. Those affidavits and submissions go beyond seeking dispensation from compliance with r 20.17(2)(b) of the Rules and extend to seeking dispensation from compliance with producing documents already listed. Spotlight also furnished submissions in opposition, necessarily without seeing either privilege objection affidavit. Spotlight and the respondents sought to have that adjudication carried out on the papers.

The material before the Court

4    I have before me the privilege objection affidavits from each of the respondents, the written submissions for them and for Spotlight, and the following other documents filed in the substantive proceeding:

(1)    the amended originating application;

(2)    the amended statement of claim;

(3)    each respondent’s defence to that amended statement of claim;

(4)    each respondent’s discovery list of documents verified by affidavit, sworn and furnished in response to the order for standard discovery; and

(5)    the July 2020 correspondence between the parties’ solicitors referred to above.

Background facts and pleaded allegations

5    Noting that I am not required to adjudicate in relation to any disputed allegation or related factual issue, the following relevant background facts or allegations emerge from the originating application and statement of claim, aided by reference to the respondents’ defences:

(1)    Spotlight is a fabric, craft, party and home interiors retailer with approximately 130 stores across Australia, New Zealand and Asia;

(2)    Mr Mehta was employed by Spotlight as an inventory and warehouse manager at a distribution centre;

(3)    Mr D’Lima was a team leader at the same distribution centre;

(4)    a company called Dreamality International Pty Ltd was a provider of printing, courier, logistical and storage services to Spotlight;

(5)    a company called Vincent Group Pty Ltd, trading under the business name “The Print & Courier Co”, was a product provider of printing, courier, logistical and storage services to Spotlight;

(6)    Spotlight alleges that Mr Duncan Vincent is the sole shareholder and director of both Vincent Group and Dreamality, and the brother-in-law of Mr D’Lima;

(7)    Spotlight further alleges that in the period from about July 2014 to about October 2019, Mr Mehta and Mr D’Lima were parties to a dishonest and fraudulent scheme with Mr Vincent whereby they obtained unauthorised payments in breach of employment, fiduciary and statutory obligations. It is pleaded that:

(a)    Mr Vincent made payments to each of Mr Mehta and Mr D’Lima, or their nominated beneficiaries, based on the value of invoices issued by Dreamality and/or the Vincent Group to Spotlight.

(b)    Mr D’Lima and/or Mr Mehta instructed Mr Vincent to apply “top ups” to certain invoices issued to Spotlight by Dreamality and/or the Vincent Group with the effect that those invoices included charges for services which had not been incurred or performed.

(c)    Mr Vincent paid each of Mr D’Lima and Mr Mehta, and they received, without the knowledge or consent of Spotlight, the amount of the “top ups” charged to Spotlight, less a 10% or 20% handling charge which was retained by Dreamality or, from January 2016, by the Vincent Group, with the alleged payments being particularised in annexures to the statement of claim (including bank account details), totalling:

(i)    almost $1.7 million in the period from about July 2014 to about October 2019 in the case of Mr D’Lima; and

(ii)    just over $1.7 million in the period from about November 2014 to about October 2019 in the case of Mr Mehta.

(d)    by reason of the above conduct, the respondents breached fiduciary duties, and contravened s 182 of the Corporations Act 2001 (Cth), particularly s 182(1), by improperly using their positions to gain an advantage for themselves or someone else or to cause a detriment to Spotlight, or knowingly or recklessly assisted in or were accessories to such contraventions. (Certain alternative and lesser characterisations are also pleaded, which do not need to be referred to.)

(8)    Spotlight further pleads allegations of:

(a)    other kinds of behaviour by Mr D’Lima also involving Mr Vincent concerning the hire of earthmoving equipment for private use by another respondent, but paid for by Spotlight, which are also alleged to be contraventions of s 182 of the Corporations Act and would be, if that conduct was made out, fraudulent;

(b)    the sale of pallets for cash by Mr D’Lima, which is also alleged to be a contravention of s 182 of the Corporations Act;

(c)    Mr Mehta conducting his own private business at the distribution centre without the knowledge or consent of Spotlight; and

(d)    Mr D’Lima failing to work the full-time hours provided by his contract of employment by only working a much shorter day.

(9)    Spotlight seeks:

(a)    declarations that:

(i)    Mr Mehta and Mr D’Lima hold unauthorised payments made to either of them or to the other and any traceable proceeds on constructive trust for it;

(ii)    Mr D’Lima holds the payments from the sale of pallets and any traceable proceeds on constructive trust for it;

(b)    an account of profits from Mr Mehta and Mr D’Lima;

(c)    equitable compensation from the respondents, including the additional respondents to the substantive proceeding;

(d)    compensation pursuant to s 1317H of the Corporations Act from the respondents, including the additional respondents to the substantive proceeding;

(e)    damages from the respondents, including the additional respondents to the substantive proceeding;

(f)    compound interest, or alternatively simple interest;

(g)    costs; and

(h)    such further or other orders as the Court sees fit.

6    It is important to note that Spotlight does not sue for any civil penalties, or even for exemplary damages. Given that the trial is to take place on 30 November 2020, I proceed upon the basis that this is now most unlikely to change. No suggestion is made to the contrary. Nor is there any evidence or suggestion of any extant other proceedings by which criminal or civil penalty sanctions are sought. Accordingly, all of the objections that are the subject of this adjudication concern what might happen outside of this litigation, including in a proceeding that does not presently exist, but might conceivably be commenced, be it:

(1)    civil penalty proceedings brought by a regulator, relevantly the Australian Securities and Investments Commission (ASIC); or

(2)    criminal proceedings, relevantly, it would seem, by the Victoria Police via the Office of the Director of Public Prosecutions for Victoria (ODPP), or possibly investigation by ASIC and prosecution by the Office of the Commonwealth Director of Public Prosecutions (CDPP), which sometimes takes place in relation to State offences that have affected a corporation, as well as federal offences (of which none are suggested).

Discovery thus far and objections to further discovery or production as part of discovery

7    The verified discovery lists for each of the two respondents are in a familiar form, having three parts:

(1)    Part 1 is for documents in their control for which no privilege claim is made;

(2)    Part 2 is for documents in their control for which privilege from production is claimed; and

(3)    Part 3 is for documents that had been, but are no longer in their control, for which objection it taken to listing the documents as otherwise required by r 20.17(2)(b).

8    In relation to Mr Mehta, in the affidavit verifying his discovery list he deposes to the basis for claiming privilege from production of documents listed in Part 2, and from listing other documents in Part 3, as part of his discovery obligations (some phrases inserted for clarity):

[2]    I have made reasonable enquiries as to the existence and location of the documents specified in the [standard discovery] order.

[3]    To the best of my knowledge, information and belief, there are no documents specified in the [standard discovery] order that are or have been in my control, other than the documents specified in this list of documents.

[4]    The documents set out in Part 1 are in my control and I do not claim privilege from production for any of these documents.

[5]    The documents set out in Part 2 are in my control but I claim privilege from production of each of these documents on the ground that to do so may tend to incriminate me and/or expose me to liability for a penalty.

[6]    I have had, but no longer have, in my possession, custody or power, the documents enumerated in Part 3 which are required to be discovered.

[7]    Documents referred to in Part 3, was last in my possession, custody or power until 11 October 2019 when employment was terminated by the Applicant and I believe that my access to the documents was removed from that time onwards.

[8]    I otherwise refuse to identify any documents specified in the [standard discovery] order that are in my control or have been but are no longer in my control because to do so may tend to incriminate me and/or expose me to liability for a penalty.

9    An Amended List of Documents, sworn on 27 July 2020, was subsequently filed by Mr Mehta on 12 August 2020. The affidavit verifying this amended discovery list was made in exactly the same terms as the first list affidavit. The list itself was amended to include an additional category of documents under Part 2.

10    Mr Mehta’s list as amended following the body of his affidavit then describes the following (additional category underlined in original):

Part 1 – Documents in the control of First Respondent

Part 2 – Documents in the control of First Respondent for which privilege from production is claimed

Part 3- Document that has been, but is no longer in the First Respondent’s control

11    In addition to what was set out in the letter from his solicitors dated 23 July 2020, Mr D’Lima deposes in the affidavit verifying his discovery list in much the same way, but not identically to, Mr Mehta (some phrases inserted for clarity):

[2]    I have made reasonable enquiries as to the existence and location of the documents specified in the [standard discovery] order.

[3]    To the best of my knowledge, information and belief, there are no documents specified in the [standard discovery] order that are or have been in my control, other than the documents specified in this list of documents.

[4]    The documents set out in part 1 are in my control and I do not claim privilege from production for any of these documents.

[5]    The documents set out in part 2 are in my control but I claim privilege from production of each of these documents on the ground that to do so may tend to incriminate me [and/or expose me] to liability for a penalty.

[6]    I am unable to identify any documents specified in the [standard discovery] order that have been but are no longer in my control because to do so may tend to incriminate me and/or expose me to liability for a penalty.

12    Mr D’Lima’s list following the body of his affidavit then describes the following, noting that he provides no information in relation to Part 3 beyond his affidavit reproduced above:

Part 1 - Documents in the control of Second Respondent

Part 2 – Documents in the control of Second Respondent for which privilege from production is claimed

13    Mr Mehta and Mr D’Lima therefore:

(1)    do not identify any documents over which privilege is not claimed;

(2)    object to producing documents already listed in Part 2 of their existing discovery lists on the basis that to do so may tend to incriminate them or expose them to liability for a penalty;

(3)    object to including a category of documents in Part 3, on the same grounds, and seek dispensation from complying with r 20.17(2)(b) of the Rules, which provides that the discovery list must describe “each document that has been, but is no longer in the party’s control a statement when the document was last in the party’s control and what became of it”;

(4)    object to producing communications with legal advisors for which legal professional privilege is asserted and not challenged.

14    Mr Mehta additionally:

(1)    identifies bank statements for accounts that have already been identified by him in a November 2019 affidavit listing assets and liabilities, and resisting production of those statements upon the ground that they may tend to incriminate him or expose him to liability for a penalty;

(2)    identifies email communications between himself, Mr D’Lima and another respondent, resisting production of those emails upon the ground that they may tend to incriminate him or expose him to liability for a penalty;

(3)    identifies the type of Part 3 documents as being emails and other written communications on Spotlight’s servers, sent and received during employment with Spotlight; and

(4)    relies on his confidential privilege objection affidavit in support of his objections.

15    The structure of the submissions on the objections is that Mr D’Lima addresses the legal principles which he relies upon and which Mr Mehta adopts, as addressed in more detail below. They then each develop their own arguments on that foundation. Spotlight notes that it is in the “invidious position” of having to make submissions without seeing the respondents’ confidential privilege objection affidavits. However, on the basis of the material that it does have access to, it does not accept that the respondents can invoke the privilege against self-incrimination to avoid:

(1)    making discovery of the bank statements in their possession; or

(2)    describing what has happened to documents no longer in their possession, whether specifically or by way of categories, as required by r 20.17(2)(b), or otherwise.

Legal principles

16    Rule 20.02 of the Rules provides that “an order made under this part does not require the person against whom the order is made to produce any document that is privileged”. The most common form of privilege, legal professional privilege and its statutory incarnation, client legal privilege, attaches to communications and only thereby to the document insofar as it forms part of such a communication.

17    There is a difference between a document the communication of which is inherently privileged and a document which is privileged because it has been communicated in a certain manner. This explains why, for example, access to an original document may be allowed, but access to a copy prohibited by reason of privilege. This was the central issue determined by the High Court in Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; see also The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; 213 CLR 543 at [9]-[10]; Cantor v Audi Australia Pty Ltd [2016] FCA 1391 at [63]. Thus to speak of a document being privileged may obscure the real issue to be addressed, namely, whether the production of a communication manifested by describing or producing a document pursuant to the standard discovery order, or flowing from that order, can be resisted upon the basis of privilege. The precise nature of the protection from compliance with discovery obligations afforded by a claim of privilege against self-incrimination and/or a claim of penalty privilege is an issue raised by this adjudication. A further related issue is how the respondents discharge their onus to make good their privilege claim.

18    It is worth noting at the outset that penalty privilege came into existence through discovery in equity proceedings in England. As the High Court pointed out in Daniels at [13] (omitting footnotes):

Before turning to the reasoning which led to the decision in [Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328], it is convenient to say something as to the nature of the privilege against exposure to penalties and its treatment in that case. That privilege is one of a trilogy of privileges that bear some similarity with the privilege against incrimination. The other two are the privilege against exposure to forfeiture and the privilege against exposure to ecclesiastical censure. The privilege against exposure to penalties and that against exposure to forfeiture had their origins in the rules of equity relating to discovery, but it is clear, as noted by Mason A-CJ, Wilson and Dawson JJ in Pyneboard, that the privilege against exposure to penalties has long been recognised by the common law and is no longer simply a rule of equity relating to discovery.

19    It should be noted that very little of the reasoning in Pyneboard concerning penalty privilege survives after Daniels: see the analysis in Migration Agents Registration Authority v Frugtniet [2018] FCAFC 5; 259 FCR 219, especially at [37]. Frugtniet considered at some length the distinction between privilege against self-incrimination and penalty privilege.

20    In Meneses v Directed Electronics OE Pty Ltd [2019] FCAFC 190; 373 ALR 624; 140 ACSR 340 the following pertinent observations were made based on long-standing authority:

(1)    at [85], privilege 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 person to whom the question or requirement to produce is directed to a criminal charge, and while it may be abridged by statute or waived, it is otherwise without real exception, citing and quoting Reid v Howard (1995) 184 CLR 1 at 14;

(2)    at [86], in relation to privilege against self-incrimination:

The privilege against self-incrimination protects an individual not only from self-incrimination directly under a compulsory process, but also from making a disclosure that may lead to incrimination or to the discovery of real evidence of an incriminating character: [Sorby v Commonwealth (1983) 152 CLR 281; 46 ALR 237; 57 ALJR 248] at CLR 310; ALR 259 per Mason, Wilson and Dawson JJ. Thus, the risk of exposure to criminal sanctions may be indirect: Reid v Howard at CLR 7; ALR 612 per Deane J.

(3)    at [87]:

… The penalty privilege may be invoked in judicial proceedings to resist a requirement that a defence be filed that complies with the rules of pleading, to resist an order for the filing of witness statements, to resist answering interrogatories, and to resist the production of documents by way of discovery, or in response to a notice to produce or subpoena.

21    As noted above, Spotlight does not sue for any civil penalties, or for exemplary damages. That is important, because, as was pointed out by the Full Court in Frugtniet (at [51]):

… The two privileges, by reason of their very different origins, are relevantly distinguishable. The privilege against self-incrimination applies in all settings in which it properly arises, unless excluded in accordance with the principle of legality by application of the rule in Potter v Minahan [(1908) 7 CLR 277], expressed in its modern form in Daniels at [11]. Penalty privilege ordinarily applies only in a curial setting to protect a party from having to assist in the process of seeking to have a penalty imposed upon them, but may be found to have a broader application as a matter of statutory construction, including by reference to curial features of an otherwise non-curial setting.

22    Penalty privilege is not a substantive rule of law, ordinarily being confined to the civil penalty litigation in which it arises. It serves the primary purpose of ensuring that those who bring a case seeking penalty sanctions prove it without the court-ordered assistance of the person against whom it is brought: Frugtniet at [38]-[39], citing and quoting Daniels at [31]; see also Rich v Australian Securities & Investments Commission [2004] HCA 42; 220 CLR 129 at [24]-[25]. The Full Court in Frugtniet noted at [42] that:

the first question posed in Rich was whether the proceedings in which the privilege was asserted exposed the appellants to penalties or forfeitures being imposed by a court, a question that required a focus on the relief that was being sought against the person making the penalty privilege claim.

23    Thus penalty privilege is not available to preclude compliance by the respondents with discovery obligations, either as to describing documents, or producing them for inspection, merely because that might assist Spotlight in proving the (non-civil penalty-related) allegations made against them in the substantive proceeding. They must prove a sufficient risk of exposure to a penalty in other proceedings that do not yet exist, and may never exist.

24    There is limited scope to claim penalty privilege outside of the litigation in which an obligation of communication or production is otherwise imposed, and the onus imposed on the person claiming the privilege is more exacting. In Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (A Firm) (No 3) [2018] FCA 1107; 357 ALR 695, Moshinsky J observed:

[97]    As a general rule, in the absence of exceptional circumstances, a party to non-penalty civil proceedings is not to be excused in limine from giving discovery, but should instead be left to object to producing particular documents on the grounds that such production might tend to expose him or her to criminal liability or a civil penalty: Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1979) 42 FLR 204 at 208, 210–11; QC Resource Investments Pty Ltd (in liq) v Mulligan [2016] FCA 813 at [19].

[98]    The gist of the privileges is that the giving of answers or the production of documents would tend to expose the claimant to the apprehended consequence: Cross on Evidence at [25100].

[99]    In the context of the privilege against self-incrimination, a valid claim for the privilege can be made out if the claimant can establish that the act of providing information or documents would give rise to a “real and appreciable” risk of prosecution: Rio Tinto Zinc Corporation v Westinghouse Electric Corporation [1978] AC 547 at 574; [1978] 1 All ER 434 at 457; Rank Film Distributors Ltd v Video Information Centre [1982] AC 380 at 392; [1981] 2 All ER 76; Sorby v Commonwealth (1983) 152 CLR 281 at 290; 46 ALR 237 at 242 (Sorby); Microsoft at [40]. By parity of reasoning, a valid claim for the privilege against exposure to penalties can be made out if the claimant can establish that providing the information or documents would give rise to a “real and appreciable” risk of institution of proceedings for a civil penalty. I note that in Mining Projects, Finkelstein J stated at [10] that in civil actions where no claim for a penalty is made, the defendant must show that providing the information requested “would tend to subject him to a penalty” in separate proceedings, before he or she can rely on the privilege. I do not consider this formulation to be substantively different.

25    The above reasoning was not challenged on appeal: see Deloitte Touche Tohmatsu (A Firm) v Sadie Ville Pty Ltd (As Trustee for Sadie Ville Superannuation Fund) [2020] FCAFC 23; 144 ACSR 1 at [6]. Further, that appeal failed in relation to the finding by Moshinsky J that the necessary risk as to self-incrimination or penalty privilege had not been proven.

26    In Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1979) 42 FLR 204 (referred to the passage from Sadie Ville at [97] reproduced above), Deane J, as a member of this Court, quoted extensively from authority which tightly constrained a claim of penalty privilege in cases which did not themselves seek the imposition of such a penalty. His Honour said of that class of case (at 212):

… In my view, the only circumstances which would warrant a departure in the present case from the ordinary approach that a party should be left to object to production of particular documents or to answering particular interrogatories would be that it appeared that the actual discovery, as distinct from production for inspection, of documents or the actual order for interrogatories would tend to expose the party ordered to make discovery or answer interrogatories to liability to a penalty. Notwithstanding the argument to the contrary advanced on behalf of the respondents, I am unable to see that either an order for discovery or an order for interrogatories would, in the present case, in itself have or be directly productive of that effect. In those circumstances, I consider the ordinary approach should apply and the respondents should be left to object to producing particular documents or answering particular interrogatories.

I should, perhaps, add that if, in relation to any particular document of which discovery is required by a respondent, the view is taken that to describe it by reference to its nature or contents would tend to render that respondent liable to a penalty, that circumstance in itself would justify less precision in the description of the document than would otherwise be appropriate. In circumstances where lack of precision of description would not, in the view of the particular respondent, suffice to avoid a tendency to expose to a penalty, an application to modify the order for discovery could of course be made to the court.

27    The above passages from Refrigerated Express are of direct relevance to the objection taken by the respondents to discovering documents by producing them as described in Part 2, or by describing them in Part 3, as opposed to producing them. Those passages also have a material bearing on the sufficiency of the evidence each respondent adduces in support of the penalty privilege aspect of their objections.

28    In QC Resource Investments Pty Ltd (In Liq) v Mulligan [2016] FCA 813, Edelman J, as a member of this Court, refused a global claim of privilege against pleading to 92 paragraphs of a statement of claim in non-civil penalty proceedings by reason of “making a sweeping claim alleging that if he were required to plead to those paragraphs then he might be exposed to a penalty in other, unspecified litigation which has not been threatened or commenced”, applying Refrigerated Express. In giving the respondent, Mr Mulligan, a further opportunity to consider his position, and in directing the parties to confer with a view to reaching as much agreement as possible, his Honour observed (at [44]):

There are other matters which counsel for the parties might consider prior to conferral. One of those is whether confidentiality orders, and related orders, under the Federal Court of Australia Act 1976 (Cth) ss 37AF, 37AI, and Federal Court Rules 2011 (Cth) rr 1.32, 2.32(1)(a) and 20.03 might ameliorate the possibility of any exposure to a penalty. At this hearing, Mr Mulligan’s response was that he maintained, effectively, a blanket application for privilege as a basis for dispensation from the rules of court for all 92 paragraphs. Of course, if and to the extent that that privilege was proved, he could not be compelled to waive it: Reid v Howard [1995] HCA 40; (1995) 184 CLR 1, 17 (Toohey, Gaudron, McHugh and Gummow JJ). But there will be cases where a respondent seeks orders to protect his rights and ensure an efficient hearing, rather than to contest in detail whether he should be required to raise substantive factual matters of defence which he might seek to raise in any event at trial.

29    In Sadie Ville at [99] reproduced above, Moshinsky J described the applicable test for a successful claim of privilege against self-incrimination as being a “real and appreciable risk” of prosecution. His Honour applied the same test by parity of reasoning to a claim of penalty privilege. The case of Rio Tinto Zinc Corporation v Westinghouse Electric Corporation [1978] AC 547 at 574 referred to by his Honour is not a reference to the House of Lords decision in that report, but rather to the second of two English Court of Appeal decisions that were the subject of appeals to the House of Lords. That second decision of the Court of Appeal was affirmed, with the appeal challenge being on a different issue to the test of a “real and appreciable risk”. However as part of that reasoning, disposing of a cross-appeal, Viscount Dilhorne, at 627-8, expressly endorsed the passage from the judgment of Lord Denning MR at 574 cited by Moshinsky J in the passage from Sadie Ville at [99] reproduced above. It is worth reproducing the words of Lord Denning MR on this topic at 574:

… once it appears that a witness is a risk, then “great latitude should be allowed to him in judging for himself the effect of any particular question”: see Reg v Boyes (1861) 1 B&S 311, 330. It may only be one link in the chain, or only corroborative of existing material, but still he is not bound to answer if he believes on reasonable grounds that it could be used against him. It is not necessary for him to show that proceedings are likely to be taken against him, or would probably be taken against him. It may be improbable that they will be taken, but nevertheless, if there is some risk of their being taken – a real and appreciable risk – as distinct from a remote or insubstantial risk, then he should not be made to answer or to disclose the documents. …

And in the Australian case of Brebner v Perry [1961] SASR 177, where he had already given a like statement to the police – and by giving evidence there was no increase in risk by his being made to answer – he was made to answer. But where there is a real and appreciable risk – or an increase of an existing risk – then his objection should be upheld.

30    Viscount Dilhorne was the only Law Lord in Rio Tinto Zinc to refer directly to the test identified by Lord Denning MR, at 628:

Lord Denning contrasted a real and appreciable risk with a remote or insubstantial one, and once it appears that the risk is not fanciful, then it follows that it is real. If it is real, then there must be a reasonable ground to apprehend danger, and, if there is, great latitude is to be allowed to the witness and to a person required to produce documents.

If the appellant companies are compelled to produce the documents which they were asked to produce, I cannot reach the conclusion that it would be fanciful to suppose that that would expose them to no greater risk than at present of proceedings for the recovery of a penalty being brought against them. The documents might well authenticate and support the information now in the hands of the [European] Commission. They might afford conclusive proof of a breach of article 85 and, when in possession of such evidence, the [European] Commission might decide to take action.

In my opinion the decision of the Court of Appeal was right on this and it follows that the respondents’ cross-appeal should be dismissed.

31    The respondents suggest a lower threshold than a “real and appreciable risk”, by relying upon an observation of Shaw LJ in Rio Tinto Zinc in a single page supporting judgment at 581, which includes the sentence:

[t]he precise measure or degree of the risk to the witness is something which the court is not called upon to assess so long as there is a degree of risk which cannot be dismissed as tenuous or illusory or so improbable as to be virtually without substance.

32    There are two problems with this attempt to lower the threshold. First, further down the same page, Shaw LJ referred to there needing to be an “appreciable chance” that the peril exists, which is much closer to the test of “real and appreciable risk” identified by Lord Denning MR at 574. Secondly, a test of only not being “tenuous or illusory or so improbable as to be virtually without substance” is not a test that has been adopted in any other case that the respondents have identified. Rather, Lord Denning’s formulation has stood the test of time, described as a principle by Gibbs CJ in Sorby at 290, and deployed at 292, a deployment that was quoted with approval by Deane J in Reid v Howard at 6.

33    The respondents also rely upon the observation by Moshinsky J in Sadie Ville at [102] that in some cases the pleading itself has provided a “basis upon which to infer that the act of providing information or documents would give rise to a real and appreciable risk of criminal prosecution”, citing a number of authorities. That provides a further tool by which to evaluate the nature and extent of the risk identified in the confidential affidavit evidence. So too does the question of whether complying with the standard discovery obligations in full will add to any jeopardy that the respondents already face, without which the claim is likely to fail: Microsoft Corporation v CX Computer Pty Ltd [2002] FCA 3; 116 FCR 372 at [41]; see also Gemmell v Le Roi Homestyle Cookies Pty Ltd [2014] VSCA 182; 46 VR 583 at [112], applied in Citation Resources Ltd v Landau [2016] FCA 1114; 116 ACSR 410 at [29].

Relevant criminal offence and civil penalty provisions

34    The following provisions appear to be a possible source of the peril that the respondents might face if the privileges they assert are not upheld, as referred to in the correspondence summarised and partially reproduced above, and in the pleadings:

(1)    secret commission offences under s 176 of the Crimes Act 1958 (Vic), which provide:

176    Receipt or solicitation of secret commission by an agent an indictable offence

(1)    Whosoever being an agent corruptly receives or solicits from any person for himself or for any other person any valuable consideration—

(a)    as an inducement or reward for or otherwise on account of doing or forbearing to do or having done or forborne to do any act in relation to his principal’s affairs or business; or

(b)    the receipt or any expectation of which would in any way tend to influence him to show or to forbear to show favour or disfavour to any person in relation to his principal’s affairs or business; or

(2)    Whosoever corruptly gives or offers to any agent any valuable consideration—

(a)    as an inducement or reward for or otherwise on account of doing or forbearing to do or having done or forborne to do any act in relation to his principal’s affairs or business; or

(b)    the receipt or any expectation of which would in any way tend to influence him to show or to forbear to show favour or disfavour to any person in relation to his principal’s affairs or business—

shall be guilty of an indictable offence, and shall—

be liable if a corporation to a level 5 fine and if any other person to level 5 imprisonment (10 years maximum) or a level 5 fine or both.

(2)    destruction of evidence offences under s 254 of the Crimes Act, which provide:

254    Destruction of evidence

    (1)    A person who—

(a)    knows that a document or other thing of any kind is, or is reasonably likely to be, required in evidence in a legal proceeding; and

   (b)    either—

(i)    destroys or conceals it or renders it illegible, undecipherable or incapable of identification; or

(ii)    expressly, tacitly or impliedly authorises or permits another person to destroy or conceal it or render it illegible, undecipherable or incapable of identification and that other person does so; and

(c)    acts as described in paragraph (b) with the intention of preventing it from being used in evidence in a legal proceeding—

is guilty of an indictable offence and liable to level 6 imprisonment (5 years maximum) or a level 6 fine or both.

Notes

      1    Document is defined in the Evidence Act 2008.

2    The maximum fine that may be imposed on a body corporate found guilty of an offence against this section is 3000 penalty units: see Sentencing Act 1991 s. 113D.

(2)    This section applies with respect to a legal proceeding, whether the proceeding is one that is in progress or is to be, or may be, commenced in the future.

   (3)    s 182 of the Corporations Act, which is a civil penalty provision per s 1317E, and provides:

182    Use of position—civil obligations

Use of position—directors, other officers and employees

(1)    A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a)    gain an advantage for themselves or someone else; or

(b)    cause detriment to the corporation.

    Note:    This subsection is a civil penalty provision (see section 1317E).

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

    Note 1:    Section 79 defines involved.

    Note 2:    This subsection is a civil penalty provision (see section 1317E).

Mr Mehta’s open argument

35    The substance of Mr Mehta’s case is:

(1)    He has deposed to the facts that form the basis of his claim for privilege against self-incrimination and the penalty privilege in his confidential affidavit. These facts are provided in support of seeking dispensation from this Court from providing documents listed in Part 2 over which he claims privilege, and dispensation from complying with r 20.17(2)(b).

(2)    He has deposed to sufficient facts that establish a “real and appreciable risk” of prosecution, including the prospect of prosecution if he complies with r 20.17(2)(b) by listing a category of documents in Part 3 and being required to explain why those documents are no longer in his possession or control.

(3)    Spotlight has alleged that he, as part of his employment, was a party to a “dishonest and fraudulent scheme”, including the allegation that he received unauthorised payments pursuant to the alleged scheme and that the scheme was a furtherance of a fraudulent and dishonest design.

(4)    Blatant criminality is asserted in the language of the allegations levelled against him in the statement of claim, which, if proved, would doubtlessly expose him to criminal prosecution and civil penalty.

(5)    For the privilege to apply, it is not necessary that he be guilty of an offence for which he would be convicted if compelled to comply with discovery. Rather, it is sufficient that to so comply may contribute to an action brought against him: citing Lamb v Munster (1882) 10 QBD 110, at 111 per Field J and 113 per Stephen J; Lamb v Munster at 111, quoted (via Sorby at 288 per Gibbs CJ) with approval in Reid v Howard at 12 (per Toohey, Gaudron, McHugh and Gummow JJ) where their Honours stated that privilege against self-incrimination:

operates so that a person cannot be compelled “to answer any question, or to produce any document or thing, if to do so ‘may tend to bring [them] into the peril and possibility of being convicted as a criminal’”.

Mr D’Lima’s open argument

36    The substance of Mr D’Lima’s case is that he is in obvious peril of criminal prosecution in respect of the secret commission payments he is alleged in this proceeding to have obtained, obtaining such payments being an offence under s 254 of the Crimes Act. I treat Mr D’Lima as adopting, to the extent relevant, the more detailed submissions advanced by Mr Mehta summarised above, and in particular, as relying upon the allegations made against him in the statement of claim.

37    Mr D’Lima submits that the substantive proceeding is aimed at proving that he engaged in conduct which would establish, or go a long way toward establishing, that he had also committed criminal acts and acts that would expose him to a civil penalty, which is plain on the face of the pleadings. He submits that his confidential affidavit, together with the nature of the claims made against him on the face of the pleadings is sufficient to establish the requisite “real and appreciable” risk.

Spotlight’s argument

38    Spotlight, while significantly inhibited and constrained by not being able to see the confidential affidavits:

(1)    does not accept that the respondents can invoke the privilege against self-incrimination (which I will treat as an argument extending to their risk of exposure to penalty privilege), to avoid producing the bank statements in their possession, or describing documents as required by r 20.17(2)(b);

(2)    asserts that the respondents’ submissions do not go far enough to establish that producing bank statements generally listed in Part 2, or merely describing documents in Part 3, would tend to increase their risk of criminal prosecution.

(3)    points out that it has already obtained, via subpoenas, bank statements over the period October 2014 to October 2019 held by the respondents, and also documents from Duncan Vincent and the Vincent Group which are exhibited to the witness statement filed by Mr Vincent in this proceeding;

(4)    asserts that any dispensation with r 20.17(2)(b) should be the least intrusive means of protecting any valid claim for privilege;

(5)    notes that the respondents’ submissions make no attempt to explain why describing documents or categories of documents would tend to increase their risk of criminal prosecution;

(6)    characterises the respondents’ earlier reliance on Citation Resources as being misplaced, because in that case McKerracher J declined to make an order for discovery and effectively excused the respondent in limine (that is, at the outset or entirely) from his discovery obligations, including because ASIC was conducting an investigation into alleged offences related to the subject matter of the civil proceeding; and

(7)    submits that the respondents have made it clear that they do not seek to avoid discovery in limine and there is no evidence that separate criminal or civil penalty provision proceedings are on foot or under contemplation.

Consideration

39    The live issue between the parties is whether the respondents have demonstrated that compliance with discovery obligations would create or increase a real and appreciable risk of exposure to criminal prosecution or of civil penalty proceedings being brought against them. The Court has had the benefit of candour by way of confidential affidavits made by each of the respondents, read in the context of the open material described above. As will become apparent, those affidavits were an indispensable part of some of the claims they make.

40    There can be no doubt that Spotlight has specifically alleged multiple civil-only breaches of s 182 of the Corporations Act, and that it seems to have quite detailed information about the money that it says was illegally obtained, including as to dates, amounts and bank account details. However, the higher threshold required to establish penalty privilege arising from the risk of a separate civil penalty proceeding is not made out in this case. Further, it was not seriously suggested that the existing case brought by Spotlight was likely to change in such a manner that it would be. I am not satisfied that there is any real or appreciable risk of separate civil penalty proceedings being brought against either respondent in relation to contraventions of s 182 that are already the subject of the substantive proceeding, and I am satisfied that there is virtually no risk of that becoming a part of the existing proceeding. This is especially so given the advanced stage of this proceeding in going to trial in only two months on 30 November 2020. The penalty privilege claims in relation to Part 2 of each of the respondents’ discovery lists of documents are therefore rejected.

41    If the asserted penalty privilege was the only basis for objecting to production of documents listed in Part 2 of each list of documents, or to objecting to listing documents in Part 3 (if that is in truth a further objection that is taken), the objection would need to be taken by reference to individual documents, applying the principles described in Refrigerated Express, reproduced above at [25] (see also [26]). However, that will not be necessary, because the respondents fare better in relation to their claims of privilege against self-incrimination.

42    The nature of the scheme alleged against the respondents is, as pleaded, one of obtaining secret commissions. Proving this to a civil standard, aided by discovery, is likely to go some way towards assisting in making not just the present civil case stronger, but also making the basis for a possible criminal case stronger. This therefore increases the risk of a criminal prosecution taking place, including by assisting in the proof of the provenance or authenticity of documents, or knowledge or some other mental state in respect of particular transactions. As Sheppard J pointed out in the civil insolvency trading case of Re New World Alliance Pty Ltd (Receiver and Manager Appointed); Sycotex Pty Ltd v Baseler (1993) 47 FCR 90 at 98, after referring to the importance of civil and criminal prohibitions on insolvent trading:

Until this case is tried, it may not be possible for a prosecuting authority to determine whether the facts of it warrant criminal prosecution or not. Indeed, until the case is tried, no prosecuting authority may know of it. But so long as the limitation period of five years continues to run, it cannot be gainsaid that there is a real and appreciable risk of prosecution. That period will not expire until October 1996. Even then, a prosecution may still be instituted at a later time with the Minister’s consent: see s 1316.

In the circumstances I do not regard the risk of prosecution as remote or unlikely; in the words of the authorities, it is real and appreciable.

43    Given the nature and content of the pleadings at the heart of the substantive proceeding, this is one of those cases, as referred to by Moshinsky J in Sadie Ville at [102], where the pleading itself provides a sufficient basis, in the context of both the open material and confidential affidavits of both respondents, to reach the conclusion that there is a “real and appreciable risk of criminal prosecution”. Therefore the respondents should not be compelled to produce the bank statements generally referred to in Part 2 of their respective discovery lists of documents, nor should Mr Mehta be compelled to produce the emails which he also describes in Part 2 of his amended list of documents.

44    In relation to the claim of privilege against self-incrimination arising from the r 20.17(2)(b) obligation concerning documents no longer in the possession of either respondent, I am constrained by being unable to make any overt reference to what is referred to in this regard in the confidential affidavits. However, I am satisfied that compliance with that obligation would very clearly expose both respondents to a very real and appreciable risk of being charged and prosecuted for serious criminal offences. Accordingly, Mr Mehta should not be required to disclose more than he already has in his amended list of documents. Similarly, Mr D’Lima should not be required to file any amended list of documents, listing in Part 3 the documents he has confidentially disclosed.

45    It is important that I record that, while upholding privilege against self-incrimination in respect of documents listed in Part 2 of each of the lists of documents was a predictable outcome, so too was the rejection of the penalty privilege claim in respect of those documents once proper regard was had to the applicable authorities. The upholding of privilege against self-incrimination in respect of Part 3 of each of the respondents’ lists of documents was based on material that was in the confidential affidavits and could not have been known or anticipated by Spotlight. The respondents should have brought a proper application to be excused from their discovery obligations in respect of Part 3 of each of their lists of documents for discovery, rather than simply choosing not to comply with discovery obligations. They should not have needed to be compelled to take that step by the further orders made by the docket judge. In all the circumstances, the costs of this privilege adjudication should be costs in the cause, so as to abide by the outcome of the substantive proceeding.

Associate:

Dated:    2 October 2020

SCHEDULE OF PARTIES