ASIC v Rich
[2005] NSWSC 62
•16 February 2005
Reported Decision:
52 ACSR 374
New South Wales
Supreme Court
CITATION: ASIC v Rich [2005] NSWSC 62
This decision has been amended. Please see the end of the judgment for a list of the amendments.HEARING DATE(S): Various dates between 6 September and 7 December 2004, then written submissions, and oral submissions on 4 and 7 February 2005
JUDGMENT DATE :
16 February 2005JURISDICTION: Equity
JUDGMENT OF: Austin J
DECISION: Documents admissible and not excluded from evidence
CATCHWORDS: SEARCH WARRANTS - Crimes Act 1914 (Cth) Pt 1AA - whether access to seized things by consultant of investigating agency is prohibited by s 3F(5) - whether electronic things copied under s 3L(2)(c) are things "seized" for purposes of s 3F(5) - whether things seized under search warrant may be used in an investigation with civil and criminal elements, and in a subsequent civil proceeding - whether owner of seized things may consent to their use and retention for purposes of civil proceedings
LEGISLATION CITED: ASIC Law ss 119A, 121, 127
Corporations Act 2001 (Cth) ss 471A, 477
Corporations Law ss 180, 181, 182, 184, 999, 1308
Crimes Act 1914 (Cth) ss 3, 3C, 3E, 3F, 3K, 3L, 3ZVCASES CITED: ASIC v Marshall Bell Hawkins Ltd [2003] FCA 833
ASIC v Rich [2004] NSWSC 923
ASIC v Rich [2004] NSWSC 934
ASIC v Rich [2004] NSWSC 951
ASIC v Rich [2004] NSWSC 963
ASIC v Rich [2004] NSWSC 969
ASIC v Rich [2004] NSWSC 970
ASIC v Rich [2004] NSWSC 1062
ASIC v Rich [2004] NSWSC 1089
ASIC v Rich [2004] NSWSC 1090
ASIC v Rich [2004] NSWSC 1104
Austin v The Commonwealth (2003) 215 CLR 185
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432
Brown v United States 411 US 223 (1973)
Carroll v Mijovich (1991) 25 NSWLR 441
Coco v R (1993) 179 CLR 47
Deputy Commissioner of Taxation v De Vonk (1995) 61 FCR 564
Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570
Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575
Entick v Carrington (1765) 19 State Tr 1029, 95 ER 807
George v Rockett (1990) 170 CLR 104
Ghani v Jones [1970] QB 693
Gollan v Nugent (1988) 166 CLR 18
Greer v New South Wales Police [2002] NSWSC 356
Grollo v Macauley (1995) 45 FCR 336
Harman v Secretary of State for the Home Department [1983] 1 AC 280
Hart v Commissioner, Australian Federal Police (2002) 124 FCR 384
Hunter BNZ Finance Ltd v CG Maloney Pty Ltd (1998) 18 NSWLR 420
Hunter v Southam Inc [1984] 2 SCR 145
Hyman v Hyman [1929] AC 601)
Jacobsen v Rogers (1995) 182 CLR 572
Johns v Australian Securities Commission (1993) 178 CLR 408
Johnson v United States 333 US 10 (1948)
Jones v Dunkel (1959) 101 CLR 298
Kennedy v Baker (2004) 207 ALR 247
Lieberman v Morris (1944) 69 CLR 69
Mabo v Queensland (No 2) (1992) 175 CLR 1
Malone v Metropolitan Police Commissioner [1980] 1 QB 49
Malubel Pty Ltd v Elder (1998) 88 FCR 242
Marcel v Commissioner of Police of the Metropolis [1992] Ch 225
Maynegrain Pty Ltd v Compafina Bank [1984] 1 NSWLR 258
Minnesota v Carter 525 US 83 (1998)
Morison v London County and Westminster Bank Ltd [1914] 3 KB 356
Morris v Director of the Serious Fraud Office [1993] Ch 372
Ousley v The Queen (1997) 192 CLR 69
Polycarpou v Australian Wire Industries Pty Ltd (1995) 36 NSWLR 49
Puglisi v Australian Fisheries Management Authority (1997) 148 ALR 393
R v Ladocki [2004] NSWCCA 336
R v Nicholas (2000) 1 VR 356
Re Morris (1943) 43 SR (NSW) 352
Rakas v Illinois 439 US 128 (1978)
Re H and the Adoption Act [2004] NSWSC 1242
S & M Motor Repairs v Caltex Oil (1988) 12 NSWLR 358
United States v Salvucci 448 US 83 (1980)
Wade v New South Wales Rutile Mining Company Pty Ltd (1969) 121 CLR 177
Williams v Keelty (2001) 111 FCR 175PARTIES: Australian Securities and Investments Commission (P)
John David Rich (D1)
Mark Alan Silbermann (D4)FILE NUMBER(S): SC 5934/01
COUNSEL: R B S Macfarlan QC with J P A Durack SC, N J Beaumont and J E O'Sullivan (P)
D L Williams SC with M J Steele and S A Goodman (D1, D4)SOLICITORS: Jan Redfern, Solicitor for Australian Securities and Investments Commission (P)
Joanne Kelly, Solicitor (D1, D4)
LOWER COURT JURISDICTION:
1. The course of the hearing so far 2. The search warrant issues - introduction 3. Facts 3.1 Initiation of investigation 3.2 Issue of search warrants 3.3 Execution of search warrants 3.4 Subsequent use of seized materials by ASIC and PwC 3.5 Extension of investigation to directors’ duties 3.6 Mr Wigney’s advice 3.7 Commencement of Federal Court proceedings in Williams v Keelty 3.8 The evolving case on directors’ duty of care and diligence 3.9 The judgment in Williams v Keelty 3.10 Shift away from the insolvent trading case, and the joint advice of Mr Pembroke SC and Mr Stack 3.11 Preparation of the Consolidation Report 3.12 The fourth joint opinion of Mr Bathurst QC and Mr Payne 3.13 ASIC initiates general view of search warrant procedures 3.14 Mr Pembroke SC’s advice in conference on 10 October 2001, and the developing focus on a civil penalty case 3.15 Arrival of Ms Rees 3.16 Ms Redfern’s e-mail of 19 October 3.17 Conference with Mr Pembroke SC on 24 October 3.18 Further instructions to Mr Bathurst QC and Mr Payne 3.19 Mr Pembroke SC’s written advice of 31 October, and subsequent events 3.20 ASIC/DPP Workshop, 15 November 2001 3.21 NECC Meeting on 21 November 3.22 Counsel’s further advice of 29 November, and NECC’s meeting on 3 December 3.23 The Sixth Joint Opinion of Mr Bathurst QC and Mr Payne 3.24 Advice in conference from the DPP 3.25 The Joint Opinion of Mr Brereton SC and Mr Stack dated 7 December 2001 3.26 Later events 4. Conclusions as to facts 4.1 Ms Redfern’s knowledge of the investigation 4.2 Ms Redfern’s knowledge about the search warrants 4.3 The scope of the investigation from June to December 4.4 Ms Redfern’s knowledge, understanding and belief about restrictions on the use of search warrant materials for civil purposes 5. Alleged illegalities in execution of search warrants 5.1 The search warrant provisions of the Crimes Act 5.2 Copying of the Lotus Notes cashflow database 5.3 Making seized things available to PwC 5.4 Making available to ASIC things allegedly not “seized” 6. Alleged illegalities in ASIC’s use of seized material for civil investigation and civil proceeding 7. Statutory obligation to return seized materials 8. Effect of the liquidators’ consent of 7 September 2001 8.1 Efficacy of liquidators’ consent, as regards future use of seized materials in a civil proceeding 8.2 Efficacy of liquidators’ consent, as regards the statutory obligation to return seized things 8.3 Effect of the liquidators’ consent of 7 December 2001, as a matter of law and construction 9. Effect of Mr Keeling’s consent 10. Summary of findings as to lawfulness and proprietary of ASIC’s conduct with respect to seized materials 11. Conclusion on search warrant issues
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
AUSTIN J
WEDNESDAY 16 FEBRUARY 2005
5934/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V JOHN DAVID RICH & ORS
JUDGMENT (Search Warrant Issues)
HIS HONOUR:
1. The course of the hearing so far
1 During the course of the final hearing of this civil penalty proceeding, issues have emerged relating to the admissibility of
· most of the documents that ASIC proposes to tender, having regard to the contention that they were first obtained through the execution of search warrants issued in relation to suspected criminal offences; and
· the evidence of ASIC's forensic accountant, Paul Carter, a partner at PricewaterhouseCoopers ("PwC").
2 Most of the evidence and argument that the court has heard, over a period of more than four months, relates to these two sets of issues. In the interests of public accountability of the court's process, rather than because of direct relevance to the issues now before me, I shall briefly set out the course of the hearing to date, before turning to the matters for decision.
3 The hearing commenced on 6 September 2004. Over the ensuing four months the hearing time has been taken up, inter alia, with ASIC's opening of its case, the receiving of evidence about the "provenance" of the documents ASIC wishes to tender, many arguments about aspects of the numerous notices to produce administered by the defendants to ASIC and the subpoenas issued by the defendants to PwC and others (including frequent contests about client legal privilege and waiver of privilege), and an unsuccessful application by the defendants for me to disqualify myself from the further hearing of the case on the ground of apprehended bias. Some of the matters contested since the commencement of the final hearing have led to published judgments by me ([2004] NSWSC 923, [2004] NSWSC 934, [2004] NSWSC 963, [2004] NSWSC 951, [2004] NSWSC 969, [2004] NSWSC 970, [2004] NSWSC 1062, [2004] NSWSC 1089, [2004] NSWSC 1090, [2004] NSWSC 1104), although on many occasions where the issue did not raise any question of principle, I have left the judgments in their transcript form without wider publication.
4 In the course of the hearing of ASIC's provenance evidence, questions were raised by the defendants concerning the lawfulness and propriety of ASIC's use, for civil purposes, of documents initially obtained by the execution of search warrants on specified criminal grounds, and the lawfulness of copying electronic records during the execution of the warrants. ASIC introduced evidence on these matters, which included affidavit evidence by Jan Redfern, a senior officer of ASIC, and she was cross-examined at length. There were contests in which ASIC sought to limit the scope of Ms Redfern's cross-examination, leading to rulings and published judgments which had the effect of limiting the scope of the evidence which the defendants could adduce with respect to matters going to ASIC's state of mind in the period after December 2001. At one stage I was persuaded to formulate and address some questions of law which were intended to resolve the search warrant issues expeditiously, but that proved to be unsuccessful for reasons that have been recorded in judgments.
5 During the course of the hearing and, in particular, during the process of production of documents in response to notices to produce and subpoenas, the defendants have explored issues concerning the history of PwC's involvement with ASIC before the preparation of the Carter Report, leading to the questions about the admissibility of Mr Carter's evidence that are before me now. Those issues were pursued during the lengthy cross-examination of Cassandra Reynolds, now a partner at PwC, who at the relevant times was a senior employee of the firm working with Mr Carter. Later Mr Carter himself gave lengthy evidence. Evidence has so far been taken in the proceeding generally, though largely directed to questions of admissibility, with the exception of the evidence of Mr Carter, which was taken on the voir dire. I ruled, however, in a published judgment ([2004] NSWSC 1062 (10 November 2004)), that his evidence once given was evidence in the proceeding.
6 The parties have taken care to identify, in the mass of evidence so far received, the evidence to which I should have regard for the purpose of determining the questions now before me. This has led, inter alia, to the tender by ASIC of 16 volumes of documents prepared by the defendants. The documents were tendered by ASIC at the defendants' request, so as not to deprive the defendants of any opportunities they may have at the conclusion of ASIC's case, as defendants who have not gone into evidence.
7 At the end of the evidentiary phase directed to these issues, I received very extensive written and oral submissions about them, traversing difficult points of law as well as much contested evidence. The volume and intensity of the submissions are not surprising, given that the matters now put before me for decision are the culmination of an enormous amount of work, on both sides, over the course of the hearing and before it commenced, and given also that my decisions have the potential to affect the future course of the hearing very substantially. The direct consequence, unfortunately, is that my judgments are lengthy.
8 The written submissions and oral argument were presented, pursuant to my directions, in two separate components, addressing respectively the Carter Report and the search warrant issues. After the hearing of argument on both issues was over, I decided it would be prudent to prepare my judgments on both matters concurrently and to preserve the prospect of delivering a single judgment covering both matters. Indeed, that was a course I favoured until very recently. Having at last satisfied myself that the issues can be satisfactorily dealt with by separate judgments, I have now decided that it would be best, in the interests of clarity, to proceed in that fashion. This is my judgment on the search warrant issues. My judgment on the Carter Report will follow.
2. The search warrant issues - introduction
9 To a substantial degree, ASIC's case against the defendants, as outlined in the opening, will rely on documents. ASIC wishes to tender 12 volumes of documents exhibited to Mr Carter's affidavits and reports, and a further six volumes of documents comprising its tender bundle. Many of the documents were first obtained by ASIC as a result of the Australian Federal Police (“AFP”) executing a number of search warrants, issued under the Crimes Act 1914 (Cth) at the behest of ASIC, on 1 June 2001, at the premises of One.Tel and at the private residences of certain of the directors.
10 The defendants have submitted that the search warrants executed on 1 June 2001 were issued for specified purposes, namely the investigation of suspected criminal offences by One.Tel, Mr Rich and Mr Silbermann, as stated in the warrants. They have not challenged the lawfulness of the issue of the search warrants, and they have not contended that the warrants were procured by ASIC for improper purposes. But they have argued that in various ways, the process of executing the search warrants and subsequently using the documents obtained under the warrants for a civil investigation and a civil proceeding has been illegal or improper, to the knowledge of ASIC. According to the defendants' submission, ASIC has wrongfully sought to deploy this illegally or improperly obtained evidence by making the documents available to Mr Carter for the purpose of preparation of his reports, and ASIC is now wrongfully seeking to tender bundles of documents that were illegally or improperly obtained.
11 According to the defendants' submission, ASIC has not discharged the onus that it is said to bear with respect to illegally or improperly obtained evidence under s 138 of the Evidence Act 1995 (NSW), of establishing that the desirability of admitting the evidence outweighs the undesirability of doing so. Further, the court should, according to the defendants, exclude the documentary evidence by recourse to its inherent jurisdiction to protect the integrity of its processes, principally on the ground that, by allowing the documents into evidence the court would associate itself with the unlawful and improper use of that material, in a way that would be calculated to bring the administration of justice into disrepute.
12 ASIC has denied that there was any illegal or improper conduct during the course of execution of the search warrants and subsequent use of the documents for the purposes of its investigation and the present litigation. On 7 December 2001 the liquidators of One.Tel purported to consent to ASIC's use of the documents obtained on execution of the search warrant at the premises of One.Tel, for the purpose of commencing the present legal proceeding. The instrument of consent was confirmed by the liquidators executing a deed on 15 October 2004. ASIC has submitted that the liquidators' consent has authorised continued retention and use of the seized materials, and cured any illegality or impropriety that may have occurred. It makes a similar submission with respect to the effect of Mr Keeling's consent on the lawfulness and propriety of its retention and use of a document seized under search warrant from his residence.
13 These matters have been canvassed at great length in the parties' written submissions, comprising over 350 pages. They have been labelled DS 43, 44 and 45, and AS 45, 46 and 47. There are also brief written submissions by both parties, each dated in 11 February 2005, which I shall label DS 46 and AS 48 respectively. There were supplementary oral submissions on 4 and 7 February 2005.
14 The parties have referred to these various issues as "the search warrant issues". To resolve them, it is necessary, first, to make findings as to the historical facts and the state of knowledge and understanding of ASIC at various times (heading 3) and to state expressly some findings on contentious matters (heading 4). It will be appropriate, subsequently, to consider the following issues, in the light of the findings of fact:
- 5. Was there any illegality in the process of issue and execution of the search warrants and consequent acquisition of the documents by ASIC?
6. Was there any illegality or impropriety on the part of ASIC in its use of the documents, up to 7 December 2001?
7. Has ASIC been, and is it now, under a statutory obligation to return the documents, which it has failed to discharge?
8. What is the effect of the liquidators' instrument of consent of 7 December 2001?
9. What is the effect of Mr Keeling's consent?
15 I shall conclude by summarising my findings as to the lawfulness and propriety of ASIC's conduct with respect to the seized materials (heading 10), and then express my conclusions as to admissibility (heading 11).
16 As will become clear, my conclusions on these matters will make it unnecessary to deal with certain other issues, relating (inter alia) to the scope and application of s 138 and any continuing inherent jurisdiction to exclude illegally obtained evidence.
3.1 Initiation of investigation
17 ASIC commenced an investigation into the affairs of One.Tel after receiving a referral from the Australian Stock Exchange on 25 May 2001. One.Tel was placed into administration by its directors on 29 May 2001, and Steven Sherman and Peter Walker of Ferrier Hodgson were appointed voluntary administrators.
18 On 31 May 2001 Allen Turton, a delegate of ASIC, made a decision under s 13(1) of the ASIC Law (in force at that time) that ASIC should embark on an investigation of potential contraventions of ss 999, 1311(1)(a) and 1307 of the Corporations Law, provisions identifying criminal offences relating to providing false information to the market and falsifying books. At that time the s 13 determination was confined to these criminal matters and did not extend to the duty of care of company directors and officers (s 180). Mr Turton recorded in his file note (Exhibit P27/1.93) that he made the decision after reading the ASX referral, having discussions with other ASIC officers, and having a conversation with James Packer and reviewing financial reports provided by him.
3.2 Issue of search warrants
19 On the same day ASIC took steps to have search warrants issued under Part 1AA of the Crimes Act, and it retained PricewaterhouseCoopers to assist it in the execution of the warrants. Although the decision to seek the issue of the warrants was made by someone else, Ms Redfern gave evidence that she was aware that the application was to be made.
20 The decision to have search warrants issued under the Crimes Act was made despite One.Tel being under the control of administrators in whom ASIC had confidence. So much was recorded in Ms Redfern's e-mail of 25 July 2002, in which she speculated that her colleagues might be "overly enthusiastic" about the issue of search warrants and said that there should be "more quality assurance on the decision", giving the execution of the search warrant at the premises of One.Tel as an example. It appears, however, from Ms Redfern's evidence that search warrants were obtained because there was a concern about preserving evidence, given that Bradley Keeling and perhaps others were still working at the One.Tel premises.
21 The terms of PwC's retainer were set out in a letter from Mr Carter to the Director of Enforcement of the Western Australia Regional Office of ASIC, dated 31 May 2001. The retainer covered "forensic data retrieval and analysis services", including the imaging of computer systems and transfer of those images to compact discs for restoration to other computer systems designated by ASIC. Graham Henley, one of PwC's specialist computer forensic team, gave evidence that the services were to be provided during the execution of the search warrants.
22 On 1 June 2001 ASIC hosted a briefing in preparation for the execution of the search warrants, attended by officers of ASIC, the AFP and PwC. Warrants were to be executed simultaneously later that day at the offices of One.Tel, and at the residences of Mr Rich, Mr Silbermann, Mr Keeling and Kevin Beck. An officer of ASIC and a computer analyst from PwC were allocated to the execution of each of the search warrants. PwC staff were to be declared by the warrant holders to be "constables assisting" for the purpose of execution of the warrants.
23 The six search warrants were issued in similar form. The search warrant relating to the premises of One.Tel was addressed to Scott Sykes, an officer of the AFP, as executing officer. It was issued by a magistrate. He declared himself to be satisfied by information on oath that there were reasonable grounds for suspecting that there was evidential material at the premises which satisfied all of three conditions which were set out.
24 The three conditions were, approximately, that:
- (1) the things authorised to be seized were books and records for the period 1 January 1999 to 31 May 2001;
(2) the things to be seized related to One.Tel, its directors, Publishing and Broadcasting Ltd, Consolidated Press Holdings Ltd, or News Corporation Ltd;
(3) there were reasonable grounds for suspecting that the things to be seized would afford evidence as to the commission of offences:
- (a) under ss 999 and 1311(1)(a) of the Corporations Law, by One.Tel issuing announcements to the ASX and releases to the media concerning the financial position of One.Tel which it knew or ought reasonably to have known to be materially false or misleading;
(b) under ss 999 and 1311(1)(a) of the Corporations Law, by Mr Rich issuing announcements to the ASX and releases to the media concerning the financial position of One.Tel which he knew or ought reasonably to have known to be materially false or misleading;
(c) under s 1307 of the Corporations Law, by Mr Silbermann, in falsifying books affecting or relating to the affairs of One.Tel.
25 The warrant authorised entry, search and seizure of evidential material, relating to the offences to which the warrant related, and to other Commonwealth indictable offences. It stated that the executing officer was authorised to obtain such assistance as was necessary and reasonable in the circumstances.
26 The warrants were executed on the afternoon and evening of 1 June 2001. Six of the ASIC officers who were involved in the execution of the search warrants went on to be involved in the subsequent investigation.
3.3 Execution of search warrants
27 The warrant for execution at the premises of One.Tel was executed by Mr Sykes, assisted by various officers of ASIC, Mr Henley and another employee of PwC. Those executing the search warrant seized approximately six or seven boxes of hard copy documents. The representatives of PwC took electronic images of three different types of electronic records, namely certain directories in One.Tel's "I:drive", a Lotus Notes cashflow database, and the hard drives of nine desktop computers (including computers alleged by ASIC to have been used by Mr Rich, Mr Silbermann, Mr Keeling and Mr Beck). The hard copy documents and the electronic images were recorded on property seizure records completed for the execution of the search warrant.
28 Mr Henley gave evidence that he spoke to Mr Brotherson and Mr Robson of One.Tel, and read them the three conditions of the search warrant and they assisted him in ways that he specified. I shall return to the detailed evidence of Mr Brotherson and Mr Henley, when I consider the defendant's submission that the Lotus Notes cashflow database was unlawfully copied without the written consent of One.Tel. Suffice it to say here that, with assistance from Mr Brotherson, Mr Henley procured a copy of the finance, administration and corporate counsel directories of the I:drive, a copy to CD of the Lotus Notes cashflow database, and images of the hard drives of the nine computers.
29 Officers of ASIC and staff of PwC were present at the execution of the search warrants at the residences of Mr Rich, Mr Silbermann and Mr Keeling. In each case hard copy documents were seized and images were made on PwC equipment of the hard drives of personal computers. The image of the computer made at Mr Rich's residence was signed over to Mr Hay of PwC. Mr Hunter, who was present at the execution of the warrant at Mr Silbermann's residence, gave evidence that an image of a personal computer was taken onto a PwC hard disk, which he took back with him to One.Tel's premises. Evidence was given by Mr Henley and Mr Cerny (also a technical staff member of PwC) that, during the execution of the search warrant at Mr Keeling's premises, images were taken onto PwC hard drives of a desktop computer and a laptop computer.
30 The images taken from the I:drive and desktop computers at One.Tel's premises, and the images of the home computers at the residences of Mr Rich, Mr Silbermann and Mr Keeling, were taken by PwC to its premises on the night of 1 June 2001 or on the following morning and were placed in PwC's safe, and later made available to ASIC. The CD of the Lotus Notes cashflow database was taken by the Australian Federal Police and was later made available to ASIC. The hard copy documents were taken by ASIC.
3.4 Subsequent use of seized materials by ASIC and PwC
31 As from about 2 June 2001 the officers of ASIC who were involved in the investigation, and staff of PwC (and in particular, Mr Carter and Ms Reynolds from the time of their engagement) had access to the hard copy and image documents that had been seized from One.Tel's premises or copied in the execution of the One.Tel search warrant on 1 June 2001, and that position continued until early December 2001.
32 The evidence indicates that PwC personnel worked from ASIC's premises from late 2001 until about August 2002, and had access to both hard copy and electronic documents during that time. Access to the material seized from residences was restricted after 7 December 2001, when ASIC split the LSS system (its computer system) to restrict access to that material. It appears that the restriction was implemented successfully to exclude the "civil team" from access to the material seized from residences, subject to one occasion when Mr Kwan of PwC erroneously accessed the material in May 2004 and was told that this should not occur again.
33 The defendants have attached a schedule to their written submissions of 17 December 2004 (DS 43, Schedule 2), which summarised the detailed evidence relating to the uses to which the seized materials were put. ASIC's written submission in reply (AS 46) challenged the defendants' account of the evidence on some matters of detail, and supplemented it, but as I understand the submissions, there is no major factual contest between the parties as to the contents of Schedule 2.
34 ASIC does not propose to tender any of the seized material from residences, except for a single voicemail obtained from Mr Keeling's premises, as to which there is evidence that Mr Keeling has consented to ASIC's use and retention of the material. It is not relevant to any question I have to determine for me to make findings about the use of the residential search warrant material during ASIC's investigation - except as to the splitting of the computer system on 7 December 2001, a matter which is relevant to ASIC's understanding of the restrictions on the use of search warrant materials for extraneous purposes.
35 As to the material seized from One.Tel's premises (by "seized" I mean to include electronic information copied in the course of execution of the warrants), I do not understand ASIC to dissent from the proposition in paragraph 1 of Schedule 2 of DS 43, that the search warrant materials were used by the One.Tel investigation team without restriction upon access until at least 7 December 2001 (see also DS 43 at [48], which was not disputed by ASIC in its response in AS 46). It is unnecessary for me to make findings as to how the One.Tel material was copied and accessed by the ASIC team and PwC during that time.
3.5 Extension of investigation to directors' duties
36 ASIC's investigatory team from June to December 2001 included Ms Redfern (who was New South Wales general counsel for ASIC until 1 July 2001, and thereafter became Deputy Executive Director of Enforcement, reporting to the Executive Director of Enforcement, Mr Wood); and various other investigators and lawyers including Mr Turton and Mr Howell, Directors of Enforcement for New South Wales and Western Australia respectively, Mr Hogan, Mr Connor and Ms Rees (who joined the team on 18 October 2001 as a consultant lawyer).
37 Ms Redfern met with Lachlan Murdoch on 3 and 4 June 2001 and later discussed that interview with Mr Turton.
38 On 5 June 2001 Mr Turton executed a file note under s 13(1) of the ASIC Law, as a delegate of ASIC, which had the effect of extending the investigation so that it became an investigation with respect to:
· criminal provisions of the Corporations Law: s 999 (false or misleading statements in relation to securities), s 286 (obligation to keep books), s 184 (criminal offences concerning good faith and use of position), s 1308 (false or misleading statements in documents lodged with ASIC) and s 1002G (insider trading);
· provisions with only civil consequences unless additional ingredients were established: s 588G (insolvent trading) and s 1001A (continuous disclosure), and
· provisions to which only civil consequences were attached: s 180(1) (care and diligence), s 181 (good faith - civil obligations) and s 182 (use of position - civil obligations).
39 The file note (Exhibit P27/1.199) records that he made his decision to extend the investigation after reviewing a list of specified information including board papers, board minutes, market announcements and financial documents, and after receiving verbal advice from Ms Redfern regarding Mr Murdoch's comments during interviews.
40 The decision to expand the investigation having been made, there was a conference with counsel on 6 June at which ss 588G and 180, declarations of contravention and disqualification and compensation orders, and s 1317H were discussed. The evidence does not indicate who participated, apart from Mr Hogan. The defendants say that this note represents "the germination of the present proceedings". That appears to be so, although at that time s 588G (insolvent trading) was also under consideration.
41 On 8 June 2001 this Court made asset preservation orders (referred to in submissions as "freezing orders") with respect to Mr Rich and Mr Silbermann. There was a team meeting on 14 June 2001, attended by Ms Redfern, and one of the investigators, Mr Connor, circulated an investigation plan, to be "signed off" by 19 June.
42 On 15 June 2001 Mr Turton, as delegate of ASIC, signed a further file note under s 13(1), recording his decision to investigate whether there may have been contraventions of s 1309 (making available false information - a criminal provision) by the two defendants and others (Exhibit P27/1.221). This determination was in addition to, and not in substitution for, the determination made on 5 June, and it had the effect of further expanding the investigation. It was made after Mr Turton reviewed various affidavits, including Mr Murdoch's affidavit, and received verbal advice from a number of ASIC officers including Ms Redfern.
3.6 Mr Wigney's advice
43 Mr Wigney of counsel provided written advice to ASIC with respect to the investigation into the HIH group, which was being conducted concurrently with ASIC's investigation into the One.Tel group. His advice, dated 22 June 2001, was read by Ms Redfern when it was received. Mr Wigney was asked to advise whether ASIC was still able to apply for search warrants even though a civil proceeding had commenced. His opinion was that, so long as the ASIC officer who swore the affidavit in support of the application for the warrant acted for a bona fide purpose of investigating specified criminal offences and had reasonable grounds for suspecting the commission of those offences, the existence of a civil proceeding would of itself be no bar to the application for the warrant.
44 He went on to note an issue that, he said, had not been resolved definitively, namely whether documents lawfully seized pursuant to a search warrant can subsequently be used for a purpose different from the purpose for which they were seized (that is, for use as evidential material in relation to the offences specified in the warrant). Specifically, he postulated seizure of documents pursuant to warrant and a later decision that there was insufficient evidence to lay a charge for commission of the offences specified in the warrant, and he asked whether the seized documents could then be used in civil proceedings. After referring to ss 3F(5) and 3ZV, he noted cases that appeared to "establish a principle that documents seized under a compulsory power can only be used for the purposes for which the power was enacted", and that accordingly documents seized to facilitate investigation and prosecution of stated offences could only be used for that purpose. He noted a possibility, arising out of Grollo v Macauley (1995) 45 FCR 336, at 352 (Jenkinson J) that the court might grant leave to permit the seized documents to be retained and used in a civil proceeding.
45 Mr Wigney's observations were directed to use of seized materials in a subsequent civil proceeding, not in an investigation. Although he formulated the principle supported by the cases broadly, his discussion hypothesised a firm decision not to lay charges followed by the initiation of a civil proceeding, rather than use of the seized materials in a single investigation having criminal and civil elements.
46 Ms Redfern agreed in cross-examination that, upon reading that advice, she was aware that documents seized pursuant to search warrants issued under the Commonwealth Crimes Act could only be used "for police purposes", that is for investigating criminal offences (T 1510). She said she understood that the seized documents were to be returned "if you no longer had a criminal investigation on foot" (T 1509).
47 Her evidence that the seized documents could only be used for investigating criminal offences needs to be considered in the context of her evidence as a whole. She was in concern to emphasise, quite frequently, that she regarded the One.Tel investigation as a single investigation having criminal and civil components. I shall return to her evidence on that subject later, but at this stage I make the point that I do not regard her answer to a single question, agreeing that search warrant materials were to be used only to investigate criminal offences, as evidence inconsistent with that general theme.
3.7 Commencement of Federal Court proceedings in Williams v Keelty
48 Ms Redfern gave evidence that in 2001, she was very concerned about ASIC's entitlement or otherwise to use search warrant materials: T 1439. But as I read the evidence, her concern related to the use of seized materials in a civil proceeding. Her answer that she was generally concerned was followed immediately by questions about the Williams v Keelty proceeding and ASIC's undertaking not to use seized materials in that proceeding. I did not understand her evidence to convey that she was "very concerned" as to whether she might be precluded from using seized materials in an investigation just because the investigation was a composite one having civil elements.
49 Ms Redfern was aware, throughout the second half of 2001, that documents obtained by the execution of search warrants were being used in the One.Tel investigation. She gave evidence that she could not recall reading the One.Tel search warrants in 2001: T 2831-2.
50 By 5 July 2001, Raymond Williams and Rodney Adler, who had been directors of HIH, had commenced proceedings in the Federal Court seeking interlocutory injunctions to restrain ASIC from inspecting documents it had seized under search warrants, and (in the case Mr Adler) to restrain Ms Redfern and another ASIC officer from involvement in a civil penalty proceeding that had been initiated. In an e-mail dated 5 July Ms Redfern described Mr Adler's argument as "hopeless".
51 On 6 July 2001 an officer of ASIC wrote to Ms Redfern raising the question whether the application by Mr Williams and Mr Adler had any effect on an ASIC investigation into another company, Harris Scarfe, where ASIC was considering both civil and criminal matters. He asked whether anything should be done in the short term in relation to documents seized pursuant to warrants in the Harris Scarfe matter, especially in relation to handling and use of seized documents. I infer that Ms Redfern received and read that communication, but the evidence does not indicate her response.
52 During July 2001 Ms Redfern was cross-examined at the hearing of the Williams v Keelty, and her credit was attacked. She had been questioned about ASIC's conduct regarding use of seized materials during her cross-examination, and consequently the use of search warrant materials became of particular interest to her: T 1511-2. The cross-examination appears to have related to the use of seized materials for the purpose of a civil proceeding.
3.8 The evolving case on directors' duty of care and diligence
53 Ms Redfern was aware that the One.Tel investigation extended to both civil and criminal matters, as was made plain in a briefing paper dated 7 July 2001 which she received, and an investigation plan dated 12 July 2001, sent her by Mr Connor to reflect their discussions. An updated investigation plan was circulated by Mr Howell to various people including Ms Redfern on 17 July 2001, and in his covering e-mail Mr Howell expressed the hope to be able to convince the court at a directions hearing on 24 September that ASIC was in a position to commence a substantive action.
54 The investigation plan of 17 July 2001 referred to collection of evidence to prove or disprove breaches of various provisions, including s 180 which attracted only civil penalties, and s 588G which attracted only civil consequences unless additional ingredients were shown. The plan noted that search warrants had been issued and that the documents seized under those warrants were under analysis. It was therefore clear to readers of the investigation plan of 17 July that the seized materials were being used for the purposes of an investigation which extended beyond criminal matters.
55 On 24 July 2001 Ms Redfern attended a meeting of the National Enforcement Co-ordination Committee ("NECC"), the group within ASIC which considered and made decisions on, inter alia, the commencement of legal proceedings. The meeting of 24 July 2001 appears to be the first time that the One.Tel investigation was discussed at the NECC. At that time the voluntary administrators had just become liquidators of One.Tel, and the minutes of the NECC meeting referred to arrangements to formulate ASIC's comment (if any) on the appointment of the liquidators.
56 As a member of the NECC, Ms Redfern received regular written progress reports on the One.Tel investigation, about the time of the NECC meetings. In those meetings the NECC would consider whether or not to bring proceedings. NECC meetings at which the One.Tel investigation was considered were held on 24 July, 7 August, 4 September, 18 September, 2 October, (perhaps) 16 October, 21 November and 3 December 2001. Ms Redfern received progress reports in respect of most of those meetings, although there is no evidence of progress reports for the meetings of 24 July and 4 September.
57 The defendants invited the court to infer, from the progress reports and other materials that I shall mention, that Ms Redfern was aware at the time of the progress reports and continuously during the period from July to October 2001 that the materials obtained under search warrant were the subject of analysis in the One.Tel investigation, and that ASIC's investigation included an investigation of possible contraventions of s 180. It is relevant to note that the papers for the 7 August NECC meeting, distributed on 3 August to the NECC members, including Ms Redfern, included a progress report listing various persons of interest, including Mr Rich, Mr Keeling and Mr Silbermann. Shortly after the NECC meeting on 7 August, Ms Redfern and Mr Howell had a discussion in which they resolved that the next briefing concerning One.Tel should deal with strategy and options, and it should occur at the NECC meeting scheduled for 4 September. Having regard to this evidence, I agree with the defendants that such inferences are appropriate.
58 On 28 August 2001 Mr Howell circulated a briefing note to Mr Wood, Ms Redfern and Mr Turton and others. The briefing note "highlighted" major issues that had been identified. Two of the issues related to banking facilities, and the specific matters that led to ASIC subsequently sending a brief to the DPP with a view to criminal charges against Mr Silbermann (which were ultimately not pursued). There were three other matters, relating to One.Tel accounts (upon which the briefing note said that the "main focus" related to possible contraventions of ss 1309 and 1307), false or misleading statements in relation to securities, and continuous disclosure. On the same day Mr Staples sent an e-mail to Mr Connor, attaching a paper which said that "the team is investigating whether Rich has contravened CL s 999 …", and also whether One.Tel's directors and executive officers intentionally, recklessly or negligently failed to give proper notification of ASIC.
59 The documents of 28 August are important because, although other evidence indicates a growing interest on the part of ASIC in a civil s 180 case, the documents of 28 August show that the potential criminal consequences of the matters being investigated were still under consideration.
60 Ms Redfern circulated an e-mail to ASIC officers proposing that before 4 September she and others would meet with the liquidators of One.Tel to have a "meaningful discussion" of the kind necessary before the next court directions hearing on 24 September. A meeting was arranged between Ms Redfern and a liquidator of One.Tel and was held on 29 August. The agenda papers for the NECC meeting of 4 September proposed a verbal recent report on One.Tel, and the minutes of the meeting record that a progress update was given.
61 An Investigation Plan Progress Update dated 5 September 2001 listed as the scope of investigation "to collect evidence to prove or disprove" that a number of listed contraventions occurred, corresponding with the statutory provisions designated in the s 13 file notes. The document contained a list of tasks, principally for examinations and re-examination is under s 19, but at the end of the document the "miscellaneous investigative administration" included "liaise with DPP on a monthly basis".
62 Ms Redfern participated in meetings with counsel on 5, 7 and 12 September. According to Mr Hogan's notes, Ms Redfern attended a meeting with Mr Pembroke SC and Mr Stack of counsel, and other ASIC officers, where potential causes of action were to be identified and it was suggested that ASIC might consider a directors' duties case. According to the notes, there appears to have been some discussion about revealing results of the investigation to date (probably, I infer, to the court on 24 September), and reference appears to have been made to the seized documents. Cross-examined about this matter, Ms Redfern agreed that at least as early as September 2001, a civil penalty proceeding for breach of directors' duties was under consideration.
63 On 7 September 2001 Mr Turton signed a file note under s 13(1), recording reason to suspect contraventions by Mr Silbermann of s 596 of the Corporations Law (using false pretences or fraud to induce a person to give credit to a company): Exhibit P27/1.374. He described his decision as a decision to extend ASIC's investigation into One.Tel and others including the two defendants, and said that he had reviewed a document entitled "One.Tel Ltd Briefing 28 August 2001" and had received verbal advice from a number of ASIC officers (not including Ms Redfern).
3.9 The judgment in Williams v Keelty
64 Hely J delivered his judgment in Williams v Keelty (2001) 111 FCR 175 on 13 September 2001. Ms Redfern agreed in cross-examination that she was very interested in the judgment and read it carefully at that time. She acknowledged (T 1856-7) that she understood that:
- (a) Part 1AA of the Crimes Act provided a limited legislative permission to make things seized available to officers of other agencies;
(b) Part 1AA required the return of the things seized when the reason for seizure no longer existed or if it was decided that the things were not to be used in evidence in criminal proceedings;
(c) using the things seized for purposes other than those specified in the warrant (such as, for example, evidence in a civil proceeding) would be an abuse of power; and
(d) ASIC could not lawfully use documents seized for a purpose foreign to the purpose for which seizure was authorised.
65 His Honour's decision will be considered in detail later in these reasons for judgment. As will be seen, the relevant parts of the judgment were concerned with whether ASIC could use seized materials as evidence in, or in connection with, an existing civil proceeding. But Hely J expressed the relevant principles in wide language.
3.10 Shift away from the insolvent trading case, and the joint advice by Mr Pembroke SC and Mr Stack
66 Agenda papers for the NECC meeting of 18 September were circulated on 14 September, and Ms Redfern had several meetings with counsel, one attended by representatives of the liquidator, on 17 September. She attended the NECC meeting on 18 September. The minutes of the meeting, which are characteristically brief, recorded that counsel's opinion was to be sought in respect of insolvent trading, and "investigation to focus on directors' duties".
67 Over the next two days there were further conferences with Mr Pembroke SC and Mr Stack, leading to written advice by them on 19 September, which noted that there had been "a logical and informal division of responsibility between the Commission and the Liquidators", and after discussion, concluded that it had become apparent that "an insolvent trading proceeding, if one is available, will be undertaken by the liquidators", and that "the Commission will, if so advised, undertake a civil penalty action for breach of directors' duties", although the Commission was not able to "point to some definable course of action … at this stage of its investigation". Thereafter ASIC did not pursue an insolvent trading claim, and the principal focus of ASIC's investigation was on directors' duties.
68 At a directions hearing on 24 September, the asset preservation proceeding was adjourned for further directions on 10 December. Having regard to counsel's advice, Ms Redfern recognised that it would be necessary to develop a prima facie case by December 2001 if it were to maintain the asset preservation regime that was then in place.
3.11 Preparation of the Consolidation Report
69 Shortly after the directions hearing of 24 September, the idea was developed that ASIC's team members would complete preliminary reports supported by documentation, outlining their findings to date, and Mr Connor and Mr Hogan would then consolidate those findings into a single report by 3 October, for the purpose of obtaining counsel's advice. Ms Redfern stressed in an e-mail the importance of meeting this timetable. In the meantime ASIC sent a brief to advise to the Director of Public Prosecutions with respect to a suspected criminal offence by Mr Silbermann concerning banking facilities (eventually not pursued).
70 There was a further meeting of the NECC on 2 October, at which it was noted that Ms Redfern and Mr Howell would provide a thorough briefing and recommendations on 27 November and would discuss the "Consolidated Report". A progress report circulated for the 2 October meeting listed a number of persons of interest including Mr Rich, Mr Keeling, and Mr Silbermann. It was the last progress report to list a significant number of persons of interest, beyond the defendants in the present proceeding.
71 The consolidated report foreshadowed at the NECC meeting on 2 October was completed on the following day, and has become known during the course of evidence and submissions as "the Consolidation Report", although its actual title was "One.Tel Investigation - Progress Summary". The document, which ran to 31 pages, considered One.Tel's financial reporting tools, information provided to One.Tel's directors, financial information available to the market, One.Tel cashflows, forecasts and global cash position, issues relating to Publishing and Broadcasting Ltd, and issues relating to banking facilities. At various stages in the document the investigators expressed opinions about "concerns", supporting evidence and proposed further action, and occasionally stated some conclusions.
72 The Consolidation Report was not allowed into evidence as proof of the truth of its contents, but it is permissible to regard it as evidence of the matters under consideration at the time it was written. Clearly some of the concerns and conclusions recorded in the document relate to negligence, but there were also concerns expressed about falsification of documents and active deceit, and some of the other matters identified are said to be either deliberate or negligent. Reading the document as a whole, I have concluded that there is a significant element of concerned about criminal offences, although there is an emphasis on duty of care.
3.12 The fourth joint opinion of Mr Bathurst QC and Mr Payne
73 An opinion of Mr Bathurst QC and Mr Payne in relation to the HIH proceeding, entitled "fourth joint opinion", addressed issues concerning the use of materials obtained under a search warrant. The opinion is dated 3 October and refers to arguments raised in Williams v Keelty, but the authors do not appear to have read Hely J's judgment prior to concluding their opinion, for there is no reference in the opinion to Hely J's decision and reasons. Nevertheless counsel's views are generally very similar to the views expressed by Hely J.
74 Counsel advised that if ASIC obtained material seized under a search warrant issued under Part 1AA for the purpose of a criminal investigation, it could not later use any of that material as evidence in a civil proceeding regarding similar facts and issues. The "guiding principle" was that the powers conferred by Part 1AA must only be used for the purposes for which those powers were granted and must be exercised reasonably in all the circumstances - although, they said, it was arguable that materials obtained pursuant to a warrant limited to certain specified offences might be used as evidence in the prosecution of other criminal offences. Counsel disagreed with the suggestion (mentioned in Mr Wigney's advice) by Jenkinson J at first instance in Grollo v Macauley that material seized pursuant to a search warrant could be used in a civil proceeding with the sanction of the court, saying that the suggestion was "implicitly doubted" by the Full Court on appeal, (1995) 56 FCR 533 at 550B, 551D-E.
75 Counsel advised that if the same ASIC officers are involved in the execution of a search warrant and the conduct of a civil proceeding concerning the same or similar facts, there is an increased prospect that a court will find that the procuring of the warrant was for the improper purpose of obtaining evidence for the civil proceeding; and an increased risk of a successful challenge to the use of search warrant materials in the civil proceeding, on the ground of contempt of court. They said that these risks would be minimised by establishing entirely separate criminal and civil investigation and litigation teams.
76 One of the questions addressed by counsel in the fourth joint opinion was this:
- "Can ASIC seize material under a search warrant for the purposes of a criminal investigation and later derive information from that material and use it to initiate further investigations to be carried out for the purposes of obtaining evidence for civil proceedings involving similar facts and issues?" Counsel's brief answer was that ASIC was not able to use material seized pursuant to a search warrant for the purpose of deriving information for use in civil proceedings.
77 The hypothesis underlying the question was unclear. It seemed to contemplate a criminal investigation and then a subsequent derivation of information from, and use of, the seized material to initiate further investigations for the purposes of a civil proceeding. It is not clear to me from reading the opinion that counsel was invited to focus on a single investigation which has criminal and civil elements. The recommendation for separate teams seems to have emerged out of counsel's answers to questions regarding improper purposes at the point of issue of the warrant and use of the seized materials in a civil proceeding, rather than any risk of impropriety from use of the seized materials in the course of an investigation having criminal and civil elements.
78 Ms Redfern agreed in cross-examination that she read the fourth joint opinion and understood the "guiding principle" to which I have referred. She said she did not disagree with it and accepted that ASIC should act accordingly.
79 On 4 October Ms Redfern sent a memorandum to Mr Wood, copied to others, in which she noted that Mr Bathurst and Mr Payne had considered whether documents obtained on search warrant could subsequently be used in civil proceedings, and she said that "the advice from counsel is that the documents cannot be used because of the narrow terms of the provision of the Crimes Act". Following receipt of the opinion, Ms Redfern sought further advice from Mr Bathurst and Mr Payne. She took leave and was away from ASIC's premises from 5 to 15 October.
3.13 ASIC initiates general review of search warrant procedures
80 On 12 October 2001 Mr Wood initiated a general review of ASIC's search warrant procedures, in response to criticisms made by Hely J made in Williams v Keelty. The review was to be conducted by Associate Professor Susan McNicol of Monash University and Mr Ladlay, ASIC's ACT Regional Commissioner. He wrote to Associate Professor McNicol on that day, and Ms Redfern was aware that he did so.
81 Ms Redfern gave some evidence in cross-examination about her understanding of search warrant law in June and mid-October 2001 (T 1482ff, T 1867ff). She was asked whether she held the view at the time that ASIC was free to use search warrant materials for the purpose of investigating possible contraventions of s 180 of the Corporations Law, a provision with only civil consequences. She said:
- "My view at the time was that we could use search warrant material in order to investigate the conduct to consider whether there were contraventions either at criminal or civil standard in relation to directors' duties and some of the other provisions that were referred to. That was my view, rightly or wrongly."
82 When pressed further, she said:
- "… you don't have a separate investigation for either a civil or a criminal matter. You just have one investigation to consider whether you will get to a criminal or only a civil standard."
83 When asked whether she had legal advice to support her view, she said that ASIC had Mr Wigney's advice but she agreed that the view she held as to the propriety of using search warrant materials in an investigation which had a civil aspect was not supported by legal opinion. She said that the issue for her related to what could be done at the end of the investigation process if ASIC formed the view that it would not launch a criminal prosecution - that is, I take it, she was uncertain and needed further advice about the prospect that the search warrant materials (and possibly evidence derived from their use) might be excluded from evidence if the decision at the end of the investigation was to take civil rather than criminal action. She said that by October she had learned more about search warrants and had formed the view that there was no problem (T 1869).
84 Ms Redfern gave evidence (T 1862) that she did not turn her mind to ASIC's entitlements and obligations with respect to use of the One.Tel search warrant materials until about 19 October. She explained that until that time, she had a peripheral involvement in the One.Tel investigation and more heavy involvement in the asset preservation litigation, although she had given consideration to issues about the use of search warrant materials in connection with HIH.
85 This evidence was challenged, but I accept it. The word "peripheral" identifies a question of degree. Ms Redfern said, in effect, that the focus of her attention until mid-October was on the HIH litigation and the asset preservation proceeding. It is nevertheless true that she had a significant involvement in the One.Tel investigation, and I do not take her evidence as meaning to deny that this was so. She participated in the discussions which led to the extensions of the s 13 determinations, she received investigation plans and progress reports, she had a role in the preparation of the strategies and options paper, she met with the liquidators, she participated in the 18 September NECC meeting at which it was decided to focus on directors' duties, and prepared her "plan of attack" e-mail of 25 September, and she was involved in the instigation of the Consolidation Report. Her point about "peripheral" involvement was, I think, intended to explain why she did not give particular attention to the use of the search warrant materials in the One.Tel matter before 19 October.
86 In an e-mail dated 25 July 2002, Ms Redfern referred to the limitations about the use of seized materials and said they needed to be carefully considered at the outset, and the possibility that there may need to be two teams should be addressed. In their context, however, it seems to me reasonably clear that these remarks are directed to difficulties in use of the seized materials in subsequent civil proceedings, rather than in the investigation phase.
3.14 Mr Pembroke SC's advice in conference on 10 October 2001, and the developing focus on a civil penalty case
87 On 10 October, while Ms Redfern was on vacation, others in the One.Tel investigation team met again with Mr Pembroke SC and discussed a potential proceeding under s 180, and the engagement of accounting and corporate governance experts. The evidence indicates that the focus of attention at the conference was s 180 rather than other duties of directors. In particular, there is an e-mail from Mr Hogan to Ms Redfern dated 12 October which attaches a memorandum summarising the 10 October conference with counsel. The memorandum describes two causes of action for breach of s 180, namely a "systems" case (evidently based on failure to have appropriate systems in place to monitor financial performance) and a "statements" case (evidently based on failure to verify the accuracy of statements made to the market).
88 On 13 October Mr Howell sent an e-mail to Ms Redfern, telling her that a lot had happened during her vacation, observing that "Murdoch's interview just confirmed my view that all directors were negligent - Michael Pembroke agrees".
89 On the same day, Mr Howell distributed a progress report for an NECC meeting then scheduled for 16 October. The progress report included the heading "Investigation Focus", under which it was said that "the investigation is focusing on breaches of duty by directors, Rich, Keeling, Silbermann, Beck, Packer, Murdoch, Adler and Greaves between January and May 2001 in neglecting their duties in respect of the financial position of One.Tel and allowing false and misleading statements to be made to the market". According to Ms Redfern's evidence (T 2858) the reference to allowing false and misleading statements to be made to the market indicated that ss 999 and 1308 were still under consideration, and the focus of investigation had not been reduced to s 180. I shall return to this. The "persons of interest" list was revised in the progress report, to remove the names of those who were not directors of One.Tel, and to included One.Tel's non-executive directors, Messrs Packer, Murdoch, Adler and Greaves. No minutes have been produced evidencing that any NECC meeting was actually held on 16 October.
90 On 17 October, having returned from vacation, Ms Redfern reviewed the One.Tel investigation, including the Consolidation Report, Mr Hogan's e-mail of 12 October attaching a memorandum of the conference with counsel, and a transcript of interview with Mr Murdoch. In this way she became aware that Mr Pembroke had described two causes of action against the directors, each based on s 180.
91 In cross-examination, Ms Redfern did not accept that by 10 October the particular directors' duties that were being examined for the purposes of proceedings were under s 180 of the Corporations Law, but she agreed that at some stage ASIC eliminated insolvent trading from the investigation (T 2902-3). It was put to her that by October 2001 she had formed the view that she wanted to take civil penalty proceedings against at least Mr Rich, but she rejected the suggestion that she had made a decision, saying that this was only an available option and she was considering whether to advise the Commission to pursue it (T 2958), though she acknowledged that it was the most likely remedy (T 2959). She agreed that from October 2001 she personally held the view that there was sufficient evidence to bring a civil penalty proceeding against at least Mr Rich: T 2959. She insisted, however, the criminal conduct by the defendants was part of the investigation, and although less likely than a civil proceeding it had not been entirely ruled out (T 2960-1).
92 At some stage Ms Redfern made a handwritten note on Mr Hogan's memorandum summarising the 10 October conference. The note was "What about actual knowledge?" She explained in cross-examination that she regarded the s 180 case as a lower-level case, and thought that if there was actual knowledge, a different approach may have been appropriate. She wrote the note because she felt that an obvious issue was being ignored in the investigation.
3.15 Arrival of Ms Rees
93 Ms Rees became a consultant with ASIC on about 18 October, joining the investigation team as a senior lawyer (T 2896; cf T 2964). Ms Redfern agreed in cross-examination that at that time, there was no intention of taking criminal proceedings against any of the directors for breach of directors' duties, but she added that "it wasn't entirely eliminated", and said that "there were a couple of things that we were actually looking at the time in terms of back-up tapes and things like that". Her evidence that criminal prosecutions had not been entirely eliminated is consistent with the fact that in November and early December there were some fourteen s 19 examinations and interviews (conveniently listed in ASIC's principal submission, AS 45, p 49), so in mid-October the investigation was far from complete.
94 About the same time Mr Carter was engaged by ASIC to act as an investigator in the One.Tel matter. There was a team meeting on 18 October, but is not clear whether Ms Redfern was present. It appears from notes made by Mr Hogan, that there was discussion favouring the "statements" case, presumably the one identified by Mr Pembroke SC in conference on 10 October, and the notes also refer to "Tom Bathurst advice", suggesting that there was some discussion about the use of search warrant materials for civil proceedings.
3.16 Ms Redfern's e-mail of 19 October
95 Ms Redfern sent an e-mail to Mr Howell on 19 October, copied to various other people including Ms Rees, expressing her opinions as a result of the review of the materials on 17 October. She expressed the preliminary view that there was potential for a good civil case against the least Mr Rich, Mr Keeling and possibly Mr Packer, and to a lesser extent Mr Murdoch. She expressed a preference for seeking only banning and compensation orders and not pecuniary penalties, so as to avoid "the quasi criminal arguments". She said she wanted counsel's advice on the use of the material obtained under search warrant, saying:
- "We have recieved [sic] an advice from Tom Bathurst QC about the limitations of the Crimes Act and since much of the One.Tel material was received from One.Tel I wonder whether we could do anything to unravel the Crimes Act problems. Counsel should be briefed with the Bathurst advice."
96 In her affidavit made on 1 October 2004, Ms Redfern referred her e-mail of 19 October 2001 and said:
- "At the time that I sent that e-mail my concern was as to whether or not ASIC would be entitled the use in evidence (that is, to tender) documents obtained under search warrant in a civil proceeding relating to the collapse of One.Tel. I did not believe that there was any impediment to ASIC reviewing documents obtained under search warrant during the course of what I considered to be an investigation relating to various issues arising out of the collapse of One.Tel for the purpose of determining whether or not that documentary evidence was of such a kind and rose to such a level of proof as to warrant the commencement by ASIC of criminal proceedings, or whether the material instead warranted the commencement of civil proceedings."
97 In an e-mail sent on 22 October she described a brief to Mr Bathurst and Mr Payne, to address additional questions of interest to ASIC generally, namely "what can we do if we are at the end of the investigation and want to use and what if we are in the middle of both and want to use". Additional questions to counsel concerned the derivative use of materials obtained pursuant to search warrants.
3.17 Conference with Mr Pembroke SC on 24 October
98 On 24 October 2001 Ms Redfern met with Mr Pembroke SC, Mr Carter of PwC, and ASIC officers including Ms Rees. By that time she had formed the view that ASIC had a reasonable case for civil proceedings against some, at least, of the directors, according to her oral evidence. Mr Carter made detailed notes of this meeting. It appears from the notes and Mr Carter's oral evidence that at the meeting there was discussion about bringing civil penalty proceedings against directors, and how the case might be put. Mr Carter's note identified two schools of thought as to the approach and scope of the work. One was an approach based on the knowledge of the defendants ("who knew what and lied about it"), an approach said to have been favoured by Ms Redfern. The other was an approach based on the adequacy of One.Tel's reporting system, said to be favoured by Mr Carter, Mr Pembroke and Ms Rees.
99 Mr Carter noted the work to be undertaken by PwC to assist ASIC in bringing these civil penalty proceedings, but also noted ASIC was "pursuing charges under s 1317". His view after the meeting was that PwC had been engaged to assist ASIC in its deliberations as to whether to initiate a civil penalty proceeding.
3.18 Further instructions to Mr Bathurst QC and Mr Payne
100 In an e-mail to another ASIC officer on 25 October, Mr Stecher, Ms Redfern confirmed that Mr Bathurst had advised that ASIC could not use evidence from search warrants for non-criminal proceedings, and she said the advice had "huge implications", and that there might be things that could be done. She said "we are facing this in One.Tel and are seeking advice as to what action should be taken". The correspondence appears to relate to the implications of the prohibition on using search warrant materials in civil proceedings. On the same day, Ms Redfern sent an e-mail to Ms Rees, confirming that ASIC needed "warrant advice", which she said would be very important.
101 On 30 October an ASIC officer sent a memorandum of further instructions to Mr Bathurst and Mr Payne, in which she summarised their fourth joint opinion and briefed them to answer further questions. The questions were directed to practical issues but did not explore whether ASIC could use search warrant materials in an investigation with criminal and civil components.
3.19 Mr Pembroke SC's written advice of 31 October, and subsequent events
102 On 31 October 2001 Mr Pembroke SC advised in writing that he had two causes of action in mind, both under s 180, namely a failure to ensure that the board was provided with the means to monitor management so as to be satisfied that the company was being properly run, and a failure to ensure that market announcements made on behalf of the company had a reasonable factual basis. This echoes the advice Mr Pembroke gave in conference on 10 October. Ms Redfern's oral evidence was that Mr Pembroke had a particular view of the matter, that was not necessarily her view (T 2853).
103 Mr Pembroke's written advice suggested that the assistance of PwC be sought, with a view to obtaining accounting evidence to explain the lack of practical utility of the information the directors had and the significance of what they did not have, and corporate governance evidence as to the practice of reasonably prudent directors of listed companies in relation to financial information. He also advised that information be obtained from PwC on whether there was a reasonable factual basis for the market announcements that had been made, and whether the directors had knowledge putting them on notice that there was no reasonable factual basis for the announcements.
104 There is other evidence from about this time to indicate that the One.Tel investigation team was looking closely at issues concerning the actual knowledge of the directors (for example, an e-mail of Ms Rees dated 30 October 2001 and an e-mail from Mr Staples stated 31 October setting out some draft questions for Mr Carter).
105 There is a One.Tel team meeting agenda circulated on 7 November which contains a series of headings, mostly on matters of investigation, but there are a few suggesting that possible criminal offences were still under investigation - for example "s 999 Mr Rich".
106 Ms Redfern gave evidence that, by early November 2001, there was considerable discussion within ASIC as to the permissible use of search warrant material, in light of the fourth joint opinion of Mr Bathurst and Mr Payne (T 2943). On 2 November ASIC sent a letter to Mr Pembroke SC, Mr Brereton SC and Mr Stack to advise on various questions including whether ASIC could use evidence obtained under warrant to initiate further investigations in order to obtain evidence for a civil proceeding.
107 On 5 November Mr Pembroke asked Mr Carter to investigate further the "warning bells" available to the non-executive directors in relation to working capital, EBITDA and cash, what happened to debtors, and what demonstrated an obvious connection between the negligence of directors and consequences flowing to the company.
3.20 ASIC/DPP Workshop, 15 November 2001
108 An ASIC/DPP workshop was scheduled for 15 November 2001, and on 9 November Mr Ladlay circulated the agenda to various people. On the same day he wrote to Ms Redfern, saying that Mr Wood had asked him to undertake a review of search warrant procedure in light of the HIH decision, and that he would be meeting with associate Professor McNicol a few days later. He asked for a copy of Mr Bathurst’s opinion, and Ms Redfern subsequently provided the fourth joint opinion to him. Ms Redfern attended the workshop on 15 November. The first agenda item was "Related Civil and Criminal Proceedings and Issues Concerning Search Warrants". There was a paper presented on this topic, under the authorship of Paul Shaw of the DPP's office.
109 The paper referred to the ASIC/DPP guidelines and said that application should be made for a civil penalty order until the DPP had indicated to ASIC that a criminal proceeding should not be instituted. Mr Shaw explained that "search warrants are a criminal investigation tool only and cannot be used for civil proceedings." Amongst the practical lessons that might be learned from Williams v Keelty was that:
- "There may need to be some quarantining of ASIC officers after execution of search warrants, between criminal/civil penalty proceedings. This will reduce potential for allegations of impropriety but will mean a duplication of resources."
110 It appears, from some handwritten notes in evidence, that there was a One.Tel investigation team meeting on 16 November. The notes have the heading "Degree of culpability", with subheadings "1 - Dishonesty (actual knowledge), 2 - Negligence (posns as jt mgg dirs), 3 - Systems (place proper systems, alerted bd etc to problems)". I do not regard such brief notes as a reliable indication of the true subject matter of the meeting, but they provide some slight evidence that a dishonesty case against the defendants was still under consideration.
3.21 NECC meeting on 21 November
111 There was a special NECC meeting on 21 November 2001. On that day Ms Redfern sent a memorandum to various ASIC Commissioners, copied to ASIC officers, setting out her views. She said she anticipated seeking approval to commence civil penalty proceedings against Mr Rich and Mr Keeling, and that the One.Tel team would be in a position to commence such proceedings by 10 December. She noted that the team was considering whether to seek pecuniary penalties, given that they would like the opportunity to use transcripts of s 19 examinations in evidence. She said that advice was being sought but her preliminary view was that failure to seek a pecuniary penalty "will not divert regulatory impact if the overall advantage of negating the 'quasi criminal' status of the civil proceedings is achieved".
112 In a memorandum of 21 November Ms Redfern summarised the scope of ASIC's investigation. She said: "our investigations have focused on market disclosures, directors duties, false or misleading accounting and misstatements to both the market and creditors". This suggests that the criminal aspect of the investigation was a significant part of it.
113 According to a note of the NECC meeting of 21 November made on ASIC's SPEAR system, the NECC received a briefing on the status of the investigation, with presentations by Mr Carter and Mr Pembroke SC. The NECC requested further advice from Mr Pembroke on available enforcement options, and it was recorded that there would be a further meeting of the NECC on 3 December at which Mr Pembroke would present further advice.
114 Ms Rees sent an e-mail to various members of the One.Tel investigation team dated 22 November, headed "Commission briefing yesterday", which I take to be a reference to the NECC meeting. She said the Commission had requested that further advice be obtained from counsel as to a number of matters, and suggested a team meeting. She listed the matters for advice as follows:
· the nature of each offence available against the executive directors, the likelihood of success and what the remedy would be
· what potential actions would be available against the non-executive directors, the likelihood of success and what the remedy would be
· the impact of any action against the non-executive directors on the action against the executive directors
· what other and more extensive outcomes to banning orders may be available, eg compensation
· whether the evidence would support criminal proceedings against any of the directors.
115 Ms Rees' e-mail provides some significant evidence that, although the focus of attention was clearly on civil proceedings, the question of criminal proceedings against any of the directors was still under consideration on 22 November.
3.22 Counsel's further advice of 29 November, and NECC's meeting on 3 December
116 On 29 November 2001 ASIC received written advice from Mr Pembroke SC, Mr Brereton SC and Mr Stack, to the effect that ASIC would be justified in commencing a civil penalty proceeding against Mr Rich, Mr Keeling and Mr Greaves.
117 In paragraph 27 of the advice, counsel addressed the question whether the proof of the matters canvassed in the advice would be so clear as to be "beyond reasonable doubt", saying that while they were satisfied that a single judge sitting in the Corporations List of this Court would find the contraventions proved on the balance of probabilities, they did not believe that a criminal jury, charged with the responsibility deciding beyond reasonable doubt, could be so readily satisfied. They concluded that "the case is strong on the civil standard, but we do not recommend that consideration be given to a criminal prosecution".
118 The fact that, on 29 November 2001, counsel addressed the question whether a criminal prosecution should be brought and, having reviewed the evidence, advised against it, is quite a strong indication that until then, the possibility of criminal prosecution was still alive. The defendants invited me to regard paragraph 27 as merely a "sign off". I can see no basis for treating it as anything other than a simple statement of advice on a matter that at that time, counsel regarded as a matter under consideration.
119 The NECC met again on 3 December, and according to the record of the meeting made on ASIC's SPEAR system, ASIC decided at that meeting to commence and action for damages against Mr Rich, Mr Keeling, Mr Greaves and Mr Silbermann on 10 December, the day when ASIC would next be in court in respect of the asset preservation orders. The statement of claim was to be finalised by Mr Pembroke.
120 Ms Redfern's evidence was that the decision on 3 December was "in-principle approval by the Commission", subject to a number of things (T 1887). The final decision was taken later, after consultation with the DPP, but without referral back to the NECC. That evidence is supported by Ms Redfern's e-mail to the Commissioners dated 7 December 2001 (Exhibit P27/3.312).
291 It strains the imagination to see how that issue could involve any constitutional question about the protection of individual liberties against encroachment by government agencies. It would be surprising if there were any legislative policy preventing the owner of seized documents from co-operating with a regulator by consenting to use of the documents in circumstances where the regulator wishes to take civil recovery proceedings at its risk for the owner's benefit.
8.1 Efficacy of liquidators' consent, as regards future use of seized materials in a civil proceeding
292 The determination of the effect of the liquidators' consent of 7 December is made less than straightforward because the current law of search warrants blends public and private law considerations. The private law component is well established in the case law. For instance, in Jacobsen v Rogers (1995) 182 CLR 572, at 584 Mason CJ, Deane, Dawson, Toohey and Gaudron JJ described the legal effect of a search warrant as follows:
- "The warrant itself is simply a document, issued by a person with statutory power to do so, authorising the doing of acts which would otherwise be illegal [citing Reg v Inland Revenue Commissioners; Ex parte Rossminster Ltd [1980] AC 952, at 1000]. The acts which it authorises constitute an invasion of premises without the consent of the persons in lawful possession or occupation of them and the seizure of things answering the description contained in the legislation. In other words, what would otherwise be a trespass ceases to be so when done pursuant to a valid warrant."
293 At common law, there was a "prima facie immunity from seizure of papers and possessions", jealously protected by the courts: George v Rockett (1990) 170 CLR 104, at 110 (Full High Court). Indeed, except in the case of a warrant issued to search a place for stolen goods, the common law did not recognise the issue of search warrants and refused to permit a constable to enter private property without the permission of the occupier, because entry without consent was perceived to be an invasion of the right of private property: Entick v Carrington (1765) 19 State Tr 1029; 95 ER 807.
294 It is clear law that the person with a right to immediate possession of chattels may consent to conduct which would otherwise constitute conversion, and so remove the tortious character of the conduct, and the consent may be implied from conduct: Maynegrain Pty Ltd v Compafina Bank [1984] 1 NSWLR 258, at 264-5 (Privy Council). The tortious character of the conduct may also be cured by ratification or waiver, after it has occurred: Morison v London County and Westminster Bank Ltd [1914] 3 KB 356, at 373 per Lord Reading CJ; Hunter BNZ Finance Ltd v CG Maloney Pty Ltd (1998) 18 NSWLR 420, 440-1 per Giles J. If a search warrant is nothing more that an authority to do something which would otherwise be tortious, these authorities must be taken to establish that the person whose private rights have been or will be invaded by entry and seizure, without a warrant or in reliance on a warrant not properly issued, can prospectively or retrospectively remove the legal consequences of the invading conduct.
295 It would also follow that persons other than the owner/occupier would lack standing to intervene or to restrain the owner/occupier from consenting to or ratifying the conduct in question. In Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570, at 575, Hodson CJ in Eq contemplated that an application to restrain misuse of wrongfully seized documents would be an application by the owner of the documents (see also Greer v New South Wales Police [2002] NSWSC 356, at [19] per Bell J; and, more remotely, Williams v Keelty at [236] per Hely J).
296 Problems may arise, however, where persons other than the owner/occupier have an interest arguably warranting protection, such as an interest in the confidentiality of documents seized without a valid search warrant. The High Court noted in George v Rockett (at 110) that the private law analysis in terms of property rights has been supplemented by another consideration which tends to straddle the public/private division and has been increasingly stressed in modern times, namely the protection of privacy: see, for example, R v Nicholas (2000) 1 VR 356, at [84] (Supreme Court of Victoria Court of Appeal); Hunter v Southam Inc [1984] 2 SCR 145, at 157 (Supreme Court of Canada).
297 Modern search warrants are an essential part of the criminal justice system, upon which the community depends for the effective investigation and prosecution of crime. Therefore legislatures have sought to balance the interests of the community and the individual by authorising the issue and execution of search warrants only on strict terms. The conferral of statutory authority subject to statutory conditions takes the law beyond a merely private law setting.
298 The defendants submitted that statutory search and seizure provisions are "not concerned merely with making lawful what would otherwise be unlawful, but with important safeguards of fundamental constitutional importance on the rights of citizens of Australia to live in a civil society in which the use of police power is constrained and closely regulated by law": (DS 43, at [61]). The statutory conditions imposed on the search warrant procedure, on this analysis, are not merely limits on the permitted use of the material, but rather they create a positive legal obligation not to exceed the constraints that the statute imposes. The obligation exists, according to the defendants, not merely for the protection of the rights of the occupier but to safeguard the public interest in ensuring that material obtained by warrant cannot be used for any purpose other than the prosecution of crime. The defendants said (DS 43, at [62]):
- "The powers given to the police to prosecute crime - powers such as those of arrest, search and seizure and other forms of compulsion - are drastic powers which are jealously circumscribed by law. They are not to be used by a corporate regulator as a sort of Trojan horse in order to 'kick start' a civil penalty investigation."
299 That last assertion does not accurately reflect my findings of fact. It was not contended that ASIC procured the issue of the search warrants for an improper purpose of civil penalty investigation, and in fact the investigation that took place was an investigation having civil criminal and civil components.
300 In part, the defendants' submissions were directed to the proposition that any consent by the occupier cannot have a retrospective effect, to render lawful the improper conduct of public authorities who have previously failed to comply with search warrant procedures. But that is not the issue for me, in view of my findings. The question is whether the constraints surrounding the search warrant procedure have moved sufficiently far from the private law to the public law sphere that I should hold that the consent of an individual to prospective conduct that would otherwise be prohibited by law cannot be operative.
301 The defendants, in their submissions, took the court to various constitutional pronouncements against arbitrary or on lawful search and seizure, including the Fourth Amendment to the Constitution of the United States of America, s 21 of the New Zealand Bill of Rights Act 1990, s 8 of the Canadian Charter of Human Rights and Freedoms 1982, article 8(1) of the European Convention on Human Rights, and article 17 of the International Covenant on Civil and Political Rights. They asserted that the rights protected by those constitutional instruments are not merely private rights; they are rights that the public as a whole has an interest in seeing respected and observed, which inhere in the nature of our civil society (citing some observations of Kirby J in his dissenting judgment in Austin v The Commonwealth (2003) 215 CLR 185, at [255] to support the latter proposition). They emphasised that the International Covenant on Civil and Political Rights has an important role to play an Australian law by virtue of Australia's accession both to the Covenant itself and (in 1980) to its optional first protocol (citing s 138(3)(f) of the Evidence Act, Mabo v Queensland (No 2) (1992) 175 CLR 1, at 42 per Brennan J, and Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575, at [116] per Kirby J).
302 The defendants also cited judicial and academic observations as to the fundamental importance of the right to protection from the arbitrary use of power, and the duty of courts to vindicate the right both for the individual concerned and for society as a whole: George v Rockett (1990) 170 CLR 104, at 110 (Full High Court); Carroll v Mijovich (1991) 25 NSWLR 441, at 445 (Kirby P); Malone v Metropolitan Police Commissioner [1980] QB 49, at 64 (Roskill LJ); Johnson v United States 333 US 10 (1948), at 13 (US Supreme Court, Robert Jackson J); S & M Motor Repairs v Caltex Oil (1988) 12 NSWLR 358, at 373 (Kirby P); Polycarpou v Australian Wire Industries Pty Ltd (1995) 36 NSWLR 49, at 66 (Kirby P); K Mann, "Punitive Civil Sanctions: The Middleground Between Criminal and Civil Law" (1992) 101 Yale LJ 1795, at 1799. The defendants referred to similar pronouncements by government bodies including the Australian Law Reform Commission.
303 What these various pronouncements establish, with great emphasis, is the law's concern to protect individual citizens from the arbitrary and uncontrolled exercise of power by or on behalf of the State, and the interest of the whole community in ensuring that this protection is effective. They also provide indications that what is at stake in the "strict enforcement" of search warrant provisions is more than just the protection of private rights of property and privacy. In Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570, Hodgson CJ in Eq took the view (at 575) that the plaintiff's right to restrain improper use of a video taken in the course of execution of a search warrant rested on abuse of power and abuse of process rather than mere civil trespass against the occupier of the premises, although subsequently it has been suggested that the true basis for such relief is either protection of confidential information or trespass: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, at [53]-[54] per Gleeson CJ, and [104] per Gummow and Hayne JJ (Gaudron J agreeing). But the concern over protecting the individual against the arbitrary power of the State does not arise where the owner of documents freely consents to their use in litigation conducted by a regulatory agency at its risk and expense, for the potential benefit of the owner.
304 The questions that will have to be decided, sooner or later, are
· whether the law of search warrants has developed so far as to become a statutory scheme of duties and obligations which can never be abrogated by the owner/occupier, notwithstanding the private law analysis upon which the law search warrants has traditionally been based; and
· whether, if the answer the first question is in the affirmative, public duties may be enforced by third parties to the occupier/executing officer relationship (this second question is a separate question, the answer which is not entailed by the answer to the first: see Brown v United States 411 US 223 (1973), at 230 per Burger CJ, asserting that Fourth Amendment rights are personal rights which may not be vicariously asserted; see also Minnesota v Carter 525 US 83 (1998), at 88; United States v Salvucci 448 US 83 (1980), at 86-87; Rakas v Illinois 439 US 128 (1978), at 133-8).
- In my opinion, however, it is not necessary to answer these general questions in the present case.
305 The constraint upon use of the seized materials as evidence in a civil proceeding is not itself an express statutory constraint. It is, as I have shown, an implied limitation emerging out of the structure and purposes of the search warrant legislation, combined with the general proposition that if a power is conferred for a particular purpose it is limited by the purpose for which the power is conferred. Williams v Keelty and the Marshall Bell Hawkins case drew from this general proposition the more particular conclusion that seized materials could not be used as evidence in civil litigation. But it was not necessary for the judge in either case to consider whether that proposition was subject to a qualification that would permit the owner of the seized documents freely to consent to their prospective use in proposed civil litigation from which the owner would benefit.
306 I cannot see in the cases any basis for insisting that the restriction on use is absolute and not subject to such a qualification, except a literal reading of Hely J's observations in Williams v Keelty divorced from the context in which he spoke. I have already held that his Honour's observations should not be read in that way. In the Marshall Bell Hawkins case, Merkel J said (in effect) that ASIC could not use seized materials for licence revocation proceedings, having regard to Williams v Keelty and the Johns case, but then he recognised, without expressly qualifying his statement of principle, that it was open to ASIC to seek orders that would, if made, permit it to use the seized materials for that purpose. That is significant because it indicates that the constraint on user in civil litigation is not absolute. It is also relevant, by a reasonably close analogy, that in Johns, 178 CLR at 423, Brennan J treated the statutory provisions protecting the confidentiality of information obtained compulsorily by ASIC as subject to "express waiver by all affected parties". And it is relevant, though the analogy is less strong, that in Morris v Director of the Serious Fraud Office [1993] Ch 372, at 383, Sir Donald Nicholls V-C, citing other authority, said that police should not disclose seized documents "without the consent of the owner" (see also at 385).
307 I have been referred by both parties to cases dealing, in contexts quite distant from the search warrant area, with the question whether statutory provisions create private rights capable of waiver or release, or public rights which cannot be given away by any individual's assent. I do not find cases (other than the Johns and Morris cases) construing other statutes in other circumstances to be helpful here, in any specific way. They only establish, at the general level, that
· sometimes a statutory scheme operates to confer authority to override private or common law rights, in circumstances where the owner of the right may extend that authority by consent (see, for example, Wade v New South Wales Rutile Mining Company Pty Ltd (1970) 121 CLR 177, at 185, per Windeyer J; R v Ladocki [2004] NSWCCA 336);
· on other occasions, the statute operates to create public rights and obligations rather than merely an authority to override private rights, in such circumstances that it is inconsistent with the public purpose of the statutory scheme to permit an individual to waive or release his or her rights (for example, to bring an application under Family Provision Act - Re Morris (1943) 43 SR (NSW) 352, at 356; Lieberman v Morris (1944) 69 CLR 69; or to seek a maintenance order under the Family Law Act - Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432; Hyman v Hyman [1929] AC 601);
· whether the particular statutory scheme falls into one category or the other depends on the purpose of the scheme, the construction of its provisions, and the nature of the rights concerned, and it cannot be assumed that, because one of the rights conferred by the statutory scheme cannot be waived, none of them can be waived.
308 The defendants may be partially right, in that some of the statutory requirements for valid issue and execution of search warrants might create public rights which cannot be waived by any individual. But that does not mean that every right created by or under search warrant legislation is in that category. I do not need to decide the issue on a general basis. For the reasons I have given, and the reasons set out under the next heading, it seems to me that the owner of the seized materials may prospectively release or modify two specific rights, one an implied right and the other an express statutory right, namely the right to prevent the seized materials from being used in civil proceedings and the right to require the return of the materials.
309 In summary:
- (a) to the extent that the law of search warrants is still governed by private law considerations, the owner of documents seized under a search warrant may consent to the use of those documents in a manner not authorised by the warrant, just as any owner of goods may consent to a use of those goods that would otherwise constitute trespass;
(b) the constitutional and public policy considerations superimposed on the law of search and seizure in some other countries, and by international covenants adopted in Australia, do not appear to be attracted when what is at stake is the owner of seized documents consenting to their prospective use in a proposed proceeding for the owner's potential benefit;
(c) the cases that have articulated the constraint preventing seized materials from being used as evidence in a civil proceeding do not address the question whether the owner of the seized materials can give prospective consent to such use;
(d) while not addressing the consent point, Merkel J in the Marshall Bell Hawkins case proceeded on the basis that the constraint on using seized materials as evidence in a civil proceeding was not absolute, and there is some support in analogous statutory regimes for the view that the owner's consent should be given operative effect ( Johns and Morris ).
310 In my view these considerations lead to the conclusion that the freely formed consent of the owner of seized documents to their prospective use in a proposed civil proceeding for the owner's potential benefit is effective to remove the constraint that would otherwise prevent their use as evidence in the civil proceeding.
8.2 Efficacy of liquidators' consent, as regards the statutory obligation to return seized things
311 Here, there is a statutory obligation in s 3ZV(1), not expressly qualified by reference to the owner's consent. But the application of the statute leads to an entitlement on the part of the owner (or the occupier) to return of the materials, when one of the conditions of s 3ZV(1) is satisfied. Nothing in the statute would prevent the owner from returning the seized materials to the constable, or to officers of the agency to which they had been made available, after the materials had been returned in compliance with the statute. In my view, the law does not insist on the charade of delivery up immediately followed by delivery back, in a case where the common objective is for the seized materials to be retained by the constable or regulatory agency for use in a civil proceeding. That conclusion is supported by the analysis of the nature of search warrants in Jacobsen v Rogers and George v Rockett , and by the dicta in the Johns and Morris cases to which I have referred.
312 It follows that the owner of the documents may prospectively absolve the constable or regulatory agency from the statutory obligation to return the documents, by giving freely informed consent to their retention. I can see no public interest that would stand in the way of such an arrangement. There is nothing in any of the cases or the international covenants to which I have been referred that would be inconsistent with that conclusion. It is unnecessary for me to consider whether the consent can operate retrospectively to remove the legal consequences of a past failure to return the seized things.
8.3 Effect of the liquidators' consent of 7 December 2001, as a matter of law and construction
313 The instrument of consent is dated 7 December 2001 and is signed by Mr Sherman and Mr Walker, who are described in the document as "the Liquidators". It briefly describes, in numbered paragraphs, their appointment as voluntary administrators and later liquidators, the circumstances relating to ASIC's investigations (the investigations designated by minutes under s 13 of the ASIC Act being called "the Investigations"), and the issue and execution of the One.Tel warrant, and states that the seized and copied documents ("the Documents") had been made available to ASIC under s 3F(5).
314 The instrument continues:
- "1.8 The Liquidators are entitled to possession of the Documents.
1.9 The Liquidators have been informed by the Commission that the Commission does not intend to use the vast majority of the Documents in any criminal proceedings for a summary or indictable offence.
1.10 The Liquidators have been informed of the provisions of section 3ZV of the Crimes Act (1914) (Cth). The Liquidators confirm the acts required to comply with section 3ZV of the Crimes Act (1914) (Cth) are matters for the Commonwealth and/or Federal Agent Scott Sykes to determine for themselves.
1.11 The Liquidators have been informed that the Commission is continuing the Investigations.
2. CONSENT
2.1 The Liquidators consent to the Commission retaining the Documents.
2.2 The Liquidators consent to the Commission copying the Documents and retaining those copies.
2.3 The Liquidators consent to the Commission using (and having used) the Documents for the purposes of and incidental to:-
(a) conducting and continuing the Investigations;
(b) bringing civil proceedings against any or all of the former directors and officers of One.Tel Ltd; and
(c) prosecuting civil proceedings against any or all of the former directors and officers of One.Tel Limited"
315 The instrument of consent is not expressed to be a deed and no valuable consideration is identified for the consent that it contains. As far as I can see, that does not matter. The significance of the document is that it constitutes and records the liquidators' act of consent, and (there being no suggestion that the liquidators have purported or intend to resile) it is not material to inquire whether they are contractually bound to maintain their consent.
316 By clause 2.1 the liquidators consent to the retention of "the Documents". "The Documents" are defined as the documents secured upon execution of the warrant and identified in the Property Seizure Record which is annexed to the instrument of consent. The annexure lists many hardcopy documents, and also identifies the copy of the I:drive, the copy of the Lotus Notes cashflow database on CD, and copies of various computers. Therefore the consent to retainer is comprehensive, extending as a matter of construction to all the documents seized or copied during the execution of the One.Tel search warrant.
317 Paragraph 1.10 is no obstacle to this conclusion. As I construe it, that paragraph is a protection clause for the liquidators, saying (in effect) that it is up to ASIC and the executing officer to satisfy themselves about their obligations under s 3ZV. That does not detract from the scope or efficacy of the liquidators' consent to retention of the Documents.
318 On the analysis I have adopted, it was unnecessary for the liquidators to consent, as they did, to the use of the Documents for the purposes of conducting and continuing the Investigations. However, it was necessary for them to consent, as they did, to ASIC prospectively using the Documents for the purposes of and incidental to bringing and prosecuting the then proposed civil proceeding. The description of "civil proceedings against any or all of the former directors and officers of One.Tel Limited" is apt to describe the present civil proceeding, which was brought against some of the former directors and officers of One.Tel.
319 The Documents seized and copied during the execution of the One.Tel search warrant were on the premises of One.Tel. It appears from the Property Seizure Record that they were business records of the One.Tel group or copies of the contents of computers on One.Tel's premises used by One.Tel officers. I infer that One.Tel was the owner of the Documents and the occupier of the premises.
320 It was not contended that the liquidators lacked capacity or authority to consent on behalf by One.Tel, as they purported to do. It seems to me clear that, as liquidators, they had the power to do so: see Corporations Act, ss 471A and 477(2)(c), (d) and (m).
321 Therefore, as a matter of law and construction, the instrument of consent was effective to give the consent of the liquidators on behalf of One.Tel, the owner of the Documents and occupier of the premises, to their use in the present proceeding and to their retention by ASIC.
9. Effect of Mr Keeling's consent
322 Search warrants were executed on 1 June 2001 at the residences of various directors and officers of One.Tel, including Mr Keeling. ASIC has informed the court that none of the documents in the 12 volumes of exhibits to Mr Carter's reports originates from any material seized from the residential premises under the search warrants. However, ASIC seeks to tender, in its tender bundle, a single document which was originally obtained through the execution of the search warrant at Mr Keeling's residence. It is a transcript of a voicemail message obtained from Mr Keeling's home computer.
323 This document does not appear to have had any significance for Mr Carter. It does not form part of the exhibits to his reports. It is in a supplementary tender bundle exhibited to Mr Carter's affidavit of 14 April 2004, although it is not the subject of any specific comment in that affidavit.
324 There is considerable evidence concerning Mr Keeling's consent to ASIC using documents seized from his residence in connection with the present proceeding. It is unnecessary to set out the evidence in detail. It involved, at one stage, ASIC returning the seized documents to Mr Keeling, and Mr Keeling later voluntarily delivering the documents back to ASIC. That, I take it, removes any problem with respect to s 3ZV(1). Mr Keeling indicated, by e-mail in October 2002, that he would informally discover the material seized from him under search warrant once the location of the material was ascertained, and after further correspondence he eventually confirmed, in an e-mail dated 17 January 2004, that he had no objection to ASIC discovering any material, including computers, seized under search warrant from him in or about May 2001. Eventually, on 18 October 2004 Mr Keeling entered into a formal deed with ASIC in which he confirmed and ratified the giving of his consent and specifically, consented to ASIC and PwC using the documents for the investigation into the affairs of One.Tel and for bringing, conducting and continuing the present proceeding.
325 For the reasons I have given, there was no unlawfulness or impropriety with respect to ASIC obtaining the voicemail record and using it for the purposes of its single investigation, but it would be unable to use the document as evidence in, or in connection with, the present civil proceeding in the absence of an effective consent by Mr Keeling. The question posed is the same as the question posed by the liquidators' consent on behalf by One.Tel, except in one respect. Mr Keeling did not give his consent until after ASIC commenced the present proceeding. Depending upon one's interpretation of the facts, he consented in October 2002 or January 2004 or October 2004. But (on the basis that there is no issue about return of seized materials, for the reason I have explained) the only constraint upon ASIC in respect of Mr Keeling's seized materials relates to using the materials in a civil proceeding.
326 Given that only one document is to be tendered, and that it has not yet been received in evidence, it seems to me that Mr Keeling's consent, whenever precisely it was given, amounts to a prospective consent to a use that has not yet occurred. In my view Mr Keeling has effectively given his consent, in a fashion that enables ASIC to tender the document it wishes to tender, notwithstanding that the source of the document was execution of the search warrant at Mr Keeling's residence.
10. Summary of findings as to lawfulness and propriety of ASIC's conduct with respect to seized materials
327 In summary, I have reached the conclusions that:
- (a) One.Tel's written consent to the copying to CD of the Lotus Notes cashflow database was not needed, because the CD was brought to the premises rather than found at the premises, and consequently the copying of the database was authorised by s 3L(2)(c)(i) of the Crimes Act and there was no impropriety or unlawfulness in respect of that copying;
(b) the search warrant materials were made available to PwC's partners and employees pursuant to consultancy arrangements by virtue of ASIC's powers to delegate and engage consultants under the ASIC Act, consistently with s 3F(5), and therefore not illegally or improperly;
(c) the process of copying, to storage devices brought to the premises, information stored in electronic form in the course of execution of the search warrants involved the seizure of electronic things, with the consequence that the executing officer was authorised under s 3F(5) of the Crimes Act to make those electronic things available to officers of ASIC, and there was therefore no impropriety or unlawfulness involved in that process;
(d) ASIC's use of the search warrant materials, with the assistance of PwC, during the period from 1 June to 7 December 2001, in a single investigation the scope of which, throughout that period, extended to possible contraventions of the criminal provisions identified by the warrant, other criminal provisions and some civil provisions, was not improper or unlawful;
(e) neither of the conditions stipulated in s3ZV(1) had been satisfied by 7 December 2001, and consequently the statutory duty to return the One.Tel seized materials had not arisen;
(f) the liquidators' consent of 7 December 2001 was effective to authorise ASIC to use the One.Tel seized materials as evidence in, and for other purposes connected with, the present civil proceeding, and to relieve ASIC of the obligation that would otherwise have arisen at some time after 7 December to return the One.Tel seized materials to One.Tel;
(g) Mr Keeling's operative consent (whichever one it was) was effective to authorise ASIC to use the copy voicemail as evidence in the present civil proceeding, and ASIC has no obligation to return that document;
(h) assuming that, without authority, ASIC has or had possession of copies of the computer images that were made at the residences of Messrs Rich, Silbermann and Beck, which are not documents ASIC wishes to tender, I would not exclude any of ASIC's evidence on this ground.
328 This makes it unnecessary to consider any of the following matters:
· the state of mind ASIC at any time after 7 December 2001, since that question would be relevant only as to the court's discretion to admit the tendered documents under its inherent jurisdiction or s 138 of the Evidence Act, if there were some impropriety or unlawfulness associated with their acquisition or use;
· whether, as ASIC submitted, a causal connection between any impropriety or illegality and the obtaining of the evidence need be shown;
· the effect of the liquidators' deed of consent of 15 October 2004;
· whether either the 2001 consent or the 2004 consent had any retrospective effect;
· the application of s 138 of the Evidence Act, and consequently what is meant by the word "obtained" in that section;
· whether the onus of proof in respect of s 138 and the inherent jurisdiction (if it exists) would be borne by ASIC or the defendants, and how heavy that onus might be;
· whether the court's inherent power to protect the integrity of its processes by excluding evidence or staying a proceeding has survived as a basis for excluding evidence independently of s 138, or has become folded into the statutory discretion;
· whether, and if so how, the court would exercise any relevant discretion to exclude the evidence ASIC wishes to tender, for reasons relating to the search warrant issues;
· whether ASIC sought to disguise the fact that it was using search warrant material in the proceedings (an allegation going, as I understand it, to the discretionary exclusion of evidence under s 138 or the asserted the inherent jurisdiction).
329 I have received detailed written submissions on the matters that I have identified as matters not now requiring decision. Sometimes it is appropriate for a court to express views on matters that do not strictly need to be decided. Here, however, the issues addressed in submissions were difficult and the parties' approaches were widely divergent. Should it happen that my decision is reversed and some or all of these issues become live again, it will not be difficult for the parties to revise and reissue their written submissions, and at that stage the court will benefit from the thoroughness, clarity and force of the respective arguments. In the meantime, I think this is a case where it is best not to express views on matters that need not be decided.
11. Conclusion on search warrant issues
330 None of the challenges to the general admissibility of the documents ASIC wishes to tender, based on the sourcing of those documents in the search warrant materials, has succeeded.
18/02/2005 - Paragraph 37, the word "month" replaced with the word "and"Paragraph 196, the words "provided to me by Mr Henley" have been italicisedParagraph 202, second sentence of quoted passage, the word "not" has been deletedParagraph 205, the word "agencies" prior to the words "[emphasis supplied]" has been italicised - Paragraph(s) 37, 196, 202, 205 23/02/2005 - Paragraph 37, the word "month" replaced with the word "and"Paragraph 196, the words "provided to me by Mr Henley" have been italicisedParagraph 202, second sentence of quoted passage, the word "not" has been deletedParagraph 205, the word "agencies" prior to the words "[emphasis supplied]" has been italicised - Paragraph(s) 37, 196, 202, 205
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