Australian Prudential Regulation Authority v The Partners, Clayton Utz
[2003] FCA 1265
•20 OCTOBER 2003
FEDERAL COURT OF AUSTRALIA
Australian Prudential Regulation Authority v The Partners, Clayton Utz & Ors [2003] FCA 1265
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY v THE PARTNERS, CLAYTON UTZ, THE PARTNERS, FREEHILLS and PETER BRUCE DAVIS
V 668 OF 2003
NORTH J
20 OCTOBER 2003
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 668 OF 2003
BETWEEN:
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY
APPLICANTAND:
THE PARTNERS, CLAYTON UTZ
FIRST RESPONDENTTHE PARTNERS, FREEHILLS
SECOND RESPONDENTPETER BRUCE DAVIS
THIRD RESPONDENTJUDGE:
NORTH J
DATE OF ORDER:
20 OCTOBER 2003
WHERE MADE:
MELBOURNE
IN RELATION TO THE THIRD RESPONDENT, THE COURT ORDERS THAT:
1.The third respondent answer the questions put to him at the examination conducted under Part 25 Division 5 of the Superannuation Industry (Supervision) Act 1993 (Cth) on 12 June 2003.
IN RELATION TO THE THIRD RESPONDENT, THE COURT DECLARES THAT:
2.Communications concerning the subject matter of the letter dated 1 June 2000 from Velos & Davis Lawyers to M V Anderson & Co are not subject to legal professional privilege.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 668 OF 2003
BETWEEN:
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY
APPLICANTAND:
THE PARTNERS, CLAYTON UTZ
FIRST RESPONDENTTHE PARTNERS, FREEHILLS
SECOND RESPONDENTPETER BRUCE DAVIS
THIRD RESPONDENT
JUDGE:
NORTH J
DATE:
20 OCTOBER 2003
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
The applicant, Australian Prudential Regulation Authority (APRA), has made an application to the Court to exercise its powers under s 289(3) of the Superannuation Industry (Supervision) Act (Cth) (the Act) to inquire into the failure of the respondents to comply with a requirement under the Act, and to make appropriate orders and declarations.
Section 289 of the Act states as follows:
‘289. Powers of Court where non-compliance with this Act
(1)This section applies if the Regulator is satisfied that a person has, without reasonable excuse, failed to comply with a requirement made under this Act.
(2)The Regulator may by writing certify the failure to the Court.
(3)If the Regulator does so, the Court may inquire into the case and may order the person to comply with the requirement as specified in the order.’
In relation to the first two respondents, APRA has sought production of documents specified in Notices directed to them dated 15 May 2003, and issued under s 269 of the Act, and declarations that certain documents are not subject to legal professional privilege. Counsel for APRA has informed the Court that the matter has been resolved in relation to the first respondent and negotiations are underway with the second respondent.
These reasons therefore refer to the application as it relates to the third respondent, Peter Davis of Velos & Davis Lawyers. APRA seeks an order that Mr Davis answer questions that were put to him at an examination conducted under Part 25 Division 5 of the Act, and a declaration that communications concerning the subject matter of the letter dated 1 June 2000 from Velos & Davis Lawyers to M V Anderson and Co are not subject to legal professional privilege. Counsel for the third respondent, Mr Holdenson QC, said that Mr Davis neither consents nor opposes the application, and will abide by a decision of the Court as to whether the material is subject to legal professional privilege, or not.
Mr Livermore, who appeared on behalf of the applicant, relied on the affidavit of Mr Thomas Alexander Jambrich dated 21 August 2003, to support APRA’s claim. Mr Jambrich is a member of the Australian Federal Police and his affidavit explains the background to the application. He deposes that APRA commenced an investigation into the affairs of the Wall and Ceiling Superannuation Fund (the Fund) in June 2001. Mr Wayne Ridings established this Fund in 1998, and is a director of the trustee of the Fund. MV Anderson & Co is the auditor and tax agent of the Fund.
The investigation relates to a possible breach of certain investment restrictions contained in the Act, referred to as the ‘in-house asset rules’. Mr Jambrich explains that these rules are designed to help protect the retirement benefits of members by ensuring that the security of the investments of the Fund is not dependent on the success of the business activities of an employer or related party. Amendments to the Act in 1999 strengthened the in-house asset rules, so that, pursuant to s 83, a regulated superannuation fund must not acquire an in-house asset that would result in the market value ratio of the in-house assets exceeding 5 per cent. Mr Jambrich deposes that in 1999, when those amendments came into effect, at least 90 per cent of the Fund’s investments were in-house assets.
Mr Livermore explained that APRA’s investigations have identified substantial evidence that Mr Ridings and others created a series of false documents intended to deceive APRA into finding that certain investments made by the Fund were not in breach of the in-house asset rules, but fell within the exception set out in s 71A of the Act. Section 71A seeks to alleviate the effect of the amendments made to the in‑house asset rules, by making an exception in relation to investments entered into before 11 August 1999. It is alleged that after the plan to create false documents was formulated by Mr Ridings and others, three firms of solicitors were contacted on behalf of the trustee of the Fund to provide legal advice confirming that the investments fell within the exception under s 71A of the Act. In relation to Velos & Davis Lawyers, the advice sought was whether certain Heads of Agreement between the Fund and a Unit Trust was an enforceable agreement and came within the s 71A exception. A copy of a letter of advice signed by Mr Davis, dated 1 June 2000 and addressed to MV Anderson & Co, was included as an exhibit to Mr Jambrich’s affidavit.
There is further reference in Mr Jambrich's affidavit to a signed statement of Mr Richard Campbell, a former internal administrator of the Fund. Mr Campbell described the process of backdating documents in order to create a paper trail that makes it appear that transactions fell within the s 71A exception, when in truth they did not.
In response to the Notice under s 269 served on Mr Davis on 15 May 2003, Mr Davis produced a bundle of documents to APRA on 2 June 2003.
On 3 June 2003, Mr Davis was served with a Notice pursuant to s 270 of the Act to attend before an inspector for examination. He was examined on 12 June 2003 but refused to answer the questions put to him on the basis that legal professional privilege would be breached.
Mr Livermore explained that the proceeding did not intend to, nor did it need to, allege any wrongdoing whatsoever against Mr Davis. He argued that APRA was entitled to the relief sought even if, as APRA contends is the case, Mr Davis was an innocent legal representative caught up in the illegal doings of others. As Mr Davis does not oppose the making of the orders sought, and in light of the uncontested evidence in the affidavit of Mr Jambrich and the explanation and submissions made of it by Mr Livermore, I conclude that there is a colour of illegality about the transaction upon which Mr Davis was asked to advise: Bullivant v Attorney-General (Vict) [[1901] AC; O’Rourke v Darbishire ([1920] AC 581; Commissioner of Australian Federal Police v Propend Finance Pty Limited (1997) 188 CLR 501; Clements, Dunne & Bell Pty Ltd v Commissioner, Australian Federal Police (2001) 188 ALR 515. Consequently I am satisfied that it is appropriate to make the orders sought.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North. Associate:
Dated: 6 November 2003
Counsel for the Applicant: Mr G Livermore Solicitor for the Applicant: Penny Limperis Counsel for the First Respondent: No appearance Solicitor for the First Respondent: No appearance Counsel for the Second Respondent: Ms M E Kennedy SC Solicitor for the Second Respondent: Freehills Counsel for the Third Respondent: Mr O P Holdenson QC Solicitor for the Third Respondent: Velos and Davis Date of Hearing: 20 October 2003 Date of Judgment: 20 October 2003
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