Australian Securities and Investments Commission v Macdonald (No 9)

[2009] NSWSC 13

CITATION:	Australian Securities and Investments Commission v Macdonald (No 9) [2009] NSWSC 13
JUDGMENT DATE :	2 February 2009
JUDGMENT OF:	Gzell J
DECISION:	Legal professional privilege in the documents abrogated.
CATCHWORDS:	EVIDENCE - Client Legal Privilege - Documents produced in answer to a subpoena - Objection that privileged documents for purpose of Uniform Civil Procedure Rules 2005, r 1.9(3) - Legal professional privilege abrogated under James Hardie (Investigations and Proceedings) Act 2004 (Cth), s 4(1) in relation to James Hardie material which includes books and information of which ASIC requests or requires production or provision - Civil Procedure Act 2005, s 68 provides that a court may by subpoena order a person to produce any document to the court - Whether the documents were not James Hardie material because produced by court order and not at request or requirement of ASIC
LEGISLATION CITED:	James Hardie (Investigations and Proceedings) Act 2004 (Cth) Evidence Act 1995 Australian Securities and Investments Commission Act 2001 (Cth) Civil Procedure Act 2005 Freedom of Information Act 1982 (Cth) Archives Act 1983 Proceeds of Crime Act 2002 (Cth)
PARTIES:	Australian Securities and Investments Commission (Plaintiff) Peter Donald Macdonald (First Defendant) Peter James Shafron (Second Defendant) Phillip Graham Morley (Third Defendant) Michael Robert Brown (Fourth Defendant) Michael John Gillfillan (Fifth Defendant) Meredith Hellicar (Sixth Defendant) Martin Koffel (Seventh Defendant) Geoffrey Frederick O'Brien (Eighth Defendant) Gregory James Terry (Ninth Defendant) Peter John Willcox (Tenth Defendant) ABN 60 Pty Ltd (Eleventh Defendant) James Hardie Industries NV (Twelfth Defendant)
FILE NUMBER(S):	SC 1490/2007
COUNSEL:	Mr A Bannon SC/ Mr R Beech-Jones SC/ Ms D Hogan-Doran/ Ms S Pritchard / Ms J Single/ Mr A Kuklik (Plaintiff) Mr S Finch SC/ Mr D Studdy SC/ Mr D Mackay (First Defendant) Mr B Walker SC/ Mr M Holmes QC/ Mr R Lancaster/ Mr N Owens (Second Defendant) Mr B Oslington QC/ Mr R Dick/ Mr N Bender (Third Defendant) Mr T Bathurst QC/ Mr R Whitington QC/ Mr R Hollo/ Mr R Hardcastle/ Mr I Colquhoun (Fourth to Seventh Defendants) Mr P Wood/ Mr M Henry (Eighth Defendant) Mr R McHugh SC/ Mr S Nixon (Ninth Defendant) Mr T Jucovic QC/ Mr R Scruby (Tenth Defendant) Mr I Pike (Eleventh Defendant) Mr A Meagher SC/ Ms K Morgan (Twelfth Defendant)
SOLICITORS:	Clayton Utz (Plaintiff) Minter Ellison (First Defendant) Middletons (Second Defendant) Henry Davis York (Third Defendant) Atanaskovic Hartnell (Fourth to Seventh Defendants) Arnold Bloch Leibler (Eighth Defendant) Blake Dawson (Ninth Defendant) Kemp Strang (Tenth Defendant) Baker & McKenzie (Eleventh Defendant) Mallesons Stephen Jaques (Twelfth Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

MONDAY 2 FEBRUARY 2009

1490/07 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v PETER DONALD MACDONALD & ORS (NO 9)

EX TEMPORE JUDGMENT

1 James Hardie Industries NV, the 12th defendant, objects to the production of five documents in answer to the second of three subpoenas issued to Atanaskovic Hartnell.

2 The second subpoena was issued on 15 December 2008 and required production of originals and copies of all documents evidencing or incorporating their retainer by JHINV and its Supervisory Board of Directors on or about 11 August 2004 to provide them with advice on matters arising out of the Special Commission of Inquiry into the Medical Research and Compensation Foundation.

3 The subpoena also sought the production of copies of all accounts issued by them to JHINV and/or its Supervisory Board of Directors from on or about 11 August 2004 in connection with the provision of advice by them and a Dutch law firm, De Brauw Blackstone Westbroek, in answer to requests for advice immediately prior to the release of the report of the Inquiry as to the requirements applicable under Dutch law and JHINV’s articles of association for directors to make declarations of interests having regard to the Inquiry’s findings.

4 The subpoena also sought production of copies of all accounts issued by them to JHINV and/or its Supervisory Board of Directors in connection with advice sought from them and De Brauw during the first half of 2005 as to the manner of updating directors’ declarations of interests and how voting on decisions relating to negotiations with the New South Wales government regarding the terms of a binding agreement for JHINV to provide further funding for asbestos claimants should take place.

5 The basis for the objection is that the documents are privileged documents for the purpose of the Uniform Civil Procedure Rules 2005, r 1.9(3) as they contain privileged information as that term is defined in the Dictionary. That definition includes information of which evidence could not, by virtue of the operation of Division 1 of Part 3.10 of the Evidence Act 1995, be adduced in the proceedings over the objection of any person. Section 118 of the Evidence Act, which is in Division 1 of Part 3.10, protects client legal privilege. It provides, relevantly for present purposes, that evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of a confidential communication made between the client and a lawyer for the dominant purpose of the lawyer providing legal advice to the client.

6 Redactions of the documents, obliterating the portions claimed to be privileged information, have been produced. JHINV submits that the redacted portions disclose the substance of confidential instructions and advice, and not merely that advice was sought.

7 The Australian Securities and Investments Commission, the plaintiff, does not dispute that a solicitor client relationship existed between Atanaskovic Hartnell and JHINV. Nor does it dispute that the documents may contain privileged information. It submits that the privilege is abrogated under the James Hardie (Investigations and Proceedings) Act 2004 (Cth), that JHINV has waived privilege and that the redacted portions of the documents may not reveal the substance of legal advice as distinct from the fact of its provision.

8 The abrogation in question is contained in s 4(1) of the James Hardie (Investigations and Proceedings) Act. It is in the following terms:

“Legal professional privilege is abrogated in relation to James Hardie material for the purposes of, or in connection with:
(a) James Hardie investigation; or
(b) James Hardie proceeding.”

9 James Hardie material is a defined in s 3 of the James Hardie (Investigations and Proceedings) Act. Relevantly for present purposes paragraphs (c) and (d) of the definition include books and information of which ASIC requests or requires the production or provision. They are in the following terms:

“(c) books that, after the commencement of this Act, ASIC, an ASIC delegate or the DPP requests or requires the production of, or receives, for the purposes of, or in connection with, a James Hardie investigation or a James Hardie proceeding;
(d) information that, after the commencement of this Act, ASIC, an ASIC delegate or the DPP requests or requires the provision of, or receives, for the purposes of, or in connection with, a James Hardie investigation or a James Hardie proceeding;”

10 Books are defined widely in terms of the Australian Securities and Investments Commission Act 2001 (Cth), s 5(1) to include:

A register;
Financial reports or financial records, however compiled, recorded or stored;
A document;
Banker’s books; and
Any other record of information.

11 HINV submits that the abrogation does not apply because the documents produced in answer to the subpoena were not requested or required by ASIC. It submits that they were produced by order of the court. The Civil Procedure Act 2005, s 68 provides that the court may order attendance or production of documents by a person by subpoena. It provides:

“Subject to rules of court, the court may, by subpoena or otherwise, order any person to do either or both of the following:
(a) to attend court to be examined as a witness,
(b) to produce any document or thing to the court.”

12 The documents under challenge were produced under subpoena and therefore by order of the court. But the question remains whether their production was requested or required by ASIC in terms of paragraphs (c) and (d) of the definition of James Hardie material.

13 Legal professional privilege is a fundamental common law right. But parliament may abrogate it. I am mindful of the proposition that any abrogation of common law rights and privileges must be in clear terms and for the proper administration of justice. But I do not accept the submission of JHINV that the documents are not James Hardie material.

14 Section 4 of the James Hardie (Investigations and Proceedings) Act goes to considerable length to make plain that legal professional privilege is abrogated with respect to James Hardie material, not only in a James Hardy investigation but also in a James Hardie proceeding. So much is plain from the terms of s 4(1). But the section goes further to enforce the terms of s 4(1). Section 4(2) provides that, without limiting the generality of s 4(1), a claim of legal professional privilege in relation to James Hardie material does not prevent an authorised person from requesting or requiring the production or provision of James Hardie material or exercising power under a warrant issued under s 36 or s 37 of the Australian Securities and Investments Commission Act in relation to James Hardie material or from receiving or using James Hardie material for the purposes of, or in connection with, a James Hardie investigation or a James Hardie proceeding.

15 The clear intention demonstrated by this provision is that James Hardie material should be available for use, without the restrictions usually accorded to legal professional privilege, in a James Hardie proceeding as well as in a James Hardie investigation and that authorised persons should not be prevented from exercising their investigative powers.

16 An authorised person is defined in s 3 of the James Hardie (Investigations and Proceedings) Act to mean ASIC, an ASIC delegate, a person exercising or who has exercised a power under a warrant issued under s 36 or s 37 of the Australian Securities and Investments Commission Act, the DPP and a person who has instituted a James Hardie proceeding or caused a James Hardie proceeding to be begun or carried on.

17 But s 4 of the James Hardie (Investigations and Proceedings) Act goes further to enforce this intention. Section 69 of the Australian Securities and Investments Commission Act provides that where a lawyer is required to give information or produce a book and that would involve disclosure of a privileged communication, the lawyer is entitled to refuse to comply unless the person to whom, or by or on behalf of whom, the communication was made, and in the case of a body corporate being would up, the liquidator, consents. Section 4(3) of the James Hardie (Investigations and Proceedings) Act provides that to avoid doubt, s 69 does not apply in relation to James Hardie material for the purposes of, or in connection with, a James Hardie investigation or a James Hardie proceeding.

18 And s 4(4) of the James Hardie (Investigations and Proceedings) Act further enforces the legislative intention that James Hardie material should be available to be tendered as evidence in a James Hardie proceeding. It provides that without limiting the generality of s 4(1), despite Division 1 of Part 3.10 of the Evidence Act 1995, or a similar law of a State or Territory and s 76(1)(d) of the Australian Securities and Investments Commission Act a claim of legal professional privilege in relation to James Hardie material does not prevent that material from being admissible in evidence in a James Hardie proceeding.

19 It is not only a claim of legal professional privilege that is abrogated by the James Hardie (Investigations and Proceedings) Act. Section 4A(1) abrogates professional confidential relationship privilege in relation to a James Hardie proceeding. It provides:

“Professional confidential relationship privilege does not apply in relation to James Hardie material for the purpose of, or in connection with, a James Hardie proceeding.”

20 The intention is that all forms of professional privilege in relation to James Hardie material are abrogated so far as a James Hardie proceeding is concerned.

21 To limit the abrogation and avoid general claims for its application both a James Hardie investigation and a James Hardie proceeding are defined in terms of specific events.

22 A James Hardie proceeding is defined in s 3 of the James Hardie (Investigations and Proceedings) Act to mean a proceeding ASIC, an ASIC delegate or the DPP institutes, causes to be begun or causes to be carried on, relating to conduct engaged in by a body corporate that is part of the James Hardie Group or a person who is, or was, an officer, employee or professional adviser of such a body corporate that relates to a thing that is, has been or could have been, the subject of a James Hardie investigation.

23 A James Hardie investigation is defined in s 3 of the James Hardie (Investigations and Proceedings) Act in terms of specific events that may be described thus:

The financial position of the James Hardie Group and the entities within it and their ability to meet liabilities at any time;
The restructure of the James Hardie Group;
The appointment of directors to named entities;
The conduct of officers, employees or professional advisers to an entity within the James Hardie Group if the conduct may have affected the ability of the entity to meet liabilities, related to the restructure of the James Hardie Group or related to the appointment of directors to the named entities;
An event to which reference is made in the James Hardie Special Commission of Inquiry report or a James Hardie Special Commission of Inquiry hearing; and
Prescribed events relating to the James Hardie Group or entities within it.

24 Further limitation on abrogation is contained in s 4(5) of the James Hardie (Investigations and Proceedings) Act. It provides that any claim of legal professional privilege by an authorised person in relation to James Hardie material is not abrogated and s 4A(2) provides that the section does not apply to any claim of professional confidential relationship privilege by an authorised person in relation to James Hardie material. Section 5 preserves legal professional privilege, notwithstanding s 4, in respect of specified sections of the Freedom of Information Act 1982 (Cth), the Archives Act 1983 (Cth) and the Proceeds of Crime Act 2002 (Cth). Finally, s 6 provides that the Act does not otherwise abrogate or affect the law relating to legal professional privilege or professional confidential relationship privilege.

25 Thus the areas of operation of the abrogations in s 4(1) and s 4A(1) of the James Hardie (Investigations and Proceedings) Act are strictly limited. There is no intention to intrude upon the public benefit afforded by the privileges beyond that specified in the legislation.

26 But where the privileges are excluded, the legislative intention is that records, books and information relevant to a James Hardie investigation or a James Hardie proceeding can be used freed from the claim of privilege. The other components of the definition of James Hardie material in s 3 of the James Hardie (Investigations and Proceedings) Act also support this conclusion. They are:

Records made, kept or received by the James Hardie Special Commission of Inquiry;
Books that, after the commencement of the Act, a person takes possession of, or secures against interference, under a warrant issued under s 36 of the Australian Securities and Investments Commission Act for the purpose of, or in connection with, a James Hardie investigation or a James Hardie proceeding ; and
Other books, or information, relevant to a James Hardie investigation or a James Hardie proceeding that an authorised person receives after the commencement of the Act.

27 The intention is that all of this material may be adduced in evidence in a James Hardie proceeding.

28 If the view proposed by JHINV is correct it means that, notwithstanding the initiation of a James Hardie proceeding, ASIC cannot use the court procedure for production of documents under subpoena but must use its powers under the Australian Securities and Investments Commission Act notwithstanding that they are directed to investigative activity rather than court proceedings.

29 A James Hardie proceeding is one of only two situations in which the abrogations apply. It will usually represent the culmination of the other situation, a James Hardie investigation.

30 An interpretation that excludes abrogation with respect to material obtained by ordinary court process in a James Hardie proceeding is contrary to the legislative intention I have described.

31 I was pressed by the parties with various extracts from the explanatory memorandum that accompanied the introduction of the James Hardie (Investigations and Proceedings) Bill 2004 to the House of Representatives. But, as is typical of such documents, it says little beyond a précis of the Bill. I was not assisted by the references to it.

32 In my view the solution to this problem lies in an interpretation of paragraphs (c) and (d) of the definition of James Hardie material in s 3 of the James Hardie (Investigations and Proceedings) Act that does not exclude a court order additional to a request or requirement by ASIC or the other specified entities.

33 In this case that is a James Hardie proceeding, ASIC requested the production of books under paragraph (c) and requested the provision of information under paragraph (d) when it sought the leave of the court to issue the subpoena to JHINV. Further, ASIC demonstrated its requirement that the books be produced and the information be provided when it sought the leave of the court to issue the subpoena. The fact that the books were produced and the information was provided under court order does not abrogate the fact that a request or requirement was made by ASIC.

34 In my view, the objection to the production of the five documents in question by JHINV should be overruled. That being so, it is unnecessary for me to consider the further arguments of ASIC that JHINV had waived privilege with respect to the documents and that some of the redacted material may not have disclosed the substance of any legal advice as distinct from the fact of its provision.

35 I therefore overrule the objection of JHINV to the production of the five documents in question. I rule that legal professional privilege with respect to them is abrogated under s 4(1) of the James Hardie (Investigations and Proceedings) Act 2004 (Cth). I rule that the documents be produced to the court. I grant ASIC access to the documents other than those with respect to which an objection is taken that the redacted portions are non-responsive to the subpoena. I order that the digital content of my reasons for judgement be entered upon the court record database after its inclusion in Caselaw.

**********