Australian Securities and Investments Commission v Whitlam

[2002] NSWSC 526

Reported Decision: 42 ACSR 143
(2002) 20 ACLC 1229

New South Wales

Supreme Court

CITATION:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V WHITLAM [2002] NSWSC 526 revised - 25/06/2002
FILE NUMBER(S):	SC 4421/01
HEARING DATE(S):	11/06/02
JUDGMENT DATE:	13 June 2002
PARTIES :	Australian Securities and Investments Commission - Plaintiff Nicholas Richard Whitlam - Defendant
JUDGMENT OF:	Gzell J

COUNSEL :	Mr D R Stack - Plaintiff Mr A J Bannon SC with J Stephenson - Defendant Mr R Cobden - For Mr Dempsey
SOLICITORS:	Australian Securities and Investments Commission Lawyer Watson Mangioni Corporate and Commercial Lawyers - For the Defendant
CATCHWORDS:	PROCEDURE - Discovery - Notice to Produce - Expurgated portions of transcript of examinations - Forensic purpose - Propensity to make unbalanced and irrational statements - Fishing - Cross-examination as to credit - Proceedings for pecuniary penalities and disqualification.
LEGISLATION CITED:	Corporations Law (Cth) Corporations Act 2001 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) Evidence Act 1977 (Qld) Supreme Court Rules Rules of Court Excise Act 1901 (Cth) Customs Act 1901 (Cth)
CASES CITED:	Associated Dominions Assurance Society Pty v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250 at 254 Fried v National Australia Bank (2000) 175 ALR 194 Alister v R (1983-1984) 154 CLR 404 at 414-415 Re Emma Silver Mining Co (1875) LR 10 Ch App 194 at 197 Lucas Industries v Hewitt (1978) 18 ALR 555 R v Saleam (1989) 16 NSWLR 14 at 19 Carter v Hayes (1994) 72 A Crim R 387 at 389 Labrador Liquor Wholesale Pty Ltd v Chief Executive Officer of Customs (2001) 162 FLR 230 Hunt v Judge Russell (1995) 63 SASR 402 at 410 Bailey v Beagle Management (2001) 105 FCR 136 at 143 Sankey v Whitlam (1978) 142 CLR 1 Air Canada v Secretary of State for Trade [1983] AC 394
DECISION:	See par 16

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

THURSDAY 13 JUNE 2002

4421/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v NICHOLAS RICHARD WHITLAM

JUDGMENT

1 The plaintiff has brought proceedings against the defendant for his disqualification from managing a corporation for such period as the court determines and for his payment to the Commonwealth of pecuniary penalties of $200,000 or such other amount as the court considers appropriate in respect of each of a number of alleged contraventions of the Corporations Law (Cth) and the Corporations Act 2001 (Cth).

2 Pursuant to the Australian Securities and Investments Commission Act 2001 (Cth), s 21(3) Robert John Dempsey and Richard James Talbot were required to answer questions put to them at an examination of matters being investigated by the plaintiff. In an affidavit by Christopher Stephen D’Cotta read before me, seven matters of investigation are identified. The proceedings before the Court involve two of those matters. The plaintiff has filed and proposes to read in the proceedings, affidavits by Messrs Dempsey and Talbot in relation to those two matters. Portions of the transcripts of the examinations of Messrs Dempsey and Talbot relating to those two matters have been provided to the defendant’s legal advisers.

3 The defendant has issued a notice to produce the entirety of the transcripts. The Supreme Court Rules, Pt 36 r 16 provides that the plaintiff must produce the documents unless the court otherwise orders. The plaintiff maintains that their production, solely for the purpose of cross-examination as to credit, is an abuse of process and that the public interest in maintaining the confidentiality of examinations which are required to be held in private under the Australian Securities and Investments Commission Act 2001 (Cth), s 22 requires an immunity against production.

4 Ancillary to these submissions were those that the plaintiff was obliged to object to production because the Australian Securities and Investments Commission Act 2001 (Cth), s 127(1) required it to protect from disclosure information given to it, that the application was fishing and a disguised form of application for further discovery. As to the former submission, s 25 provides that a copy of the transcript of an examination may be provided to a legal adviser. It is thus contemplated that the plaintiff may disclose such confidential information. As to the last submission, the application is for the production of the entirety of the two documents and not, simply, for further discovery. Fishing was described in Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250 at 254 per Owen J as follows:

“A “fishing expedition”, in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not.”

In my view the application is not a fishing expedition. The nature of the material contained in the suppressed portions of the transcripts is identified in the affidavit read before me. The question is whether the defendant shows an appropriate forensic purpose in seeking access to that material.

5 The affidavits of Messrs Dempsey and Talbot and the expurgated copies of the transcripts of their examinations provided to their legal advisers were before me. Counsel for the defendant took me to various portions of the transcripts to ground the submissions that Messrs Dempsey and Talbot had a propensity to make wild and intemperate allegations. Further, the submission was made that certain questions put by the inspector to Mr Dempsey were based upon matters not contained in the portions of the transcript revealed to the legal advisers, the inference I was invited to draw being that such was contained in the expurgated portions of the transcript. It was submitted that this was sufficient to justify access to the expurgated portion of Mr Dempsey’s transcript prior to the relevant questions. Generally it was submitted that there was a legitimate forensic purpose in having access to the expurgated portions of both transcripts to determine whether that material also demonstrated a propensity to make unbalanced and irrational statements and a lack of objectivity and reliability with respect to the other matters of investigation beyond those the subject of the proceedings.

6 In Fried v National Australia Bank (2000) 175 ALR 194 the bank issued a subpoena to another bank to produce all documents constituting or evidencing or containing details of interest paid to, or income otherwise earned from or through that other bank by specified companies in specified years. The purpose was to establish if the companies had earned interest which had not been declared to the Australian Taxation Office in which event the documents could be used to attack the credit of the first applicant who had lodged the companies’ tax returns. Weinberg J set aside the subpoena. He said at 200, par [29]:

“It is not appropriate, in my view, for a court to permit a subpoena to stand which does little more than troll for documents which may be used to impugn the credit of a particular witness. This is particularly so when the documents sought have nothing to do with any of the issues in dispute in the proceedings. The court must be alert to ensure that any subpoena which is issued has a legitimate forensic purpose. That purpose must be identifiable, and likely to facilitate the conduct of the proceeding, not merely to oppress a party or witness.”

In my view the instant circumstance differ from those considered by Weinberg J. While the expurgated portions of the transcript relate to matters not the subject of the present proceedings, they do relate to the conduct of the defendant with respect to the companies the subject of the matters before the court. Integral to the plaintiff’s case are the assertions of Messrs Dempsey and Talbot. If they have a propensity for unbalanced and irrational statements and they lack objectivity and display unreliability, those are matters which would give the court grounds for concern.

7 In Labrador Liquor Wholesale Pty Ltd v Chief Executive Officer of Customs (2001) 162 FLR 230 the Court of Appeal of Queensland held that proceedings for penalties for breaches of the Excise Act 1901 (Cth) and the Customs Act 1901 (Cth), were criminal proceedings for the purposes of the Evidence Act 1977 (Qld). An application for special leave to appeal to the High Court from that decision is to be heard this month. It may be that the proceedings before this court are criminal proceedings. For present purposes, however, I assume that they are not. Nonetheless, they are proceedings which can give rise to serious disqualifications and penalties. In such proceedings any propensity of the type mentioned above displayed by key witnesses for the plaintiff, I regard as a matter of concern to the court. In my view a sufficient forensic purpose for access to the material has been demonstrated.

8 In Alister v R (1983-1984) 154 CLR 404 at 414-415 in the context of criminal proceedings, Gibbs CJ said:

“Although a mere “fishing” expedition can never be allowed, it may be enough that it appears to be “on the cards” that the documents will materially assist the defence. If, for example, it were known that an important witness for the Crown had given a report on the case to ASIO it would not be right to refuse disclosure simply because there were no grounds for thinking that the report could assist the accused. To refuse discovery only for that reason would leave the accused with a legitimate sense of grievance, since he would not be able to test the evidence of the witness by comparing it with the report, and would be likely to give rise to the reproach that justice has not been seen to be done.”

I adopt a similar approach to these proceeding which may carry the sorts of pecuniary penalty and disqualification mentioned at the outset.

9 I am fortified in my approach by the authorities referred to in Fried at 199 par [24] for the proposition that it may be legitimate to issue a subpoena directed to a third party in order to obtain documents which are to be used solely to impeach the credit of a witness – Re Emma Silver Mining Co (1875) LR 10 Ch App 194 at 197, Lucas Industries Ltd v Hewitt (1978) 18 ALR 555, R v Saleam (1989) 16 NSWLR 14 at 19, Carter v Hayes (1994) 72 A Crim R 387 at 389 and Hunt v Judge Russell (1995) 63 SASR 402 at 410.

10 I am also fortified by the following observation of a Full Court of the Federal Court in Bailey v Beagle Management (2001) 105 FCR 136 at 143:

“Thirdly, even if the notices to produce are properly to be regarded as fishing, that concept has undergone substantial rethinking in this Court in recent years. In as number of cases it has been pointed out that O 15A, r 6 (discovery before action) expressly contemplates what once might have been castigated as fishing and that it would be incongruous if the power to order discovery were less extensive in favour of a party to a proceeding properly brought in the Court than in favour of someone unable for lack of evidence to mount a case : Caltex Refining Co Pty Ltd v Amalgamated Metal Workers Union (1990) 51 IR 113, Trade Practices Commission v CC (NSW) Pty Ltd (1995) 58 FCR 426 at 436 (Lindgren J), Treasurer of the Commonwealth v Canwest Global Communications Corp [1997] FCA 578 (Full Court), Microsoft Corporation v Adelong Electronics Pty Ltd ( t/as Ade Computers ) [1997] FCA 224 (Burchett J), Bertran v Vanstone [1999] FCA 1753 at [18]-[23] (Kenny J), Donnelly v Davison (2000) 105 FCR 1 (Branson J). Also one should not lose sight of what the majority of the High Court in G rant v Downs (1976) 135 CLR 674 at 685 noted as the public interest

“… which requires that in the interests of a fair trial litigation should be conducted on the footing that all relevant documentary evidence is available”.”

The comparable provision in the Rules of Court is Pt 3 r 1.

11 The utility of granting production to the unexpurgated transcripts was also raised. It was said that it would lead to a trial within a trial. It was said that any tender of the transcripts would be rejected by the court. Those are matters for the court to consider in due course. They do not, in my view, deny access otherwise allowable for the forensic purpose above identified.

12 The plaintiff objects to the production of unexpurgated copies of the transcripts on the basis of public interest immunity. I am thus required to consider two conflicting aspects of the public interest – whether harm would be done by the production of the documents and whether the administration of justice would be frustrated or impaired if the documents are withheld and I am required to decide which of those aspects predominates (Sankeyv Whitlam (1978) 142 CLR 1).

13 Both Messrs Dempsey and Talbot were represented and opposed production, supporting the submissions on behalf of the plaintiff, and adding their own submissions. It was pointed out on behalf of Mr Talbot that he was informed that his examination would be conducted in private and it was therefore his understanding that the evidence would remain confidential. It was submitted that it would be unconscionable and unfair to him to now permit the disclosure and use of his evidence.

14 It has been suggested that where the Crown objects to the production of documents on grounds of public interest immunity, a judge should not look at the documents unless persuaded that inspection would be likely to satisfy the judge the production should be ordered (Air Canada v Secretary of State for Trade [1983] AC 394). Counsel for the plaintiff agreed with my suggestion that if I was against him in relation to the above issues, I should inspect the documents in order to determine whether the expurgated portions of the transcripts should be produced.

15 I have concluded that my inspection of the unexpurgated transcripts is likely to satisfy me that an order for production should be made. I regard the public interest in preparation of the defence case as outweighing the objections of Messrs Dempsey and Talbot and the plaintiff. In particular, I regard the circumstance that portions of the transcripts have been produced consistent with the contents of the affidavits sworn by both gentlemen, as significant. Since confidentiality with respect to portion of their examination has thus been lifted, I regard the lifting of confidence with respect to the balance as of lesser significance than the testing of the evidence by the defence for a propensity of the nature discussed above.

16 I direct the plaintiff to produce to me a copy of the record made in accordance with the Australian Securities and Investments Commission Act 2001 (Cth), s 24(1) of the examinations of both Messrs Dempsey and Talbot. I will make further orders once I have perused the documents.

Last Modified: 06/26/2002