BCEG International (Australia) Pty Ltd v Xiao (No 2)

[2023] NSWSC 289

Supreme Court

New South Wales

Medium Neutral Citation:

BCEG International (Australia) Pty Ltd v Xiao (No 2) [2023] NSWSC 289

Hearing dates:

24 March 2023

Date of orders:

24 March 2023

Decision date:

24 March 2023

Jurisdiction:

Equity

Before:

Darke J

Decision:

Order that a notice to produce be set aside.

Catchwords:

CIVIL PROCEDURE – notice to produce issued pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 34.1 – application to set aside – where the first and second defendants have been found guilty of contempt – where the first and second defendants are exposed to penalties for contempt – whether the privilege against exposure to a penalty can be invoked to set aside the notice to produce – whether the first and second defendants waived the privilege against exposure to a penalty by serving affidavits in relation to the penalty hearing – notice to produce set aside – held that the privilege against exposure to a penalty remains available notwithstanding findings of guilt for contempt – held that the mere service of affidavits does not constitute a waiver of the privilege against exposure to a penalty beyond perhaps the contents of the affidavits themselves

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), rr 21.10, 34.1

Cases Cited:

Deputy Commissioner of Taxation v Shi (2021) 95 ALJR 634; [2021] HCA 22

Naismith v McGovern (1953) 90 CLR 336

Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328

Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat and Live-stock Corporation (1979) 42 FLR 204

Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; [2004] HCA 42

Sorby v Commonwealth (1983) 152 CLR 281

The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; [2002] HCA 49

Category:

Procedural rulings

Parties:

BCEG International (Australia) Pty Ltd (Plaintiff)
Yu Xiao (First Defendant)
Yanying Chen (Second Defendant)
Interlink Laboratory Pty Ltd (Third Defendant)
Interlink Wagga Central Pty Ltd (Fourth Defendant)
West Wyalong Marketplace Pty Ltd (Fifth Defendant)

Representation:

Counsel:
Mr N D Riordan (Plaintiff)
Mr J C Giles SC with Mr B Le Plastrier (Defendants)

Solicitors:
Thomson Geer Lawyers (Plaintiff)
HWL Ebsworth Lawyers (Defendants)

File Number(s):

2019/310768

Publication restriction:

None

Judgment – EX TEMPORE

1. Consequent upon the judgment I gave in this matter on 8 February 2018, the Court made orders giving effect to my conclusions that each of the first, second, fourth and fifth defendants were guilty of contempt or contempts of court. A hearing on penalty is listed before me on 30 March 2023. Directions have been made for the service of evidence and written submissions in respect of that hearing.

2. On 2 March 2023, the plaintiff served upon the first and second defendants a notice to produce for inspection, the terms of which would require various documents, as described in the ten paragraphs of the notice, to be produced for inspection by the plaintiff. The notice was evidently intended to be a notice served pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 21.10. The parties fell into dispute in relation to the notice, and on 21 March 2023 the first and second defendants filed a Notice of Motion seeking an order that the notice to produce be set aside. The motion is supported by the affidavit of the defendant's solicitor, Mr Neil Wallman, a partner of HWL Ebsworth Lawyers, affirmed on 20 March 2023.

3. The motion is opposed by the plaintiff, although it should be noted that it has recently served a further notice to produce, this time pursuant to UCPR r 34.1, in terms almost identical to the notice served on 2 March 2023. Counsel for the plaintiff indicated that the plaintiff would be content to proceed on the basis that the second notice is the process to which the application to set aside relates. Senior Counsel for the first and second defendants, after submitting that the first notice to produce was not properly issued within the ambit of the power under UCPR r 21.10, agreed to proceed on the basis suggested. In these circumstances, the first notice to produce should be taken to be withdrawn. A note to that effect will be included in the Court's orders to be made later today. It is not necessary to say anything further about that notice.

4. The first and second defendants raise a number of arguments as to why the second notice to produce should be set aside, either wholly or at least in part. The primary argument is that the notice should be set aside in circumstances where the first and second defendants invoke the privilege against exposure to a penalty.

5. In Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 at 335-6 Mason ACJ, Wilson and Dawson JJ said:

It is well settled that “a party cannot be compelled to discover that which, if answered, would tend to subject him to any punishment, penalty, forfeiture, or ecclesiastical censure” to use the words of Bowen L.J. in Redfern v. Redfern...Indeed, in a civil action brought merely to establish a forfeiture or enforce a penalty the rule is that neither discovery nor interrogatories will be allowed (In re A Debtor; Associated Northern Collieries). See generally the discussion by Deane J. in Refrigerated Express Lines (A/asia) Pty. Ltd. v. Australian Meat and Live-stock Corp.

6. In The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; [2002] HCA 49, Gleeson CJ, Gaudron, Gummow and Hayne JJ said at [12]-[13]:

Pyneboard, which was decided prior to Re Bolton; Ex parte Beane, was concerned not with legal professional privilege, but with the privilege against exposure to penalties – a privilege which all members of the Court in Pyneboard treated as separate and distinct from the privilege against incrimination. In that case, it was held that neither a person nor a corporation served with a notice under s 155(1) of the Act could refuse to comply with the notice on the ground that compliance might expose that person or corporation to a civil penalty.

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

7. Further, at [31], their Honours referred to Naismith v McGovern (1953) 90 CLR 336 at 341-2 where it was stated by Williams, Webb, Kitto and Taylor JJ:

Originally orders for discovery were not obtainable at common law, except to a limited extent, and a party to a common law action who desired general discovery had to proceed by a bill in equity. But the Court of Equity would not make an order for discovery or for the administration of interrogatories in favour of the prosecutor whether the prosecutor was the Crown or a common informer or any other person where the proceeding was of such a nature that it might result in a penalty or forfeiture: ‘nemo tenetur seipsum prodere’. When discovery and interrogatories were provided for under the rules made under the Judicature Act the same principle was applied.

8. In Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; [2004] HCA 42, a question arose as to whether the privilege applied in circumstances where the relevant proceedings were said to have a protective rather than a punitive purpose. Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ rejected that reasoning at [30]. Their Honours stated at [31] that the question whether the privilege against exposure to penalties applies requires consideration of the kinds of relief which are sought in the proceedings. In that case, it was held that an order for discovery made against the appellants should not have been made. At [39] their Honours explained:

The primary judge ordered that the appellants make discovery of documents by verified list. That order would permit the appellants to object to production of any document on a ground of privilege. At first sight, that might suggest that the appellants’ challenge to the order for provision of a verified list of documents is premature. That is, it might suggest that any question of privilege is one about privilege from production rather than privilege from making discovery. That is not so. As Isaacs J pointed out in R v Associated Northern Collieries, once it is determined that the proceedings expose a person to penalty, the proper course is to refuse any order for discovery…

9. The present proceedings are contempt proceedings where the plaintiff seeks orders that the defendants, and in particular the first and second defendants, be punished for contempt, including by being imprisoned. In these proceedings, the first and second defendants are plainly exposed to a penalty.

10. However, the plaintiff submitted that the privilege against exposure to a penalty is not engaged in the current circumstances, because liability has already been established. Reference was made to the statement of Deane J in Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat and Live-stock Corporation (1979) 42 FLR 204 at 207 where his Honour said that it is a well established principle that a defendant in proceedings which are solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents which may assist in establishing his liability to the penalty. The discussion by Deane J of the privilege and its effect upon the availability of discovery was referred to in the joint judgment in Pyneboard Pty Ltd v Trade Practices Commission (supra) quoted earlier. The plaintiff submitted that once someone has been "found liable for contempt" the privilege is no longer engaged or available, because there is no real risk of conviction; the person has already been convicted. Reference was made to authorities including Sorby v The Commonwealth (1983) 152 CLR 281 at 290 per Gibbs CJ, and Deputy Commissioner of Taxation v Shi (2021) 95 ALJR 634; [2021] HCA 22 at [35] per Gordon J.

11. I am unable to accept those submissions of the plaintiff. The privilege invoked by the first and second defendants is the privilege against exposure to a penalty. That is a privilege distinct from the privilege against self-incrimination which, it may be assumed for the purposes of argument, is no longer available in respect of the charges of contempt which have now been established. In my opinion, the separate privilege against exposure to a penalty remains available to the first and second defendants, notwithstanding that they have been found guilty of various contempts of court.

12. The first and second defendants remain in these proceedings exposed to penalties. Moreover, it is not entirely accurate to say, as the plaintiff does, that the first and second defendants have been "found liable for contempt". Rather, they have been found guilty of contempt or contempts of court. Those findings do not in and of themselves create any liability. To paraphrase Deane J, liability for a penalty has not been established. The findings mean that the proceedings continue on to consider the question of what, if any, punishment should be imposed for the contempts found. That is the very exposure to a penalty that gives rise to the privilege that is now invoked by the first and second defendants. For similar reasons, it is not correct to assert, as the plaintiff does, that the privilege serves no purpose as "liability has been established" or that a legal obligation to produce documents in answer to a notice to produce will not add to the jeopardy faced by the first and second defendants. Those defendants evidently seek to resist production of documents that might assist the plaintiff, which is acting effectively as the prosecutor, to establish facts that might lead to the imposition of a greater penalty than would otherwise be the case.

13. The plaintiff then submitted that even if the privilege continued after the first and second defendants were found to be in contempt, the first and second defendants waived the privilege by serving their affidavits in relation to the penalty hearing. Those affidavits have been marked as exhibits on this application. It was submitted that the waiver extends at least to the issues about which they have elected to go into evidence.

14. Again, I am unable to accept the plaintiff's submissions. I accept, of course, that the privilege may be waived, either expressly or impliedly. However, the mere service of the affidavits in advance of the penalty hearing, and in accordance with directions made by the Court for that purpose, does not in my view amount to any waiver of the privilege against exposure to a penalty, beyond, perhaps, the contents of the affidavits themselves. I think that is so even if the acts of service of the affidavits are regarded as voluntary acts on the part of the first and second defendants. I see no present inconsistency between the service of those affidavits, which may, but might not, be sought to be read at the penalty hearing, and the maintenance of the privilege otherwise. Whilst it may be considered likely that the first and second defendants will be called at the penalty hearing, it is by no means inevitable.

15. I would add that in contempt proceedings such as this, where the liberty of the first and second defendants is at stake, it is appropriate to allow them to take a step by step approach to their defences, including as to the giving of evidence, even if that approach might not be permitted in the interests of case management principles in civil litigation of a more usual type.

16. Nevertheless, it should be recognised that if, at the penalty hearing, either or both of the first and second defendants are called, and if their affidavits are sought to be read, questions of waiver will then arise for consideration and determination. It may be, as I think Senior Counsel for the first and second defendants accepted, that in those circumstances the plaintiff would be entitled to require them to produce documents to the extent that waiver is established. I would urge the parties to confer about these matters in advance of the hearing and seek to reach some agreement about the scope of such production in those events. That would assist in minimising delay and disruption in the course of the hearing.

17. The conclusions I have expressed above that the privilege against exposure to a penalty continues to be available to the first and second defendants, and that there has not been a waiver of the privilege, beyond, perhaps, the contents of the served affidavits themselves, lead to the conclusion that the second notice to produce dated 22 March 2023 should be wholly set aside. The limited waiver to which I have referred does not justify any such notice requiring the production of documents.

18. It is not necessary to consider various other arguments raised in relation to the notice to produce, including as to the breadth of the categories and the question of whether parts of it could be justified on the basis that there has also been a waiver of client legal privilege. However, I will state that were it necessary to consider that question, I would not have found that the paragraphs of the served affidavits that are referred to in the plaintiff's submissions gave rise to any waiver of client legal privilege so as to justify paragraphs 9 and 10 of the notice to produce. I accept the plaintiff's submission that it is very likely that the first and second defendants (or at least the first defendant) received legal advice about the orders made on 28 April 2022 and 8 June 2022. However, I do not think that the first defendant has made any express or implied assertions in his affidavit about the contents of any legal advice received. The first defendant, rather, seems to say that his understanding of the orders derived from his reading of the Court's orders. Moreover, the first defendant does not refer to even the bare receipt of any legal advice. So, whilst he has put forward his state of mind concerning the meaning of the orders, I do not think that he has done so in a way that makes any particular assertions about any legal advice he may have received in that regard. In all the circumstances, I do not think that the first defendant is acting inconsistently with maintaining client legal privilege in respect of any such advice. The affidavit of the second defendant takes this issue no further.

19. For the above reasons, the Court will order that the notice to produce dated 22 March 2023 served by the plaintiff upon the first and second defendants be set aside. I note that the notice to produce dated 2 March 2023 served by the plaintiff upon the first and second defendants is taken to have been withdrawn.

20. It seems to me, prima facie, that costs of the Notice of Motion filed on 21 March 2023 should follow the event, in which case the appropriate costs order would seem to be that the plaintiff pay the first and second defendants' costs of the Notice of Motion.

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Decision last updated: 28 March 2023