Caratti -v- Boban Pty Ltd (Administrators Appointed) - [2015] WASC 118

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: CARATTI -v- BOBAN PTY LTD (ADMINISTRATORS APPOINTED) [2015] WASC 118

CORAM: MITCHELL J

HEARD: 26 MARCH 2015

DELIVERED : 26 MARCH 2015

PUBLISHED : 2 APRIL 2015

FILE NO/S: COR 60 of 2014

BETWEEN: ALLEN BRUCE CARATTI
Plaintiff
AND
BOBAN PTY LTD (ADMINISTRATORS APPOINTED)
First Defendant
PINEVIEW INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED)
Second Defendant
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Third Defendant
JAMIE KEVIN POLLOCK
Fourth Defendant
JOHN SHEAHAN AND IAN RUSSELL LOCK AS JOINT AND SEVERAL ADMINISTRATORS OF BOBAN PTY LTD
Fifth Defendant
JOHN SHEAHAN AND IAN RUSSELL LOCK AS JOINT AND SEVERAL ADMINISTRATORS OF PINEVIEW INVESTMENTS PTY LTD
Sixth Defendant

Catchwords:

Practice and procedure - Discovery - Application for discovery of documents relevant to contempt allegation - Privilege against selfincrimination

Legislation:

Nil

Result:

Application allowed in part

Category: B

Representation:

Counsel:

Plaintiff:     Mr N D C Dillon
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     No appearance
Fourth Defendant          :     Mr J E Scovell
Fifth Defendant            :     Mr T J Porter
Sixth Defendant            :     Mr T J Porter

Solicitors:

Plaintiff:     Roe Legal Services
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     No appearance
Fourth Defendant          :     Mills Oakley Lawyers
Fifth Defendant            :     Sheahan Lock Partners
Sixth Defendant            :     Sheahan Lock Partners

Case(s) referred to in judgment(s):

Australian Competition and Consumer Commission v FFE Building Services Ltd [2003] FCAFC 132; (2003) 130 FCR 37
Bridal Fashions Pty Ltd v Comptroller‑General of Customs (1996) 17 WAR 499
CFMEU v Boral Resources (Vic) Pty Ltd [2013] VSCA 378
CFMEU v Grocon Constructions (Victoria) Pty Ltd [2014] VSCA 261
Coco v The Queen (1994) 179 CLR 427
Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543
Environmental Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477
Exagym Pty Ltd v Professional Gymnasium Equipment Company Pty Ltd (No 2) [1994] 2 Qd R 129
Lee v NSW Crime Commission (2013) 251 CLR 196
MacDonald v Australian Securities and Investments Commission [2007] NSWCA 304, (2007) 73 NSWLR 612
NSW Food Authority v Nutricia Australia Pty Ltd [2008] NSWCCA 252; [2008] 72 NSWLR 456
Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435
R v Associated Northern Collieries (1910) 11 CLR 738
Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129
Witham v Holloway (1995) 183 CLR 525
Woods v Skyride Enterprises Pty Ltd [2012] WASC 4
X7 v Australian Crime Commission (2013) 248 CLR 92
MITCHELL J:
(This judgment was delivered extemporaneously on 26 March 2015 and has been edited from the transcript.)

Procedural history

The plaintiff applies for discovery of the following documents:
(a)from the fourth, fifth and sixth defendants, all documents evidencing any communications with the Australian Taxation Office or the Deputy Commissioner of Taxation since 1 April 2014 relating in any way to the affairs of the first and second defendants;
(b)from the fourth, fifth and sixth defendants, all documents evidencing any communications between the fourth, fifth and sixth defendants in relation to such communications with the Australian Taxation Office or the Deputy Commissioner of Taxation; and
(c)from the fifth defendant, all documents which are or have been in the fifth defendant's possession, custody or control relating to any matter in question raised by the plaintiff's interlocutory process dated 6 March 2015 (which is an application for a finding that the fifth defendant has committed a contempt of court).
The application is made as an interlocutory application in the primary action which (in very broad summary) seeks orders which will confirm the plaintiff's control of the first and second defendants. The fifth and sixth defendants were purportedly appointed as administrators of the first and second defendants, respectively.
In related proceedings, the fifth and sixth defendants seek declarations that they were validly appointed. There is also an associated application by a company called Soil and Contracting Pty Ltd for an order winding up the first defendant.
In the present application, the plaintiff has also applied for orders that the administrators in their capacity as administrators of the first defendant be held in contempt, and pay the plaintiff's costs thrown away by reason of an adjournment of a trial of this and related matters which had been listed for 27 October 2014 and associated with the appointment of a provisional liquidator to the first defendant.

Grounds for contempt application

The grounds on which the contempt application are made are as follows:
1.On 1 April 2014 orders were made by Master Sanderson, inter alia, restraining the Fifth Defendant, whether by themselves, employees, officers or agents, and each and all of them, from taking any step in the administration of the First Defendant (Boban), or doing any act or thing in furtherance of that administration, until the hearing and determination of the Originating Processes [in the relevant matters].
2.The trial in [those matters] was due to commence on Monday, 27 October 2014.
3. Emails dated 24 October 2014 from Mr Lock [one of the fifth defendants] to Sourina Simmalavong & others of the Australian Taxation Office (ATO) with the attached spreadsheet and bundles of invoices from Mammoth Investments Pty Ltd to Soil and Land Contracting Pty Ltd, the Fifth Defendant, evidence that after the April 2014 injunctive order was made, the Fifth Defendant:
(a)investigated and identified the ATO as a potential creditor of Boban; and/or
(b)provided information to the ATO as a potential creditor in the administration of Boban; and/or
(c)raised with the ATO whether the ATO should claim in the administration of Boban.
4.Each of the matters identified at paragraph 3 a, b and c above either by themselves or together constituted the taking of a step in the administration of Boban, or, alternatively, the doing of an act or thing in furtherance of the administration of Boban.
5.By email at 5.27 pm on Friday 24 October 2014 the Fifth and Sixth Defendants provided to the parties a letter from the ATO dated 24 October 2014, attaching a proof of debt by which the Deputy Commissioner of Taxation (Commissioner) claimed from Boban $2,308,324.70 for “estimated” income tax and general interest charges for the years ended 30 June 2003, 2004 and 2005 (Proof of Debt).
6.Neither the letter nor proof identified on what material or grounds the Commissioner has determined that Boban was so indebted.
7.The Plaintiff did not know the grounds upon which the Commissioner has issued the Proof of Debt (9 to 11 years after the relevant financial years) and disputed that any income tax was payable by Boban.
8.The existence or otherwise of a significant debt to the Commissioner would have been material to the issue of solvency of the First Defendant and, accordingly, relevant to the application in these proceedings (COR 60) and in the proceedings COR 23 [the application to wind up the first defendant] which is being managed and heard with these proceedings.
9.At the commencement of the trial on 27 October 2014, the Fourth, Fifth and Sixth Defendants did not disclose:
(a)the material or grounds upon which the Commissioner determined that Boban was indebted; and
(b)that they provided the information acted on by the Commissioner,
and the trial was adjourned to allow investigation in relation to why and on what grounds the Commissioner had issued the proof of debt.
10.Subsequently on 31 October 2014 Darren Weaver and Martin Jones were appointed joint and several provisional liquidators (Provisional Liquidators) to report to the Court on the Proof of Debt lodged by the Commissioner.
11.On 10 December 2014 the Provisional Liquidators informed the parties that the Commissioner had unconditionally withdrawn his Proof of Debt and the ATO had confirmed there is no intention of submitting an amended or updated proof of debt.
12.On 15 December 2014 in a report to the parties provided in compliance with their appointment the Provisional Liquidators attached a copy of a letter dated 21 November 2014 from the Australian Government Solicitor on behalf of the ATO addressed to the Provisional Liquidators, which enclosed a schedule of relevant documents used by the ATO to prepare the Proof of Debt. The schedule identified the emails from Ian Lock (being one of the joint and several administrators who comprise the Fifth and Sixth Defendants) sent to the ATO on 24 October 2014 containing information that the ATO contends it relied upon to prepare the Proof of Debt.
13.In the premises the preparation of and the provision of the information and emails to the ATO was in contempt of the April 2014 injunctive order.
14.Significant costs have been incurred and thrown away by Allen Caratti by reason of the adjournment of the trial on 27 October 2014 and by reason of the application for the appointment of a provisional liquidator. (original emphasis)

Relevance of documents sought

The parties before me accept that the documents sought in the discovery application would be relevant to matters arising in the contempt application. It also seems to be common ground that those documents are sought for the purpose of assisting the plaintiff in proving the contempt. I agree that those documents are clearly relevant to the contempt application as it is formulated by the plaintiff by reference to communications between the administrators and the Australian Taxation Office. The circumstances in which the communications with the Australian Taxation Office occurred and the reasons for those communications will clearly be in issue in the contempt proceedings.
In view of that conclusion, it is unnecessary to determine whether the documents would be otherwise relevant as contended for by the plaintiff. In my view, therefore, it is appropriate to order the discovery of the specified documents sought from the fourth defendant.

Discovery in contempt proceedings

However, I am not prepared to make an order for discovery against the fifth or sixth defendants for the following reasons.
Contempt proceedings are clearly punitive in character, and that is so whether they are characterised as, technically, an allegation of civil or criminal contempt. Further, whether the proceedings are classified as criminal or civil, the onus will be on the plaintiff to establish the contempt beyond reasonable doubt.[1] He will bear this onus in circumstances where the fourth and fifth defendants, as individuals, enjoy privilege against self‑incrimination. That privilege is a basic and substantive common law right.[2]
[1] Witham v Holloway (1995) 183 CLR 525.
[2] X7 v Australian Crime Commission (2013) 248 CLR 92 [104]; Lee v NSW Crime Commission (2013) 251 CLR 196 [184], [266].
While the proceedings for contempt are criminal in nature, they are not a criminal prosecution.[3] The proceedings are governed by the Rules of the Supreme Court 1971 (WA) (the Rules), including O 26 r 6 and r 7 which generally allow the court to order discovery of specific classes of documents. However, the question arises as to whether those provisions of the Rules authorise an order directing an alleged contemnor to give discovery.
[3] Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435 [58].
As the decisions of the High Court in X7[4] and Lee[5] illustrate, determining whether a statutory power authorises the compelling of a person charged with a criminal offence to provide information which may prejudice the person's defence can raise difficult questions of statutory construction on which reasonable minds might differ. However, all judges of the High Court in those cases recognised a requirement for clear expression of an unmistakable and unambiguous intention to abrogate a fundamental common law right such as the privilege against self‑incrimination before a statutory provision will be construed as providing for that outcome.[6]
[4] X7 [21], [24], [142], [158].
[5] Lee [29] ‑ [30], [126], [170] ‑ [173], [307] ‑ [314].
[6] See also Coco v The Queen (1994) 179 CLR 427.
Similar to the privilege against self-incrimination are the privileges against exposure to penalties and forfeiture which had their origins in the rules of equity relating to discovery but came to be also recognised as rules of the common law.[7] Those privileges are also only able to be excluded expressly or by necessary implication in the relevant legislation.[8]
[7] See Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543 [13].
[8] Daniels [11], [16].
There is nothing in the general terms of O 26 of the Rules sufficient to indicate an intention to abrogate the privileges against self‑incrimination or exposure to penalties. Nor is there anything in the general words of s 167 of the Supreme Court Act 1935 (WA) to indicate an intention to authorise rules of court which would abrogate those fundamental common law rights. The fact that the rule about the privilege against exposure to penalties had its origins in the approach of courts exercising equitable jurisdiction to bills for discovery in aid of penal suits provides an important context against which the general language of the rules is to be construed.[9] Given that historic background, it can hardly be supposed that the well‑established position that discovery not be ordered against a respondent to penal proceedings was to be abolished by a side‑wind without being expressly addressed.
[9] For a history of the rules see R v Associated Northern Collieries (1910) 11 CLR 738, 741 ‑ 748.
In CFMEU v Grocon Constructions (Victoria) Pty Ltd,[10] the Victorian Court of Appeal appeared to favour the view that discovery

could in some cases be ordered against a corporate respondent to a contempt application, subject to the sound exercise of judicial discretion. However, that conclusion was very much based upon the view of the court that the corporate respondent in that case could not, in law, claim any privilege in answer to an order for discovery.[11] I note that special leave has been granted to appeal against the decision in Grocon to the High Court, but that the appeal has not been resolved.
[10] CFMEU v Grocon Constructions (Victoria) Pty Ltd [2014] VSCA 261.
[11] Grocon [502]; Environmental Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477.
A case closer to the present is Rich v Australian Securities and Investments Commission.[12] The issue raised in that case concerned whether discovery should have been ordered against directors of a company in the primary proceedings. In the primary proceedings, the Commission sought declarations that the directors had contravened a statutory duty requiring them to exercise their powers and discharge their duties with reasonable care and skill. The Commission also sought orders for compensation to the company concerned and orders that the directors be disqualified from managing a corporation.
[12] Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129.
After referring to Daniels, the plurality in Rich observed:
Although the privilege against exposure to penalties had its origins in the rules of equity relating to discovery, when discovery and interrogatories were provided for under the rules made under the Judicature Act, the Court of Equity's principle (that 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 some other person, should not be made where the proceeding was of such nature that it might result in a penalty or forfeiture) was applied more generally. As was further pointed out in the joint reasons in Daniels Corporation, the privilege against exposure to penalty now serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it. That is not to say that the privileges against exposure to penalties or exposure to forfeitures are substantive rules of law, like legal professional privilege, having application beyond judicial proceedings. In the present matter, however, the only issue is about the application of these privileges to discovery in judicial proceedings. No wider question arises [24]. (citations omitted)
The plurality concluded that the proceedings brought against the directors by the Commission in Rich were penal in character, and then noted:
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 [39]. (citations omitted)
Rich was referred to by the Victorian Court of Appeal in Grocon, but distinguished on the basis that Rich concerned individuals who were entitled to claim privilege against self‑incrimination.[13]
[13] Grocon [489].
In NSW Food Authority v Nutricia Australia Pty Ltd,[14] Spigelman CJ (with whom other members of the Court of Criminal Appeal agreed) cited Rich and other cases as authority for the proposition that:
The penalty privilege has been held to be a sufficient basis for a court to refrain from exercising its powers to compel steps usually taken in civil proceedings, such as discovering or filing of witness statements, even where what is apprehended is only derivative use[.]
[14] NSW Food Authority v Nutricia Australia Pty Ltd [2008] NSWCCA 252; [2008] 72 NSWLR 456 [170].
The proceedings for contempt in the present case are clearly penal in character. In my view, it is appropriate to apply the approach adopted in Rich and decline to make any order for discovery against the fifth and sixth respondents in relation to documents which may be relevant to, and which may assist the plaintiff in proving, the allegation of contempt. The fifth and sixth respondents are individuals who are clearly entitled to assert a privilege against self‑incrimination and a privilege against exposure to penalties in relation to the allegations brought against them by the plaintiff.
I note that counsel for the plaintiff made a submission that the administrators were in a special position as they were officers under the control of the court and that, in those circumstances, it was not open to the administrators to seek to protect themselves against what they have done and, therefore, they were not able to avail themselves of the privilege against self‑incrimination or the privilege against exposure to penalties. Counsel was not able to cite any authority for that proposition and I do not accept, in the absence of authority, that the status of an individual as an officer of the court leads to those privileges being abrogated.
The approach I have adopted is consistent with that taken by EM Heenan J in Woods v Skyride Enterprises Pty Ltd,[15] where an application for discovery was refused so far as it related to individual respondents to an allegation of contempt. It is also consistent with observations made by Beach JA (with whom Osborn JA agreed) in CFMEU v Boral Resources (Vic) Pty Ltd,[16] that:
It may be accepted for present purposes that not all of the rules of civil procedure apply to a proceeding seeking to have a party adjudged guilty of contempt of court. A prime example of a rule which may not apply is a rule requiring an individual party to incriminate himself or herself by giving discovery.
[15] Woods v Skyride Enterprises Pty Ltd [2012] WASC 4 [24].
[16] CFMEU v Boral Resources (Vic) Pty Ltd [2013] VSCA 378 [10] ‑ [11].

The approach I have taken is also consistent with observations made by Byrne J in Exagym Pty Ltd v Professional Gymnasium Equipment Company Pty Ltd (No 2).[17]
[17] Exagym Pty Ltd v Professional Gymnasium Equipment Company Pty Ltd (No 2) [1994] 2 Qd R 129.
In view of the conclusion which I have reached, based on the privileges against self‑incrimination and exposure to penalties, it is unnecessary for me to deal with the question of whether the accusatorial nature of proceedings for contempt is incompatible with the proper exercise of a power to require a respondent to an allegation of contempt to assist the person making the allegation to prove their case beyond reasonable doubt by discovering documents in their possession, custody or control.
In my view, the power conferred by the Rules does not extend to ordering an alleged contemnor who has not waived his or her privileges to discover documents relating to the alleged contempt.

Statutory provisions as to compellability of witnesses

Counsel for the plaintiff also pointed to s 7 and s 11 of the Evidence Act 1906 (WA), and suggested that privilege may be abrogated by a combination of those provisions. Section 7 makes a party to proceedings compellable in those proceedings. Section 11 provides for the court to compel answers to incriminating questions and then provide a certificate which renders the answers inadmissible in evidence in criminal proceedings against the person, other than on a prosecution for perjury committed in the proceedings.
In my view, s 7 and s 11 are not relevant to the court's power to order discovery. They concern a later stage of the proceeding when evidence is being called. Nor do they address the privilege against exposure to penalties. I would also note that a certificate under s 11 would be of no utility if evidence was given in the proceedings in which the penalty against a witness was sought.
In any event, the approach suggested by counsel for the plaintiff does not seem to me to be consistent with the decision of the court in Bridal Fashions Pty Ltd v Comptroller‑General of Customs,[18] where it was held that the mere fact that a party is a compellable witness does not abrogate privilege against exposure to a penalty.
[18] Bridal Fashions Pty Ltd v Comptroller‑General of Customs (1996) 17 WAR 499.

Vacation of order extending time for the winding up application

Counsel for the fifth and sixth defendants also sought a vacation of orders 7 and 9 made by Master Sanderson on 13 March 2015. Order 7 required the fifth defendant to file and serve any affidavits in opposition to the application for contempt by 1 April 2015. Order 9 required the fifth defendant to file and serve an outline of submissions in opposition by 15 April 2015. The fifth and sixth defendants rely on the same privileges which they used to resist the application for discovery.
As was noted by Mason P in MacDonald v Australian Securities and Investments Commission[19], the Australian Securities and Investment Commission's concession in Rich that an order requiring Mr Rich to file and serve affidavits should not have been made was proven to be correct by the decision of the Full Federal Court in FFE Building Services Ltd.[20]
[19] MacDonald v Australian Securities and Investments Commission [2007] NSWCA 304, (2007) 73 NSWLR 612, [67] ‑ [70].
[20] Australian Competition and Consumer Commission v FFE Building Services Ltd [2003] FCAFC 132; (2003) 130 FCR 37.
In my view, respondents to a motion for contempt should not be compelled to file witness statements or submissions in advance of the hearing, before the prosecution has begun its case.

Conclusion

For those reasons, I would make an order in the terms sought as against the fourth defendant for discovery, but would otherwise dismiss the plaintiff's application for discovery. I would also vacate orders 7 and 9 made by Master Sanderson in COR 60 of 2014 on 13 March 2015.