Corporations & Securities Panel v Bristile Investments Pty Ltd
[1999] WASC 183
•24 SEPTEMBER 1999
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CORPORATIONS & SECURITIES PANEL -v- BRISTILE INVESTMENTS PTY LTD & ORS [1999] WASC 183
CORAM: MILLER J
HEARD: 22 SEPTEMBER 1999
DELIVERED : 24 SEPTEMBER 1999
FILE NO/S: COR 266 of 1999
BETWEEN: CORPORATIONS & SECURITIES PANEL
Applicant
AND
BRISTILE INVESTMENTS PTY LTD (ACN 056 541 096)
First RespondentBLEND INVESTMENTS PTY LTD (ACN 073 513 667)
Second RespondentAUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
Third RespondentCP VENTURES LTD (ACN 006 306 565)
Fourth RespondentWESFI LTD (ACN 008 672 740)
Fifth Respondent
Catchwords:
Corporations - Corporations & Securities Panel - Referral under s 733 Corporations Law - Conduct of inquiry - Applicability of legal professional privilege
Legislation:
Corporations Law
Australian Securities & Investments Commission Act
Result:
Questions of law referred to Court answered in the negative in each case (ie legal professional privilege abrogated in relation to inquiry conducted by Corporations & Securities Panel)
Representation:
Counsel:
Applicant: Mr R L Le Miere QC & Mr A C Willinge
First Respondent : Mr P D Evans
Second Respondent : Mr P D Evans
Third Respondent : Mr C G Colvin
Fourth Respondent : Ms J M Hill
Fifth Respondent : Mr A D L Throssell
Solicitors:
Applicant: Blake Dawson Waldron
First Respondent : Freehill Hollingdale & Page
Second Respondent : Freehill Hollingdale & Page
Third Respondent : Malleson Stephen Jacques
Fourth Respondent : Bennett & Co
Fifth Respondent : Australian Securities & Investment Commission
Case(s) referred to in judgment(s):
Australian Securities Commission v Dalleagles Pty Ltd (1992) 36 FCR 350
Baker v Campbell (1983) 153 CLR 52
Carter v Managing Partner, Northmore Hale Davy & Leake (1995) 183 CLR 121
Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319
Grant v Downs (1976) 135 CLR 674
Re Compass Airlines Pty Ltd (1992) 109 ALR 119
Walsh v Permanent Trustee Australia Ltd (No 4) (1994) 14 ACSR 653
Case(s) also cited:
Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501
Controlled Consultants Pty Ltd v Commissioner for Corporate Affairs (1985) 156 CLR 385
Environmental Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477
Hamilton v Oades (1989) 166 CLR 486
Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328
Registrar of Titles (WA) v Franzon (1975) 132 CLR 611
Taikato v R (1996) 186 CLR 454
Walsh v Permanent Trustee Australia Ltd (No 4) (1994) 14 ASCR 653
MILLER J: The Corporations & Securities Panel ("the Panel") is established pursuant to s 171 of the Australian Securities & Investments Commission Act ("the Act"). Pursuant to s 733 of the Corporations Law where it appears to the Australian Securities & Investments Commission ("the Commission") that unacceptable circumstances may or have occurred:
(a)in relation to an acquisition of shares in a company; or
(b)as a result of conduct engaged in by a person in relation to shares in, or the affairs of, a company;
the Commission may apply to the Panel for a declaration under s 733(3) in relation to the acquisition or conduct. Section 733(3) provides:
"Where, on an application under subsection (1), the Panel is satisfied:
(a)that unacceptable circumstances have occurred:
(i)in relation to an acquisition of shares in the company; or
(ii)as a result of conduct engaged in by a person in relation to shares in, or the affairs of, the company; and
(b)having regard to the matters referred to in section 731 and any other matters the Panel considers relevant, that it is in the public interest to do so;
the Panel may by writing declare the acquisition to have been an unacceptable acquisition, or the conduct to have been unacceptable conduct, as the case may be."
Pursuant to s 733(5) of the Corporations Law the Panel may only make a declaration under s 733(3) if it has given each person to whom the declaration relates an opportunity to make submissions to any inquiry conducted by the Panel in relation to the matter. Pursuant to s 733(6) the Panel, where it makes a declaration, must give written reasons therefor.
Procedures for the conduct of inquiries before the Panel are set out in s 195 of the Act and in reg 16 and reg 17 of the Australian Securities & Investments Commission Regulations ("the Regulations").
The function performed by the Panel under s 733 of the Corporations Law was described in Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 190 as follows:
"When the function to be performed by the Panel under s. 733 is examined in the light of the principles stated above, it becomes apparent that the decision to be made by the Panel is not an adjudication of a dispute about existing rights and obligations. The Commission alone can institute proceedings before the Panel and invoke an exercise of its authority. In applying for a declaration under s. 733, the Commission is not seeking the vindication of any right or obligation; a declaration, when made, does not resolve an actual or potential controversy as to existing rights. Nor does the Panel, in granting or refusing a declaration, make its decision solely by reference to the application of the law to past events or conduct. Although the function entrusted to the Panel is that of making a declaration about past events or conduct, the functions is one in which the Panel is bound to take account of the considerations of commercial policy mentioned in s. 731 (13) and 'any other matters the Panel considers relevant' in arriving at the conclusion that it is in the public interest to make a declaration, as well as to apply the provisions of ss. 732 and 733 to the facts which it finds. Furthermore, the object of the inquiry undertaken by the Panel and of the declaration which it makes under s. 733 is to enable the Panel to make one or more of the orders set out in s. 734. In other words, the object of the Panel's inquiry and determination is to create a new set of rights and obligations, that is, rights and obligations arising from such orders as the Panel may make in a particular case, being rights and obligations which did not exist antecedently and independently of the making of the orders. It follows from what has already been said that, in creating that new set of rights and obligations, considerations of policy, including commercial policy, as well as factors not specified by the legislature yet deemed relevant by the Panel, on which it may form a subjective judgment, must inevitably play a prominent part."
Pursuant to s 733 of the Corporations Law the Commission on 9 August 1999 lodged an application with the Panel contending that unacceptable circumstances had or may have occurred in relation to:
"(a)an acquisition and proposed acquisition of shares in Wesfi Limited ("Wesfi") by CP Ventures Ltd ("CPV"); and/or
(b)the conduct of CPV in relation to shares in Wesfi."
The acquisitions and conduct in question were alleged to have taken place in the context of the takeover bid for Wesfi by Blend Investments Pty Ltd, a wholly owned subsidiary of Bristile Ltd. Because of the confidentiality of the material contained within the Commission's application it is inappropriate that I document anything more than the barest detail of the matters which are the subject of the application.
The Panel decided on 11 August 1999 to hold an inquiry in accordance with r 20(a) of the Regulations and on 9 September 1999 the Panel by its solicitors issued to the first and second respondents a notice pursuant to r 16(1)(d) of the Regulations to produce documents to the Panel. On the same day it issued a summons to David Norman Gilham to appear before the Panel and produce documents.
On 14 September 1999 the Panel convened a conference under r 35 of the Regulations which conference was later adjourned until 24 September 1999. Meanwhile, on 16 September 1999 the second respondent through its solicitors and counsel claimed legal professional privilege in respect of certain letters, being a letter from the second respondent to Messrs Freehill Hollingdale & Page and a letter from Messrs Freehill Hollingdale & Page to the second respondent, contending that the Panel was not entitled to inspect, rely upon the contents of the documents, or disclose them to other parties. The Commission submitted to the Panel that legal professional privilege did not apply in proceedings before it and pursuant to the provisions of s 196 of the Act, the Panel of its own motion referred to this Court for decision questions of law which had arisen at its inquiry. Those questions are:
"1.Does legal professional privilege apply in relation to:
(a)the production, inspection and use of documents pursuant to a direction given pursuant to Regulation 16(1)(d), (e), (f) and (l) of the Australian Securities and Investments Commission Regulations;
(b)the production, inspection and use of documents pursuant to a requirement under s192(4)(b) of the ASIC Act;
(c)a requirement to answer a question pursuant to s192(4)(a) of the ASIC Act;
or
(d)evidence given by a witness to an inquiry, under a summons issued pursuant to s192 of the ASIC Act, or pursuant to s191(2)(b) of the ASIC Act, or otherwise.
2.In particular, does the assertion of legal professional privilege constitute a reasonable excuse within s198 of the ASIC Act."
The Panel's power to summon witnesses and take evidence is set out in s 192 of the Act as follows:
"A member may, by written summons in the prescribed form given to a person:
(a)require the person to appear before the Panel at an inquiry to give evidence, to produce specified documents, or to do both; and
(b)require the person to attend from day to day unless excused, or released from further attendance, by a member."
Regulation 16 of the Regulations gives to the Panel a power (r 16(d)) to give directions to parties and interveners to lodge with the Panel specified documents relating to an inquiry. Section 192(4) of the Act gives to a member presiding at an inquiry the power to require a witness at the inquiry to answer a question put to the witness and to produce a document specified in a summons issued under that section. Under s 198 of the Act, a person shall not, without reasonable excuse, fail to comply with the requirement made under s 192(1)(2) or (4). It is the question whether legal professional privilege constitutes a "reasonable excuse" for failing to comply or is otherwise a ground for refusing to produce documents or answer questions which is the issue before the Court.
It is clearly established that legal professional privilege is not merely a rule of evidence, but is a fundamental and substantive common law right: Baker v Campbell (1983) 153 CLR 52 at 88, 89, 94, 116, 117, 127 and 128; Carter v Managing Partner, Northmore Hale Davy & Leake (1995) 183 CLR 121 at 132 and 161. I accept the submission of counsel for the first and second respondents that as a head of privilege, legal professional privilege, is so firmly entrenched in the law that it is not to be exorcised by judicial decision: Grant v Downs (1976) 135 CLR 674 at 685. There must be a clear expression of legislative intent by express words or necessary implication for the privilege to be abrogated: Baker v Campbell (supra) at 90 (Murphy J), at 116 (Deane J) and at 123 (Dawson J) and Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319 at 322-3 (Brennan J), at 331 (Dawson J), at 338 (Gaudron J) and at 348 (McHugh J). In Yuill (supra) at 323 Brennan J put it this way:
"In the absence of language which expressly excludes the privilege, indicia of legislative intention can be found in the nature of statutory power, the prescribed manner of exercise and the purpose which its exercise is designed to achieve ..."
Section 69 of the Act deals specifically with the issue of legal professional privilege, and provides that a lawyer required by the Panel to give information or to produce documents which would disclose a privileged communication may refuse to make that disclosure if the client does not consent. The lawyer must, however, disclose the name and address of the client.
Section 76 of the Act also makes reference to legal professional privilege. Section 76(1)(d) is in these terms:
"A statement that a person makes at an examination of the person is admissible in evidence against the person in a proceeding unless:
(a)…
(b)…
(c)…
(d)the statement discloses matter in respect of which the person could claim legal professional privilege in the proceeding if this subsection did not apply in relation to the statement, and the person objects to the admission of evidence of the statement."
The provisions of s 69 of the Act are made applicable to Div 3 of Pt 10 of the Act (which Part in Division deals with inquiries by the Panel) but the provisions of s 76 of the Act are not.
It is argued on behalf of the Commission that the provisions of s 69 and s 76 of the Act would be redundant if legal professional privilege was not intended to be otherwise abrogated. Therefore, it is said, by necessary implication, legal professional privilege does not apply. This was the reasoning adopted by French J in Australian Securities Commission v Dalleagles Pty Ltd (1992) 36 FCR 350. There, French J was concerned with the question whether the provision of the Act were intended to exclude the operation of legal professional privilege in relation to the production of books under a notice issued pursuant to s 33. His Honour (at 361) pointed out that where the High Court had construed a statute closely analogous to that under consideration and concluded that the privilege was excluded, there would be little room for the expression of any different view in relation to the application of that reasoning in cases in which it is plainly applicable. His Honour reviewed the decision in Yuill (supra), saying:
"This is so in relation to the decision of the High Court concerning the operation of certain provisions of the Companies (New South Wales) Code in Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319. In Yuill's case (supra) the High Court concluded by a majority that the power of an inspector to compel production of documents under s 295(1) of the Companies (New South Wales) Code was not subject to legal professional privilege."
After reviewing the provisions of the Companies (New South Wales) Code which were the subject of consideration by the High Court in Yuill, and after citing passages from the judgments of Brennan J and Dawson J, French J said (at 365):
"A number of textual differences between the Code and the ASC Law were relied upon by counsel for the respondents to support the proposition that the court should look afresh at the question whether under the ASC Law legal professional privilege was abrogated in relation to books required to be produced pursuant to a notice under s 33. In my opinion, however, the generality of the reasoning adopted by the majority of the High Court in Yuill's case is not affected by those textual differences and although I am not strictly bound by the decision, its approach to the question of statutory construction is of the highest persuasive authority. I do not consider that in the present case there is any reason which would justify departing from it in its application to the ASC Law. Applying the reasoning adopted by the High Court, I am led to the conclusion that the provisions of the ASC Law were intended to exclude the operation of legal professional privilege in relation to the production of books under a notice issued pursuant to s 33."
Like French J, I am of the view that the generality of the reasoning adopted by the majority of the High Court in Yuill (supra) is entirely applicable to the questions under review in the present application. The approach of the Court to the question of statutory construction is not only of the highest persuasive authority, but is compelling.
In Yuill Brennan J singled out a number of indicia of legislative intent to abrogate legal professional privilege in relation to the requirement contained in s 295(1) of the Companies (New South Wales) Code to produce books to an inspector authorised to require an officer of a corporation whose affairs were under investigation to produce books relating to its affairs and to appear for examination and to answer questions. His Honour noted that s 308 of the Code created a specific exemption which entitled solicitors to refuse to comply with a notice issued under s 295 where compliance would involve a breach of legal professional privilege, the exemption being conditioned on the furnishing of the client's name and address. His Honour then said (at 324):
"The enactment of s. 308 would be otiose and the specifying of a condition governing the solicitor's excuse for non-compliance would be futile if the observance of legal professional privilege were a reasonable excuse for non-compliance, for a solicitor who is bound to observe legal professional privilege would be entitled to refuse to comply with a notice issued under s. 295 without satisfying such a condition (Reg. v Bell; Ex parte Lees (25)) otherwise than by identifying the client whose privilege is asserted: Southern Cross Commodities v Cronies (26). The apparent purpose of the statutory condition is to ensure that a client can be located and required to disclose communications protected by legal professional privilege although the solicitor may be excused from disclosing them."
Another important indication of legislative intention to exclude the privilege was said by Brennan J to emerge from consideration of the purpose of instituting a special investigation under the relevant part of the Code. His Honour (at 326) said:
"Yet another and important indication of legislative intention to exclude the privilege emerges from consideration of the purpose of instituting a special investigation under Pt VII of the Code - "Special Investigations". Part VII provides for investigation into the affairs of corporations when investigation is, in the opinion of the relevant Minister, warranted in the public or national interest (s. 291(1) and (2)) or when the Ministerial Council decides that an investigation should take place: s. 291(3). It would frequently be impossible in practice for an inspector to discharge the duty laid upon him by s. 305 to form an opinion on the affairs of a corporation and to report that opinion and the facts on which it is based if he were unable to compel disclosure of professional communications between legal advisers and those who have played some part in a corporation's affairs."
His Honour concluded (at 327):
"… I do not think that s. 296(2) of the Code should be construed so as to admit legal professional privilege as an excuse for failing or refusing to comply with a legitimate requirement under s. 295 to produce books. To admit such an excuse would be to impair and, in some cases, to destroy the effectiveness of the mechanism which Pt VII has created in order to enforce the laws governing corporations."
This reasoning is, in my view, entirely applicable to an inquiry conducted by the Panel.
Dawson J made reference to the provisions of the Code which dealt with a claim of legal professional privilege by a legal practitioner in the following way (at 335):
"Controlled Consultants was concerned with comparable provisions under the Securities Industry (Victoria) Code and it was recognised in that case that the legislation drew a distinction between real evidence in the form of books and evidence of a testimonial character. It may be notice in passing that s. 308, in dealing with a claim of legal professional privilege by a legal practitioner, draws no such distinction. Be that as it may, privilege against self-incrimination must, upon the reasoning adopted in Controlled Consultants, be held to have been abrogated by Pt VII. That privilege is the other leading exception to the rule of compulsion in relation to evidence and it is unlikely that the legislature though it necessary to deny its protection for the purposes of an investigation under Pt VII, intending at the same time to preserve legal professional privilege, when a claim of legal professional privilege might well hamper an investigation as much as, or more than, a claim of privilege against self‑incrimination."
Dawson J (at 333) echoed the observations of Brennan J (at 327) in relation to the possibility of destruction of the effectiveness of the mechanism created by the relevant part of the legislation there under review to enforce the laws governing corporations if legal professional privilege was not in the circumstances abrogated. His Honour said:
"Plainly, any investigation is likely to be hampered by a claim of legal professional privilege on the part of an officer of the company being investigated. This is the more so when the aims of the investigation include the prosecution of offences and the institution of civil proceedings. In particular, establishing such matters as fraud, negligence or breach of duty may depend upon proof of the nature of any legal advice given. Legal professional privilege may not, of course, be claimed even at common law for communications which amount to participation in a crime or a fraud, but a claim of legal professional privilege may nevertheless seriously impede the investigation of those matters. It is against that background that the specific provisions of Pt VII which throw light upon the intention of legislature should be considered."
Counsel for the first and second respondent argued that the provisions of the Act, insofar as they relate to the Panel, have an entirely different purpose to "the mere facilitation of investigation". It was further argued that because a communication made in the furtherance of a criminal or fraudulent purpose excludes the operation of legal professional privilege, the extent to which the privilege is capable of hampering an enquiry before the Panel is doubtful. Reference was made to Re Compass Airlines Pty Ltd (1992) 109 ALR 119 where it was held that the purpose of s 597 of the Corporations Law enabling a liquidator to gain information regarding the affairs of a company would not be stultified if legal professional privilege could be claimed in relation to documents produced. Lockhart J (at 128) said:
"A powerful reason for there being no implied exclusion of legal professional privilege from s 597 is that the privilege itself does not extend to communications made in furtherance of any criminal or fraudulent purpose: R v Bell; Ex parte Lees (1980) 146 CLR 141 at 145, 152-3, 161-1, 30 ALR 489; R v Cox (1884) 14 QBD 153; Williams v Quebrada Railway Land and Copper Co [1895] 2 Ch 751; R v Bullivant [1900] 2 QB 163; [1901] AC 196; O'Rourke v Darbishire [1920] AC 581; Keep Bros v Birch and Bradshaw Ltd [1928] NZLR 360. This exception to legal professional privilege tends directly against any implication that it is necessary for the effective conduct of an examination under s 597 that the privilege be ousted. If the examination of the examinee reveals that the assertion of legal professional privilege is in act being used to shield a criminal or fraudulent purpose which taints the communication itself, then the immunity is inapplicable.
Subject to the application, if any, of Yuill's case I find no necessary implication can be found in s 597 or any other provision in the Corporations Law to abrogate the application of legal professional privilege with respect to an examination under s 597 or the production of documents thereunder."
Lockhart J considered Yuill distinguishable on a number of grounds, one of which was that the specific provision dealing with legal professional privilege in the Companies Code (s 308, the equivalent section in the ASC Law being s 69) had no equivalent in s 597. As Lockhart J pointed out (at 130):
"Section 308 created a specific exemption which entitled lawyers to refuse to comply with a notice issued under s 295 where compliance would involve a breach of legal professional privilege. Also the specific protection afforded by s 299 of the Code against certain uses of statements which would otherwise be protected by legal professional privilege has no equivalent in s 597. None of the specific provisions of the Companies Code referred to by Dawson J to support his findings of the abrogation of legal professional privilege are to be found in s 597 except for s 597(12) and (12A) specifically dealing with self incrimination. I mentioned earlier that subss (12) and (12A) do not support that argument of the abrogation of legal professional privilege. There is no requirement in s 597 for the person to whom disclosure may be required to form or report any opinion in contrast to s 305 of the Code. There is in s 597 no express reference to a solicitor for a corporation such as is found in para (a) in the definition of 'officer' in s 289(1) of the Code."
Lockhart J made reference to the Dalleagles case (at 131) as follows:
"Yuill was applied by French J in Australian Securities Commission v Dalleagles Pty Ltd (1992) 108 ALR 305, in support of his finding that the provisions of the ASC Law were intended to exclude the operation of legal professional privilege in relation to the production of books under a notice issued pursuant to s 33 of that law; but his Honour was not dealing with s 597."
In my view, the reasons for the conclusion of the Full Federal Court in Compass Airlines Pty Ltd (supra) that there was no implied exclusion of legal professional privilege from s 597 of the Corporations Law have no application to the questions before me. As Lockhart J acknowledged (at 128) one of the "powerful reasons" for there being no implied exclusion of legal professional privilege from s 597 was that the privilege itself did not extend to communications made in furtherance of any criminal or fraudulent purpose. The Panel is not in the present instance concerned with any questions of criminal or fraudulent purpose, and indeed, its concerns are with the question whether a "new set of rights and obligations" should be created in the context of a corporate takeover bid (Precision Data Holdings Ltd (supra) at 190). Further, Lockhart J (at 130) drew particular attention to the fact that there was no equivalent in s 597 of the Corporations Law of the provision contained within s 308 of the Companies Code and s 69 of the Act in relation to a specific exemption to entitle lawyers to refuse to comply with a notice where compliance would involve a breach of legal professional privilege.
It seems that there is a consistent line of reasoning in Yuill (supra) and in Dalleagles (supra) which would support the argument of the Commission before me that legal professional privilege is abrogated in relation to inquiries before the Panel save for the provisions of s 69 of the Act. In my view, there is a necessary implication flowing from the nature of the legislative power, the prescribed manner of its exercise, and the purpose which its exercise is designed to achieve which requires that the privilege be abrogated. The most compelling reasons are:
(a)the provision in s 69 of the Act which affords to a lawyer and a lawyer alone the entitlement to claim legal professional privilege;
(b)the specific reference to an entitlement to claim legal professional privilege in relation to statements made by a person at an examination under s 76(1)(d) of the Act, which provision is inapplicable to inquiries before the Panel;
(c)the abrogation of the privilege against self‑incrimination in relation to inquiries by the Panel (s 68 of the Act), a factor considered by Dawson J in Yuill (at 335) to be important in consideration of the application of legal professional privilege under s 295 of the Companies (NSW) Code.
There is also some support for the view that legal professional privilege is abrogated in inquiries before the Panel to be drawn from the decision in Walsh v Permanent Trustee Australia Ltd(No 4) (1994) 14 ACSR 653. There it was held in the context of proceedings commenced by the Commission under s 50 of the Act in the name of another that legal professional privilege does not prevent the discovery in the proceedings of documents produced by a party to the Commission in the exercise of its investigative powers. As Brownie J said (at 654):
"It seems to me that for the reasons given by Brennan and Dawson JJ in Yuill, and by French J in Dalleagles, the giving of a notice under s 33 of the ASC Law, and the delivery of documents pursuant to that notice, results in the position that the person to whom the documents are produced may use or permit their use in a proceeding such as this case, notwithstanding that they were once the subject of legal professional privilege. In particular, s 37(4) has the effect of permitting documents, once privileged, to be used in a way inconsistent with that privilege."
In my view, there is every indication from the nature of the legislative power contained within the Act, the prescribed manner of its exercise by the Panel, and the purpose which its exercise is designed to achieve, that by necessary implication legal professional privilege is abrogated in relation to proceedings before the Panel, so that the answers to questions of law posed for determination by the Court are in the negative in each instance.
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