Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3)

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FEDERAL COURT OF AUSTRALIA

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285

File number: VID 1157 of 2017
Judge: O'CALLAGHAN J
Date of judgment: 6 March 2019
Catchwords: EVIDENCE – whether respondents established a basis to claim privilege against self-incrimination or privilege to self-exposure to penalty – no sufficient basis to find that documents were anything other than documents of corporations and that no claims to either form of privilege were therefore available – whether there exists an exception to s 187 of the Evidence Act for “sole director/sole employee” companies – no such exception should be recognised – whether production of the documents would give rise to a real and appreciable risk of prosecution and/or institution of proceedings for a pecuniary penalty
Legislation: Evidence Act 1995 (Cth)
Cases cited:

ASIC v Mining Projects Group Ltd (2007) 164 FCR 32

Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) PtyLtd (2015) 256 CLR 375

Devine Marine Group Pty Ltd v Fair Work Ombudsman [2013] FCA 442

Griffin v Panzer (2004) 137 FCR 209

In the Matter of Kala Capital Pty Ltd (No 2) [2012] NSWSC 1293

R v Ronen (2004) 62 NSWLR 707

SZHWY v Minister for Immigration and Citizenship (2007) 159 FCR 1
Date of hearing: 26 October, 19 November and 11 December 2018, and 11 February 2019
Registry: Victoria
Division: General
National Practice Area: Commercial and Corporations
Sub Area  Commercial Contracts, Banking, Finance and Insurance
Category: Catchwords
Number of paragraphs: 136
Counsel for the Applicants/Cross-Respondent: Mr M W Wise QC with Ms N J Hickey
Solicitor for the Applicants/Cross-Respondent: K & L Gates
Counsel for the First and Sixth Respondents/Cross-Claimant: Dr S B McNicol QC with Mr A N McRobert
Solicitor for the First and Sixth Respondents/Cross-Claimant: Norton Rose Fulbright
Counsel for the Second and Eighth Respondents:

Mr M S Osborne QC with Mr T P Warner
Solicitor for the Second and Eighth Respondents:

Mills Oakley
Counsel for the Seventh Respondent:

Dr W A Rothnie
Solicitor for the Seventh Respondent: Hall and Wilcox
Table of Corrections
7 March 2019 In Orders, Orders 1-10 have replaced Order 1 in original; Annexure A has been added.

ORDERS

VID 1157 of 2017
BETWEEN:

DIRECTED ELECTRONICS OE PTY LTD

Applicant
AND:

OE SOLUTIONS PTY LTD

First Respondent

HANHWA AUS PTY LTD

Second Respondent

HAN HWA HIGHTECH AUSTRALIA PTY LTD  (and others named in the Schedule)

Third Respondent
AND BETWEEN:

JOHNNY MENESES

Cross-Claimant
AND:

DIRECTED ELECTRONICS OE PTY LTD(and others named in the Schedule)

First Cross-Respondent

JUDGE:

O'CALLAGHAN J

DATE OF ORDER:

6 MARCH 2019

THE COURT ORDERS THAT:

Privilege Applications

Mills

1.On or before 4PM on 21 March 2019, the Seventh Respondent (Mills) is to file and serve on the Applicant copies of the following of his sworn affidavits filed in this proceeding and presently sealed (Mills Affidavits):

(a)14 November 2017 filed pursuant to paragraph 24 of the search order made by Justice Beach on 26 October 2017…

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Details
Case
[2019] FCA 285
Decision Date

CaseChat Overview and Summary

The Federal Court was tasked with determining whether the respondents could claim privilege against self-incrimination or privilege against exposure to civil penalties with respect to certain documents seized during a search. The applicant, Directed Electronics OE Pty Ltd, sought access to these documents, which were identified as "Listed Things" in a search and seizure order executed at multiple locations. The respondents, including OE Solutions Pty Ltd, Mr Johnny Meneses, and others, argued that the documents were subject to privilege and should not be disclosed.

The court examined several legal issues, including whether the documents were corporate documents or personal documents of the respondents, and if the respondents could claim privilege against self-incrimination or exposure to civil penalties. The court also considered whether there existed an exception to section 187 of the Evidence Act for "sole director/sole employee" companies. After reviewing extensive submissions and affidavits, the court found that the respondents had not established a sufficient basis to claim privilege for the documents in question.

The court concluded that the respondents' claims to privilege must be refused, and the documents must be made available for inspection by the applicant's solicitors. The court granted a certificate under section 128A(7) of the Evidence Act for certain affidavits and documents, ensuring that the disclosed information could not be used against the respondents in any proceeding except for criminal proceedings related to the falsity of the evidence. The court reserved costs and directed the parties to file further submissions regarding costs and any additional orders.

Orders

Orders of the court

Privilege Applications

Mills

1. On or before 4PM on 21 March 2019, the Seventh Respondent (Mills) is to file and serve on the Applicant copies of the following of his sworn affidavits filed in this proceeding and presently sealed (Mills Affidavits):

(a) 14 November 2017 filed pursuant to paragraph 24 of the search order made by Justice Beach on 26 October 2017 (Search Order);

(b) 11 July 2018 filed pursuant to paragraph 24 of the Search Order; and

(c) 11 July 2018 filed pursuant to order 3 of the orders made by Justice Beach on 19 February 2018 (as varied by order 1 of the orders made by Justice Beach on 16 March 2018) (Discovery Order).

2. This Court grants a Certificate under section 128A(7) of the Evidence Act 1995 (Cth.) (Act) in the form of Annexure A to this order (128A Certificate) in respect of the Mills Affidavits and of the documents either referred to in and/or exhibited to any of and identified by him in the Mills Affidavits as being subject to claims of privilege (Mills Documents).

3. On or before 4PM on 21 March 2019, Mills is to provide inspection of the Mills Documents to the Applicant's solicitors.

Hanhwa Parties

4. The Second Respondent and the Eighth Respondent's (together, Hanhwa Parties) application (Hanhwa Parties Privilege Application) seeking an order that they be relieved of the obligation to provide inspection to the Applicant of the documents referred to in exhibit KL‑2 to the Affidavit of Kichang Lee sworn 4 October 2018 (Hanhwa Documents) on the grounds of privilege be refused.

5. On or before 4PM on 21 March 2019, the Hanhwa Parties are to provide inspection of the Hanhwa Documents to the Applicant's solicitors.

Meneses Parties

6. The First Respondent and the Sixth Respondent’s (together, Meneses Parties) application (Meneses Parties Privilege Application) seeking an order that they be relieved of the obligation to provide inspection to the Applicant of the documents referred to in the Part 2 of each of their Lists of Documents filed in this proceeding dated 20 June 2018 and 9 July 2018 (Meneses Documents) on the grounds of privilege be refused.

7. On or before 4PM on 21 March 2019, the Meneses Parties are to provide inspection of the Meneses Documents to the Applicant's solicitors.

Further orders and costs

8. On or before 4PM on 13 March 2019, Mills, the Hanhwa Parties and the Meneses Parties are to file and serve any submissions they wish to rely upon regarding:

(a) the making of any further orders in relation to Mills' application seeking an order that he be permitted to not provide inspection to the Applicant of the Mills Documents, or otherwise that he be provided the 128A Certificate (Mills Privilege Application); and

(b) the costs of the Mills Privilege Application, the Hanhwa Parties Privilege Application and the Meneses Parties Privilege Application.

(Respondents’ Submissions)

9. On or before 4PM on 18 March 2019, the Applicant file and serve submissions it wishes to rely upon in response to the Respondents' Submissions.

10. Costs be reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

VID 1157 of 2017

CERTIFICATE UNDER SECTION 128A OF THE EVIDENCE ACT 1995

This Court certifies under section 128A of the Evidence Act 1995 of the Commonwealth that the information disclosed in the following affidavits is information to which subsection 128A(8) of that Act applies:

1. Affidavit of Craig John Mills affirmed on 14 November 2017 pursuant to the search order made by Justice Beach on 26 October 2017 (Search Order) including any exhibits or annexures thereto;

2. Supplementary Affidavit of Craig John Mills affirmed on 11 July 2018 pursuant to the Search Order including any exhibits or annexures thereto; and

3. Affidavit of Craig John Mills affirmed on 11 July 2018 pursuant to order 3 of the orders made by Justice Beach on 19 February 2018 (as varied by order 1 of the orders made by Justice Beach on 16 March 2018) including any exhibits or annexures thereto.

[A copy of each of the affidavits and their exhibits / annexures is to be attached to this certificate, and duly authenticated by the court or its proper officer.]

Dated:

(affix seal)

_______________________________

Justice O’Callaghan

Note Subsection 128A(8) of the Evidence Act 1995 provides as follows:

(8) In any proceeding in an Australian court:

(a) evidence of information disclosed by a relevant person in respect of which a certificate has been given under this section; and

(b) evidence of any information, document or thing obtained as a direct result or indirect consequence of the relevant person having disclosed that information;

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence concerned.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Secondly, I shall cause Mr Mills to be given a certificate pursuant to s 128A(7) of the Evidence Act 1995 (Cth) (Evidence Act) in respect of the whole of the evidence contained in or exhibited to his affidavit dated 14 November 2017 and his two further affidavits, each dated 11 July 2018. I shall hear the parties as to the precise form of orders, including as to costs, that should be made in light of the following reasons.INTRODUCTION The applicant (Directed) made an application on 19 February 2018 to Justice Beach (who is the docket judge for this proceeding) to obtain access to various documents seized during the execution (the search) of a search and seizure order that his Honour made on 26 October 2017 (the search order), and which was executed at four locations the next day. The documents to which Directed sought access were identified as “Listed Things”, as defined in the search order. On 19 February 2018, Justice Beach ordered that Directed’s application be dealt with in the context of the respondents making their discovery, and that any respondent who or which sought to make claims of privilege with respect to any of the documents seized during the search, or otherwise to be discovered, could do so. His Honour also ordered that any of the respondents who wished to make claims of privilege in relation to discovery, or in relation to Directed’s application, should file and serve any affidavits and submissions setting out, with reference to each document or category of documents, the grounds of objection. There is thus no formal interlocutory application before me in respect of the privilege issues, which a judge other than the docket judge is required to deal with, for the obvious reason that the application involves the prospect (realised in this case) of the court inspecting documents in respect of which claims to privilege are made. For reasons which are explained below, the hearing of Directed’s applications and of the various claims to privilege made by the relevant respondents, although they commenced in October 2018, were not completed until last month. During the ensuing period, the parties filed numerous submissions and affidavits in support of their competing positions. In the end, for reasons which I trust these reasons make obvious, it was not necessary to refer to most of the affidavit material. The written submissions were extensive and detailed oral submissions were made by all parties over the course of the four days. I will now briefly describe the parties and the roles they play.MENESES PARTIES The first respondent, OE Solutions Pty Ltd (OE Solutions), and the sixth respondent, Mr Johnny Meneses (together, Meneses Parties) resist inspection by Directed of 111 documents which they claim are subject to the privilege against self-incrimination (PSI) and 3031 documents which they claim are subject to the privilege against exposure to civil penalties (PCP) (Meneses Documents). Of the Meneses Documents, all but 583 were seized during the search.LEE PARTIES

Decision

Reasons for decision

For those reasons, for the reasons given by Brereton J in In the Matter of Kala Capital Pty Ltd (No 2) [2012] NSWSC 1293, the answer to question 2 is no.CONCLUSION FOLLOWING FROM QUESTIONS 1 AND 2 The claims to Privilege by the Meneses and Lee Parties must therefore be refused, and the 3,135 documents in respect of which Mr Meneses claims Privilege, and the 39 in respect of which Mr Lee claims Privilege, must be made available to Directed’s solicitors for inspection.QUESTION 3 Question 3 is whether each of the Relevant Documents is a document seized during the search or is an “independently” discovered document and whether the evidence enables the court to determine which documents were seized and which were independently discovered. Having read the relevant affidavit material, although the question has no relevance given the view I take with respect to question 1, I am satisfied that the answer to the question is yes.QUESTIONS 4 AND 5 Those questions are unnecessary to decide.QUESTION 6 Question 6 is whether, if at common law the Relevant Respondents can claim the Privilege in respect of seized documents, each of the Relevant Documents has a real and appreciable tendency to incriminate Messrs Meneses, Mills or Lee for a criminal offence or expose them to a civil penalty. This question is unnecessary to decide with respect to Mr Meneses and Mr Lee, but it is with respect to Mr Mills. In my opinion, in respect of the privilege against self-incrimination, this is a clear case where the very seriousness of the allegations made mean that the Relevant Documents have a real and appreciable tendency to incriminate Messrs Meneses, Mills or Lee. In the case of civil penalty privilege, the avowed object of significant parts of the proceeding, summarised above, is the infliction of penalties. As Finkelstein J explained in ASIC v Mining Projects Group Ltd (2007) 164 FCR 32 at [9]-[10]: In the case of self-incrimination privilege the defendant must establish that the provision of information or the production of documents in the civil case leads to a real and appreciable risk of a criminal prosecution before the privilege can be invoked … That will not be difficult to show when, as here, the proceeding is aimed at proving that the directors engaged in conduct which would establish, or go a long way toward establishing, that they had also committed criminal acts. The manner in which penalty privilege is to be claimed depends upon the type of proceeding in which the claim is made. In R v Associated Northern Collieries [1910] HCA 61; (1910) 11 CLR 738, Isaacs J drew attention (at 742) to the “inherent distinction between a civil action to prevent or redress a civil injury on the one hand, and a civil action to recover a penalty on the other. In the latter case the whole and avowed object of the proceeding is the infliction of the penalty” … In an action to recover a penalty it is not necessary for the defendant to establish that there is a risk he will be subjected to a penalty by providing information to the plaintiff. The plaintiff is seeking the information for that very purpose. It does not matter that in the proceeding the plaintiff also claims other relief …(Most case citations omitted).(Emphasis added)

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.