Fielding v Vagrand Pty Limited

[1993] FCA 1077

CATCHWORDS

PRACTICE and PROCEDURE - report for disciplinary hearing against auditor produced on subpoena by the ASC - claim for public interest immunity - whether access should be granted to party not involved in disciplinary proceedings but with own private suit against auditor

Australian Securities Commission Act 1989 (Cth) ss.127(1),

127(2), 127A(2)(c), 213(1), 216(3)

Sankev v Whitlam [l9781 142 CLR 1
Alister v the Oueen [l9841 154 CLR 404
Commonwealth v Northern Land Council [l9911 30 FCR

Zarro & Ors v ASC [l9921 36 FCR 40

22 SEPTEMJ3ER 1993

JOHN ARTHUR FIELDING & ANOR v VAGRAND PTY LIMITED & ORS

No. NG 385 of 1993

EINFELD J

SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) NO. NG 385 of 1993

GENERAL DIVISION 1

Between: JOHN ARTHUR FIELDING

First Applicant

JOHN FIELDING CPA WWAGEMENT SERVICES PTY
LIMITED

Second Applicant

And	r	VAGRAND PTY LIMITED /IN LIOUIDATIONl First Respondent/Cross Claimant
RICHARD NEVIN MOFFITT & ORS T/AS THOMPSON DOUGLASS & CO Second Respondents/Cross Defendants

MINUTE OF ORDERS

EINFELD J SYDNEY 22 SEPTEMBER 1993

1.  Access to the report of Thompson Douglass & Company produced on subpoena by the Australian Securities Commission is refused.

1. Applicants are to pay the costs of the second respondents as assessed or taxed on a party-party basis.

EINFELD J

SYDNEY

22 SEPTEMBER 1993
JN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WmES DISTRICT REGISTRY) NO. NG 385 of 1993

GENERAL DIVISION 1

Between: JOHN ARTHUR FIELDING

First Applicant

JOHN FIELDING CPA MANAGEMENT SERVICES PTY
LIMITED

Second Applicant

And :	VAGRAND PTY LIMITED (IN LIOUIDATION) First Respondent/Cross Claimant
Second Respondents/Cross Defendai

REASONS FOR JUDmNT

EINFELD J SYDNEY 22 SEPTEMBER 1993

The applicants allege, amongst other things, negligence on the part of one of the second respondents, Richard Moffitt, in relation to certain accounts of and a Part A Statement issued

to the public by elements of the Westmex Limited group. In	addition, there are disciplinary proceedings on foot before
the Companies Auditors and Liquidators Disciplinary Board (the Board), instituted by the Australian Securities Commission (ASC) under the provisions of section 1292(1) of the Corporations Law, for the cancellation of M r Moffitt's registration as an auditor based, at least in part, on his audit of the Westmex accounts. At a return of subpoenas before the Court on 2 August 1993 the applicants sought access to a report produced by the ASC. This report provides expert opinion on the conduct of an audit by the second respondents, under the supervision of Mr Moffitt, of the Westmex accounts for the year ended 30 June 1989 (the report). By accepting an offer from Westmex to take over a trust in which the applicants held units, the applicants became the holders of shares in a part of the Westmex group included in the second respondents1 audit.
The second respondents claim public interest immunity against the disclosure of the report to the applicants in these proceedings. They submit that the report was prepared for the purpose of, and forms part of, the ASC's case in the disciplinary proceedings which, together with the material put before the Board, are intended by the legislature to be private.
The applicants contend that the issues for determination have already been resolved between the parties in the judgment of
Justice Davies on 28 July 1993, where his Honour held that the
Commission was empowered under section 127A(2)(c) of the
Australian Securities Commission Act 1989 (Cth) (the ASC Act) to form an opinion whether it was in the public interest that the document be produced or the information disclosed. The applicants submit that as the ASC has produced the documents and has not objected to inspection of them, there is no further public interest to be protected. Furthermore, the applicants contend that the second respondents have no standing to oppose access to the report as it is not their document.
In my opinion, the second respondents as partners in a firm of accountants involved in this case and, through M r Moffitt, in the disciplinary proceedings before the Board, have a direct interest in the report and have standing to oppose access by the applicants to it. As the report provides an expert opinion on the conduct of an audit by the second respondents, for which Mr Moffitt was the engagement partner, the second respondents have standing in relation to the issue of access.
There are a number of provisions of the ASC Act which deal with the confidentiality of proceedings and documents. Section 127(1) provides:

The Commission s h a l l t a k e a l l r easonab l e measures t o

p r o t e c t from unauthor i sed u s e o r d i s c l o s u r e

i n f o r m a t i o n g i ven to i t i n c o n f i d e n c e i n o r i n

connection	w i t h	the performance	o f i t s f u n c t i o n s	or
the exercise	o f i t s powers	under a	n a t i o n a l	scheme

l a w o f t h i s j u r i s d i c t i o n .

In relation to disciplinary hearings to determine whether an auditor's registration should be cancelled or suspended,

identical powers and obligations to those given to the	section 213(1) of the ASC Act provides the Board with
Commission by section 127(1). Subsections (1) and (2) of section 127A provide:
( 1 ) S u b j e c t t o this s e c t i o n , a person who was a t a n y t ime :

( a ) appo in ted f o r the purposes of a l a w s p e c i f i e d

i n an a p p l i c a t i o n o rder ; or

(b)	engaged as a member of the staff of the NCSC; o r
(c)	authorised to perform or exercise any function
o f power o f the NCSC or any function or power on behalf o f the NCSC;

must not, except t o the extent necessary t o perform h is or her o f f i c i a l duties, or t o perform or exercise such a function or power, ei ther d irect ly or indirect ly , make a record o f , or disclose t o any person, any information that i s or was acquired by

h i m or her because o f having been so appointed,

engaged or authorised, or make use o f any such information, for any purpose other than the performance o f h i s or her o f f i c i a l duties or the performance or exercise o f that function or power.

Penalty:	$5,000 or imprisonment for one year, or
both.

( 2 )

Nothing i n subsection ( 1 ) precludes a person from:

(a)	producing a document to a court in the course o f criminal proceedings or i n the course o f any proceedings under the National Companies and Securities Commission Act 1979 or under a prescribed l a w or national scheme l a w o f t h i s or any other jurisdiction; or
(b)	disclosing to a court in the course of any

proceedings referred t o i n paragraph ( a ) any	matter or thing that came under h i s or her
notice i n the performance o f o f f i c i a l duties or i n the performance o f a function or the exercise o f a power referred t o i n that subsection; or

(c) producing a document or disclosing information

t o a person t o whom, i n the opinion o f the Commission, i t i s i n the public interest that

disclosed; or the document be produced or the information be
(d)	producing a document or disclosing information that i s required or permitted by any Act o f t h i s or any other jurisdiction t o be produced or disclosed, a s the case may be; or
(e)	producing a document or disclosing information

t o the Commission.

Moreover, disciplinary hearings must be held in private unless requested by the auditor in question to be held in public: section 216(3).

As found by Justice Davies on 28 July 1993, the ASC has power under s 127A(2)(c) to authorise the disclosure of information given to it if, in the opinion of the Commission, it is in the public interest that the document be produced or the information disclosed. His Honour also held that the obligation of confidentiality imposed by section 213(1) covers material communicated by the Commission to the Board. I respectfully agree with his Honour's opinions in these respects.

The second respondents submit that the prevailing public interest in these circumstances is that of giving effect to the confidentiality obligations imposed by the ASC Act on the Board and its proceedings. The question to be determined in the present case is, however, not whether material can be disclosed by the Board, but whether the second respondents can successfully prevent access being granted to a document produced on subpoena on the grounds of public interest immunity, where the ASC itself does not object to the

production of the report.

The applicants' submission was that by producing the report to the Court, the ASC has formed a positive opinion in favour of disclosure. The ASC made no submissions in the proceedings before me, but it did send a letter to the solicitors for the applicants on 20 July 1993 stating that it has no objection to the discovery of the report. In my opinion this attitude does not amount to the formation of the relevant opinion. Nor does the mere production of the report to the Court allow the inference of such an opinion. The ASC could have released the report directly to the applicants if it had chosen to do so. I do not know why it has not done so -- and there is no reason why it cannot supply it even now -- but by neither consenting nor objecting to the production required by the subpoena, the ASC has left it to the Court to determine whether access should be granted to the applicant in the present proceedings. It is difficult to understand why the Court's time is being taken up with such a meaningless exercise.

A recent statement of the approach to be taken by the Court in deciding this question can be found in the decision of Justice Lockhart in Zarro & Ors v ASC [l9921 36 FCR 40. This case involved a claim for public interest immunity by the ASC in relation to documents relating to allegations of fraudulent and negligent misrepresentations. His Honour stated at 45:

I t was dec ided i n S a n k e v v Whit lam [ l9781 142 CLR 1

and	con f i rmed i n A l i s t e r v	the	Oueen	[ l 9841 154 CLR
404	t h a t ,	when one p a r t y t o a proceed ing seeks	the

produc t ion o f documents and o b j e c t i o n i s t a k e n t h a t

i t would be c o n t r a r y t o the p u b l i c i n t e r e s t t o

produce them, the c o u r t mus t c o n s i d e r two

c o n f l i c t i n g a s p e c t s o f the p u b l i c interest: first, whether harm would be done by the produc t ion o f the documents and, s econd l y , whether the a d m i n i s t r a t i o n

of j u s t i c e would be impaired i f the documents were

w i thhe ld ; and t o d e c i d e by a b a l a n c i n g exercise

which o f these e l e m e n t s predominates . A b a l a n c i n g

exercise can o n l y be undertaken when i t appears t h a t

b o t h a s p e c t s o f the p u b l i c interest r e q u i r e

c o n s i d e r a t i o n :

" i e when i t appears , on the one hand, t h a t

damage would be done t o the p u b l i c

interest by producing the documents sough t

or documents o f t h a t c l a s s , and, on the

other hand, t h a t there a r e o r a r e l ike ly

to be documents which c o n t a i n m a t e r i a l

e v i d e n c e .	The	c o u r t	can	then	c o n s i d e r	the
n a t u r e	o f	the	i n j u r y which	the	n a t i o n	o r
the	P u b l i c	S e r v i c e	would	be	l ikely	t o

s u f f e r ,	and	the	e v i d e n t i a r y	v a l u e	and
impor tance	o f	the	documents	i n	the

p a r t i c u l a r l i t i g a t i o n . . . "

S e e Alister	v	The	Oueen	( s u p r a ) p e r	G i b b s	C J	( a t
412 ) .

As was po in t ed o u t by a Fu l l Court o f this Court i n gommonwealth v Northern Land Counci l [ l 9911 30 FCR l ( a t 3 1 ) , when a c l a i m for p u b l i c interest immuni ty i s r a i s e d there may be a t h r e s h o l d q u e s t i o n whether

the documents i n q u e s t i o n a r e or may be o f

s u f f i c i e n t impor tance t o the c a s e t h a t the c o u r t should under take the exercise, which may involve their i n s p e c t i o n , o f b a l a n c i n g the p u b l i c interest

i n w i t h h o l d i n g produc t ion a g a i n s t the p u b l i c

interest i n the a d m i n i s t r a t i o n o f j u s t i c e . The

n a t u r e o f the b a l a n c i n g p roces s and .the f a c t o r s

r e l e v a n t t o d e c i d i n g a p u b l i c interest immuni ty

c l a i m were	cons ide red i n Northern	Land	Counci l	( a t
38-39) .

In the present case the applicants seek access to the report, not because it is claimed that it would provide any material which is admissible as evidence in the current proceedings, even arguably so, but because it would or might point to avenues of investigation and might bring to the attention of

addition, the affidavit by the solicitor for the applicants	the applicants matters which may otherwise be overlooked. In
states that access to the report would result in a significant time and cost saving for the applicants in the preparation of their own expert report. No cross examination was sought on these contentions and there was no contrary evidence. There is nothing unreal or extravagant about these contentions. They should thus be generally accepted, although no subject matters were identified as likely to be overlooked nor do any come readily to mind.
In accordance with the statement of the Full Court in Northern Land Council at 39, quoted by Justice Lockhart in Zarro, the first question is whether the report is of sufficient importance to require or incline the Court to undertake the balancing exercise as to whether the harm done by the production of the report outweighs or predominates over the impedient to the administration of justice if it is withheld. In my opinion, the circumstances of the present case are not sufficient to categorise the report as of such importance. The report is one opinion on a number of matters of conduct of one of the second respondents made for the purposes of proceedings extraneous to this litigation. It does not go to the primary facts involved here.
The matter does not in truth raise a matter of public interest immunity and seems to be a storm of curiosity in a teacup of
use the report in evidence in this case, it will have to be irrelevance. It is obvious that if the respondents wish to
made available to the applicants. If it is not to be used, it cannot be relevant. In my opinion the matter should be dealt with on the basis of the opinions of the experts who are selected by the parties for the purposes of this case. Perhaps the applicants will choose the same expert as the ASC. If not, and the applicants' expert takes longer to prepare a report because the ASC's expert's report is not available, it
is a pity but does not raise an issue of legal principle. Reasons of convenience or expediency in seeking access to the report for the purposes of preparation in these proceedings are not of sufficient weight to justify the Court undertaking the difficult exercise, with little evidence, of balancing the public interest in refusing access against the public interest in the due administration of justice. A "fishing" expedition to embarrass M r Moffitt is even less worthy.
For these reasons I refuse access to the report of Thompson Douglass & CO produced on subpoena by the ASC. The applicants are to pay the costs of the second respondents in relation to this application on a party-party basis.

I certify that this and the

Solicitors for the	Mr S J Blanks of
applicants	Stephen Blanks & Associates
Solicitors for the	MS S P Baines of Baker &
first respondent	McKenzie
Solicitors for the	MS E Woodforde of Phillips
aecond respondent	Fox
Date of Hearing	2 August 1993
Written submissions completed	5 August 1993

Date of Judgment 22 September 1993