Integrated Financial Group Pty Ltd v Australian Securities & Investments Commission

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: INTEGRATED FINANCIAL GROUP PTY LTD -v- AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION [2004] WASC 75

CORAM: ROBERTS-SMITH J

HEARD: 30 MARCH 2004

DELIVERED : 28 APRIL 2004

FILE NO/S: CIV 1226 of 2004

BETWEEN: INTEGRATED FINANCIAL GROUP PTY LTD (ACN 080 561 833)
Plaintiff
AND
AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
Defendant

Catchwords:

Corporations - Investigation by Australian Securities & Investments Commission - Notice to produce books - Computer tape - Delivered to recipient of notice by mistake - Believed to be backup computer tape of entity being investigated - In fact backup tape of plaintiff - Did contain relevant information of entity being investigated - Whether production of tape responded to notice - Whether ASIC entitled to retain and use it in investigation

Legislation:

Australian Securities & Investments Commission Act 2001 (Cth), s 33, s 37

Rules of the Supreme Court, O 16 r 1

Result:

Defendant's application for summary judgment granted

Category: A

Representation:

Counsel:

Plaintiff: Mr S D Hall SC
Defendant: Mr C G Colvin SC & Mr M K Benter

Solicitors:

Plaintiff: Fairweather & Lemonis
Defendant: Australian Securities & Investment Commission

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

Adler v Gardiner (2002) 43 ACSR 24
Allied Mills Industries Pty Ltd v Trade Practices Commission (No 1) (1981) 34 ALR 105
Burton v Shire of Bairnsdale (1908) 7 CLR 76
Currency Brokers (Aust) Pty Ltd v Corporate Affairs Commission (New South Wales) & Anor (1986) 10 ACLR 623
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 23 ALR 480
Films Rover International v Cannon Film Sales Ltd [1987] 1 WLR 670
Kelly v The Queen (2004) 205 ALR 274
Kennedy v Wallace [2004] FCA 332
Phillips v Corporate Affairs Commission (SA) (1986) 5 ACLC 50
Pickering v Federal Commissioner of Taxation (1998) 98 ATC 4977
Propend Finance Pty Ltd v Commissioner, Australian Federal Police (No 2) (1994) 29 ATR 87
Pyneboard Pty Ltd & Ors v Trade Practices Commission & Bannerman (1982) 39 ALR 565
Young v Holloway (1895) P 87

Case(s) also cited:

Amalgamated Television Services Pty Ltd v Australian Broadcasting Tribunal (1989) 91 ALR 363
Baker v Campbell (1983) 153 CLR 52
Carlton & United (NSW) Pty Ltd v Bond Brewing New South Wales Ltd (1987) 76 ALR 633
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Custom Credit Corporation Ltd v Whitehall Holdings Pty Ltd, unreported; SCt of WA; Library No 920231; 7 April 1992
Federal Commissioner of Taxation v Citibank Ltd (1989) 20 FCR 403
Green v F P Special Assets Ltd & Ors (1990) 3 ACSR 731
May v Deputy Commissioner of Taxation for the Commonwealth of Australia (1998) 98 ATC 4960
Morris v Director of Serious Fraud Office [1993] 3 WLR 1
Mott v Mount Edon Goldmines (Australia) Ltd (1994) 12 ACLC 319
Regent's Pty Ltd v Subaru (Australia) Pty Ltd (1996) ATPR 41463

ROBERTS-SMITH J: This case is about a mistake - or rather the consequences of one.
A computer backup tape, which was the property of the plaintiff, was handed to Deloitte Management Pty Ltd ("Deloittes") in April 2003 under the mistaken belief it was a backup tape of the records of the Strategic Superannuation Fund ("the Fund").
The defendant ("ASIC") is conducting an investigation into the plaintiff ("IFG"), Strategic Capital Superannuation Services Pty Ltd ("Strategic Capital"), the Fund and related entities.
Deloittes told ASIC they had a backup tape of the records of the Fund.
ASIC issued a notice under s 33 of the Australian Securities and Investments Commission Act 2001 ("the ASIC Act") to Deloittes requiring production of the tape.
Deloittes handed the tape over to ASIC.
The tape was a backup tape of IFG - although it did contain some records of the Fund. IFG wants the tape back. ASIC refuses to give it back.
By chamber summons filed 23 February 2004 the plaintiff seeks an interlocutory injunction, inter alia:
1.ordering the defendant to deliver up to the court the backup tape marked with the sticker "Friday" delivered by Deloittes to the defendant on or about 23 June 2003 in response to a notice requiring the production of books of the Fund and all copies in either electronic or hard copy of the backup tape or of the contents of it;
2.restraining the defendant from disclosing or using the information contained on the backup tape; and
3.requiring the defendant to file and serve an affidavit identifying details of anyone to whom the information on tape has been disclosed.
There is also before me a chamber summons of the defendant seeking orders that the action be dismissed and judgment be entered for the defendant with costs, or alternatively, the statement of claim filed by the plaintiff with the writ of summons dated 23 February 2004 be struck out.
The grounds of the defendant's application as set out in its chamber summons are that the action ought to be dismissed on the basis the defendant has a good defence on the merits or alternatively, the statement of claim ought to be struck out on the basis it discloses no reasonable cause of action.
The applications were heard together by consent, the parties agreeing that the same submissions would go to both.
Strategic Capital was formerly trustee of the Fund. It was replaced as trustee on 4 April 2003 by Deloittes.
Mr Anthony Glass is a director of IFG, having been so appointed on 2 March 1999. He is also a director of Strategic Capital, having been so appointed on 28 July 2000.
As at April 2003 IFG carried on a financial services business from offices at 14 Ventnor Avenue, West Perth. As part of its operations IFG operated a computer system also situated at that location.
About December 2001 the plaintiff installed a new computer system ("the plaintiff's system").
The plaintiff's system contains a Microsoft small business server which includes a Microsoft exchange server email system. The information and software used by the plaintiff's system is stored on the server. The exchange server enabled access to the plaintiff's system. The plaintiff has an additional terminal server which facilitated remote access to the plaintiff's system.
Those persons who had external access to the servers included Glass, Mr Terry Lawson, Mr Michael Van Rens and Mr Greg Milner. Lawson and Van Rens were appointed directors of the plaintiff on 28 November 1997. They were also appointed directors of Strategic Capital in July 2000. Lawson remains a director but Van Rens resigned from that position on 14 March 2003. Milner provided marketing services relating to the business activities of the plaintiff.
The plaintiff allowed Van Rens, Lawson and Glass to utilise the plaintiff's system for their own private business purposes. However, the plaintiff's system remained under the control and supervision of the plaintiff. The access to Glass's personal login and electronic mail record was only available to him and to the plaintiff's system administrator. The same applied for Van Rens and Lawson.
Prior to April 2003 the plaintiff's system was used by up to 20 separate people at any one time, who were all engaged in the plaintiff's business. Each user had their own separate login and password.
The plaintiff's system was backed‑up each business day by placing a backup tape in the server. The backup tape made a copy of the information stored on all of the servers comprising the plaintiff's system. The tape for each day was then marked by reference to the relevant day of the week and the week of the month. For example, the backup tape for the first Friday of a particular month was marked with the notation "Friday 1".
According to Glass, the following information was stored on the plaintiff's system:
•details of the plaintiff's database recording the names and contact details of approximately 15,000 separate contacts;
•the communications by the plaintiff with each of those contacts in relation to possible services that could be provided by the plaintiff;
•the businesses and services provided by the plaintiff to its clients, including financial planning records and insurance records;
•documents relating to the assessment of potential commercial ventures assessed by the plaintiff;
•documents relating to the financial affairs and activities of Glass, Van Rens and Lawson;
•documents relating to the personal affairs of Glass, Van Rens and Lawson;
•documents relating to business ventures assessed by Glass, Van Rens and Lawson for potential investments.
Glass deposes that to the best of his knowledge, information and belief the plaintiff's system contained only the following limited information in relation to Strategic Capital and the Fund:
•an Excel spreadsheet providing a summary of information in relation to each member of the Fund;
•scanned copies of applications made by members to join the Fund;
•scanned copies of documents effecting a rollover by members of superannuation investments into the Fund; and
•scanned copies of applications by approximately 30 members of the Fund, for life insurance and disability insurance cover.
As at April 2003, Strategic Capital maintained a separate computer ("the Strategic computer") containing information relating to Strategic Capital and the Fund. The information on the Strategic computer could not be backed up to the plaintiff's system as the Strategic computer ran a separate software program which was not compatible with the backup process on the plaintiff's system. Therefore the information on the Strategic computer was backed up onto a separate computer disk.
That computer disk was delivered to Deloittes on 9 February 2004.
The reason the scanned documents referred to above were scanned into the plaintiff's system was because the Strategic computer did not have scanning facilities.
About 27 June 2003 the Strategic computer was delivered up to Sharyn Long & Associates, the accountants appointed by Deloittes in respect of the Fund.
About 7 April 2003, Glass was assisting Deloittes as a director of Strategic Capital, by handing to Deloittes property of the Fund. He handed to Mr Bob Colan of Deloittes the most recent backup tape for the plaintiff's system. He did so in the mistaken belief it recorded the backed‑up information of Strategic Capital relating to the Fund. He did not appreciate at the time that the backup tape he was handing over was the property of the plaintiff. He deposes that the backup tape he handed to Colan had a notation on it "Friday 1" or "Friday".
Deloittes received the tape believing (as did Glass) that it was the backup tape of the Fund.
In May 2003, ASIC was seeking to identify who had actual possession of books and records of or in relation to the Fund. Colan informed Mr Anthony Lewis, the ASIC project manager for the investigation, that Deloittes had a "daily" backup copy of the computer records of the Fund.
On 23 June 2003, Lewis issued a notice pursuant to s 33 of the ASIC Act to Deloittes ("the Deloitte notice").
The notice relevantly required production of:
"The backup tape of the computer records of the Strategic Capital Superannuation Fund".
No point is taken about the validity of the notice.
On 23 June 2003, Lewis served the Deloitte notice on Deloittes and the backup tape was produced to him by Colan.
On 28 July 2003, a number of other s 33 notices were issued and served as part of this investigation, in respect of a number of entities and individuals. Those notices were issued before anyone at ASIC had examined the contents of the backup tape.
Documents were produced to ASIC in response to those notices.
In early August 2003, the restored records of the backup tape were loaded onto a stand‑alone computer in the Perth office of ASIC. They were then reviewed to determine whether there was any information in them relevant to the investigation.
In affidavit evidence filed by ASIC, it is stated that numerous documents relating to the affairs of Strategic Capital have been identified. There are other documents which concern the affairs of Strategic Capital, including a sub‑folder containing some 70,000 scanned images of documents. It is said that although only approximately half of the documents in that sub‑folder have presently been reviewed, there are hundreds of them which concern the affairs of Strategic Capital and are relevant to the suspected contraventions of the statutory provisions identified in the Deloitte notice.
On 9 February 2004, the plaintiff's solicitors, Fairweather & Lemonis, wrote to Deloittes advising that they acted for the plaintiff and demanding the return of the backup tape delivered to Deloittes in error by Glass on or about 7 April 2003. They wrote that Glass did not have the authority of IFG to hand over the tape and his conduct in so doing had not been authorised nor ratified by IFG. They further stated that the tape contained confidential information of IFG, its clients and other persons. They maintained that property in the tape had not passed to Deloittes which were therefore not entitled to retain possession of it, nor to make copies of it, nor to make use of any information on it.
Fairweather & Lemonis wrote a further letter to Deloittes on the same day in their capacity as solicitors for Strategic Capital. They noted that on 7 April 2003, Glass had handed to Deloittes a backup tape which he mistakenly believed was that of the Fund. They wrote they were now forwarding with that letter a backup disk of Strategic Capital containing information in relation to the Fund up to 31 March 2003.
On 11 February 2004, Deloittes wrote to Fairweather & Lemonis advising that the backup tape voluntarily given to them had been treated as a backup tape of the Fund and was immediately placed in a fireproof security cabinet at their Perth office. It was not otherwise dealt with until 23 June 2003 when Deloittes complied with the notice from ASIC requiring the production of books of the Fund. They handed over possession of the tape to ASIC believing it to be part of the Fund records. Deloittes wrote that accordingly they were not in a position to return the tape to the plaintiff because it was no longer in Deloittes' possession and nor were they in a position to give any undertakings or indemnities regarding the use of it.
On 13 February 2004, Fairweather & Lemonis wrote to ASIC demanding the return of the backup tape.
After recounting the circumstances in which it came to be delivered to ASIC, they wrote that it contained "marginal information" in relation to the Fund limited to the Excel spreadsheet, scanned copies of applications to the Fund and documents effecting a rollover for members into the Fund and scanned insurance applications in respect of approximately 30 out of the total of approximately 500 members of the Fund.
The solicitors maintained that the tape was, and remained, the property of IFG, it did not constitute a "book of the Fund" and did not fall within the terms of the Deloitte notice. They demanded the return of it.
By letter dated 17 February 2004, ASIC declined to return the backup tape. ASIC maintained that the tape and its contents fell within the ambit of the requirement to produce contained in the notice and that they contain a very significant number of documents relevant to ASIC's investigation. They wrote that ASIC would not be returning the tape or any of the documents derived from it until such time as the investigation was concluded and any consequent enforcement action had been taken.
The letter continued:
"I note in passing that, in addition to being broadly relevant to ASIC's investigation, the contents of the tape raise two further matters of interest. The first is that they appear to present a version of events that could be construed as inconsistent with certain of the responses your clients gave in the context of their respective s 19 ASICAct examinations. The second is that many of those documents fall within the terms of various notices issued and served on your clients. If that is right it would suggest that your clients, in particular TIFG (more particularly if, as you assert, the tape is in fact TIFG's), may not have properly complied with the various ASIC Act notices served on them in this matter. As you would no doubt be aware, the ASIC Act contains provisions that render contempts of ASIC, making false statements under oath, concealment of books and non‑compliance with ASIC Act notices, criminal offences. We are mindful however that many instances of non‑compliance and the like are often the product of inadvertence rather than a course of deliberate conduct and that that may be the case in this instant.
A further concern we have is that in your letter you provide a specific description of the tape and in particular you refer to the word or words 'Friday' or 'Friday 1' as being marked on the tape. While it is possible that one of your clients specifically recalled the circumstances in early April 2003 in which the tape was handed over, including the date, and to whom it was handed, the accurate recollection of what was written on the spine of the tape is remarkable. The tape has, so far, only been shown to one person since we took possession of it. That was in the context of a s 19 ASIC Act examination at which specific and strict non‑disclosure directions were made. Accordingly, we are now concerned that one of the examinees may have breached a non‑disclosure direction made to that person in the examination."
It is to be noted from the above that there is a dispute between the parties about the extent to which the backup tape contains records of the Fund. The plaintiff claims it contains only a few such records; the defendant claims it contains a substantial number.
It is submitted on behalf of the defendant that the plaintiff has known of Glass's mistake in handing over the tape to Deloittes, since June 2003, that the defendant's officers have done extensive work examining the tape and investigating the documents on it since then and that the necessary effect of the orders sought by the plaintiff would be that the defendant's officers who have been involved in the investigation to date, would have to cease involvement in the investigation and new officers would have to commence the task afresh. The point is supported by affidavit evidence in which it is stated that four ASIC officers have worked on the tape, the investigation is rated as a "complex" investigation by ASIC and that up until 26 February 2004, some 4,460 hours have been recorded as the staff time spent working on the investigation. That is said to be a conservative assessment. Only two officers have had direct access to the stand‑alone computer onto which the backup tape has been restored and they have spent a total of approximately 60 working days reviewing the restored records. The other members of the investigation have in the course of their conduct of it, used many documents sourced from the backup tape.
It is submitted on behalf of the plaintiff that the fundamental question which will determine both the applications is whether the backup tape was within the scope of, and so lawfully received by, ASIC, under the terms of the Deloitte notice.
The notice was issued under s 33 of the ASIC Act.
That section is in the following terms:
"ASIC may give to a person a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books that are in the first‑mentioned person's possession and relate to:
(a)affairs of a body corporate; or
(ab)affairs of a registered scheme; or
(b)a matter referred to in any of paragraphs 31(1)(g) to (m), inclusive; or
(c)a matter referred to in paragraph 32A(c) or (d)."

It is not in issue that a computer tape or disk containing financial information is a "book" for the purposes of s 33 (as defined in s 5 of the ASIC Act and s 25 of the Acts Interpretation Act 1901 (Cth).
Section 33 is contained in Div 3 (Inspection of Books) of Pt 3 (Investigation and Information Gathering) of the ASIC Act.
By s 13, and subject to an exception which is of no present concern, ASIC may make such investigation as it thinks expedient for the due administration of the Corporations legislation where it has reason to suspect a contravention of the Corporations legislation or a law of the Commonwealth or of a State or Territory in this jurisdiction concerning the management or affairs of a body corporate, or which involves fraud or dishonesty relating to a body corporate.
Section 37 deals with the power of ASIC where books are produced or seized under a requirement made under Div 3 of Pt 3. A person authorised to do so on behalf of ASIC may take possession of any of the books, may inspect and make copies or take extracts from any of them, may use or permit the use of the books for the purposes of a proceeding and may retain possession of them for so long as is necessary for the investigation or proceeding.
It remains only to mention s 86 of the Corporations Law, which provides that a thing that is in a person's custody or under a person's control is in the person's possession.
Although failure to comply with a s 33 notice is an offence, that does not necessarily mean the provision (or any notice issued under it) is to be read restrictively. Regard must be had to the objects and purpose of the legislation (Kelly v The Queen (2004) 205 ALR 274). The whole of Pt 3 is directed to the investigation and information gathering function of ASIC. It clearly contemplates a process of making inquires, identifying what documents are or may be available bearing upon the particular investigation, obtaining production of the books and analysing them. It is to be expected in the ordinary course of such investigations that the investigators will not necessarily know in any detail or with any great particularity, precisely what documents are available nor what the content of them is. That information will in many cases only become clear once the documents are produced and examined or the investigators are satisfied they do not exist.
None of this is to say there need not be sufficient particularity in a s 33 notice to demonstrate that what it requires is a proper exercise of the power.
Although concerned with a different legislative provision (s 264(1)(b) of the Income Tax Assessment Act 1936 (Cth)) the following passage from the judgment of Gibbs ACJ in Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 23 ALR 480 at 490 is apposite:
"To be valid a notice to produce documents under s 264(1)(b) must of necessity identify with sufficient clarity the documents which are required to be produced. However the notice must in my opinion go further: it must show the person to whom it is addressed that any document which he is required to produce is one whose production the Commissioner is entitled to require. Where a notice is addressed to a taxpayer who is required to produce documents which relate to his own income or assessment, the very description of the documents (for example, 'your books of account') may be enough to show that the notice is within the power conferred by the section. Where however the notice is addressed to one person, requiring him to produce the documents of another, the notice must show that those documents relate to the income or assessment of a particular person, who must be identified. The power is confined to giving a requirement of a particular kind - a requirement to produce documents relating to the income or assessment of some person - and a notice requiring the production of documents not so related is beyond the scope of the power."
That passage was quoted by Northrop, Deane and

Fisher JJ in their joint judgment in Pyneboard Pty Ltd & Ors v Trade Practices Commission & Bannerman (1982) 39 ALR 565 at 570. Their Honours then went on to say (speaking of s 155(1) of the Trade Practices Act 1974 (Cth)):
"The requirement that a notice under s 155(1) convey, with reasonable clarity, to the recipient what information he is required to furnish or what documents he is required to produce is not to be applied in a precious or hypercritical fashion (see, Melbourne Home of Ford Pty Ltd v Trade Practices Commission (No 3) (1980) 31 ALR 519 at 531). Artificial dissection, in the cause of determined obfuscation, can introduce an argumentative element of uncertainty into words which, when read reasonably in context, are adequate to convey a plain and clear meaning. Provided a notice makes it reasonably clear, in the circumstances in which it is given and on a fair reading of its terms, what information or documents are required, the requirements of s 155(1) as to clarity will be satisfied. In this regard, the mere fact that parsing and analysis in the artificial atmosphere of the courtroom can lead to the identification of a number of latent ambiguities will not invalidate what, as a matter of common sense, is reasonably clear."
In Currency Brokers (Aust) Pty Ltd v Corporate Affairs Commission (New South Wales) & Anor (1986) 10 ACLR 623, Bryson J held that if the notice issued under s 12(3) of the Companies (New South Wales) Code requiring a person to produce certain books, conveys to the recipient, knowledge of the requirement made of him with such clarity that he can fairly understand what he has to do, then it is valid. His Honour noted (at 625) that it appears to be well‑established that a notice under s 264 of the Income Tax Act must indicate the power on which the giving of the notice is based with reasonable clarity. He said it was not clear to him that there was a similar need in the case before him, but if there were it was amply met.
Bryson J further noted that s 12(3) was indifferent in its expressed terms, to ownership or entitlement to possession or custody of the documents and appeared to extend to any document which the recipient is able to produce.
That is clearly also the position in respect of s 33 of the ASIC Act and that appears to have been common ground before me.
In Currency Brokers, Bryson J thought there to be no reason to apply a strict or punctilious standard to a specification of documents to be produced. He considered it necessary to ask whether the specification is comprehensible or clear in that it can reasonably be understood so as to comply with it.
At 628 his Honour, referring to the possible conflict between the penal nature of the statutory provision and the purpose of the legislation, said:
"Narrow definitions of 'specify' and its derivatives are to be found in dictionaries but to apply them here would be to choose the narrowest rather than the purposive meaning of the expression, contrary to what s 5A of the Companies and Securities (Interpretation and Miscellaneous Provisions) (NSW) Code requires where more than one construction would otherwise be available. The consideration that the provision is penal, while important, appears to me to be but one factor among those bearing on the construction of 'specify' in this context.
Another important matter is the evident purpose of the provision to place effective investigative tools in the hands of the Commission. In the nature of investigation the person giving the notice and making the specification would often not be well informed, yet the process would be futile if this disabled him from giving a valid notice. Further, s 5A appears to me to displace the presumption which the penal character of a provision would otherwise create as a matter of last resort for the resolution of ambiguities."
In my opinion that is the approach which ought to be taken here, not only to s 33 itself, but to the construction of the notice.
I recognise, as Mr Hall SC points out, that in both Pyneboard and Currency Brokers the challenge to the relevant notices to produce were made by the recipient of the notices, whereas here it is the owner of the document which complains about its production. He submits therefore that those cases are not to the point because the concern in them was whether the notices were sufficient to enable the recipients to know sufficiently what documents had to be produced in accordance with them. The question here, he says, is not whether the description of the document was sufficient for Deloittes to know what ASIC was requiring it to produce - that was known, because both Deloittes and ASIC were referring to the same particular tape, but were both labouring under a mistake as to what it actually was - but whether the s 33 notice was legally effective for ASIC to receive and retain that tape.
Mr Hall further submits that ASIC is bound by the terms of its notice - it is that which determines whether, (as he puts it), there was a lawful right for ASIC to come into (and retain) possession of the tape.
It is useful to start from established principles.
The first is that s 33 of the ASIC Act is not concerned with property rights in, nor legal entitlement to, possession of books. It does not matter that a person who has possession of a document may not have a legal right to possession (Allied Mills Industries Pty Ltd v Trade Practices Commission (No 1) (1981) 34 ALR 105, 125‑6).
The second principle, allied to the first, is that s 33 is not concerned with the legal relationships between the person who has possession of the book, the person with the proprietary or other legal interest in it and ASIC. The section is concerned with the ability of the person to whom the notice is addressed to produce the books when required to do so (Federal Commissioner Taxation v ANZ Bank, supra per Gibbs ACJ at 520).
In Allied Mills the circumstances were a step anteriorly removed from the present in that the subject documents were not produced to the Trade Practices Commission in response to a statutory notice. A former State manager of Allied Mills was interviewed by the Commission in the course of its investigation of possible breaches of the Trade Practices Act ("the TPA") by Allied Mills. He disclosed the existence of certain relevant documents belonging to Allied Mills. The Commission investigator told him they could compel production of the documents by issuing a notice under s 155 of the TPA. His response was that if the Commission could do that, he might as well hand the documents over, which he did.
Allied Mills sought orders restraining the Commission from making use of, or disclosing, the information in the documents, claiming, inter alia, property in the documents and breach of confidence.
Sheppard J held that the authorities established that the public interest in the disclosure (to the appropriate authority) of iniquity will always outweigh the public interest in the preservation of private and confidential information, that the disclosure of evidence or material which established, or tended to establish the breach of Trade Practices legislation was the disclosure of iniquity within that rule and that in the case before him there were reasonable grounds for believing that Allied Mills may be implicated in a breach of the TPA and the document itself disclosed the iniquity and so therefore could not be recovered as a confidential document.
His Honour rejected the submission made on behalf of Allied Mills that the documents were not lawfully in the possession of the Commission because they were confidential documents held by it against the will of the owner and the only lawful way they could have been obtained was by the issue of a valid notice under s 155 of the TPA. He rejected it because public interest considerations in the conduct of investigations into suspected breaches of the law indicated that was not the intention of Parliament. His Honour said (at 146):
"The provisions of s 155 ought to be regarded as provisions the better to enable or empower the Commission to carry out its task of seeing to it that the provisions of the Act, and thus the will of Parliament, are obeyed. It may be that a person such as Allied Mills has not the same protection if its documents reach the hands of the Commission otherwise than as the result of its consent or the issue of a notice under the section. But it would, in my opinion, defeat the consequences of the public policy considerations to which I have referred if, in the event that a beach of the law were disclosed by a member of the staff of a company, it could nevertheless successfully claim an injunction to prevent the use of the documents and information which had come into the Commission's hands, and which the Commission sought to use in support of a prosecution. It is not suggested in the present case that Mr Matthews could not lawfully give information to the Commission, notwithstanding that the information might itself be confidential. Why should documents stand in any different position? In my opinion the Commission's retention of the documents is lawful for all the earlier reasons I have given."
There is no doubt the backup tape was in the possession of Deloittes. That being so, it was to that extent susceptible to an order for production to ASIC pursuant to a notice under s 33 of the ASIC Act. It does not matter whether Deloittes' possession of it was lawful, or the result of a mistake (Federal Commissioner of Taxation v ANZ Banking Group, supra.)
It seems to me there are really two fundamental questions. The first is whether production of the backup tape did properly respond to the Deloitte notice (or to put it another way, whether the notice called for production of the backup tape). The second question is, if the Deloitte notice did not call for production of that tape, whether ASIC may nonetheless retain and use it in the investigation.
The Deloitte notice specifically required the production by Deloittes of "the backup tape of the records of the Strategic Capital Superannuation Fund". Taken in isolation that would be a description of the Fund's backup tape of its records, that is to say, a tape belonging to the Fund and being a backup tape made by or for the Fund, of its records. That is how Mr Hall submits the description should be read, and that accordingly the backup tape which is the property of the plaintiff, and is the backup tape of the plaintiff's records (but which happens to contain some relevant financial records of the Fund) simply does not meet that description.
The plaintiff's submission is that the sole issue is whether the backup tape answers the description in the Deloitte notice. The plaintiff relies on Phillips v Corporate Affairs Commission (SA) (1986) 5 ACLC 50.
That was a decision of Olsson J on the efficacy of a notice issued by the South Australian Corporate Affairs Commission ("the CAC").
The CAC was investigating the books of Armtech Ltd. The CAC issued a notice to Armtech pursuant to s 12 of the Companies (South Australia) Code requiring production of various books and records of Armtech for inspection by a CAC investigator. The notice stated that its requirements were for the purpose of ensuring compliance with s 267(1)(a) and/or (b) of the Companies Code. Those sections related to the keeping of accounting records which correctly record the business of the company and which enable the preparation of accounts which can be properly audited. The notice specified a number of documents including one described as the "Duraprint" contract and one described as the "Greenhorn" contract.
Armtech argued it was not required to produce either contract pursuant to the notice because neither document had, nor could have, any impact upon the accounts of Armtech, at that stage.
Olsson J held that the "Duraprint" contract did fall within the terms of the notice, but the "Greenhorn" contract did not.
In discussing the terms and effect of the notice Olsson J placed considerable importance on the feature that it was highly specific. The Commission could have lawfully issued a notice expressed widely, requiring all books relevant to the affairs of Armtech. Indeed, the opening portion of the notice was couched in those terms, but it concluded by stating that the requirement contained in the notice was "for the purpose of ensuring compliance with …" the specified sections of the Companies (South Australia) Code dealing with the requirements of a corporation to keep proper accounting records. Notwithstanding the wide statutory power which could have been exercised therefore, the notice itself was, as Olsson J described it, "self‑limiting".
The effect was as described by his Honour at 66‑56:
"Not only is that the only reasonable and logical construction of which the document is capable but it must be remembered that a failure to comply attracts very substantial penal consequences under sec 14. It is trite law to say that, in such circumstances, it is not appropriate to apply an unduly liberal construction to the document.
It seems to me that, had the notice, by its very terms, not been self‑limiting, then very different considerations may well have arisen. A requirement simply to produce 'all books relating to the affairs of' Armtech may well have produced rather different legal and practical considerations, which do not, on the facts, here arise for consideration.
It follows then that the import of the notice, as it was specifically expressed, was to require production of only such of the books relating to the affairs of Armtech as could fairly be said to pertain to the ensuring of compliance with sec 267(1)(a) and 267(1)(b) of the Code, being those generic items stipulated in the schedule which fell within such parameters, ie any generally expressed descriptions in the schedule were necessarily subject to the limitations arising from the stated purpose of the notice."
and at 58 his Honour said:
"That is the discrete demand made and that is what Armtech must satisfy on pain of penal consequences …"
As can be seen from those passages, a significant factor in his Honour's reasoning was that the challenge to the notice was being made by Armtech, which was required to comply with it under pain of penal consequence.
In this case it was Deloittes which was required to comply with the notice - and did so. Deloittes is not at risk of penal consequences for failing to comply with a notice which it claims to be invalid or lacking in specificity or contains a description the tape does not meet.
That is not to say the recipient of a notice may not suffer adverse legal consequences from complying with a statutory notice of this kind. They may well do so if documents of a third party which do not fall within the proper purview of a notice, are wrongly produced in circumstances which amount to a breach of confidence or of a proprietary or some other legal right of the third party. That potential consequence is another reason for not giving notices of this kind a wider reading than they require.
Olsson J was unconvinced of the argument advanced by the CAC that in determining the "books" to which the notice attached, the only criterion was the reasonable perception of the authorised person at the time of issue of the notice. In his Honour's view, "in the present context" (my emphasis) the sole issue was whether or not the subject contracts answered the descriptions set out in the notice. His Honour added (at 58):
"The response to such a question may often be obvious from the inherent nature of documents in question. In other situations, as here, that may well not be so."
Senior counsel for the plaintiff drew my attention to the dictum of Gyles J in Kennedy v Wallace [2004] FCA 332 at [102] where his Honour expressed the opinion that a particular document seized under a search warrant did not answer the description of anything described in the warrant and there was no sensible meaning (my emphasis) of the terms of the warrant which could lead to that result. Having said that, his Honour added:
"Whilst it may be that there is no requirement that the task of construing the warrant should be prima facie hostile to the invasion of privacy which is involved (cf Hart v Commissioner of Australian Federal Police (2002) 123 FCR 384) neither should construction of it be strained to authorise a seizure which has taken place."

Similarly, Gyles J held (at [107]):
"In my opinion there is nothing in the relevant provisions of the Crimes Act or in the terms of the warrant itself to permit seizure of a document which the officer reasonably suspects to be, for example, a note of a communication. Actual compliance with condition 1 was necessary. The thing to be seized must be accurately described in the warrant and whether it is or is not is a question of objective fact which is not committed to the opinion of the officer or to the reasonable suspicion of the officer."
There however, his Honour was distinguishing a belief that there were reasonable grounds for suspecting that things seized will afford evidence to the Commission of an offence (as in for example, Adler v Gardiner (2002) 43 ACSR 24, [21] and Propend Finance Pty Ltd v Commissioner, Australian Federal Police (No 2) (1994) 29 ATR 87 at 100) from an opinion of an officer that a particular item met a description on a warrant.
The authorities relied upon by the plaintiff do not go against the proposition urged on behalf of the defendant, that the Deloitte notice - and the sufficiency of the requirement in it - is to be determined in light of the circumstances in which it was given.
To construe the notice in the context of the circumstances in which it was given, is consistent with the principle that what is required is sufficient clarity of description to identify that which is to be produced and to show it is something ASIC is entitled to require. The essence of the description is to identify "with reasonable clarity" what documents the recipient is required to produce. The question is whether the words are sufficiently clear to show what is required. The principle does not require the words of the description to be divorced from the circumstances in which the notice was issued. Those circumstances may, in my view, include the common knowledge and understanding of ASIC and the recipient of the notice. I do not mean by this that what is meant by a notice is to be determined by the opinion of ASIC or its officer alone. But a common understanding between ASIC and the recipient that a particular description describes the same thing would be sufficient, provided the words of the description could reasonably be construed as referring to, or including, that thing. The requirement for clarity is not to be applied "in a precious or hypercritical fashion".
The third established principle is that the specificity required in a statutory notice to produce books must be sufficient to clearly identify what is required to be produced and to show that the books specifically required are within the power of the relevant authority to require production (Federal Commissioner of Taxation v ANZ Banking, supra, per Gibbs ACJ at 524 and 525). That is to say, that they relate to a particular investigation.
The latter aspect does not mean the recipient must necessarily be able to make the determination that the notice falls within the ambit of the statutory power. In Federal Commissioner of Taxation v ANZ Banking, Mason J (with whom Jacobs and Murphy JJ agreed on this) said at 537:
"What par (1)(b) has in mind is that a notice may be given requiring the recipient to produce 'all books, documents and other papers' in his custody or control 'relating thereto', that is, to the income or assessment of the person whose name is stated in the notice. It is then for the recipient to decide for himself, difficult though the task may be, which of the documents answer the description. If his decision is wrong he exposes himself to prosecution and penalty.
The existence of this hazard is not a sufficient basis for the conclusion that the section requires the Commissioner to give a notice in such terms as would enable the recipient on reading it and on examining the documents in his custody or control to determine whether they fall within the ambit of the Commissioner's powers. To so hold would be to impose an impossible burden on the Commissioner. In many, if not most, cases he will be unaware of the contents of the documents of which he seeks production. And there will be cases in which a recipient who is not the taxpayer will lack the degree of knowledge of the taxpayer's affairs and of the Commissioner's approach to his assessment that is necessary to determine whether the documents relate to the taxpayer's income or assessment. Not only would the suggested requirement frustrate the object of conferring the power, it would be inconsistent with the section as I have explained it."
In the present case, it was Deloittes who described the backup tape as "the backup tape of the records of the Strategic Capital Superannuation Fund". They described it that way because that is what they thought it was. The Deloitte notice gave the description which Deloittes had given ASIC. Both Deloittes and ASIC knew what tape was being referred to because of the communication between them. They were both referring to the same physical item. There is no dispute in this case that a tape of that description was one, the production of which could lawfully be required by ASIC under s 33 of the ASIC Act.
As it happens the tape was a backup tape of the records of the plaintiff but which included relevant records of the Fund.
I think it clear beyond doubt that had the Deloitte notice described the tape in that way, the tape would have been one of which ASIC could lawfully have required production. The necessary nexus or connection for that to be a valid exercise of power was the fact that the tape contained relevant financial records of the Fund; that it contained primarily records of the plaintiff would not have taken it outside the scope of the proper exercise of the power, nor been any proper objection to production.
It is convenient to summarise the factual situation with the above principles in mind. The situation is that:
(a)The Deloitte notice specified production of a tape described in a particular way, relating to the financial records of the Fund.
(b)The Deloitte notice was a valid notice.
(c)A tape which met the description in the notice would have been properly within the scope of ASIC's power to acquire and would have to have been produced by Deloittes, if in their possession, irrespective of whose property it was or how it had come into Deloittes' possession.
(d)Both ASIC and Deloittes intended and understood the description to refer to a particular tape in Deloittes' possession.
(e)Deloittes produced that tape in response to the notice.
(f)Although Deloittes and ASIC both believed the tape to be the backup tape of the records of the Fund, it was in fact an IFG backup tape of the records of IFG.
(g)The tape did, however, contain relevant financial records of the Fund.
In my view, in these circumstances the production of the tape did properly respond to the notice. Deloittes was obliged to produce the tape to ASIC and ASIC was lawfully entitled to receive and retain it and deal with it in accordance with s 37 of the ASIC Act.
I do not accept the submission of senior counsel for the plaintiff that ASIC should not be entitled to retain possession of the tape because IFG as lawful owner has not been afforded an opportunity to contest the notice.
First, IFG has effectively been afforded that opportunity by these proceedings.
Secondly, there is nothing in the ASIC Act which requires the giving of such an opportunity to the owner of books, production of which is sought from the possession of a third party. Given the nature of the statutory investigative powers, there is obviously good reason for that.
Thirdly, the authority upon which senior counsel relies by way of analogy in support of the submission, is quite distinguishable. That authority is Pickering v Federal Commissioner of Taxation (1998) 98 ATC 4977, a decision of the Federal Court of Australia.
The submission relies upon the dicta of Goldberg J in that case, that in relation to a notice issued to a solicitor it was the obligation of the solicitor (who was in lawful possession of the relevant document) to challenge a notice if any ground of invalidity was exposed.
The Deputy Commissioner of Taxation served on the applicant, who was a member of a firm of solicitors, a notice under s 264 of the Income Tax Assessment Act, requiring production of an extensive range of documents relating to employees' share acquisition plans, employee benefits trusts or similar plans which had been established or prepared by the firm between certain dates.
With the exception of two categories of documents, Goldberg J held the notice was valid and had to be complied with.
One argument advanced by the appellant against the notice was that (apart from legal professional privilege which was not overridden by s 264) there was a contractual relationship of confidentiality between solicitor and client, which would be overridden or interfered with by a s 264 notice. However, it was submitted that it was because any contractual duty of confidence between the applicant and any client of the firm yielded to the operation of a valid notice that the respondent should give any client of the firm a right to be heard, not as to the decision to issue the notice, but as to the validity of it.
Goldberg J said there was a fundamental flaw in this submission. His Honour referred to the authorities which established that there is no obligation on the Commissioner to comply with the requirements of natural justice and give an addressee an opportunity to be heard before deciding to serve a notice under s 164, nor before doing so.
His Honour then outlined the submission made and his conclusion with respect to it (at 4,977):
"The applicant did not contest the conclusion to be derived from these cases but said nevertheless the respondent had to take into account the fact that rights of persons, other than the addressee of the notice, might be affected as a result of the service of the notice and that those persons had a right to be heard after the notice was served as to whether or not the notice was valid. It was said that in failing to provide in the notice that persons whose rights might be affected by the service of the notice should be given notice of the service of the notice and an opportunity to challenge it, the respondent failed to take into account a relevant matter and that as a result the service of the notice was vitiated.
However, I consider that that submission is inconsistent with the conclusion to be derived from the authorities to which I have referred. Even though the affairs or business circumstances of third parties may be disclosed as a result of the service of a notice under s 264(1)(a) of the Act I do not consider that they have a reasonable or legitimate expectation that they will be given an opportunity to be heard in relation to it. This is more especially so when there is no doubt that such contractual right of confidence they may have in relation to their dealings with an addressee of such a notice will be overridden as a matter of law by the service of a notice. If there be any expectation of a client in such circumstances, it is an expectation that the client's solicitor will only respond to a lawful notice properly served and will not disclose the affairs of the client unless the solicitor is lawfully required to do so. In such circumstances it is the obligation of the solicitor to challenge a notice if any ground of invalidity is exposed and not the right or entitlement of the client whose affairs may be covered by the notice to do so."
It may immediately be appreciated that the observation made by his Honour as to the obligation of the solicitor to challenge a notice if any ground of invalidity is exposed, derived entirely from the solicitor/client relationship and the obligation of a solicitor to always act in the best interests of the client. Beyond that, the pertinent conclusion expressed by his Honour was that the client, that is the third party whose document or information it was, had no right, nor entitlement, to challenge the notice. In the present case, of course, there is no solicitor/client relationship between Deloittes and the plaintiff and on the basis of his Honour's conclusion, the plaintiff had no right nor entitlement to challenge the Deloitte notice - much less to be afforded an opportunity by ASIC to do so. That authority simply does not assist the plaintiff.
Order 16 r 1 of the Rules of the Supreme Court ("the Rules") provides that any defendant to an action may apply to the court for summary judgment which may be given if the court is satisfied that the action is frivolous or vexatious, that the defendant has a good defence on the merits, or that the action should be disposed of summarily or without pleadings.
It is for the defendant to satisfy the court that there is no serious question to be tried on any cause of action raised by the plaintiff. As the learned author of "Seaman: Civil Procedure Western Australia" says at [16.1.3] a case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff's case being tried in the ordinary way. Once it appears there is a real question, whether of fact or law and that the rights of the parties depend upon it, it is not competent for the court to dismiss the action as frivolous or vexatious or an abuse of process (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.
An action is clearly frivolous if it is obviously unsustainable and an abuse of the process of the court (Young v Holloway (1895) P 87 at 90). The inherent jurisdiction of the court to protect its process from abuse by summarily disposing of an action as frivolous or vexatious is exercised only if the claim is so obviously untenable that it cannot possibly succeed (Burton v Shire of Bairnsdale (1908) 7 CLR 76 at 92).
Likewise, the power to order summary judgment on the basis that the defendant has a good defence on the merits should be exercised with great care and never unless it is clear there is no real question to be tried (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99).
In my opinion, the defendant has demonstrated that it has a good and complete defence to the plaintiff's claim. That being so, I consider the appropriate course is to give summary judgment under O 16 r 1 rather than strike out the plaintiff's statement of claim.
The above conclusions are sufficient to dispose of all matters before me, but in deference to the submissions put by counsel for both parties, I will also deal with the plaintiff's application for an interlocutory injunction.
The principles are well established. The applicant must satisfy the court there is a serious question to be tried, that damages at common law would not be an adequate remedy and that the balance of convenience lies in favour of granting the injunction.
For the reasons already given above, it is my conclusion that there is no serious question to be tried.
The question whether damages would be an adequate remedy does not arise in the circumstances of this case as there is no cause of action for damages.
The balance of convenience is better expressed as balancing the injustice which might be suffered by the defendant if the injunction is granted and the plaintiff later fails at trial, against the injustice which might be suffered by the plaintiff if the injunction is not granted and the plaintiff later succeeds at trial (Films Rover International v Cannon Film Sales Ltd [1987] 1 WLR 670).
So far as the plaintiff is concerned, the prejudice is said to be that if the backup tape is not returned, the plaintiff would be deprived of its proprietary and possessory rights in the tape. There seemed also to be a submission made that the continuation of the investigation and potentially damaging aspects of that so far as the plaintiff and others the subject of investigation are concerned also demonstrates ongoing prejudice. I see no attraction in that argument. To grant an injunction for the purpose of, or at least one which would have the effect of, inhibiting or preventing an investigation into breaches of the law, would be contrary to the public interest which the ASIC Act is intended to further.
So far as ASIC is concerned, this is an investigation which has now been underway for some time and which has involved more than 590 days of staff time to date. The affidavit evidence demonstrates that if the injunction were to be granted in the terms sought, those ASIC officers who have been involved in the investigation - and particularly those concerned with the analysis of the backup tape - would have to be removed from it and none of the information obtained from the tape could be used. Identifying and removing the information obtained either from the tape or as a result of the analysis of it would be a very substantial exercise. The undertaking proffered by the plaintiff (which essentially involved the return of the tape to the plaintiff and the plaintiff itself then conducting an examination of it and determining which documents were within the proper scope of the investigation) seems to me entirely unworkable and inappropriate.
In my view the balance of convenience falls entirely on the side of ASIC.
Accordingly, were the action to be continuing, I would have dismissed the plaintiff's application for the interlocutory injunction.

[2004] WASC 75

28 APRIL 2004

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