Le Roi Homestyle Cookies Pty Ltd (in liq) v Gemmell
[2013] VSC 452
•29 August 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2011 06998
IN THE MATTER of
LE ROI HOMESTYLE COOKIES PTY LTD (IN LIQUIDATION) (ACN 102 590 483)
BETWEEN:
| LE ROI HOMESTYLE COOKIES PTY LTD (IN LIQUIDATION) (ACN 102 590 483) and DAVID ANTHONY ROSS, RICHARD ALBARRAN AND BLAIR ALEXANDER PLEASH (AS LIQUIDATORS OF LE ROI HOMESTYLE COOKIES PTY LTD (IN LIQUIDATION)) (ACN 102 590 483) | First Plaintiff Second Plaintiff |
| v | |
| WILLIAM GEMMELL & ANOR | Defendants |
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JUDGE: | FERGUSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 April 2013 | |
DATE OF WRITTEN SUBMISSIONS | 19, 22 April, 2, 5 July 2013 | |
DATE OF JUDGMENT: | 29 August 2013 | |
CASE MAY BE CITED AS: | Le Roi Homestyle Cookies Pty Ltd (in liquidation) v Gemmell | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 452 | |
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PRACTICE AND PROCEDURE – Appeal from Associate Judge ordering delivery of defence in insolvent trading claim – Defendants did not claim privilege against self‑incrimination nor penalty privilege during course of public examinations by Liquidator – Defendants claiming entitled to be relieved from delivering fulsome defences and making discovery on basis of claim of privilege – Pleading based on answers given during public examinations – Privileges waived in respect of answers – No dispensation from compliance with pleading or discovery Rules - Corporations Act 2001 (Cth) ss 588G, 588M, 597.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A R Kirby | Clamenz Evans Ellis Lawyers |
| For the Defendants | Mr I D Martindale SC with Mr P L Ehrlich | Chiodo Madafferi Solicitors |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Reasoning of the Associate Judge................................................................................................... 2
Grounds of appeal............................................................................................................................. 3
Have the Defendants established that pleading defences would tend to subject them to a penalty in separate proceedings? (Grounds 2(a) and (d)).............................................................................. 3
What is the effect of the Defendants having failed to claim privilege during their public examinations? (Ground 2(b))....................................................................................................................................... 7
Are procedural considerations relevant in determining whether the Defendants ought be required to file defences and make discovery? (Ground 2(c))...................................................................... 15
Conclusion......................................................................................................................................... 16
HER HONOUR:
Introduction
The Liquidators of Le Roi Homestyle Pty Ltd allege that the Defendants have contravened the insolvent trading provisions of the Corporations Act 2001 (Cth).[1] The Liquidators seek orders for payment of the amount of unsecured debts[2] said to have been incurred whilst the Defendants are alleged to have been both de facto and shadow directors. Before the proceeding was instituted, the Liquidators conducted public examinations of each of the Defendants pursuant to s 597 of the Corporations Act. In large part, the insolvent trading claim against the Defendants is based on information elicited in the course of the public examinations. Under s 597, examinees are required to answer questions even if the answers might expose them to a penalty or criminal prosecution. However, examinees are given some protection. If they claim penalty privilege or privilege against self-incrimination, their answers may not be used against them in criminal or penalty proceedings. Here, neither defendant claimed either privilege during his examination. Despite this, in the current proceeding the Defendants applied for orders dispensing with and relieving them from complying with the pleading and discovery requirements of the Supreme Court (General Civil Procedure) Rules 2005[3] to the extent that compliance may have a tendency to expose them directly or indirectly to a civil penalty in respect of the subject matter of the proceeding. On the hearing, the Defendants also sought to be excused from complying with the Rules because they said to do so may expose them to a criminal sanction. An Associate Judge dismissed the application and ordered that defences be filed and that all parties make discovery. The Defendants have appealed from those orders.
[1]Section 588G.
[2]Section 588M.
[3]Rules 13.07, 13.10, 13.12 and 29.
The appeal is brought under r 77.06 of the Supreme Court (General Civil Procedure) Rules 2005.[4] The Defendants are required to show error on the part of the Associate Judge before appellate power may be exercised.[5] Particular caution should be taken in reviewing the decision because the order appealed from relates to a matter of practice and procedure.[6]
[4]As the appeal is not one from consent orders or orders as to costs, leave is not required to bring the appeal: Supreme Court Act 1986 (Vic), s 17A(2).
[5]Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission & Ors (2000) 203 CLR 194, [14].
[6]Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170, 177 (Gibbs CJ, Aickin, Wilson and Brennan JJ).
The central issue in the appeal is whether, having failed to claim either penalty privilege or privilege against self-incrimination during the course of their public examinations, the Defendants may now invoke those privileges, and avoid filing fully responsive defences or making discovery. In my opinion, for the reasons set out below, the Defendants have waived their rights to claim privilege and must plead a defence and provide discovery in accordance with the Rules.
Reasoning of the Associate Judge
The Associate Judge found that the Defendants had not established that pleading defences would tend to subject them to a penalty in separate proceedings. His Honour observed that the Defendants’ misgivings about doing so were more apparent than real. Ultimately, the Associate Judge did not place a great deal of weight on the public examinations and what had occurred there. However, his Honour was of the view that answers having been given at the examinations without any claims to privilege having been taken, in a practical sense, it was now of no utility to claim privilege against self-incrimination. In other words, the information was in the hands of the Liquidators, ASIC,[7] or a prosecutor for use without restrictions that might otherwise have applied had a claim for privilege been invoked. His Honour also took into account the practical implications that a split trial would have if the Defendants were not required to put on a defence until after the Liquidators had closed their case.
Grounds of appeal[8]
[7]The Australian Securities and Investments Commission.
[8]The Defendants proceeded on the erroneous assumption that it may be necessary to obtain leave to appeal. Consequently, the grounds of appeal are in a document prepared as a draft (rather than final form) notice of appeal. I will refer in these reasons to that notice as the ‘Notice of Appeal’.
The Defendants contended that the Associate Judge erred in law in failing to excuse them from filing defences and making discovery in accordance with the Rules.[9] The particulars of that ground of appeal are that the Associate Judge erred by:
(a)failing to apply the principles set out in the authorities and finding that it was for the Defendants to establish that having to plead defences would tend to subject them to a penalty in separate proceedings;[10]
(b)finding that, in a practical sense, there was now no utility in the Defendants claiming privilege against self-incrimination;[11] and
(c)taking into account procedural considerations in respect of the effect that claiming the privilege may have on the running of the trial.[12]
[9]Ground 1, Notice of Appeal.
[10]Grounds 2(a) and (d) Notice of Appeal.
[11]Ground 2(b) Notice of Appeal.
[12]Ground 2(c) Notice of Appeal.
The Defendants sought to set aside the orders made by the Associate Judge requiring them to file and serve defences and to make discovery.
It is convenient to deal in turn with each of the particulars of the error said to have been made by the Associate Judge.
Have the Defendants established that pleading defences would tend to subject them to a penalty in separate proceedings? (Grounds 2(a) and (d))
The right to make and maintain a claim for privilege against self-incrimination is a basic and substantive common law right.[13] On the other hand, penalty privilege is a procedural rule which applies in judicial proceedings and ‘serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it’ without assistance from the defendant.[14]
[13]Reid v Howard (1995) 184 CLR 1, 5 (per Deane), 11 (per Toohey Gaudron, McHugh and Gummow JJ); X7 v Australian Crime Commission [2013] HCA 29, [104] (per Hayne and Bell JJ).
[14]Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543, 559; Rich v Australian Securities and Investments Commission (2004) 220 CLR 129, [24].
In Re APCH (No 2),[15] Robson J summarised the relevant principles that emerge from the authorities concerning the obligation of a party to plead or provide discovery where penalty privilege or privilege against self-incrimination are claimed:
[15](2012) 93 ACSR 130.
(a)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.
(b)In an action to recover a penalty it is not necessary for a defendant to establish that there is a risk the defendant will be subjected to a penalty by providing information to the plaintiff. The plaintiff is seeking the information for that very purpose.
(c)In civil actions, where no claim for penalty is made, the defendant must show that providing the information requested would tend to subject him to a penalty in separate proceedings before he can rely on the privilege.
(d)The privilege against exposure to penalty is a common law right of privilege that may be availed of as of right and is enforced and protected by the Court.
(e)The privilege against the exposure to penalty may be relied on by a defendant to a civil [proceeding] in which a penalty is not sought (“the non penalty civil proceeding”).
(f)The privilege against the exposure to penalty extends to the obligation upon a defendant to plead, give discovery and answer interrogatories in the non penalty civil proceeding.
(g)As a general rule, the privilege does not entitle a defendant to a non penalty civil proceeding to obtain an order in limine[16] excusing him or her from giving discovery or answering interrogatories.
(h)In exceptional circumstances, a defendant may be entitled to such orders in limine.
(i)By extension, in exceptional circumstances, a defendant may be entitled to orders in limine that he may deliver a defence that departs from the Rules of Court only insofar as to protect his privilege against exposure to penalty.
(j)Exceptional circumstances may exist where the defendant to the civil proceeding is also the subject of separate civil penalty proceedings alleging the same or similar conduct.
(k)Where a defendant seeks to take the privilege against exposure to penalty in a defence, the proper course is to plead accordingly and – if challenged – the defendant will be required to justify that the privilege is taken in good faith and on reasonable grounds for the privilege to stand.[17]
[16]The Latin expression for ‘at the threshold’.
[17]Re APCH (No 2) (2012) 96 ACSR 130, 154 [115] (citations omitted).
To that list I would add that the privileges can only be overridden by statutory authority, or waived and may not be abrogated by the purported exercise of a judicial discretion.[18]
[18]Reid v Howard (1995) 184 CLR 1, 5, 8 (per Deane J), 12, 14, 17 (per Toohey, Gaudron, McHugh and Gummow JJ).
As Robson J observed, there must be a real and appreciable risk of criminal prosecution or tendency to subject the person to a penalty for the privileges to be invoked in separate civil proceedings. In this regard, in Rio Tinto Zinc Corporation v Westinghouse Electric Corporation,[19] Shaw LJ said:
… before a claim for privilege is upheld the court must be satisfied that there is a real and genuine basis for the assertion by the witness that he will tend to be exposed to proceedings or penalties. The precise measure or degree of the risk to the witness is something which the court is not called upon to assess so long as there is a degree of risk which cannot be dismissed as tenuous or illusory or so improbable as to be virtually without substance. The question is, whether there is a recognisable risk? The principle which protects a witness from obligatory self-incrimination is not to be qualified by or weighed against any opposing principle or expedient consideration so long as the risk of self-incrimination is real in the sense that what is a potential danger may reasonably be regarded as one which may become actual if the witness is required to answer the questions or to produce the documents for which privilege is claimed.[20]
[19][1978] AC 547.
[20]Ibid 581.
In Australian Securities and Investments Commission v Mining Projects Group Ltd,[21] ASIC had brought a civil penalty proceeding against the defendants. Finkelstein J observed that it will not be difficult to show that the provision of information or the production of documents in a civil case leads to a real and appreciable risk of a criminal prosecution when 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.[22]
[21](2007) 164 FCR 132.
[22]Ibid [9].
The Defendants accepted that there are no exceptional circumstances that would absolve them from pleading at all. They propose to file a defence but only to the extent that it does not tend to expose them to prosecution for a criminal offence or penalty.[23] They would reserve the right to amend the defence after the close of the Liquidators’ case when they would mount a positive defence, if so advised.
[23]This approach is consistent with the process endorsed by Robson J in APCH (No 2) (2012) 93 ACSR 130.See also Pascoe v Divisional Security Group Pty Ltd (2007) 209 FLR 197 [35].
The claim against the Defendants is brought under s 588G(2) of the Corporations Act 2001 (Cth).Amongst other things, contravention of that section can attract a civil penalty of up to $200,000.[24] In addition, in certain circumstances where dishonesty is involved, a director who permits a company to trade whilst insolvent is liable for a criminal offence punishable by imprisonment with a maximum term of five years.[25]
[24]Corporations Act s 1317E(1)(e), 1317G(1).
[25]Corporations Act s 588G(3), 1311(3), sch 3 item 138. A pecuniary penalty may be imposed as an alternative to or in addition to a term of imprisonment.
The Defendants rely on that paragraph in the amended statement of claim[26] which pleads that the Defendants have each contravened s 588G. They submitted that that paragraph without more demonstrates that the filing of a defence in accordance with the Rules may tend to expose them to a penalty in other proceedings and demonstrates that there is a real and appreciable risk of criminal prosecution.
[26]23 November 2012.
Counsel for the Liquidators submitted that the prospect of criminal prosecution of the Defendants is remote and that penalty privilege is of a lower order of importance. He observed that there is no evidence of criminal proceedings nor penalty proceedings against the Defendants, and almost three years have passed since the relevant events are alleged to have taken place.
In my opinion, if the Liquidators establish their claim against the Defendants, it is almost inevitable that the facts necessary for the imposition of a civil penalty will also be established. It would also be likely to establish at least some of the elements that would need to be proved in a criminal prosecution. ASIC has not given any indication as to whether penalty proceedings would be instituted, nor has the Director of Public Prosecutions ruled out criminal proceedings. In this regard, there is no time limit on when a criminal prosecution may be brought. As set out above, the Associate Judge observed that the Defendants had not established that pleading defences would tend to subject them to a penalty in separate proceedings and that their apparent misgivings about filing defences were more apparent than real. Whilst as a matter of practical reality the likelihood of penalty proceedings (or for that matter, criminal proceedings) being brought may be low, I do not think that it can be discounted sufficiently to render it ‘so improbable as to be virtually without substance’. In my opinion, in the absence of a positive indication from ASIC that penalty proceedings will not be brought, it is not possible to say that the risk of penalty proceedings is so low as to be of no consequence. Similarly, in respect of criminal proceedings, in the absence of a prior conviction for the offence or an immunity from prosecution having been given or other similar circumstances, the risk is not sufficiently low to warrant ignoring it. It should not be forgotten that it is not for the Liquidators, nor for the Court, to determine whether penalty proceedings or a criminal prosecution ought be brought — those are matters for ASIC and the relevant prosecuting authority.
However, that does not mean that the Defendants ought necessarily to be excused from filing defences and providing discovery. It is first necessary to consider whether the Defendants are entitled to maintain the privileges in this proceeding or whether they have waived that right.
What is the effect of the Defendants having failed to claim privilege during their public examinations? (Ground 2(b))
If during a public examination a person claims the privileges against self-incrimination and penalty privilege, they may maintain their right to claim the privileges on subsequent occasions, despite the fact that answers have been given during the examination.[27] In those circumstances, the answers have been given under compulsion of law and there has been no waiver of the privileges. Here, however, the question is whether having failed to claim either privilege during the course of the public examinations, the Defendants have now waived their rights to make those claims in this proceeding.
[27]Southern Equities Corporation Ltd (in liq) v Bond (2001) 78 SASR 554.
At the commencement of each Defendant’s public examination, the Associate Judge before whom the examinations were conducted informed the Defendant that he was not excused from answering questions on the grounds that the answer may incriminate him or make him liable to a penalty.[28] The Associate Judge read out the text of s 597(12A) of the Corporations Act which is in the following terms:
[28]Corporations Act s 597(12).
Where:
(a)before answering a question put to a person (other than a body corporate) at an examination, the person claims that the answer might tend to incriminate the person or make the person liable to a penalty; and
(b)the answer might in fact tend to incriminate the person or make the person so liable;
the answer is not admissible in evidence against the person in:
(c) a criminal proceeding; or
(d) a proceeding for the imposition of a penalty;
other than a proceeding under this section, or any other proceeding in respect of the falsity of the answer.
Having read that section to the examinee, the Associate Judge stated that the provision meant that if the examinee wished to claim that the answer to a particular question might tend to incriminate them or make them liable to a penalty he should say the word ‘privilege’ then give his answer. The Associate Judge told the examinee to repeat the word ‘privilege’ before giving each answer for which he wished to make the claim of privilege. Having given this warning, the Associate Judge asked the examinee if he had understood. Both Defendants said that they did understand. Neither claimed any privilege before answering the questions that were put to them.
Senior Counsel for the Defendants submitted that the mere fact that the Defendants had not said the word ‘privilege’ before any answers did not establish that they had waived their right to claim penalty privilege and privilege against self-incrimination because waiver would require that they gave up the right advertently, consciously or deliberately. The Defendants were not represented by counsel nor a solicitor during the public examinations. They contended that nothing that had been said at the start of each examination by the Associate Judge could have led them to an understanding that they were waiving privilege. I do not agree. In my view, the warning that the Associate Judge gave was clear and their lack of legal representation is of little moment. The Defendants were informed about their rights and chose not to claim either privilege. This is not a case where the Defendants claimed privilege in respect of some answers but, through inadvertence, failed to claim privilege in respect of all answers. They simply did not claim any privilege in respect of any question at all despite the warning given to them by the Associate Judge.
The Defendants next submitted that in any event, a person having failed to claim the privileges on one occasion could not be required to incriminate themselves on a different occasion, for example, in pleading a defence or by making discovery. They submitted that s 597(12) abrogates the privileges against self-incrimination and penalty with respect to a question — in other words, it is a question by question abrogation.[29] Moreover they submitted that s 597(12A) is directed to something different — it provides a statutory admissibility protection so that, with some limited exceptions, the answer in respect of which privilege has been claimed cannot be used in any criminal or penalty proceeding. Consequently, the Defendants submitted that unless the Court could be satisfied that the answers to questions asked in the examinations sufficiently support the allegations of material fact pleaded in the amended statement of claim, such that they would not be further disadvantaged by having to plead a defence, the Court ought not require them to plead or provide discovery. They relied on the decision in Accident Insurance Mutual Holdings Ltd v McFadden (‘McFadden’).[30] In that case, an insurer had denied indemnity under a car insurance policy in respect of a claim for theft of a car. The insured sued. Part of the defence to the claim was that the car had not been stolen because one of the insured had told a third party (Mr Leathem) to ‘get rid of’ the car. Mr Leathem had provided statements to the insurer’s investigator about this. At trial, Mr Leathem was called as a witness but refused to answer questions put to him and invoked the privilege against self-incrimination. The New South Wales Court of Appeal held that the trial judge had been correct in upholding Mr Leathem’s claim for privilege and determined that he had not waived the privilege in making the statements to the investigator. Kirby P stated:
The witness may have been fixed with the written statements which he had already signed. But he was not obliged to go beyond those statements, to provide elaborated oral testimony which could be used in later criminal proceedings or could afford the prosecuting authorities evidentiary leads with which to enlarge the prospects of obtaining his conviction out of his own mouth.
The giving of a written statement (whether to police or to an insurance investigator) on the general subject matter of certain criminal activities does not forever waive the privilege against self-incrimination in respect of other crimes which may arise from the oral elaboration of the written document. Of course, what is involved raises a question of degree. Each question put must be judged by reference to the matters already admitted and the waiver already expressed. But because of the prosecution for a wide range of offences which this witness potentially faced and the great latitude normally allowed to a witness to be protected from self-incrimination, I consider that the course adopted by P R Bell DCJ was proper.[31]
[29]Written submissions prepared by Junior Counsel for the Defendants which were filed before the hearing of the appeal argued that s 597(12) of the Corporations Act does not operate to abrogate penalty privilege but only abrogates the privilege against self-incrimination. However, on the hearing of the appeal, Senior Counsel for the Defendants (correctly, in my view) contended that the section abrogates each privilege. This was confirmed in subsequent written submissions (dated 2 July 2013) filed on behalf of the Defendants.
[30](1993) 31 NSWLR 412.
[31]Ibid 424.
Clarke JA observed that the cases about waiver of legal professional privilege concern the unfairness that may arise if only part of a privileged communication is disclosed such that a false impression is created by the failure to disclose the whole of the privileged communication. His Honour stated:
It is not contended that the witness Leathem waived his privilege to decline to answer question Y by answering question X. There are no considerations of distortion or unfairness of the type discussed in the cases which intrude into this case. All that is put in support of the waiver is the making of the earlier statements. In principle it would seem to me that that conduct could not constitute a waiver of a right to decline to provide self-incriminating answers to questions put during the course of a trial. If it were otherwise it would mean that persons who had made admissions to police could be taken to have waived the right to remain silent. This has never been suggested and, if correct, it would constitute an enormous infringement of an ancient and fundamental right of all citizens.[32]
[32]Ibid 432.
Later in his judgment, Clarke JA rejected the argument that as Mr Leathem had already provided a statement, he would not have exposed himself to further jeopardy by giving sworn testimony. His Honour expressed his views in the following way:
Any witness who gives sworn evidence admitting to his guilt of a crime is exposing himself to jeopardy unless he has already been dealt with for that crime, he has been pardoned or there are other similar circumstances. The fact that he might have earlier admitted the crime in a signed statement, which he may or may not wish to disavow, cannot mean, in my view, that there is no additional prejudice in giving sworn testimony to like effect.[33]
[33]Ibid 433.
Meagher JA dissented. His Honour was of the view that Mr Leathem’s conduct in making the statements constituted a waiver and he ought to have been directed to answer the questions asked of him, at least insofar as the questions asked were covered by the statements he had made.[34]
[34]Ibid 438.
In Reid v Howard (‘Reid’),[35] an accountant had been misappropriating his clients’ funds and he had made a general statement to the police as to the use of some of the funds. No charges were laid. The clients brought a civil claim against him and sought an interlocutory order requiring disclosure of his assets and the source of the funds with which they were acquired. The accountant resisted the making of such an order claiming privilege against self-incrimination. The High Court held that the accountant was entitled to maintain the claim for privilege against self-incrimination and said:
…the appellant's statement to the police has not resulted in the laying of criminal charges. Almost certainly, that is because it lacks detailed particulars of his misappropriations. There can be no doubt that disclosure of the assets upon which the appellant “applied ... moneys or property entrusted to him” by the respondents and, in respect of each of those assets, “the amount of any moneys and the identity of any property” applied in its acquisition, as required by the various orders which have been made against him, would place him in greater “peril ... of being convicted as a criminal” than the perfectly general admission of fraudulent misappropriation contained in his statement to police.[36]
[35](1995) 184 CLR 1.
[36]Ibid 12 (per Toohey, Gaudron, McHugh and Gummow JJ) and see also 5–6 (per Deane J).
It is implicit in the court’s reasoning that the general statements made by the accountant to the police did not constitute a waiver of the privilege in respect of the more detailed information that was sought from him by way of interlocutory order in the civil proceeding.
Here, the position is in some respects different from the circumstances in Reid. In the present case, the detailed information has been provided through the answers given at the public examinations and has been used to draw the more general statement of claim.
At the heart of the reasoning in both Reid and McFadden is a concern about obliging a person to go beyond what they have said in an earlier unsworn statement if by doing so the person would be at danger of further incriminating themselves or further exposing themselves to a penalty. Indeed, in McFadden part of the concern seems to stem from the possibility of the witness exposing himself to proceedings in respect of additional crimes to those to which he might have been exposed by the earlier statements. In the present case, however, there is no suggestion that the Defendants will expose themselves to any different penalty or criminal proceeding to which they are not already exposed by virtue of having failed to claim privilege during the course of their public examinations. Moreover, the Defendants had their rights explained to them at the beginning of their examinations. Having received that warning, they did not claim either privilege. In addition, unlike in Reid and McFadden, the earlier statements made by the Defendants were not unsworn statements made to the police or an investigator, from which they may wish to resile. Rather, the Defendants gave sworn answers to the questions that they were asked during the conduct of public examinations in the Court.
Here, a close reading of the amended statement of claim and the transcript of the examinations discloses that the allegations pleaded and the particulars are to a large degree based on the earlier sworn examination answers given by the Defendants. In my opinion, the Defendants have waived the right to claim the privileges in respect of the answers that they gave during their public examinations. It should not be forgotten that a person who has answered questions in earlier court proceedings (as the Defendants have here) is not entitled to claim the privilege against self-incrimination to refuse to answer the same questions when put.[37] By analogy, they should also not be permitted to avoid pleading and providing discovery. Further, if the Defendants were to be excused from pleading the matters about which they have already answered questions in their public examinations, the outcome would be irrational. For example, having failed to claim the privileges, the answers they gave are admissible in a proceeding brought by ASIC for the imposition of a penalty.[38] Yet, as counsel for the Liquidators noted, it is that type of proceeding that the Defendants seek to protect themselves from by belatedly seeking to claim penalty privilege. They have already lost the protection that they now seek. As the Associate Judge said there is now no utility in claiming privilege against self-incrimination.
[37]Registrar, Court of Appeal v Craven (1994) 77 A Crim R 410, 428; Australian Securities and Investments Commission v Mining Projects Group Ltd (2007) 164 FCR 32 [24].
[38]Corporations Act s 597(12A)(d).
The Defendants did not submit that in pleading their defences and making discovery they would have to go beyond the information that they provided during their examinations. Having failed to do that, I do not think that there is any justification for relieving them of their obligations to comply with the pleading and discovery Rules.
I would add that the Defendants also sought to rely on the recent decision of the High Court in X7 v Australian Crime Commission.[39] In that case, the court (by majority) held that the Australian Crime Commission Act 2002 (Cth) did not authorise an examiner appointed under the Act to require the plaintiff who had been charged to answer questions concerning the offences in respect of which the charges had been laid. Hayne and Bell JJ (with whom Kiefel J agreed in substance) held that the provisions of the Act should not be construed as authorising such questioning.[40] Such a construction would constitute a fundamental alteration to the accusatorial process.[41] Applying the principle of legality, their Honours observed that an alteration of that kind can only be made by express words or necessary intendment and cannot be effected by a statute cast in general terms.[42] Relying on that authority, the Defendants submitted that there is nothing in the Corporations Act from which the necessary implication to be drawn is that the s 597 examinee may not exercise their right to refuse to do anything in this proceeding that would tend to incriminate them or expose them to a penalty, such as filing a positive defence, answering interrogatories or giving discovery. So they contended, nothing in s 597 (or the Division of the Corporations Act in which it is found) leads to the conclusion that any purpose of s 597 would be defeated by permitting them to claim penalty privilege in this proceeding. They observed that the Liquidators are still armed with the transcripts of evidence obtained at examination which they may deploy in this proceeding as they see fit.[43] So they said, the purposes of s 597 have been entirely fulfilled and have not been defeated. In addition they submitted that an implication of general waiver of privileges cannot be considered to be the necessary implication of the statutory text, because the purpose or purposes of the provisions in question would not be defeated or even affected by a determination that the Defendants privileges outside the confines of the examination proceedings have not been abrogated by the examinee’s non-exercise of rights under s 597(12A).
[39][2013] HCA 29.
[40]Ibid [146]–[148].
[41]Ibid [97]–[118].
[42]Ibid [70]–[71], [86]–[87], [119], [124] and [142].
[43]Corporations Act, s 597(14).
In my opinion, the decision in X7 v Australian Crime Commission is of no assistance in this case. The High Court was not there concerned with waiver of privilege, and the principles espoused in that case simply have no application in the present context. It is not a question of the legislation implying a general waiver of privileges. Rather, it is the conduct of the Defendants in failing to invoke the privileges when giving sworn answers that constitutes the waiver. For the reasons which I have given, that waiver is not a general waiver, but rather the particular waiver of the information contained within their examination answers. The position as to waiver is all the more stark because the legislation specifically deals with the protection of the privileges. The Defendants received a warning about the privileges and had the opportunity to invoke them. Having failed to do that, they have waived their right to claim the privileges in respect of the answers that they gave.
Are procedural considerations relevant in determining whether the Defendants ought be required to file defences and make discovery? (Ground 2(c))
As I have determined that the Defendants are obliged to file defences and provide discovery in accordance with the Rules, I will only consider this ground of appeal briefly. The Liquidators submitted that the approach urged by the Defendants would have serious repercussions for the management of the trial and would work an injustice on the Liquidators: the Defendants would not need to file any defences nor make discovery before trial and there would have to be a split trial if they subsequently did elect to run a positive defence and give evidence. The Liquidators contended that these were relevant considerations, particularly as, in their view, the claim is a straightforward insolvent trading claim and is not a large claim.
The Defendants contend that the Associate Judge erred because the privileges cannot be overridden by considerations about the disruptive effect on the trial if they were excused for the time being from complying with the procedural rules that apply to the pleading of a defence and the giving of discovery. I accept those submissions. In my opinion, if the privileges are available, then it is not relevant that the effect on the trial would be disruptive. As I noted above, the privilege against self-incrimination is a substantive right. It cannot be overridden by procedural rules. Nor can either privilege be abrogated by judicial decision.
Conclusion
For the foregoing reasons, the appeal will be dismissed.
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