LM Investment Management Limited (in liq) v EY (No 5)

LM Investment Management Limited, in liquidation, sued its former auditors, EY, for various claims including breach of contract, tortious duty, misleading and deceptive conduct, and breaches of the Corporations Act and the ASIC Act. The defendants claimed privilege against self-incrimination or exposure to a civil penalty in various paragraphs of their defence. The plaintiff sought to strike out these claims of privilege. The court was required to determine whether the defendants were likely to be prosecuted for an offence or civil penalty, whether the claims of privilege were justifiable, whether the defendants could delay their election to waive privilege, and whether the defendants could make blanket claims of privilege. The court held that the defendants' claims of privilege were not justifiable. The risk of prosecution or exposure to penalty was not fanciful for the second and third defendants, but there was no real, appreciable prospect of the first defendant's partners being prosecuted. The court found that the defendants' claims of privilege were not based on allegations arising out of or under the Corporations Act or the ASIC Act. Therefore, the defendants had no point in relation to the cancellation or suspension of their registration as auditors. The court struck out various paragraphs of the defence, but allowed the defendants to replead certain matters. The second and third defendants were given leave to elect, on one occasion only, to waive the privilege against self-incrimination claimed to excuse them from pleading and disclosing documents in this proceeding, but only after the close of the plaintiff’s case at trial, and before the case for any of the defendants is opened at trial. The first defendant was required to plead all the facts, matters and circumstances it relied upon to support its case based on ss 1317S or 1318 of the Corporations Act by a date to be fixed at a further review of this proceeding. The application made by Court Document 62 was dismissed.