R v Mclaughlin
[2004] SADC 86
•11 June 2004
DISTRICT COURT OF SOUTH AUSTRALIA
(Criminal)
R v MCLAUGHLIN
Decision of His Honour Judge David
11 June 2004
CRIMINAL LAW
SUBPOENAS – defendant charged with offences contrary to Corporations Act – main Prosecution witness already pleaded guilty and sentenced to offences arising out of same allegations – Prosecution witness interviewed by solicitors for Receivers of Company involved – interview held after adjournment of examination pursuant to s 597 of Corporations Act – Receivers claim legal professional privilege – transcript of interview sent to “ASIC” pursuant to s 30 of ASIC Act – ASIC sent transcript to Commonwealth Director of Public Prosecutions – Receivers object to further disclosure – Commonwealth Director of Public Prosecutions and defendant request disclosure before trial.
Decided that although record of interview was privileged such privilege abrogated to extent of providing copy of interview to defendant – consideration of effect of s 30 of ASIC Act upon legal professional privilege.
Further record of interview between accountants retained by Receivers and same witness for the purposes of investigating possible claim on behalf of Receivers against auditors – such record held to be privileged.
Corporations Act 2001 ; ASIC Act ; Cross on Evidence pp 703 and 704, referred to.
Carter v The Managing Partner, Northmore Hale Davy & Leake and Others (1995) 183 CLR 121 ; Hartogen Energy Limited (In liquidation) and Others v The Australian Gas Light Company and Others (1992) 236 FCR 557; ESSO Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49; Australian Securities Commission v Dalleagles Pty Ltd and Others (1992) 108 ALR 305 ; Corporate Affairs Commission of New South Wales v Yuill and Ors (1991) 172 CLR 319; Daniels Corporation International Pty Ltd and Anor v Australian Competition and Consumer Commission (2002) 192 ALR 561; Carbone and Another v National Crime Authority and Others (1994) 126 ALR 79; Health & Life Care Ltd v Price Waterhouse and Others (1997) 69 SASR 362, applied.
R v MCLAUGHLIN
[2004] SADC 86
The defendant, Daniel Francis McLaughlin, has pleaded not guilty to 17 counts of failing to act honestly while an officer of a Corporation contrary to the Corporations Act 2001. The matter has been set for trial. I am asked to decide whether documents which are the subject of two subpoenas dated the 9th February 2004 and the 23rd February 2004 should be made available to the defendant or whether they are subject to legal professional privilege.
Background
The charges that Mr McLaughlin faces are allegations that come out of the collapse of the Harris Scarfe Group of Companies. On the 6th April 2001 the firms of Ferrier Hodgson (Adelaide) and Ferrier Hodgson (Melbourne) were appointed jointly and severally as Receivers and Managers of that Group of Companies. The subpoena of the 9th February 2004 is directed to the Commonwealth Director of Public Prosecutions and the subpoena of the 23rd February 2004 is directed to Mr Bruce Carter who is a partner of the firm appointed as Receivers and Managers.
A Mr Alan Hodgson was a Director of the Harris Scarfe Group of Companies and eventually pleaded guilty to charges contrary to the Corporations Act involving the Harris Scarfe Group of Companies’ collapse. It is clear that from the start of investigations by both the Receivers and the Australian Securities and Investments Commission (“ASIC”) he was cooperative and willing to talk freely about the matters. The Prosecution in the present case against Mr McLaughlin intend calling him as a witness. Mr Hodgson was interviewed by solicitors acting for the Receivers on the 22nd and 23rd November 2001. Prior to that he had given evidence in the Supreme Court of South Australia before Judge Bowen Pain pursuant to an examination under section 597 of the Corporations Act. Those examination proceedings commenced on the 21st June 2001 and Mr Hodgson gave evidence on the 6th August, the 10th August and the 9th November 2001. It was then eventually agreed between the parties that as Mr Hodgson was speaking quite liberally about his role in the collapse of the Harris Scarfe Group of Companies it would be better to adjourn the proceedings before Judge Bowen Pain and continue the investigation in private at the offices of Fisher Jeffries. The section 597 examination was eventually adjourned until the 12th December 2001 and interviews took place in the offices of Fisher Jeffries conducted by solicitors representing the Receivers on the 22nd and the 23rd November 2001. The matter was never brought back on in the Supreme Court.
I find that at the time of the interviews at the offices of Fisher Jeffries the Receivers were clearly anticipating a civil action against the auditors of the Harris Scarfe Group of Companies. It is also clear that the interview with Mr Hodgson was a statement taken for the purposes of that anticipated action. That interview was tape recorded and transcribed. Both the tapes and the transcription were sent to Mr Hodgson for the purposes of him correcting and signing the transcript. He returned a copy of the transcript to the offices of Fisher Jeffries but not the tapes. They remained in his possession.
The transcription of the interview which was sent back to Fisher Jeffries (which I will refer to as the “Hodgson transcript”) was eventually sent to ASIC on the 4th February 2002. A notice dated the 30th January 2002 was sent to Mr Carter to produce “all records of private interviews with Alan Hodgson conducted by Fisher Jeffries on behalf of the Receivers, Managers Harris Scarfe Ltd”. That notice was sent pursuant to section 30 of the ASIC Act. Although the transcript was sent to ASIC the Receivers maintained legal professional privilege over that material. On receipt of the Hodgson transcript ASIC sent copies of it to the Commonwealth Director of Public Prosecutions. As a result of receiving that material the Director wishes to disclose it to the defence in this trial because of the rules of disclosure. The Receivers maintain the claim of legal professional privilege. Both the Commonwealth Director of Public Prosecutions and the defendant, Mr McLaughlin, join forces in asking for disclosure.
The subpoena of the 23rd February 2004 asks for the production of “all notes and records of an interview conducted with Mr Alan Hodgson and by representatives of Ferrier Hodgson on 11 May 2001” from the Receiver.
By a letter of the 2nd May 2001 (Exhibit P6A) Mr Peter Holmes of Ferrier Hodgson was retained by Fisher Jeffries acting on behalf of the Receivers as a forensic accountant to assist in delivering advice to the Receivers about possible causes of action available to the Harris Scarfe Group of Companies against its auditors. As a result he conducted an interview with Alan Hodgson in the presence of his solicitor Mr Tim Bourne on the 11th May 2001. It is clear that the reason for that interview was to obtain from Mr Hodgson his statement on issues relevant to possible causes of action against the former auditors. He duly completed that task. Present at the interview was also Mr Lachlan Johns also of Ferrier Hodgson who took notes. The file note of that record of interview (which I will refer to as the “Holmes record of interview”) was provided to Fisher Jeffries. The Receivers claim legal professional privilege over that file note which records that record of interview on the basis of legal professional privilege in that it was a statement taken from a potential witness either for the purposes of litigation or for the purposes of Fisher Jeffries advising their client. Once again both the Commonwealth Director of Public Prosecutions and the defendant Mr McLaughlin ask for disclosure of that material.
It is clear in relation to both subpoenas that the material which is sought to be disclosed is potentially relevant and important to the defence in the trial of McLaughlin. Mr Hodgson is obviously going to be an important witness for the Prosecution and the subject matter which is sought to be obtained in the Hodgson and Holmes interviews is potentially the same subject matter upon which he will give evidence in Mr McLaughlin’s trial. However it is argued by the Receivers that nevertheless the law clearly says that if that subject matter is privileged then that takes precedence over the difficulties that a defendant might have in a subsequent criminal trial.
The Hodgson Transcript
Ms Rosemary Davey for the Commonwealth Director of Public Prosecutions supported by Mr Stephen Apps for the defendant argued that the Hodgson transcript is not covered by legal professional privilege for a number of reasons. Ms Davey, who presented the argument, submitted that the circumstances of the interviews held at Fisher Jeffries cannot be characterised as witness interviews and in fact were an abuse of the powers contained in section 596 of Corporations Law. She also argued that the interviews were not confidential. Her argument in essence was that as Mr Hodgson was being interviewed whilst the proceedings before Judge Bowen Pain were adjourned he was in fact under threat that if he did not cooperate at the interview he would then be back before Judge Bowen Pain in the Supreme Court. Consequently, it is argued, there was a form of compulsion which destroys legal professional privilege. She further argued that even if the Hodgson record of interview was privileged such privilege was abrogated by the notice from ASIC which required the handing over of the copy of that interview to them, even though it was done under the umbrella of legal professional privilege. She further argued that the handing on of that material by ASIC to the Commonwealth Director of Public Prosecutions abrogates the privilege even further and it would therefore follow that the Commonwealth Director of Public Prosecutions has no other alternative but to hand that material onto the defendant pursuant to disclosure laws in criminal trials.
It is argued by Mr Doyle for the Receivers that the Hodgson record of interview is clearly privileged because it came into existence for the dominant purpose of contemplated legal proceedings. He argued that under the principles set out in Carter v The Managing Partner, Northmore Hale Davy & Leake and Others (1995) 183 CLR page 121 and Hartogen Energy Limited (In liquidation) and Others v The Australian Gas Light Company and Others (1992) 236 FCR page 557, the Hodgson transcript is clearly protected by legal professional privilege despite the effect that might have on a subsequent criminal trial. He further argued that the handing on of the material to ASIC pursuant to section 30 of the ASIC Act is only an abrogation of privilege for the limited purpose of producing documents to an authority. He argued that it is not an abrogation of privilege for all purposes or indeed a destruction of privilege. He draws a distinction between ASIC using the documents to further its investigation as distinct from passing those documents onto the prosecuting authority whom he says is not entitled to access privileged material. I will return to those arguments.
Facts
The Receivers called a number of witnesses who were involved in the Hodgson interview. I received affidavits and heard evidence from Nicholas David Bampton a solicitor at Fisher Jeffries acting for the Receivers, Bruce James Carter the Receiver himself, Malcolm Fraser Blue a Queens Counsel retained by the Receivers for conducting the interview with Mr Hodgson and Amanda Mary Brown who was also involved in the interview. Also called was Peter John Holmes but I will deal with his evidence when considering the Holmes record of interview.
The Commonwealth Director of Public Prosecutions called Timothy Daniel Bourne who was the solicitor for Mr Hodgson at the time and Mr Alan Hodgson himself. I do not think it necessary to go into the evidence in any detail because in my view there is very little difference in the evidence of the witnesses as to the salient matters.
I find that the examination before Judge Bowen Pain was not called for the purposes of forcing or enticing Mr Hodgson into giving a statement at the offices of Fisher Jeffries. I find that the evidence is quite clear that the adjourning of the examination before Judge Bowen Pain and the taking of a statement at Fisher Jeffries in private was of equal benefit to both sides and was done quite voluntarily. The fact that those proceedings were adjourned while a statement was being taken at the offices of Fisher Jeffries does not in anyway add an aspect of compulsion to that interview. It is clear that Mr Hodgson was willing to speak to Fisher Jeffries and was happy to do so outside of the glare of publicity with its inconvenience and added costs. I find it clearly proved that the purpose of that interview was for the taking of a statement in relation to impending action against the former auditors of the Harris Scarfe Group of Companies.
I turn to the law. It is agreed that in both civil and criminal cases, “confidential communications passing between a client and a legal adviser need not be given in evidence or otherwise disclosed by the client and, without the client’s consent, may not be given in evidence or otherwise disclosed by the legal adviser if made either (1) to enable the client to obtain, or the adviser to give, legal advice, or (2) with reference to litigation that is actually taking place or was in the contemplation of the client.” (Cross on Evidence page 703 and 704).
The test of whether a document is privileged is concerned with the purpose for which it is created. Although the test used to be the “sole purpose test” the High Court decision of ESSO Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR page 49 has changed that to a “dominant purpose” test. The principle also applies even though the documents are in the possession of a third party (Hartogen Energy Ltd (In liquidation) and Others v The Australian Gas Light Company and Others (1992) 36 FCR page 557). In my view both the Hodgson transcript which is in the possession of the Commonwealth Director of Public Prosecutions and the tapes sent to Mr Hodgson merely for the purposes of correction are privileged documents. What concerns me is whether such privilege has been abrogated.
Waiver of Privilege
It is argued by Ms Davey that there is a clear legislative intent under the ASIC Act to waive legal professional privilege in relation to those documents which are the subject of a section 30 notice. Consequently it is argued that legal professional privilege is abrogated for the Hodgson transcript. I set out the relevant sections of the Act:-
“30 (1) [Body corporate] ASIC may give to:
(a) a body corporate that is not an exempt public authority; or
(b) an eligible person in relation to such a body corporate;
a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books relating to affairs to the body.
30 (2) [Registered scheme] ASIC may give to:
(a) the responsible entity of a registered scheme; or
(b) an eligible person in relation to the responsible entity;
a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books relating to the operation of the scheme.
Notice to produce books about securities
31 (1) [ASIC may give notice] ASIC may give to:
(a) a securities exchange; or
(b) a member of the board of a securities exchange; or
(c)a person who is or has been (either alone or together with any other person or persons) a dealer, an investment adviser or a securities representative of a person; or
(d)a nominee controlled by a person of a kind referred to in paragraph (c) or jointly controlled by 2 or more persons at least one of whom is such a person; or
(e)an eligible person in relation to a person of a kind referred to in paragraph (a), (b), (c), or (d); or
(f)any other person who, in ASIC’s opinion, has been a party to a dealing in securities; a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books relating to:
(g) the business or affairs of a securities exchange; or
(h) a dealing in securities; or
(j)advice given, or an analysis or report issued or published, about securities; or
(k)the character or financial position of, or a business carried on by, a person of a kind referred to in paragraph (c) or (d); or
(m)an audit of, or a report of an auditor about, a dealing in securities or accounts or records of a dealer or investment adviser.
31 (2) [Application to trustees] A reference in subsection (1) to a dealing in securities, or to a business carried on by a person, includes a reference to a dealing in securities by a person as a trustee, or to a business carried on by a person as a trustee, as the case may be.
Notice to produce books about futures contracts
32 (1)[Notice to member to produce specified books] ASIC may give to:
(a)a futures exchange; or
(b)a clearing house for a futures market; or
(c)a futures association; or
(d)a member of the board of a body corporate that is a futures exchange, a clearing house for a futures market, or a futures association; or
(e)a person who is or has been (either alone or together with any other person or persons) a futures broker, a futures adviser or a futures representative of a person; or
(f)a nominee controlled by a person of a kind referred to in paragraph (e) or jointly controlled by 2 or more persons at least one of whom is such a person; or
(g)an eligible person in relation to a person of a kind referred to in a preceding paragraph; or
(h)any other person who, in ASIC’s opinion, has been a party to a dealing in a futures contract;
a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books relating to:
(j)the business or affairs of a futures exchange, of a clearing house for a futures market, or of a futures association; or
(k)a dealing in a futures contract; or
(m)advice given, or an analysis or report issued or published, about futures contracts; or
(n)the character or financial position of, or a business carried on by, a person referred to in paragraph (e) or (f); or
(p)an audit of, or a report of an auditor about, a dealing in a futures contract or accounts or records of a futures broker or futures adviser.
32 (2)[Application to trustee] A reference in subsection (1) to a dealing in a futures contract, or to a business carried on by a person, includes a reference to a dealing in a futures contract by a person as a trustee, or to a business carried on by a person as a trustee, as the case may be.
Notice to produce books about financial services
32AFor the purposes of Division 2 of Part 2, ASIC may give to:
(a)a person who supplies, or has supplied, a financial service; or
(b)an eligible person in relation to that person;
a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books relating to:
(c)the supply of the financial service; or
(d)the financial service.
Notice to produce documents in person’s possession
33 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, and 32(1)(j) to (p), inclusive; or
(c)a matter referred to in paragraph 32A(c) or (d).”
In support of her argument Ms Davey referred to the cases of Australian Securities Commission v Dalleagles Pty Ltd and Others (1992) 108 ALR 305 and Corporate Affairs Commission of New South Wales v Yuill and Ors (1991) 172 CLR 319.
Mr Doyle argued that if there is an abrogation of privilege by the ASIC Act it is only for the purposes of supplying that material to ASIC for investigation. It can go no further. He cited Daniels Corporation International Pty Ltd and Anor v Australian Competition and Consumer Commission (2002) 192 ALR 561, as an authority for the proposition that legal professional privilege will not be abolished by legislative provisions except by express language or clear and unmistakable implication. The Court held that section 155 of the Trade Practices Act 1974 (Commonwealth) did not override a claim for legal professional privilege. In the joint judgment of Gleeson CJ, Gaudron, Gummow and Hayne JJ it was said (at page 564):-
“Legal professional privilege
[9] It is now settled that legal professional privilege is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings. It may here be noted that the ‘dominant purpose’ test for legal professional privilege was recently adopted by this court in Esso Australia Resources Ltd v FCT in place of the ‘sole purpose’ test which had been applied following the decision in Grant v Downs.
[10] Being a rule of substantive law and not merely a rule of evidence, legal professional privilege is not confined to the processes of discovery and inspection and the giving of evidence in judicial proceedings. Rather and in the absence of provision to the contrary, legal professional privilege may be availed of to resist the giving of information or the production of documents in accordance with investigatory procedures of the kind for which s 155 of the Act provides. Thus, for example, it was held in Baker v Campbell, that documents to which legal professional privilege attaches could not be seized pursuant to a search warrant issued under s 10 of the Crimes Act 1914 (Cth).”
The Court went on to hold that on a construction of section 155 of the Act legal professional privilege was not abrogated.
In my view the relevant sections of the ASIC Act make it clear that legal professional privilege is abrogated to the extent of the relevant documents being handed over to ASIC for the purposes of further investigation. I find that there is a clear implication that privilege is further abrogated to allow the material to be handed over to the prosecuting authority namely the Commonwealth Director of Public Prosecutions. In my view that is the clear implication of the Act. Merely passing on the material for the purposes of investigation but not for prosecution would be meaningless. I therefore find that the Act contemplates that ASIC would hand over the documents for the purposes of prosecution to the Commonwealth Director of Public Prosecutions if appropriate. That being so I find there is the further clear implication that the Commonwealth Director of Public Prosecutions would be allowed to have the material inspected by the defence in any action pursuant to procedures of disclosure in criminal trials.
I therefore find that the Hodgson transcript can be viewed by the defendant and his counsel for the purposes of the forthcoming trial but the abrogation of legal professional privilege is confined to that purpose and will go no further.
I hasten to add that the tapes that are in the possession of Mr Hodgson for the purposes of correction are privileged. I do not agree with the argument that the handing on of those tapes to Mr Hodgson for correction waives privilege (Carbone and Another v National Crime Authority and Others (1994) 126 ALR 79).
The Holmes Record of Interview
It was argued by Ms Davey that the Holmes record of interview was not subject to legal professional privilege because, as it took place on the 11th May 2001, it was not in contemplation of anticipated legal proceedings and was merely an investigation to find out what had happened concerning the Harris Scarfe Group of Companies’ collapse. It was also argued that that interview was not confidential and not being confidential that was fatal to a claim of privilege. Mr Holmes in his evidence said that the interview to him appeared to be “an open meeting” in which Mr Hodgson attended with his solicitor Mr Tim Bourne. That view of the meeting is supported by the evidence of Mr Bourne who said that there was no suggestion that there was any question of confidentiality. It is also clear both from the evidence of Mr Carter and Mr Bampton that although there were no specific legal proceedings on foot nevertheless the interview by Mr Holmes of Mr Hodgson on behalf of the Receivers was for the purposes of at least investigating the auditors as responsible parties for the collapse of the Harris Scarfe Group of Companies.
There is clear authority that lack of confidentiality is not fatal to a claim of legal professional privilege. Ms Davey quite properly cited the case of Health & Life Care Ltd v Price Waterhouse and Others (1997) 69 SASR 362 as an authority for that proposition which of course is contrary to her position in this case.
I find that the record of interview by Mr Holmes of the 11th May 2001 is clearly for the purposes of Fisher Jeffries giving legal advice to the Receivers who is their client in the matter of further action. Although the litigation that is contemplated is not as definite as it was later when Mr Hodgson was interviewed at the offices of Fisher Jeffries it nevertheless was brought into existence for the purposes of giving legal advice and I therefore find it is privileged.
Rulings
I rule:-
1.That the Hodgson transcript which is in the possession of the Commonwealth Director of Public Prosecutions can be inspected by the defence but nobody else.
2.The tapes sent to Mr Hodgson for the purposes of correction are privileged.
3.The file note of the Holmes record of interview of the 11th May 2001 is privileged and cannot be inspected.
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