Regina v Ronen

[2004] NSWSC 1283

Reported Decision: 211 FLR 258

Supreme Court

CITATION:	Regina v Ronen & Ors [2004] NSWSC 1283
HEARING DATE(S):
JUDGMENT DATE:	26 February 2004
JUDGMENT OF:	Whealy J at 1
DECISION:	I propose to dismiss the motions which have been issued on behalf of the accused. Each motion is accordingly dismissed.
CATCHWORDS:	Subpoena - application to set aside proper officer of corporation - separate legal identity of corporation - obligations on corporation where subpoena issued
LEGISLATION CITED:	Corporations Act 2001 s 187 of Evidence Act 1995
CASES CITED:	Woolmington v The Director of Public Prosecutions (1935) AC 462 at 481 Environmental Protection Authority v Caltex Refining Co Pty Limited per McHugh J National Employers Mutual General Association Limited v Waind & Hill (1978) 1 NSWLR 372 at 381 Workcover NSW v Police Service of NSW (2000) 50 NSWLR 333 at 350 Salomon v Salomon & Co (1987) AC 22 Macleod v R (1997) ALR 33 Penn-Texas Corp v Murat M Anstalat (No 2) (1964) 2 QB 647 Rochfort v Trade Practices Commission (1982) 153 CLR 134 at 146 Environmental Protection Authority v Caltex (1993) 178 CLR 477 Commissioner for Railways v Small (1938) 38 SR 564 at 573-574
PARTIES :	Regina v Ida Ronen Regina v Nitzan Ronen Regina v Izhar Ronen
FILE NUMBER(S):	SC 70222/03; 70032/03; 70223/03
COUNSEL:	Mr T. Game SC; Ms S. McNaughton - Crown Mr R. Richter QC; Mr N. Rosenbaum - Accused Ida Ronen Mr I. Hill QC; Mr E. Power - Accused Nitzan Ronen Mr R. Van de Wiel QC; Mr P. Jones - Accused Izhar Ronen
SOLICITORS:	Ms P. Musgrave - Cth DPP Watsons Solicitors - Accused

LOWER COURTJURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):
LOWER COURT JUDICIAL OFFICER :

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
CRIMINAL LIST

WHEALY J

THURSDAY 26 February 2004

70032/03 - REGINA v Nitzan RONEN
70222/03 - REGINA v Ida RONEN
70223/03 - REGINA V Izhar RONEN

JUDGMENT - (On application to set aside subpoenas;
see p 178 of transcript)

1 HIS HONOUR: On 2 February 2004, an indictment was presented against each of the accused and each was arraigned on that occasion. There are two charges in the indictment. These are set out in full in the decision I gave on 3 February 2004, as is the overall nature of the Crown case. I shall not repeat those matters in this decision but they may be taken to be incorporated in these reasons in relation to the present dispute which I am obliged to resolve.

2 On 5 February 2004, Miss Lawler gave evidence that there were a number of employees of the Dolina Group of companies, On Fovo and Ronen Young Fashions who were, as she described it, on the payroll. Her evidence revealed that a number of these employees were, for several years from December 1994, paid in cash for overtime and that the payments were not recorded in the payroll. She said that she received instructions to do this from Nitzan, Izhar and Mrs Ida Ronen. The practice, however, ceased in 1998 when Mr Greyling became the chief financial officer of the group.

3 Miss Lawler said that she would prepare lists of people who needed to be paid overtime. She would give the list to Mrs Ronen who, in turn, would provide her with the equivalent amount of cash. This happened, she said, on a weekly basis.

4 Miss Lawler was asked whether there were records that would assist her in ascertaining the number of employees in the relevant category and the frequency with which the practice was followed. She said she thought there would be old payroll records which would show who was on the payroll at the time. The overtime records were not kept and did not find their way into the records of Dolina, Ronen Young and On Fovo Fashions.

5 Miss Lawler also referred to the 1998 payroll records which, she thought, would have given details of the overtime payments made in the period after the cash payments for overtime ceased. She thought there were payroll records for the 1999 and 2000 years as well. They were, she said, kept at the Dolina premises “across the road in old records” (see transcript 126 on voir dire).

6 On 10 February 2004, I granted leave to the Crown to serve short notice of five subpoenas. They were to be returnable before me at 10am on Tuesday 24 February 2004. I shall identify the five documents. The first subpoena was addressed to:

“Proper officer, Dolina Enterprises Pty Ltd, 132 to 142 Epsom Road, Rosebery.”

7 The documents required to be produced are set out in the schedule. They are:

“All payroll reports for the company Dolina Enterprises Pty Limited for the period October 1991 to February 2001 inclusive.”

8 The second subpoena is addressed to:

“The proper officer, Dolina Fashions Group Pty Limited, 132 to 142 Epsom Road, Rosebery.”

9 It requires the production of, "All payroll reports for the company Dolina Fashion Group Pty Ltd" for the same period as did the first subpoena.

10 The third is addressed to:

“Proper officer, Ronen Young Fashion, 132 to 142 Epsom Road, Rosebery.”

11 It requires the production of, "All payroll reports for the business Ronen Young Fashion" for the same period.

12 The next subpoena is addressed to:

“Proper officer, Dolina Australia Pty Limited.”

13 It requires the production of, "All payroll reports for the company Dolina Enterprises Pty Ltd" for the same period.

14 There is then, finally, a subpoena to:

“Proper officer, On Fovo Pty Ltd.”

15 It requires the production of, "All payroll reports of the company On Fovo Pty Limited", again for the period October 1991 to February 2001 inclusive.

16 The Crown position both in relation to the evidence of Miss Lawler which I have identified and the payroll records themselves is that the material is said to be relevant to the offences charged in the indictment because it tends to show that the accused had access to large sums of cash, between 1994 and 1998, which they had been able to utilise, for example, in paying cash to employees for overtime. Although these details were not apparently included in the payroll records, the records since 1998 and a comparison of those records with earlier payroll records will help identify the workers in the relevant category and, in a general sense, the extent of overtime payments during the later period.

17 Late last week, I granted leave to serve short notice of motions filed on behalf of each of the accused. Effectively, the motions sought orders that each of the subpoenas I have identified be set aside on the grounds that the subpoenas were oppressive and/or constituted an abuse of process.

18 I should say, before addressing the major issues arising on the hearing of the motions, that there is reference in the evidentiary material before me to the execution of a search warrant by officers of the National Crime Authority on 7 February 2001 at 132 to 142 Epsom Road, Rosebery. Documents and copies of computer files were seized and removed from the premises during this exercise. It has been suggested that this material may have included a computer download of the payroll records contained on the hard drive. The hard drive material, it seems, however, remains at Epsom Road, as Miss Lawler has indicated in her evidence to which I have made earlier reference.

19 The second preliminary matter is that Mr Webb of Queens Counsel appeared before me on 24 February 2004. He had been instructed to appear on behalf of each of the corporations I have identified in reciting details of the subpoenas. His instructions on behalf of each of those companies are to resist production of the documents and have the subpoenas set aside on the basis that they are oppressive.

20 Essentially, Mr Webb took the position that he intended to rely upon the submissions which were to be made by and on behalf of each of the accused. No motion or affidavit, however, had been filed on behalf of the corporations. No further additional submissions were at that time made on behalf of each of the companies.

21 The principal argument in support of the accused's motions arose in the following way: Paragraphs 9 to 12 of the affidavit in support of each of the motions, Mr Watson's affidavit, asserts in its amended form that Izhar Ronen is the sole director and company secretary of Dolina Enterprises Pty Ltd; that Nitzan Ronen is the sole director and company secretary of Dolina Fashions Group Pty Ltd; that Ida Ronen is the sole director and secretary of On Fovo Pty Ltd, and that Nitzan and Izhar Ronen are the only directors of Dolina Australia Pty Ltd, with Nitzan Ronen being the company secretary. Mrs Ida Ronen is, of course, the sole proprietor of Ronen Young Fashions, that being a business name and not a corporation.

22 Mr Richter of Queen's Counsel, who represents Mrs Ida Ronen, took up the cudgels on his client's behalf with his customary vigour. Counsel for the other two accused, however, endorsed his submission fully.

23 The principal argument was that the subpoenas were oppressive and an abuse of process because they called, in effect, upon each of the accused as proper officer of the relevant company to produce documents and give evidence, if necessary, in the document-producing exercise of material possibly supportive of the Crown's case and thereby incriminatory against each accused. Counsel argued that the subpoena process could not be used in this way. It represented, he said, a fundamental breach of the rights of each accused and did so under colour of the Court's judicial processes.

24 In the ultimate, Mr Richter submitted that the subpoenas were oppressive by seeking to compel the accused in this trial to do things they were not compellable to do. They were an abuse of process because they sought to invoke the Court's judicial power to perform what was in fact an executive act.

25 Before resolving the issue it is necessary to say something about the argument developed by Mr Richter QC. The starting point is his reliance upon the principles in Woolmington v The Director of Public Prosecution (1935) AC 462 to 481. As to these McHugh J in Environmental Protection Authority v Caltex Refining Co Pty Limited (a case concerned with the issue as to whether a company may claim privilege against self-incrimination at common law) said this at 550:

“It is a fundamental rule of the common law, that, whatever the charge and wherever it is tried, the onus of proving the guilt of the accused rests upon the Crown and never shifts to the accused. ( Wollmington ). The rule is reinforced by the further rule that an accused person cannot be compelled to give evidence in defence of his or her plea of not guilty. The practical effect of those rules is that the prosecution must prove the guilt of the accused by evidence other than the compulsory answers or assistance of the accused. If in the course of or for the purpose of judicial proceedings, the prosecution could force the accused to provide evidence which did or could incriminate that person, the adversary system of justice would be undermined.”

26 The argument was then advanced by the proposition, urged by Mr Richter, that each subpoena, in the case of the corporate subpoenas, is in fact addressed to each accused. In that situation, the principles to which I have referred would make it entirely inappropriate for an accused person to be compellable to search for and, if found, to produce to the Court documents which the prosecution would then seek to make use of in advancing its case against that accused.

27 In support of this last proposition, Mr Richter has referred to the evidence of Mr Watson which I have recited earlier. This identified the fact that, generally speaking, each accused was a secretary and a director of one or other of the corporate entities to which the subpoena have been addressed. Mr Richter said from the bar table that his instructions were that, at this point in time, no other person had been authorised to speak on behalf of, or to authorise another to speak on behalf of, the recipients of the subpoenas.

28 I should interrupt this recitation of Mr Richter's argument to say that Mr Game SC, the Crown Prosecutor, complained that there was no evidence on this point; and emphasised, no doubt correctly, that, upon the hearing of a motion to set aside the subpoena, the onus is on the moving party to demonstrate by evidence or otherwise that it should be set aside. (See National Employers Mutual General Association Limited v Waind & Hill (1978) 1 NSWLR 372 at 381 and Workcover NSW v Police Service of New South Wales (2000) 50 NSWLR 333 at 350.) Nevertheless, I am content to proceed, for the purpose of the resolution of the issues arising under the motions, on the basis that the fact is that Mr Richter's instructions are as he has stated them to be.

29 The next point of reference in the arguments advanced on behalf of the accused is the definition of "officer of a corporation" in section 9 of the Dictionary to the Corporations Act 2001. I shall not set out the entirety of this definition but portions of it read:

“Officer of the corporation means:
(a) a director or secretary of the corporation; or
(b) a person
(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(ii) who has the capacity to affect significantly the corporation's financial standing; or
(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation).”

30 There is also section 82A of the Corporations Act 2001. Again I shall not set it out in its entirety. Relevantly, however, the section reads:

“Officers of bodies corporate and other entities
(1) Subject to subsection (2), officer, in relation to:
(a) a body corporate; or
(b) an entity; includes:
(c) a director, secretary, executive officer or employee of the body or entity.”

31 I should add, finally, in relation to this exposition of the argument that Mr Richter rightly emphasised the force of his argument by reference to that aspect of the subpoena addressed Mrs Ida Ronen that required her as "the proper officer" of the business Ronen Young Fashions to produce records of that business. Recognising, no doubt, the force of this part of the argument, Mr Game SC promptly withdrew that part of the relevant subpoena so that its presence no longer plays a part in the resolution of the issues.

32 Now, as to the force of the argument in relation to the corporate entities, there can be no doubt whatsoever regarding the existence and fundamental nature of the principles enunciated in Woolmington. If the remaining subpoenas affront these principles, it is clear that they should be set aside. The question is: Do they offend those principles?

33 In my opinion they do not. The first point where the structure of the argument weakness is the assertion, implicit in the argument, that the subpoenas are in truth addressed to each of the accused. It must be acknowledged that there is in fact no definition of the phrase "proper officer" in the Corporations Act 2001 or elsewhere. No doubt, however, it is appropriate, in a loose sense, to describe the director and secretary of each company as an "officer" of the corporation either because of the office held or because it is to be inferred, from the holding of that office and other material in the proceedings, that each accused may be properly described as the directing mind of the relevant company.

34 There are two principal reasons, however, that lead me to the conclusion that the structure of the argument is unsound. The first reason relates to the existence of basic principles respecting the distinct legal personality of corporations. These principles emerged long ago in the era of the joint stock company. They reflected a more fully developed understanding of the distinct legal identity of the corporation. The concept is of course well-known and finds expression in Salomon v Salomon & Co (1987) AC 22. In more recent time however in Macleod v R (1997) ALR 33 the following appears in the joint judgment of Gleeson CJ, Gummow and Hayne JJ at paragraph 28:

“The scope and operation of the provisions necessary move with those developments; their construction is informed by the proposition that a company has rights, interests and duties which differ from those of its directors, officers and members. The conduct or state of mind of the latter is not always to be attributed to the former.”

35 In the same case McHugh J at paragraph 75 said:

“A corporation is an entity separate from other persons who are the shareholders or associated with it. In Salomon v Salomon & Co , the House of Lords unequivocally ruled that even if a company is in essence a one person business, no question of agency or trusteeship arises between the company and its controller. The company has the legal and beneficial title to its property.”

36 Finally, in the same case, Callinan J at paragraph 127 said:

“Taken to their logical conclusion the appellant's submissions would, if correct, mean that no matter how the appellant chose to use Tradex money, the company (by him) could always validate that use by consenting to it. I cannot accept this submission. It ignores the vital distinction which the law draws between separate legal personalities. It is a distinction which section 173 itself makes. The funds or property of a company can only be used or applied as a result of some act or conduct on the part of a natural person. The fact that the natural person so acting is in effect in control of the company does not mean that he is the company or that no distinction may be drawn between what he does and what the company may lawfully do.”

37 The force of these statements and the principles which underline them are equally applicable in relation to the converse situation which arises in the present matter. Each subpoena is addressed to the company and not to the director, secretary or individual controlling or being the determining mind of the corporation. It is the corporation which has the obligation to produce the documents, not any individual.

38 Moreover, the documents to be produced are the property of the corporation. They are not the property of the officers of the corporation. They are not the property of the accused.

39 This brings me to the second consideration which again, in my view, undermines the argument advanced on behalf of each accused. It relates to the proper method of issuing a subpoena duces tecum to a company and the obligation which thereupon falls on the company to comply with that subpoena. The principles are stated in Lord Denning's oft quoted remarks in Penn-Texas Corp v Murat M Anstalat (No 2) (1964) 2 QB 647 at 643. They were referred to with approval by Mason J in Rochfort v Trade Practices Commission (1982) 153 CLR 134 at 146:

“The question arises, what is to be done when the documents are in possession of a company? How is the Court to compel production of them? One thing is quite clear. It is no good serving a subpoena duces tecum on any of the officers or servants of the company: For each of them can say that he has no authority from the company to produce them, and that would be the end of any proceedings against him...
The only thing to do is to serve a subpoena duces tecum on the company itself, requiring it, by its proper officer, to give evidence to produce the documents. That is what was done in R v Daye [1908] 2 KB 333. And it seems to me to be the only way in which a company can be compelled to produce documents which are in its possession or custody. The command or requirement on the company is comparable to an order on a company, by its proper officer, to file an affidavit of documents or to answer interrogatories. The officer answering must make inquiries of the other officers as to the documents and must then produce them on behalf of the company; Bank of Russian Trade Limited v British Screen Productions Limited [1930] 2 KB 90.”

40 The procedure which is to be followed where a company is be subpoenasd to produce documents is that which was followed in the present case. It is well established that a corporation may not claim the privilege against self-incrimination. This is the case both at common law and by statute. (See Environmental Protection Authority v Caltex (1993) 178 CLR 477 and section 187 of the Evidence Act New South Wales 1995.) Moreover, the privilege against self-incrimination, where it exists, is that of the witness who is called to produce the documents. He cannot claim the privilege on the ground that the document tends to incriminate another. (Rochfort per Mason J at page 145).

41 The importance of the last mentioned matter is that none of the corporations who have been subpoenaed in the present matter can claim privilege against self-incrimination. Nor can any of the corporations claim that the production of the documents would or might tend to incriminate the accused. But the fundamental proposition remains that the subpoena is in fact addressed to the company in each case and not to any individual.

42 The general obligation on a person or body which is in receipt of a subpoena duces tecum is dealt with by Mason J at page 143 in Rochfort. His Honour said:

“A party to litigation can compel a stranger to produce documents by serving on him a subpoena duces tecum. Once served with the subpoena and provided with the proper conduct money, he must obey it and bring to court the documents described in the subpoena if he has them, unless the writ is set aside on the ground that it is oppressive, and produce them to the Court unless he can establish some good reason why they should not be produced...
Neither the Federal Court rules or the form of the subpoena issued by the Court explicitly limit the obligation to produce documents owed by a person served with the subpoena to documents which he holds. A subpoena, which has the effect of a court order, requires the person to whom it is addressed to produce the documents which it describes. It assumes that he has the ability or capacity to produce them. At times this idea has been expressed by saying that the person served is bound to produce any documents which is within his possession, custody or control. But these statements should not be allowed to obscure the true effect of the subpoena - it binds a person who can produce to do so.”

43 The combination of the two sets of principles I have identified bring about this result: Where a subpoena duces tecum is served on a corporation, it is a subpoena to the corporation itself. The reference to "proper officer" in the subpoena does not in any way detract from the proposition that it is to the company itself that the subpoena is addressed. It is not addressed to any particular individual in the company, whether that individual be an “officer” or not. The subpoena assumes the company has the described documents in its possession. If that be the case, there is an obligation on the company, subject to the usual protections, to produce the documents to the Court. The obligation however is on the company, not on any individual.

44 The form of the subpoena recognises that the company itself may or will have to select an employee or agent to give evidence and produce the documents. It is a matter for the company to choose that person. The company cannot defeat the purpose of the subpoena, that is the production of the documents it has in its possession, by appointing as the person to produce the documents a director of the company accused of a criminal offence who may be implicated by the production of the documents. Nor can it defeat the purpose of the subpoena by refusing to appoint any person to answer the subpoena.

45 I repeat that the subpoena is addressed to the company. If the company has the documents, as the subpoena assumes, they must be produced to the Court. This obligation, of course, is subject to the outcome of any application to set the subpoena aside. It is also subject to the right which the person producing the document has to state whether he or she has anyway objection to its production. (Commissioner for Railways v Small (1938) 38 SR 564 at page 573-574).

46 It is a corollary to the propositions I have enunciated that the absence of authority from the employer to bring the documents to court and to produce them is not a material circumstance when the Court's order requires them to be brought and produced. As Mason J said in Rochfort at 152: "The point is that the common law rule and statute make compellable the production of a document which is physically held by a person in court. It can scarcely be doubted that the Court can order the production of a document held by an employee in court, notwithstanding that he has no authority from his employer to do so or that he has been instructed not to do so.”

47 This corollary, however, is essentially a side wind in relation to the principal point which has been argued by Mr Richter QC in relation to the present motions.

48 Finally, this is not a case where the Court is bound to infer that there is no one in the employ of the subpoenaed companies who could not either locate or subsequently bring the documents to the Court. The position is quite to the contrary. The evidence of Ms Lawler shows that she was responsible, at least during certain periods, for the holding of the payroll records and that she knows where they are presently located.

49 In general terms, the companies have been identified as having a reasonably considerable number of employees from time to time; and there has been identified, in addition, the existence, from time to time, of a financial controller for the Dolina group. There is ample evidence available from which the Court may infer that the company, throughout the range of its employees, has the ability to locate and produce the relevant documents in response to the subpoena. The response, however, will be a response by the company itself and the company, as I have explained, cannot claim privilege against self-incrimination for itself. Nor can it, for the reasons I have explained, claim privilege on behalf of the accused. It is not a matter for Mrs Ronen or her sons to give instructions or to issue an authorization. It is a matter for each company to fulfill its obligations in relation to the relevant subpoena.

50 In my opinion, the issue and the call upon the subpoenas do not infringe the fundamental principles which underpin the conduct of a trial conducted according to the adversary system. I am also satisfied that the circumstances which have led to the issue of the subpoena, and to the present debate before the Court, do not amount to an abuse of process of the Court.

51 I refer first to the reasons given more fully in my decision on 3 February 2004. It is, of course, always the duty of the Court to consider anxiously the steps taken by the prosecution in furtherance of the obtaining of evidence for the prosecution in any case. The basic circumstances, however, were as I described them in that earlier decision. Ms Lawler did not wish to attend a conference with the Crown. Neither the Crown nor the defence knew at that time precisely what her evidence would be. It was not known whether she would adhere to the statements she had given at an earlier point of time.

52 Overall it was my view, in the unusual circumstances revealed in the present matter, that it would be in the interest of justice that the procedure suggested by the Crown be adopted. This was a procedure involving the ordering of pre-trial evidence. I have earlier in these reasons identified part of the evidence which in fact has now been given by Ms Lawler. This evidence led naturally and logically to a request for the production of the payroll records.

53 Although it appears that a copy of the computer download of company records, which may include part or all of the payroll records, was seized during a search at an earlier point of time, the fact remains that the prosecution wish to have access to the hard drive computer records.

54 It seems to me perfectly natural and appropriate that Ms Lawler should be asked to identify those documents and, for that purpose, the company should be required to produce them. I do not consider that an abuse of process is involved in the circumstances which have arisen in relation to the issue of the subpoenas.

55 I propose to dismiss the motions which have been issued on behalf of the accused. Each motion is accordingly dismissed.

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Last Modified: 07/16/2007