Ross v Internet Wines Pty Ltd - [2004] NSWCA 195

No judgment structure available for this case.

Reported Decision:
60 NSWLR 436

Court of Appeal

CITATION: Ross v Internet Wines Pty Ltd & Ors [2004] NSWCA 195

HEARING DATE(S): 17 December 2003 and subsequent written submissions

JUDGMENT DATE:
21 June 2004

JUDGMENT OF: Spigelman CJ at 1; Giles JA at 2; McColl JA at 111

DECISION: (1) Appeal allowed in part; (2) Set aside orders 3, 4 and 5 made on 20 August 2003; (3) No order as to the costs of the appeal.

CATCHWORDS: Orders for disclosure by affidavit of assets and funds removed from bank account - whether basis in proceedings or sufficient evidence warranting making orders - procedure described in Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538 followed - affidavit to be delivered to judge with notice of motion claiming privilege against self-incrimination - whether procedure infringed privilege - procedure disapproved. D.

CASES CITED: Accident Insurance Mutual Holding Ltd v McFadden (1993) 31 NSWLR 412;
AMP General Insurance Ltd v Prasad [1999] NSWSC 349;
Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538;
Counsel v Hitchcock (1892) 142 US 547;
Duffy v Super Centre Development Corporation Ltd (1967) NSWR 382;
Griffin v Sogelease Australia Ltd [2003] NSWCA 158;
HPM Industries Pty Ltd v Graham (Young CJ in Eq, 17 July 1996, unreported);
National Australia Bank Ltd v Rusu (Hamilton J, 6 April 1998, unreported);
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319;
Reid v Howard (1995) 184 CLR 1;
Rio Tinto Zinc Corporation v Westinghouse Electric Corporation (1978) AC 547;
Sorby v The Commonwealth (1983) 152 CLR 281.

PARTIES :
David Martin Ross - Appellant
Internet Wines Pty Ltd - First Respondent
Bruce McIntosh - Second respondent
Vera McIntosh - Third Respondent
Palm Beach Cellars & Food Supplies Pty Ltd - Fourth Respondent
Castlemoon Pty Ltd - Fifth Respondent
John Flowers - Sixth Respondent

FILE NUMBER(S): CA 40725/03

COUNSEL: M L D Einfeld QC & J Horowitz - Appellant
P T Russell - First to Fifth Respondents

SOLICITORS: Verekers - Appellant
Cridlands - First to Fifth Respondents
Bertock & Associates - Sixth Respondent (submitting)

LOWER COURTJURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 2332/03

LOWER COURT
JUDICIAL OFFICER : Austin J

CA 40725/03
ED 2332/98

SPIGELMAN CJ
GILES JA
McCOLL JA
Monday 21 June 2004

ROSS v INTERNET WINES PTY LTD & ORS

Judgment

1 SPIGELMAN CJ: I agree with Giles JA.

2 GILES JA: This was an appeal, by leave granted on 23 September 2003, from orders made by Austin J on 20 August 2003. The appellant was Mr David Ross. The active respondents (“the respondents”) were initially Mr Bruce McIntosh, Mrs Vera McIntosh and Internet Wines Pty Ltd (“Internet Wines”). At some point Internet Wines was deregistered. It was an unnecessary respondent, as it was not an applicant for the orders made by Austin J. The appellant elected to continue without it.

3 The substantive orders made on 20 August 2003 were as follows: their structure, wording and spelling set out below is as in the original -

“1. An order that, within 48 hours of this order, David Martin Ross (eighth cross defendant to the second cross claim) deposit into the account of the sixth defendant, PBC & PS Pty Limited (formerly known as Palm Beach Cellars and Food Supplies Pty Limited), (”PBC”) with National Australian Bank Limited branch at 690 Pittwater Road, Brookvale, being BSB No. 082 146, account no. 69 265 0396 (“the bank account”), the amounts referred to in the schedule to these orders or such part of those amounts which are still within his possession or control

2. Until further order an order that David Martin Ross be restrained from disposing of or dealing with in any way (other than by depositing into the bank account or so as to comply with order 5 hereof) any of the money, property or assets of the fifth defendant or the sixth defendant, including the money referred to in the schedule to these orders.

(a) gives details of all of his assets, both real and personal and all bank and other accounts maintained or controlled by him together with details of amounts held in those accounts; and

(b) identifies all fund removed by him from the bank account or any other account maintained by the fifth defendant or the sixth defendant since 1 January 2003, and -

the circumstances under which those amounts were removed; to whom the amounts were paid; and identifying any part of the funds so removed remaining in his possession or control and the whereabouts of those funds.

4. An order that any such notice of motion in which a claim for privilege against self incrimination is made and supporting affidavit be served on the solicitors for the 1st Defendant, the 2nd Defendant, the 3rd Defendant and the 4th Defendant by 6.00 pm on Monday 25 August 2003.

6. An order vacating orders 8 and 9 made by Adams, J, on 30 December 1999.

7. …

THE SCHEDULE

$23,200 withdrawn from the account of the 6th Defendant, PBC, on or about 30 May 2003;

$100,000 withdrawn from the account of the 6th Defendant, PBC, on or about 2 June 2003.”

4 When the appeal came to be heard the amended notice of appeal challenged only orders 3, 4 and 5 made on 20 August 2003, and the grounds of appeal were -

“1. His Honour erred in law in making an Order requiring the appellant to swear an affidavit in circumstances where it is acknowledged that such course may expose him to a risk of self-incrimination.

2. His Honour erred in law in requiring the appellant to pass accounts in circumstances where to do so may tend to incriminate him.

5 The argument in the appellant’s written submissions was that the procedure considered in Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538, a procedure followed by Austin J in making the orders, was erroneous, because the appellant’s privilege against self-incrimination (“privilege”) would be infringed when he was required to swear the disclosure affidavit or pass accounts and he would not be protected pursuant to s 128 of the Evidence Act 1995.

6 The respondents did not in their written submissions fully support Bax Global (Australia) Pty Ltd v Evans. Their substantive arguments were that the appellant had not claimed privilege, that it had not been decided that he was entitled to privilege, and that in those circumstances the regime established by Austin J’s orders did not infringe any privilege to which he might have made out an entitlement.

7 It became apparent at the hearing that the appeal papers were deficient as to when and how the appellant claimed the privilege. In oral submissions the appellant’s argument came to include whether the orders were properly made apart from any question of privilege, and the appeal papers were deficient in showing in what circumstances and on what materials the orders were made. The hearing of the appeal was adjourned. Leave was granted further to amend the amended notice of appeal, and directions were given for the filing of affidavit evidence to supplement the appeal papers and for supplementary written submissions. The parties were content that the appeal be decided without a further oral hearing.

8 The ground of appeal added by amendment was -

“4. His Honour erred in making the orders of 20 August 2003 when there was no basis upon which Mareva-type orders could properly be made in circumstances where:

(a) the substantive proceedings make no claim alleging the wrongful withdrawal of the amounts described in the schedule to the Respondents’ amended Notice of Motion dated 8 August 2003 and in the schedule to his Honour’s orders of 20 August 2003 (upon which basis the respondents’ claim to Mareva-type relief was apparently founded); and

9 The further amended notice of appeal was not enlarged to challenge the orders other than orders 3, 4 and 5. The added ground of appeal, however, probably extended to order 2 as well, and should be so regarded.

10 In part regularising some of their submissions at the hearing of the appeal, the respondents filed by leave a notice of contention -

“1. There was no evidence before the court below that would allow findings that:

(a) there are or were reasonable grounds to fear that compliance with the orders of the court below may tend to incriminate the appellant;

(b) the appellant’s objection is taken bona fide.

2. None of the matters raised in paragraph 4 of the appellant’s further amended notice of appeal filed 19 December 2003 was raised by the appellant before the court below.”

11 The questions in the appeal thus became -

(a) whether apart from any question of privilege the orders had been properly made;

(b) if so, whether the appellant had claimed and made out an entitlement to privilege; and

(c) if so, whether the procedure followed by Austin J infringed privilege.

The proceedings until August 2003

12 The orders of 20 August 2003 were made in proceedings which began in 1998 but to which the appellant became a party only in 2002. Some history from the beginning is necessary.

13 As at early 1998 Palm Beach Cellars & Food Supplies Pty Ltd (“PBC”), then known as Internet Wines Pty Ltd, conducted a bottle shop and delicatessen business (“the business”) at premises on Barrenjoey Road, Palm Beach (“the premises”). The premises were owned by Castlemoon Pty Ltd (“Castlemoon”) and leased to PBC. Mr McIntosh was the licensee and the manager of the business.

14 The proceedings were essentially between the persons involved in the business and in PBC and Castlemoon. The course of the proceedings was complex. The documentation was often not well drawn and there were procedural deficiencies. In what follows I seek to address the substance of what occurred so far as relevant to the appeal.

15 Mr Costas Goumas, Mr Leo Vescio and Mrs Zina Vescio (collectively, “the plaintiffs”) commenced proceedings by a summons filed on 8 May 1998. They joined Mr McIntosh, Mrs McIntosh, Mr John Flowers and Mrs Angela Flowers as the first to fourth defendants, Castlemoon as the fifth defendant and PBC as the sixth defendant (collectively, “the defendants”).

16 In a statement of claim filed on 7 July 1998 the plaintiffs alleged that it had been agreed between the natural persons that they would together purchase and carry on the business through PBC and purchase the premises through Castlemoon, with profits and losses to be shared equally between the Goumas, Vescio, McIntosh and Flowers groupings. They alleged that Mr McIntosh as the then controller of PBC and Castlemoon was to cause shares to be issued or transferred so that the four groupings would have four equal shareholdings in the two companies, and was to cause Mr Vescio and Mr Goumas to be appointed officers of Castlemoon. They alleged that the promised share issues or transfers and the promised appointments had not been made, that there had been failure to account for their share of the profits of the business, and that they had been excluded from the operation of the business. They claimed declarations that they were entitled to become shareholders, orders that the business and the premises be sold, orders that PBC and Castlemoon be wound up, and an accounting for the “profits and receipts” of the joint venture.

17 By a notice of motion filed with the summons the plaintiffs applied for the appointment of a receiver to the business. On 27 May 1998 the Court noted, but without an order, that the defendants “agree to the appointment of a full time manager, to be agreed to by the parties or, on the failure of the parties to reach agreement, to be nominated by the Australian Hotels Association”. The responsibilities of the manager were stated, and the agreement as noted included that PBC and Castlemoon would not enter into any transaction or incur any expenditure otherwise than in the ordinary course of business.

18 On 9 September 1998 the McIntoshes and Flowers and the two companies filed a joint defence. They admitted a conditional joint venture agreement, but said that the condition of a successful three month trial period had not been satisfied and so the plaintiffs were not entitled to the relief they claimed.

19 The proceedings came on for hearing in May 1999. Leave was given to file an amended statement of claim in which, amongst other things, orders were claimed appointing the plaintiffs as managers or appointing a receiver/manager of the business. However, on 17 May 1999 the Court noted “that the proceedings are to be settled between the Plaintiff [sic] and the 1st to 6th Defendants”. On 31 May 1999 the Court noted “the terms of the proposed settlement and two forms of Deeds” and made orders.

20 Although it is not clear why, that was not an end to the plaintiffs’ claims. On 20 August 1999 the plaintiffs filed in court a notice of motion seeking orders for the winding up of PBC and Castlemoon. By consent the notice of motion was adjourned to 2 September 1999. Also by consent, orders were made and other matters were noted, the short minutes relevantly stating -

“The Court Orders that:

…

2. The first defendant will resign as Manager and relinquish all Management control in the fifth and sixth defendants until further order.

…

The court notes that:

…

B. The first defendant undertakes to the Court to do all acts and things and sign all documents necessary for the new Manager, David Ross, to undertake his duties, including authorising the bank.

C. The first defendant undertakes not to enter the premises of the sixth defendant without the written consent of the Manager, David Ross.

D. The court notes the new Manager, David Ross, shall have full unfettered control of the 5th & 6th Defendant [sic], including, but not limited to, the hiring and firing of staff, the signing of all cheques and the banking of all funds.”

21 On 2 September 1999 the notice of motion was stood over generally. What thereafter happened to the plaintiffs’ claims is obscure, but need not be investigated. So far as presently relevant, there had been continued contention over the management of the business, presumably on an interim basis, which had at this point been resolved by the agreed appointment of the appellant as manager in place of Mr McIntosh.

22 The proceedings took another direction, with dispute between the defendants. On 24 December 1999 the Flowers filed a cross-claim against Mr McIntosh, Mrs McIntosh, the McIntosh company Internet Wines, PBC and Castlemoon, as first to fifth cross-defendants. It seems that by this time the former Internet Wines Pty Ltd had changed its name to PBC and Mr McIntosh had changed the name of another company to Internet Wines Pty Ltd.

23 Points of cross-claim were filed on 6 January 2000. The Flowers alleged that in February 1999 Mr McIntosh had caused PBC’s liquor licence to be transferred to Internet Wines and, in breach of his undertaking given on 20 August 1999, had on 2 October 1999 taken over management of the business and conducted it for his own benefit and that of Internet Wines, and that on and after 2 October 1999 he had diverted PBC’s profits to Internet Wines. Extensive relief was claimed, which it is not necessary to relate.

24 On 30 December 1999 Adams J made orders of a Mareva kind against the McIntoshes and Internet Wines, together with orders -

“8. Pending the determination of these proceedings all of the rents and profits of the business styled Palm Beach Cellars and Food Supplies Pty Limited be paid to David Ross, the attorney for the cross claimants, to manage the profits and to pay and discharge all expenses properly incurred in respect of the business styled Palm Beach Cellars and Food Supplies Pty Limited and that the said David Ross pass accounts and pay the balance which may be certified to be due from him as the Court may direct.

9. Pending the determination of these proceedings, in accordance with orders made by this Court on 20 August 1999 David Martin Ross is to have full and unfettered control of the Fourth and Fifth Cross defendants and manage the Fourth Cross Defendant, and the Second Cross Defendant and the Third Cross Defendant are to relinquish all management control of the Fourth and Fifth cross defendants and are until further order not to re-enter the premises of Palm Beach Cellars and Food Supplies Pty Limited, 1109 Barrenjoey Road, Palm Beach.

25 The circumstances in which these orders were made were not disclosed, save that the McIntoshes’ solicitor, Mr Kenneth Rook, gave evidence that they were not made by consent. At this time the appellant, still or again having the management of the business, was described as the Flowers’ attorney. The orders of 20 August 1999 had not appointed the appellant as manager, and he was not manager “in accordance with” any order then made. He had become manager pursuant to the agreement of the parties. Order 9 made on 30 December 1999 was incorrect in this respect, and the error was thereafter continued and enlarged. Despite the reference to the appellant as the attorney for the Flowers, the better view is that orders 8 and 9 made by Adams J of their own force appointed the appellant as manager of the business, or of PBC and Castlemoon which is much the same thing, as from 30 December 1999. They were not well phrased, but cannot sensibly be taken to have meant other than appointment as manager.

26 An amended cross-claim was filed on 18 February 2000. It substantially re-cast the Flowers’ allegations. It extended them to failure to account to PBC during 1997 and 1998 and to misappropriation of its money or assets at various times after 2 October 1999, in addition to the earlier alleged transfer of the liquor licence and diversion of profits, and was more specific as to involvement of Mrs McIntosh. Oddly, in the now even more extensive claims to relief was a claim -

“25) An order that pending the determination of these proceedings or until further order that all of the rents and profits of the Business be paid to David Ross, the attorney of the First and Second Cross Claimants, to manage the profits and to pay and discharge all expenses properly incurred in respect of the Business and that the said David Ross pass accounts and pay the balance which may be certified to be due from him as the Court may direct.

27 The McIntoshes and Internet Wines filed a joint defence on 10 April 2000 and an amended defence on 5 June 2000, in substance denying any wrongful conduct.

28 On 7 June 2000 the respondents filed a second cross-claim. They named the Flowers, the Vescios, Mr Goumas, Castlemoon and PBC as the first to seventh cross-defendants. They alleged that they were entitled to have transferred to Internet Wines the internet sales element of PBC’s business and the liquor licence, and that the Flowers had prevented that from occurring by the relief obtained on 30 December 1999. They alleged that the plaintiffs had not honoured a settlement of 19 May 1999 in that they had not transferred their shares in PBC and Castlemoon to the McIntoshes or the Flowers, and that the Vescios had “purported to terminate the deed of settlement”. They alleged that the Flowers had not honoured an agreement of “about September 1999” to transfer their shares in PBC and Castlemoon to the McIntoshes. They alleged that the Flowers and the plaintiffs had conducted the affairs of PBC and Castlemoon oppressively by removing the McIntoshes as directors in March 2000 and in other ways. Relief was claimed by way of specific performance of the transfer of the internet sales business and the liquor licence, specific performance of the various agreements, winding up of PBC and Castlemoon or buying the McIntoshes out, and damages.

29 At various times defences were filed by the Flowers, the Vescios and Mr Goumas to the second cross-claim, all in substance denying breach of obligations owed to the respondents.

30 On 4 December 2001 an amended first cross-claim was filed, it seems to take account of a settlement to do with the internet sales element of PBC’s business and removing that from the area of dispute. What thereafter happened to the Flowers’ claims is also obscure, but also need not be investigated.

31 Pursuant to leave granted on 7 May 2002, an amended second cross-claim was filed on 31 May 2002. It deleted the allegation of breach of a settlement agreement, and substituted an allegation of breach by the Flowers of an agreement made on 20 May 1999 concerning the conduct of the business and the funding of the settlement. The appellant was joined as the eighth cross-defendant.

32 The allegations made against the appellant were -

“D. FAILURE TO ACCOUNT

31. By order made on 19 [sic] August 1999 the eighth cross defendant (“David Ross”) was appointed to manage the retail liquor business.

32. During the period 19 August 1999 to 2 October 1999 (“the management period”) David Ross purported to manage the retail liquor business pursuant to the said order.

33. As a consequence of his appointment to manage the retail liquor business David Ross was under a fiduciary duty to account to Palm Beach Cellars for the income of the retail liquor business.

33 The relief claimed in the amended second cross-claim was not at this time amended conformably with the joinder of the appellant. Presumably because their standing to claim against the appellant was questioned, on 19 September 2002 the respondents applied for and were granted leave “to bring on behalf of PBC the claims against David Martin Ross contained in paragraphs 31 to 34 of the Further Amended Second Cross-Claim a copy of which is annexed hereto”, together with leave to file the further amended second cross-claim. The further amended second cross-claim was filed on 27 September 2002. Paragraphs 31 to 34 were unchanged, but there was now relief claimed against the appellant -

“10. An order that an account be taken of all money received and disbursed by David Martin Ross on behalf of PBC.

34 The appellant filed a defence to the further amended second cross-claim on 15 November 2002. He (erroneously) admitted his appointment by the Court on 20 August 1999 as manager of the retail liquor business, but denied para 32 of the further amended second cross-claim. His defence continued -

“3. In further answer to paragraph 32 of the Further Amended Second Cross Claim David Ross says:

(a) prior to his appointment as manager of the retail liquor business by the Supreme Court of New South Wales, Bruce McIntosh had full, free and unfettered control of the retail liquor business;

(i) failed and refused to allow David Ross to be sole signatory on the retail liquor business cheques;

(ii) required the signature of Bruce McIntosh, as co signatory, on all retail liquor business cheques;

(c) on 2 October 1999 Bruce McIntosh and Vera McIntosh, in breach of the orders of the Supreme Court of New South Wales, caused David Ross to be evicted from the premises of the retail liquor business and failed and refused to allow David Ross to manage or to take part in the management of the retail liquor business;

(d) at the time that Bruce McIntosh and Vera McIntosh wrongly evicted David Ross from the premises of the retail liquor business, Bruce McIntosh failed and refused to allow David Ross access to the books and records prepared by David Ross during the period 20 August 1999 to 2 October 1999;

4. By reason of the matters, facts and circumstances, pleaded in paragraph 3 above, David Ross was unable to manage the retail liquor business pursuant to the orders of the Supreme Court of New South Wales as alleged in paragraph 32 of the Further Amended Second Cross Claim.

5. In answer to paragraph 33 of the Further Amended Second Cross Claim, David Ross says that by reason of David Ross being appointed by order of the Supreme Court of New South Wales as manager of Palm Beach Cellars, David Ross owed a fiduciary duty to Palm Beach Cellars but otherwise denies paragraph 33 of the Further Amended Second Cross Claim.

6. In further answer to paragraph 33 of the Further Amended Second Cross Claim, David Ross says that by reason of the matters facts and circumstances pleaded in paragraph 3 above, Bruce McIntosh and Vera McIntosh had a fiduciary duty to account to Palm Beach Cellars for the income of the retail liquor business during the period 20 August 1999 to 2 October 1999.

7. David Ross denies paragraph 34 of the Further Amended Second Cross Claim.

8. In further answer to paragraph 34 of the Further amended Second Cross Claim David Ross says that Bruce McIntosh and Vera McIntosh have failed to account to Palm Beach Cellars for the income of the retail liquor business during the period 20 August 1999 to 2 October 1999.”

The August 2003 applications for orders against the appellant

35 It is necessary to trace in greater detail what happened in the applications, from when they were first made until the orders of 20 August 2003 and thereafter. Amongst other things, the evidence on which the orders were made must be considered.

36 On 5 August 2003 the McIntoshes applied to the Duty Judge, Gzell J. His Honour made returnable for 8 August 2003 a notice of motion in which the McIntoshes claimed relief against the appellant and others. The McIntoshes were described as the first and second cross-defendants to the first cross-claim. Internet Wines was not an applicant. What follows is concerned only with the application for relief against the appellant.

37 The relief claimed was relevantly -

“3. An order that David Martin Ross, Eight [sic] Cross Defendant to the Second Cross-Claim, forthwith deposit to the account of the Sixth Defendant, PBC and PS Pty Limited (formerly known as Palm Beach Cellars and Food Supplies Pty Limited), (PBC) with National Australia Bank Limited, 690 Pittwater Road, Brookvale branch being BSB No. 082 146 Account No. 69 265 0396 (the Bank Account), the amounts referred to in the schedule.

4. Vacate orders 8 and 9 made by Adams J on 30 December 1999.

5. Pending the determination of these proceedings the Eight [sic] Cross-Defendant to the Second Cross-Claim, David Martin Ross, be restrained from disposing of or dealing with in any way any of the money, property or assets of the Fifth Defendant, Castlemoon Pty Limited or the Sixth Defendant, PBC.

7. …

THE SCHEDULE

$23,200 withdrawn from the account of the 6th Defendant, PBC, on or about 30 May 2003;

$100,000 withdrawn from the account of the 6th Defendant, PBC, on or about 2 June 2003.”

38 There was no appearance for the appellant on 8 August 2003. Gzell J informed the McIntoshes’ counsel, Mr Lever SC, that a letter had been received from the appellant indicating that he was unable to attend the hearing and seeking an adjournment. Mr Lever read affidavits of Mr Rook sworn 25 June 2003 and 5 August 2003 (“the Rook affidavits”), to the content of which I will come in due course. His Honour relevantly made orders -

“3. Order that until further order David Martin Ross be restrained from disposing of or dealing in any way (other than by depositing into the account of the sixth defendant, PBC and PS Pty Limited, account no. 69 265 0396 with the Brookvale branch of the National Australia Bank at 690 Ptitwater Road, Brookvale, “the bank account”) any of the money, property or assets of the fifth defendant or the sixth defendant, including the money referred to in the schedule to these orders.

4. Order that David Martin Ross deposit into the account the amounts referred to in the schedule or such part of those amounts which are still within his possession, custody or control.

39 The matter was adjourned to 13 August 2003. Neither a transcript of the occasion nor any reasons his Honour gave at the time were before us.

40 The McIntoshes had filed an amended notice of motion in court on 8 August 2003, although no doubt Gzell J did not address the additional relief claimed because the amended notice of motion had not been served. It relevantly added the claims to relief -

“2.A An order that pending the determination of these proceedings David Martin Ross, whether by himself or his servants or agents be restrained from disposing of or dealing with any of his money, property or other assets other than for the following purposes:

(a) to enable him to pay and to continue to pay reasonable legal expenses of defending these proceedings and any appeal therefore;

(b) to defend any other proceedings that may be brought against him;

(c) to meet his taxation liabilities;

(d) to pay ordinary proper business expenses bona fide incurred by him;

2.B That within 5 days of the orders made pursuant to this amended notice of motion, David Martin Ross swear an affidavit giving details of all of his assets both real and personal and all bank and other accounts maintained or controlled by him together with details and amounts held in those accounts.”

41 On 13 August 2003 the matter was again before Gzell J. The appellant was represented by his solicitor, Mr Andrew Rummery.

42 The appeal papers included a further affidavit sworn by Mr Rook on 8 August 2003 (“the further Rook affidavit”). Whether the Rook affidavits were read or referred to on 13 August 2003, and whether the further Rook affidavit was read, is unclear. According to Mr Rummery, Mr Lever sought to file in court two affidavits; he (Mr Rummery) objected to them being read because they had only just been handed to him and one of the affidavits was sworn by the appellant’s previous solicitor, Mr Bertock; and Gzell J said that he was “not going to accept these affidavits”. According to Mr Rook, the affidavits to which Mr Rummery referred were not the Rook affidavits, although he did not say what affidavits they were. That was the extent of the evidence before us.

43 The orders of 5 August 2003 had required that all affidavits in support of the notice of motion be served on the appellant, and if one of the unaccepted affidavits was an affidavit of Mr Bertock the probability is that the unaccepted affidavits were not the Rook affidavits. Although Mr Rook did not say that the Rook affidavits were read or referred to, they should have been served, and since Gzell J was familiar with the affidavits the probability is that all concerned acted upon them and that they were read or taken to have been read. But the further Rook affidavit was new, and may well have been the other unaccepted affidavit. I am not satisfied that the probabilities favour the reading of the further Rook affidavit.

44 Gzell J made an order in terms of para 2A of the amended notice of motion with the addition of “or earlier order of the court”, and an order -

“ … that by no later than 4.00 pm on Monday 18 August 2003, David Martin Ross swear an affidavit identifying all funds removed by him from the bank account of the 6th defendant numbered 69 265 0396 with the Brookvale branch of National Australian Bank at 690 Pittwater Road, Brookvale which were no longer in his possession or under his control on 8 August 2003 and the circumstances under which and to whom he parted with the possession or control of each of those funds.”

45 The matter was adjourned to 20 August 2003 before the Duty Judge. Again, no transcript of the occasion was before us, and what submissions were made to his Honour was not disclosed. In particular, it was not disclosed whether Mr Rummery sought the discharge of any of the orders made on 8 August 2003 or whether the only debate was over the additional relief claimed in the amended notice of motion, nor was it disclosed whether Mr Rummery asserted that the order requiring the swearing of an affidavit (which differed from that sought in the amended notice of motion) infringed the appellant’s privilege. As to the latter, he probably did not, since his evidence to which I shortly come is that he asserted privilege on 20 August 2003 and evidence of earlier assertion was conspicuously absent. Gzell J did not deliver reasons for making the orders.

46 So the matter came before Austin J, the Duty Judge on 20 August 2003. The accounts of what occurred before his Honour were incomplete and not congruent.

47 According to Mr Rummery in para 7 of his affidavit, when the matter was called he informed the judge that the appellant “is unable to comply with the Court’s orders which required him to file an affidavit by Monday afternoon”, and that “the appellant instructs me that he wishes to claim the privilege against self-incrimination”. The matter was stood down.

48 Still according to Mr Rummery -

“8. … The matter was then called later that morning and Mr Lever SC addressed his Honour in respect of the Appellant’s failure to comply with the Court’s Orders, requiring him to swear an affidavit by 4pm Monday 18 August 2003 and the Appellant’s claim for privilege against self incrimination.

Mr Lever SC: ‘Your Honour should not be satisfied that this is a matter for which Mr Ross is entitled to claim the privilege.’

His Honour: ‘Well, Mr Lever, it does appear in your Notice of Motion that you claim Mr Ross has taken monies from a bank account. It seems to me that you are claiming that he took that money.’

Mr Rummery: ‘Your Honour, this is a matter in which Mr Ross is entitled to claim the privilege against self-incrimination. Mr Lever’s clients have made a claim against Mr Ross that he took monies from a bank account. Mr Ross has been ordered to swear an affidavit saying what happened to those monies and now he claims that if he is required to do so, then this may incriminate him.’

11. His Honour then remarked that there was a procedure for dealing with these types of circumstances and that he wished to adjourn for a short time while he re-read his decision on Bax Global.

Mr Rummery: ‘Your Honour, there is a recent Court of Appeal Decision that may be relevant here. Perhaps if I provide your Honour’s tipstaff with the citation, then that might be of some assistance’.

His Honour: ‘Oh, I see, that may well be relevant, what is the name of the case?’

Griffin v Sogelease

Bax Global

49 The matter was stood down until 2 pm. Short minutes were prepared by the respondents’ solicitors. Mr Lever and Mr Rummery addressed on the short minutes. Mr Rummery could not recall “the exact content of those addresses”, but did recall “going through each paragraph” of the short minutes. The orders were then made. Other than by saying he would follow the procedure in Bax Global (Australia) Pty Ltd v Evans, Austin J did not provide reasons.

50 Mr Rook’s evidence of this occasion was only -

“24. I refer to paragraph 7 of Mr Rummery’s 18 December affidavit. Mr Rummery:

24.1 informed the Court that he was instructed to oppose the orders sought; and

25. At no time prior to the hearing of this Appeal did Mr Rummery or Senior Counsel when appearing for the Appellant make any submission to the effect that:

25.1 there were no grounds for the making of the orders which are the subject of this appeal; or

25.2 there was no evidence to support the making of the orders which are the subject of this appeal; or

26. Mr Rummery did not request that His Honour provide reasons for his judgment.”

51 The appellant objected to the admission of this evidence as “Conclusion: relevance: statement made without foundation; lack of specificity as to which hearings before the Court are being referred to”. Mr Rook’s para 24, so far as it went, could not be open to dispute. I consider his paras 25 and 26 admissible in relation to the hearings which Mr Rook attended.

52 No transcript of this occasion was before us, and Mr Rummery gave evidence that, on enquiry to the Reporting Services Branch, he was told that “there was no transcript”.

53 The two accounts, so far as they went, made no mention of reading the Rook affidavits, with which Austin J had not previously been acquainted, or the further Rook affidavit. It is possible that his Honour was not referred to them. The orders made by Gzell J on 8 and 13 August 2003 had been made until further order, and the issues on 20 August 2003 seem to have been only compliance with the order made on 13 August 2003 requiring that the appellant swear an affidavit as to the money from the bank account and whether the appellant was entitled to claim privilege. The “going through each paragraph” of the short minutes may have been concerned with the framing of the orders, and not with whether grounds for making them had been made out. There may not have been occasion to refer his Honour to the affidavits.

54 On the other hand, the orders made by Austin J enlarged the relief previously granted. Order 1 made by his Honour was in substance the same as order 4 made on 8 August 2003. Order 2 was akin to orders 3 and 5 made on 8 August 2003. Order 3, however, added significantly to the orders previously made. Orders 5 and 6 were completely new. It is unlikely that his Honour would have granted the enlarged relief unless he had been referred to the affidavits or in some manner told of their contents. On the probabilities, he was at least told of their contents, or such of their contents as the parties thought necessary.

55 On 25 August 2003 Mr Rummery applied to Austin J by a notice of motion filed in court for an order staying “the Orders of this Honourable Court made 20 August 2003”, relying on an affidavit sworn by the appellant on 22 August 2003. In that affidavit the appellant relevantly said -

“3. As to paragraph 3 of these Orders, I object to being required to comply with that Order on the ground that compliance may tend to incriminate me.

56 In the course of the day the appellant filed an application for leave to appeal “from the making of Orders by Austin J on 20 August 2003”. His Honour then stood the matter over to 27 August 2003 for argument on the notice of motion.

57 On 27 August 2003 the appellant’s application was also supported by an affidavit of the appellant sworn on 26 August 2003. In that affidavit the appellant explained that he was informed of the orders made on 20 August 2003, that he sought legal advice, that he “inadvertently overlooked” his obligations to comply with the order requiring money to be paid into the bank account of PBC but had now paid money in, and -

“10. I say that if I am ordered to comply with Orders 3, 4 and 5 of the Orders made 20 August 2003, I will be forced to waive my privilege against self incrimination in order to comply with the Orders of the Court, and may thereby expose myself to a further risk of self-incrimination.”

58 The appellant’s complaint was thus extended from order 3 to orders 4 and 5 as well. There was no complaint as to order 1. From a reference in the reasons next mentioned, his Honour was told by the McIntoshes that the appellant had paid approximately $9,000 to PBC’s account, and his Honour plainly enough believed that it had been paid in obedience to order 1. Counsel for the appellant suggested before us that the $9,000 was not related to the amounts of $23,200 and $100,000, but the clear inference is that it was. One would think that paying money back would admit taking the money out, which seems to have been what the appellant said was incriminating. This is but one of many curiosities in the proceedings.

59 Austin J granted a limited stay of order 3, and of order 4 “because it is consequential upon order 3”, until one week after the return date for the application for leave to appeal on 8 September 2003. His Honour did not expressly say that the appellant had made out a claim to privilege in relation to order 3. His Honour also stayed order 5 for the same period, but with the limitation -

“Order 5 is in a different category, because nothing put before me today suggests that there is any claim for privilege with respect to the preparation of accounts for the period up to 30 June 2003. Therefore, the appropriate course is to stay order 5 only so far as it requires accounts to be prepared and passed beyond that date, and so far as it requires the payment of any net balance.”

60 Austin J was directly concerned with a stay, not with explaining why he made the orders of 20 August 2003, and with the claimed privilege rather than the basis for granting relief. As to privilege, however, his reasons included -

Reid v Howard

Bax Global (Australia) Pty Ltd v Evans

Vasil v National Australia Bank

61 The reasons otherwise sought, as his Honour indicated at their conclusion, “to set out the competing arguments [as to the Equity Division practice] so as to assist the Court [of Appeal] should any further application for a stay be made”.

The orders apart from any question of privilege

62 It is necessary to begin with the claim made against the appellant by the respondents, or at least by the McIntoshes. They claimed that the appellant had failed to account to PBC for the income of the retail liquor business which he managed for the period 19 August 1999 to 2 October 1999. The end-date was the date on which, according to the appellant’s defence, the McIntoshes evicted him from the premises. That the McIntoshes confined their allegation of management to ending at that date strongly supports that they did evict the appellant, so that he was no longer managing the business. The appellant’s defence was to the effect that he had been unable to manage the business for the period because of the McIntoshes’ conduct, and that he was not in a position to provide an accounting because the McIntoshes kept the books and records of the business from him.

63 Then regard should be had to the appellant’s position from 30 December 1999. I have concluded that he was appointed as manager of the business by the orders of Adams J. The parties seem to have proceeded on that basis – for example, it underlies the exchange of correspondence in Mr Rook’s affidavit of 25 June 2003.

64 Then regard should be had to the evidence on which the orders of 20 August 2003 were made.

65 Mr Rook’s affidavit of 25 June 2003 was expressed to be in support of a notice of motion returnable on 26 June 2003. In that notice of motion the respondents claimed against the appellant discovery and inspection of various primary and secondary accounting records of PBC and Castlemoon, none earlier than 1 January 2002. The affidavit relevantly began with a letter to the appellant’s then solicitor complaining that the appellant had failed to pass accounts for the period 31 December 1999 to 30 June 2002 as required by order 8 made by Adams J on 30 December 1999. Apparently the business had been sold in June 2002. The affidavit was thereafter concerned with obtaining, in the face of inaction and some resistance on the appellant’s part, accounting records and information with respect to periods the earliest of which began on 1 January 2001. On 26 June 2003 orders for discovery and inspection were made by consent.

66 Mr Rook’s affidavit of 5 August 2003 referred to an NAB account into which the proceeds of sale of the business had been deposited and provided evidence that, without notice to the McIntoshes, the appellant had withdrawn the amounts of two term deposits with the NAB on 30 May 2003 ($23,200) and 2 June 2003 ($100,000). It asserted that this was, amongst other things, contrary to an agreement to give notice to the McIntoshes before dealing with the money. It identified by reference to the appellant’s discovery documents some other payments apparently alleged to have been made from PBC’s account for the benefit of the appellant or others, all in 2002-3. Mr Rook said also that “Up to the time of swearing this affidavit I have received no notification of any application by David Martin Ross to pass accounts for monies received or disbursed by him as required by the orders made by Justice Adams on 30 December 1999.”

67 If the Rook further affidavit was read and referred to, it relevantly noted in PBC’s bank statements the 2002-3 payments identified in the affidavit of 5 August 2003.

68 The affidavits said nothing as to the appellant’s management of the business for the period 19 August 1999 to 2 October 1999 or as to accounting for his management during that period. They provided a basis for findings that the appellant had failed to provide an accounting for his management of the business from 30 December 1999, had withdrawn the two amounts in mid-2003, and had had something to do with the other 2002-3 payments. They contained no direct evidence as to the appellant’s assets or that the appellant had disposed of or hidden his assets or intended to do so, whether to make himself judgment-proof or for some other reason. Otherwise than by inference from any findings last mentioned that the appellant was “not the sort of person who would, unless restrained, preserve his assets intact so that they might be available to his judgment creditor” (Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 326), the affidavits provided no direct evidence of a risk of dissipation of assets.

69 Ground 4 in the further amended notice of appeal described the challenged orders as “Mareva-type”, and there were many references to Mareva relief in submissions. In fact the orders of 20 August 2003 went beyond Mareva relief, as the respondents correctly pointed out, and did not include the core Mareva relief of a restraint on the appellant’s dealing with his own money and assets.

70 Putting aside order 4, the orders made on 20 August 2003 were to the following effect. First, the appellant was ordered to repay to PBC the two sums of money withdrawn from its accounts on 30 May and 2 June 2003 (order 1, preceded by order 4 made on 8 August 2003). Secondly, the appellant was restrained in dealing with PBC’s and Castlemoon’s money and assets (order 2, preceded by orders 3 and 5 made on 8 August 2003). Thirdly, the appellant was ordered to provide an affidavit as to his own money and assets (order 3(a)). Fourthly, the appellant was ordered to provide an affidavit as to money withdrawn from PBC’s account since 1 January 2003 (order 3(b), preceded by an order made on 13 August 2003). Fifthly, the appellant was ordered to pass accounts in relation to his management of the business (order 5). Sixthly, it was ordered that orders 8 and 9 made by Adams J be vacated (order 6).

71 The series of orders was regrettably complex, in particular where successive orders dealt with the same subject. As I have said, the orders made on 20 August 2003 did not include a restraint on the appellant’s dealing with his own money and assets. That had been the subject of order 2A made on 13 August 2003. Order 2A was not the subject of appeal.

72 Orders 1 and 3(b) did not go beyond funds withdrawn from any PBC account since 1 January 2003. Neither order 1 nor order 3(b) was in aid of the claims against the appellant in the proceedings, and if there were no more the orders should not have been made. But there was more. Orders 8 and 9 made by Adams J must have been drawn to the attention of Austin J – he made an order setting them aside – and I infer that he regarded the appellant as a court-appointed manager of PBC and the business. The appellant was subject to the control of the Court, and the McIntoshes as parties to the first cross-claim in which the interlocutory appointment of the appellant had been made were entitled to invoke the Court’s intervention. (No doubt that explains their description in the notice of motion as cross-defendants to the first cross-claim rather than cross-claimants.) The orders were made in the exercise of the jurisdiction described by Street J in Duffy v Super Centre Development Corporation Ltd (1967) NSWR 382 at 383 -

“The receiver and manager is appointed as an officer of the Court to undertake in that capacity the management of the business of the company as well, of course, as undertaking the care of the company’s assets. To the extent to which he makes decisions from time to time, they are in effect made under the authority of the Court itself, and they are subject to review and control by the Court should a proper case be made out requiring such intervention. Whilst this Court does, therefore, have an ultimate control over the day-to-day actions of a receiver and manager, it is a control which is not in my view to be too freely exercised. If, of course, there can be shown to be some defect in the manner in which the receiver and manager is conducting his duties – a defect arising either out of some want of good faith or out of some erroneous approach in law or in principle – then that is clearly a ground on which the Court would entertain an application by one of the interested parties for appropriate directions or some other form of remedial order.”

73 Order 2 was of the same nature. In the exercise of the Court’s control over the appellant as manager, and in the face of evidence of failure to account as manager and of misappropriation of money from the NAB account, the appellant was restrained from dealing with PBC’s and Castlemoon’s money and assets.

74 Order 3(a) was Mareva relief, ancillary to order 2A made on 13 August 2003. The purpose of Mareva relief is to prevent abuse or frustration of a court’s processes by disposal of assets so that any judgment can not be enforced. The judgment sought against the appellant in the second cross-claim was through an accounting for his management of the business for the period 19 August 1999 to 2 October 1999, presumably with an order that he pay to PBC any amount found to be due on the accounting. In principle the orders could have been in aid of the claims to that order. It is clear enough, however, that they were not made for that reason, but were founded upon preservation of the appellant’s assets to meet a judgment arising from the withdrawal of the $123,200 and possibly the 2002-3 payments. I see no reason why Mareva relief can not be granted in aid of an accounting required of a court-appointed manager, and I infer that Gzell J and Austin J had that in mind: the orders went together with the other orders directed to the appellant’s management of the business pursuant to the orders made by Adams J and his obligation in order 8 to “pass accounts and pay the balance which may be certified to be due from him”.

75 The evidence of risk of dissipation of assets was exiguous. However, that the appellant had withdrawn the two sums of $23,200 and $100,000 was plain, as was at the least tardiness and more likely recalcitrance in accounting for his management of the business since 30 December 1999. There was a prima facie case that he had been party to other unauthorised withdrawals from PBC’s account in 2002-3. The inference was open that he was a person who would, unless restrained, take steps to make himself proof against an order that he pay any amount found to be due on the accounting, and proof sufficient for Mareva relief can be provided in that way (see Patterson v BTR Engineering (Aust) Ltd). Whether Gzell J and Austin J reasoned in that manner is not known, but Gzell J’s order 2A was not challenged on appeal and there was no ground of appeal relating to failure by Austin J to give reasons. It is sufficient that there was evidence on which a risk of dissipation of assets could be found, as I infer his Honour did, and it is not irrelevant that his Honour began with the unchallenged order 2A and was giving ancillary relief.

76 Order 5 was not Mareva relief. It was plainly in response to the respondents’ complaint that the appellant had failed to pass accounts pursuant to order 8 made by Adams J on 30 December 1999, and was not in aid of the claims against the appellant in the proceedings. So far as in its terms it went to the earlier period 19 August 1999 to 2 October 1999, as to which there was an unresolved issue over the appellant’s actual management of the business and ability to account, it should not have been made. But it was otherwise no more than enforcement of order 8 made on 30 December 1999, and again an exercise of control over a court-appointed manager. There should have been added after “6th Defendant” the words “on or after 30 December 1999”, but the order was properly made.

77 It will be noted that order 5 was not made subject to the proviso concerning privilege found in order 3. That may have been because Mr Rummery’s submissions to Austin J focussed on swearing an affidavit saying what happened to money taken from the NAB account, although the evidence does not permit a finding. The respondents accepted in the appeal that saying what happened to the money in an accounting raised the same issue of privilege as making the disclosure affidavit. They did not submit that an accounting by a court-appointed manager was less open to a claim to privilege, and said that “a similar regime [to that] contemplated under [orders] 3 and 4 ought to apply to [order 5]”, so that “If it is asserted that the accounts do so offend the privilege, they should be brought in secretly and determined by the judge in court when he has the accounts in front of him to determine the issue”. This brings its own problems, to which I will return.

78 Order 6 is explicable as a termination of the appellant’s authority to deal with the assets of PBC and Castlemoon; only on a malevolent construction would it also terminate his obligation to account. No attention was paid to it in the appeal, and no more need be said.

79 I do not think it has been shown that, apart from any question of privilege, the orders were not properly made. I have not overlooked the respondents’ notice of contention, saying in effect that the appellant did not raise in the court below absence of a necessary substantive claim or inadequacy of the respondents’ evidence. The contention appears to be factually correct in both respects, but it does not matter.

80 Through an affidavit of Mr Rook, the respondents proffered a (still) further amended second cross-claim which Mr Rook said they would seek to file. A written submission explained that the McIntoshes wished to proceed upon its new causes of action “once the matter returns to the Court below”. The amendments added paras 34A to 34L, too long to set out but amounting to allegations that the appellant managed the business from 30 December 1999 until its sale in June 2002 and during a dispersal period thereafter and that, in breach of a deed entered into on 12 November 2001 and his fiduciary obligations, he withdrew the two amounts of $23,200 and $100,000 and “failed and refused to account to [PBC] for the sum of $123,200 … and has failed to account to [PBC] and Castlemoon for his collection and dispersal of the assets, liabilities, debts and income of these companies”. The additional relief sought was that the appellant account to PBC for the $123,200. These are not matters for the appeal.

Entitment to privilege

81 This should be considered in the light of the procedure in Bax Global (Australia) Pty Ltd v Evans.

82 The privilege against self-incrimination is “a basic and substantive common law right” (Reid v Howard (1995) 184 CLR 1 at 11). Otherwise than by statute, it is not open to exception in civil proceedings and in particular is not subject to over-riding orders by which incriminatory disclosure may be made but the information disclosed can not be used in criminal proceedings against the disclosing party (ibid at 14-17).

83 However, a claim to privilege can impede protection and enforcement of the opposite party’s civil rights, and can sometimes hinder the disclosing party in presenting his own case. Section 128 of the Evidence Act endeavours to balance the fundamental common law right with other demands of justice.

84 Section 128 applies if a witness objects to giving particular evidence on the ground of privilege (s 128(1)). If the court finds there are reasonable grounds for the objection, it is not to require that the evidence be given and is to inform the witness that he need not give the evidence but that if he does so a certificate will be given under the section (s 128(2)). If the witness gives the evidence, the court is to cause the giving of a certificate (s 128(3)), the effect of which is that the evidence and information obtained as a direct or indirect consequence of the witness giving the evidence can not be used against him (s 128(7)). As well, however, where the court is satisfied that the evidence may tend to prove the commission of an offence against Australian law but does not tend to prove the commission of an offence against a foreign law, and that the interests of justice require that the witness give the evidence, the court may require that the witness give the evidence (s 128(5)) and is to cause the giving of a certificate (s 128(6)).

85 As recounted in Bax Global (Australia) Pty Ltd v Evans, the procedure there considered was developed with a view to making disclosure orders as part of Mareva relief but subject to a s 128 certificate. The objective was that a plaintiff’s civil rights could be protected and enforced consistently with recognition of the disclosing party’s privilege and preservation from adverse consequences of incriminatory disclosure.

86 The procedure was described by Austin J -

Vasil

National Australia Bank Ltd v Rusu

AMP General Insurance Ltd v Prasad

[41] If the Court decides to initiate the disclosure process, the procedure which it chooses is likely to depend on whether, on the one hand, an objection to disclosure based on the privilege against self-incrimination has been taken or is a real possibility, or on the other hand the disclosure order is unlikely in the circumstances to raise any question about self-incrimination. In the latter case, it is enough simply to express the order to be subject to any claim of privilege against self-incrimination, as Hodgson J did initially in Reid v Howard. In the former case, it is more appropriate to use the fuller procedure which I shall describe.

[42] The Court initiates the disclosure procedure by making an order that a disclosure affidavit be prepared and delivered to the judge's associate in a sealed envelope, together with directions that the affidavit not be filed or served on any other party, and that the further hearing be notified to the Director of Public Prosecutions. At that hearing the judge opens the envelope and inspects the affidavit. Any affidavit or oral evidence to support the witness' objection is then adduced, and submissions are heard as to whether for the purposes of s 128(2) there are reasonable grounds for the objection, even though at that stage the plaintiff's counsel has not had access to the affidavit which is the subject of the objection. The judge then rules on that question.

[43] If the decision is that there are no reasonable grounds for the objection, the witness' obligation to comply with the disclosure order remains and must be satisfied. If there are reasonable grounds for the objection, then the Court gives the witness the warning required by s 128(2). If the witness chooses to give the evidence after hearing the warning, the Court directs that copies of the affidavit be provided to the legal representatives of the other parties, but that the contents not be disclosed to any other person. The affidavit is formally read and objections to admissibility are taken in the normal way. If there is a risk that this process will disclose the contents of the affidavit to persons other than the deponent and the legal representatives of the parties, it may be necessary for the court to be closed during this process. Once the affidavit has been read, the s 128 certificate is given and attached to it.

[44] If the witness elects not to give the evidence, then the Court hears any further submissions as to whether it should require the witness to give the evidence under s 128(5), and makes a determination accordingly. If the Court decides to require the witness to give the evidence, then it follows the procedure for the reading of the affidavit as outlined above. If the Court decides not to require the witness to give the evidence, the judge directs that all copies of the affidavit be returned to the witness' legal representative and authorises their destruction.

[45] Where evidence is given to which a certificate applies, the witness is protected by s 128(7) and there is a risk to the prosecuting authorities that their evidence in the criminal proceedings may be corrupted by knowledge of the witness' civil evidence. For at least that reason, steps should be taken to limit the use and dissemination of the protected evidence. In the HPM Industries case, Young J agreed that the appropriate procedure was to permit only the plaintiff's lawyers to see the information, subject to conditions set by the Court. As I have mentioned, there may on occasions be a special risk of prejudice to the witness even though a certificate is given, also justifying orders restricting the inspection of the evidence.

Reid v Howard and Vasil

87 His Honour recognised differing views on whether the maker of the disclosure affidavit was a witness for the purposes of s 128(1), or whether it was necessary that the deponent give oral evidence: he preferred (at [36]) the view of Hamilton J in AMP General Insurance Ltd v Prasad [1999] NSWSC 349 to that of Young J (as Young CJ in Eq then was) in HPM Industries Pty Ltd v Graham (17 July 1996, unreported), and thought making the affidavit sufficient.

88 One matter evident in the procedure as described is that there will be some kind of preliminary assessment of “the likelihood that the disclosure order may be open to objection on the ground of the privilege against self-incrimination”, see paras [40]-[41] in his Honour’s description of the procedure. It is not entirely clear, but it seems that an overwhelming case of privilege could lead to refusal to make the disclosure order, presumably on the basis that a s 128(5) determination that the evidence should be given but with a certificate is unlikely; alternatively, a weak case of privilege could be left for a later claim, presumably on the basis that the disclosing party is unlikely to persist in or make a claim to privilege. No doubt subject to that, his Honour discussed when the decision to cause the issue of a certificate was made, and preferred (at [37]) the approach of Hamilton J in National Australia Bank Ltd v Rusu (6 April 1998, unreported) whereby there was an open mind until the disclosure affidavit was brought into court and inspected, as to both “whether there were reasonable grounds for the objection with respect to the privilege, and … whether to require under s 128(5) that the evidence be given subject to a certificate”.

89 There can be no doubt that the appellant claimed privilege on 20 August 2003. So far as the respondents submitted that it was apparent from the orders made by Austin J that privilege had not been claimed, because by the proviso to order 3 and the procedure of order 4 his Honour left for the future a claim to privilege, the orders are explained by his Honour’s adoption of the Bax Global (Australia) Pty Ltd v Evans procedure. So far as the respondents submitted that the appellant had not claimed privilege because he had not filed a notice of motion and affidavit in conformity with order 4, that is beside the point.

90 The appellant did not on 20 August 2003 support by evidence his claim to privilege. His affidavits of 22 August 2003 and 27 August 2003 were assertions, and hardly evidence. Evidence is not a necessity. Depending on the circumstances, tendency to expose to self-incrimination may be obvious or sufficiently discernible. As was said by Clarke JA in Accident Insurance Mutual Holding Ltd v McFadden (1993) 31 NSWLR 412 at 430 -

Vaillant v Dodemead

91 The parties put submissions on whether Austin J had held that the appellant was entitled to claim privilege. The respondents referred again to the orders leaving a claim to privilege for the future. The appellant submitted in substance that his Honour’s reasons implicitly accepted that privilege was there to be claimed. He said that his Honour had commented that the respondents claimed that the appellant “took monies from a bank account”; that adopting the Bax Global (Australia) Pty Ltd v Evans procedure presupposed self-incrimination and was designed to provide the protection of s 128 of the Evidence Act; that in the reasons of 27 August 2003 his Honour observed that if the Bax Global (Australia) Pty Ltd v Evans procedure were incorrect he would “be forcing [the appellant] to go down a path, even the first step of which would be in violation of his privilege”; and that his Honour specifically found as to staying order 5 that there was “nothing put before me today [which] suggests that there is any claim for privilege with respect to the preparation of accounts for the period up to 30 June 2002”.

92 In the light of his explanation of the procedure in Bax Global (Australia) Pty Ltd v Evans, I consider that Austin J did not hold that the appellant was entitled to claim privilege. He clearly enough made the preliminary assessment that the disclosure order might be open to objection on the ground of privilege, and so decided “to initiate the disclosure process” (Bax Global (Australia) Pty Ltd v Evans at [41]). Consistently with his preference for the approach of Hamilton J in National Australia Bank Ltd v Rusu, he must have left for inspection of the appellant’s affidavit whether there were reasonable grounds for the objection, and so left any decision as to entitlement to privilege until that time.

93 The respondents’ submissions were in aid of the further submission that unless Austin J held that the appellant was entitled to claim privilege, his Honour’s orders were not open to challenge. It was said that until it was found that compliance would tend to expose the appellant to self-incrimination the orders could be made and had to be complied with. The respondents accepted that if the judge found that whatever was in the disclosure affidavit would infringe the appellant’s privilege, the order for delivery of the affidavit should not be made, and presumably they would take the same attitude to the order for passing accounts. But according to the submission, the time for claiming privilege and determination of entitlement to privilege was otherwise when the disclosure affidavit was “inspected” by the judge at the hearing appointed following its delivery to the judge’s associate, and until that time the orders were good.

94 I do not think that is so, and in my opinion whether Austin J held that the appellant was entitled to claim privilege was a false issue in the appeal. There were three alternatives: that his Honour held that the appellant was not entitled to privilege; that he did not hold one way or the other; and that he held that the appellant was entitled to privilege. The first alternative can be put aside. The appellant had claimed privilege. Even if the second alternative were the case, an order should not have been made compliance with which would infringe the appellant’s privilege if he was entitled to it. Determination of entitlement had to precede compliance, not follow it. If the procedure in Bax Global (Australia) Pty Ltd v Evans could compel infringement prior to determination of entitlement, that in itself made the procedure erroneous and made the orders following the procedure open to challenge.

The

Bax Global (Australia) Pty Ltd v Evans

procedure

95 In Griffin v Sogelease Australia Ltd [2003] NSWCA 158, in which the Bax Global (Australia) Pty Ltd v Evans procedure was adapted to discovery of documents, Tobias JA (Meagher and McColl JJA agreeing) questioned but did not decide whether s 128 could be invoked in an interlocutory application -

if a witness objects to giving particular evidence

witness

evidence

Bax Global

Reid

96 The appellant’s submissions took issue with the procedure at an earlier point. He submitted that privilege was infringed when he was compelled to make the disclosure affidavit, an act outside a protective certificate under s 128, and that by that act alone his privilege was “lost or at least compromised”; alternatively, that privilege was infringed when the disclosure affidavit was read by the judge at a time when it was not known whether the claim to privilege would be upheld or whether a certificate would be issued.

97 As noted by Tobias JA in Griffin v Sogelease Australia Ltd at [50], in Vasil v National Australia Bank Ltd (1999) 46 NSWLR 207 Fitzgerald JA had questioned whether the then Equity Division practice encountered “some of the objections referred to by the majority decision in Reid v Howard (at 16-17)”. Fitzgerald JA cited from those pages -

Scott v Scott

Russell v Russell

Farrelly v Farrelly

Raybos Australia Pty Ltd v Jones

98 In Bax Global (Australia) Pty Ltd v Evans Austin J said of this -

“[38] … There the High Court objected to the special procedure established by the Court of Appeal's orders, on the ground that there were no criteria set out for the court to decide whether the plaintiff's solicitors should be granted leave to disclose the information contained in the affidavit, and if it was not to be disclosed, whether it would be necessary to conduct the proceedings behind closed doors; more generally, justice would not be served by the modification of a fundamental right of general application. It seems to me, with respect, that by enacting s 128 the legislature has modified the privilege by subjecting it to the judicial discretion in s 128(5), and by creating a procedure in which the court must determine whether there are any reasonable grounds for the objection. Restrictions imposed by the court on the use and dissemination of evidence to which a certificate applies will normally be adopted as a practical measure to protect prosecuting authorities, rather than as a judicial supplement to the witness' rights, which I take to be adequately addressed in s 128(7) in the absence of special circumstances.

Vasil

99 It is important, in my view, to recognise that the balance struck by s 128 does not give the disclosing party complete protection. Disclosure to third parties, not necessarily prosecuting authorities, can lead to “the use of the testimony of the witness to search out other testimony to be used against him” (Sorby v The Commonwealth (1983) 152 CLR 281 at 293 per Gibbs CJ, referring to Counsel v Hitchcock (1892) 142 US 547). There may be doubt whether information is obtained as a direct or indirect consequence of his giving the evidence, and questions of proof in that regard. There may be debate over the extra-territorial effect of a certificate, despite provisions in s 128 of the Commonwealth Evidence Act giving federal effect to them and notions of full faith and credit. As a balance of interests, s 128 necessarily impacts upon the disclosing party’s common law privilege.

100 The reality of the scope of protection is recognised in the contemplation, under the Bax Global (Australia) Pty Ltd v Evans procedure, of steps to limit “the use and dissemination of the protected evidence” and orders restricting its inspection, see paras [43] and [45] in Austin J’s description earlier set out. No doubt the restrictions are in part intended to protect the prosecuting authorities from allegations of derivative use of information disclosed, but they must also be intended to enhance the disclosing party’s protection against derivative use. I respectfully do not agree with Austin J’s observation, in Bax Global (Australia) Pty Ltd v Evans at [38], that the restrictions are not “a judicial supplement to the witness’ rights, which I take to be adequately addressed in s 128(7) in the absence of special circumstances”. The certificate is “taken” to be adequate only because the legislature has so decreed where s 128 applies, hence no doubt his Honour’s reservation as to special circumstances, and the restrictions are a supplement to the witness’ rights.

101 In my opinion, the appellant’s position should be upheld. The appellant was obliged to deliver a disclosure affidavit to the judge’s associate, and it would be “inspected” by the judge at a hearing. I will assume, without deciding, that the appellant would thereby be a witness for the purposes of s 128(1). But by compliance with the obligation his fundamental common law right would already be infringed. In order to have his claim to privilege determined, he would have to disclose the material which he said was incriminatory and should not be disclosed. There would be offence to the principle underlying the observation of Lord Denning MR in Rio Tinto Zinc Corporation v Westinghouse Electric Corporation (1978) AC 547 at 574, that a witness “should not be compelled to go into detail – because that may involve his disclosing the very matter to which he takes objection”. See also Accident Insurance Mutual Holdings Ltd v McFadden cited above, stating that the court will determine a claim to privilege “without requiring the witness fully to explain how the effect would be produced, for if it were necessary, the protection which the rule is designed to afford the witness would be annihilated”.

102 If the information in the disclosure affidavit tended to incriminate the appellant, he was imperilled because he had brought into existence an incriminatory document: the respondents’ acceptance of infringement if it had been found that whatever was in the disclosure affidavit would infringe the appellant’s privilege recognised the peril. The respondents submitted that the appellant was no more imperilled than a person who was ordered by subpoena to produce a document at court, the order being good and the claim to privilege being made at the time appointed for production. But that is different. The appellant was compelled to make a document which did not previously exist, and no longer had control of the document after its delivery to the judge’s associate: all this without any s 128 certificate.

103 True it is that the court would exercise control over the document, such that it should only go beyond the judge’s eyes after it had been decided that a certificate should issue pursuant to either s 128(2), (3) or s 128(5), (6). But that control would initially be exercised without the opposite party having access to the disclosure affidavit itself, upon which amongst other materials the judge decided whether privilege had been made out. As earlier noted, the protection of a s 128 certificate is not complete and, as was recognised in Bax Global (Australia) Pty Ltd v Evans (at [43]-[45]), there “may on occasions be a special risk of prejudice to the witness even though a certificate is given”.

104 I recognise the objective of the Bax Global (Australia) Pty Ltd v Evans procedure in the administration of justice. In my opinion, however, it is impermissible for the court to substitute for a person’s fundamental common law right the statutory balance of rights, supplemented by court-devised additional protection by way of artificially making the disclosing party a witness, closure of the Court, limitations on who can see the disclosure affidavit, or if privilege is upheld and no certificate is granted return of the affidavit to its maker; all not pursuant to statute but by the court devising a procedure intended to inhibit the direct or derivative use against the person of information tending to incriminate. Taking up the words in Reid v Howard at 17, it is -

“ … inimical to the administration of justice for a civil court to compel self-incriminatory disclosures, while fashioning orders to prevent the use of the information thus obtained in a court vested with criminal jurisdiction with respect to the matters disclosed. Nor is justice served by the ad hoc modification or abrogation of a right of general application, particularly not one as fundamental and as important as the privilege against self-incrimination.”

105 I return to order 5 made on 20 August 2003, the order that the appellant pass accounts “and pay the balance which may be certified to be due from him as the Court may direct”. As I have indicated, the respondents accepted that saying what happened to the money in an accounting raised the same issue of privilege as making the disclosure affidavit. It is not easy to see how the Bax Global (Australia) Pty Ltd v Evans procedure could be adapted to order 5, and the submissions were not developed. In ordinary circumstances accounts would be filed and there would be a vouching and certification. If there were contention over receipts or disbursements, a hearing of some kind would be necessary. Can the accounting party be made a witness at the time of filing the accounts, for the purposes of s 128? If the filed accounts disclose misappropriation, realistically either the accounting is immediately to be brought to an end or a certificate must issue: can there be a real exercise of discretion in granting a certificate? Is bringing the accounting to an end consistent with maintenance of the court’s orders and authority over its officer? If the accounting proceeds without a certificate, can the court countenance certification of an amount which is almost certainly incorrect? These and other questions underline that what is occurring is judicial “ad hoc modification or abrogation of a right of general application”.

106 The solution must be found in well-devised legislation of general application to circumstances in which the administration of justice calls for incriminatory disclosure, but with protection against direct or derivative use of the information disclosed in criminal proceedings against the disclosing party.

The result

107 Orders 3, 4 and 5 made on 20 August 2003 should be set aside. Costs below appear to have been reserved, and there is no occasion to enter upon them. The appellant’s added ground of appeal has not been successful, although it must have brought the greater part of the costs of the appeal. When leave to amend the notice of appeal was granted it was said that the appellant would have to bear any costs occasioned by the adjournment. In my opinion, and taking that into account, justice between the parties will be done if no order is made for the costs of the appeal.

Addendum

108 The pressures of the Duty Judge list, and the exigencies of applications such as those made in August 2003, must be recognised. Nonetheless, after a contested hearing the Court should generally state, however briefly, why the contest is resolved in the manner it is, so that the parties know why they succeeded or failed and if there is an appeal difficulties such as those encountered in this appeal are diminished. If it is thought that the reasons for making orders will sufficiently appear from the course of argument, it is necessary to ensure that a transcript is taken.

109 It is generally undesirable that ex parte relief be granted until further order, as was done in orders 3 and 5 made on 8 August 2003, or that mandatory relief be granted ex parte as was done in order 4 then made. The party subject to ex parte relief should not have to apply to discharge it.

Orders

110 I propose the orders -

1. Appeal allowed in part.

2. Set aside orders 3, 4 and 5 made on 20 August 2003.

111 McCOLL JA: I agree with Giles JA.

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Last Modified: 06/28/2004

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Citations

Ross v Internet Wines Pty Ltd [2004] NSWCA 195

Most Recent Citation

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Cases Cited

8

Statutory Material Cited

0

Bax Global (Australia) Pty Ltd v Evans [1999] NSWSC 815

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Cited Sections

CITATION:	Ross v Internet Wines Pty Ltd & Ors [2004] NSWCA 195
HEARING DATE(S):	17 December 2003 and subsequent written submissions
JUDGMENT DATE:	21 June 2004
JUDGMENT OF:	Spigelman CJ at 1; Giles JA at 2; McColl JA at 111
DECISION:	(1) Appeal allowed in part; (2) Set aside orders 3, 4 and 5 made on 20 August 2003; (3) No order as to the costs of the appeal.
CATCHWORDS:	Orders for disclosure by affidavit of assets and funds removed from bank account - whether basis in proceedings or sufficient evidence warranting making orders - procedure described in Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538 followed - affidavit to be delivered to judge with notice of motion claiming privilege against self-incrimination - whether procedure infringed privilege - procedure disapproved. D.
CASES CITED:	Accident Insurance Mutual Holding Ltd v McFadden (1993) 31 NSWLR 412; AMP General Insurance Ltd v Prasad [1999] NSWSC 349; Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538; Counsel v Hitchcock (1892) 142 US 547; Duffy v Super Centre Development Corporation Ltd (1967) NSWR 382; Griffin v Sogelease Australia Ltd [2003] NSWCA 158; HPM Industries Pty Ltd v Graham (Young CJ in Eq, 17 July 1996, unreported); National Australia Bank Ltd v Rusu (Hamilton J, 6 April 1998, unreported); Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319; Reid v Howard (1995) 184 CLR 1; Rio Tinto Zinc Corporation v Westinghouse Electric Corporation (1978) AC 547; Sorby v The Commonwealth (1983) 152 CLR 281.
PARTIES :	David Martin Ross - Appellant Internet Wines Pty Ltd - First Respondent Bruce McIntosh - Second respondent Vera McIntosh - Third Respondent Palm Beach Cellars & Food Supplies Pty Ltd - Fourth Respondent Castlemoon Pty Ltd - Fifth Respondent John Flowers - Sixth Respondent
FILE NUMBER(S):	CA 40725/03
COUNSEL:	M L D Einfeld QC & J Horowitz - Appellant P T Russell - First to Fifth Respondents
SOLICITORS:	Verekers - Appellant Cridlands - First to Fifth Respondents Bertock & Associates - Sixth Respondent (submitting)

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	ED 2332/03
LOWER COURT JUDICIAL OFFICER :	Austin J