Vizl, Anthony Francis v Fehon, Paul

[1998] FCA 557

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 168  of  1997

BETWEEN:

ANTHONY FRANCIS VIZL
First Applicant

MICHAEL VIZL
Second Applicant

AND:

PAUL FEHON
First Respondent

JON FANNING
Second Respondent

KEIRAN MURPHY
Third Respondent

THE CHAIRPERSON, NATIONAL CRIME AUTHORITY
Fourth Respondent

JUDGE:	EMMETT J
DATE:	15 MAY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

HIS HONOUR: By an application for review pursuant to section 39B of the Judiciary Act 1903 (Cth) the applicants sought to review: (a) decisions of the first and second respondents made on or about 4 March 1997 to seize certain documents of the applicants; (b) the conduct of the first and second respondents in seizing the documents; and (c) the decisions of the third and fourth respondents made on about 6 March 1997 to retain, inspect and copy such of the documents as they choose.

The proceedings have now been discontinued pursuant to leave granted on 13 February 1998.  However, questions remain as to who should bear the costs of the proceedings prior to their discontinuation.  In such a circumstance, if it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the Court will make no order as to the costs of the proceedings.  (See, for example, Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 143 ALR 1 at 4. per McHugh J.) In some cases the court may feel confident that although both parties have acted reasonably one party was almost certain to have succeeded if the matter had been fully tried (see Ex parte Lai Qin at 3 per McHugh J).

It is therefore necessary to determine whether or not the applicants acted so unreasonably in bringing these proceedings or whether the respondents acted so unreasonably in defending the proceedings that it would be proper for the applicants to pay the costs or alternatively for the respondents to pay the costs. 

In order to determine this question it is necessary to say something about the proceedings. 

The proceedings arise out of the purported execution of a search warrant addressed to the first respondent, Sergeant Paul Fehon, who was on secondment to the National Crime Authority.  By the search warrant a Stipendiary Magistrate stated that he was satisfied by information on oath that there were reasonable grounds for suspecting that there was at the premises of Brett Galloway, Solicitors, Level 10, 155 King Street, Sydney, evidential material which satisfied all of three conditions which were there stated.

The first condition was that the things must be conveyancing files, loan documents, trust documents, trust ledgers and receipts, client files and any of the above material that was electronically stored on any floppy disk, hard drive, magnetic tape, compact disk or magneto-optical disks and any equipment required to read that material.  The second condition was that the things must relate to any one or more of the following: 

• Steven John Wallis;

• James Andrew Whiting;

• Michael Vizl;

• CMD Discretionary Trust;

• Anthony Vizl;

• Lot 3 Tourmaline Court, Mudgeeraba Bonnegan;

• Lot 4 Tourmaline Court, Mudgeeraba Bonnegan.

The third condition was that the things must be things as to which there are reasonable grounds for suspecting that they will afford evidence as to an offence against the laws of the Commonwealth, namely, that between 1 January 1991 and 20 February 1997 at the Gold Coast in the State of Queensland Steven John Wallis defrauded the Commonwealth.

By the warrant, the executing officer, any person assisting who was a constable and any other person who has been authorised by the executing officer to assist in executing the warrant was authorised, amongst other things, to enter the said premises, to search the premises for any evidential material that satisfies all of the three conditions specified above and to seize any such evidentiary material that may be found.

On 4 March 1997, Detective Sergeant Fehon and the second respondent, Constable Fanning, attended at the premises and sought to execute the warrant.  It is common ground that on that occasion the first and second respondents had a discussion with Mr Brett William Galloway, a principal of the firm of solicitors named in the warrant.  There is some dispute as to the precise conversations which then took place.

I have before me affidavits by Mr Galloway and by Sergeant Fehon as to their respective versions of what occurred.  To the extent that there is any difference between their versions I do not understand it to have been suggested that either of them was deliberately fabricating evidence.  However, I would have been asked to conclude, had this matter gone to a final hearing, that the recollection of one or other was defective.

The issue between the applicants and the respondents concerns the extent to which the third condition in the search warrant to which I have referred was satisfied.  It is common ground that Mr Galloway had, prior to 4 March 1997, at various times acted for the first applicant, Mr Anthony Francis Vizl and the second applicant, Michael Vizl, who is the father of AnthonyVizl.  It is also common ground that Mr Galloway had previously acted for the CMD Discretionary Trust. 

However, Mr Galloway said, and it was not suggested to the contrary, that he had no knowledge of Steven John Wallis or James Andrew Whiting.  He also said that he had no knowledge of the two parcels of land referred to in the third condition.  It is also common ground that Mr Galloway informed the first two respondents on 4 March 1997 that, whereas he was familiar with Michael Vizl, Anthony Vizl and the CMD Discretionary Trust, he had no knowledge of the two parcels or land or Steven John Wallis or James Andrew Whiting.

The difference between the versions of the discussions given by Mr Galloway and Sergeant Fehon relates to the circumstances in which custody of various files which were in the possession of Mr Galloway was entrusted to the first two respondents.  Mr Galloway said that Sergeant Fehon said to him words to the effect:

“If you have any files relating to any of these things in the second condition, we have to take them”.

Mr Galloway said that, having consulted his client list and identified a number of files which he believed met the second condition, he said to Mr Fehon:

“OK how do we do this?” 

Mr Fehon, according to Mr Galloway, said:

“You get the files out, Senior Investigator Fanning will make a list, you will get a receipt. You can tell us what is privileged and we can put that in a separate envelope.  Arrangements will be made for the legal officer to come down from Brisbane in the next couple of days and you can discuss the privileged documents with him.” 

Mr Galloway said that he replied:

“I haven't spoken to my client.  It’s his privilege but I’d be at least claiming privilege on my personal notes and my correspondence with the client.  There are a lot of files.  I don’t know if I should take them all apart.  Maybe I can leave things intact and I’ll document the file name and deal with the other issues later.  I can discuss what will happen with legal privilege and the relevance of what is in the files later with the legal officer on Wednesday or Thursday.  Thursday will be better for me”. 

He said that he told Mr Fehon:

“None of these files contain any information about a person called Wallis or Whiting.  I can guarantee that.” 

Mr Fehon did not respond.  He also said that as he gave each file to Mr Fanning with Mr Fehon nearby, he said words such as:

“This is a debt collection file.  You won't want that.”

or

“Are you sure you want that?” 

To such statements Mr Fehon responded to the effect:

“We'll worry about that later.”

or

“We've got to take it”. 

Mr Galloway says that he described every file by reference to its file title but did not describe the contents of the bundle of documents.  He watched both of the first two respondents and neither of them looked inside any file or through the loose bundle of papers.

Some corroboration of Mr Galloway's version is to be found in an affidavit of his secretary.  She said that in the presence of the first two respondents Mr Galloway said to him:

“They will require everything you have on the computer with regard to either the CMD Discretionary Trust, Michael or Anthony Vizl.  Will you show them what you have and give them the computer disks?” 

Sergeant Fehon disputes much of what I have set out above and recounts his version of the discussion principally as follows: Mr Galloway indicated to Sergeant Fehon at various stages during the search the documents which he considered to be his personal notes on each file.  During the course of that exercise Mr Galloway said words to the effect:

“In my opinion some of these documents are not related to the conditions in the warrant.”

He said Mr Galloway used words to the following effect when he came upon a file which he considered was not relevant:

“I think this file is not relevant.  Do you require it?” 

Mr Fehon responded:

“On what grounds do you think that it is not relevant?” 

Mr Galloway:

“I think that it is outside the warrant.” 

Sergeant Fehon:

“If that is the case, I will have to inspect the document fully.” 

Mr Galloway:

“Look, I don't have any objection to you having the document.  I have some clients I need to attend to, so which ever is the easiest way to do this.” 

Sergeant Fehon:

“If you agree we can give an undertaking that the documents will be sealed and held at the NCA Exhibit Room until someone from the Brisbane NCA is available to view them at a time convenient to you.” 

Mr Galloway:

“That is fine, look if you give that undertaking, then you can take all of the files that I have here which relate to Vizl.” 

Mr Fehon:

“I appreciate that you have clients waiting and I do not intend to impede your other business dealings.” 

Mr Fehon says he also said words to the following effect:

“So as to allow you to think about the question of privilege in relation to documents seized I can have the documents sealed so that nobody has access to them and stored in a secure place at the NCA Headquarters.  This would be in lieu of filing all documents with the Registrar of the Court.” 

He said:

“I prefer that you seal the documents and secure them at NCA Headquarters so long as nobody has access to those documents.” 

Sergeant Fehon said:

“I will make arrangements to have the documents put in a secure place and I will also attempt to have an officer from our Brisbane office to be in attendance at a suitable time when you can come and inspect the documents for the purpose of identifying those which you may wish to claim privilege on.” 

When the first two respondents departed Mr Galloway's office with various files, arrangements were made for a meeting to take place on 6 March 1997.  Mr Galloway said that on 6 March 1997 Sergeant Fehon told him that Mr Kieran Murphy, the third respondent, would be arriving in Sydney at 4.30 p.m. and they arranged a tentative appointment for Mr Galloway to see him shortly after that.

In the meantime, on 5 March 1997, Mr Galloway wrote to the first two respondents confirming that a claim for privilege was made in relation to correspondence with his client's and his own personal notes at least until such time as he was in a position to take instructions from his client.  The letter went on:

I note that you will arrange for a solicitor from the National Crime Authority to contact me with a view to inspecting the documents during the afternoon/evening of Thursday 6 March 1997. 

I note that I informed you that I had a view that the subpoena was particularly wide and that the bulk of the information provided to you appeared to have little to do with the subject matter of the search warrant.  In this regard I note that you informed me of the following: 

(1) Stephen John Wallis was in fact James Andrew Whiting;

(2) the warrant apparently involved some alleged money laundering activity pertaining to some land at the back of the Gold Coast which I assume is the land referred to in the search warrant.

To the best of my knowledge information and belief none of the information provided to you concerns any transaction pertaining to the land referred to in the search warrant and/or the involvement of the persons described in the search warrant in that transaction.  It is as a consequence of that view that I have been instructed to seek counsel's advice as to whether or not an application should be made to set aside the search warrant on the basis that none of the information taken from my office pertains to the alleged transaction and therefore, such information is irrelevant to the issue or issues at hand.  If agreement can be reached in relation to this aspect of the matter, of course, no action will need to be taken.

Mr Galloway said that at about 6.15 pm on 6 March 1997 he went to the offices of the National Crime Authority where he met the third respondent, Mr Kieran Murphy, together with two others who Mr Galloway believed were officers of the National Crime Authority.  Mr Galloway said that Mr Murphy asked for permission to inspect the documents in the two archive boxes containing the files which had been delivered to Sergeant Fehon and Constable  Fanning.  Mr Galloway says that Mr Murphy's request was to inspect the documents with a view to returning those which were not relevant and isolating those which were legally professionally privileged. 

Mr Galloway said that objection was taken to any inspection of the documents on the ground that they had been illegally seized since the warrant was not properly or reasonably executed.  Further objection was taken to inspection of a large number of the documents on the ground of legal professional privilege.  It was said that the method by which the documents had been selected was in breach of the requirement that any documents seized must satisfy all three, not just the first and second, of the conditions in the warrant.  Mr Murphy refused to return the documents although Mr Murphy gave an undertaking that the documents would not be inspected or otherwise interfered with before 2.30pm on Friday 7 March 1997 and Mr Galloway undertook to commence proceedings in the Federal Court to continue that situation.

At the meeting on 6 March 1997 Mr Galloway said to the others present:

…there is one file that I haven't been able to find, I’ve looked for it in the meantime, I think I told you I still can't find it, I have got no idea where it is.  I’ve spoken with my client, I have instructions from him that if and when I find it, I am to hand it to you, no holes barred [sic]. 
……………………………………………………………………………………………

…You will know that there’s an agents file in Queensland.  I can tell you where it is in fact, I wasn't quite sure what this was all about, I went and looked at it yesterday.  And I can tell you the details of where you can go and look at it.

So that’s the file I think you want.  It may not contain everything that my files contain so I don't know because I can't find my file, but that file was in there.  And that's the file that you seem to be looking for because it involved the transaction with those people who you guys say is one person, who I don't know and have never met, a Trust and so forth.  So that's what you're looking for this is ....

That statement appears to relate to the file relating to CMD Discretionary Trust which Mr Galloway could not find in his office.

These proceedings were commenced on 7 March 1997.  On that day, an ex parte order was made by Beaumont J that the respondents be restrained up to an including 11 March 1997 from inspecting, copying or otherwise interfering with the documents seized on 4 March 1997.  On 11 March 1997 the proceedings were stood over by consent to 19 March 1997 though the ex parte injunction was not continued.  On 19 March 1997 orders were made relating to the giving to the applicants and Mr Galloway access to the documents in order that any documents in respect of which legal professional privilege was claimed could be isolated and sealed.  The directions included one that the legal representatives of the respondents have access to the documents other than the privileged ones.

There was also a direction that the legal representatives must not disclose to anyone other than the Court any information they obtained as a result of any inspection.  Directions were also given for the filing of statements of claim, defence, reply and affidavits.  The matter came before me on 24 April 1997 and amendments were made to directions which had been given on 19 March 1997.

Further affidavits were filed and the pleadings were completed.  On 17 June 1997, a notice of motion was filed seeking leave to file an amended application and amended statement of claim.  On 19 June 1997 a further search warrant was executed in Queensland relating to a file concerning the CMD Discretionary Trust which was then in the custody of Mr Anthony Kenneth Abbott, a Queensland and New South Wales solicitor. 

On 10 July 1997 leave was given to the applicants to file the amended application and directions were given for the filing of further evidence. The amended application and an amended statement of claim pursuant to that amended application, both of which were filed on 17 July 1997, raised an allegation of fraud on the power conferred by section 3F of the Crimes Act 1914 (Cth) in relation to the search warrant.

It was alleged that the decisions in question, that is the decisions under review, involved an exercise of power for a purpose other than the purpose for which the powers were conferred or alternatively involved an exercise of discretionary power in bad faith.  It was alleged that the purpose of seizure and retention of the documents was to permit the third and fourth respondents, the fourth respondent being the chairperson of the National Crime Authority, to look through the applicants’ documents to see whether there was anything that might be of interest or use to the respondents in the discharge of their duties, including the duty to investigate the commission of crime such as the offence comprised in the third condition of the warrant and such as offences which might have been committed by the applicants.

A defence was filed to that amended statement of claim.  However, on 19 November 1997 the applicants discontinued the proceedings so far as concerns the claims made by the amended statement of claim.

The allegation by the applicants in the amended statement of claim was said to be based on two matters.  One is the fact that on 4 March 1997 no attempt was made by the first and second respondents to satisfy themselves as to the extent to which the files satisfied the third condition in the search warrant.  The other is the fact that the search warrant executed in Queensland was not executed until after the filing of the notice of seeking leave to make the allegation of fraud on the power.  It was said that an inference could be drawn from those two facts that the purpose for executing the warrant on 4 March 1997 included the purpose of looking through the applicants’ documents to see whether there was anything which could be used in relation to the investigation of offences which might have been committed by the applicants.  I do not consider that those two circumstances justify such an inference being drawn. 

At the time of the discontinuance the claims made in the amended statement of claim, I reserved the costs of the amended statement of claim and the costs thrown away by the discontinuance of those claims.  In the circumstances I consider that it is appropriate that the applicants pay the respondents' costs of the amended statement of claim and any costs thrown away as a consequence of the discontinuance of the amended statement of claim.  It may be that those costs are not very significant in relation to the costs of the proceedings overall.  It is there that the real issue lies. 

Two alternative legal propositions have been advanced by counsel for the respective parties.  As to the matter of substance which has been raised by the proceedings, whichever view of the discussions which took place on 4 March 1997 is accepted, it is common ground that no attempt was made by the first and second respondents to form a judgment as to whether the files which were taken satisfied the third condition.  The applicants contend that in those circumstances they had very good prospects of succeeding in the principal claim that the seizure was unlawful because of failure to comply with terms of the warrant.  It was said by counsel for the applicants that a seizure under a warrant is unlawful unless the officers named in it consider and exercise judgment as to whether or not things found in the course of execution fall within the scope of the warrant.  It was said that in the circumstances of this case it was clear that such a judgment was not exercised whichever version was accepted. 

The conduct of the first and second respondents is said to be justified by section 3F of the Crimes Act which relevantly provides as follows:

(1)A warrant that is in force in relation to premises authorises the executing officer or a constable assisting:

(c)to search the premises for the kinds of evidential material specified in the warrant, and to seize things of that kind found at the premises.

Counsel for the applicants relied on observations made by Beazley J in Bartlett v Weir (1994) 72 A Crim R 511 at 522:

…I consider that the execution of the warrant in its entirety was fundamentally flawed for the reasons which I have stated, namely, that the second respondents seized items without knowing whether they fell within the terms of the warrant, intending to examine them later, and without having held, at the time of seizure, the requisite reasonable belief that the goods seized might afford evidence of the commission of a crime.  Accordingly, I am of the opinion that the execution of the warrant … was unlawful.

Counsel for the respondents, on the other hand, pointed out that those observations were made in relation to a warrant issued under former section 10 of the Crimes Act.  The warrant under consideration in that case authorised the seizure of certain objects which there were reasonable grounds for believing that the same would afford evidence as to the commission of an offence.

Counsel contended that the language of section 3F(1)(c) is significant in not referring to the subjective mind of the officer executing the warrant. He contrasted the provisions of section 3F(1)(d) which relevantly provides that a warrant authorises the executing officer or constable assisting:

to seize other things found at the premises in the course of the search that the executing officer or a constable assisting believes on reasonable grounds to be:

(i) evidential material in relation to an offence to which the warrant relates.

There is in section 3F(1)(c) no reference to the requirement for any belief on the part of the executing officer. It is, of course, not appropriate for me to decide the competing views as to the requirements for the valid execution of the search warrant. However, I am satisfied that both contentions are at least arguable such that it would have been reasonable for the applicants, in the light of the evidence, to contend that there was a failure to comply with the terms of the warrant insofar as it was justified by section 3F(1)(c).

On the other hand, I accept that it was equally open to the respondents to argue to the contrary. Nevertheless, the applicants say that, even if one accepts the respondents’ contention as to the true effect of section 3F(1)(c), on the evidence before me the applicants were bound to succeed in their claim. The contention is that, when one considers the nature of the documents which were the subject of seizure, it is impossible to conclude that, even objectively considered, there could be reasonable grounds for suspecting that those documents could afford evidence as to the offence described in the third condition.

I did not have before me the files which were the subject of seizure.  They had, in fact, been returned to the applicants on 11 July 1997.  It is common ground that they had not been inspected by the respondents at that stage.  It was contended on behalf of the applicants that, in circumstances where the documents had been seized without any effort being made by the respondents to form a judgment as to whether the third condition was satisfied and where the documents had been returned without inspection, it is inconceivable that the documents would have or could have satisfied the third condition.

While I did not have the files in question, I had before me schedules describing the documents contained in the files.  It was not suggested that the descriptions were other than reliable although it was contended on behalf of the respondents that the descriptions did no more than describe the nature of the documents without saying anything as to their content.

The contention for the respondents was that, having regard to the breadth of the description of the offence in the third condition to the search warrant, it was impossible to conclude that the documents described in the schedule could not constitute evidence as to an offence described so widely.  The applicants contended, however, that the width of the description of the offence assists their contentions.  I was referred to observations made by the High Court in George v Rockett & Anor (1990) 170 CLR 104 at 117 referring to the requirement of reasonable grounds for believing in what was there under consideration:

That significance depends on the manner in which a complaint which grounds a search warrant and the warrant itself identify the object of the search.  The thing must be identified either as a specific object or as an object which answers a particular description.  It is by reference to the means of identification of the object of the search that the sufficiency of both reasonable grounds for suspecting and reasonable grounds for believing must be judged.  Where a specific object is identified, the question whether there are reasonable grounds for believing that, if it exists and is found, it will afford evidence as to the commission of an offence is a discrete question to be answered according to the facts set out in the complaint.  Where the object is identified by description, the broader and less specific the description, the more difficult it is likely to be to satisfy the requirement of reasonable grounds for believing that a thing answering the description will afford evidence of the commission of an offence.  Conversely, the narrower and more specific the description, the more difficult it may be to satisfy the requirement of reasonable grounds for suspecting that the designated object is in the particular location.

Their Honours then proceeded to give an illustration of those propositions. 

I am not sure that those observations necessarily bear on the question which I have before me.  If I were deciding this matter on a final basis, it would be necessary for me to conclude whether or not, from an objective point of view, there were reasonable grounds for suspecting that the files in question would afford evidence as to the offence described.  That involves the applicants proving a negative.  That, of course, is always a very difficult task.

The point was made forcefully by counsel for the applicants that the opportunity was open to the respondents to file evidence indicating the connection which might exist between the documents in the files on the one hand and the suspected offences on the other.  Counsel for the respondents, on the other hand, contended that no inference could be drawn from the absence of any evidence as to those matters.  Ultimately, it is a question as to whether or not the onus which the applicants undertake has been discharged. 

It may be that, as I have said, on the final hearing of the matter, I would draw inferences about such questions and might have to form a view that in the light of the descriptions of documents which are contained in the schedules it is more likely than not that those documents could not afford evidence as to the commission of any offence.  However, having regard to the nature of the issue before me today, that it is not appropriate for me to form a conclusion as to those matters.

The only question is whether it was reasonable for the parties to conduct the litigation in the way in which they have.  I am satisfied that the applicants have done so in that there is on the face of the description in the schedules no connection between Steven John Wallis and those documents.  The real question is whether it was reasonable for the respondents to maintain their resistance to the claim up to the time when the applicants decided to discontinue.

Even if I were deciding the matter on a final basis I am not convinced that the applicants have discharged their onus.  But since I am only considering whether it was reasonable for the respondents to resist the claim in the way they have, my view is that it was not unreasonable for them to do so.  McHugh J in Ex parte Lai Qin observed that the court may feel confident that even though both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.  I do not consider that I can have that degree of confidence.

Having said that, if this is a relevant consideration, I have formed the view that the applicants may well have had the better of the argument based on the evidence which is before me.  Nevertheless, I would not say that I could be confident that the applicants were almost certain to have succeeded if the matter had been fully tried.  In the circumstances I consider that the appropriate course is to adopt the general principle and that there be no order as to the costs of the proceedings.

I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett

Associate:

Dated:             15 May 1998

Counsel for the Applicant:	D.A. Buchanan SC
Solicitor for the Applicant:	CM Finn Associates
Counsel for the Respondent:	R.B. Wilson
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	15 May 1998
Date of Judgment:	15 May 1998