Ms Balding's state of mind
23 Ms Balding is a person who has had extensive experience in reviewing large quantities of documents.
24 She said in her affidavit of 26 July 2002 that when seizing documents pursuant to the warrant she had regard to the three conditions in the warrant, although she presently has no recollection of the basis upon which she seized particular documents. Nor does Ms Balding have a recollection of having seized the disputed documents, but she does not dispute a property search record maintained by the AFP which records that the file in which the disputed documents are found, was seized by her.
25 The property seizure record maintained by the AFP shows that the search commenced at 7.20 am on 26 June 2001. The first item recorded as having been seized by Ms Balding is at 7.50 am when three files are recorded as having been "located" by her. Six folders are recorded as having been located by Ms Balding at 7.55 am. Two bundles of documents and two folders are recorded as having been located by Ms Balding at 8.00 am. Four folders (including the folder containing the disputed documents) and a bundle of documents regarding HIH board meetings are recorded as having been located by Ms Balding at 8.05 am. The disputed documents are contained in a blue folder marked "HIH Insurances Ltd 6 Sept 99 - 16 March 01 containing various documents relating to HIH" which was barcoded SBA213028. Ms Balding's evidence was that at this point she looked at the files carefully, and made a decision as to whether they should be put back into the filing cabinet or shelf from which they had been taken, or set aside for seizure. Some of the files seized at this point were quite small, consisting of folders containing a few documents only.
26 At about 4.35 pm on the day of the search, Federal Agent Brown, Mr Unicomb and Ms Balding met in the large boardroom of Adler Corporation's premises. The purpose of this meeting, which lasted until about 9 pm, was to review the material that had been seized during the course of the day. An Australian Federal Police Officer selected a folder for review, and made notes of the details of the folder which he then handed to Ms Balding. Ms Balding opened the folder in front of Mr Unicomb who was sitting between Ms Balding and Federal Agent Brown. Ms Balding made notes of her review of the documents. The notes include the following entry:
"New box 213023-213028
SBA213028 - spring transfer file 6 Sept 99 - 16 Feb 01
Seize HIH I.T."
The words "HIH I.T." were Ms Balding's abbreviation for HIH insolvent trading offence, referring to either warrant offence (g) or (h) depending upon which time period the document related to.
27 In the case of some files reviewed at this meeting, Ms Balding's note is "leave", indicating that the file was not to be removed from the premises. Ms Balding's evidence was that her review covered many more times the number of documents than were actually seized.
28 Approximately 18,000 documents were the subject of the seizure from the premises of Adler Corporation on 26 June. Ms Balding said in her affidavit that during the course of the execution of the relevant warrant, AFP and ASIC officers seized roughly only one-quarter to one-fifth of the material reviewed. Since then about 15,000 of the 18,000 documents seized have been returned. Ms Balding said that the documents were not returned because they outside the scope of the warrant, but I have no other information as to the circumstances of their return.
29 Counsel for the applicants, Mr Hammerschlag SC, submitted that I should not accept Ms Balding as a witness of truth, and I should not accept her evidence that she turned her mind to the question of whether the disputed documents and other documents seized by her during the course of the search fell within the terms of the warrant. In counsel's submission, Ms Balding was engaged in a indiscriminate "negative" search in which no genuine attempt was made to determine whether things seized fell within the terms of the warrant. Mr Hammerschlag points to the property seizure record, and to the numerous documents which were recorded as having been located by Ms Balding within a comparatively short time frame, as making it unlikely that Ms Balding gave genuine consideration to whether the documents seized, and in particular the disputed documents, fell within the terms of the warrant at the point of their original seizure. It is "inconceivable", in Mr Hammerschlag's submission, that anyone could have "reviewed" later in that day about 12,000 documents in the period of about 5 hours commencing at about 4.30 pm on the day of the search, even though Ms Balding's evidence was that the documents were quickly and cursorily reviewed. Further, Mr Hammerschlag submitted that it is obvious on the face of the disputed documents, all of which are faxes from a non-executive director of HIH to a journalist, that objectively they could not form a basis to suspect that they will "afford evidence" of insolvent trading by HIH in terms of warrant offences (g) and (h). Reliance was also placed by Mr Hammerschlag upon a number of other documents which were seized during the course of the search which, in his submission, were so obviously outside the scope of the warrant as to demonstrate the absence of a genuine attempt properly to execute the warrant.
30 One of the elements of the offence of "insolvent trading" created by s 588G of the Corporations Law is that a director suspected at the time at which a debt was incurred by the company, that the company was insolvent. The disputed documents were brought into existence by Mr Adler during the period covered by warrant offence (h). The file in which the disputed documents were contained also included an article headed "HIH Insurance on a Hiding to Nothing - HIH Heading into Hospital" apparently written by Morgan Mellish. The article commences:
"HIH Insurance shares slumped another 30% yesterday after scathing analysts' reports that value the company as low as 50 cents a share.
Several analysts said the viability of the company was now in question and a fall in its credit rating could leave it unable to write quality insurance risks."
The article concludes with the following paragraph:
"Former FAI Insurances CEO and HIH director Mr Rodney Adler is understood to have sold about 1.3 million shares through Foster Stock-broking, cutting the Adler family interest to about 19 million shares, or about 4%."
31 The faxes from Mr Adler to Mr Mellish bearing the date 14 September 2000 and 15 September 2000 appear to have been written in relation to this article. The article appears to be the next document in the file. The letters take issue with the last paragraph of the article which I have quoted, but otherwise do not take issue with the statements contained in the article, and in particular do not take issue with the first two paragraphs which I have quoted. I do not think that it can be said that these letters are necessarily outside the scope of the warrant because the view is open that they throw light on Mr Adler's perception of HIH's financial position at a relevant time.
32 The third of the disputed documents is a fax of 23 November 2000 from Mr Adler to Morgan Mellish, which asserts that in every second or third article which Mr Mellish writes about HIH, there is invariably a line, or a paragraph, that has a statement to the effect that most of HIH's problems have resulted from its "ill fated purchase of FAI Insurances two years ago". Mr Adler comments upon that statement in the fax and points out that although the acquisition of FAI caused losses for HIH, this pales into insignificance compared to the losses which HIH sustained on other investments which are referred to in the letter. Again, I do not think it can be said that this document necessarily falls outside the scope of the warrant because it may throw light on Mr Adler's perception of the financial position of HIH at a time relevant to warrant offence (h).
33 I have considered whether the objective circumstances pointed to by Mr Hammerschlag should cause me to reject Ms Balding's sworn evidence that both at the time when the documents were originally seized, and at the time at which the seizure was reviewed later on that day, she gave consideration to whether the disputed documents, related to warrant offence (g) or (h). I am not persuaded that I should do so. Ms Balding presented as a witness who was doing her best to tell the truth. The fact that she could not remember whether she seized the disputed documents, and did not remember the intellectual process which she engaged in on 26 June 2001 in relation to the disputed documents, is unsurprising. I would have felt more cause for concern if she had claimed an actual recall of what that process was in relation to the disputed documents. The fact that Ms Balding cannot recall what her mental process was does not lead to the conclusion that she did not apply her mind to the question of whether the documents were within the third condition of the warrant.
34 Whilst a number of folders are recorded as having been "located" within a comparatively short space of time, I know nothing about the nature of those documents, either in terms of their number or in terms of their contents, which would enable me to conclude that Ms Balding's testimony cannot stand having regard to the objective facts. Some of the folders seized at this time were, on the evidence, quite small and there was some duplication of contents. There was evidence from Ms Balding that her examination of the files on the morning of 26 June 2001 began prior to the first entry in the AFP's property seizure record attributed to her. A matter which has caused me concern is Ms Balding's evidence that about 12,000 documents were "reviewed" in the period of about 5 hours after the original seizure commencing at 4.30 pm. Statistically that would indicate that about 1.5 seconds was deployed in the "review" of each document, but, for all I know, slabs of documents could be assessed without individual consideration of the component parts.
35 Mr Hammerschlag submitted that I should reject Ms Balding's contemporaneous notation on the afternoon of the seizure: "seize HIH I.T." as a fiction, as Ms Balding did not turn her mind to whether the documents related to warrant offences (g) or (h) or not. It was put to Ms Balding that this was merely an attempt on her part to justify seizure of a file that she knew was not within the warrant. Ms Balding denied that this was so. One possibility, I suppose, is that Ms Balding did not turn her mind to the question of whether the documents satisfied the third condition when she first seized the documents in the morning, but she did so later in the day at the meeting in the board room commencing at about 4.30 pm. Ms Balding's explanation for the afternoon review was that it was intended as a second look at the documents which had been seized for more abundant precaution. She had learnt a lot more about the matter during the course of the day's events, and it afforded an opportunity of getting the benefit of Mr Unicomb's views of the documents in question. I accept this evidence.
36 Ms Balding's evidence was that she arrived at the premises of Adler Corporation at about 7 am on the morning of 26 June, and that she was engaged in looking at documents thereafter. Whilst there are a number of entries with respect to Ms Balding at 8 am, followed by five entries at 8.05 am, it does not follow that the documents the subject of the five entries were first looked at by her after 8 am, or that her consideration of them was confined to the period between 8 am and 8.05 am. She said, and I accept, that her review of the documents commenced prior to the first recorded seizure attributed to her at 7.50 am.
37 Exhibits B-G are individual documents which were the subject of seizure. I do not think that any relevant conclusion can be drawn from the mere production of those documents. Perhaps the high water mark of them is Exhibit C, which is a letter from the BRW sub-editors to Mr Adler which discusses the use of "Mr" in front of Ray Williams' name, and the magazine's policy of referring to people simply as "Smith", "Jones", "Bloggs" or whatever. Taken in isolation this letter is incapable of being related to the warrant, but it is a document taken from a file barcoded SBA213033. I have no idea what other documents were contained in that file which might be connected with the letters, or whether the file, considered as a file, was a thing which might be seized in terms of the warrant.
38 Ms Balding had extensive knowledge of the HIH investigation in which she was fully involved as a team leader. Her role in the investigation included the drafting of the application for the search warrant. The matters relied upon by Mr Hammerschlag do not persuade me that I should reject Ms Balding's sworn testimony that at the time of seizure of the disputed documents she turned her mind to the question as to whether they fell within the scope of the warrant.