Adler v Gardiner

The Amended Application 6 Grounds 6, 7 and 8(a) of the Amended Application for Review provide as follows: "6. The procedures that were required by law to be observed in connection with the making of the decisions to seize certain documents pursuant to the first and second warrants were not observed. Particulars The officers of the second respondent who made the decisions to seize the documents failed to ensure that they fell within the terms of the first and second warrants. 7. The decisions to seize certain documents pursuant to the first and second warrants were not authorised by the enactment in pursuance of which they were purported to be made. Particulars Documents were seized that did not fall within the terms of the first and second warrants such that the seizure of them was not authorised by s 3F of the Crimes Act. 8. The making of the decisions to seize certain documents pursuant to the first and second warrants was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made. Particulars (a) Documents were seized that did not fall within the terms of the first and second warrants such that the seizure of them was not authorised by s 3F of the Crimes Act. 7 The paragraph of the applicant's Amended Statement of Claim that deals with these grounds provides as follows: "Seizure beyond the terms of the warrants (ground 6, 7 and the first particular of ground 8 in the Amended Application for Review) 63 As a result of the execution of the first and second warrants, documents were seized that fell outside the terms of the first and second warrants in that: (a) the said documents were not within the third condition of the first warrant or the second warrant; and (b) were not otherwise within the first and second warrants because either: (i) no belief was formed by the executing officer or any constable assisting that seizure was necessary to prevent the concealment, loss or destruction or use of any such document in committing an offence; or (ii) any such belief was not formed on reasonable grounds." 8 The "first warrant" is the warrant No 431 of 2001 in respect of the premises of Adler Corporation at level 34, 264-278 George Street, Sydney. The "second warrant" is search warrant No 433 of 2001 in respect of Mr Adler's home at Bellevue Hill. The evidence and submissions on the deferred questions were confined to the first warrant. 9 The warrant in question is a so-called "three condition warrant". The relevant conditions of the warrant as far as the disputed documents and this hearing are concerned are as follows: "First condition Things which are originals or copies or drafts of any of the following including any of them which are stored in electronic or magnetic form: All things referred to in (a) to (p) below relating to the period 1 July 1997 to 15 March 2001, whether or not created during that period being: … (e) records of communication including correspondence, reports, announcements, media releases, files, file notes, memoranda, notes of conversations, electronic mail and facsimile transmissions; … Second condition Things which relate to any one or more of the following: (a) HIH Insurance Limited ("HIH") … … (c) Rodney Stephen Adler ("Adler"); … Third condition Things as to which there are reasonable grounds for suspecting that they will afford evidence as to the commission of the following offence(s) against the laws of the Commonwealth: PACIFIC EAGLE EQUITIES PTY LTD - Breach Of Director's Duties And False And Misleading Statement By Adler Acquisition of HIH shares … (b) An offence against s 999, namely that between 19 June 2000 and 21 June 2000 Adler made a statement, namely that he was buying HIH shares, that was materially misleading which was likely to induce the purchase of shares in HIH by other persons when he knew that the statement was materially misleading in that he was not personally purchasing the shares; … HIH INSURANCE LIMITED - Insolvent trading (g) An offence against ss 588G and 1317FA, namely that between 1 July 1998 and 12 March 2000 [Raymond Reginald] Williams and the other directors of HIH recklessly and dishonestly and intending to gain an advantage for HIH failed to prevent HIH incurring debts when at the time such debts were incurred HIH was insolvent and Williams and the other directors of HIH suspected that HIH was insolvent or would become insolvent as a result of incurring those debts; (h) an offence against s 588G, namely that between: (a) 13 March 2000 and 15 December 2000 Williams; and between (b) 13 March 2000 and 15 March 2001, other directors of HIH dishonestly failed to prevent HIH incurring debts when at the time such debts were incurred HIH was insolvent and Williams and the other directors of HIH suspected that HIH was insolvent or would become insolvent as a result of incurring those debts; …" The offences specified in pars (b), (g) and (h) of the third condition are hereinafter referred to as the "warrant offences". It is common ground that the disputed documents fell within the first and second conditions of the warrant; the dispute is about the third condition. 10 I find that the disputed documents were seized by Jennifer Anne Balding ("Ms Balding"), an ASIC officer, in circumstances to which it will be necessary to return later in more detail. Ms Balding was not the "executing officer" in relation to the warrant, hence she was only authorised by the Crimes Act to seize the disputed documents if she was a "constable assisting" in relation to the warrant within the meaning of s 3C of the Crimes Act. The first issue between the parties is whether Ms Balding was a "constable assisting" in relation to the execution of the warrant. 11 The second issue results from by the applicants' contention that the warrant was not validly executed, and the disputed documents were not lawfully seized, as Ms Balding did not have an actual suspicion that each of the disputed documents was within the terms of the warrant. In the applicants' submission, Ms Balding was engaged in an indiscriminate, "negative" search for documents, without forming any view as to whether or not the documents, and in particular, the disputed documents fell within the terms of the warrant. 12 The third issue identified by the applicants is whether, if Ms Balding formed the view at the time of execution of the warrant that the disputed documents fell within its terms, there were reasonable grounds for that opinion. In the applicants' submission there was no rational basis for a conclusion that the disputed documents could afford evidence as to the commission of any of the warrant offences.

The statutory framework 13 The authorisation to seize documents is found in s 3F of the Crimes Act. Section 3F(1)(c) provides: "(1) A warrant that is in force in relation to premises authorises the executing officer or a constable assisting: (a) … (b) … (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 …" "Evidential material" is defined in s 3C to mean: "a thing relevant to an indictable offence or a thing relevant to a summary offence, including such a thing in electronic form." 14 "Thing relevant to an indictable offence" is defined in s 3 to mean, inter alia: "(a) … (b) anything as to which there are reasonable grounds for suspecting that it will afford evidence as to the commission of any such offence … (c) …" 15 A "constable assisting" in relation to a warrant, is defined in s 3C as meaning: "(a) … (b) a person who is not a constable and who has been authorised by the relevant executing officer to assist in executing the warrant."

Constable assisting 16 The relevant executing officer is Federal Agent Brown. The issue is whether Ms Balding had been authorised by that officer "to assist in executing the warrant". If it is established that Federal Agent Brown authorised Ms Balding to assist her in the execution of the warrant, it is not necessary for the respondents to establish that the executing officer specifically authorised Ms Balding to enter the premises to search for documents or to seize documents, as authority in that respect flows from the terms of the Crimes Act. 17 It is not suggested that any written authority or a written record of an authority was brought into existence. However, Puglisi v Australian Fisheries Management Authority (1997) 148 ALR 393 at 401 recognises that whatever the practical desirability of the written record, it is not essential to the existence of a valid authority. I find as a fact that Ms Balding was authorised by Federal Agent Brown to assist in executing the relevant warrant. I make that finding for the following reasons: - Ms Balding was a member of a team put together to assist Federal Agent Brown in the execution of the search warrant at the premises of Adler Corporation; - Federal Agent Brown said at a meeting held on 25 June 2001, at which Ms Balding was present, that Ms Balding, amongst others, was to assist her in the execution of the warrant; - when Federal Agent Brown went to the offices of Adler Corporation early in the morning of 26 June 2001 she said to the team members, including Ms Balding: "We will start the search and seizure in Adler's office and his secretary's office. If documents are to be seized, bring them out to Chris who is the property officer and we will record all the documents. If you have any doubt about seizing a document, check with Glen Unicomb, Jennifer Balding or me." - the execution of the search warrant at the Adler Corporation premises took over 14 hours. During that time Federal Agent Brown observed members of the team assisting, including Ms Balding, searching for documents, seizing documents and having the documents recorded in the property seizure records. Federal Agent Brown expected her advisers to make decisions about seizing documents; and - at about 4.35 pm on 26 June 2001, Federal Agent Brown, Mr Unicomb and Ms Balding were in the conference room at the premises of Adler Corporation. The three of them reviewed about two-thirds of the documents which had been seized earlier in the day and decided whether those documents should be left at the premises, or whether they should continue to be "seized". 18 Ms Balding clearly assisted in the execution of the warrant, and, equally clearly, the executing officer knew that Ms Balding was rendering that assistance. The executing officer had prior knowledge that Ms Balding would assist in this way, and had assented to Ms Balding providing that assistance. Throughout 26 June, Federal Agent Brown concurred in what Ms Balding was doing in this regard. These circumstances are sufficient to establish the requisite authority. Federal Agent Brown did not say to Ms Balding the words: "I hereby authorise you to assist me in the execution of this warrant", but the requisite authority may be, and was, conferred by less direct means. The failure to document the persons who were within the description of a "constable assisting" is indicative of sloppy administration, rather than illegality.

The scope of the search 19 Both the Crimes Act and the warrant authorised search for, and seizure of, things as to which there are reasonable grounds for suspecting that they will afford evidence of the commission of an offence specified in the warrant. The applicants submitted that the disputed documents could never be admitted in evidence in a trial in relation to the warrant offences, hence they were necessarily outside the scope of the warrant. 20 The submission misconceives the reach of the expression "afford evidence". Bearing in mind that the power to issue a search warrant is in aid of a criminal investigation, a thing may afford evidence as to the commission of an offence, even though it may not be admissible in evidence at a trial: George v Rockett (1990) 170 CLR 104 at 119. A thing will afford evidence of the commission of an offence if it assists, directly or indirectly, in disclosing that an offence has been committed, or in establishing or revealing the details of the offence, the circumstances in which it was committed, the identity of the person or persons who committed it or any other information material to the investigation of those matters: George v Rockett (supra) at 120. The expression "will afford evidence" does not import a requirement that the documents must necessarily be sufficient to achieve a conviction; it is sufficient that they have relevance to or probative connection with, an issue arising upon an allegation of the offence alleged: Parker v Churchill (1985) 9 FCR 316 at 326. That includes things which are adjectivally relevant as well as things which are of substantive relevance: Ozzy Tyre & Tube Pty Ltd v Chief Executive Officer of Customs [2000] FCA 891 at [30]-[31].

The executing officer's state of mind 21 The executing officer or constable assisting has to make a judgment as to whether seizure of a document is authorised by the warrant. The executing officer or constable assisting has to consider whether "there are reasonable grounds for suspecting" that the document will afford evidence as to the commission of a warrant offence. This is judgment which the executing officer must make in relation to every "thing" which is to be seized in reliance upon the warrant. But where the relevant thing consists of a folder or file, there may well be justification for an executing officer, or constable assisting, to take the entirety of the folder or file in which he or she locates an individual document itself within the warrant, because the context in which the document is found may itself be of assistance in evaluating the true evidentiary significance of the document in question: Harts Australia Ltd v Commissioner, Australian Federal Police [2002] FCA 245 at [39]. 22 The judgment is one which must be made at the time of seizure. A warrant holder is not entitled to take anything which he or she chooses in purported reliance on the warrant and to leave it until later on, in the course of a subsequent examination, to determine whether any of the material taken falls within the terms of the warrant: Harts v Commissioner, Australian Federal Police (supra) at [24]. However, in an evidentiary sense, there is no necessary inconsistency between seizing documents in circumstances where the executing officer has an actual belief that there are reasonable grounds for suspecting that they will afford evidence of the commission of a warrant offence, and that same officer later coming to the conclusion on more detailed consideration of the document that it does not, in truth, have that effect: Harts v Commissioner, Australian Federal Police (supra) at [24].

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.

The objective inquiry 39 The executing officer or constable assisting, has to be satisfied that there are reasonable grounds for suspecting that things seized will afford evidence as to the commission of an offence. The notion of reasonable grounds for a suspicion imports an objective test, but "reasonable" involves a value or normative judgment (Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 at 167), and there may well be legitimate differences of opinion as to what falls within the term, particularly when it is used in relation to a nebulous expression such as "suspicion". A court is not entitled to substitute its own opinion on that question for the opinion of the executing officer or constable assisting. That does not mean that the executing officer, or constable assisting, has an unexaminable discretion; it does mean, however, that the officer's decision is only impeachable if the decision was one which the officer could not lawfully reach on the materials before him or her: Minister for Immigration & Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 275-276. 40 In Propend Finance Pty Ltd v Commissioner, Australian Federal Police (1994) 29 ATR 87 at 100 Davies J rejected an invitation to examine a number of the documents seized under a search warrant to determine whether or not they were evidence of the offences stated in the warrant. His Honour declined that invitation as that is not his Honour's task. His Honour said: "The material before the court would not enable me to decide, by merely reading a particular document, whether it answered the description in the warrant. A background knowledge of the nature of the offences charged and of how the particular documents fitted into the picture would be required. Presumably, the officers authorised to execute the warrants had that knowledge. The court has no jurisdiction to interfere with their seizure unless their actions are proved to have been excessive. A mere examination of a particular document would be unlikely to establish that." 41 The onus, then, is on the applicants to establish that the seizure decisions taken in relation to the disputed documents were infected by reviewable error. In the light of my finding that it was open to Ms Balding to conclude that the disputed documents fell within the terms of the warrant, and that she in fact drew a conclusion to that effect, it follows that the applicants have not established that the seizure decision was not authorised by the Crimes Act, or that it was an improper exercise of the power conferred by the Crimes Act, or that it was otherwise contrary to law or amenable to judicial review. 42 The Amended Application should be dismissed insofar as it seeks relief on the grounds alleged in pars 6, 7 and 8(a) thereof. In conformity with the agreement reached between the parties, costs incurred on and from 2 August 2002, including the costs of the hearing on 10 September 2002, should be paid by the applicants. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Counsel for the Applicant: Mr D Hammerschlag SC

Counsel for the Respondent: Mr A Robertson SC, Ms P McDonald

Solicitor for the Respondent: Australian Securities & Investments Commission