ASIC v ABC Fund Managers Limited [2001] VSC 92

Supreme Court of Victoria|2001-04-06|Before: Warren J

PRIVILEGE - claim for privilege against self incrimination - whether defendant witnesses should be required to file affidavits of evidence prior to trial.

The principal application in this proceeding is brought by the Australian Securities and Investments Commission against the Defendants A.B.C. Fund Managers Ltd (the first defendant), Wharton Partners Pty Ltd (the second defendant), Allied Securities Pty Ltd (the third defendant), A.B.C. Investment Management Pty Ltd (the fourth defendant), Tye Nominees Pty Ltd (the fifth defendant) and Lingus Pty Ltd (the sixth defendant). The Commission seeks an order to wind up a number companies and unregistered managed investment schemes. Further, the Commission seeks injunctions against the defendants retraining their activities in relation to managed funds and also seeks an accounting of all funds received from investors and subscribers to the relevant schemes.

The solicitor for the defendants filed an affidavit in which he deposed that the witnesses have expressed concern that the filing of any affidavits by them in the present proceeding may be used against them in any subsequent criminal proceedings. That is, the witnesses claim the privilege against self incrimination and the privilege against exposure to a civil penalty.

The fundamental principle applicable to circumstances where a party claims privilege against self incrimination or against exposure to a civil penalty is found in the judgment of Deane J in Refrigerated Express Lines Australasia Pty Ltd v Australian Meat and Livestock Corporation (1979) 42 FLR 204 where his Honour stated at 207-208:

"It is a well established principle that a defendant in proceedings which are solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents which may assist in establishing his liability to the penalty . . . Even where, as in the present case the proceedings are not for recovery of a penalty but to prevent and redress civil injury, a party to a litigation ought not to be compelled to provide information or produce documents for inspection by the other party if the result thereof will be to provide evidence against him which may be used to establish his liability to a penalty in other proceedings."

The principle was relied upon by Heerey J in Australian Competition and Consumer Commission v McPhee & Son (Aust) Pty Ltd (1997) 148 ALR 601 the case concerned an application by the respondents to rescind an existing order that witness statements be filed in the proceeding prior to the hearing. The proceedings were for pecuniary penalties under Pt IV of the Trade Practices Act 1974.

In the instant case, the privilege is claimed not by a party to the proceeding, but to officers of the defendants and a person having dealings with the defendant companies. However, the principle is not limited to a party to a proceeding. A witness is not bound to furnish evidence against him or herself if the witness can satisfy the court that there is a reasonable ground for not doing so. If the court thinks that the witness has no reasonable ground it will overrule the objection and compel the witness to answer. But if it appears to the judge that, by being compelled to answer, a witness may be furnishing evidence against him or herself which could be used in criminal proceedings or in proceedings for a penalty, then the objection should be upheld. It is sufficient that there is a real and appreciable risk of proceedings being taken against the witness: Re Westinghouse Electric Corporation Uranium Contract Litigation MDL Docket No 235 (No 2) [1977] 3 All ER 717 at 721, per Denning M.R. That case concerned the production of documents by an entity that was not a party to the proceeding.

Subsequent to the decision in Westinghouse, the High Court has held that there no exceptions exist to the fundamental principle:

"There is no basis for excepting any class or category of person whether by reference to legal status, legal relationship or, even, the offence in which he or she might be incriminated because, as already indicated, its purpose is the completely general purpose of protecting against `the peril and possibility of being convicted as a criminal': Lamb v Munster (1882) 10 QBD 110 at 111. For the same reason, there can be no exception in civil proceedings, whether generally or of one kind or another. Moreover, it would be anomalous to allow that a person could refuse to answer questions in criminal proceedings or otherwise make disclosure with respect to the same matter in civil proceedings." See Reid v Howard [1995] HCA 40; (1995) 184 CLR 1; per Toohey, Gaudron, McHugh and Gummow JJ at 14.

There is also no distinction that can be drawn between a case concerned with the privilege against exposure to a civil penalty and a case concerned with the privilege against incrimination: See Australian Competition and Consumer Commission v McPhee & Son (Aust) Pty Ltd (1997) 148 ALR 601.

Further, there is no distinction between the filing of affidavits or the filing of witness statements prior to the hearing of the proceeding. In Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [1999] FCA 672; (1999) 163 ALR 465, the officers of a company were joined as defendants. The ACCC sought an order requiring them to file and serve their statements of evidence prior to trial. The ACCC gave undertakings not to use the statements, but conceded that the object of the orders sought was to make it easier for the ACCC to establish the factual foundation for obtaining an order against the officers imposing pecuniary penalties. Sackville J refused to make the order, relying on McPhee and Reid v Howard.

In the present proceeding, Mr Peters who appeared for ASIC submitted that Reid v Howard applies to an individual and not a corporation. However, it is the individuals and not the company that claim the privilege. Here the witnesses claim the privilege on the basis that the information they may disclose in an affidavit or witness statement may used be against them in any subsequent criminal trial. The witnesses are more concerned about the consequences that may flow in respect of their own liability under the Law rather than that of the defendant companies.

It was also submitted for the Commission that an order requiring the witnesses to file affidavits or witness statements does not compel the witnesses to waive the privilege against self-incrimination. It was submitted that that is completely within the control of the witnesses.

The issue was considered by Sackville J in ACCC v Amcor, supra. There Sackville J was concerned with witnesses who were individual respondents to the proceeding and against whom civil penalties were sought. The ACCC sought orders that if the individual respondents intended to give evidence at the trial that they should be required to file and serve witness statements in advance of the hearing. His Honour noted such an order would require the individual respondents to decide whether to file statements before the ACCC had established by evidence that there was a case to be answered by each of them (at 469). Such a course, his Honour noted, would expose the individual respondents to the risk that their own words would materially assist the ACCC to make out a case against them (at 470).

I am presently concerned with a case where the witnesses have not been made parties to the proceeding and against whom civil penalties are not sought by ASIC at this time. The authorities indicate that this of itself does not bar those witnesses from claiming the privilege sought. The witnesses claim that there is a risk that should they be ordered to provide their evidence in advance of the hearing, such evidence may be used by ASIC to provide leads into investigations into the conduct of the witnesses themselves (as officers of the respondent companies). They are concerned with potential proceedings.

The witnesses have been the subject of examination by the Commission pursuant to s.19 of the Australian Securities and Investments Commission Act 1989. They are potentially protected from the use of statements given during the examinations by virtue of s.68(3) of that Act. I observe that none of the witnesses are the subject of any criminal proceeding or a proceeding for the imposition of a penalty. That is not to the point. Mr Wharton and Mr Gillies are directors of the defendant companies. Any affidavit or witness statement by them before the Commission proves its case renders them at risk of putting the Commission on a trail of investigation. The position of Mr Wharton and Mr Gillies falls within the parameters of the principle as stated by Toohey, Gaudron, McHugh and Gummow JJ in Reid v Howard, supra (at 14):

"There is simply no scope for an exception to the privilege, other than by statute. At common law, it is necessarily of general application, a universal right which, as Murphy J pointed out in Pyneboard protects the guilty and the innocent. There is no basis for accepting any class or category of person whether by reference to legal status, legal relationship or, even the offence in which he or she may be incriminated, because as already indicated, its purpose is the completely general purpose of protecting against 'the peril and possibility of being convicted as a criminal': Lamb v Munster (1882) 10 QBD 110 at 111. For the same reason there can be no exception in civil proceedings, whether generally or of one kind or another. Moreover it would be anomalous to allow that a person could refuse to answer questions in criminal proceedings or before investigative bodies where the privilege has not been abrogated if that person could be compelled to answer interrogatories or otherwise make disclosure with respect to the same matter in civil proceedings."

It follows that I will exempt Mr Wharton and Mr Gillies from the application of the order for the filing of affidavits before the trial because to order otherwise would put them at risk, make them vulnerable to furnishing the basis of an actual or potential case against themselves as individuals by ASIC.

I turn to consider the issue of Mr Khor. He is one of the witnesses in respect of whom the privilege has been sought, but who is not presently legally represented. The information before the court concerning Mr Khor is that he is an accountant with his own accounting firm called Charter Tax & Management Pty Ltd. The firm had dealings with the defendant companies. Mr Khor has not personally through legal representation sought to claim the privilege. It has been claimed on his behalf by the solicitors representing the interests of the companies and those of Mr Wharton and Mr Gillies (both of whom are officers of the defendant companies). Therefore, Mr Khor cannot be taken to have sought to claim the privilege. The proper course would be for Mr Khor to claim privilege. In the absence of such claim any evidence by him should be filed in affidavit form in the ordinary way. It follows that in so far as an application is made with respect to Mr Khor it is refused.

Australian Securities and Investments Commission Act 1989

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