ASIC v Rich

5934/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v JOHN DAVID RICH & ORS JUDGMENT 1 HIS HONOUR: The question before me is whether the plaintiff Australian Securities and Investments Commission ("ASIC") is entitled to privilege in the masked portions of two documents. The question is to be decided in the context of civil penalty proceedings brought by ASIC against John David Rich and others. The lengthy trial of those proceedings is going on at the present time before Austin J. It became apparent that there was a likelihood (which has eventuated) that the documents would need to be examined by a Judge for the purpose of determining the question of privilege. Austin J has referred the question to me for determination in the face of a request that he not be the Judge to examine the documents. 2 The privilege claimed is privilege under s 118 of the Evidence Act 1995 ("the EA"), commonly called legal advice privilege. Mr Durack SC, who appears before me for ASIC on the application, has expressly eschewed reliance upon s 119 of the EA to claim the privilege commonly known as litigation privilege in respect of the documents. 3 There has already been one decision on a privilege question not totally dissimilar from the privilege question to be decided by me. That decision was made by White J: see ASIC v Rich NSWSC 13 August 2004 unreported ("the White judgment"). The participants in the argument before me are ASIC on the one hand and the first and fourth defendants on the other. Those defendants are represented before me by Mr M J Steele, of counsel, on this application. 4 The principles governing the determination of the question are not, in reality, the subject of contention between the parties, although the question of the existence of privilege has been keenly contested. The essential criterion for the existence or non-existence of the privilege is agreed between the parties to have been correctly stated in the White judgment as follows: "4 Mr Steele of counsel, who appeared for the first and fourth defendants, submitted that the onus lay on the plaintiff to make out its claims for privilege. That proposition was not disputed.

5 He also submitted, by reference to authority that before privilege could attach to the communication it must be shown that Ms Redfern [the creator of the relevant document] was consulted in a professional capacity in relation to a professional matter, and that the communication is not only made in confidence, but also arose from the relationship of client and lawyer."

White J cited, and the citation is repeated in this case, what was said by Mason CJ and Wilson J in Waterford v The Commonwealth (1987) 163 CLR 54 at 62: "Whether in any particular case the relationship is such as to give rise to the privilege will be a question of fact. It must be a professional relationship which secures to the advice an independent character notwithstanding the employment."

See also the decisions of Debelle J in Southern Equities Group Limited (In Liq) v Arthur Andersen & Co [2001] SASC 398 and of the Victorian Court of Appeal in Mitsubishi Australia Pty Limited v Victorian WorkCover Authority (2002) 4 VR 332. 5 The document dealt with in the White judgment was, as appears above, a document created by Ms Jan Redfern. The two documents in this case were, likewise, documents created by Ms Redfern. The document in that case was a document which, in terms, stated that its purpose was to provide ASIC with a briefing on the investigation that ultimately led to the present proceedings, in particular, to provide legal advice on proposed enforcement outcomes. That document was provided to Commissioners of ASIC. 6 The relevant facts about Ms Redfern are as follows. Prior to 30 June 2001 she held the position of New South Wales General Counsel for ASIC. As from 1 July 2001 she became Deputy Executive Director of Enforcement, a position which she held until 16 January 2004, when she became the Executive Director of Enforcement. She held the position of Deputy Executive Director of Enforcement at the time of creation of the documents under consideration before me and at the time of the creation of the document dealt with by White J. She states on affidavit that she continued after 1 July 2001 to perform some of the functions of New South Wales General Counsel as part of a transitional phase that included her remaining the solicitor on the record in asset freezing proceedings that were then current. Indeed, she says that her primary role connected with ASIC's One.Tel investigation was in relation to those asset freezing proceedings from early June to mid October 2001. 7 The documents that I am considering were created respectively on 19 October and 25 October 2001. The document which White J considered was created on 21 November 2001. The present proceedings were commenced on 12 December 2001 and Ms Redfern became and remains ASIC's solicitor on the record in those proceedings. It is in this context that she deposed that: "Some time in about mid-October 2001, I reviewed the progress of ASIC's investigation into One.Tel to ensure that the investigation was proceeding satisfactorily."

She makes statements in subsequent separate paragraphs of the affidavit concerning her creation of the emails under consideration of 19 October and 25 October 2001. The addressees of the 25 October document were two lawyers in the employ of ASIC, Joanne Rees in Sydney and Thomas Staples in Perth, although copies were sent to other persons. There were eight addressees of the earlier email of 19 October 2001 and a copy was sent to Allen Turton. All persons to whom the emails were addressed or copied were persons within ASIC. In the case of the addressees of the email of 19 October, a number of the addressees were lawyers and a number were not. The first addressee was Steve Howell, who is not a lawyer, but was the Assistant Director, Enforcement, Corporate Investigations South-West and is described as the project sponsor, that is, the person in charge of the One.Tel investigation project at that time. All the persons named except Allen Turton were, at the time, Ms Redfern's inferiors in the organisation. Even Mr Howell, the project sponsor of the investigation, was inferior to and reported to her. Allen Turton was her superior, to whom she reported, but only had an email copied to him rather than being an addressee. 8 I have been greatly assisted by the manner in which counsel have made their submissions to me in this case. In particular, Mr Steele's submissions have been a model of concision and clarity, despite the fact that he has been labouring under the disadvantage of making submissions to me about the contents of documents to which he is not privy. He has submitted to me that, for the documents to attract privilege (and it should be understood that I am referring to the portions of the documents which are masked), the question to be answered is whether Ms Redfern was acting in the capacity of a lawyer providing independent advice to her client, or whether she was acting in an executive capacity. If it is not established on the balance of probabilities that it is in the former capacity that she was acting in making the communications, the documents are not privileged. 9 Mr Steele conceded what had been put to me by Mr Durack to the effect that the courts have emphasised that advice privilege was an important right at common law and, where it is now embodied in the EA, it continues to be an important right. Its purpose, in either case, is to facilitate in the public interest full and frank communications between client and lawyer. Whilst conceding that, Mr Steele has emphasised that the courts are equally jealous to see that the privilege is not extended beyond its proper role. 10 Thus, it is emphasised in Waterford that, where a person is a lawyer, but is not giving advice in that role, the communications should not be protected by privilege. Mr Steele emphasises that Ms Redfern says in her affidavit that in mid October she was reviewing the process of the One.Tel investigation to ensure that it was proceeding satisfactorily. He submits that that smacks of the performance of an executive rather than a legal function. Whatever "mid October" may mean, he points out that her references to her sending of emails of 19 and 25 October 2001 follow in her affidavit shortly after her statement about that review. He refers to the opening paragraph of the 19 October email, which is not masked, wherein she commences by stating that she has had the opportunity to review the progress summary, the notes of the meeting with counsel and the transcript of the interview with Murdoch. He says that I should infer that those actions were part of her executive review of the One.Tel investigation and that context points towards the masked portions that follow as being statements made in the course of, or to report on, or to give instructions arising from that review. 11 He says that the fact that the communications which I am reviewing are downwards communications, ie, communications to persons who were inferiors, is to be contrasted with the situation before White J of an upward communication, ie, an advice directed to the Commissioners. 12 He comments on the fact that no further evidence was called from Ms Redfern as to the purpose of the communications, albeit she was available (in this regard I gather she is presently being cross examined before Austin J, but there would have been no problem in having Austin J release her to give evidence before me if that were deemed appropriate). 13 He comments on the absence of two other features present in relation to the document dealt with in the White judgment. One is the absence of any evidence of a request for legal advice. The other is any explicit statement that what was being conveyed was legal advice. He again emphasises that it would not be enough that what appeared in the masked portions of the documents could be characterised as legal advice. He emphasises that more has to be shown, namely, that she was giving legal advice in an independent capacity as a lawyer. Because she had two hats, each of which she wore from time to time at the relevant period, the Court would not be likely to find that she was acting, in sending these emails, as a solicitor advising her client rather than the Director of Enforcement giving instructions and guidance to subordinates. He cites in that regard what was said by Gibbs CJ in Attorney General (NT) v Kearney (1985) 158 CLR 500 at 510: "The advice will not be privileged if the legal adviser gives it in some other capacity (eg as an officer of a non-legal department) ..."

Mr Steele also cites what was said by Debelle J in Southern Equities Corp at [11]. 14 On the other hand, as well as emphasising to me the importance of maintaining the right of legal advice privilege, whether at common law or under the EA, Mr Durack emphasises to me that the best and surest guide to the proper characterisation of the material in contest is what is in the documents. He says specifically that more important than any additional statements that Ms Redfern could now have made about what her intentions or purposes were at the time is what is to be spelt out from what was written in those documents some three years ago. 15 At one stage it seemed to me that the material in the email of 19 October 2001 might fall into two categories. After the preliminary paragraph (unmasked), which I have already cited, there is a section of the document commencing with the words "My preliminary view", which is also unmasked. There was a second half of the document that followed the words, "As for the things that need to be done, they are as follows." Those words are emphasised by Mr Steele as suggesting, in his submission, directions to subordinates. 16 At one stage, I thought that the fact that the communications were to subordinates in the organisation might be suggestive that the material ought not be characterised as legal advice and particularly that material appearing under a heading of things needing to be done directed to subordinates smacked strongly of executive direction. Mr Durack, however, submitted to me that, looking at the material itself in the context, what followed that heading should be regarded as somewhat akin to an advice on evidence by counsel about a matter which, whilst listing things that should be done, was undoubtedly of the nature of legal advice as to what evidence needed to be collected, and why and how it might best be collected, for the purposes of litigation. 17 In the end, and particularly in light of the contents of these documents, it is my view that Mr Durack's submission is correct, that the most important thing is what is contained in the documents. I do not have the benefit of Mr Steele's submissions about the material in the documents, because he cannot see it before my determination. His submissions were, as I have said, very clearly put and were, on the face of them, cogent. There is no doubt that there are suggestions in the material of executive direction by Ms Redfern. On the other hand, Mr Durack has relied on her express evidence that she was continuing at this time a dual role, including ongoing functions of general counsel; that a communication of 21 November made by her was characterised by White J as privileged (admittedly in circumstances somewhat different from the circumstances of the present documents); and that in December she took the role and has continued in it of the plaintiff's solicitor on the record in the proceedings. All these speak of an ongoing role of legal adviser and representative on her part, as well as her having undoubtedly, from 1 July 2001 onwards, an executive role. I should add that I do not think it flows from the characterisation placed on the 21 November 2001 document by White J that the October documents must have the same characterisation; the significance of the decision is that it makes it plain that Ms Redfern continued at least in part in the role of a legal adviser at that time. 18 In the light of all these matters I have carefully read the masked material. In the circumstances of this case, as I have said, Mr Durack's submission is, in my view, correct that that material is of the utmost importance. It is my view, looking at the material, that it does have the characterisation of the giving of independent legal advice by a person acting in the role of a legal adviser giving advice to a client. I have attended to Mr Steele's appropriate warning that the role of legal professional privilege should not be extended beyond its proper sphere. However, as I have said, I have a clear view arising from a reading of the material in the context of the surrounding circumstances that the masked portions of Ms Redfern's communications are of such a quality that those portions of the document are entitled to legal advice privilege. 19 I should add that Mr Breckenridge, solicitor, characterised and described the masked contents of the 25 October document as providing "legal advice as to topics on which advice from counsel should be obtained". I should say that the only portion of that document which correctly answers that description is the numbered paragraph 1 which is not masked. It is not a correct description of the masked portion of the document, as is quite clear to me from a perusal of the document. 20 The parties are agreed that the appropriate order for the costs of the application before me in the light of my decision is that the costs of the application be costs in the proceedings.

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