HIS HONOUR: By a further amended notice of motion filed in these and related proceedings, the defendants/cross-claimants sought a series of orders against the cross-defendant in each case. In the events that have occurred, not the least of which was the considerable and sensible, not to say customary, assistance of counsel for these parties, the issues with which I was asked to deal have been significantly narrowed. The orders that remain controversial are sought in the following terms:
"2(b) The first cross-defendant ('Mr Feng') is to file and serve all affidavits from lay witnesses, expert evidence and documentary evidence upon which he intends to rely at trial by 29 August 2014 and he not be permitted to rely upon any evidence not served in accordance with this order without leave of the Court.
2(c) Pursuant to UCPR 21.2:
(i) The defendants/cross-claimant and Mr Feng are to exchange categories of documents for discovery by 1 August 2014;
(ii) The defendants/cross-claimant and Mr Feng are to file and serve verified lists of documents by 15 August 2014;
(iii) The defendants/cross-claimant and Mr feng are to permit inspection of the documents discovered by 22 August 2014;
(iv) The defendants/cross-claimant and Mr Feng are to provide copies of any discovered document requested by the other within 14 days of that request."
It will be apparent that the specific dates referred to in these prayers for relief have been overtaken by events and can be disregarded for present purposes.
The essence of the cross-claim is that the cross-defendant Mr Feng was complicit in or responsible for the creation of a series of fraudulently inflated estimates and tax invoices for the cost of repairs to motor vehicles allegedly damaged in a series of collisions and that they were prepared or created by him with the aim or intention of recovering excessive amounts from the cross-claimant as the insurer of the vehicles that are said to have caused the damage. Mr Feng has denied the allegations which allege that anything he did was fraudulent. It is unnecessary for present purposes to descend into the details of the pleadings that reflect these truncated conclusions.
Mr Feng contends that the relief sought should be refused because to grant it would destroy or seriously compromise his privilege against self-incrimination. On 26 June 2014 his solicitors wrote to the cross-claimant in these terms:
"We also draw to your attention that, given that you have alleged that our client engaged in fraudulent misappropriation in the pleadings and particulars and has, on several occasions, informed the Court that your client's case is that our client perpetrated a systemic [sic, systematic] fraud, our client relies upon the privilege against self-incrimination and the privilege against exposure to penalty.
In particular, pursuant to the applicable principles, our client cannot be compelled to adduce its evidence until after your client's case has closed nor should our client be compelled to provide discovery. In the circumstances, we will not be agreeing to any orders in respect of service of evidence or discovery. Please confirm that you accept that our client is entitled to rely upon the privilege. Otherwise, if your client does not accept this, we require you to file and serve a motion [in] this regard."
The cross-claimant contends that the proper course is for Mr Feng to be ordered to file and serve any lay, expert and documentary evidence upon which he intends to rely, but to the extent that there are matters which may tend to prove that he has committed an offence or is liable to a civil penalty, he can choose not to deal with, but instead apply to the trial judge for leave to adduce oral evidence of, those matters. It is suggested further that, in respect of any such matters, Mr Feng ought to be required through his solicitors to give particulars of the likely evidence ahead of the trial in order to afford the parties and the Court the best opportunity to deal with the issue efficiently.
[2]
The privilege
Due to the nature of the claim against Mr Feng which, if established, would expose him to the possibility and peril of prosecution, he has opposed discovery upon the basis of his substantive common law right to claim privilege against self-incrimination. The principles upon which he relies were dealt with in his submissions as follows.
It is well established that a party may invoke the privilege against self-incrimination in proceedings if there is a real and appreciable risk that by answering questions or producing documents he will face criminal prosecution.
In Reid v Howard [1995] HCA 40; (1995) 184 CLR 1, an accountant who had been accused of misappropriating money by his clients in civil proceedings (and was the defendant in those proceedings) was ordered to disclose his assets and source of funds. On appeal, the Court of Appeal imposed a regime so as to limit the use of his evidence in any subsequent criminal proceedings, but still required the accountant to make the disclosure. The High Court upheld an appeal brought by the accountant on the basis that he had a substantive common law right derived from the privilege against self-incrimination that would be impinged upon by orders to disclose his assets. The regime of the Court of Appeal to limit the use of that evidence was no answer in that regard.
Deane J referred to the privilege as "deeply ingrained in the common law", reflective of "a cardinal principle", and not subject to judge made exceptions or qualifications. He reasoned that the accountant was entitled to claim the privilege because compliance with the order placed the accountant at risk of prosecution:
"Compliance by the appellant with the order of disclosure under the Court of Appeal's regime would involve disclosure of potentially incriminating material to an officer of the State (ie the Registrar in Equity) and to solicitors representing clients who are involved in litigation against the appellant in which they claim to have been defrauded by him. In turn, the solicitors would be free to make the disclosed material available to those clients and their counsel. The disclosed material could be used as a basis of investigation by the clients and their legal representatives. Indirect or derivative evidence discovered through those investigations could constitute the basis of public findings in the civil proceedings to the effect that the appellant was guilty of specific acts of misappropriation of trust moneys. Such indirect or derivative evidence could be made available to prosecution authorities and could be used either in the prosecution of the appellant for such specific offences or as a basis for further investigation."
Toohey, Gaudron, McHugh and Gummow JJ similarly referred to the privilege as a fundamental bulwark of liberty and a basic and substantive common law right rather than simply a rule of evidence, and stated that it was, excluding a statutory abrogation, "without real exception", and concluded that compliance with the order in question would place the accountant in greater peril of being convicted as a criminal and therefore entitled to raise the privilege. They stated that:
"… 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."
The purpose of the privilege (and the related privilege against exposure to penalty) was recently described by the Court of Appeal in MacDonald v ASIC [2007] NSWCA 304; (2007) 73 NSWLR 612, in which the defendants were only required to serve unverified defences by virtue of the application of the penalty privilege. Mason P said this at [64]:
"[64] The privilege serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it: The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at 559 [31]; Rich (at 142 [24]). But this does not define the scope of the privilege. The related privilege touching the criminal law is one of self-incrimination (emphasis added). The nub of the privilege is that the State should not be able to compel a defendant to provide proof against him or herself: Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477 at 532; Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 129."
The privilege operates, among other ways, to protect the relevant party from being compelled in civil proceedings to serve witness statements or discover documents where the privilege applies.
In Refrigerated Express Lines Australasia Pty Ltd v Australian Meat and Live-stock Corp (1979) 42 FLR 204 at 207, it was alleged that the respondents had been engaged in, or were accessories to, various types of arrangements that contravened Part IV of the Trade Practices Act 1974 or were involved in a conspiracy to breach the Act. The respondents claimed that they should be excused from the start from giving discovery of documents or from answering interrogatories because to do so would expose them to a penalty. Deane J held that a person cannot be compelled to provide information or produce documents that may be used as a "link in the chain" to establish liability to a penalty in other proceedings.
In Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328, the Trade Practices Commission served notices requiring the appellants to provide information and documents for the purpose of ascertaining whether s 45 of the Trade Practices Act had been contravened. Although the High Court held that the privilege was abrogated by statute, Mason ACJ, Wilson and Dawson JJ described the common law position as follows (at 335-6):
"It is well settled that '…a party cannot be compelled to discover that which, if answered would tend to subject him to any punishment, penalty, forfeiture, ecclesiastical censure' to use the words of Bowen LJ in Redfern v Redfern … see also Martin v Treacher (1886) 16 QBD 507; Earl of Mexborough v Whitwood Urban District Council [1987] 2 QB 111; R v Associated Northern Collieries (1910) 11 CLR 738. Indeed, in a civil action brought merely to establish a forfeiture or enforce a penalty the rule is that neither discovery or interrogatories will be allowed (Re a Debtor … Associated Northern Collieries)."
In ACCC v J McPhee & Son (Australia) Pty Limited & Ors (1997) 77 FCR 217, Heerey J considered it to be contrary to Reid to order a party claiming the privilege to serve witness statements and also suggested that Reid applied to preclude production on discovery.
In ASIC v Plymin [2002] VSC 56; (2002) 4 VR 168 it was held that the privilege extended to the defendant not being required to provide evidence of witnesses they proposed to call, including expert witnesses. As Mandie J said at [10]::
"[10] In my opinion the privilege so described extends to protect the defendants from being required to provide evidence by way of other witnesses, including expert witnesses. The principle expressed in the decisions to which I have referred I think clearly applies to that category of evidence. Otherwise the defendants might indeed be required (in principle at least) to be the authors of their own destruction by producing such evidence at this stage. At least they might expose themselves to that potentiality either directly or derivatively by putting the plaintiff in the position of being able to carry out further investigations on the basis of the evidence which they were required to produce."
In ACCC v FFE Building Services Ltd (2003) 130 FCR 37, Emmett, Hely and Jacobson JJ, after noting that the principle was not confined to discovery and interrogatories, held at [14] that an order requiring the provision of statements of evidence prior to the close of the plaintiff's case would infringe the privilege:
"[14] By requiring an individual respondent, prior to the closure of an applicant's case, to file statements of evidence proposed to be given by witnesses to be called by that respondent, such a respondent would be exposed to the risk that indirect or derivative evidence, being evidence obtained by using the material disclosed in the statement as a basis of investigation, could be tendered against the respondent. The provisional disclosure of information may set in train a process that may lead to the imposition of a penalty or may lead to the discovery of real evidence in support of the imposition of a penalty: Reid v Howard (at 6)."
In Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129, the trial judge ordered the defendants to provide discovery and serve affidavits. The Court of Appeal upheld this decision on the basis that the proceedings (disqualification proceedings against directors) were not penalty proceedings and therefore the directors were not entitled to rely upon penalty privilege. However, the High Court overturned the Court of Appeal decision and refused the discovery application on the basis that the privilege applied. Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ stated at [39]:
"[39] The primary judge ordered that the appellants make discovery of documents by verified list. That order would permit the appellants to object to production of any document on a ground of privilege. At first sight, that might suggest that the appellants' challenge to the order for provision of a verified list of documents is premature. That is, it might suggest that any question of privilege is one about privilege from production rather than privilege from making discovery. That is not so. As Isaacs J pointed out in R v Associated Northern Collieries, once it is determined that the proceedings expose a person to penalty, the proper course is to refuse any order for discovery. As Isaacs J said, to leave the party at risk of penalty to object to production of documents, having first listed them, may lead to the very mischief which the privilege is designed to prevent. In the words of Lord Coleridge CJ in Jones v Jones, to which Isaacs J referred:
'The whole case for the plaintiff may depend upon his power to trace a particular document into the possession of the defendant, and, upon its non-production, to prove its contents by secondary evidence.'
That being so, the proper course in this matter was to refuse the application for discovery."
On the question of affidavits, ASIC conceded that if the privilege applied, then the order to file affidavits prior to trial should not have been made. The correctness of this concession was confirmed by Mason P in MacDonald v ASIC at [69].
In One.Tel Limited (in liquidation) v Rich [2005] NSWSC 226, Bergin J held that the defendants were not required to file evidence prior to trial in compensation proceedings brought by a liquidator against them under s 1317J of the Corporations Act 2001 because the evidence might be used to establish their liability to a penalty in other proceedings.
The scope of the related penalty privilege was also recently defined by the Court of Criminal Appeal as follows in NSW Food Authority v Nutricia Australia Pty Ltd [2008] NSWCCA 252, (2008) 72 NSWLR 456 at [170] per Spigelman CJ:
"[170] The penalty privilege has been held to be a sufficient basis for a court to refrain from exercising its powers to compel steps usually taken in civil proceedings, such as discovering or filing of witness statements, even where what is apprehended is only derivative use: see Rich v Australian Securities and Investments Commission (especially at 147 [39]); Australian Competition and Consumer Commission v FFE Building Services Ltd [2003] 130 FCR 37at 493 especially at 41 [14], 44 [29], 45 [34]; MacDonald v Australian Securities and Investments Commission (2007) 65 ACSR 299 especially at 309 [64]-[71]."
The width of the rule is also well documented in Cross on Evidence (9th ed, 2012) at [25-075].
The cross-claimant responded in the following terms.
White J in Scott Pascoe v Divisional Security Group Ltd [2007] NSWSC 211 identifies the central principles in proceedings such as these at [18]-[33]. Relevantly, in order to claim privilege so that he should not be required to serve evidence or give discovery of documents prior to the hearing, Mr Feng must prove that his is an exceptional case:
"[33] In my view, One.Tel Limited (In Liq) v Rich is one of the exceptional cases referred to by Deane J in Refrigerated Express. If that were not so, I would be respectfully of the view that it is not in accordance with appellate authority by which I am bound. Being such an exceptional case, it is distinguishable. No exceptional circumstances apply in the present case. It is not suggested that proceedings for a pecuniary penalty order or a disqualification order have been brought or foreshadowed by ASIC. The third defendant may be entitled in these proceedings to object to answering particular questions on the grounds that answers may expose him to a civil penalty. He may be entitled to object to producing particular documents for inspection on the same grounds, provided, in each case, that he swears to a belief that to answer the questions, or to produce the documents, would tend to expose him to that jeopardy, and the Court is satisfied that the objection is well taken."
The cross-claimant contended that there is no evidence that addresses, let alone satisfies, that test. There is no evidence that there are any penal or criminal proceedings foreshadowed against Mr Feng or any evidence that a certificate issued by me pursuant to s 128 of the Evidence Act 1995 would not relevantly protect Mr Feng in any event.
The cross-claimant contended that this was significant because Mr Feng was required to establish that the provision of information or the production of documents in these proceedings involves a real and appreciable risk of criminal prosecution: see Le Roi Homestyle Cookies Pty Ltd (in liquidation) v Gemmell [2013] VSC 452 at [9]. In ASIC v Mining Projects Group Ltd [2007] FCA 1620 at [10], Finkelstein J said:
"[10] …in civil actions where no claim for a penalty is made the defendant must show that providing the information requested would tend to subject him to a penalty in separate proceedings before he can rely on the privilege."
The cross-claimant contends that Mr Feng has failed to show that in this case.
More particularly, the cross-claimant submitted that it is wrong to suggest that all of the material that Mr Feng may wish to rely upon could tend to subject him to a penalty in separate proceedings. For example, Mr Feng has denied a number of the central allegations in the cross-claims. Presumably he intends to adduce evidence in support of those denials. It is unlikely that such evidence would all tend to subject Mr Feng to a penalty in separate proceedings.
The cross-claimant contended that Mr Feng has not identified any basis upon which it could be said that his is an exceptional case. Nor has he identified any particular evidence or documents that might tend to subject him to a penalty in separate proceedings. His case is no different to that faced by defendants on a regular basis in which they are required to decide whether to put material into evidence in support of their defence of a case alleging serious misconduct. There is said to be nothing exceptional about that.
[3]
Consideration
In my opinion Mr Feng is entitled to the protection afforded to him by the successful exercise of his common law right against self-incrimination.
I am not satisfied that the issue can be decided upon the basis that, as the cross-claimant asserts, there is no evidence that there are any criminal proceedings foreshadowed or anticipated against Mr Feng. Mr Feng is alleged to have made false claims for financial reward that repairs had been done when in fact they had not, with the intention of defrauding named parties. The allegations raised in the cross-claim would if proved, on one available view, amount to criminal conduct. It is unnecessary for present purposes to explore that proposition in detail. It is sufficient for me on this application to observe that I consider there to be a real and appreciable risk of a criminal prosecution. That view is assisted by the fact that the conduct complained of is allegedly not limited to an isolated instance but is said to form part of a series of not dissimilar events. That yet to be established fact would enhance to a marked extent the likelihood of a criminal prosecution.
It is also unrealistic in my view to expect or require Mr Feng, or anyone in a similar or equivalent position, to put on evidence or produce documents that do not expose him to the risk of prosecution while simultaneously holding back the evidence or documents that appear to do so. The privilege against self-incrimination is effectively indivisible and an assertion of, or claim to exercise, the privilege ought not to be conditioned upon fine choices about where it starts and ends.
The present proceedings are attended by some curiosities about which I do not intend to comment. The likelihood that statements from Mr Feng or discovery of documents by him would significantly alter the forensic balance between the parties joined on the cross-claim seems to me to be remote. Be that as it may I take the position to be as earlier described by Mandie J in Plymin at [10].
Nor is it a correct approach to say that there is no evidence that a certificate issued to Mr Feng pursuant to s 128 of the Evidence Act would not relevantly protect him in any event. The protection offered by that section applies to evidence to the giving of which as a witness Mr Feng relevantly objects. It does not apply so as to give him protection with respect to evidence that he chooses to lead without objection, whether or not pursuant to a direction to do so: see Kalid Kaddour v R [2013] NSWCCA 243 at [27]-[49].
[4]
Conclusion and orders
I consider that prayers 2(b) and 2(c) of the cross-claimant's further amended notice of motion should be dismissed. I order that the costs of the motion should be Mr Feng's costs in the proceedings.
[5]
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Decision last updated: 27 February 2015