AWB Limited v Australian Securities and Investments Commission

Federal Court of Australia|2008-12-11|Before: Commission J, Gordon J

INTRODUCTION 1 In August 2007, the Australian Securities and Investments Commission ("ASIC") commenced an investigation pursuant to s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act") into the activities of AWB Limited ("AWB"), AWB (International) Ltd ("AWBI") and a number of individuals, arising out of or in connection with the supply of wheat to Iraq as part of the United Nations Oil for Food Programme. 2 In the course of its investigation, ASIC gathered information primarily through the exercise of its compulsory powers under the ASIC Act. It conducted examinations of employees and former employees of AWB and AWBI pursuant to s 19 of the ASIC Act and, in addition, obtained signed witness statements voluntarily from other employees and former employees. Nineteen transcripts of the s 19 examinations and fourteen signed witness statements are in issue in these proceedings ("the AWB Information"). 3 In early 2008, ASIC received a request from the Australian Federal Police ("the AFP") that it disclose certain information, including the AWB Information, to the AFP. AWB's solicitors learned of the request from a current employee and three former employees who had been examined by ASIC. Those current and former employees had been contacted by ASIC about the AFP request. ASIC informed them that ASIC was considering whether to provide the transcript of their s 19 examination to the AFP and, consistent with the decision of the High Court in Johns v Australian Securities Commission (1993) 178 CLR 408, provided each of them with an opportunity to be heard and to make submissions to ASIC in relation to the proposed release of the transcript of their s 19 examination to the AFP. 4 Upon learning of the proposed disclosure by ASIC, AWB wrote to ASIC on 1 April 2008 seeking an opportunity to be heard and to make submissions to ASIC in relation to the proposed release of information to the AFP including the conditions of the release. ASIC responded on 11 April 2008. At that time, the request was limited to the transcripts of the s 19 examinations. ASIC outlined the terms of the AFP request, its proposal to release the transcripts of the s 19 examinations to the AFP and the conditions upon which that information was proposed to be released. ASIC expressed the view that: It is ASIC's view that the protocols that were applied during the course of the section 19 ASIC Act examinations to ensure that information subject to a valid claim of legal professional privilege was not disclosed were sufficient, and that no privileged information was disclosed during the course of any examinations. … Further, in light of the conditions on which ASIC proposes to release the examination transcripts to the AFP, and the secrecy provisions imposed on employees of the AFP by section 60A of the Australian Federal Police Act 1979 Cth [sic], ASIC does not consider that [AWB's] interests in the confidentiality of any information provided to ASIC by examinees will be adversely affected by the proposed release. Although it is ASIC's view that ... [AWB's] interests will [not] be adversely affected by any decision to release the information to the AFP on the limited basis identified in paragraph 5 above, ASIC proposes to give [AWB] an opportunity to make submissions in relation to the conditions to be imposed on the disclosure of the transcripts of examinations of current or former employees of [AWB] to the AFP under section 127(4) of the ASIC Act. 5 ASIC and AWB's solicitors corresponded for some months. By July 2008, the AFP request had extended to disclosure of the witness statements that had been provided voluntarily by the employees and former employees of AWB. 6 In general terms, AWB sought to prevent disclosure of the AWB Information to the AFP to the extent that the AWB Information would disclose a communication which is the subject of AWB's legal professional privilege. AWB did not seek access to the AWB Information. Instead, it suggested two possible solutions to the problem - the appointment of an independent third party to review the AWB Information to ensure that disclosure of the AWB Information would not disclose a communication which is the subject of AWB's legal professional privilege, or, pursuant to s 127(4A) of the ASIC Act, that conditions be attached to the disclosure of the AWB Information to the AFP. The conditions sought by the AWB were: (a) the proposed disclosure should only be made to certain specified officers of the AFP (AFP Officers); (b) any information that is the subject of the proposed disclosure must only be used internally by the AFP Officers to assist the AFP to perform or exercise its functions for the purposes of its investigation into possible breaches of Australian law committed by AWB, AWBI and certain individuals; (c) the AFP Officers must not disclose any information that is the subject of the proposed disclosure to any other person, either internally within the AFP or externally outside the AFP, unless the conditions contained in s 127(4) of the ASIC Act are satisfied; (d) AWB must be permitted to make submissions regarding any proposed disclosure by the AFP Officers to any other person; (e) If the AFP is required to disclose the information gained from ASIC by compulsion of law, the AFP must give notice to ASIC and AWB before this information is disclosed; and (f) Any disclosure by the AFP Officers to any other person must be subject to these conditions. 7 On 2 September 2008, a delegate of the Chairperson of ASIC made a decision to authorise the disclosure of the AWB Information to the AFP under s 127(4) of the ASIC Act, subject to certain conditions ("the Decision"). The delegate did not adopt either of the solutions proffered by AWB. Instead, the conditions imposed by the delegate pursuant to s 127(4A) were: 4.1 The information is only to be made available to AFP officers who are investigating possible breaches of Australian law committed by [AWB], [AWBI], and certain individuals; 4.2 the information may only be used by the AFP to enable or assist the AFP to perform or exercise its functions for the purposes of its investigation into possible breaches of Australian law committed by [AWB], [AWBI], and certain individuals; 4.3 the information is not to be disclosed voluntarily outside the AFP without the prior written consent of ASIC; 4.4 if the AFP is required to disclose the information by force of law (including by subpoena), the AFP must give prior written notice to ASIC and any party whose interests may be adversely affected by the disclosure; 4.5 each … transcript that has not been corrected and signed by the relevant examinee is to be given a notation to that effect before release to the AFP. 8 On 11 September 2008, AWB commenced these proceedings to challenge the Decision under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act") and s 39B of the Judiciary Act 1903 (Cth) on the following grounds: 1. constructive failure to exercise jurisdiction and absence of power; 2. error of law; 3. failing to take into account relevant considerations; 4. taking into account irrelevant considerations; 5. denial of natural justice. 9 At the time each of the employees or former employees of AWB were examined under s 19 of the ASIC Act, a set of procedures were agreed between ASIC and AWB for determining claims of legal professional privilege over documents which were required to be produced to ASIC pursuant to a notice issued by ASIC under s 30 of the ASIC Act. The protocol included an acknowledgement that if documents which are the subject of a claim of legal professional privilege by AWB were inadvertently disclosed to ASIC pursuant to the protocol, ASIC acknowledged and agreed that ASIC would not assert that legal professional privilege had been waived by AWB solely by reason of that inadvertent disclosure and any inspection of the documents by ASIC would not have the consequence of waiving legal professional privilege. 10 Of course, AWB was not examined or interviewed. Its former and current employees were the subject of the s 19 examinations. It was for that reason that AWB also sought to attend each of the examinations to protect its legal professional privilege. Prior to the commencement of the examination of an employee of AWB named Sarah Scales, Dr McNicol of Counsel, on behalf of the AWB and AWBI, made the following submissions: [W]e are submitting that [we are] entitled to a limited right of appearance at the section 19 examinations, solely for the purpose of protecting the company's (sic) legally privileged communications. We do not seek a general right of intervention in the examination. What we are seeking is a very limited and narrow right of audience in which we seek to address privilege issues. We are merely wishing to protect AWB[']s privilege, and in particular, any threatened disclosure of privileged communications. [AWB is] seeking to invoke and maintain its legal professional privilege in any material and information that is properly protected by privilege. I have three … main areas of concern and they are all closely related to one another. … [We are] concerned about oral disclosures being made by examinees and witnesses which may reveal AWB[']s privileged communications. AWB[']s privilege may be disclosed, albeit unintentionally, insofar as ASIC is concerned. ASIC may not seek to elicit any privileged material but it may nonetheless occur. A situation might arise, for example, where AWB[']s privilege is disclosed in an answer given by a witness to Mr Inspector's question. For example, the witness might volunteer deliberately in the belief that the oral disclosure will be of assistance to that particular witness - maybe in the belief it will be exculpatory of that witness. Now, the fact that ASIC has generously given the undertaking not to ask and not to intend to ask questions that will elicit answers that may, in turn, disclose privileged communications will not prevent this sort of privileged information being disclosed by the witness. We are aware, and it is true, that individual examinees do not have the power to waive the company's privilege. It's AWB[']s privilege we're here to maintain today. But individual witnesses can inadvertently or deliberately reveal, nonetheless, confidential communication. It's not so much the documents that we're concerned with or all those documents that were ruled upon, for example, by Young J in the Federal Court[;] we're concerned about the possibility of oral answers being given which disclose privileged communications…. That's our first concern, and as I said we have only three main concerns. The second one[,] which is a consequence of the first concern, is that if there is an unauthorised disclosure, and I refer to it as "unauthorised" because an individual does not have the capacity or the legal capacity to waive the company's privilege. If, nonetheless, there is an unauthorised disclosure by an individual employee for example, or an examinee of the privileged information, then ASIC will become fixed with knowledge of this privileged information, and it will still be privileged if AWB has not waived it. Now, the consequences of ASIC becoming fixed with such knowledge of privileged material has the potential of compromising the integrity of the investigation. It's difficult to unscramble pieces of privileged information from pieces of non-privileged information. It's difficult to segregate in the corporate mind of ASIC those pieces of information. And there is learning on this - cases which say that once you are aware and have knowledge of privileged information, you are in a sense tainted with that knowledge and you have that knowledge and you can't build that Chinese wall in your head. Now, there's also the problem of derivative use of that information once ASIC has knowledge of the privileged information. It may be used in - there will not be a flow-on effect to other information. And I make mention of the Cole Inquiry here where situations were given where individual witnesses revealed privileged information of the company, in the hope for example, that - or expectation - that [it] may be exculpatory of them. And unless the company - AWB, who obviously was present at the Cole Inquiry, unless they objected at that time then the privilege was said to have been lost or waived because of the silent acquiescence of the privilege holder, and that is the company itself. So my second concern, in short, is simply that once disclosed then the AWB[']s privileged communications cannot be ignored or segregated in the corporate mind of ASIC. And this has the potential to undermine the integrity of the examination because the intellectual use of that information will simply remain. And there's another related concern to this - the derivative [use] point - and that is that obviously there can be disclosures of written records of section 19 examinations under section 25 of the ASIC Act, and we're concerned about that because given there are several class actions on foot against AWB, that concern that we have is far from hypothetical. And the third concern is this. AWB has a fundamental right to claim privilege and this, we submit, this right does not interfere with the privacy of section 19 examinations. We're aware that examinations are to be conducted in private but we say that that privacy does not extend to preventing the exercise of fundamental common law rights. The privacy of your examinations might exist to protect the interest of examinees or their identity or the integrity of the investigation, but privacy has a particular connotation here. The documents themselves that are used at the examinations can ultimately be released in one way or another and could ultimately be used in evidence. And it's difficult to see how giving the company - AWB - a right to assert privilege will interfere with the privacy of the examinations. Most of the Cole information, for example, is publicly known and released and these examinations might be simply conducted with a view to swearing up some of those statements and that information that's already publicly known form the Cole Inquiry. So, our third concern is simply that it's fundamental that the company - AWB - as the privilege holder has a right to have an adequate opportunity to claim legal professional privilege in respect of its own privileged communication. Now adequate opportunity is a phrase that's used in the learning and it has been said "What is an adequate opportunity will depend on the facts of a particular case." But if there's an adequate opportunity it must be conferred on privilege holders to assert and invoke their privilege. We are aware that, through your email of 4 October 2007, that you said that you will be notifying - you ASIC - will be notifying witnesses at the commencement of the interviews, they're not obliged to disclose communications over which they or a third party may claim legal professional privilege. Well, you also have given a concession that you will not intend to ask questions that elicit answers that may disclose privileged communications. And you have said that in circumstances where a witness discloses a privileged communication, ASIC does not intend to ask the examinee to disclose the substance of that communication. Our submission is that these concessions are helpful but they do not go far enough to ensure that the company's privilege is and will be protected. There must be a specific invocation of privilege - legal professional privilege - privilege is personal to the holder of the privilege and the privilege may either be invoked or waived. And only the holder of the privilege may waive the privilege. And in the event of waiver, the communication that is otherwise privileged, will be released or disclosed. And the fact that ASIC will be notifying the examines and the witnesses that they're not obliged to disclose communications over which a third party - and in this case AWB being the third party - may have a claim to privilege, is not sufficient to protect the privilege of that party. Any my final point is simply this. This is a context where the ordinary concerns of confidentiality in the examinations have to some extent, at least, been eroded by the fact that much of what is being addressed in these examinations has already been canvassed at the public hearing of the Cole Inquiry. And we note that in, for example, the section 19 notice to Sarah Scales this morning, you have asked [her] to refresh her memory from statements that she gave to the Cole Inquiry in December 2005 in her addendum statement in February 2006, and her … oral evidence that she gave to the Enquiry in February 2006. And those are my submission[s], and thank you for the opportunity to present them. 11 The ASIC investigator responded to the submissions, in part, in the following terms: I'll confirm that at the preamble to the examinations that we'll be conducting. We'll be confirming to witnesses that they are - in answer to any question - they are not obliged to disclose communication[s] over which they or a third party may have a claim for legal professional privilege. We will also embark upon a description that if they wish to refuse to answer a question on the basis that to do so would disclose communication that may be the subject of claim for legal professional privilege, then they will be asked to provide the following information: (1) A description as to the general nature of communication. (2) To whom and by whom it was made. (3) The circumstances in which it was made. (4) Whether any obligation of confidentiality was imposed at the time of the communication, and if so, how. (5) The name of the party who may have a claim for privilege, and (6) An explanation of the grounds upon which they believe that the claim may be made. 12 After adjourning to take advice on the submissions, the investigator returned and said that he was not prepared to permit AWB to be represented at the examination of Ms Scales and therefore would not make a direction under the ASIC Act for such representation. The investigator was not prepared to issue reasons. After the investigator restated the six points identified in [11] above, the following exchange occurred: DR McNICOL: Thank you. Mr Inspector. I only just have one final question and that is, is it contemplated that - I think it was the penultimate point number 5 - where it was identified that the name of the person who may have a claim to privilege - can assert the privilege - is it contemplated that that person - examinee - can claim the privilege on behalf of the company? MR CARIDI: [T]he only party to whom a claim for legal professional privilege can make that claim is the holder themselves. In a situation such as this where … Sarah Scales may consider that a third party might have a claim, one would envisage that that may well be AWB. And so in an answer to that question, one would imagine that she would venture the answer - AWB would be the holder of the privilege. DR McNICOL: So it is contemplated that examinees can claim the privilege on behalf of the company? MR CARIDI: No, they're not entitled to make the claim. They can say that another party may have a claim and may make a claim, and if they do ASIC will proceed accordingly in the way that I have described. … MR CARIDI: Neither they could make the claim nor they can waive the claim as you have most rightly pointed out.

ISSUE 13 ASIC did not permit AWB or AWBI to protect any of its privileged communications from being inadvertently or deliberately disclosed by the examinees during the course of the s 19 examinations. Moreover, none of these arrangements was expressly said to apply when ASIC voluntarily obtained a witness statement from some of AWB's employees or former employees. In those circumstances, was ASIC required to consider whether passing the AWB Information to the AFP would disclose a communication which might be the subject of AWB's legal professional privilege? For the reasons that follow, the answer to that question is no.

LEGISLATION AND ANALYSIS 14 The decision by ASIC to disclose the AWB Information to the AFP was made under s 127(4) of the ASIC Act. Section 127 of the ASIC Act entitled "Confidentiality" provides, so far as is relevant, that: (1) ASIC must take all reasonable measures to protect from unauthorised use or disclosure information: (a) given to it in confidence in or in connection with the performance of its functions or the exercise of its powers under the corporations legislation (other than the excluded provisions); or (b) that is protected information. … (2) For the purposes of subsection (1), the disclosure of information as required or permitted by a law of the Commonwealth or a prescribed law of a State or internal Territory is taken to be authorised use and disclosure of the information. … (4) Where the Chairperson is satisfied that particular information: (a) will enable or assist … any other agency within the meaning of the Freedom of Information Act 1982, to perform or exercise any of the agency's functions or powers; … … the disclosure of the information to the agency … by a person whom the Chairperson authorises for the purpose is taken to be authorised use and disclosure of the information. (4A) The Chairperson may impose conditions to be complied with in relation to information disclosed under subsection (4). … (4E) A person must not intentionally or recklessly fail to comply with a condition imposed under subsection (4D). … (Emphasis added.) 15 The following matters are not in dispute. The AFP is an "agency" within the meaning of the Freedom of Information Act 1982 (Cth) (s 127(4)(a) of the ASIC Act) and the AWB Information is "information" for the purposes of s 127 of the ASIC Act. 16 It was also not contended by either side that a different analysis or result should obtain under s 127 of the ASIC Act for the transcripts of the s 19 interviews as opposed to the voluntarily obtained witness statements. This is not surprising; as s 127(1) makes clear, the section applies equally not only to information obtained in connection with its powers and functions under the corporations legislation but also to information "given to it in confidence" and obtained "in connection with the performance of its functions." There was no suggestion here that the 14 witness statements were given to ASIC otherwise than in confidence and in connection with the performance of its functions (here, the s 13 investigation). Both because the issue (ie whether a different analysis or result was required for the witness statements) was not raised by the parties and because I am independently satisfied that no different analysis or result is required, I need not and do not distinguish between the transcripts and witness statements for purposes of the following analysis. 17 The issue which lies at the heart of the dispute between ASIC and AWB concerns what occurs if an examinee or witness inadvertently, or deliberately, discloses material in which AWB claims privilege when AWB has not been provided with an opportunity to protect its privilege and ASIC is then requested to disclose the information (including the privileged communications) under s 127(4) of the ASIC Act. 18 Section 127(1) of the ASIC Act imposes an obligation on ASIC to take all reasonable measures to protect the unauthorised use or disclosure of information given to it in confidence in performance of its functions: Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1188 at [7]. Section 127(4) provides an exception to that general principle. Where ASIC is satisfied "particular information" will assist, for example, the AFP, then disclosure of that "particular information" to the AFP will be taken to be an authorised use and disclosure of that "particular information". 19 The exercise of the power under s 127(4) of the ASIC Act is the exercise of an additional power in relation to the "particular information" identified by ASIC at the time of the request by the AFP. It necessarily will involve consideration of "information" that did not exist at the time of the examination (here, the questions and answers recorded in the transcript) or the taking of the witness statement (here, the statement). It will also necessarily involve the consideration of matters that did not exist at the aforementioned times, including the nature of the agency function or power (here, criminal investigation by the AFP) and the usefulness of the information to that exercise of power (here, the conduct of that investigation). Section 127(4A) of the ASIC Act provides that ASIC may impose conditions in relation to disclosure of the "particular information" under s 127(4). The conditions imposed by ASIC in respect of the AWB Information are those set out in [7] above. 20 In the present case, the dispositive issue (see [13] above) has two aspects to it. The two aspects to consider are: 1. whether, in exercising the power under s 127(4), by deciding to pass the AWB Information to the AFP, ASIC failed to consider a relevant matter; and 2. a more basic question of power. For reasons which will become obvious, it is first necessary to deal with the question of power.

SECOND LIMB: QUESTION OF POWER 21 There is no factual foundation yet established that there is material in the AWB Information to which the legal professional privilege of AWB attaches. However, if the AWB Information does contain information to which the legal professional privilege of AWB attaches, ASIC would have power to pass on that material to the AFP. That conclusion requires development. 22 It is settled that "legal professional privilege is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client or his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services": Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at [9] and [11] and the authorities cited. 23 In the absence of a statutory provision to the contrary, legal professional privilege may be availed of to resist the giving of information or the production of documents in accordance with investigatory procedures of the kind contained in s 155 of the Trade Practices Act 1975 (Cth) ("the TPA"): Daniels Corporation 213 CLR 543 at [10] and [11]. Despite differences in language between the TPA and the ASIC Act, no different result ensues. There is no express provision in the ASIC Act abrogating legal professional privilege. Moreover, there is nothing in the ASIC Act supporting the contention that the abrogation of legal professional privilege is a necessary implication: see eg ss 1(1), 1(2), 1(3), Pt 3 and, in particular, ss 68 and 69. 24 In the course of argument, ASIC appeared to suggest there were qualifications to the general proposition that the ASIC Act did not abrogate legal professional privilege. The qualifications were, first, that the ASIC Act is silent as to whether a person other than a lawyer may refuse to give information on the ground that it would disclose a communication for which the person claims legal privilege. If that observation by ASIC was intended to provide support for a contention that an individual, not a lawyer, could be compelled by ASIC to disclose information for which the individual had a claim for legal professional privilege, then that contention is rejected. It is rejected because it finds no support in the Act and is contrary to authority (Daniels). There is no basis for distinguishing between a lawyer and an individual in the context of legal professional privilege. So much is made clear from the express words of s 69 of the ASIC Act. In the circumstances specified (which includes ASIC's powers of investigation, examination and information gathering in Pt 3), a lawyer may refuse to comply with a requirement to give information or produce a book, where to do so would involve the disclosure of a privileged communication with the lawyer in their capacity as a lawyer "unless … the person to whom, or by or on behalf of whom, the communication was made consents to the lawyer complying with the requirement" (emphasis added): s 69(2). In other words, consistent with authority, the section proceeds on the premise that the holder of the privilege (being the client regardless of whether the client is an individual or a body corporate) must consent to the disclosure of the privilege it holds. No other party is able to waive the privilege; it is the holder of the privilege (the client) that must act inconsistently with the maintenance of that privilege for privilege to be waived: see Cadbury Schweppes Pty Ltd v Amcor Ltd (2008) 246 ALR 137 at [17]. Any other result is contrary to the fundamental principles summarised in [21] and [22] above. 25 That then brings me to the second of ASIC's suggested qualifications - that even if the ASIC Act does not abrogate legal professional privilege, the privilege rises no higher than that ASIC cannot compel a person, subject to a s 19 notice to attend for examination, from disclosing his or her own privileged information. That contention requires closer examination. 26 On the assumption that, at the outset of a s 19 examination, ASIC told an examinee that legal professional privilege may be availed of by that person to resist the giving of information or the production of documents that would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, then disclosure by an examinee or witness of information in which he or she holds the privilege would constitute an act inconsistent with the maintenance of that privilege and privilege would be waived: see Cadbury 246 ALR 137 at [13]. So much may be accepted. It is consistent with the established principles on waiver. 27 If ASIC's submission is intended to suggest that if that same person (for example, an employee, director, consultant to, but not a legal adviser of, a third party) was privy to the privileged communications of the third party, then ASIC could compel production of that privileged information, that contention should be rejected for the reasons outlined in [21] and [22] above. 28 If, however, ASIC meant to submit not that it could compel a person (here, an employee or former employee) to disclose a third party's (here, a company's) privilege by force of statute, but rather that the person may lack the standing to assert the third party's privilege, then that contention may be accepted. Just as an employee can only waive a corporation's privilege if he or she has authority to do so (typically, where the person is a current officer or director), so too may an employee only assert a claim of privilege belonging to a corporation if he or she has the requisite authority: Commodity Futures Trading Commission v Weintraub 471 US 343, 348-49 (1985); In re Grand Jury Proceedings 469 F3d 24 (1st Cir 2006); Wrench LLC v Taco Bell Corporation 212 FRD 514, 517 (WD Mich 2002) (collecting cases); see also S McNicol, Law of Privilege (1992) at 161-62 (citing Rochfort v Trade Practices Commission (1982) 153 CLR 134 for the proposition that an employee cannot assert the privilege of self-incrimination on behalf of a corporation [at that time corporations were still thought to have such a privilege] because the privilege is personal to the holder). To put it another way, the ASIC investigator was legally correct when he told counsel for AWB that "[n]either … could [the employees] make the claim [of privilege on behalf of AWB] nor [could they] waive the claim…": [12] above. 29 In other words, I accept the contention that although ASIC cannot compel the production of legally privileged communications of a person (ie the ASIC Act does not override or abrogate legal professional privilege), that does not mean that ASIC cannot receive such communications under any circumstances. As ASIC contended, legal professional privilege affords a person immunity from compulsory disclosure of its privileged communication (Daniels). That immunity does not prevent receipt by ASIC in the circumstances of the present case of legally privileged information from the examinees and the witnesses where they were not the holder of the privilege. 30 That conclusion sounds, at least at first blush, as harsh or unjust. Even Mason J, in holding that an employee could not claim privilege against self-incrimination on behalf of his or her corporate employer in order to resist a subpoena, accepted that (Rochfort at 145): To acknowledge that the employee's possession [of privileged information] is sufficient in itself to sustain an obligation to produce, without reference to his employer, would be to disregard the employer's rights with respect to his documents. What is more it would deprive him of the privilege of objecting to produce a document on the ground that it has a tendency to incriminate him. However, closer examination reveals both why this result is not as harsh as it first seems and why it is necessary. 31 First, although the examination under s 19 of the ASIC Act is private, it is an examination where "the inspector may give directions about who may be present during it, or during a part of it": s 22(1). If a direction is made for a person to attend, that person is entitled to attend the examination: s 22(2). The "person" referred to in s 22 is not the examinee's lawyer. The right of the examinee's lawyer to attend and address the inspector is separately and expressly provided for in s 23. Who then could that person be? One obvious contender is the legal adviser of the examinee's employer in circumstances such as those outlined in the extracts of the transcript (see [10] above). But ASIC did not permit that to occur. The power to make directions must include directions not only about the identity of the legal representative who might be entitled to attend on behalf of the company at any examination, but also about the non-disclosure of the contents of the examination to any person or entity (including the entity seeking to protect its privileged communications). 32 Of course, there cannot be a general rule that a legal representative of the employer or the former employer of the examinee should be permitted to attend to protect the employer's privilege. There may well be circumstances where to do so would jeopardise the investigation: see eg Gangemi v Australian Securities and Investments Commission (2003) 129 FCR 284 at [35], [38]; see also Rochfort at 145 (Mason J) (stating that request for the production of privileged information should generally be directed to the employer but "the protection of the employer's interests [in the information] must give way to the public interest in the efficient administration of justice in case of collision between the two"). But in the absence of such a circumstance, the voluntary grant by ASIC of a limited right to be present in the manner outlined by counsel for AWB might have forestalled the issues raised in these proceedings. 33 However, neither AWB nor AWBI took any step to review the decision of the investigator to refuse to permit AWB to be represented at the examinations. Whether such an effort would have succeeded seems unlikely (see [36]-[37] below); in this regard, it is illuminating to examine United States v Western Electric Corp Inc 1990-1 Trade Cases ¶ 68,939; 1990 WL 39129 at *1 (DDC 1990) (stating that the company had no right to have its own counsel present, whether in addition to or in lieu of individual counsel, at examinations of present or former employees because that "would be an obvious prescription for frustrating investigations into wrongdoing"). 34 However that may be, the fact of the matter is that ASIC now has possession of information which, at least in theory, could be subject to a valid claim of privilege by AWB. The question then is whether ASIC is entitled to make use of that information, notwithstanding the possible privilege claim, and the answer to that question is yes. As the Court of Appeal in Cowell v British American Tobacco Australia Services Ltd [2007] VSCA 301 said (at [32]): [A]lthough it is now accepted that legal professional privilege is more than just a rule of evidence or procedure, it is clear that it is not to be characterised as a rule of law conferring individual rights sounding in damages or an injunction to restrain an apprehended or continued breach [Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 565 (Gummow J)]. Consequently, once information in a privileged document has come into the hands of a party to litigation, even as a result of compulsive process which is later reversed, the fact that the document was and remains privileged does not of itself prevent that party from making use of the information [Calcraft v Guest [1898] 1 QB 759, 763-4; Baker v Campbell (1983) 153 CLR 52 (Gibbs CJ, in diss), 67, 80 (Mason J, in diss) 101, 109-110 (Brennan J in diss), 129 (Dawson J); Trevorrow v State of South Australia (No 4) (2006) 94 SASR 64, 70 (Doyle CJ), 80 (Debelle J), 101 (White J); Heydon, Cross on Evidence, 7th Aust Ed (2004) [25025]. 35 Secondly, a government agency or authority (such as ASIC) in the exercise of its compulsory powers must provide the person the subject of the exercise of the power with a reasonable opportunity to claim legal professional privilege on his or her own behalf: see Federal Commissioner of Taxation v Citibank Ltd (1989) 20 FCR 403, 414 and MM v Australian Crime Commission (2007) 244 ALR 452 at [35]-[36]; but see JMA Accounting Pty Ltd v Commissioner of Taxation (2004) 139 FCR 537 at [10]-[13]. Given the arrangements put in place by ASIC (see [9], [11] above), there was no (and could be no) complaint that the examinees were not provided with a reasonable opportunity to claim legal professional privilege on their own behalf. 36 I should also note that examinees were even given an opportunity to raise an issue as to a possible third-party privilege. No doubt this is the best policy, but whether it was required as a matter of law may be doubted: see Rochfort at 145-47 (noting that in general effort should be made to respect potential interests of the third-party lawyer but that there are various circumstances where the interests of justice will trump protection of those interests). In MM, Emmett J held that a person must be given a reasonable opportunity to claim privilege on behalf of others as well as himself or herself. In support of this proposition, his Honour relied on the Full Court's decision in Citibank; however, that decision was disapproved by the later Full Court decision in JMA. Moreover, the conclusion in MM rested on a premise which may be in doubt. Emmett J reasoned (at [35]) that an examinee "would be obliged to make claims for privilege in respect of documents where the privilege might reasonably be expected to exist in order to ensure that such a claim for privilege would not be lost." (Emphasis added.) In other words, his Honour found that the obligation to make a claim on behalf of others must exist in order to prevent waiver. However, as I have already noted, and as the parties in this case recognised from the start, only the holder of the privilege may waive it. Thus there is no possibility that the failure of an employee to claim privilege on behalf of the corporation would result in waiver or loss of the privilege (except perhaps where the employee is authorised to waive the privilege). To the contrary, it is precisely if a general duty to claim the privilege is imposed that a risk of waiver arises - that is, imagine that an employee under a duty was given a reasonable opportunity to claim privilege on behalf of the employer but failed to do so; under Mann v Carnell (1999) 201 CLR 1 that would be conduct inconsistent with the maintenance of the privilege and would mean that any employee, without the knowledge or authority of the corporate employer, could waive the corporation's privilege. For those reasons, it does not seem either necessary or wise to impose a general obligation on an examinee to claim privilege on behalf of a third party, nor to create a general obligation on behalf of the examiner to give the examinee a reasonable opportunity to make such a claim. While an employee may have an obligation in contract or equity to maintain the confidences of his or her employer (NP Generations Pty Ltd v Feneley (2001) 80 SASR 151 at [16]-[19]), that cannot be converted into an ability to control the exercise of the employer's legal professional privilege. 37 But while there may be a question as to what obligations or abilities a person may have in respect of claims of privilege on behalf of third parties, it is clear that there is no requirement in the ASIC Act, which imposes an obligation on ASIC to afford a person or entity (other than the person the subject of the exercise of the compulsory power) (ie the third party itself): 1. an opportunity to intervene or interject in the exercise of the compulsory power over another in order to claim or assert legal professional privilege on behalf of itself: see, in particular Pts 3 and 7 of the ASIC Act; or 2. notice that the exercise of its compulsory power in relation to another individual (such as an examinee) may result in that individual providing information that is subject to a claim of legal professional privilege by that third party. See by way of example, May v Deputy Commissioner of Taxation (1999) 92 FCR 152 at [31], [36] and [38] and MM at [36] and [37]. 38 That is not surprising. If ASIC were under an obligation to notify a third party that the exercise of its compulsory power in relation to another individual (such as an examinee) may result in that individual providing information that is subject to a claim of legal professional privilege by that third party, by what criteria would ASIC determine when and in what circumstances it was required to notify a third party? Would ASIC be required to interrupt an examination upon becoming aware of the prospect of or the fact of information being provided by an examinee which might be the subject of a claim of privilege by a third party? How would ASIC determine if it was properly subject to a claim for legal professional privilege? The list of difficulties is endless and the possibility great that efficient and timely investigation of wrongdoing would be frustrated. 39 Moreover, there are measures that the third party can take to prevent disclosure of its privileged information even in the absence of a right to intervene. First, where an examinee is subject to the exercise of compulsory powers by a government authority and in possession of privileged information where the holder of the privilege is a third party, it is open to the holder of privilege to require or authorise the examinee to assert the holder's privilege to the authority: MM at [33] (cf s 122(3) of the Evidence Act 1995 (Cth)). Of course, the efficacy of this strategy is likely to be limited in situations where the third party does not have prior notice of the examination or other exercise of power over another under the ASIC Act. 40 Secondly, equity may restrain use of confidential information improperly obtained, especially where the information is used as a "springboard for a claim or defence in litigation": Cowell v British American Tobacco Australia Services Ltd [2007] VSCA 301 at [15]-[17]. As Emmett J noted in MM, there is nothing to prevent the holder of a claim for privilege making a privilege claim prior to the tendering of evidence against the holder of any information obtained by ASIC in circumstances not giving rise to a waiver: eg ss 76-83 of the ASIC Act; ss 118 and 122 of the Evidence Act 1995 (Cth) and British Coal Corporation v Dennis Rye Ltd (No 2) [1988] 3 All ER 816. Put another way, "the right of the holder of the privilege not to have privileged material used in evidence against him or her [or it]" is not affected by the disclosure of the privileged material by a party within the scope of the privilege but not entitled to control its exercise: MM at [38]. This is a natural consequence of the basic principle that only the holder of the privilege may waive it. Moreover, although not applicable in the present case (because the third party here is a corporation, which has no privilege against self-incrimination: Daniels at [31]), that preservation of privilege extends not only to legal professional privilege but also privilege against self-incrimination because the ASIC Act abrogates privilege against self-incrimination (s 68(1)) and then provides a "use immunity" to the examinee in relation to information obtained in a s 19 examination where the requirements of s 68(2) are satisfied: s 68(3) of the ASIC Act. Interestingly, unlike other Commonwealth legislation, the "use immunity" in the ASIC Act only applies to persons in relation to the making of an oral statement or the signing of a record and not to the production of documents: s 76(1)(d) of the ASIC Act; see also Privilege in Perspective, ALRC Report No 107 (2007) at Ch 7 and in particular, paras [7.65] - [7.69] and [7.103] and [7.104]. 41 Against that background, it is necessary to turn to consider s 127 of the ASIC Act.

FIRST LIMB: POWER UNDER S 127(4) 42 It is well established that "an administrative decision may be impugned if the decision maker was bound to take a factor into account in reaching his or her decision but failed to do so": MM at [40]. If a statute states expressly the factors that must be taken into account that will be decisive. However, if the relevant factors are not expressly stated, they must be determined by necessary implication from the subject matter, scope and purpose of the Act: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1985) 162 CLR 24, 39-40; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323, 347-348. 43 As noted earlier, in the present case the question does not centre upon ASIC's power to compel the examinee to reveal anything; it turns upon the proper construction of ASIC's separate and distinct power to pass on what, by hypothesis, is privileged information. The relevant power is found in s 127 of the ASIC Act. Two questions arise: what does s 127 provide and, in particular, does it state expressly the factors that must be taken into account by the decision maker in deciding under s 127(4) "that particular information … will enable or assist … [the AFP] … to perform or exercise any of the agency's functions or powers". 44 Section 127 is set out above (see [14]). Subject to ss (2) to (4), it protects the confidentiality of information to which it applies. Subsection (4) is the relevant section. It provides that the delegate of the Chairperson must consider whether the "particular information" will enable or assist the AFP to perform or exercise of its functions or powers. Although there was some dispute in the present case about the purpose of ASIC's investigation, the AWB did not suggest that the release by ASIC to the AFP of the AWB Information was for any purpose other than to enable or assist the AFP to perform or exercise its functions or powers: s 127(4). 45 However, that is not the end of the enquiry. The disclosure of the AWB Information by ASIC to the AFP was subject to conditions imposed under s 127(4A) (see [7] above). ASIC's s 127 power to disclose is discretionary: Johns at 428 and 469. The conditions are important. When, as here, conditions are imposed they are enforceable as an equitable obligation. The AFP is affected by the terms on which it received the AWB Information: Johns at 429. The obligation (expressed as a condition) is enforceable, at least, by injunction: Johns at 429. 46 The question which then arises is whether the disclosure of the AWB Information under s 127(4) requires ASIC to observe procedural fairness not only towards the examinee but also a party in the position of AWB consistent with the principles set out in Johns v ASC (1993) 178 CLR 408. The exercise of the statutory power is conditional upon the observance of the rules of natural justice (Johns at 470; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 591 and Annetts v McCann (1990) 170 CLR 596, 598), but does that natural justice requirement extend to AWB? 47 First, it must be recalled that the AWB Information was protected by disclosure (s 127(1)) subject to the qualifications prescribed in ss (2)-(4). That antecedent right or duty is not determinative. However, it is a relevant factor affecting the exercise by ASIC of its discretionary statutory power to disclose the AWB Information to the AFP. Exercise of the authority conferred by s 127(4) was "apt to affect adversely" the interests of the examinees who are prima facie entitled to have the transcripts kept confidential: Johns at 430. It was for that reason, consistent with Johns, that ASIC observed the rules of natural justice and informed each of the examinees that it proposed to disclose the transcripts and gave each examinee an opportunity to oppose: Johns at 430-431. 48 The present case, however, concerns not the examinee but AWB, the employer or previous employer of each examinee. In Johns, McHugh J said (at 472) that "the need to preserve the confidentiality of ASIC's investigation does not exclude procedural fairness, but reduces its content, perhaps in some circumstances to nothing". Here, the question of whether or not ASIC was obliged to observe the rules of natural justice in the case of AWB did not arise. Although AWB was not told by ASIC of the proposed disclosures to the AFP, it learned of that fact, was "given the opportunity to put submissions before [ASIC] relating to matters requiring the non-disclosure of information by [ASIC]" (Johns at 472) and took advantage of that opportunity by making numerous submissions opposing the disclosure. AWB might have persuaded ASIC to accept or adopt its submissions. It did not. In the circumstances, it is not necessary to pursue McHugh J's observation to its end to determine precisely how much the content of procedural fairness may have been reduced with respect to AWB; I need only find (and do find) that the opportunity to be heard that was given to AWB was sufficient.

CONCLUSIONS 49 It follows from what I have just said that none of AWB's grounds of review is made out. The specific grounds are disposed of as follows.

Constructive failure to exercise jurisdiction and absence of power - ss 5(1)(c) and (d) of the ADJR Act 50 There was no and could be no constructive failure to exercise jurisdiction or an absence of power contrary to ss 5(1)(c) and (d) of the ADJR Act. AWB's contentions that ASIC was "[not] empowered by the ASIC Act to obtain confidential and privileged communications from persons other than the holder of the privilege in circumstances where the holder has not expressly or by implication waived the privilege" is too broad a proposition. ASIC is not empowered to compel production from the privilege-holder and did not do so. 51 However, as noted earlier, although ASIC cannot directly compel the production of legally privileged communications, that does not mean that ASIC cannot receive such communications otherwise than through compulsion of the privilege-holder. Moreover, s 127(4) expressly confers power upon ASIC to disclose information properly obtained to third parties.

Error of law and failure to take into account relevant considerations - ss 5(1)(e), (f) and (j) of the ADJR Act 52 AWB's contentions that the conduct of the delegate constituted a breach of s 5(1)(e) of the ADJR Act is also rejected. The contentions proceed on a factual misconception that the delegate did not inspect the AWB Information. The delegate did (see [14] of the Decision). Moreover, the allegations that the delegate failed to consider whether the act of disclosure by ASIC to the AFP constituted a use of confidential and legally privileged communications and would destroy the confidentiality that AWB was entitled to maintain assume that it was necessary for ASIC to consider those matters. With respect to the first matter (use of confidential and privileged information), it was not necessary for ASIC to do so because, as noted earlier, "the fact that the [communication] was and remains privileged does not of itself prevent [a party] from making use of that document": see [33] above. With respect to whether confidentiality would be destroyed, the delegate carefully considered that issue and imposed conditions on the disclosure to the AFP designed to preserve confidentiality and limit any further disclosure or use of the information. In this connection, it is also important to reiterate that because any privilege belonging to AWB still exists and has not been waived, it is still open to AWB to oppose, on the ground of legal professional privilege, the use against it in any legal proceeding of the AWB Information.

Taking into account irrelevant considerations - s 5(1)(e) of the ADJR Act 53 This contention proceeded on the assumption that the conditions imposed by ASIC under s 127(4) "fall short of protecting the rights which AWB had not been given the opportunity to assert against ASIC". AWB's "rights" were to prevent the inadvertent or deliberate disclosure of privileged information which may have been included in the AWB Information. For the reasons explained above (see [30] to [37] above), there was no obligation on ASIC to provide AWB with any opportunity to protect those "rights" in the first instance (ie the right to be present at the examinations or otherwise interject privilege objections), and in any event, AWB did not challenge ASIC's decision to exclude it from the information-gathering process. ASIC obtained the information other than by compulsion of the privilege-holder. It is entitled to use it. AWB is still entitled to protect its rights in the manner described above (see [38] to [39]).

Denial of natural justice - s 5(1)(a) of the ADJR Act 54 AWB contended that it was not given an opportunity to be heard on the "balance" between the need for protection of AWB's privilege and the need for an efficient and timely investigation, which the delegate considered relevant to the Decision, or on whether the conditions imposed by the delegate would protect against further undermining of the confidentiality in any privileged communications. 55 In my view, there was no denial of natural justice. AWB was "given the opportunity to put submissions before [ASIC] relating to matters requiring the non-disclosure of information by [ASIC]" (Johns at 472) and took advantage of that opportunity by making numerous submissions opposing the disclosure. As I have found, this opportunity to be heard was enough to satisfy any requirements of natural justice in the circumstances: see [47] above. Moreover, it is of the utmost importance to recall that in a proceeding of this nature it is neither necessary nor right to decide the merits of the decision. 56 For those reasons, I would dismiss the application and order the applicant to pay the respondent's costs to be taxed in default of agreement. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

Associate: Dated: 11 December 2008 Counsel for the Applicant: Mr C Scerri QC and Mr P Corbett

Solicitor for the Applicant: Allens Arthur Robinson

Counsel for the Respondent: Mr S McLeish SC and Ms Z Maud

Solicitor for the Respondent: Australian Securities and Investments Commission

Australian Securities and Investment Commission Act 2001(Cth)

Trade Practices Act 1975(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (14 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (20)

Cited By (3)