50 In In the matter of Two Grand Jury Subpoenas Duces Tecum Served Upon Union Bank of Switzerland (1993) 601 NYS 2d 253 the Supreme Court of New York set aside Grand Jury subpoenas where compliance would involve the Swiss Bank in violation of Swiss secrecy laws, and where the documents could be obtained within 2-3 months by application to the Swiss authorities. Weissberg J held that before the Bank would be required to engage in conduct which violated Swiss secrecy laws, the Court would need to be satisfied, considering the comity involved, that the information was crucial to the Grand Jury investigation; that the information cannot otherwise be obtained in a timely fashion, and that there was a failure of good faith attempts on the part of the Bank to comply with the subpoena.
51 On the other hand, in In re Grand Jury Proceedings; United States v Field (1976) 532 F 2d 404 the United States Court of Appeals of the Fifth Circuit began with the proposition that the fact that obedience to the subpoena would subject the witness to criminal prosecution in his country of residence was insufficient of itself to prevent enforcement of the subpoenas. The Court then undertook a balancing exercise in relation to the interests involved which it resolved in favour of assisting the Grand Jury to obtain information which might possibly uncover criminal activities of the most serious nature. Whilst reasonable efforts should be made to avoid placing a person in a position whereby obedience to one law results in a breach of another:
"... this court simply cannot acquiesce in the proposition that United States criminal investigations must be thwarted whenever there is conflict with the interest of other states."
52 Field was followed by the Eleventh Circuit in In re Grand Jury Proceedings; United States v The Bank of Nova Scotia (1982) 691 F 2d 1384 and applied to a situation in which the subpoena called for the production to the US Grand Jury of documents located in the foreign country, rather than testimonial evidence. The Court rejected the proposition that application should be made to the foreign court for an order permitting disclosure because of the cost in time and money involved and the uncertainty of success. The United States ought not to be put in the position of seeking the permission of a foreign court to be allowed to do something which is lawful under United States law.
53 In Brannigan the Privy Council referred to the decision of the Ontario Court of Appeal In re Spencer and The Queen (1983) 145 DLR (3d) 344. That case went on appeal to the Supreme Court of Canada (1985) 21 DLR (4th) 756, but the appeal was dismissed. A witness was required to testify notwithstanding his exposure to conviction under foreign law. Estey J agreed with the majority, but indicated that, in his view, it would have been preferable for the proceedings at first instance to have been stayed, so as to allow application to have been made to the foreign court for an order permitting disclosure of the evidence sought to be adduced.
54 ALRC Report No 80, Legal Risk in International Transactions, refers to the balancing exercise undertaken by courts in the USA between the interests of the US plaintiff as litigant and the integrity of any US laws involved in the dispute on the one hand, and any interests of the foreign bank and the foreign jurisdiction on the other. The report states (4.24) that in England, the balancing approach has been supplemented by an emphasis on the sovereignty of the foreign state, and the legitimate interests of professional confidentiality. MacKinnon v Donaldson, Lufkin and Jenrette Securities Corporation (1986) 1 Ch 482 was cited in support of that proposition.
55 MacKinnon v Donaldson, Lufkin and Jenrette Securities Corporation concerned a subpoena and order served upon Citibank in London (which was not a party to the proceedings) to produce books and papers held in its New York office, relating to transactions that took place in New York on an account maintained by a Bahamanian company. Hoffmann J held that, exceptional circumstances apart, a court should not require a foreigner to produce documents which are outside the jurisdiction, concerning business transacted outside the jurisdiction:
"The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in respect of their conduct outside the jurisdiction."
(At 493.) Banks are in a special position because documents which they hold relate not only to their own affairs, but also to the affairs of their customers. A duty of confidence is owed to the customer, regulated by the law of the country where the account is kept. That duty is, in some countries, reinforced by criminal sanctions:
"If every country where a bank happened to carry on business asserted a right to require that bank to produce documents relating to accounts kept in any other such country, banks would be in the unhappy position of being forced to submit to whichever sovereign was able to apply the greatest pressure."
(At 494.) Application to secure production of the documents could have been made to the courts in New York. His Lordship held (at 499) that where alternative procedures are available, an infringement of sovereignty can seldom be justified except, perhaps, on the ground of urgent necessity.
56 FDC Co Ltd v The Chase Manhattan Bank NA (1990) 1 HKLR 277 is a decision of the Court of Appeal in Hong Kong, to similar effect. A subpoena had been issued by the United States Internal Revenue Service against the Bank in America designed to obtain information about the account maintained by the plaintiff, an American firm, with the Hong Kong branch of the defendant Bank. The Court held that a Bank's duty of confidence is not subject to territorial limits, and it restrained the defendant from complying with the subpoena, and from transferring the information to the USA. The Court recognised the dilemma in which the Bank found itself - if it transferred the information to the USA it might be prosecuted in Hong Kong; if it did not do so it might be proceeded against in New York for contempt. Nonetheless, the Court declined to treat that difficulty as an overriding factor, and was not persuaded that the importance which the law of Hong Kong attaches to the preservation of the confidence between the Bank and its customers is outweighed by other interests to which the law attaches importance.
57 These cases focus on the circumstances in which courts will or will not allow their own procedures to be used to compel the production of documents or disclosure of information where production or disclosure is forbidden by foreign law. They are not directly applicable where the question is whether a person has a reasonable excuse for not complying with a notice lawfully issued by a body such as NCA. But where the excuse relied upon is the commission of an offence under foreign law they provide some assistance by way of analogy.
58 It was accepted by the Bank that the documents called for by the Notice are relevant to the inquiry being conducted by the NCA pursuant to the Ministerial reference. I have no evidence as to the importance of the documents to that investigation. It may be that until the documents are produced and examined, any assessment of their importance would be little more than speculation. I mention the absence of evidence on this topic to indicate that, whilst the onus lies on the Bank to establish a reasonable excuse, it may be incumbent on NCA to bring forward evidence of a particular matter if it wishes to rely upon it, having regard to the fact that NCA has joined in the adoption of the declaratory procedure so as to determine whether, in the particular circumstances of the present case, foreign law provides a reasonable excuse for non-production of the documents in question.
59 The most important factor, in any balancing exercise, is that the documents called for by the Notice relate to transactions undertaken by, or in relation to, the Bank in Australia, with persons in Australia, where the records which once existed in Australia relating to those transactions have either been destroyed, or removed, to Malta because it was convenient for the Bank to proceed in that way. I use the expression "transactions undertaken by, or in relation to, the Bank" so as not to convey any view as to whether the Bank was or was not conducting the business of banking in Australia in the years in question, as that matter has not been the subject of submissions by either side. And it will be recalled that I have already found that the Bank's procedures were not adopted for the purpose of circumventing investigation of the Bank or its customers by Australian regulatory authorities.
60 In those circumstances, a reasonable person would conclude (subject to the issue of the availability of alternative means of securing the information in question, to which I shall return), that the Australian public interest in the investigation of criminal activity in Australia, possibly involving organised crime, outweighs any public or private interest in the maintenance of banker/customer confidentiality under the laws of Malta. This is particularly so when those laws themselves recognise that the confidentiality of that relationship is, in some circumstances, to be displaced in favour of the investigation and prosecution of particular criminal activity, and when it is suspected that the Australian banking system has been used in connection with criminal activity, or the proceeds thereof.
61 Accordingly, I would hold that (subject to the issue of alternative availability) even if there is a real and appreciable risk that for the Bank to produce the documents called for by the Notice would involve it in the commission of an offence under Maltese law, that would not constitute a "reasonable excuse" for non-production of the documents in question. That is so whether or not the proviso to s 257 of the Criminal Code, referred to at paragraph 30 above, provides an available defence. If it does, then that would provide an additional reason for coming to that conclusion.
62 Does it make any difference if the NCA is able to obtain the documents the subject of the s 29 Notice by means of an investigation order issued by the Criminal Court of Malta under s 8A of the Prevention of Money Laundering Act 1994? In one sense it may seem odd that the existence of an alternative means of obtaining the information in question should provide a reasonable excuse to the recipient of a Notice for not producing the documents, if the NCA decides to proceed by that route. It is for the NCA to decide how it will proceed, and unless the decision to proceed by one means rather than another is vitiated by Wednesbury unreasonableness, the existence of an alternative is of no avail to the recipient of the Notice.
63 But the Courts have treated the availability of alternative means of securing the information in question, which does not involve any risk of prosecution under foreign law, as relevant to the issue of whether the Court's processes should be used to compel its production. And the weighing exercise to which the Privy Council referred to in Brannigan would be undertaken on a false basis if there were left out of account the fact (assuming it to be a fact) that the information sought could be obtained by another means which would not expose the recipient of the Notice to the risk of prosecution, without materially adverse consequences to the inquiry.
64 Accordingly, I would hold that if NCA could obtain the documents called for by the Notice by means of an investigation order under Maltese laws, without materially adverse consequences to its inquiry, then a real and appreciable risk of prosecution under Maltese law if the documents were produced to NCA pursuant to the Notice, would constitute a reasonable excuse for non-production of the documents in question.
65 NCA has submitted that the true operation of Maltese law is that it cannot obtain the documents in that way. This issue was raised for the first time in closing submissions. To that issue I shall return. But a consequence of the NCA's participation in the declaratory procedure is that the responsibility for adducing evidence as to any prejudice to the inquiry, should the NCA proceed to seek an investigation order under Maltese law, falls upon it. It is beside the point that if the matter had proceeded in a different way it would have been the NCA, rather than the Federal Court, which would have been charged with the responsibility of determining the factual question of prejudice to the inquiry.
66 My attention has not been directed to any reasons put forward by the NCA in correspondence, for not taking up the offer made on behalf of the Bank in its solicitor's letter of 9 November 1998 (referred to at par 19 above) to co-operate with the making of an application by Australian authorities in the Maltese Courts. Whilst the second respondent, in his reasons for decision given on 26 February 1999 stated that he had "a clear duty" to weigh up the competing questions of the NCA's investigative needs and the matters put forward by the Bank's solicitors, including possible breaches of Maltese law and alternate sources of information, he did not thereafter advert to the possibility of an application being made to the Maltese authorities, or mention any adverse effects to the investigation should NCA proceed in that way.
67 The second respondent swore an affidavit on 13 May 1999 designed to establish that the s 8A procedures were not available because the information then available to the NCA did not identify the commission of any relevant offence, nor did it identify any particular suspect person in relation to any offence, upon which an application could be made to the Maltese Attorney-General for assistance. No other reference was made to any adverse consequences for its inquiry if NCA was to proceed in that way.
68 In cross-examination, Mr Melick indicated that any application to the Maltese Attorney-General would be made through the Attorney-General's Department on behalf of the NCA through the mutual assistance scheme. He got no advice as to the time it would take to make such an application and obtain the documents under Maltese law.
69 Mr Melick gave the following evidence at T p 30:
"To do that, your Honour, I've got to explain how we make mutual assistance requests, that's all. The Attorney-General's Department makes mutual assistance requests on our behalf. They refer to the Mutual Assistance Act and they insist that we have a suspect, a series of evidence and that we can show that the evidence we get from another country will materially assist in the prosecution of that offender. If you don't get to that threshold, they're not interested.
MR PEMBROKE: Because of the opinion which you've expressed about your lack of satisfaction about sufficient evidence to prove the commission of an offence involving the Bank of Valletta, you don't think that the mutual assistance program can be enlivened? --- It's a question of law whether or not it can be enlivened or it's a matter of practicality, I don't think it can be.
The practicality gets back to your opinion about the lack of sufficient evidence to prove the commission of an offence? --- Yes, it does."
And at p 34 Mr Melick gave the following evidence under cross-examination:
"When a fresh notice was issued in 1998, did you take steps to make any inquiry from persons expert in Maltese law as to the availability of the procedure which is now being considered? --- No, because I considered the procedure to be completely impractical.
Is that because of the evidence you have given this morning, based upon your opinion as to the sufficiency of the evidence to prove the commission of an offence? --- In part, that was one of the reasons. The other reason was my experience with such applications which can take up to seven years to complete. The average time of a mutual assistance application, of the ones I'm aware of in our office at the moment, is several years, and we have one that has gone for eight years now."
70 Mr Melick justified not seeking advice as to the Maltese position on the basis that the NCA had enough experience with the "Mid Med Bank applications which got us nowhere". But those applications related to the enforcement of forfeiture orders. What was proposed here was an application for an Investigation Order made with the co-operation of the Bank which would be the subject of the Order. Mr Melick professed to have a general understanding, based on some advice from a Maltese friend of his, presumably at about the time of the Mid Med application that:
"... in places like Malta, Guernsey, Israel, Switzerland, Cayman Islands; any organisation; any country which has a banking system designed to facilitate free trade, and I think it is probably to express it, that the courts make it very difficult for an MA request to succeed and I'm not aware of even a simple MA request which hasn't even opposed being achieved in under 18 months to two years."
71 Mr Melick was present when Dr Muscat gave evidence to the effect that he had no reason to think that the documents called for by the Notice could not be obtained by utilising the procedures set out in s 8A of the Prevention of Money Laundering Act. Dr Muscat was not cross-examined upon that contention. It is self evident that there would be some cost and some delay associated with the making of an application. However, in the light of the failure to cross-examine Dr Muscat, and the generally unspecific nature of the understanding to which Mr Melick referred, and the failure to advert to any practical problems associated with making an application to the Maltese authorities in the correspondence, or in the second respondent's decision, or in the evidence in chief, I am not satisfied if NCA can obtain the documents called by the Notice by means of an investigation order under Maltese law, that any materially adverse consequences would flow to the NCA's inquiry, or that the inquiry would be materially prejudiced by pursuit of that course.