Braswell v United States 487 US 99

Abuse of process or quasi-estoppel 4In an earlier interlocutory application, Mr Lee sought an order that the examination summonses and the subject orders for production be set aside. Initially, the grounds he then relied on included that the liquidator was not eligible to have the examination summonses or orders issued, or was seeking to examine on matters not within the meaning of 'examinable affairs' under the (Cth) Corporations Act 2001. Not all of those grounds were pressed on that application, which ultimately relied on allegations of improper purpose and bias - which were also invoked in support of an application for removal of the liquidator - and of non-disclosure in respect of the application for the issue of the examination summonses and orders for production. 5That application was heard by Black J, on 24 July and 16 August 2012, at the conclusion of which his Honour gave a judgment dismissing Mr Lee's application [In the matter of Kala Capital Pty Limited (in liquidation) [2012] NSWSC 1073]. After rejecting each of the grounds invoked for setting aside the summonses and the orders for production, including that their issue was an abuse of process (at [20]), for apprehended bias (at [24]), and for non-disclosure (at [30]), his Honour added (at [33]), "I do not understand Mr Lee to contest the examination summonses and orders for production other than on the bases noted above, which I have not accepted". 6In those circumstances, one starts from the position that, after bringing unsuccessfully an application to set aside the relevant orders, that was heard at some length, and in which Mr Lee could have advanced any grounds he wished to support the setting aside of the orders for production, he now brings a fresh application seeking the same relief (albeit with some additional more confined relief in the alternative) on grounds which he did not then advance. While principles of res judicata and issue estoppel probably do not apply in these circumstances, it is well established that even following an interlocutory hearing that resolves an issue, it can be an abuse of process to seek to re-agitate the issue [Stephenson v Garnet [1898] 1 QB 677; Brinds Ltd v Chapmans Ltd (Unreported judgment of Needham J, NSWSC, 24 September 1985, BC8500523)]. In that light, one approaches this case powerfully influenced by the consideration that there has been a previous unsuccessful attempt to set aside the subject orders for production. It might well be that that would suffice to justify dismissal of at least parts of the present application. However, other parts are more refined, and might be supported on different grounds. 7The applicant complains that the orders for production go beyond the examinable affairs of the company. In Re BPTC Limited (in Liquidation) (1993) 10 ACSR 756, Bryson J describe the legal limits of the power then contained in (NSW) Supreme Court Rules 1970, Pt 36 r 12 - which was relevantly the predecessor of Civil Procedure Act, s 68 - in the present context as being defined by "whether a person acting judicially could reasonably be of the view that production of the document or thing described in the order was required for the purpose of examining a person within the bounds set by s 597 and the internal limitation in the examination orders", so that if a proposed order fell within the power so construed, a discretion existed to make the order (at 763). 8It is quite conceivable that production of some documents or things might be required for the purpose of examining a person, even though that document or thing does not itself directly relate to the examinable affairs of a corporation. For example, a director's passport may have no direct relationship to the examinable affairs of a corporation, but it may tend to show where the director was on a day or days relevant to events to be the subject of examination. Similarly, a director's telephone bills might show his or her whereabouts and engagements on dates relevant to the subject matter of the examination. For that reason, I do not think it can be said that just because there is no overt connection between the documents sought and the examinable affairs of the corporation, the order is beyond power. On the other hand, it will be more difficult for those at whose suit the order issued to support it in such circumstances, at least without some evidence or argument pointing to the relevance of such material. 9In this case, an application that the orders for production should be set aside as being excessively wide could have been made at the time of the application that was made before Black J. There does not seem to be any sufficient explanation as to why it was not then made. This part of the application, in particular, is one that is amenable to the quasi-estoppel argument. 10Because the liquidator has made some sensible and practical concessions - in submissions lodged today - in respect of the scope of the orders for production, I will limit the scope of the orders for production in accordance with those concessions, but no further.

Objection on the ground of self-incrimination 11The next matter with which I shall deal is the objection on the grounds that the order requires production of documents that would require the applicant to incriminate himself. 12There is no doubt that the subject matter of the examination will, in part at least, involve matters in respect of which it is likely to be suggested that the applicant will have contravened directors or officers duties prescribed by the Corporations Act, in such a way as to render himself liable, at least for 'civil penalties' under that Act. Such 'civil penalties' are no doubt penalties for the purposes of the law in respect of self-incrimination. 13However, it is important to recognize a number of distinctions in this area of the law. First, this is not a case - like Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 209 ALR 271 - in which the proceedings are for a penalty. It is well established, as was upheld in that case, that courts will not make an order for discovery in proceedings for a penalty. That is a distinct rule from that which allows a claim for privilege against self-incrimination in response to a subpoena (or order for production or order to answer interrogatories). 14This distinction was recognized in the Court of Appeal, in a case which held that orders for disclosure that might require a respondent to incriminate himself or herself ought not be made ex parte in association with Mareva orders [Vasil v National Australia Bank Ltd [1999] NSWCA 161; (1999) 46 NSWLR 207], in which Meagher JA, albeit in dissent, accepted the respondent's submission (at [2]): ... that all relevant authorities made it clear that, in the case of a subpoena duces tecum and in the case of a subpoena ad testificandum, in the case of an order to give discovery or an order granting leave to interrogate, the objection that the answers or the documents might incriminate the person required to answer questions or produce documents should be taken at the time when the information was required to be taken or the documents produced, not earlier. His Honour added: "The authorities on this point are quite clear, and are in the respondent's favour." 15Although Stein JA took a different view on the ultimate question in that case in respect of its application to an ex parte Mareva order, his Honour said (at [8]): I accept, as Meagher JA makes plain in his judgment, that in the case of a subpoena, discovery or interrogatories, if the person concerned wishes to obtain the privilege, he or she does so at a time when the documents are produced or the interrogatories are required to be answered. In this way the privilege is preserved. 16Similarly, in the case of an order for production, the circumstance that it might require production of documents which would have a tendency to incriminate the person to whom it is addressed does not render it invalid or liable to be set aside on that ground, but the recipient may take objection to production of the documents at the time of production. The procedure to be invoked in that respect is prescribed by (NSW) Uniform Civil Procedure Rules 2005 ("UCPR"), r 1.9; in this regard, see In the matter of Triflex Electrical Pty Limited (in liq) [2012] NSWSC 1206 (9 August 2012). 17In this case, therefore, it seems to me that it would be inappropriate to set aside the orders for production, or any of them, on the basis that they call for documents such that as might incriminate the recipient. In addition, for reasons explained in Triflex Electrical, I do not think it necessary for such orders to be valid, that they incorporate a "carve out" of the type suggested in claim two in the interlocutory process. That is because provision for the type of procedure envisaged is already made, in effect, by r 1.9. However, pursuant to r 1.9, it remains open, to Mr Lee at least, to object to the production of documents when complying with the order, on the ground that their production might expose him to a penalty or forfeiture. 18Before returning to that in more detail, I shall address the argument that Mr Lee is entitled to take that objection in respect of documents to be produced by his corporate "alter egos", for want of a better word, namely, Archirox and Arten Atelier. In this respect, it is said that they are one-person companies, in that he is the sole shareholder and director in each. Although there is some evidence that one of those companies has another employee, I shall proceed on the basis that they are, for all intents and purposes, one-person companies. 19In this country, two cases have to some extent addressed this argument, but neither in a way that concludes it. In Microsoft Corporation v CX Computer Pty Ltd [2002] FCA 3; (2002) 116 FCR 372, Lindgren J in the Federal Court was not satisfied that it was impossible or impracticable for the company's list of documents to be verified by an individual other than the sole director who set up a claim of self incrimination. In R v Ronen [2004] NSWCCA 67; (2005) 64 NSWLR 707, the Court of Criminal Appeal was satisfied that there were persons other than the accused with sufficient control over the subpoenaed documents, and thus with the capacity to ensure that the companies complied with their legal obligations to comply with the subpoenas, so that the issue and service of the subpoenas did not derogate from the accused's privilege against self incrimination. 20However, in the course of that judgment, Spigelman CJ referred to a number of decisions in the United States of America relevant to so-called one-person companies. In Braswell v United States 487 US 99 (1988), 109 - 110, Rehnquist CJ, delivering the opinion of the court, said that the custodian's act of production was not deemed a personal act, but rather, the act of the corporation, and "any claim of Fifth Amendment privilege asserted by the agent would be tantamount to a claim of privilege by the corporation - which of course possesses no such privilege" - a situation analogous with that previously in this jurisdiction. In Environment Protection Authority v Caltex Refining Company Proprietary Limited [1993] HCA 74; (1993) 178 CLR 477, McHugh J (at 542) referred to the result in Braswell without disapproval. 21The majority judgment in Braswell, as Spigelman CJ mentioned in Ronen, considered the implications of a conclusion that an individual entitled to claim privilege in fact produced records as the custodian for the company. The court said that in a criminal prosecution against the custodian, the government could not introduce into evidence before the jury the fact that the subpoena was served upon, and the corporation's documents were delivered by, one particular individual, the custodian. To that observation the court appended (at 118 (footnote 11)): We leave open the question whether the agency rationale supports compelling a custodian to produce corporate records when the custodian is able to establish, by showing for example that he is the sole employee and officer of the corporation, that the jury would inevitably conclude that he produced the records. 22As Spigelman CJ further pointed out, it was argued in subsequent cases that there was an exception in the case of a corporation with a sole owner, director, officer and employee. In the United States, that argument has been consistently rejected: by the Second Circuit in Matter of Grand Jury Subpoenas 959 F 2d 1158 (2d Cir 1992); by the Fourth Circuit in United States v Stone 976 F 2d 909 (4th Cir 1992) cert denied, 507 US 1029 (1993); and, by the New York District Court in United States v Moseley 832 F Supp 56 (WDNY 1993). 23In United States v Stone, the United States Court of Appeals' Fourth Circuit rejected the submission, on the following basis: Ashford is a one-man operation; however, it is still a corporation, a state law-regulated entity that has a separate legal existence from Wujkowski shielding him from its liability. The business could have been formed as an unincorporated sole proprietorship and production of its business records protected by the privilege against self-incrimination ... Wujkowski chose the corporate form and gained its attendant benefits, and we hold, in accord with the decisions of sister circuits, that he cannot now disregard the corporate form to shield his business records from production. 24That was applied in United States v Moseley, and a similar result was suggested in obiter dicta of Rand J in the Supreme Court of Canada in Klein v Bell [1955] 2 DLR 513, 523 - 524. 25In Ronen, Spigelman CJ left open the position in Australia of a one-person company (at [79]). In reaching that conclusion, his Honour gave considerable emphasis to the accusatorial nature of criminal proceedings, and the inappropriateness, absent statutory authority, of making any order that has the effect that an accused against whom an indictment has been presented must do something calculated to assist the preparation or presentation of the Crown case (at [67]). 26That concern does not operate in the present circumstances. Mason P also addressed the United States cases (at [109] and following). His Honour, on the assumption that the appellants were the only proper officers of their respective corporations, said that it did not follow that the issue of the subpoenas was oppressive as regards them: On the assumption made, the appellants are presented with the option of appointing a proper officer to cause the subpoena to be answered. This step would involve no incriminatory admission. Nor, in my view would it involve a step that impinged upon the appellants' right to put the Crown to proof of guilt without requiring them to assist in the process. It stems from their antecedent relationship with corporations that, in all probability, they brought into being. It is an aspect of their continuing duties as officers of the corporations (if they choose to remain such) to ensure that the corporations obey corporate legal obligations. If those duties are burdensome or inappropriate, the respondents can step aside from a managerial role. It is not oppressive to offer them this choice, or some milder choice such as the appointment of a "proper officer" (if there is presently no such officer who does not fear self-incrimination). 27Subsequently, his Honour reached the following conclusions: [112] The command of the subpoenas is addressed to the corporations. As legal entities they have independent duties to comply. "Corporate existence implies amenability to legal process" (Wilson (at 374)). If it were shown to be the case (and it has not been thus far) that there is no-one with custody or possession of the records who could lawfully answer the call of the subpoena on the corporations' behalf without risk of testimonial self-incrimination, then the corporations must still take steps to comply. This may mean the appointment of a receiver. Or it may mean that a "proper officer" with nothing to fear by way of self-incrimination has to be appointed (cf United States v Barth 745 F 2d 184 (2d Cir 1984) at 189, cert denied 470 US 1004; Re Two Grand Jury Subpoenae Duces Tecum 769 F 2d 52 (2d Cir 1985); Re Two Grand Jury Subpoenae Duces Tecum 793 F 2d 69 (2d Cir 1986) at 74; Braswell (at 116)). [113] For reasons already given, it is not to the point for the appellants to say that they are the present directing minds of the various corporations and that they personally would have to set in train the steps to "outsource" the performance of the duty falling on the corporations. To adapt the language of Lumbard J speaking for the court in Re Two Grand Jury Subpoenae Duces Tecum 793 F 2d 69 (2d Cir 1986) at 74: "... It is the duty of the [companies], not the [Supreme Court] or the [prosecution], to identify an appropriate custodian to produce subpoenaed documents. If no one may act as custodian without incriminating himself or herself, the firm is required to produce the subpoenaed records by supplying a new agent who has had no previous connection with the firm". [114] At the end of the day, the oppression argument is an attempt by the appellants to frustrate the subpoenas by suggesting that they trench upon the appellants' rights. This is to shift the proper focus of inquiry. The corporations are not free to select an individual to be their proper officer " '... who because he fears self-incrimination may thus secure for the corporation the benefits of a privilege it does not have'. Such a result would effectively permit the corporation to assert on its own behalf the personal privilege of its individual agents" (United States v Kordel 397 US 1 (1969) at 8). 28Kirby J agreed with both Spigelman CJ and Mason P. 29Essentially for the reasons enunciated in United States v Stone and by Mason P in Ronen, I am of the view that in this context the sole director of a one-person corporation is not entitled to object to the production of documents by that corporation on the basis that it would be incriminatory of that director. The production is by the person as an agent of the company, not on his or her own behalf. If the director fears self-incrimination, then it is open to him or her to take steps to have the company appoint some other proper officer for the purpose of compliance with the order for production. 30That then brings me back to the detail of the application, which I treat as an objection under r 1.9. In addition, the applicant invoked Civil Procedure Act, s 87, which relevantly provides as follows: 87 Protection against self-incrimination in relation to interlocutory matters (cf Act No 25 1995, sections 128 and 133) (1) In this section: civil penalty has the same meaning as it has in the Evidence Act 1995. conduct includes both act and omission. culpable conduct means conduct that, under: (a) the laws of New South Wales, or (b) the laws of any other State or Territory, or (c) the laws of the Commonwealth, or (d) the laws of a foreign country, constitutes an offence or renders a person liable to a civil penalty. order for production means an interlocutory order requiring a person (other than a body corporate) to provide evidence to the court or to a party to a proceeding before the court. provide evidence means: (a) to provide an answer to a question or to produce a document or thing, or (b) to swear an affidavit, or (c) to file and serve an affidavit or a witness statement, or (d) to permit possession to be taken of a document or thing. (2) This section applies in circumstances in which: (a) an application is made for, or the court makes, an order for production against a person, and (b) the person objects to the making of such an order, or applies for the revocation of such an order, on the ground that the evidence required by the order may tend to prove that the person has engaged in culpable conduct. (2A) This section does not apply in circumstances in which section 128A of the Evidence Act 1995 applies. (3) If the court finds that there are reasonable grounds for the objection or application referred to in subsection (2) (b), the court is to inform the person, or the person's legal representative: (a) that the person need not provide the evidence, and (b) that, if the person provides the evidence, the court will give a certificate under this section, and (c) of the effect of such a certificate. (4) If the person informs the court that he or she will provide the evidence, the court is to cause the person to be given a certificate under this section in respect of the evidence. (5) The court is also to cause a person to be given a certificate under this section if the court overrules an objection to the making of an order for production, or refuses an application for the revocation of such an order, but, after the evidence is provided, the court finds that there were reasonable grounds for the objection or application. (6) Despite anything in this section, the court may make an order for production if it is satisfied of the following: (a) that the evidence required by the order may tend to prove that the person has engaged in culpable conduct, (b) that the culpable conduct does not comprise conduct that, under: (i) the laws of any State or Territory (other than New South Wales), or (ii) the laws of the Commonwealth, or (iii) the laws of a foreign country, constitutes an offence or renders a person liable to a civil penalty,(c) that the interests of justice require that the person provide the evidence. (7) If the court makes an order for production under subsection (6), it is to cause the person to be given a certificate under this section in respect of the evidence required by the order. (8) In any proceedings: (a) evidence provided by a person in respect of which a certificate under this section has been given, and (b) evidence of any information, document or thing obtained as a direct or indirect consequence of the person having provided such evidence, cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence. (9) If a question arises under this section relating to a document, the court may order that the document be produced to it and may inspect the document for the purpose of determining the question. 31If s 87 be invoked, then the consequence is not that the order for production is revoked or set aside, but that the court informs the person required to produce documents in accordance with subs 3. For those purposes, the first question therefore must be whether there are reasonable grounds for the objection. Similarly, under r 1.9, the court is required to consider whether to uphold or overrule to the objection, and usually the issue is whether there are reasonable grounds for the objection. 32As I indicated earlier, it is clear enough that some aspects of the examination will go to alleged breaches of directors' duties, and be intended to establish a basis for what may be 'civil penalty proceedings'. But that is by no means to say that all aspects of the examination will do so. It is likely that some of the documents caught by the order for production will have the potential to be self-incriminatory, but it is improbable that all of the documents caught by the order for production will do so. 33Before me there has been no attempt to segregate the documents caught by the order into those that might properly be the subject of a claim for privilege and those that might not. There is no evidence of any attempt by a responsible legal practitioner to review the material and allocate it into those different categories, and there is no evidence to show how some categories of documents or how particular categories of documents might attract privilege. In those circumstances, I am entirely unable to be satisfied in respect of any particular document that there are reasonable grounds for the objection. 34No basis for making the order sought in para 3 of the interlocutory process - which in my view can properly be brought, effectively as an objection under CPA, s 87, or UCPR, r 1.9, notwithstanding dismissal of the earlier application to set aside - has therefore been established.

Claim for legal professional privilege 35The final issue is a claim for legal professional privilege in respect of documents produced in answer to a separate subpoena by Paul Andrew Brown, a solicitor. Initially, there was an envelope of documents - Packet S12 - in respect of all of which a claim for privilege was made. There has been extracted from the whole of the documents produced by that solicitor. In the course of the proceedings, the documents in respect of which there was a claim for privilege were further confined, it being conceded that in respect of some of those in the envelope, Mr Lee was acting on behalf of, or was instructing the solicitor on behalf of, the plaintiff company Kala Capital - although in respect of another set of documents it was maintained that he was seeking advice as to his personal position. 36It is true that it would appear that he was seeking some advice, to some extent, in respect of his personal position, as one who was required to guarantee the lease; but it seems clear enough that the reason his guarantee was sought was that he was then a director of the company, and I am not satisfied that he was acting other than as a director of the company for all purposes in seeking that advice, or that Paul Brown was retained other than by the company. I would not uphold the claim for legal professional privilege in respect of the documents in packet S12, and I will grant access, in respect of the documents in that packet, to the liquidator.

Orders 37I make the following orders: (1)Order that each of the orders for production be varied in accordance with and to the effect set out in paragraph [15] and [18] of the supplementary outline submissions of Respondents initialled by me, dated this day and placed with the papers. (2)Interlocutory process otherwise dismissed, with costs. (3)Grant access to the liquidator to documents in packet S-14 produced by JDK Legal. (4)Extend time for compliance with the orders for production to 4 February 2013 at 9am before the Registrar. (5)Grant access to Kala Capital Pty Ltd (in liquidation) and Schon Gregory Condon to documents in packet S-12 produced by Paul A Brown & Co. (6)The order for production addressed to Alfred Kin Chau Lee be amended as follows: (a)Delete paragraphs 5(c), 6, 22 and 25; (b)At the end of paragraph 7, insert the words "relating to work done for Kala Capital and/or Lok Man Ng"; (c)In paragraph 10, delete the word "all" and insert the word "the" before the words "Invoices rendered"; (d)In paragraph 13, delete the words "Group Certificates"; (e)At the end of paragraph 16, insert the words "relating to work done and the Invoices for Kala Capital and/or Lok Man Ng"; (f)In paragraph 26, insert the words "for Kala Capital and/or Lok Man Ng" after the words "projects undertaken"; and (g)In paragraph 27, insert the words "relating to projects carried out for Kala Capital and/or Lok Man Ng" after the words "1 July 2008 to date". (7)The order for production addressed to Arten Atelier Pty Ltd be amended as follows: (h)Delete paragraphs 2 and 11; (i)At the end of paragraph 3, insert the words "relating to work done for Kala Capital Pty Ltd and/or Lok Man Ng"; (j)In paragraph 6, delete the word "all" and insert the word "the" before the words "Invoices rendered"; (k)In paragraph 9, delete the words "Group Certificates"; (l)At the end of paragraph 12, insert the words "relating to work done and the Invoices for Kala Capital and/or Lok Man Ng" after the words "payments made)"; (m)In paragraph 18, insert the words "undertaken for Kala Capital and/or Lok Man Ng" after the words "karaoke projects"; and (n)In paragraph 19, insert the words "relating to projects carried out for Kala Capital Pty Ltd and/or Lok Man Ng" after the words "relevant period". (8)The order for production addressed to Archirox Pty Ltd be amended as follows: (o)Delete paragraphs 2, 11 and 17; (p)At the end of paragraph 3, insert the words "relating to work done for Kala Capital Pty Ltd and/or Lok Man Ng"; (q)In paragraph 6, delete the word "all" and insert the word "the" before the words "Invoices rendered"; (r)In paragraph 9, delete the words "Group Certificates"; (s)At the end of paragraph 12, insert the words "relating to work done and the Invoices for Kala Capital and/or Lok Man Ng" after the words "payments made)"; (t)In paragraph 18, insert the words "undertaken for Kala Capital and/or Lok Man Ng" after the words "karaoke projects"; and (u)In paragraph 19, insert the words "relating to projects carried out for Kala Capital Pty Ltd and/or Lok Man Ng" after the words "relevant period".

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 December 2012