Findex Group Ltd v iiNet Ltd

Supreme Court of NSW|2017-04-28|Before: Ward CJ, Rein J, McDougall J

iiNet Ltd (First Defendant) iiNet (Ozemail) Pty Ltd (Second Defendant) LinkedIn Australia Pty Ltd (Third Defendant) David Keith McKay (Fourth Defendant) ASIC (Applicant) Representation: Counsel: P Singleton (Applicant - ASIC) MA Friedgut (Plaintiffs)

Solicitors: Conrad Gray (Applicant - ASIC) Harmers Workplace Lawyers (Plaintiffs) Corrs Chambers Westgarth (Third Defendant) Just Dispute Resolution (Fourth Defendant) File Number(s): 2016/00271090 Publication restriction: Nil

Judgment

HER HONOUR: Before me for hearing on 28 April 2017 was an application by the Australian Securities and Investments Commission (ASIC), claiming public interest immunity in respect of certain documents seized from or produced by a Mr McKay, a former employee of Findex Group Limited (Findex).
Findex is the first plaintiff in proceedings brought in this Court (2016/00271090) seeking the preliminary discovery of documents to enable the plaintiffs to ascertain the true identity of the publisher of certain allegedly disparaging and defamatory publications. The second plaintiff is the managing director of Findex. The third and fourth plaintiffs are senior officers of Findex.
The plaintiffs obtained orders for preliminary discovery from McDougall J on 13 September 2016 and then, on 16 September 2016, Rein J made search (or Anton Piller) orders in standard form, on the basis that the evidence before him gave rise to a concern that the then putative defendant (Mr McKay) (who was subsequently joined as the fourth defendant by consent orders made by Rein J on 22 September 2016) would attempt to "cover his tracks" if he learnt of the proceedings. It was following the execution of those orders that the documents the subject of the present application were produced. I was informed by counsel for the plaintiffs on the hearing of the present application that the first, second and third defendants "have really fallen out of the proceedings altogether" and there is reference in correspondence on the court file to the proceedings having been discontinued against those defendants, but no notice of discontinuance appears to have been filed. In any event, none of the defendants (including the fourth defendant) appeared on the hearing of this application.
ASIC is not a party to those proceedings. ASIC intervened in the proceedings by filing a notice of motion on 21 December 2016 seeking orders that there be no access to, or inspection of, certain identified documents and that none of those documents be tendered into evidence in the proceedings. The scope of the documents the subject of its claim for public interest immunity was subsequently narrowed, as set out in an amended notice of motion that was filed, with leave, at the outset of the hearing before me. In that amended notice of motion, ASIC also seeks the return (to the Independent Solicitor appointed in accordance with the earlier search orders) of a particular document that has already been made available to the plaintiffs' legal representatives and one officer of the first plaintiff (Mr Doucas), a compliance and governance officer. ASIC's application for the return of that document is on the basis of the same public interest immunity claim. ASIC says that it was by inadvertence that this document was not previously made the subject of the claim for public interest immunity.
The underlying dispute between the plaintiffs and Mr McKay, arising out of the allegedly defamatory publications, is as to alleged misleading and deceptive conduct by Mr McKay and also, in the case of the second to fourth plaintiffs, a claim in defamation. Counsel appearing for the plaintiffs on the present application informed me that the plaintiffs had suspected that the publications were made by a former disgruntled employee (and, in fact, that they had suspected it was Mr McKay) and that the preliminary discovery application was in order to be sure about this. Counsel for the plaintiffs also confirmed that the plaintiffs do not need access to the documents the subject of ASIC's claim for public interest immunity for the purposes of the preliminary discovery application; rather, he says that "[t]he reason that we need them is because we say that it is almost certain that these documents will disclose further causes of action, deceptive and misleading conduct causes of action, defamation causes of action and separate causes of action that we have against Mr McKay", arising out of the disclosure or publication by Mr McKay of material to ASIC. Reference was made to other proceedings that are apparently on foot in the Federal Court of Australia in relation to Mr McKay but the present application relates only to the preliminary discovery proceedings.

Affidavit evidence relied upon by ASIC

ASIC relied on two affidavits both affirmed on 25 January 2017 by a solicitor in its employ. The first affidavit outlines the claim for public interest immunity in very broad terms; the second, a confidential affidavit (to which the plaintiffs have not been given access) outlines the claim with far more particularity and, relevantly, identifies by reference to the content of the documents in question the basis on which it is said that their disclosure will be harmful to the public interest.
The plaintiffs objected to the filing in Court and reading of the second affidavit on two bases. First, that ASIC had been ordered to file and serve the evidence on which it relied by 27 January 2017 (that order having been made when ASIC was represented in Court and there having been no objection made thereto) but had not served the confidential affidavit. The second was by reference to the audi alteram partem principle of procedural fairness. The plaintiffs submitted that it was in the interest of the administration of justice that, as a matter of procedural fairness, they be advised of the basis of ASIC's public interest immunity claim, and of the evidence that ASIC proposed to adduce in support of it, in order to be able to respond to it.
The plaintiffs submitted that the onus of establishing a basis for public interest immunity was not discharged by the first of the two ASIC affidavits, in which the deponent deposed variously to a concern that disclosure "may be contrary" to the public interest and that it "would be harmful to the public interest" and hence that if the second affidavit was not (as they said it should not be) read, ASIC's claim for public interest immunity would fail. This argument echoes that later raised by the plaintiffs (after I had read the confidential affidavit) on the substantive question as to whether a valid claim for public interest immunity had been made (dealt with below at [27]-[29]).
ASIC, on the other hand, argued that disclosure to the plaintiffs of the confidential affidavit would render futile its claim for public interest immunity, since the affidavit contained detailed information as to the content of the documents in question as a necessary part of identifying how harm would arise from the publication of those documents. Counsel for ASIC indicated that, of the broad well recognised categories of immunity, this claim fell into the "effective investigations" category; in other words, as I understand it, ASIC's position is that disclosure of the confidential affidavit (and hence the content of the documents) would be prejudicial to the effective policing and investigation functions performed by ASIC in its capacity as a regulatory authority.
As to the two bases on which objection was made by the plaintiffs to the reception into evidence of the confidential affidavit into evidence, ASIC argued, first, that the direction by McDougall J for the filing and service of evidence could not be construed as the making of an order that overrode or abrogated the claim for public interest immunity (a fundamental common law privilege). It noted that the open affidavit that was served within the time specified by McDougall J itself made reference to the existence of a confidential affidavit and that no objection was raised prior to the hearing before me as to this affidavit being read. In particular, ASIC foreshadowed that if I were minded to order disclosure of the confidential affidavit then it might elect not to read it and would then seek an adjournment in order to prepare another affidavit outlining the claim for immunity but without reference in that affidavit to the content of the documents in question.
As to the second basis relied upon by the plaintiffs (its natural justice claim), ASIC pointed out that a public interest immunity claim involves a determination of three matters: whether there is a valid claim for immunity; whether there is a valid need for disclosure; and (if both the first two questions are answered in the affirmative) whether balancing the overall public interest, the interest in secrecy is greater than the needs of justice in the particular case (referring to Alister v The Queen (1983) 154 CLR 404 at 412 (Gibbs CJ)). ASIC maintained that the first step is not a matter inter partes and hence that the question of natural justice does not arise at that stage (referring to Young v Quinn (1985) 4 FCR 483 at 485-486 (Bowen CJ)).
ASIC also referred to National Crime Authority v Gould (1989) 23 FCR 191, where the tender of confidential evidence was permitted, and argued that there were reasons for not permitting disclosure of the affidavit (even if limited to the plaintiffs' legal representatives), namely that to do so would itself be an encroachment on the immunity and might place the legal representatives in a difficult position (where, to avoid an accidental disclosure, the legal representatives might consider themselves forced to withdraw) (referring to Hilton v Wells (1985) 5 FCR 296; Commonwealth of Australia v Northern Land Council (1993) 176 CLR 604; [1993] HCA 24).
Finally, ASIC maintained that, in order to rule on the validity of the public immunity claim, it would be necessary for me first to read the confidential affidavit and argued that it was essential that deponents of affidavits of this kind be able to be candid and to give as full a description of matters in their affidavits as appropriate without concern that the affidavits would be made available to anyone other than the judge.
By way of background on the initial question as to whether the confidential affidavit should be read (without its disclosure to the plaintiffs' legal representatives), I note that in R v Bebic (Court of Criminal Appeal (NSW), 27 May 1982, unrep), the Court of Criminal Appeal, considering a claim by the Department of Prime Minister and Cabinet of public interest immunity in response to a subpoena seeking documents related to an important Crown witness (in an appeal against conviction for charges of conspiring to make and detonate explosives), was faced with an application that access to the affidavit relied upon in support of the application itself be restricted to the Court on grounds that its contents would or might themselves compromise the claim for privilege. The Court of Criminal Appeal noted (at 4-5) that: We had and we still have some doubts about the propriety of restricting the affidavit in the way proposed. However, it may well be that that course is, in certain cases, of which this is one, no more than a logical extension of the established practice of the courts inspecting the allegedly privileged documents itself. See Conway v Rimmer [1908] AC 910, and Sankey v Whitlam [1978] 142 CLR 1. … It seems to us that granted that it is now commonplace for judges to make a private inspection of documents in order to resolve a claim for privilege (see Conway at 979 and 995-6 and Sankey at 65) it follows that in a proper case the judge may similarly keep to himself the affidavit by which the claim is supported. It is a question of public interest which is to be decided separate from the lis between the principal antagonists, in which, in the present case, the party answering the subpoena is not involved. We have of course taken account of the principle that the question of public interest, as is made clear in Sankey may involve conflict between the public interest asserted by the claim for privilege and the public interest in the due administration of justice. We think that to disclose the affidavit might prejudice the claim for privilege. We therefore conclude our order is that it is to be retained sealed up with the papers.
In Nestle Australia Ltd v Commissioner of Taxation (Cth) (1986) 11 FCR 453, Wilcox J in the Federal Court upheld a claim for public interest immunity over certain documents containing information provided by various foreign governments. That information had been provided on the basis that it would be treated confidentially, in some cases on the basis that the identity of neither the person within the foreign government providing the information nor the foreign government itself would be revealed. It was claimed that disclosure would be contrary to the public interest in that it would seriously inhibit the ability of the Commissioner to obtain information which was provided voluntarily from officers of foreign governments and would prejudice his ability to obtain information essential to enquiries and investigations. Some of the reasons supporting the claim were set out in a confidential document, it being said that disclosure of these reasons would itself be contrary to the public interest. Wilcox J said (at 460): Having read the document I think that this claim is justified. The reasons themselves provide identification of some of the relevant foreign governments. It is never satisfying to be required to receive material relating to the manner in which a judicial discretion is to be exercised which is not freely available to the parties concerned in the matter. Nor is it desirable to preclude a party from challenging the validity of reasons put before the Court. However, in the case of claims to public interest immunity, it is sometimes necessary to take that course: see Alister v The Queen (1984) 51 ALR 480 at 481 and Jackson v Wells (1985) 5 FCR 296 at 307-308. This is such a case. I accept the statement of Mr Brook that disclosure of the detailed reasons would itself be inimical to the public interest.
Turning to National Crime Authority v Gould, to which particular reference was made by ASIC, this involved a claim of public interest immunity by the National Crime Authority (NCA) in relation to documents sought by subpoena in committal proceedings against persons accused of committing federal drug importation offences. A magistrate of the Local Court of NSW had dismissed the immunity claim and ordered production of the documents within seven days. That decision was the subject of a judicial review application in the Federal Court. The basis of the claim for public interest immunity was contained in two affidavits. The first was sworn by a solicitor for the NCA (who lacked the necessary authority to make a claim for public interest immunity) and contained the detailed basis on which the claim was made. The NCA sought that this affidavit be viewed only by the Court. The second affidavit was sworn by an officer of the NCA with the necessary authority to make a claim for immunity, and expressed the view that the matters disclosed in the first affidavit, and in particular the grounds on which the immunity was claimed in specific paragraphs of it, would prejudice the operations and effectiveness of the NCA in fulfilling its statutory functions. The magistrate refused to view the first affidavit, although the exact basis of that refusal was unclear.
Relevantly, Foster J in the Federal Court, who considered that the comments in Bebic were of general application, was of the view (at 198) that if the magistrate had refused to view the first affidavit on the basis that he should not do so unless it was first disclosed to the defence, then he would have fallen into error. His Honour noted (at 198) that: The affidavit may, itself, contain material which if disclosed, could adversely effect [sic] public interest. The very reasons advanced in the affidavit for the non-disclosure of the materials sought in the subpoena may themselves indicate facts the disclosure of which in a public forum might well be inimical to the proper and efficient conduct of the operations of the NCA… Of course they may not; in which case, the Court may well think it appropriate to make the contents available to the defence for the argument of the question of immunity. Such considerations cannot, of course, arise unless the Court has regard to the contents of the affidavit in the first place.
Having regard to both parties' submissions on this preliminary issue, I was of the view that in order properly to rule on the application (and in particular the first question as to whether a valid claim of public interest immunity had been raised) it was necessary for me to read the confidential affidavit and that I should do so without first ordering its disclosure to the legal representatives for the plaintiffs (given the intimation that the affidavit itself disclosed the nature and details of the claim of immunity by reference to the documents over which the immunity was claimed). I adjourned the hearing briefly in order to do so.
Having read the confidential affidavit (though not at that stage the documents themselves) I was satisfied that disclosure of the confidential affidavit would involve disclosure of the contents of the material in respect of which the claim for public interest immunity had been made. I indicated to the parties that I was satisfied that disclosure of the affidavit would itself jeopardise the claim for public interest immunity and that I was satisfied that the affidavit established a prima facie valid claim for public interest immunity. I was not prepared to order disclosure of the affidavit (which I marked as a confidential exhibit), taking into account the concerns expressed in the authorities referred to above, and directed that there be no access to the affidavit by any of the parties to the proceedings, or their legal representatives, or any third person without the leave of the Court.
Having thus reached the conclusion that there was a prima facie valid claim for immunity, I then invited submissions from the plaintiffs as to the second and third of the questions raised in Alister, namely the need for disclosure and a balancing of the public interest in secrecy against the needs of the particular case. It should be remembered that the category of public interest immunity into which these documents fall was identified by ASIC as being the "effective policing/investigations" category.

Affidavit evidence relied upon by the plaintiffs

The plaintiffs then read three affidavits: an affidavit of Michael Doucas sworn 7 September 2016; an affidavit of Madeleine Anne Boyd affirmed 24 November 2016; and an affidavit of Amy Siyi Zhang affirmed 15 February 2017, and tendered the exhibits to those affidavits (including a confidential exhibit to Ms Zhang's affidavit, the sole reason for its confidentiality being that the regime that had been agreed with Mr McKay was that the documents in that exhibit were to be seen only by the legal representatives and Mr Doucas). Ms Zhang's affidavit was treated as confidential (and access to it was restricted accordingly) on the basis that it was part of the same confidentiality regime that had been agreed with Mr McKay in relation to the documents exhibited to it.
There was reference in Ms Zhang's affidavit (at [28(d)]) to the document (reproduced at Tab 39 of the confidential exhibit to her affidavit) that was the subject of ASIC's "claw back" application in its amended notice of motion. It was accepted by the plaintiffs that a ruling on this document (and the content of [28(d)]) would abide the outcome of the public interest immunity claim.
ASIC maintained that the plaintiffs' affidavits should only be used for the second step of the process (the plaintiffs' need to have access to the documents) and not for the purpose of contradicting the public interest immunity claim itself. This was not agreed by the plaintiffs. Rather, the plaintiffs made clear that they were taking issue with the claim for public interest immunity at every step of the process (including as to whether a valid claim for immunity had been made out) notwithstanding the conclusion I had by that stage reached that, prima facie, that was the case and notwithstanding the obvious difficulty of making such an argument without knowledge of the contents of the confidential affidavit.
In those circumstances I suggested that submissions by the plaintiff in relation to the first question might be approached, hypothetically. In other words, I invited submissions as to the basis on which the plaintiffs would argue that there would not be a valid claim for public interest immunity if, hypothetically, the documents were to disclose, or had a tendency to disclose, matters such as: the internal machinations of how ASIC conducted investigations; or that a particular person or one or more persons was or were under investigation by ASIC (those being examples given by ASIC of cases that would fall within the effective policing/investigations category of immunity); or something else that might fall within the "effective investigations" category of immunity. In the course of argument other potential categories of documents (such as those that might disclose the existence or identity of potential whistleblowers), as was speculated in Ms Zhang's affidavit, were discussed.

Is there a valid claim for public interest immunity?

The starting point for the plaintiffs' submissions as to the existence of a valid claim for immunity was that, when the matter was before Rein J on 23 September 2016, his Honour had rejected an objection made by Mr McKay to the production by him of documents that had been provided by him to ASIC or APRA in relation to any regulatory investigation or proposed regulatory investigation. It was not suggested that his Honour's rejection of this objection raised any issue estoppel or res judicata or Anshun estoppel to preclude ASIC (which was not in attendance on that occasion) now raising its immunity claim. Rather, it was suggested that the Court had already recognised that the plaintiffs had a prima facie entitlement to see the documents "for good reason, for proper reason". In particular, reference was made to O 9 of the orders made on 23 September 2016, namely that: The Independent Solicitor is to provide a copy of all the Documents over which no claim within the meaning of 14(d) [legal professional privilege] or 23(a) [self-incrimination] of the Penal Notice is made to the applicant's/plaintiff's solicitors by 20 October 2016.
The plaintiffs emphasised that the order as there framed was for the provision to the plaintiffs' solicitors of a copy of "all" the documents to which no claim for legal professional privilege or self-incrimination privilege was made by Mr McKay.
The difficulty I have with that submission is that ASIC was not in attendance on 23 September 2016 and had not yet made its public interest immunity claim. I cannot see that the order as framed by his Honour, in the absence of debate on that issue, takes the matter any further on the first step here to be determined (the existence of a valid claim for immunity); nor for that matter does it assist in determining the second or third steps (the plaintiffs need for disclosure and the outcome of the balancing exercise). For completeness I note that the plaintiffs have pointed to the filing by Mr McKay of a notice of motion on 31 October 2016, seeking in effect to vary the orders made by Rein J on 23 September 2016 (referred to at [25] above). That notice of motion appears not to have been determined. Its relevance to the present application is moot. While that motion remained outstanding, on 16 December 2016, orders were made by consent by McDougall J for the provision to the solicitors for the plaintiffs on a confidential basis of copies of an electronic copy of documents other than those over which Mr McKay claimed litigation or client legal privilege and those over which ASIC claimed public interest immunity, for the purpose of assisting the parties to ascertain the real areas of dispute (see O 3 and O 4). McDougall J also ordered (O 4) that until further order of the Court the documents provided pursuant to O 3 were not to be provided or shown to an of the plaintiffs or any of their officers or employees save for Mr Doucas (for the purpose of obtaining instructions and subject to an undertaking by him not to provide or show them, or disclose their contents to any of the plaintiffs or any of their officers or employees, to keep them confidential and only to use them for the purposes of giving instructions in these proceedings until otherwise ordered).
The next issue raised by the plaintiffs was as to the perceived inconsistency between a statement in the open affidavit relied upon by ASIC as to a "concern" that disclosure "may be" contrary to the public interest and any statement in the confidential affidavit that expressed less equivocally the view that disclosure would be contrary to the public interest. It was submitted that the statement at [5] of the open affidavit that "ASIC is concerned that disclosure of the documents in confidential exhibit JB-1 may be contrary to the public interest" could not constitute admissible evidence in support of ASIC's claim for public interest immunity. The plaintiffs emphasised that a necessary pre-condition to a successful application for public interest immunity is that the Court is satisfied that damage would be done to the public interest by producing the documents sought or the documents of that class, and that the prevention of that harm outweighs the public interest in having the documents produced in accordance with an order of the court. They argued that the risk that disclosure would be injurious to the public interest must be proved by evidence and that "a mere equivocal statement of concern" cannot be evidence for the need of public interest immunity.
I appreciate the difficulty that the plaintiffs have in making this submission, not having had access to the confidential affidavit on which ASIC relied. However, having regard to that affidavit, it could not be said that ASIC has expressed no more than a "mere equivocal statement of concern". The deponent of the confidential affidavit has made very clear that she has reviewed each of the documents over which the public interest immunity claim was concerned and she has identified the basis on which it is said that in each case the disclosure of those documents would be contrary to the public interest.
The plaintiffs next argued that public interest immunity cannot be asserted in relation to documents the contents of which have already been published, relying upon Sankey v Whitlam [1978] 142 CLR 1 at 45 (Gibbs ACJ). They also emphasised that documents may be withheld from disclosure only if, and to the extent that, the public interest renders it necessary to do so (Sankey v Whitlam at 41 (Gibbs ACJ)). They contended that documents exhibited to Mr Doucas' affidavit (which included documents containing allegedly disparaging comments about the plaintiffs that led to the commencement of these proceedings) and those exhibited to Ms Boyd's affidavit (which included documents obtained as a result of the search order over which Mr McKay took no objection) had already been published. They said that, having undertaken a comparison, the documents contained in the confidential exhibit to Ms Zhang's affidavit (in relation to which Mr McKay objects to production, but which have been made available to the plaintiffs' legal representatives and Mr Doucas) are "really more of the same" as those that have already been published. They questioned whether, having regard to the nature of the documents that have been published, it is really necessary in the public interest that those over which ASIC claims public interest immunity be withheld. This latter question, concerning the nature and extent of information already in the public domain, appears to me to go both to the existence of a claim to immunity and (if relevant) the final balancing exercise.
ASIC objected to the use in Ms Zhang's affidavit of confidentially received material for the purpose of the plaintiffs drawing inferences about the content of the material that is subject to the public interest immunity claim. ASIC maintains that this has the impermissible effect of purporting to disclose the possible contents of the claim. So for example, as adverted to earlier, Ms Zhang's affidavit raised various matters by reference to which it was asserted that there was no public interest immunity, including the possibility that the documents might reveal the identities of "potential whistleblowers" (see ASIC's response to this at [36]-[39] below).
ASIC nonetheless did not object to the Court deriving from Ms Zhang's affidavit such assistance as it might, and recognised that it provided a useful indication of matters that should be addressed. I have had regard to Ms Zhang's affidavit in that context, noting that the plaintiffs are (by their own account) engaging in a deal of conjecture given that they must address the claim for public interest immunity on a speculative and hypothetical basis.
The plaintiffs also argued that, since the documents they seek are not ASIC documents but rather are documents that were in Mr McKay's possession and that he has published to ASIC, that of itself is a ground for saying that there is no public interest immunity over the documents. I do not accept that it follows that the fact of "publication" to ASIC of itself necessarily precludes a claim for public interest immunity in the said communication.
ASIC based its claim to immunity in this case on the public interest in "effective policing" as an aspect of the broader public interest in the administration of justice. It submitted that effective policing (and the efficacy of the work of other law enforcement agencies) entails the need to protect from compromise both individual investigations and law enforcement methods. ASIC further submitted (by reference to the information provided in the confidential affidavit) that the subject-matter of its claim is within a well-recognized category of immunity and entitled to significant weight.
While ASIC accepts that a claim of public interest immunity may be weakened or even destroyed if the need for confidentiality has become stale, or if the information in question has been published, it submitted that speculation or asserted inferences from what is publicly known (such as that sought to be drawn by Ms Zhang) will not justify the disclosure of confidential information. It argued that even if there had been some disclosure of information that fact would not necessarily defeat a claim of immunity (the question being whether or not there would be utility in making orders to prevent further disclosure), referring to R v Fandakis [2005] NSWCCA 5.
Insofar as Ms Zhang's affidavit referred to the identities of "potential whistleblowers", ASIC argued among other matters that there is no basis for thinking that the material (even if it were to be in the nature speculated in Ms Zhang's affidavit) would materially advance the case of the plaintiffs but that in any event even if the material would reveal the identity of an informer (as to which suspicion ASIC would neither confirm nor deny), the law protects informers such that their identities cannot be revealed in civil proceedings in any circumstances. ASIC argued that such protection is given both by refusing to confirm the suspicion and by refusing to deny it. ASIC also pointed to the Court's independent duty to protect informers both in respect of disclosure of material that "accurately and firmly" points to the identity of an informer but also to protect disclosure of material that "inaccurately or faintly" points to whether or not a person is an informer.
At [19] of its submissions, ASIC referred to Attorney General v Stewart (1994) 34 NSWLR 667 at 679 where Hunt CJ at CL said: The Attorney General argues that the consequences to Mr A being disclosed as such in relation to one offender who is (as a result) already before the courts might well be quite different to being disclosed as such in relation to some other offender, who may not hesitate to have him killed, who has not yet been charged, who may never be charged and who, even if he is charged, may well never learn the identity of the person who informed on him. Although the rationale for the immunity in relation to the identity of informers is expressed as being not so much the danger to the informers as the fear that, police sources would dry up, the obvious reason why the sources are likely to dry up is the informers' fear of violence from those upon whom they had informed if their identity were to be disclosed: Regina v Hennessey (1978) 68 CAR 419 at 426; Regina v Agar (1989) 90 CAR 318 at 324.
Similarly, reference was made to Cain v Glass (No. 2) (1985) 3 NSWLR 230, a decision which also related to police informers in relation to criminal charges.
Insofar as the particular document mentioned at [28(d)] of Ms Zhang's affidavit is concerned, ASIC argued that the disclosure of this document had to date been limited (to persons who might be expected to abide by an obligation of confidentiality) and that, to the extent that the document reflects not merely what certain people (not being government employees) were contemplating but what an ASIC officer was actually intending to do, it would be a document the non-disclosure of which would be a matter on which the law would place importance.
I will in due course consider the question whether, in finally determining this particular claim for public interest immunity, it is necessary to inspect the documents in question. Undoubtedly, there is power to do so (see Sankey v Whitlam at 46 (Gibbs ACJ), at 65 (Stephen J), at 96 (Mason J), at 110 (Aickin J)). However, for the purpose of determining the first step of the process (namely as to whether there is a valid claim for public interest immunity) I did not consider it necessary to inspect the documents. The confidential affidavit makes abundantly clear the way in which it is said that disclosure of the contents of the documents would harm the public interest in effective policing/investigation by ASIC of claims. I accept that ASIC has established that it has a valid claim of immunity for the reasons explained in that confidential affidavit.
In relation to the question of loss of immunity due to publication, as noted above I do not accept the plaintiffs' suggestion that any document sent by Mr McKay to ASIC has, by virtue of that communication, been "published" by him so as to jeopardise any claim by ASIC of public interest immunity. In this context, I take "publication" to require a broader form of disclosure (see, for example, the reference in Sankey v Whitlam at 45 (Gibbs ACJ) to a document that has been "published to the world").
I also doubt that, as seems to have been suggested by the plaintiffs, documents obtained as a result of a search order over which no objection is taken have therefore been "published" in the relevant sense given the implied undertaking that such documents not be used for any collateral or ulterior motive. In any event, having regard to the specific documents over which public interest immunity is claimed as described in ASIC's confidential affidavit (which, of course, the plaintiffs have not seen), I do not accept that any claim to public interest immunity over the contents of the relevant documents has been lost due to publication.

Is there a need to see the documents?

The next question is whether the plaintiffs have established a need to see documents of the kind over which public interest immunity has here been claimed.
The plaintiffs made clear that the causes of action they wish to pursue in relation to the publications by Mr McKay are for defamation and misleading and deceptive conduct. If the material in respect of which public interest immunity was claimed would not be of relevance to such a claim then it might be thought axiomatic that the need to see the documents could not outweigh any valid claim for public interest immunity. However, the nub of the plaintiffs' argument as to the need to see the documents the subject of ASIC's claim for immunity was their belief that it is "almost certain" that the documents will disclose further causes of action against Mr McKay who they assert is seeking to destroy the first plaintiff and the reputations of the second to fourth plaintiffs. They argued that the material produced to ASIC will almost certainly be relevant to the claims hitherto postulated (misleading and deceptive conduct and defamation) and they raised as a possibility that such material might shed light on other potential claims (tortious interference with contractual relations, for example) i.e., claims other than those in respect of which, as I understand it, the preliminary discovery application was sought in the first place.
The plaintiffs say that it is in the public interest that they be given access to documents (in accordance with the orders made by Rein J) so that they can take appropriate steps to protect the business of the first plaintiff and the business and personal reputation of the other plaintiffs.
On one view of the matter, it might be thought that the "need" of the plaintiffs to see the documents over which ASIC has claimed (validly in my opinion) public interest immunity, has not been established insofar as the relevant "need", for the purposes of the preliminary discovery application, was to identify (or confirm the plaintiffs' suspicion as to) the publisher of the statements about which it complains and that has now been established. What the plaintiffs now seek, apparently, is to ascertain the content of whatever further or other communications have passed between Mr McKay and ASIC (either to assist them to bolster their existing claims or as a basis for formulating some other cause of action, by reference to some other misleading and deceptive conduct or otherwise).
Insofar as the requirement to establish a "need" to see particular documents would arguably not be satisfied where what was engaged in was a mere fishing expedition, it is relevant to note that this is not a case where the documents have been identified through a discovery process, such that it can be taken to be accepted that they are of relevance to the plaintiffs' claim(s) against Mr McKay.
In this regard, I note that there has been debate in the authorities (on the issue as to whether a court should inspect documents in order to balance the competing public interests) as to whether a party in the position of the plaintiffs who is seeking production of documents over which public interest immunity has been claimed must satisfy a threshold test beyond relevance. I consider this below.
Suffice it to say that I would not, on the evidence before me, conclude that the asserted need on the part of the plaintiffs to inspect the documents is no more than a "mere fishing expedition". The outcome of the preliminary discovery application to date has established the existence of communications that give rise to a legitimate suspicion that the documents the subject of the public immunity claim may be of relevance to the causes of action presently contemplated by the plaintiffs against Mr McKay. I would therefore accept that the plaintiffs have established that the public interest in the administration of justice would support the disclosure of the documents to them.

Balancing the competing public interests

That brings me to the balancing exercise that is required.
The plaintiffs argue that, in this context, it is relevant to note that Mr McKay has been in substantial contact with the news media and that his motivation is to destroy the first plaintiff. They argue that, insofar as ASIC contends that its public interest immunity application is necessary in order to protect an ASIC investigation of or in relation to the plaintiffs, it is more likely that any such investigation would be enhanced if they had an opportunity to "respond to the relevant documents and provide their side of the story" and that providing a reasonable opportunity to the plaintiffs to respond accords with the fundamental principles of natural justice. Such an argument is of course premised on the assumption that the claim for immunity is based on an actual investigation, as opposed to investigatory technology or methodology or evidentiary issues or identification of potential whistle-blowers or the like - all aspects of the public interest in effective policing/investigation to which reference was made in the course of the hearing before me.
In response, ASIC argues that the principles of natural justice adverted to by the plaintiffs do not apply at the investigation stage; rather they would be available if and when ASIC chose to bring regulatory or criminal proceedings or impose some executive sanction. There is force in ASIC's submissions on this point. Ultimately I consider that in undertaking the balancing exercise the relevant public interest in the administration of justice is that identified earlier: namely, the plaintiffs' ability to identify potential causes of action against Mr McKay, rather than their ability to obtain documents that would allow them to make representations to ASIC in response to any investigations that may or may not be ongoing in relation to any one or more of them. As discussed above, the plaintiffs have also argued that the nature of the material already in the public domain should be taken into account in determining whether it is really necessary to withhold the documents subject to the claim for public interest immunity. Further, the submission forcefully made for the plaintiffs was that, if I were to conclude that the public interest immunity claim was valid and outweighed the plaintiffs' interest in access to the said documents, then I should nevertheless review the documents and consider whether a regime could be put in place so as to restrict access only to the extent necessary to uphold the immunity (perhaps by way of redaction of the documents or otherwise by the imposition of an appropriate confidentiality regime).
As to when the Court should exercise the power to inspect documents the subject of a public interest immunity claim in order to perform the exercise of balancing the public interest in maintaining the immunity with the public interest in the administration of justice, in Commonwealth of Australia v Northern Land Council, the majority noted (at 617-618) that in a "class" immunity claim the court may sometimes have to inspect the documents to determine whether they in truth fall within a class which attracts immunity. Where a document clearly fell within a protected class, the extent to which the circumstances would be sufficient to displace the immunity depends to a large extent to the nature of the class. So, for example, there the majority doubted (at 618) whether the disclosure of the records of Cabinet deliberations upon matters which remained current or controversial would ever be warranted in civil proceedings, hence there would be no need for the court itself to inspect the documents.
In other cases, however, it is accepted that the Court may need to inspect the document in order to balance the competing public interests. The question has there arisen as to whether in order to do so it is necessary that there be "some concrete ground for belief which takes the case beyond a mere fishing expedition", that it was "on the cards" that the documents would materially assist the defence or that the documents would go "substantially to proof" of the applicant's innocence in criminal proceedings (see Toohey J (dissenting) in Commonwealth of Australia v Northern Land Council at 633-637). The existence of a threshold beyond relevance is supported by passages in the House of Lords' judgments in the civil cases of Burmah Oil Co v Bank of England [1980] AC 1090 at 1117 (Lord Wilberforce); 1129 (Lord Edmund-Davies); 1135-1136 (Lord Keith) and Air Canada v Secretary of State for Trade [1983] 2 AC 394 at 435-436 (Lord Fraser of Tullybelton); 439 (Lord Wilberforce); 444-445 (Lord Edmund-Davies).
In Australia, a more liberal approach has been taken in criminal proceedings and proceedings intimately connected with criminal proceedings (see Alister; Jackson v Wells). The Supreme Court of South Australia has also held that, where production is sought of documents identified through the discovery process, there should not be an additional hurdle beyond mere relevance (Adelaide Brighton Cement v South Australia (1999) 75 SASR 209; [1999] SASC 379 at [9], applying the reasoning of Toohey J (dissenting) in Commonwealth of Australia v Northern Land Council.) Adelaide Brighton Cement was approved by the Full Court of the Supreme Court of South Australia in Medical Board of South Australia v Fisher (2000) 76 SASR 242; [2000] SASC 92 at [37] (Duggan, Nyland and Bleby JJ) and Milisits v South Australia (2014) 119 SASR 538; [2014] SASCFC 67 at [23] (Gray J, Peek and Nicholson JJ agreeing). However, in Spencer v Commonwealth (2012) 206 FCR 309; [2012] FCAFC 169 the Full Court of the Federal Court (at [38]) (Keane CJ, as his Honour then was, Dowsett and Jagot JJ) appeared to approve the more stringent test to be met before the court would itself inspect documents set out in Young v Quin (1985) 4 FCR 483, where Bowen CJ said (at 484) "[i]t has been said this power should be sparingly exercised. Indeed, the better view appears to be that the court should not inspect the documents unless it decides that, on balance, the documents probably ought to be produced."
Zarro v Australian Securities Commission (1992) 36 FCR 40 (Full Court of the Federal Court) involved a claim for public interest immunity by the Australian Securities Commission (ASC) in response to directions for discovery and inspection in relation to documents falling into three categories: (i) those that identified "informants"; (ii) those revealing confidential business information of persons who had supplied information voluntarily to ASC and (iii) those pertaining to an ongoing investigation by the ASC.
It was there conceded that documents in the first category, if properly and specifically identified, should not be produced. This appears to be the result of an acceptance that the "police informer rule" applied to "a document or collection of documents which, taken together, may disclose the identity of an informant" (including in relation to investigations by the ASC under its statutory powers) (see Gummow J at 60). Gummow J in Zarro referred to informant claims as "contents" rather than "class" claims. There are competing views as to the extent to which a weighing of competing public interests in required when a claim is made to protect the identify of an informer (see Derbas v The Queen (2012) 221 A Crim R 13; [2012] NSWCCA 14 at [22] to [26]), with one line of authority suggesting that as a rule the identity would not be disclosed unless doing so could help to show that a defendant in a criminal trial was innocent (see Cain v Glass (No 2) at 248 (McHugh JA, Kirby P agreeing)).
In considering the scope of "class" versus "contents" claims for public interest immunity, Lockhart J in Zarro said (at 46): [I]t must only be in rare cases of documents at high levels of government involving matters of national importance that the class doctrine can apply. Documents within the possession of the ASC (an investigative and law enforcement agency) of a confidential nature, which record information received by it concerning possible offences or irregularities and recording the possible course of investigations or information with respect to evidence concerning proceedings to which the ASC is a party, plainly may fall within the scope of public interest immunity; but as at present advised I cannot conceive of a case where they would fall within the class doctrine and thus be immune from disclosure irrespective of the contents of any particular document.
The central issue in Zarro was whether the primary judge erred in himself viewing the documents in order to determine the claim for public interest immunity in circumstances where he was not satisfied on the basis of the evidence adduced that a claim to immunity had been made out in relation to any particular document over which it was asserted. The applicants submitted that the primary judge improperly propounded the claim for immunity himself when faced with deficiencies in the ASC's claim. The Full Court rejected this and upheld the primary judge's decision to view the documents. Lockhart J (at 49) was satisfied that the primary judge did not himself seek to propound the claim for public interest immunity but rather looked at the documents for two purposes: (i) to see if the particular documents made good the claim for immunity (that is, they fell within the category of documents of a confidential nature relating to the ongoing investigation of the ASC, the disclosure of which would be very likely to inhibit that and any related future investigations) and (ii) if there was a valid claim, then to conduct the balancing exercise in considering the competing public interests. Ryan J (at 55) similarly rejected the assertion that before examining the documents for himself the primary judge should have satisfied himself that ASC had established a prima facie claim of immunity for those documents. His Honour noted that, were it otherwise, there would be no scope for the court of its own motion to protect the public interest by declaring a particular document immune from production. Gummow J (at 66) similarly found that the course taken by the primary judge was open to him.
In the present case, it is ultimately not necessary to decide whether a different threshold test is to be applied before a court itself views documents subject to a public interest immunity claim in "class" versus "contents" claims, or for different kinds of class claims or depending on whether documents are identified in answer to a subpoena or through the discovery process. Counsel for ASIC made clear in his oral submissions that it did not object to the Court itself considering the underlying material (and as noted, counsel for the respondents on the motion encouraged the court to do so if satisfied that there was a prima facie basis for a claim for public interest immunity).
Having regard to the above, and noting that the claim for immunity appears more likely to be characterised as a "contents" claim rather than as a "class" claim (to use that "rough but accepted" distinction), I have concluded that it is necessary and appropriate to inspect the documents both in order to determine whether the public interest in "effective policing/investigation" outweighs the plaintiffs' "need" to inspect the documents but also to consider whether any part of the material can be disclosed, potentially in redacted form, without prejudicing the claim for immunity.
Accordingly, in the period since judgment was reserved I have inspected the documents over which the immunity was claimed.

Determination

I am of the opinion that the public interest in the non-disclosure of the documents in question (that being the public interest in maintaining the efficacy of ASIC's policing and investigation in its capacity as a regulatory authority) outweighs the public interest that the administration of justice not be frustrated by the withholding of those documents from the plaintiffs.
The plaintiffs' firmly held belief is that the documents not yet seen "are most probably also deceptive and misleading and damaging to the first plaintiff, and defamatory of and concerning the 2nd to 4th plaintiffs". However, they have already identified the publisher of the documents in question and they have identified relevant causes of action arising out of the publications. At most there is speculation that the documents might shed light on some potential other causes of action, such as other claims for misleading and deceptive conduct of some other kind or tortious interference with contractual relations.
Balancing the nature of the claim for public interest immunity (which goes to a fundamental issue in the administration of justice within the category of effective policing/investigation claims) and the "need" of the plaintiffs to inspect the documents (which seemingly goes to a desire on their part to bolster their already existing claims for misleading and deceptive conduct/defamation and/or to formulate other causes of action in relation to the same or whatever other publications may have been the subject of the unseen communications), I have no doubt that the former prevails and outweighs the latter.
That brings me to the final issue. I am conscious of the need to do no more than is necessary to protect the public interest immunity.
In Jackson v Wells, Wilcox J (at 307) gave "anxious consideration" to a submission that the court should at least grant access to the documents subject to the public interest immunity claim to the legal representatives of the parties. In rejecting that proposal, his Honour said (at 307-308): … I would have welcomed the assistance of counsel upon the content of the documents. The applicants would, no doubt, have felt more satisfied that the documents were rigorously examined by the court if their counsel had been given the opportunity to take the court through the documents. But, in the end, I rejected the proposal. It involves a number of problems. Without reflecting in any way upon the integrity of any counsel or solicitor, difficulties are likely to arise where counsel appearing in, and advising their clients in respect of, protracted and complex proceedings acquire information which they are not free to use or to pass on to their clients. During the heat of battle an unwitting disclosure may occur. Frank and full advice becomes impossible. I am aware of cases in which, for reasons such as these, experienced counsel have declined to receive information which they are not free to share with their clients. It seems to me merely commonsense to conclude that the fewer people who have access to confidential information the less is the risk of unauthorised disclosure. Weighing the assistance likely to be obtained from counsels submissions against the sensitivity of the material, it seemed better not to accede to [counsel's] suggestion. (my emphasis)
In Commonwealth of Australia v Northern Land Council, the majority of the High Court concluded (at 620): There was … no call for [the first instance judge] to order that the documents be produced for inspection. But we would add that, even if there had been, the procedure of ordering production of documents for inspection by the legal representatives of one of the parties, even upon a restricted basis, before the claim for immunity had been decided by the court, was open to serious question. Whatever the safeguards, it represents an encroachment upon the confidentiality claimed for the documents.
For similar reasons, I have concluded that, without any disrespect or question as to the integrity of the plaintiffs' present legal representatives or any independent person who might be appointed for the purpose, it is not consistent with the maintenance of the public interest immunity to order disclosure subject to a confidentiality regime. However, having inspected the documents I do not accept that it is not practicable to implement a process of redaction of the sensitive material from the documents so as adequately to preserve the immunity but also to allow the plaintiffs access to that which would not destroy the immunity.
The directions that I propose to make will include provision to ASIC of an opportunity to review the proposed redaction of the documents that I consider would meet the competing concerns in relation to that material, before making any direction for access to the plaintiffs of the redacted material. ASIC will have an opportunity to make further submissions if it considers that, despite the proposed redaction, the public interest immunity would be destroyed by the publication to the plaintiffs of the redacted material. I propose then to direct ASIC to prepare and serve on the plaintiffs' legal representatives a bundle of the redacted documents (with any further redaction necessary to address any further ASIC submissions that I consider to be well-founded). I also propose to make access to these documents subject to the same confidentiality restrictions as set out in O 4 of the orders made by McDougall J on 16 December 2016. I will allow time for ASIC, if despite the proposed redaction and production regime it remains concerned as to the effect of the proposed orders on its claim to public interest immunity, to approach the Court of Appeal if it be so minded.
Finally, as to costs, I am inclined to the view that each side should bear its own costs of this application. While ASIC has established public interest immunity in the documents, it would have been necessary for it to incur the costs of an application such as this in order to prevent disclosure in any event. Moreover, the plaintiffs have succeeded in persuading me that some limited access (to the documents as redacted) should be granted.

Conclusion

For the above reasons, I make the following orders: 1. Admit MFI 1 as Confidential Exhibit "A" on the application by ASIC. 2. Subject to order 4 below, order that there be no access to, or inspection of, the documents in Confidential Exhibit A by anyone other than ASIC or its legal representatives and that none of the documents in Confidential Exhibit A be tendered into evidence in the proceedings. 3. Order that document ID MCN.001.001.5209 and all copies of the document at Tab 39 of Confidential Exhibit ASZ-1 to the affidavit of Amy Syi Zhang affirmed 15 February 2017 be returned to the Independent Solicitor appointed pursuant to the orders made by Rein J in these proceedings and that access to that document and its use (and the contents of [28(d)] of Ms Zhang's affidavit) be restricted as set out in order 2 above. 4. Direct that ASIC notify the plaintiffs and the associate to Ward CJ in Eq within 14 days as to whether objection is made, on the basis of public interest immunity, to the disclosure to the plaintiffs' legal representatives on a confidential basis of a copy of the documents over which public immunity has been claimed but redacted as indicated in the bundle of documents to be provided to ASIC's legal representatives at the time of publication of these reasons. If no objection is taken by ASIC to the production of the documents as so redacted, ASIC is to prepare and serve redacted copies of those documents on the plaintiffs' legal representatives within a further 14 days, access to which is to be restricted in accordance with order 4 of the orders made by McDougall J on 16 December 2016. 5. There be no order as to the costs of the application by ASIC.

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: 30 June 2017

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (11 paragraphs)

Parties

Cases Cited (21)

Cited By (3)