'I keep no Swiss records, says Trevor Kennedy'
4 The most significant allegation concerning Kennedy was that one René Rivkin (Rivkin) had given evidence to Swiss authorities that Kennedy had been the beneficial owner of approximately 12 per cent of a parcel of shares in the Australian listed public company Offset Alpine Printing Group Limited (Offset Alpine). It will be necessary to look more closely at events surrounding that parcel of shares but for present purposes it suffices to know that, when Kennedy had been interviewed by officers of the predecessor of ASIC in 1995, he had denied holding any beneficial interest in that parcel of shares. The AFR articles also contained a good deal of information alleged to relate to dealings between Kennedy and various Swiss banks. The implication of the articles was that the proceeds from the Offset Alpine shares and other monies had been hidden from the Australian authorities by means of such dealings. The articles purported to quote from the transcript of the interview between Rivkin and the Swiss authorities which was, so they said, conducted in the presence of his Swiss lawyer - a lawyer also said to be retained by Kennedy. The articles also purported to quote from at least two letters written by Kennedy to that lawyer in 2002.
5 By about 10.30 am on 30 October Kennedy had retained Tony Hartnell (Hartnell) of Atanaskovic Hartnell to act for him in matters arising out of the publication of the AFR articles. During the course of the afternoon, he visited Rivkin at his house by prior arrangement. Graham Richardson (Richardson), who was also implicated by the AFR articles in relation to beneficial ownership of part of the Offset Alpine shareholding and dealings with Swiss banks, was also present.
6 On Friday 31 October Kennedy flew to London arriving early on Saturday morning, 1 November, and checked into the Ritz Hotel. Before leaving Sydney, Kennedy had arranged to meet one Benno Hafner, a Swiss attorney based in Zurich on Monday 3 November 2003. The date of the meeting was subsequently changed to Tuesday 4 November. Kennedy's ultimate evidence was that the writing on the Ritz Hotel notepaper, made whilst in London or on his way to Zurich, was notes for the purpose of obtaining legal advice from Hafner. The notes on the notepaper of the Florhof Hotel Zurich were prepared in Zurich and were also, on Kennedy's evidence, for the purpose of obtaining legal advice from Hafner. His evidence is that he took both notes with him when he met Hafner on Tuesday 4 November. That part of Kennedy's evidence in which he claimed that he discussed the points recorded on both notes with Hafner was rejected as inadmissible in form with leave to lead further evidence. That leave was not taken up.
7 It has been admitted for the purposes of this proceeding that Hafner was a qualified Swiss lawyer. No evidence has been led from Hafner or anybody else as to the nature of his practice, as to the work that he actually does or as to how lawyers in Switzerland are organised, controlled or disciplined. No evidence has been led as to whether legal professional privilege is a concept known to Swiss law or, if so, as to how and in what circumstances it operates under the law of that jurisdiction.
8 It is submitted for ASIC that, even assuming that the notes were prepared for the purpose of meeting with Hafner and that they were actually used for that purpose, Kennedy's assertion that he saw Hafner, a qualified lawyer, for legal advice does not of itself establish legal professional privilege which would be recognised by an Australian court. It was submitted that even if legal professional privilege may exist in relation to some communications with some foreign lawyers (which was not accepted), the lack of evidence as to the role of Swiss lawyers in general and Hafner in particular was fatal to the claim. Furthermore, it was submitted that Kennedy's evidence that the purpose of meeting Hafner was to obtain legal advice in the required sense is mere assertion which does not prove the conclusion asserted and which, in any event, would be rejected. It was also submitted that the lack of evidence as to communication of the notes to Hafner is fatal to the claim of privilege. It was further submitted that the notes are not entitled to privilege because they were made for illegal or improper purposes.
9 In order to place the issues in context it is necessary to say something more about the underlying facts as they appear from the evidence in this case.
10 On or shortly after 21 April 1995, the Australian Securities Commission (ASC) (the predecessor of ASIC) received a referral from Australian Stock Exchange Ltd which drew the attention of ASC to trading in the shares of Offset Alpine between 1 September 1994 and 28 February 1995. It was suggested to ASC, amongst other matters, that there may have been breaches of the substantial shareholder provisions of the then Corporations Law by EBC Zurich AG (EBC) and Bank Leumi Le-Israel (Bank Leumi). On 26 April 1995 ASC commenced an investigation pursuant to s 13(1) of the Australian Securities Commission Act 1989 in relation to possible contraventions of s 709 and ongoing contraventions of s 615 and s 710 of the Corporations Law in relation to Offset Alpine.
11 On 3 May 1995 ASC commenced a proceeding in this Court against (amongst others) Bank Leumi and EBC. The primary relief sought was that a number of parcels of shares in the capital of Offset Alpine, of which EBC and Bank Leumi were variously registered as owners, should be vested in the ASC. Alternatively, orders were sought that the relevant respondents divest themselves of those parcels of shares.
12 On 18 May 1995 Kennedy attended an examination pursuant to s 19 of the ASC Law:
'In relation to an investigation of suspected contraventions of 615, 709 and 710 of the Corporations Law by shareholders of Offset Alpine Printing Group Ltd ACN 003 394 876 commencing on 29 January 1992 and ongoing'.
The transcript of that interview is not in evidence but Kennedy accepts that in it he denied having any beneficial interest in the Offset Alpine shares held by either EBC or Bank Leumi, claiming that his only interest was held through a company related to him which was actually registered as a shareholder.
13 The ASC proceeding was heard by Sackville J. Judgment was delivered on 14 December 1995 (Australian Securities Commission v Bank Leumi Le-Israel (1995) 134 ALR 101). It was ordered that each of Bank Leumi and EBC dispose of its shares by instructing its nominees to sell them to the highest bidder under a takeover offer current at the date of the orders or made or announced before midnight on 27 December 1995 such that all of the shares were to be sold not later than the last day for acceptance of any of those offers. However, his Honour declined to make orders requiring either Bank Leumi or EBC specifically to comply with its obligations under the Corporations Law to identify the principals for whom the shares were held or orders 'freezing' the shares or their proceeds of sale by vesting them in the Commission conditionally ie pending compliance by Bank Leumi and EBC with their obligations under the Corporations Law. An appeal came on for hearing on 21 May 1996 and judgment was delivered on 18 September 1996 (Australian Securities Commission v Bank Leumi Le-Israel (1996) 69 FCR 531, 139 ALR 527). Both the appeal and cross-appeals were dismissed. It was noted that the shareholdings had been sold prior to the appeal coming on for hearing. Atanaskovic Hartnell had acted for Bank Leumi during this proceeding. In part the reason for not ordering disclosure or framing an order to encourage disclosure was Article 47 of the Swiss Banking Law which prohibits a bank or its officers from divulging secrets entrusted to them. The upshot was that the identity of the beneficial owner or owners of the parcels of shares was not disclosed.
14 Presumably, some time after 18 September 1996 the amount obtained for the shares was distributed. It is claimed in the AFR articles that the Australian Taxation Office moved to freeze the money prior to transfer to Zurich and that the proceeds were not released until mid 1997. That is not evidence of the fact and there is no other evidence to the same effect.
15 On 1 and 2 December 2003 Kennedy was examined pursuant to s 19 of the Australian Securities and Investments Commission Act 1989. He was represented by Hartnell.
16 The following questions and answers appear from the transcript of that examination:
Q. Right. So that if we may perhaps move on from the form of the question, I'll ask you more generally: did you have any interest at all in the shares that were the subject of the ASC action?
A. Privilege. I don't believe so.
Q. And when I asked that question in terms of any interest that you have, would the question be any different - would the answer be any different if instead of referring to you personally, we referred to some family company or trust or other entity associated with you?
A. Privilege. Yes, it could well be.
Q. Mmm-hmm. And are you able to explain that for us?
A. Privilege. Well, in the late 80s, to the best of my recollection, I caused an entity to be established that was off shore.
Q. What was the name of that entity?
A. It was, I believe, called Brampton.'
17 Kennedy described the initiation of the first Brampton entity as follows:
'Q. … And you say that you gave instructions to somebody with regard to its formation?
A. Privilege. I don't recall. I - I - privilege. It was suggested to me that - that - that - that it might be useful to have something over there. I - the - to the extent which I gave instructions, I - I simply don't recall.
Q. Who - who made the suggestion that it might be useful?
A. I don't remember.
Q. And when you used the expression "over there", what did you mean by that expression?
A. As I recall, it was suggested that it might be a useful exercise, but I can't recall the details of why and -
Q. But -
A. - or -
Q. - the - the expression "over there", is that a - a reference to some particular country or jurisdiction, or what?
A. When it was originally suggested, I can't recall whether the - the - the jurisdiction was going to be the Netherlands BV - when I worked at the Consolidated Press, there was a lot of companies that were established in the Turks and Caicos and Netherlands BVs, Liechtenstein, Switzerland, et cetera. What specifically, I don't recall.'
18 Later, Kennedy said:
'Q. …So first of all, what was the structure before the change?
A. As I have said before - privilege - the structure before the change was created by some supposedly smart accountants and lawyers in London on the basis that what I was doing was strictly legal and that I had no ownership or - or authority over it...'
19 Kennedy claimed that the Brampton entity was established on the advice of London lawyers and accountants on the basis that it would be strictly legal and have nothing to do with him. It later went through different iterations. He claimed that he took no interest in the affairs of the entity, that he did not know who the beneficiaries were and indeed that he had no association with it at all. He said that there was a change in the structure following a fraud at EBC where money was stolen or misused or defrauded from the entity, and that he had Swiss lawyers examine how he might get them to try and ensure that this did not happen again. Hafner was obviously one of those Swiss lawyers.
20 The following evidence was given by Kennedy:
'A. Privilege. An entity over which I have some influence has assets in Switzerland.
Q. Righto. So that we establish a benchmark, what is that entity?
A. Privilege. I can't tell you exactly. It's another construction of smart lawyers and accountants in Switzerland.
Q. Well, can you give us any - anything in terms of a name or other form of identification that enables us to identify it?
A. Privilege. No.
Q. Can you give us any indication of who might be the subject of inquiry in order to identify it?
A. Privilege. My Swiss attorney has all the details.
Q. Right. So that we can put that into perspective, to whom do you refer when you use the expression "my Swiss attorney"?
A. Privilege. Mr Benno Hafner.'
21 Kennedy said he had first met Hafner in 1996 or 1997. He said that there was another iteration of Brampton over which he had more influence in matters such as the choice of investment managers but he was uncertain as to the nature of his interest. By that time Hafner was the person with whom he dealt in relation to the entity or entities.
22 He gave the following evidence:
'Q. After the change you say you had a degree of influence on the identity of the fund manager?
A. Privilege. Yes.
Q. And was there anybody else other than you who also had some input on the identity of the fund manager after the change?
A. Privilege. There - there was a - there were other advisers.
Q. And who were they?
A. Privilege. The - the directors that were - it's my - I don't remember. Privilege. There is - there were directors, as I understand it, who were arranged by my lawyers who had rights and they also had an influence.'
23 When pressed as to the identity of a person to whom enquiries might be made with a view to ascertaining what the structure was, Kennedy said:
'The only person that I am aware who understands the thing is Mr Hafner.'
24 In denying that Rivkin had any association with the structure of Brampton, Kennedy said that he did not believe that Rivkin would even have known about it:
'Because it was a very private piece of my own affairs'.
25 Kennedy gave the following evidence:
'Q. Well, let's just ask the question afresh. As at the 30th of October 2003 did you have available to you any records relating to your assets or transactions in Switzerland?
A. Privilege. As of the date that you mentioned I would have been able to access information from Mr Hafner.
Q. Mmm-hmm. Well, did you have any records in Australia relating to your assets or transactions in Switzerland? This is as at the 30th of October 2003?
A. Privilege. The question assumes I have assets and I'm not - I'm not clear about the actual ownership and control, et cetera, of assets in Switzerland or elsewhere that might be controlled by the existing entity. If you're asking me did I have any records here of what that entity has or does, my answer is no, I don't believe so.
Q. And did you have any records anywhere other than in Australia?
A. Privilege. I believe Mr Hafner has records relating to this entity.
Q. And what would be the nature of the records that he has?
A. Privilege. I assume he's got everything relating to them.
Q. Well, when you say "everything", what do you mean by that?
A. Well, I presume, given that he has - he has been responsible for the custody of everything relating to them, that everything that arises in relation to that entity he would - he would have or have access to.'
26 Kennedy confirmed that he had been involved in proceedings in the Commercial Court of the Canton of Zurich involving Bank Leumi and Brampton in the last couple of years.
27 The following evidence was given by Kennedy:
'Q. …Where can I find the records of this structure up to - or structures up to that date?
A. Privilege. The only place that I believe you can find those records is at the offices of Mr Benno Hafner in Zurich.
Q. Do those records still exist, to your knowledge?
A. Privilege. I do not know.
Q. Have you given any instructions in relation to the provenance of those records?
A. Privilege. No, I don't believe I have.
Q. Is there any doubt in your mind?
A. Privilege. Sorry, could you ask the question again? The provenance of - you mentioned -
Q. Have you given any instructions to Mr Hafner regarding the safe keeping of those documents or, at the other end of the spectrum, the destruction of those documents?
A. Privilege. To the best of my recollection, I've given him no instructions on either - in either case. He conducts his law practice, I presume, like everybody else does. I have no - but I have certainly - well, I have absolutely no recollection - I've certainly never asked him to do anything that you would - I've always found that lawyers are pretty unreceptive to - to - well, I shouldn't say that because I haven't asked him to do anything, but it's always been my understanding that they're unreceptive to - to - to being told what they should do in the administration of records.'
28 Kennedy confirmed that the new Brampton entity had an association with Bank Maerki Baumann. He also confirmed the existence of a dispute involving a fraud perpetrated on Bank Leumi which was the subject of one of the AFR articles. Kennedy confirmed that he kept no records in Australia of any Swiss dealings and that he visited Switzerland about once a year.
29 Kennedy accepted in his s 19 examination that he realised fairly quickly that he was likely to be the subject of another examination by ASIC as a result of the publication of the AFR articles. His evidence as to his reaction to the publication included:
'No. I mean, I'm not looking for sympathy, but this was probably the worst day of my life and the notion of sort of sitting there and thinking about what people said or didn't say, or whatever, was not - not what I had on my mind. I wasn't thinking of anything about - except about what my world was crashing down around me, frankly.'
…
'Mr Riordan, I understand, but, again, I would ask you to also understand that this was - this was an absolutely chaotic day and the - from the moment that I first learnt about this thing to the next two or three days are just a blur in my mind. There is recollections of weeping wives, of dozens of people ringing up, of all of that sort of stuff, and I think it's totally unreasonable to expect me to remember the details of conversations that occurred on that day.'
30 A reading of the s 19 transcript as a whole reveals many unsatisfactory answers to relatively straightforward questions about Kennedy's affairs which a business person with the experience of Kennedy would be expected to know, particularly as he had been on notice of the issue since 30 October and had consulted Australian and Swiss lawyers in the meantime. It is certainly far from a full and frank account of the dealings which he had in Switzerland and his participation in them. It is also far from a full and frank account of his dealings with Hafner. It is not credible that any person, let alone an experienced business person, would set up a series of entities to manage investments overseas without having any idea as to the ultimate fate of the investments or their proceeds which is the picture that Kennedy sought to convey in the answers to the questions asked of him during the examination. For the purposes of this case, it is necessary only to note the deficiencies in the evidence rather than to ascribe any cause for those deficiencies.
31 It is perfectly clear that Hafner was a good deal more than an arm's length independent source of strict legal advice in relation to Kennedy's financial affairs. It is pointed out for ASIC that Kennedy did not produce or give evidence of any records of his retainer of Hafner, either on 4 November or otherwise. Indeed, there was a nil return to a notice to produce such documents. It is also pointed out that Kennedy had already engaged Atanaskovic Hartnell to act for him. If specialised Swiss legal advice were required, then it would be conventional for the Sydney lawyers to liaise with the Swiss lawyer. After the meeting Kennedy did not bring back to Australia any documents with him, including, for example, any written advice or any note of any written advice received from Hafner. There is no evidence from Kennedy's Australian lawyers that they received a copy of any advice from Hafner following the meeting or that they received any oral advice from Hafner following the meeting.
32 Hafner's role included being custodian of all records and he was effectively the only source of information about the entities. He provided directors for the entity. He certainly appears to have occupied the role of a true attorney. Hafner was also alleged to have been a participant in the events which the AFR reported. There would be very good reason for Kennedy to wish to confront Hafner as to those disclosures, both as to his attendance while Rivkin made the incriminatory statements and as to the possession by the AFR of correspondence from Kennedy to Hafner which was embarrassing, if not worse, for Kennedy.