Victorian Civil and Administrative Tribunal|2015-03-27|Before: Mr J, Greg Garde J

The application by the Commissioner for liberty to serve a notice to admit facts is dismissed.
The proceeding is set down for a directions hearing on 24 April 2015 at 9:30am at 55 King Street, Melbourne VIC 3000 before Senior Member Smithers.

On 2 October 2014, the Legal Services Commissioner ('the Commissioner') filed an application ('the application') for an order in respect of Lewis James Spaulding ('the respondent') and for the Tribunal to hear and determine eight charges of professional misconduct against the respondent arising from five different complaints.
At a directions hearing on 28 November 2014, the Tribunal ordered that the respondent by 4pm on 9 January 2015 must either:

(b) file and serve on the applicant an outline of argument which identifies in broad terms the issues for determination. It is noted that if the respondent adopts this course, the proceeding may be adjourned part-heard and at the conclusion of the applicant's case further orders made for the filing and serving of the material to be relied upon by the respondent;

The respondent did not attend the directions hearing on 28 November 2014. A note placed at the head of the Tribunal's order records the Tribunal's findings as to service of the application:

On the evidence of James Troup by affidavit sworn 20 November 2014, the Tribunal finds that the email address to which the application has been sent, [...], is an active email address and there is a valid email server accepting mail for that address. Further domain name searches indicates that Lewis Spaulding is the registrant, administration contact and technical contact for [...]. In the circumstances the Tribunal is satisfied that the respondent has received notice of the application in this matter.

Immigration searches indicate that Mr Spaulding left Australia on 9 May 2014 and as of 17 October 2014 had not returned.

The Tribunal's order directed the Principal Registrar to serve notices of hearings and all other communications on the respondent by email at [...]. On 1 December 2014, the Tribunal's order was served on the respondent at his email address.
The proceeding is now set down for a directions hearing before me to determine the directions that should be made for the future conduct of the matter, including issues relating to the effect of the Court of Appeal decision in Towie v Medical Practitioners Board of Victoria.[1] The Commissioner applies for directions that the Commissioner be at liberty to serve a notice to admit facts and that the respondent serve a notice of dispute on the Commissioner.
The respondent has not appeared in this proceeding to date. Nor has the respondent taken any step to comply with either alternative of the Tribunal's order. It is not suggested that the respondent has waived penalty privilege.
In Towie, the Court of Appeal held:

Nevertheless, in circumstances where the alleged breach of those directions in main part gave rise to the order now appealed against, we should indicate that, in our view, the usual directions given at VCAT, would not generally be appropriate where an applicant seeks to review disciplinary proceedings and is a person who is or may be exposed to a penalty. A party may, in such cases, be required to file written grounds and an outline of argument which identifies in broad terms what is in issue on the application for review. But it will not ordinarily be appropriate that directions be given which require the applicant for review to provide an outline of argument, or any other written material, which contains a positive assertion or denial of facts or requires an election by the applicant as to whether he or she intends to go into evidence or requires any proposed evidence the applicant intends to call to be the subject of a witness statement which must be produced and served on the other side, before the case advanced against the applicant has been completed.[2]

The Commissioner relied on written submissions to the effect that:

(1) it was this passage from the judgment of the Court of Appeal that led the Tribunal to give the directions that it did and to decline to order that the applicant serve on the respondent a notice to admit facts;

(2) the passage cited from Towie did not form part of the 'ratio' of the Court, but was instead of an 'obiter' or 'in passing' nature;

(3) the passage cited is expressed as an indication of what would 'generally or ordinarily be appropriate' rather than as anything stronger or binding; and

(4) Tribunal members sitting in the Legal Practice List should not consider themselves bound to give directions on the basis of the authority of Towie.

Counsel for the Commissioner developed a number of arguments as to why Towie should be distinguished:

(1) Dr Towie was a medical practitioner, not a legal practitioner - the authority of Towie did not extend to legal practitioners;

(2) at the heart of a legal practitioner's duty to the court is a commitment to open candour and frankness irrespective of self-interest and embarrassment;[3]

(3) it is the logical corollary of this duty that disciplinary proceedings in the Legal Practice List justify different rules and privileges from those against other professionals;

(4) disciplinary and admission proceedings are not like ordinary legal proceedings as they are proceedings concerned with the protection of the public - they are not necessarily determined in accordance with the rules and procedures applied in adversarial proceedings;[4]

(5) there is nothing in the Legal Profession Act 2004 (Vic) ('the Act')[5] which provides for the conduct of an application by the Commissioner to the Tribunal - it was up to the Tribunal to determine the directions to be given in disciplinary matters; and

(6) legal practitioners were required to make full disclosure under s 4.4.11(1) of the Act regardless of the privilege against self- incrimination.[6]

At the directions hearing, counsel for the Commissioner elaborated on these submissions:

(1) the respondent was believed to be in the United States of America;

(2) the respondent's email address was active - emails were reaching him whether he read them or not;

(3) the respondent was able to answer the emails from anywhere in the world;

(4) it was not an option for the respondent to stand mute;

(5) the legal effect of Towie's case was being overstated or exaggerated by the Tribunal;

(6) application of the principles in Towie's case leads to a failure to define the issues, increased costs and an ineffective use of resources;

(7) there is significant risk of a split case, with the Commissioner finding out only during the respondent's case what the defences are, and then needing an adjournment to mount a case in rebuttal; and

(8) the Tribunal had power to give directions under s 80(3) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ('the VCAT Act') requiring a party to produce a document or provide information in a proceeding for review of a decision despite any rule of law relating to privilege.

In Rich v ASIC, [7] the High Court described penalty privilege as one of a trilogy of privileges[8] that bear some similarity with the privilege against incrimination.[9] The privilege against exposure to penalties has long been recognised by the common law. It is also recognised in equity.[10] In equity, an order for discovery or for the administration of interrogatories in favour of the prosecutor would generally not be made where the proceeding was of a nature that might result in a penalty or forfeiture.[11] The penalties which attract the privilege include monetary exactions, loss of office, and proceedings for disqualification orders against officers of corporations.[12]
The common law privilege against penalty comes from 'the deep seated belief that those who allege the commission of a crime should prove it themselves and should not be able to compel the accused to provide proof against himself'. [13]
The content of penalty privilege is discussed in Pyneboard Pty Ltd v Trade Practices Commission.[14] In an action for penalty, the court should, in the absence of statutory provision to the contrary, refuse to make any order for discovery, production of documents or the provision of information for the reason that an intended consequence of the discovery, production of documents or provision of information is the imposition of the penalty.[15]
In addition to decisions of the High Court of Australia and elsewhere, penalty privilege has been given effect in a number of cases in the Supreme Court of Victoria.[16] In MH6 v Mental Health Review Board,[17] the Court held that an involuntary treatment order under the Mental Health Act 1986 (Vic) enlivened 'those aspects of the hearing rule articulated in Towie'.[18] The consequences of an involuntary treatment rule include 'the continued, indefinite and involuntary detention of the applicant'.[19] Procedural fairness would require that an involuntary detainee be given an opportunity to hear and respond to evidence that provides the jurisdictional basis for continued confinement.[20]
In Re Australian Property Holdings Limited (in liq) (No 2),[21] Robson J held that a number of principles were established by authority:

(a) in the case of self-incrimination privilege, the defendant must establish that the provision of information or the production of documents in the civil case leads to a real and appreciable risk of a criminal prosecution before the privilege can be invoked;

(b) in an action to recover a penalty it is not necessary for a defendant to establish that there is a risk the defendant will be subjected to a penalty by providing information to the plaintiff. The plaintiff is seeking the information for that very purpose;

(c) in civil actions, where no claim for penalty is made, the defendant must show that providing the information requested would tend to subject him to a penalty in separate proceedings before he can rely on the privilege;

(d) the privilege against exposure to penalty is a common law right of privilege that may be availed of as of right and is enforced and protected by the Court;

(e) the privilege against the exposure to penalty may be relied on by a defendant to a civil procedure in which a penalty is not sought ("the non-penalty civil proceeding");

(f) the privilege against the exposure to penalty extends to the obligation upon a defendant to plead, give discovery and answer interrogatories in the non-penalty civil proceeding;

(g) as a general rule, the privilege does not entitle a defendant to a non-penalty civil proceeding to obtain an order in limine excusing him or her from giving discovery or answering interrogatories;

(h) in exceptional circumstances, a defendant may be entitled to such orders in limine;

(i) by extension, in exceptional circumstances, a defendant may be entitled to orders in limine that he may deliver a defence that departs from the Rules of Court only insofar as to protect his privilege against exposure to penalty;

(j) exceptional circumstances may exist where the defendant to the civil proceeding is also the subject of separate civil penalty proceedings alleging the same or similar conduct; and

(k) where a defendant seeks to take the privilege against exposure to penalty in a defence, the proper course is to plead accordingly and - if challenged - the defendant will be required to justify that the privilege is taken in good faith and on reasonable grounds for the privilege to stand. [22]

Robson J accepted that in a penalty proceeding a defendant should not be required to produce documents or disclose information so assisting in establishing the defendant's liability to penalty.[23] The principle extends to proceedings which are not penalty proceedings.[24]
In Gemmell v Le Roi Homestyle Cookies Pty Ltd (in liq),[25] Ashley JA adopted a paraphrase of the propositions stated by Robson J, highlighting that the privilege against exposure to a penalty can only be successfully claimed where a person shows that to give an answer or answers would tend to subject him to a penalty in [the same] or separate proceedings.[26] The privileges can be abrogated by statute or waived.[27]
Having regard to the weight of authority in Australian courts, there is no doubt that the principles relating to penalty privilege are well entrenched in the law of Victoria and are applicable to proceedings in the Tribunal.

It can be taken from the authorities as established that:

(1) penalty privilege will arise in proceedings of a disciplinary character against legal practitioners, health practitioners, and other persons, and in general in any proceedings where a monetary exaction, loss of office, forfeiture, or other penalty may result;

(2) penalty privilege will protect against the requirement to make discovery, produce documents, or give information that may assist in establishing liability to a penalty, such as that sought by a notice to admit;

(3) penalty privilege can be regarded as an extension of procedural fairness on the basis that it would be inconsistent with the respondent's common law rights and privileges to be required to make discovery, produce documents or provide information which might assist in a proceeding against the respondent to recover a penalty;

(4) penalty privilege can be abrogated by statute or waived by the respondent;

(5) while it is accepted that legal practitioners have a duty to the court of open candour and frankness, this does not affect their common law and equitable right to penalty privilege; and

(6) Towie's case does not stand alone but is consistent with, and well supported by, a considerable body of authority which is binding on the Tribunal.

Accordingly, I find in relation to the submissions made on behalf of the Commissioner that:

(1) penalty privilege is a firmly entrenched privilege underpinned by decisions of the High Court of Australia and Supreme Court of Victoria; [28]

(2) the passage cited from Towie's case represents the law of Victoria,[29] and is not open to serious question or doubt;

(3) subject to any abrogation by statute, or waiver by a respondent, it is appropriate for members of the Tribunal sitting in the Legal Practice and Review and Regulation Lists to apply the law as set out in Towie;

(4) the Court of Appeal in Towie held that the provision by a respondent of written grounds and an outline of argument which identifies in broad terms what is in issue is consistent with penalty privilege;

(5) the standard Tribunal directions are consistent with the law relating to penalty privilege as found in Towie; and

(6) in the absence of a statutory provision to the contrary, or waiver by a respondent, the effect of penalty privilege is that a respondent cannot be ordered to make discovery, produce documents, provide information or respond to a notice to admit.

Notwithstanding the existence of penalty privilege, respondents may (and often this is the case) be desirous of producing documents and information on a voluntary basis in order to defend the charges laid against them, or reduce their significance or gravity. This however is a voluntary decision. The duty of the Tribunal is to ensure that a respondent is informed of the options in order to make an informed and voluntary decision whether or not to waive the privilege.

Is there statutory abrogation of penalty privilege?

The Commissioner relied on s 4.4.11(1) of the Act which authorises an investigating authority to require an Australian legal practitioner who is subject to an investigation to provide -

(a) full written explanation of the practitioner's conduct; and

Section 4.4.11(6)(b) abrogates the privilege of self-incrimination in the case of a legal practitioner required to comply with s 4.4.11(1).
The Commissioner submitted that the doctrine of penalty privilege was not consistent with the legislative intent of the Act as demonstrated by ss 4.4.11(1) and (6)(b).
I do not accept this submission. Section 4.4.11(1)-(3) deals with the powers of an investigating authority when conducting an investigation. The powers granted are intended to facilitate the conduct of an investigation, and are confined to an investigation. The statutory powers granted to the investigating authority do not, and do not purport to, extend beyond the duration of the investigation. They do not apply to proceedings in the Tribunal which are subsequent to the conclusion of an investigation.

Observance of penalty privilege does not mean that the Commissioner is placed at a significant disadvantage or that there is no remedy if a respondent is uncooperative, causes delays, or unnecessarily runs up costs.
Firstly, a respondent who elects to rely on penalty privilege may nonetheless be required to file written grounds, and an outline of argument which identifies in broad terms what is in issue.[30] If there is a failure to comply with directions made by the Tribunal, an application can be made to the Tribunal for an order under ss 78(1)(a) and (2) of the VCAT Act including an order for costs. While an application for such an order was ultimately unsuccessful in Towie's case, this was because, in the view of the Court of Appeal, penalty privilege had not been observed by the Tribunal. The Court of Appeal did not hold that if penalty privilege is respected, orders may not be made under ss 78(1)(a) and (2) of the VCAT Act.
Secondly, it is open to the Commissioner in an appropriate case to seek from the Tribunal the opportunity of presenting a case in reply, or directions for the provision of additional evidence. Such cases will include a case where a respondent presents a case of which no notice has been given, which has not been foreshadowed or sufficiently foreshadowed, or uses 'ambush' tactics intended or likely to cause disadvantage or unfairness to the Commissioner.
Thirdly, costs orders may be made under ss 78(2)(c) and 109 of the VCAT Act. Under clause 46D(2) of Schedule 1 to the VCAT Act, the Tribunal must make an order requiring an Australian legal practitioner whom it has found guilty of unsatisfactory professional conduct or professional misconduct to pay costs including the costs of the Commissioner and the complainant (if any) unless the Tribunal is satisfied that exceptional circumstances exist. Costs ordered under this far reaching provision may well include costs occasioned to the Commissioner by the conduct of a respondent in an excessively long case, or conduct causing disadvantage or unfairness to the Commissioner. The costs payable by a legal practitioner who chooses to cause a prolonged or fragmented hearing may be very substantial.

The application by the Commissioner for liberty to serve a notice to admit facts must be dismissed.
It is a matter for the Commissioner to decide on the course that he wishes to follow for the future conduct of this proceeding. After providing an opportunity for these reasons to be considered, the proceeding will be listed for directions.

[1] [2008] VSCA 157 (Redlich and Weinberg JJA; Mandie AJA) ('Towie').

[3] Relying on Frugtniet v Board of Examiners [2002] VSC 140 [10].

[4] Referring to Wentworth v New South Wales Bar Association [1992] HCA 24; (1992) 176 CLR 239, 250-1.

[8] The other two privileges are the privilege against exposure to forfeiture and the privilege against exposure to ecclesiastical censure.

[9] [2004] HCA 42; (2004) 220 CLR 129, 141 [23] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) referring to Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543, 553-554 [13] and to Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328, 336.

[10] Rich [23]-[24]. The history of the privilege is fully discussed by McColl JA in Rich and Silberman v ASIC [2003] NSWCA 342, [195]-[257].

[11] Rich [24]; Naismith v McGovern [1953] HCA 59; (1953) 90 CLR 336, 341-342.

[12] Rich [26], [28], [34], [36].

[13] Environment Protection Authority v Caltex Refining Co Pty Ltd [1993] HCA 74; (1993) 178 CLR 477; quoted with approval in Trade Practices Commission v Abbco Iceworks Pty Limited & Ors [1994] FCA 1279; (1994) 52 FCR 96, 129; in turn cited with approval in Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129, 142.

[14] [1983] HCA 9; (1983) 152 CLR 328, 336 (Mason ACJ, Wilson and Dawson JJ).

[16] For other jurisdictions see Valantine v Technical and Further Education Commission [2007] NSWCA 208 [51]; Bridal Fashions Pty Ltd v Comptroller - General of Customs (1996) 140 ALR 681, 690.

[18] Ibid [26] (Redlich JA and Hargrave AJA).

[21] [2012] VSC 576; (2012) 93 ACSR 130 ('Re APCH (No 2)').

[24] Ibid [86] referring to Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat & Livestock Corporation (1979) 42 FLR 204, 207-208 (Deane J).

[25] [2014] VSCA 182; (2014) 102 ACSR 367 (Ashley and Neave JJA; Almond AJA).

[27] Ibid [49]-[50], referring to Reid v Howard (1995) 184 CLR 1, 12.

[30] Towie [2008] VSCA 157 [9].

Civil and Administrative Tribunal Act 1998

Legal Services Commissioner v Spaulding (Legal Practice) [2015] VCAT 292 (27 March 2015)

Legal Practice - Penalty privilege - Respondent's failure to appear - Respondent overseas - Correctness of Tribunal's directions following Towie v Medical Practitioners Board of Australia [2008] VSCA 157 - Penalty privilege discussed - Legal Profession Act 2004 (Vic) ss 4.4.11(1) and (6) - Penalty privilege available unless abrogated by statute or waived - Obligation of respondent to comply with Tribunal directions.

Legal Services Commissioner v Spaulding

At a glance

Court

Decision date

Before

Source

Judgment (83 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (13)

Legal Services Commissioner v Spaulding (Legal Practice) [2015] VCAT 292 (27 March 2015)