Lewis v Nortex Pty Ltd

8IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3081/97 PETER LAWRENCE LEWIS v NORTEX PTY LIMITED (In Liq) 1750/02 LAMRU PTY LIMITED v KATION PTY LIMITED & ORS JUDGMENT on objection taken by witness under s 128 of the Evidence Act (see T 1076) 1 HIS HONOUR: I am dealing with an application to overrule an objection made by a witness, Mr Lamb, to answering a question asked of him by counsel for Lamru Pty Limited ("Lamru"). I am hearing together two associated sets of proceedings: one a statutory appeal against rulings by a liquidator on proofs of debt in a liquidation; the other proceedings on various claims by Lamru against the company in liquidation ("Nortex") and associated parties. Nortex was in effect a "partnership company", the partners being Lamru and Kation Pty Limited ("Kation"). Lamru stands in the place of a plaintiff or moving party in both sets of proceedings. There is no dispute that Mr Lamb is the controller of Lamru. He is not, however, a party to the proceedings except as a cross defendant to a cross claim for contribution in the ordinary proceedings. 2 One of the subject matters of the proceedings being heard is a claim that stock of Nortex was in effect stolen or misappropriated by Kation and its controller, Mr Peter Lewis. This involves evidence concerning the state of the stock lists kept by Nortex and the state of the stock on the shelves at corresponding times. Upon Mr Lamb being asked a question concerning the way in which samples were dealt with in accounting for the stock, Mr Lamb made an objection under s 128(1) of the Evidence Act 1995 ("the EA"). Mr Cotman, of Senior Counsel for the Lewis interests, has made an application that this objection ought be overruled. 3 Before returning to the course of events leading to this question and the submissions put, I shall say something about s 128, which provides as follows: "128 Privilege in respect of self-incrimination in other proceedings

(1) This section applies if a witness objects to giving particular evidence on the ground that the evidence may tend to prove that the witness: (a) has committed an offence against or arising under an Australian law or a law of a foreign country, or (b) is liable to a civil penalty. (2) Subject to subsection (5), if the court finds that there are reasonable grounds for the objection, the court is not to require the witness to give that particular evidence, and is to inform the witness: (a) that he or she need not give the evidence, and (b) that, if he or she gives the evidence, the court will give a certificate under this section, and (c) of the effect of such a certificate. (3) If the witness gives the evidence, the court is to cause the witness to be given a certificate under this section in respect of the evidence.

(4) The court is also to cause a witness to be given a certificate under this section if: (a) the objection has been overruled, and (b) after the evidence has been given, the court finds that there were reasonable grounds for the objection. (5) If the court is satisfied that: (a) the evidence concerned may tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law, and (b) the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country, and (c) the interests of justice require that the witness give the evidence,

the court may require the witness to give the evidence.

(6) If the court so requires, it is to cause the witness to be given a certificate under this section in respect of the evidence.

(7) In any proceeding in a NSW court: (a) evidence given by a person in respect of which a certificate under this section has been given, and (b) evidence of any information, document or thing obtained as a direct or indirect consequence of the person having given evidence,

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence." 4 A number of things may be said about s 128. The first is that, in my view, it replaces the common law of privilege, at least in the in court situation where objection is taken to giving evidence on grounds of self incrimination and the determination of that objection. This is similar to the situation in relation to client legal privilege: see Telstra Corporation v Australis Media Holdings [No 2] (1997) 41 NSWLR 346 at 349 - 350 per McLelland CJ in Eq; and as to settlement negotiation privilege: see Bruinsmar v Menczer (1995) 40 NSWLR 716 at 719 - 720 per Santow J; and Sparnon v Apand Pty Ltd (1996) 68 FCR 322 at 325 per Branson J. When I say that the section displaces the common law in court, there are areas where it is silent and one must look outside the EA to see the law. Thus, the EA is silent as to whether or not any inference may be drawn from the taking of the objection and one must still look outside the EA to determine whether such an inference may be drawn (it may not): see Versace v Monte [2001] FCA 1572. But in relation to in court objections, one must proceed by reference to the terms of the EA. 5 Two, the section operates in an area where it is perceived that two areas of public policy intersect. On the one hand there is a policy that if a witness may provide to the court relevant material which may have a significant bearing on the outcome of litigation (in the words of Hunter J in Strata Consolidated (Australia) Pty Limited v Bradshaw NSWSC 18 March 1996 unreported) the benefit of that evidence should be available in the interests of the administration of justice. On the other hand, the traditional policy of the common law against self incrimination is recognised and substantially maintained. As to the modern day bases of that policy: see Environment Protection Authority v Caltex Refining Co Pty Limited (1993) 178 CLR 477 at 498 per Mason CJ and Toohey J. 6 Three, the section does apply to parties who are giving evidence. This is made reasonably clear by the provisions of Part 2 clause 7 of the Dictionary to the EA. The conclusion is confirmed by reference to the Australian Law Reform Commission Reports upon which the EA was based. Clause 104(5) of the draft Bill in ALRC 26 provided for the exclusion of parties from the provisions of s 128. However, when one comes to ALRC 38, the limitation of the exclusion of parties to criminal defendants (see s 128(8)) is confirmed by the terms of par 217(a) of the Report. The application to parties has been made clear by subsequent authority: see the decision of the Full Court of the Family Court In the Marriage of Atkinson (1997) 136 FLR 347 and of Tamberlin J in the Federal Court in Versace v Monte supra. 7 Four, the objection can only be taken in respect of a threat of incrimination of a witness himself or herself. The terms of s 128 do not extend to the incrimination of a corporation, however close the association of the person with the corporation may be. After some doubt, that had been confirmed as the policy of the common law by the decision of the High Court in Caltex supra. It also accords with the policy contained in s 187 of the EA, which deprives corporations of protection against self incrimination where they may be subject to statutory interrogation. In the end, it also flows quite simply from the fact, which I have noted, that s 128 applies only to witnesses, who must be natural persons, and the section itself is silent as to corporations being entitled to any protection. 8 Five, the section, to employ the word used by Mr Cotman, "bifurcates". After the making of an objection as prescribed by subs (1), the section splits into two pathways down which the matter may proceed. The first pathway is triggered where the court identifies that there are reasonable grounds for the objection: see subs (2). The provision then is that the court is not to require the witness to give the evidence objected to and is to inform the witness of the availability and effect of the certificate. That pathway leads further, if the witness chooses to give the evidence, to the giving of the certificate by the court: see subs (3). It is to be noted that, if the finding is made that there are reasonable grounds for the objection, then the court does not have a discretion. It is obliged not to require the witness to give the evidence and to give the witness the information specified by subs (2). That subsection, however, is provided to be subject to subs (5), which provides for the second pathway. That provides that, where the court is satisfied as to certain matters and that the interests of justice require that the witness give the evidence, "the court may require the witness to give the evidence". There, even if the relevant findings specified in subs (5) are made, the court retains a general discretion as to whether or not to require the witness to give the evidence. If it does make the requirement, then the court is compelled by subs (6) to give the witness a certificate in respect of the evidence. 9 It is against the background of those propositions concerning s 128 that the particular objection now pursued is to be viewed. Last Friday, the witness was asked certain questions concerning the manner of dealing in Nortex with a "stock reserve" that was referred to in a document used between and discussed by Mr Peter Lewis and Mr Lamb. Counsel for Lamru, Mr Motbey, was asked by the Court to state in the absence of the witness the answers which he anticipated to the question and that course was followed without objection from Mr Cotman. The Court was informed that the answers would involve evidence of the giving of false information as to the level of stock to the Australian Taxation Office. Mr Cotman pressed the objection on the ground of relevance, asserting that this material was outside the pleadings and particulars and expanded the case. However, I perceived a relevance of the evidence within the case as pleaded and overruled that objection. In relation to Mr Lamb's objection to giving the evidence on the ground that it might tend to incriminate him, I said (at T 1057 line 47 to T 1058 line 14): "The second objection is the objection by Mr Lamb to answer the question on the ground that the answer may tend to incriminate him. There is no need for me to consider the matter under section 132 of the Evidence Act 1995 as the course has actually been taken by the witness and that takes us straight to section 128. Although Mr Lamb is a cross defendant to a cross claim for contribution that is included within the present trial, what is being conducted at the present is Lamru Pty Limited's case in chief and the question has been asked of him by Mr Motbey as counsel for Lamru. His role in that case is legally as a witness, not as a party, despite the close association between Lamru and himself. There appears to me, therefore, no doubt that he has an entitlement to make the objection without triggering any question as to whether a party giving evidence in his or her own case in chief may take advantage of the section 128 procedure. Mr Motbey has without objection told me in essence the general area of the answers that he anticipates, and that makes it plain that there is substance in the objection that is taken."

I ruled that there were reasonable grounds for Mr Lamb's objection. He then gave evidence concerning that subject matter, in respect of which a certificate under s 128 will be given in due course. 10 Now the situation has been repeated. Mr Lamb has been asked, as I have indicated, about the practice as to dealing with samples. Mr Cotman objected as to relevance. Mr Lamb took an objection under s 128(1) of the EA. However, in the course of argument Mr Cotman expanded his objection and took an objection that was not taken in this form in respect of my earlier ruling. It may be summarised in what he said this morning, namely, that if one looks at the cases in respect of which the s 128 procedure has been invoked, it is almost, if not completely, invariable that it has arisen in circumstances where there is an element of compulsion upon the witness. Here the witness could not be said to be under compulsion because he has caused counsel for Lamru to ask the question. It must have been asked, says Mr Cotman, on his instructions. At the very least, he could remove the situation by instructing counsel for Lamru, in his role as controller of that company, to withdraw or not to ask the question. 11 I am somewhat doubtful whether, without evidence, the specific question should be taken to be asked on behalf of the corporation on the specific instructions of the witness, albeit the controller of the company. In the end it is counsel who decides whether or not questions should be asked upon his or her perception of needs arising or benefits to be obtained in the conduct of the case for the corporation. But it is certainly true that the controller of the company would be in a position to prohibit the course being followed, whatever counsel's views. 12 Mr Motbey submits that the meaning of the section is clear. A witness, who may well be a party, may take the objection provided for by s 128(1). Once that is done, the Judge must proceed under the section. A finding must be made as to whether or no there are reasonable grounds for the objection. If there are, then there is no discretion to be exercised by the court and the court must proceed as required by subs (2) not to require the witness to answer the question but to give the witness the information specified in the subsection. The corporation and the witness are separate persons who may or may not have divergent interests. The fact that a corporation is not entitled to privilege against self incrimination does not prevent a witness associated with it from taking an objection on the basis of the witness' personal privilege against self incrimination, even where the subject matter of the two overlaps: see Caltex supra at 495 per Mason CJ and Toohey J. 13 One case in which an objection of the present sort has been dealt with is the decision of Smart J in New South Wales Crime Commission v Ahmadi NSWSC 23 September 1997 unreported. There, Mr Ahmadi was about to be tried for an offence relating to the possession of heroin. He was at the same time subject to an application in the Common Law Division of this Court by the Crime Commission for an assets forfeiture order relating to property. He indicated that he wished to give evidence in an endeavour to resist the assets forfeiture order, but was unwilling to do so for fear the evidence might be used against him in his pending criminal trial. Smart J thereupon explained to Mr Ahmadi the effect of s 128 of the EA. His Honour proceeded to say: "Although the matter is open to some doubt on s 128 of the Evidence Act, I think that the correct position is that Mr Ahmadi will only be giving evidence after objection because of the matters I have indicated to him. Accordingly, s 128(1) of the Evidence Act applies. I have preferred to give this section a broad interpretation. A narrower interpretation which would hold that the section does not apply to someone who has the option of refraining from giving evidence but gives evidence under objection would produce an anomalous and unreal result."

His Honour allowed Mr Ahmadi to give evidence with the benefit of the protection of a certificate. That decision obviously affords some support for Mr Motbey's argument that the section should be allowed to operate upon the plain literal meaning of its terms. Not only would this be an application of the clear terms of the section, but it would permit the giving of relevant evidence which, if precluded, could produce a false or skewed result in the particular proceeding with which the Court was dealing at the time. In Ahmadi , it was in effect held that there should be no implication of a principle that a party should not be able to use the provisions of s 128 because it permitted evidence to be given of some criminal conduct to the party's advantage without enhancing the risk of prosecution for the offence. 14 Two things may be said about the decision in Ahmadi. The first is that one ground upon which it could be attacked is not present in this case. Mr Ahmadi was plainly appearing in person and the "objection" arose out of discussion in court between the Judge and him as to the course that was to be followed, rather than being taken in response to a question put to a witness in the ordinary way. It also appears that the course was not objected to by counsel for the Crime Commission. There was not there, as there has been here, a formal objection in the sense of a witness being asked a question by counsel in his role as counsel for a corporation and himself making the objection in the witness box to the question upon its being asked. Here, there clearly was objection taken by the witness. On the other hand, it could be said that Mr Ahmadi was under a measure of compulsion not present in this case. He did not go to court to seek relief and, in the course of seeking that relief, take the objection. He was taken to court as a defendant by the Crime Commission, which was seeking to have property of his forfeited. In that sense, he had to speak, or simply allow his property to be forfeited. In this case, it could be said that the witness could simply cause the corporation, if not to abandon its claim, at least to abandon any attempt to use in support of it evidence which it is apparent the corporation's counsel believes may contribute to the establishment of the claim. However, the difference between the two situations may, on consideration, not be so different. 15 There are, no doubt, considerations both ways. The conclusion that I have come to is that in the present circumstances the section should simply be applied in accordance with its terms, which in my view contain no relevant ambiguity. If this adds to the likelihood of potentially self incriminating evidence being brought forward and used, perhaps to the advantage of an offender, so be it. A question has been asked of the witness by counsel for a corporation. Albeit he is closely associated with the corporation, Mr Lamb is not the corporation and has taken objection to answering the question on the ground that the answer may tend to incriminate him. In my view that course is open to him. It falls within the literal and clear words of s 128. The application made on behalf of the Lewis interests for that objection to be overruled as not available to Mr Lamb as witness in these circumstances is refused and his objection under s 128(1) stands and will be determined in the ordinary course.

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