Maersk A/S v Patti

RARES J: 1 This is an interlocutory application by the applicant, Maersk A/S, to strike out the defence of the respondent, Maurice Patti, to the statement of claim.

Background 2 When Maersk began the proceeding, it applied ex parte for a search order, which I granted on 14 December 2021 in reliance on the evidence tendered on that occasion. 3 Mr Patti submitted, correctly, today, that Maersk's allegations on which it relied for the search order suggested that some kind of fraud may have been practised on Maersk. There appeared to be a real possibility, as its submissions on the ex parte application suggested, that the nature of the allegations Maersk pleaded and the evidence that it then deployed might give rise to an allegation that Mr Patti had registered, caused to be registered or was knowingly involved in registering, in Maersk's computer systems, certain company details, email addresses and bookings that he knew had impersonated the names of extant or defunct companies. 4 On 11 February 2022, I ordered that Mr Patti file and serve on or before 25 February 2022 his defence and any cross-claim, which he then had foreshadowed. In the defence, when filed, Mr Patti asserted that he would not need to plead to almost the entirety of the allegations in the statement of claim because to do so might criminate him or expose him to a penalty.

The pleadings 5 The originating application and statement of claim, in terms, did not go beyond alleging that Mr Patti was liable for damages for breach of contract and, alternatively, Maersk sought compensation from Mr Patti under s 236 of the Australian Consumer Law in Sch 2 of the Competition and Consumer Act 2010 (Cth) for misleading or deceptive conduct in contravention of s 18. 6 The statement of claim is lengthy. It pleads that it was an express term of each of the contracts under which a cargo was carried that the "merchant", as defined, included a "shipper, holder, consignee, receiver of the goods, any person owning or entitled to possession of the goods or of the bill of lading or anyone acting on behalf of such person", so that, if it were the case that Mr Patti was involved, by acting on behalf of any persons of that description, or as a principal, he was a "merchant" and therefore liable to Maersk on the contract of carriage. 7 The statement of claim pleads a large number of dealings in which Mr Patti is alleged to have been involved as the "merchant", within the meaning of the standard terms and conditions, and undertook various steps to cause Maersk to provide containers and carry the cargoes. Maersk pleaded that Mr Patti registered or caused to be registered certain details of companies as shippers or consignees in its booking system so as to book, and obtain containers to carry cargo, described as rubber, goods, used tyres or similarly. Maersk alleged that it supplied about 385 x 40 foot (Ex IA par 6) containers and delivered them to shippers in Australia who loaded them, not with the goods described in the relevant booking, but with end of life waste tyres. The consignor then caused the loaded containers to be delivered to the port of loading in Australia. 8 The statement of claim alleged that after the formation of the various contracts for carriage of containers by different persons named as shippers, the cargoes were carried on Maersk's vessels for delivery to either a named consignee or to order, at a specified foreign port, in consequence of the original making of arrangements to register the shipper and its booking in Maersk's booking system or the use of an existing customer's registration to do so. 9 The statement of claim alleged that over a number of months in 2021: Maersk carried the relevant cargoes from the load port to the port of discharge; after receipt of each cargo, Maersk issued a bill of lading to the named shipper; the carriage of each cargo was subject to Maersk's standard terms and conditions; by reason of performing the carriage of each cargo, Maersk was entitled to freight earned and other charges; each cargo, in fact, was end-of-life waste vehicle tyres; where there was no named consignee, the cargo was not collected and no one paid the freight; where there was a named consignee, that consignee did not collect the cargo, denied it had placed the order, and asserted that it was not in truth the consignee; and none of the freight for any cargo so carried was paid. 10 Maersk's claim is for over $2 million. 11 Mr Patti's defence admitted pars 1 and 3 of the statement of claim, namely that Maersk was incorporated, was a foreign company, registered in accordance with the provisions of the Corporations Act 2001 (Cth), and able to sue in its own name (par 1), and he was a natural person (par 3). Paragraph 2 of the statement of claim pleaded that: 2. The Applicant carries on a business in Australia that includes: (a) the supply of containers for shipping of goods; (b) the carriage of containers with goods by sea from Australian ports to foreign ports; (c) the registration of customers in its systems and records; (d) the acceptance of orders for the supply of containers for stuffing; (e) the acceptance of orders for the carriage of such containers and the goods. 12 Mr Patti's defence pleaded, in par 2 (par 4 of the defence was in the same terms except for using "4-91", being all of the other paragraphs of the statement of claim, instead of "2"): 2. The Respondent does not plead to paragraph 2 of the Statement of Claim and: a. claims privilege against exposure to penalties and privilege against self-incrimination; b. thereby relies upon an exception to r 16.02, 16.03, 16.07(1), 16.07(2), 16.08 and 16.41 of the Federal Court Rules 2011 (Cth); c. reserves his right to seek leave to amend this Defence after the Applicant has presented its case.

Mr Patti's submissions 13 Mr Patti sought to justify the pleading of pars 2 and 4 of his defence without filing any evidence. He relied only on the pleadings, some of the material tendered to obtain the search order and Maersk's submissions on that occasion as a sufficient basis on which to invoke the claims to the privileges against self-exposure to a penalty (the penalty privilege) and against self-incrimination (the self-incrimination privilege). He argued that he could not be required to plead so as to comply with Pt 16 of the Federal Court Rules 2011 by responding to each allegation against him in the statement of claim. That was because to do so may have a capacity of tending to incriminate him or expose him to a penalty.

Consideration 14 The basal principle is that each of the self-incrimination and penalty privileges is a substantive common law right "that serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it": The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at 559 [31] per Gleeson CJ, Gaudron, Gummow and Hayne JJ citing Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 129 per Burchett J (emphasis added). Neither privilege can be abrogated by any order or rules of a court: Reid v Howard (1995) 184 CLR 1 at 16-17 per Toohey, Gaudron, McHugh and Gummow JJ. 15 In Grochowski v Kearney [2020] FCA 1248 at [3], O'Callaghan J said: It is well established that a personal respondent to a penalty proceeding is entitled to put the applicant to proof of its case, and that such a respondent can decline to admit matters alleged against it. To the extent that the rules of pleading might suggest otherwise, including r 16.07(2) of the Federal Court Rules 2011 (Cth), which says that allegations that are not specifically denied are taken to be admitted, those rules are required to be modified accordingly. See A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union [2005] FCA 1658; 226 ALR 247 at 251 [17] (Gyles J); MacDonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612 at 619 [39] (Spigelman CJ) ("the law of privilege confers substantive rights to which procedural rules must yield unless there is clear statutory authority to the contrary"); Australian Securities and Investments Commission v Mining Projects Group Ltd (2007) 164 FCR 32 at 37 [12] (Finkelstein J); Anderson v Australian Securities and Investments Commission [2012] 2 Qd R 401 at 406-407 [17], 407 [20], 409-410 [27], 411-412 [32]-[36] (Philip McMurdo J, Holmes and White JJA agreeing); Fair Work Ombudsman v Hu [2017] FCA 1081 at [12]-[13] (Rangiah J). (emphasis added) 16 Of course, this is not a proceeding in which Maersk has pleaded that Mr Patti engaged in conduct that was either criminal or such as to expose him to a penalty. 17 The statement in Macdonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612 at 619 [39] to which O'Callaghan J referred was not made by Spigelman CJ but was that of Mason P with whom Giles JA agreed. Mason P said, in a passage at 73 NSWLR at 624-625 [71]-[74], that North, Dowsett and Rares JJ discussed, without disapproval, in Adams v Director of the Fair Work Building Industry Inspectorate (2017) 258 FCR 257 at 289-291 [100]-[105] and see too at 293 [110] (and see also Australian Building and Construction Commissioner v O'Halloran [2021] FCAFC 185 at [84]-[85] and [96] per Kerr and Wigney JJ) that a person cannot be required to include in his or her defence "any information that may have the tendency to expose him directly or indirectly to" a penalty. Mason P said that not every form of affirmative defence has the requisite tendency adding (73 NSWLR at 625 [72]): I see nothing wrong with a pleading in the following form: "If, which is denied, the matters alleged in para X constitute a contravention of sY of the Corporations Law, the defendant says that the matters alleged by ASIC also establish that the claimant relied upon information or professional or expert advice (etc) / acted honestly (etc). The defendant reserves the right to advance in his case additional material in support of his defence, the details whereof will be disclosed by amending this paragraph after the close of ASIC's case." See also Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 86, Bridal Fashions [Pty Ltd v Comptroller-General of Customs (1996) 17 WAR 499] (at 516). 18 It is important to appreciate that the rules of this Court do not require verified pleadings, unlike those now applying in the Supreme Court of New South Wales. At common law and in the judicature system of pleading, an assertion made in a pleading does not constitute an admission by the party filing the pleading: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 85-86 per Mason CJ and Brennan J, 98 per Gaudron and McHugh JJ. Their Honours applied what Parke B, with whom Alderson and Martin BB concurred, said in Buckmaster v Meiklejohn (1853) 8 Exch 634 at 637; [155 ER 1506 at 1507], namely: In point of law, pleadings are not admissions, but are merely the statement of a case, which the party wishes to raise for the opinion of the jury. (emphasis added) 19 In Laws 170 CLR 70, the Australian Broadcasting Tribunal had commenced a public inquiry into whether it should exercise its statutory powers in respect of the well-known broadcaster, John Laws, in respect of broadcasts by Mr Laws in several programs on radio station 2GB that breached a radio program standard because that they were likely to incite and perpetrate hatred against a group (namely, Aboriginal people), on the basis of race. Subsequently, a senior executive of the Tribunal gave a radio interview about the reasons why members of the Tribunal had decided to institute the public inquiry. Mr Laws then brought defamation proceedings in the Supreme Court of New South Wales (at a time when pleadings did not require verification) alleging that the executive and the Tribunal had defamed him. The executive and the Tribunal pleaded a defence of justification that alleged that Mr Laws' broadcasts, in fact, had the racist character the subject of the public inquiry. 20 As a result, Mr Laws began proceedings in this Court seeking to have the Tribunal's decision to institute or to continue with the public inquiry quashed on the ground of apprehended bias by reason of its pleaded defence to the defamation action. That made it necessary, ultimately, for the High Court to determine the legal effect of the Tribunal's pleading and whether it could amount to an admission about its state of mind. In determining that the defence was not an admission, Mason CJ and Brennan J said (170 CLR at 86): The suggestion that pleadings should be treated in the same way as any other form of admissions fails, in our view, to take account of the function and object of pleadings when they are not required to be verified in outlining the party's case and defining the issues to be tried. Especially is this so in the case of pleading defences. The defendant is entitled to put a plaintiff to proof of his or her cause of action and so raise alternative matters in the defence which may possibly answer the plaintiff's claim without asserting in any absolute sense the truth or correctness of the particular matters pleaded. Accordingly, we do not regard the defences filed by the Tribunal as constituting admissions on the part of the Tribunal or, for that matter, on the part of its individual members. (emphasis added) 21 Nonetheless, in circumstances where there is a real and appreciable risk that a party to a civil proceeding may face a criminal proceeding or a proceeding for the imposition of a penalty, the civil proceeding must be conducted in a manner that ensures that any trial and pre-trial procedures enables the bona fide assertion of the self-incrimination and penalty privileges. 22 In a proceeding that does not itself seek the imposition of a penalty or allege a criminal offence, an allegation in a pleading can support the invocation of the self-incrimination and penalty privileges, by reason of the nature of the allegation: cf: Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (2018) 357 ALR 695 at 718 [102] per Moshinsky J; Sullivan v Krepp [2020] SASC 97 at [51] per Peek J; CC Containers Pty Ltd v Ming Lee [2012] VSC 149 at [18] per Ferguson J. 23 For example, Ferguson J held in CC Containers [2012] VSC 149 at [17]-[20] that where a pleading makes allegations that, even if not expressly pleaded as fraud, could, if proven, tend to establish a regular and systematic fraud with a large amount in issue, an individual who is a respondent or defendant may be entitled to invoke the self-incrimination privilege. Her Honour also relieved the defendants there from being required to plead a positive defence case. However, each case relating to the extent to which a party can invoke the self-incrimination and or penalty privileges will turn on its own facts, as Mason P made clear in MacDonald 73 NSWLR at 625 [72]. 24 Part VB of the Federal Court of Australia Act 1976 (Cth) imposes procedural requirements on the Court, the parties and their lawyers that are intended to achieve the overarching purpose of the civil practice and procedure provisions, namely, to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. However, requirements in the Rules to plead a defence cannot be used to bring about a real risk or possibility that, by being required to plead a positive defence or otherwise address allegations, an individual might be deprived of invoking, or attaining the benefit of, the self-incrimination and or penalty privileges. 25 In my opinion, par 2 of the defence is a prime example of why Mr Patti's present pleading cannot be sustained in respect of effectively all of the allegations in the statement of claim. The context in which Mr Patti seeks to invoke the penalty and self-incrimination privileges is important. A responsive plea to par 2 of the statement of claim could not tend to incriminate Mr Patti or expose him to a penalty. Maersk is one of the largest shipping lines of containerised cargo in the world and it operated, as one might expect, a computerised booking system with records of its customers, their orders and carriage of cargoes. An admission, in a pleaded defence, of the allegation that Maersk carried on a business in Australia could not have any criminatory effect. There could be no possible dispute about Maersk's allegation that it carried on business. Nor could his admitting that it did so could expose Mr Patti to any risk of the admission's use to criminate him or expose him to a penalty. 26 Mr Patti's right to invoke each privilege reflects an important common law raw right. But the right cannot be overstretched to apply to allegations that did not involve him or his acts or omissions such as par 2 of the statement of claim. 27 I am of opinion that Mr Patti's assertion that he would be exposed to such a risk if he had to plead to virtually each and every paragraph of the statement of claim goes beyond any legitimate invocation of the penalty and self-incrimination privileges. It is likely that he will be entitled, if so advised, to invoke one or both of those privileges in respect of particular allegations in the statement of claim that he was party to the bringing into existence of the contracts of carriage, registrations of customers and the booking of cargoes in Maersk's booking system. However, I am of opinion that there is no reason why he cannot plead to anodyne allegations by admitting, denying or stating that he does not know and cannot admit them. That is because, ordinarily, such a plea under the Federal Court Rules does not have the character of an admission but is merely a statement of what is in issue: Laws 170 CLR at 86, 98, Buckmaster 8 Exch at 637; 155 ER at 1507 28 In other instances, Mr Patti may be able to plead, by invoking one or both of the self-incrimination or penalty privileges but, stating that there is or is not is an issue about whether a fact exists independent of any admission that could be used to involve him in it. For example, it is difficult to see why Mr Patti could not plead to whether Maersk carried some or all of the containers to their ports of discharge, issued bills of lading that incorporated Maersk's standard terms, provided containers for collection or that were carried but not collected and received payment of freight or not. It is difficult to understand how the pleading of an admission or denial of those matters would have any capacity to be used in a criminal or penalty proceeding against Mr Patti, in the absence of any evidence or explanation giving rise to that possibility.

Conclusion 29 Accordingly, in my opinion, the current defence must be struck out as embarrassing. As he has accepted, Mr Patti should have leave to re-plead on the basis that he will have one week to seek particulars of any paragraphs in the statement of claim for which he needs particulars to plead, Maersk will have a week to reply and Mr Patti will have two weeks to file and serve an amended defence in accordance with the Rules. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares.