Discovery and corporations
91 As we have noted, by operation of s 187 of the Evidence Act the privilege against self-incrimination and the penalty privilege are not available to corporations that are called upon to produce documents in proceedings in the Court. Section 187 of the Evidence Act reflects Australian common law principles. Therefore, a corporation that has discovery obligations, or to which a notice to produce or subpoena is directed, cannot resist production of documents on those grounds.
92 It is necessary to refer to Griffin v Sogelease, although it did not concern any claim for privilege in respect of documents of a corporation. In that case the plaintiff (Sogelease) sought discovery of some documents from one of the defendants, Mrs Griffin. The documents that were sought included Mrs Griffin's cheque books and other documents relating to a number of financial institutions, some of which were solely in Mrs Griffin's name, and some of which were in the joint names of herself and her husband Mr Griffin, who was also a defendant. The evidence was that Mr Griffin had taken possession of all such documents, and that he had taken them to his solicitors. Mr Griffin declined to produce the documents on the ground of privilege against self-incrimination. The primary judge held that the documents were within Mrs Griffin's power with the consequence that she had an obligation to discover them and produce them for inspection. The primary judge further held that Mrs Griffin had legal title to the documents in question, and was therefore entitled to their return from Mr Griffin or his solicitors. Consequently, the primary judge made an order pursuant to the general power to give directions under s 76A (since repealed) of the Supreme Court Act 1970 (NSW) that Mr Griffin produce the documents to Mrs Griffin in order that she could comply with an order for discovery. The primary judge's decision was reversed by the Court of Appeal, which held that Mr Griffin was entitled to rely upon the privilege against self-incrimination. Tobias JA, with whom Meagher JA and McColl JA agreed, stated at [31]:
… the vice against which the privilege protects a person from self-incrimination is the requirement to compulsorily produce the offending documents.
93 The Court of Appeal held that by ordering Mr Griffin to produce the relevant documents to Mrs Griffin or her solicitors the primary judge had required their production by compulsory process, that is, by order of the court. And although Mr Griffin was not required to produce the documents directly to Sogelease he was indirectly required to do so for, once they were in the possession of Mrs Griffin or her solicitors, she was obliged to discover them, and that such an order was impermissible. The Court held at [35] that once Mr Griffin had obtained possession of the documents, he was entitled to object to any mandatory order requiring him to produce them in contravention of his right not to do so based upon his privilege against self-incrimination.
94 In Microsoft Corporation v CX Computer Pty Ltd (2002) 116 FCR 372 (Microsoft v CX Computer), the issues before the Court were whether an order for discovery should be made, and whether a notice to produce should be enforced, against a corporate respondent (Natcomp) which had a sole director and secretary (Grassia). The objection to the order was that the giving of discovery would involve self-incrimination by the director. Lindgren J rejected the objection. As to discovery, the corporation had three members, and O 15, r 9(1) of the Federal Court Rules 1979 (Cth) (since repealed) provided that an affidavit verifying a list of documents of a party which was a corporation could be made by a member or officer of the corporation: cf, Federal Court Rules 2011, r 20.22(c) which requires that an "officer" of a corporation make the verifying affidavit. Lindgren J held at [34] that there were two other members of the corporation, and that one of those members, who was the director's father, was also an "officer" as defined by s 9(1) of the Corporations Act because he held 9,900 of the 10,000 issued shares and therefore had the capacity to affect significantly the corporation's standing. In consequence, Lindgren J held at [35] that he was not satisfied that it was impossible or impracticable for the corporation's list of documents to be verified by an individual other than the sole director, or for another individual to respond on behalf of the corporation to the notice to produce. For these reasons, Lindgren J held at [37] that he was not satisfied that giving discovery or complying with the notice to produce by the corporation would require the director to engage in self-incriminatory conduct of any kind.
95 The decision of Lindgren J in Microsoft v CX Computer was cited by Gordon J in Australian Securities and Investments Commission v Mining Projects Group Ltd (No 2) [2008] FCA 951, who formulated the following propositions at [7]:
(1) a corporate defendant … may be required to provide documents and information which may tend to incriminate its officers: Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 116;
(2) a corporate defendant cannot invoke privilege on the grounds that an order or requirement to produce documents or information might tend to incriminate a natural person, such as a director: Microsoft Corporation v CX Computer Pty Ltd (2002) 116 FCR 372 at [32]-[33] (per Lindgren J) and ASIC v Mining Projects Group Ltd [2007] FCA 1620 at [5];
(3) a natural person cannot complain that a corporate defendant's compliance with an order or requirement to produce documents or information might tend to incriminate him or her: Microsoft Corporation v CX Computer Pty Ltd (2002) 116 FCR 372 at [32]-[33] (per Lindgren J) and ASIC v Mining Projects Group Ltd [2007] FCA 1620 at [5];
(4) the relevant enquiry is whether an order directed to the corporate defendant will require that a natural person tend to incriminate himself or herself: Microsoft Corporation v CX Computer Pty Ltd (2002) 116 FCR 372 at [32]-[33] (per Lindgren J) and ASIC v Mining Projects Group Ltd [2007] FCA 1620 at [5]…;
(5) a corporate defendant cannot refuse to comply with a direction for the filing of evidence on the basis that its evidence may incriminate other natural person defendants or expose them to a penalty: Chief Executive Officer of Customs v Camile Trading Pty Ltd (2004) 58 ATR 163 at 170. However, a corporate defendant will not breach such a direction if it fails to file a statement or an affidavit from a witness where that witness claims privilege: ACCC v J McPhee & Son (Australia) Pty Ltd (1997) 77 FCR 217 at 220 and ACCC v Eurong Beach Resort Ltd [2005] FCA 1134 at [10], [12] and [13]. That is to say, compliance is not required if the only source of the information is the director defendants and they are entitled to remain silent (Emphasis added): ASIC v Mining Projects Group Ltd [2007] FCA 1620 at [5]. If the corporate defendant has other sources of information available from which it can comply with the direction, then it must do so.
96 We respectfully agree with the above propositions. It is the fourth proposition that Mr Meneses seeks to invoke in the present case, as he contends that the order that he and OE Solutions produce documents that are within his custody will require him to produce documents that will tend to incriminate him and expose him to a penalty. That circumstance did not arise in Microsoft v CX Computer because on the evidence Lindgren J was not satisfied that there was not another individual, other than the sole director, who could make discovery and produce documents on behalf of the corporation.
97 In Ronen three accused were charged with conspiracy to defraud the Commonwealth of income tax. Each of the three accused was the sole director of a corporation, and two of them were directors of a fourth corporation. The Crown caused a subpoena to be issued directed to the corporations that required production of payroll records. Objection was made by the accused to the production of the documents on the ground that it would require the active participation of an accused person in the process of gathering evidence for use by the Crown in a trial. Spigelman CJ summarised the submissions at [43]:
The appellants submit that, other than each accused, there were no other directors, secretaries or persons who made decisions or participated in the control and/or decision-making processes of the companies or who were in a position to speak with authority on behalf of or to confer authority to speak, or act on behalf of the corporate entity. The subpoenas were, in substance, directed to each accused personally. In the context of a criminal trial, the appellants submit, an accused cannot be compelled to act in his or her capacity as a director and proceed to locate and produce documents or to authorise others to do so.
98 Spigelman CJ, with whom Mason P (subject to some additional observations) and Kirby J agreed, held that from the evidence it appeared that the payroll clerk, or alternatively the chief financial controller, had the necessary authority in relation to the corporations' payroll records such that they were able to conduct a search and either attend court themselves as the corporations' proper officer, or to instruct someone else to do so. Further, at [77] Spigelman CJ held that:
It is not necessary, whenever a subpoena is issued, for a company to give anyone express authority to answer the subpoena. The company is obliged to answer the subpoena. If a director or other person cannot or will not act, the company must still comply. Even in the absence of implicit authority the obligation upon the company to comply with the subpoena confers such authority as is required, as a matter of necessity, on those persons in the company who can ensure compliance.
99 At [83], Spigelman CJ concluded that on the primary judge's findings of fact, each company was physically able to produce the documents, and could do so without any act by an accused.
100 Both Spigelman CJ and Mason P referred to what the position might be in relation to a one-person company. We regard any such observations as obiter, because the case was decided on the grounds to which we have referred at [98]-[99] above. Spigelman CJ, at [53]-[55], referred to two decisions of the Supreme Court of the United States in which it was held that a corporate officer, or an individual acting as a representative of a collective group (a trade union) could not resist a subpoena for production by invoking a personal privilege: Braswell v United States 487 US 99 (1988); United States v White 322 US 694 (1944). Spigelman CJ also cited other authority where the second and fourth circuits of the United States Court of Appeals and the New York District Court held that the position was no different in the case of a corporation with a sole owner, director, officer and employee: Matter of Grand Jury Subpoenas 959 F 2d 1158 (2d Cir 1992); United States v Stone 976 F 2d 909 (4th Cir 1992) cert denied, 507 US 1029 (1993); United States v Moseley 832 F Supp 56 (WDNY 1993). We shall refer to some of the United States authorities in more detail below.
101 Spigelman CJ also cited part of the following passage from the separate reasons of Rand J in the Supreme Court of Canada in Klein v Bell [1955] SCR 309. At the time of that decision, it was accepted in Canada that a corporation could invoke the privilege against self-incrimination to resist the production of documents: Triplex Safety Glass Co. v Lancegaye Safety Glass (1934) Ltd [1939] 2 KB 395. Rand J stated (at 320-321):
The relation of the privilege to the production of documents is also in issue. In the case of the individual defendants the privilege extends to documents in their personal possession which contain incriminating matter and which, accordingly, they may object to produce.
But a distinction must be made in the case of documents of the corporation. The claim of privilege raised on an examination by a company's officer in whose custody its documents may, at any time, be, may be related either to the criminality of the company or to that of himself. In this I take the privilege to be as open to a body corporate as to an individual: Triplex Safety Glass Co. v. Lancegaye Safety Glass (1934) Ltd [1939] 2 KB 395. Although a witness may not set up the claim for the benefit of a third person yet since in an affidavit of documents the privilege may be taken by a corporation acting through its officer it would be little short of absurd that it could be defeated on the examination of the officer having custody of them. If the custody is that of the corporation for the purposes of production following an affidavit the custodian to that extent represents the corporation, and if documents are privileged in the one case, they must be also in the other.
But the claim may be that the document may tend to criminate the officer personally. In such a case I can see no sound reason for conceding it when the matter is one of authentication only and he is no more intimately associated with the corporation than as an officer, custodian or recorder of its proceedings, actions or transactions. He may be involved in some of the latter, but to admit the privilege would be to enable the corporation to prevent production on an examination by maintaining him as custodian. His custody is the possession of the company and no inference can be drawn against him from either fact: and if he chooses or is chosen to continue as custodian, he must submit to its incidental consequences. But this does not touch questions arising out of the documents so produced.
(Emphasis added.)
102 At [64], Spigelman CJ stated that the reference by Rand J to "no more intimately associated" in the passage of the extract that we have emphasised above left open the position of a one-person company. The Chief Justice then stated at [66]:
There is much to be said for the proposition that if the subpoenas do in fact require the accused to perform some act, then the subpoenas should be set aside as oppressive and/or an abuse of process.
103 Spigelman CJ then referred at [67] to the accusatorial nature of a criminal trial:
The High Court has recently emphasised the accusatorial nature of a criminal trial, in which the prosecution bears the onus of proving the guilt of an accused beyond reasonable doubt and in which the prosecution must put its case fully and fairly before the accused is called on. (See RPS v The Queen (2000) 199 CLR 620 at 630 [22]; Azzopardi v The Queen (2001) 205 CLR 50 at 64 [34], 65 [38], 117 [190], 119 [193]-[194]; Dyers v The Queen (2002) 210 CLR 285 at 292 [9], 301 [53], 308 [60]; R v Soma (2003) 212 CLR 299 at 308 [27].) This fundamental characteristic of a criminal trial does, I am inclined to believe, suggest that, absent statutory authority, a court should not make any order which has the effect that an accused against whom an indictment has been presented must do something calculated to assist the preparation or presentation of the Crown case. However, on the facts, it is not necessary to express a concluded view on this matter.
104 To the cases cited by Spigelman CJ in this passage may be added: X7 v Australian Crime Commission (2013) 248 CLR 92 at [87], [99]-[105], [118]-[120] per Hayne and Bell JJ (Kiefel J at [157] substantially agreeing); Lee v New South Wales Crime Commission (2013) 251 CLR 196; Lee v The Queen (2014) 253 CLR 455 at [31]-[33] per French CJ, Crennan, Kiefel, Bell and Keane JJ; and Strickland v Director of Public Prosecutions (Cth) (2018) 361 ALR 23 at [76]-[79] per Kiefel CJ, Bell and Nettle JJ.
105 After holding that the corporations were obliged to answer the subpoena and that the obligation to comply conferred such authority as a matter of necessity on those persons in the companies who could ensure compliance, Spigelman CJ stated at [79]:
Whether the position is different in a one person company need not be decided. In such a case it may be necessary for the court to appoint a receiver for the specific purpose.
106 Mason P (with whom Kirby J also agreed) stated in his Honour's additional observations at [106]:
The appellants respond that the subpoenas indirectly command them to take steps to ensure compliance, thereby aiding the Crown in their own prosecution. This too is misconceived. The appellants accept that they have no right to take positive steps, including the giving of instructions to company employees, to frustrate or impede compliance with the subpoenas (cf Registrar of the Supreme Court, Equity Division v McPherson [1980] 1 NSWLR 688). What if the appellants did nothing? If this caused the corporations to disobey the subpoenas, so be it. If it exposed the corporations to punishment and/or enforcement proceedings, so be it. This is no more than the consequence of the corporations being legal entities separate from the appellants. If, and it is a big if, the appellants need to appoint a "proper officer" to cause the subpoenas to be answered (whether or not documents are available to be produced), and if the appellants choose not to do so in consequence of which the corporations disobey the subpoena, so be it. The subpoenas are not an abuse of process on this account.
107 Mason P then considered the hypothetical scenario, contrary to the findings of the primary judge, that the accused were the only proper officers of their respective corporations, and stated at [109]:
… On the assumption made, the appellants are presented with the option of appointing a proper officer to cause the subpoena to be answered. This step would involve no incriminatory admission. Nor, in my view would it involve a step that impinged upon the appellants' right to put the Crown to proof of guilt without requiring them to assist in the process. It stems from their antecedent relationship with corporations that, in all probability, they brought into being. It is an aspect of their continuing duties as officers of the corporations (if they choose to remain such) to ensure that the corporations obey corporate legal obligations. If those duties are burdensome or inappropriate, the respondents can step aside from a managerial role. It is not oppressive to offer them this choice, or some milder choice such as the appointment of a "proper officer" (if there is presently no such officer who does not fear self-incrimination).
108 A significant point made by Mason P in the above passage is that the appointment of a proper officer to answer a subpoena does not involve an incriminatory admission by the accused, or a step that impinged upon an accused's right to put the Crown to proof of guilt without requiring them to assist in the process. Mason P also referred to United States authorities, and at [110] set out some passages from the opinion of the Supreme Court in Braswell v United States, which held that a custodian of corporate documents could not resist the production of documents by claiming a personal Fifth Amendment privilege against self-incrimination. At [111] Mason P expressed the opinion that the same principles applied under Australian law. We shall return to that opinion later after we address the United States authorities. At [113] Mason P adapted the language of Lumbard J in Re Two Grand Jury Subpoenae Duces Tecum 793 F 2d 69 (2d Cir 1986) at 74:
It is the duty of the [companies], not the [Supreme Court] or the [prosecution], to identify an appropriate custodian to produce subpoenaed documents. If no one may act as custodian without incriminating himself or herself, the firm is required to produce the subpoenaed records by supplying a new agent who has had no previous connection with the firm.
109 At [114] Mason P concluded that the argument that the subpoenas were oppressive should be rejected because:
At the end of the day, the oppression argument is an attempt by the appellants to frustrate the subpoenas by suggesting that they trench upon the appellants' rights. This is to shift the proper focus of inquiry. The corporations are not free to select an individual to be their proper officer " '… who because he fears self-incrimination may thus secure for the corporation the benefits of a privilege it does not have'. Such a result would effectively permit the corporation to assert on its own behalf the personal privilege of its individual agents" (United States v Kordel 397 US 1 (1969) at 8).
110 As we have mentioned, in rejecting the claims for privilege in the present case, the primary judge applied the decision of Brereton J in Kala Capital. Brereton J ruled upon an application by a sole director of two one-person companies to set aside or vary orders for production of documents that were directed to his companies on the grounds of privilege against self-incrimination and penalty privilege. The orders for production had been made in association with examination summonses, including one issued to the director under s 596A of the Corporations Act 2001 (Cth): see Re Kala Capital Pty Ltd (in liq) [2012] NSWSC 721 at [2]. Brereton J referred to the reasons for judgment of Spigelman CJ and Mason P in Ronen, and to the United States and Canadian authorities referred to by their Honours in those reasons. Brereton J at [25] noted that in Ronen Spigelman CJ at [79] (which we have set out at [105] above) had left open the position of a one-person company:
In Ronen, Spigelman CJ left open the position in Australia of a one-person company (at [79]). In reaching that conclusion, his Honour gave considerable emphasis to the accusatorial nature of criminal proceedings, and the inappropriateness, absent statutory authority, of making any order that has the effect that an accused against whom an indictment has been presented must do something calculated to assist the preparation or presentation of the Crown case (at [67]).
111 At the commencement of the next paragraph, [26], Brereton J stated:
That concern does not operate in the present circumstances.
112 By this sentence, Brereton J may have been drawing a distinction between the operation of the privilege against self-incrimination in the context of criminal proceedings, and the operation of the penalty privilege in a civil proceeding. Alternatively, Brereton J may have been suggesting that the position of a sole director of a one-person company which is called upon to produce documents may be different in the context of criminal proceedings having regard to the accusatorial nature of the criminal process, which Hayne and Bell JJ described in X7 v Australian Crime Commission at [87] as "a defining characteristic of the criminal justice system".
113 Amongst the United States authorities to which Brereton J referred was United States v Stone 976 F 2d 909 (4th Cir 1992) from which his Honour at [23] cited the following passage:
Ashford is a one-man operation; however, it is still a corporation, a state law-regulated entity that has a separate legal existence from Wujkowski shielding him from its [liabilities]. The business could have been formed as an unincorporated sole proprietorship and production of its business records protected by the privilege against self-incrimination ... Wujkowski chose the corporate form and gained its attendant benefits, and we hold, in accord with the decisions of sister circuits, that he cannot now disregard the corporate form to shield his business records from production.
114 Brereton J concluded at [29]:
Essentially for the reasons enunciated in United States v Stone and by Mason P in Ronen, I am of the view that in this context the sole director of a one-person corporation is not entitled to object to the production of documents by that corporation on the basis that it would be incriminatory of that director. The production is by the person as an agent of the company, not on his or her own behalf. If the director fears self-incrimination, then it is open to him or her to take steps to have the company appoint some other proper officer for the purpose of compliance with the order for production.
115 In Re Australian Property Custodian Holdings Pty Ltd (in liq) (recs and mgrs apptd) (controllers apptd) (No 2) (2012) 93 ACSR 130 (Re Australian Property Custodian Holdings) three one-person companies applied to be relieved from filing defences that complied with the ordinary rules of pleading, because to do so would necessarily undermine claims of penalty privilege and privilege against self-incrimination that were made by the sole director of the companies. Robson J granted the companies the relief that they sought on the ground that the director was the only person capable of giving full and proper instructions for a defence. In reaching this conclusion, Robson J distinguished the decisions of Lindgren J in Microsoft v CX Computer and the New South Wales Court of Appeal in Ronen. That was because in both cases it had not been shown that there was not another person who could make discovery or produce documents on behalf of the companies, and that the production and verification of documents in the possession of a company was markedly different from the steps required to prepare and file a defence, which could not be assigned to another individual, and nor could meaningful instructions be obtained from a receiver, if one were appointed. In the course of his reasons, Robson J at [159] addressed the position of discovery of documents (which his Honour distinguished) and stated:
If it were to be shown to be the case (and it has not been thus far) that there is no-one with custody or possession of the records who could lawfully answer the call of the subpoena on the corporations' behalf without risk of testimonial self-incrimination, then the corporations must still take steps to comply. This may mean the appointment of a receiver. Or it may mean that a "proper officer" with nothing to fear by way of self-incrimination has to be appointed.
116 In Devine Marine Group Pty Ltd v Fair Work Ombudsman [2013] FCA 442, the applicant successfully sought leave to appeal and appealed orders of a Federal Magistrate by which the applicant was ordered to make discovery of documents. The applicant had objected to making discovery on the ground that in order to comply with the order its sole director would be required to incriminate himself. The Magistrate rejected this argument, holding that another person could be appointed to make the affidavit of documents. On appeal, Lander J at [66]-[67] cited Microsoft v CX Computer at [32]-[33] for the following propositions:
… a court should not make an order requiring a corporate respondent to make discovery if, by complying with that order, a natural person would be denied the privilege otherwise entitled to that person: Microsoft Corporation v CX Computer Pty Ltd at [32]-[33].
It follows, therefore, that if a corporate respondent can give discovery without thereby requiring a natural person to lose that person's own entitlement to privilege, an order can be made. If, however, the corporate respondent can only give discovery by requiring a natural person to forego that person's right to privilege, an order should not be made.
117 Lander J went on to hold that at [70]-[71]:
In this case, the only officer of Devine Marine is Mr Devine. The order which has been made by the Federal Magistrate does not require Mr Devine to swear the affidavit, but there is no-one else who could unless a proper officer is appointed.
It is not enough, in my opinion, to say that Devine Marine could comply with the orders by employing another person to act as the proper officer without inquiry into the cost to Devine Marine in making such an appointment. That cost would bear upon the question of fairness, because the FWO claims that the jurisdiction being exercised is a "no costs" jurisdiction.
(Emphasis added.)
118 These passages accept the director's claim to privilege against self-incrimination, but assume that the position might be addressed by the appointment of a proper officer to make discovery on the company's behalf. However, Lander J held that the Magistrate's discretion to order discovery miscarried because the Magistrate failed to have regard to the cost to the company of making discovery. Lander J held that the cost was a relevant matter to which regard should have been had for the purposes of addressing whether discovery would be likely to contribute to the fair and expeditious conduct of the proceedings, which was a mandatory statutory consideration: Federal Magistrates Act 1999 (Cth), s 45(2)(a).
119 In Fair Work Ombudsman v Hu [2017] FCA 1081, Rangiah J allowed an application by a company (Marland Mushrooms Pty Ltd) and its director (Mr Marland) for relief from compliance with orders that they file affidavits and outlines of submissions in a proceeding alleging contravention of s 45 of the Fair Work Act 2009 (Cth). Section 45 is a civil penalty provision, and both the director and the company relied on the director's penalty privilege. The reasons of Rangiah J are principally concerned with the question whether there had been a waiver of privilege. His Honour decided that there had been no waiver, and at [38] held that Mr Marland could not be compelled to provide affidavits or submissions dealing with factual issues prior to the close of the applicant's case, and that Marland Mushrooms should not be required to do so, as that would deprive Mr Marland of the benefit of the privilege. In the course of his reasons, Rangiah J stated at [15]:
Penalty privilege does not apply to a corporation: s 187 of the Evidence Act 1995 (Cth). However, a Court should not make an order requiring a corporate respondent to make discovery if, by complying with that order, a natural person would be denied the privilege the person is otherwise entitled to: Microsoft Corporation v CX Computer Pty Ltd (2002) 116 FCR 372 at [31]-[33]; Devine Marine Group Pty Ltd v Fair Work Ombudsman [2013] FCA 442 at [66].
120 This passage should be understood as capturing the principles in the cases which it cites, and the reference to denying the privilege to a natural person is a reference to the natural person entitled to the penalty privilege being required to perform an act so that the corporation complies with an order. That is because a corporation is not excused from making discovery on the ground that the discovery might incriminate others, such as a director of the corporation: see [90] above.