4.6.2 Prosecutorial duty
678 If ASIC was under a prosecutorial duty, in our opinion the draft statement of Mr Robb was such that it should have called him. However, we do not accept that it was under a prosecutorial duty, and Mr Terry's specific ground of appeal does not succeed. As will appear, ASIC's failure to call Mr Robb, and possibly Messrs Wilson and Sweetman, nonetheless undermines the cogency of its case on the passing of the Draft ASX Announcement Resolution.
679 It is well established that a prosecutor should call material witnesses: Whitehorn v The Queen (1983) 152 CLR 657; The Queen v Apostolides (1984) 154 CLR 563. This is not because of a duty imposed by law, but because it "forms part of a description of the functions of a Crown Prosecutor": Whitehorn v The Queen at 674 per Dawson J.
680 The appellants contended for a duty akin to that of a prosecutor. They invoked analogy rather than direct application of the principle, in recognition of s 1317L of the Act by which the rules of evidence and procedures for civil matters are to be applied when hearing proceedings for a declaration of contravention or a pecuniary penalty order.
681 We have set out relevant provisions of the Act earlier in these reasons, see [27] above. Pursuant to s 1317E, if a court is satisfied that a person has contravened, relevantly, s 180(1) of the Act, then the court must make a declaration of contravention. Upon the making of such a declaration, in the circumstances further identified in s 1317G, the court may order a person to pay a pecuniary penalty. A disqualification order may be made pursuant to s 206C or s 206E.
682 The disqualification order itself is not a "pecuniary penalty order" within the meaning of s 1317L. It is a "civil penalty order" as defined in s 9, and the proceedings for a declaration of contravention within s 1317L leading to the making of a declaration pursuant to s 1317E are essential preliminary steps before the power to order disqualification under s 206C can be exercised. Nevertheless, there is no direct reference to proceedings for an order for disqualification in s 1317L.
683 What is now s 206C was originally enacted as a "civil penalty order" in s 1317EA(3)(a), when Part 9.4B was introduced into the then Law in 1992. Section 1317ED, the then equivalent of s 1317L, applied to proceedings for civil penalty orders. When the disqualification power was moved to s 206C by the Corporate Law Reform Program Act 1999, there was no suggestion that any substantive change was intended. In any event, nothing was said to turn on this in submissions before this Court. The appeals proceeded on the basis that s 1317L was applicable to that phase of the proceedings in which the application for orders under s 206C or s 206E was heard and determined.
684 A distinction between civil penalty proceedings and criminal proceedings is found in ss 1317N, 1317P and 1317Q. They provide for staying proceedings for a declaration of contravention or a pecuniary penalty order if criminal proceedings are started or have already been started against the person for substantially the same conduct (s 1317N); for starting criminal proceedings for conduct substantially the same as conduct constituting a contravention of a civil penalty provision (s 1317P); and for general inadmissibility in criminal proceedings against a person of evidence of information given or production of documents by the person in proceedings for contravention of a civil penalty provision for substantially the same conduct (s 1317Q).
685 In Adler v Australian Securities and Investments Commission this Court rejected a submission of the character now put on the basis of the application of s 1317L. With respect to the suggested duty of prosecutorial fairness, including the duty to call material witnesses, the Court said -
"678 … The concepts have developed in the particular circumstances of criminal proceedings. By declaring that these proceedings are to be conducted as civil proceedings, the legislature has plainly declined to pick up the concepts. … Once it is recognised not only that the proceedings are not criminal proceedings, but also that they are by prescription civil proceedings, the basis for some analogous rules is hard to see."
686 This conclusion has been applied in subsequent cases, including by intermediate courts of appeal in several jurisdictions (see, for example, Visy Industries Holdings Pty Ltd v Australian Competition and Consumer Commission [2007] FCAFC 147; (2007) 161 FLR 122 at [112]-[113]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 160 FCR 466 at [74]; Adler v Director of Public Prosecutions (C'th) [2004] NSWCCA 352; (2004) 185 FLR 422 at [43]; O'Brien v Australian Securities and Investments Commission [2009] NSWCA 312 at [47]; Australian Securities and Investments Commission v Lindberg (No 2) [2010] VSCA 19 at [51]). The relevant case law has been set out in some detail by Austin J in Australian Securities and Investments Commission v Rich at [531]-[557].
687 This Court has recently reviewed the principles applicable when the Court is asked to depart from its own earlier authority, see Gett v Tabet [2009] NSWCA 76 at [261]-[301]. It was not suggested that the reasoning in Adler v Australian Securities and Investments Commission satisfied those principles.
688 The appellants contended that the decision should be reviewed by reason of the judgment of the High Court in Rich v Australian Securities and Investment Commission. That case involved the applicability of the privilege against self-exposure to penalty which could arise at various stages of case management of a civil case, including discovery and the filing of evidence. The High Court determined that provisions of the character identified as "civil penalty provisions" in the Act were punitive. Their characterisation as protective, which had often been applied to such provisions, was not an appropriate, or at least not a complete, statement of their character for purposes of the penalty privilege. The joint judgment reaffirmed at [32] the analysis in an earlier judgment (Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49; (2003) 216 CLR 161) of the difficulties of classifying proceedings as either "civil" or "criminal".
689 In our opinion, nothing in the High Court's reasoning in Rich v Australian Securities and Investments Commission suggests that it is appropriate to reason by analogy from criminal procedure to civil penalty proceedings. Indeed, in our opinion, the analysis contained in the High Court's judgment is contrary to any such proposition.
690 The detailed requirements worked out in a considerable body of case law, as summarised, for example, in the joint judgment of the High Court in R v Apostilides at 575-576 (see also Whitehorn v The Queen at 663-664; 674-675) and now encapsulated in written policies issued by the respective Directors of Public Prosecutions, are not a source of direct analogy. The requirements that have been built up over centuries in the criminal context are, by the express provision of the Parliament in s 1317L, abjured as a directly relevant source of instruction.
691 That is not, of course, to say that the seriousness of the allegation of breach of a civil penalty provision and the severity of the orders that may be imposed consequent upon a finding of contravention of such provision, which is encapsulated in the High Court's reasoning, is not relevant in determining the content of civil procedure with respect to the failure to call a witness. The consequentialist analysis in Rich v Australian Securities and Investments Commission may well be a source of instruction in other civil contexts: see, for example, Vines v Australian Securities and Investments Commission at [133]-[134].
692 The legislative history of the provisions in Australian statutes for a civil penalty regime, now found in Pt 9.4B of the Act, indicates that they were based expressly on the need to establish an enforcement mechanism of intermediate severity between civil proceedings for compensation and criminal proceedings that could lead to criminal sanctions. This approach, referred to as "strategic regulation theory", is often expressed in terms of the visual metaphor of a "pyramid" of enforcement sanctions, namely, that sanctions escalate as contraventions become more serious.
693 There is a danger in the employment of metaphors like "pyramid". As Benjamin Cardozo pointed out, it is desirable to avoid becoming "enveloped in the mists of metaphor". He warned that we should not be diverted by the "picturesqueness of the epithets", and concluded that "[m]etaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it." (Berkey v Third Avenue Railway Company 244 NY 84 (1926) at 94-5.)
694 Nevertheless, the idea of an intermediate position was at the heart of the original development of the civil penalty regime in corporations law, see Senate Standing Committee on Legal and Constitutional Affairs ("the Cooney Committee"), Company Directors Duties: Report on the Social and Fiduciary Duties and Obligations of Company Directors (1989) [10.21]-[10.24], [13.05]-[13.15]; Australian Law Reform Commission, Principled Regulation: Federal Civil and Administrative Penalties in Australia Report 95, December 2002, at [2.45]-[2.63]. For background see Kenneth Mann, "Punitive Civil Sanctions: The Middle Ground between Criminal and Civil Law" (1992) 101 Yale Law Journal 1795 and G F K Santow, "The Trial of Complex Corporate Transgressions - The United Kingdom Experience and the Australian Context" (1993) 67 ALJ 265. The history and significance of this regime continues to be discussed, see, for example, Thomas Middleton, "The Difficulties of Applying Civil Evidence and Procedural Rules in ASIC Civil Penalty Proceedings under the Corporations Act" (2003) 8 Companies and Securities Law Journal 507; Vicky Comino, "Civil or Criminal Penalties for Corporate Misconduct - Which Way Ahead?" (2006) UQLRS 1; (2006) 34 Australian Business Law Review 428; Vicky Comino, "The Challenge of Corporate Law Enforcement in Australia" (2009) 23 Aust Jnl of Corp Law 233.
695 Judgments of intermediate courts of criminal appeal subsequent to Rich v Australian Securities and Investments Commission have concluded that that case did not affect the conclusion in Adler v Australian Securities and Investments Commission (see Adler v Director of Public Prosecutions at [43]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission esp at [74] and [76]; Visy Industries v Australian Competition and Consumer Commission at [112]; O'Brien v Australian Securites and Investments Commission at [47]. See also the observations of Austin J in Australian Securities and Investments Commission v Rich [2009] NSWSC 312 at [47]).
696 The focus of this Court's attention, by reason of s 1317L, should not be on whether the principles of criminal procedure apply by way of analogy. The focus should be to identify the particular content of the principles of civil procedure that apply. Just as in the judgment in Australian Securities and Investments Commission v Adler, the starting point is s 1317L. The Court must identify a relevant 'rule of evidence and procedure for a civil matter'. This is, as we understand their Honours' reasoning, precisely what the High Court did in Rich v Australian Securities and Investments Commission. At [19] the joint judgment referred to s 1317L and added -
"[19] … It follows from s 1317L that the statute itself requires the application of the body of law which has developed in relation to the privileges against penalties and forfeitures, when deciding whether the appellant should be ordered to make discovery of documents in the proceedings."
697 Their Honours went on to state:
"[20] … The operation of s 1317L requires consideration of whether the relief sought against the appellants or any head of that relief is a 'penalty, or anything in the nature of a penalty' … The body of law respecting the privileges relied upon by the appellants is encompassed within s 1317L, the debate between the parties being as to their application in the particular proceedings here in question."
698 Furthermore, the joint judgment said:
"[25] … Section 1317L of the 2001 Act obliges the court to apply the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of contravention. That provision requires the application of the principles governing the application of the privilege against exposure to penalties. The Commission pointed to no provision of the Act as abrogating or qualifying the privilege against exposure to penalties in relation to the procedure which gave that privilege its birth - discovery."
699 Nothing in this analysis, or its application to the facts of that case suggests that reasoning by analogy from criminal procedure is appropriate. It is, in our opinion, liable to lead to error.
700 No doubt many of the principles of a fair trial reflected in principles of civil procedure are the same as the principles reflected in criminal procedure. However, to approach the matter on the basis of adopting the particular rules that have evolved in one context to the other context is, in our opinion, directly contrary to the requirements of s 1317L as applied by the High Court in Rich v Australian Securities and Investments Commission.
4.6.3 Obligation to act fairly
701 ASIC accepted that it had an obligation to act fairly with respect to the conduct of the proceedings. However, it contended that the obligation did not oblige it to call any of the three witnesses.
702 It has often been said that a government agency, including a corporate regulator like ASIC, owes an obligation of fairness. In Australian jurisprudence the principle is usually traced to the observations of Griffith CJ in Melbourne Steamship Co Limited v Moorehead (1912) 15 CLR 333 at 342, where his Honour referred to "[t]he old fashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects."
703 The obligation is sometimes expressed in general terms:
"The duty of the executive branch of government is to ascertain the law and obey it … [W]here the matter is before the court it is the duty of the executive to assist the court to arrive at the proper and just result." ( P & C Cantarella v The Egg Marketing Board of New South Wales (1973) 2 NSWLR 366 at 383 per Mahoney J; referred to in Scott v Handley [1999] FCA 404; (1999) 58 ALD 373 at [45] per Spender, Finn and Weinberg JJ; and Mahenthirarasa v State Rail Authority (NSW) (No 2) [2008] NSWCA 2001; (2008) 72 NSWLR 273 at [16] per Basten JA (Giles and Bell JJA agreeing));
" … [T]here is expected of the Crown the highest standards in dealing with its subjects … [W]hat might be expected from others would not be seen as in full accord with the principles of equity and good conscience to be expected in the case of the Crown." ( Logue v Shoalhaven Shire Council (1979) 1 NSWLR 537 at 558-559, referred to in Hughes Aircraft Systems International v Air Services Australia (1997) 76 FCR 151 at 197 per Finn J).
704 The principle is manifest most often by reference to specific acts of alleged default by the relevant governmental agency -
"Conscientious compliance with the procedures designed to minimise cost and delay" ( Kenny v State of South Australia (1987) 46 SASR 268 at 273, referred to in Scott v Handley at [44], [45]);
The Crown should not "take or be seen to be taking, advantage of its own default" ( SCI Operations v The Commonwealth (1996) 69 FCR 346 at 368 per Beaumont and Einfeld JJ);
The Crown should not take "technical points" ( Melbourne Steamship Co v Moorehead at 342);
As a creditor, the Crown should provide assistance and information to a liquidator, so that the liquidator can determine whether to bring his own proceedings, before the government agency seeks leave to proceed in his place ( Commissioner for Revenue (ACT) v Slaven (2009) FCA 744 at [22]-[25] per Rares J).
705 There is, however, no case in which the failure to call a witness has been held to constitute a breach of the obligation of fairness. In Australian Securities and Investments Commission v Rich Austin J accepted that ASIC had a "special duty of fairness", although not a prosecutorial duty, but in the absence of a prosecutorial duty did not regard it as "under a duty … to call any particular witnesses" (at [560]). There can be a middle ground. The issue before this Court involves two questions. Can failure to call a witness constitute breach of the obligation of fairness and was there breach of the obligation in the particular circumstances of this case? What are the consequences of breach of the obligation if found to exist?
706 The relevant case law frequently refers to the obligation of fairness in terms of the duty to act as a "model litigant". This is an appropriate shorthand and has been adopted in formal statements by Australian governments, in the same manner as Directors of Public Prosecutions have set out their duties in formal prosecution policies (see the Legal Services Direction 2005 made under s 55ZF of the Judiciary Act 1903, with respect to the Commonwealth's "Model Litigant Obligation" at para [4.2], and the Model Litigant Policy for Civil Litigation issued by the New South Wales Government on 8 July 2008).
707 However, the terminology of "model litigant" should not detract from the flexibility of the idea of an obligation of fairness. The principle of a fair trial is one of the most basic principles of our legal system. It informs and energises many areas of the law. It is reflected in numerous rules and practices. It is continually adapted to new and changing circumstances. It manifests itself in virtually every aspect of our practice and procedure (see generally J J Spigelman, "The Truth Can Cost Too Much: The Principle of a Fair Trial" (2004) 74 ALJ 29). It lies behind the prosecutorial duty, see Whitehorn v The Queen at 603-4 stating that the Crown Prosecutor represents the State, and in the system of criminal justice must "act with fairness and detachment and always with the objectives of establishing the whole truth in accordance with the procedures and standards which the law requires to be observed and of helping to ensure that the accused's trial is a fair one".
708 Although expressed in terms of the law of criminal procedure, the following observations of Lord Devlin extend to civil practice and procedure -
"Nearly the whole of the English criminal law of procedure and evidence has been made by the exercise of the judges of their power to see that what was fair and just was done between prosecutors and accused." ( Connolly v DPP (1964) AC 1254 at 1347)
709 The existence of an overriding and, perhaps, unifying principle was expressed by Deane J in Dietrich v The Queen (1992) 177 CLR 292 at 326 -
"It is desirable that the requirement of fairness be separately identified since it transcends the content of more particularised legal rules and principles and provides the ultimate rationale and touchstone of the rules and practices which the common law requires to be observed in the administration of the substantive criminal law."
710 Again, in our opinion, this principle is not limited to the criminal law.
711 The following reasoning of Richardson J in the New Zealand Court of Appeal in Moevao v Department of Labour (1980) 1 NZLR 464 at 481 is also relevant -
"It is not the purpose of the criminal law to punish the guilty at all costs. It is not that that end may justify whatever means may have been adopted. There are two related aspects of the public interest which bear on this. The first is that the public interest in the due administration of justice necessarily extends to ensuring that the court's processes are used fairly by state and citizen alike. And the due administration of justice is a continuous process, not confined to the determination of the particular case. It follows that in exercising its inherent jurisdiction the court is protecting its ability to function as a court of law in the future as in the case before it. This leads on to the second aspect of the public interest which is in the maintenance of public confidence in the administration of justice. It is contrary to the public interest to allow that confidence to be eroded by a concern that the Court's processes may lend themselves to oppression and injustice."
712 This passage has frequently been cited with approval by the High Court (see, for example, Jago v District Court (NSW) (1989) 168 CLR 23 at 29-30 (Mason CJ); Williams v Spautz (1992) 174 CLR 509 at 520 (Mason CJ and Dawson, Toohey and McHugh JJ); Walton v Gardiner (1993) 177 CLR 378 at 394 (Mason CJ and Deane and Dawson JJ); Ridgeway v The Queen (1995) 184 CLR 19 at 62 (Toohey J) and 74 (Gaudron J); Nicholas v The Queen (1998) 193 CLR 173 at 256 (Kirby J)).
713 As the joint judgment in Williams v Spautz noted at 520, "[t]hese considerations are not present with the same force in civil litigation where the moving party is not the State enforcing the criminal law". However, in our opinion, they are present with some force when the State is seeking to enforce the law with the sanctions of a civil penalty regime.