NSW Crime Commission v Lee

Supreme Court of NSW|2010-09-23|Before: Davies J, Re Hugh J, Hoeben J

The Applicant's contentions 13 The Applicant put forward 6 matters he said would justify setting aside the orders made by Hoeben J. These matters were:

(b) There was substantial non-disclosure when the order was sought;

(d) The order was ambiguous and involved the need for the Applicant to make judgments of law and fact;

(f) The order gives the Commission an illegitimate forensic advantage.

(a) Order made ex parte 14 The Applicant does not contend that Hoeben J did not have the power to make the order ex parte. However, the Applicant says that it was inappropriate to have made the order ex parte on this occasion. He was a solicitor of the Court and there was no suggestion that, if notified of the application, he would have acted in any way improperly to destroy documents or put them beyond his control. 15 In any event, the Applicant submits that even if it was appropriate for the order to be made ex parte, he is entitled to challenge the order even though s 36 appears to be a very limited method of obtaining variation of the order. The Applicant says that the ordinary rules of the Court apply so that, for example, Part 36 r 16(2)(b) provides a basis for the present application. 16 The Crime Commission does not dispute that the Applicant is entitled to make application to set aside or vary the order. Whilst I doubt that the Applicant is entitled under Part 36 r 16(2)(b) because he is probably not a party within the meaning of the rules: Pickles v Gratzon (2002) 55 NSWLR 533 at [37], for the reasons I gave in NSW Crime Commission v Bonaccorso [2010] NSWSC 876 at [31] I consider that the Applicant does have the right to make the present application. 17 Because of that, the issues that gave rise to the litigation in International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49; (2009) 240 CLR 319 do not arise. Hoeben J had a discretion whether or not to make the orders ex parte. I can see no basis upon which that discretion was wrongly exercised. The fact that the person against whom the orders was sought was a solicitor is no doubt a factor to be taken into account but is not determinative of whether notice should be given.

(b) Non-disclosure 18 The Applicant's written submissions asserted that Hoeben J was not told that there was current litigation on foot between the Commission and Mr Lee with restraining orders in place and orders for examination, and was not told the Applicant acted for Mr Lee in those proceedings. In oral submissions the Applicant accepted that Mr Spark's affidavit was before Hoeben J, but it was said that his Honour did not fully appreciate that the effect of the orders he was being asked to issue would give the Commission the right to look at the solicitor's file in circumstances where the Commission was in litigation against that solicitor's client. 19 As Mr Spark's affidavit of 1 July makes clear, the Applicant was acting for Mr Lee in proceedings where restraining orders had already been obtained under s 10A of the Act by the Commission - see particularly para 6(a), (c) and (d). Even if Hoeben J did not have the file at the time he made the orders, he would know from long experience of applications by the Commission for orders pursuant to s 10A that those orders ordinarily involved orders for examination and were, in any event, interim orders pending final orders in the nature of those contemplated by ss 22 and 27 of the Act. 20 However, even if Hoeben J had not been aware that the Applicant was acting for Mr Lee in the current litigation, it is difficult to see, in the light of s 35(1)(c) what difference that would have made. Given that obligations imposed by legal professional privilege are abrogated by that section, the only remaining consideration would be whether, notwithstanding those provisions, an order ought not to have been made because of some illegitimate forensic advantage that the Commission would obtain by the orders being made. I will discuss this matter later in the judgment. (c) L egal professional privilege 21 The Applicant submits that because the documents sought to be obtained would, but for the provisions of s 35, be protected from disclosure on the basis of legal professional privilege, that ought to have been a matter that weighed heavily with his Honour before he made the order. 22 I have some difficulty with that submission. If legal professional privilege is abrogated by s 35, the mere fact alone that documents which would be required to be produced would otherwise attract legal professional privilege could not be a basis for a refusal of the order. There would need to be something additional to justify the refusal of an order. It seems to me that that is something which is available to be raised at an application such as the present. Self evidently, any additional matter concerning a privileged document would be unlikely to be known by the Commission when it applied for an order partly, for the reason that it does not know with any specificity what documents will be produced in answer to the order. 23 This need on the part of the Applicant to point to some factor over and above the privilege itself caused me to raise with counsel the question of the provision of redacted documents. Mr Temby QC for the Commission said that the provision of a redacted document would be acceptable, subject to the right of the Commission to return to Court to apply for more of the document if appropriate. 24 I note, therefore, that to the extent that any document the subject of legal professional privilege can be said to be a property tracking document, the Applicant is permitted to produce a redacted version of that document provided that the information concerning the property is unredacted. (d) Ambiguity - need for judgment 25 In this regard, the Applicant points to the fact that the failure to comply with the production order is a serious criminal offence judged by the penalty provided in s 37. The Applicant says that the terms of the order require him to make subjective judgments of fact and law about whether any such documents locate or quantify any interest in property or the transfer of an interest in property. 26 I do not think this submission should be accepted. First, any party faced with discovery or a notice to produce, or any person faced with compliance with a subpoena, is likely to have to exercise some judgment about what documents fall within a particular category for discovery or a particular description in a subpoena or Notice to Produce. There is nothing exceptional about that. Secondly, the Applicant in the present case is a solicitor and might be expected to be in a better position than most to determine what documents fall within the terms of the order. Thirdly, the offence created by s 37 is not an offence of strict liability. Putting aside the production of documents known by a person to be false or misleading, an offence is only committed if the order is contravened without reasonable excuse. It would be surprising if a mistake in judgment about a particular document would not fall within the description of a reasonable excuse. 27 Finally, bearing in mind the limited classes of documents in Schedule 4 to the order, it does not seem to me that there is any oppression about the order even if it is accepted that some judgments would have to be made.

(e) Width of the order 28 The Applicant submits that the only reasonable suspicion disclosed by Mr Spark was a suspicion going to accounting records. In those circumstances, it is submitted, any order which required production of more than accounting records was not justifiable. 29 That submission seems to me to misunderstand the evidence that Mr Spark gave. In paragraph 5 of his affidavit Mr Spark said that he suspected that the Applicant had possession or control of property-tracking documents. He then said in paragraph 6 what it was that caused him to have that suspicion. Paragraph 6 identified the fact that the Applicant was acting for both Mr Lee and Ms Park in the proceedings, and that when a Notice to Produce Documents under s 17 of the New South Wales Crime Commission Act 1985 was answered, the Applicant produced a number of receipts that concerned property of Mr Lee and his company J & Lee Property Investment Group Pty Limited. 30 What Hoeben J had to determine is whether Mr Spark had reasonable grounds for suspecting that the Applicant had possession or control of property-tracking documents (s 33(1)). Hoeben J must have concluded that there were reasonable grounds for the suspicion, but the suspicion was not simply that the Applicant had documents in the nature of receipts, but a suspicion that because he had documents in the nature of receipts he may well have other property-tracking documents. Nothing in the legislation suggests that the order that is made under s 33 is somehow limited to the grounds for the reasonable suspicion of the authorised officer. 31 In the present case it can be assumed that the documents that are required to be produced under the order are documents other than those that form the basis for Mr Spark's belief because those documents have already been produced. If, therefore, the documents already produced provide the basis for suspecting that there are other documents, there is no reason why those "other documents" should be limited to the same class as those already produced. There is no warrant for reading the legislation down in that way. (f) Illegitimate forensic advantage 32 The Applicant submits that, particularly because s 33 is to be found in Pt 4 of the Act concerned with information gathering, it cannot have been the intention of the Legislature that material could be obtained to give the Commission some advantage in proceedings which were on foot between the Commission and some other person. In that regard, the Applicant points to the fact that Mr Lee has an application under s 10C to set aside the restraining orders and will be required to contest final orders under s 22 or s 27 of the Act. 33 In my opinion, a number of matters suggests that the Act as a whole might be intended to provide some sort of forensic advantage to the Commission in proceedings under the Act. The fact that orders for examination of either the Defendant or other persons may be made points to that conclusion. Secondly, nothing in Pt 4 of the Act suggests that orders may only be sought or made when there are not proceedings on foot. Since proceedings under the Act concern property, an order made under s 33 must assist the Commission in such proceedings. Thirdly, the fact that 3 significant privileges are abrogated in s 35 also points to a similar conclusion. 34 It has been held in relation to trustees in bankruptcy and liquidators that it is no reason to deny those persons information obtainable from examinations on the basis that the information may assist the trustee or liquidator in proceedings he brings or intends to bring. In Re Hugh J Roberts Pty Ltd (In Liq) and the Companies Act (1969) 91 WN (NSW) 537 Street J said (at 540-542): These cases do not, in my opinion, lay down any principle of general application such as is sought to be advanced by Mr. Spender on behalf the applicants. The mere fact that questions might be asked of an examinee directly involving a matter currently being litigated between the company or the liquidator and that examinee or a third party does not render those questions inadmissible, nor does it render the private examination itself an abuse of the processes of the court. The liquidator is given by the statute this special authority to proceed by way of private examination to obtain information which he needs for the due winding up of the company, the affairs of which he has the responsibility of administering. The mere fact that in obtaining that information he also obtains admissions or material that are available for him to use in evidence in current proceedings falls short of rendering the process abusive, vexatious or oppressive.

There is ample authority to the effect that the liquidator's power to proceed by way of a private examination is available to him notwithstanding that the litigation to which the subject matter of the private examination may be directed is already current. 35 His Honour then made reference to North Australian Territory Co. v Goldsbrough, Mort & Co. [1893] 2 Ch 381 at 384 and Re Auto Import Co. (Australia) Ltd (1924) 25 SR (NSW) 52 at 55 and continued: The position is somewhat similar in the cognate field of bankruptcy. It may not be identical, inasmuch as in a bankruptcy the trustee's primary source of information is the bankrupt himself under the compulsion, inter alia, of statutory public examination. The public examination has a wider scope than the examination of a stranger. In a company winding up there is no principal party to be examined, and it may therefore be permissible for the court to take a more liberal view of the scope of the examination where the examinee was an officer of the company than where he is a stranger. But this is no more than one element encompassed within the overall question of how far the court should, in its discretion, allow a particular examination to proceed before it becomes oppressive or vexatious.

The similarity of approach in the bankruptcy jurisdiction is exemplified in Re Price (No. 3). At p. 140 Clyne J. quoted from an earlier decision of Cave J., In re Easton; Ex parte Davis , namely: " I admit that when the person seeking to interrogate is the official receiver or the trustee, it is no answer to say that an action is pending by the official receiver or trustee against the witness he proposes to examine."

A liquidator needs information concerning his company just as much in connection with current or contemplated litigation as in connection with other aspects of its affairs. In using the statutory machinery of private examination he will in many cases be gathering evidence as an ordinary and legitimate use of this procedure.

In my judgment it is immaterial in basic substance whether the private examination is sought to be used by a liquidator to gather information in connection with proceedings he believes he might be able to bring, proceedings he contemplates bringing, proceedings he has decided to bring, and proceedings he has already brought. There is no presently relevant distinction in substance between gathering information referable to commencing proceedings and gathering information referable to continuing proceedings. There may be more risk of or opportunity for the examination being vexatious or oppressive after proceedings have been commenced... Also an abuse of process may be more readily exposed once proceedings are already on foot. But this is surely not to the point, as vexation or oppression will not be tolerated no matter when the examination is held.

A liquidator need not be diffident in using a private examination for its ordinary and legitimate purpose in the gathering of information. But he must not abuse this process. For instance an attempt, where litigation is either contemplated or commenced, to summon the prospective or existing defendant's probable witnesses and examine them simply for the purpose of destroying their credit would exceed the legitimate use of the process. Beyond stating this extreme instance, I consider it unsafe to generalize - very often the gathering of information quite properly involves testing the reliability or credit of the examinee from whom the information is being obtained. 36 This approach of Street J was expressly approved by the Court of Appeal in Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512 at 518-520, and see also Hamilton v Oades (1969) 166 CLR 486 at 497. 37 It seems to me that the provisions of the Act, particularly those in Pt 4, make it appropriate to adopt a similar approach to the issue of forensic advantage as obtains in the area of trustees in bankruptcy and liquidators. Particularly when the Commission has indicated it will accept redacted documents in answer to the order, there is not a significant disadvantage to the Applicant or those for whom he acts if he is required to produce the documents notwithstanding the proceedings that have already been commenced against his clients.

Conclusion 38 Both parties submitted that there was no need to vary Hoeben J's order if the only effect of the variation was to permit redacted documents to be produced. For the reasons I have given, the Applicant otherwise fails in his challenge to the order made. In those circumstances the Notice of Motion should be dismissed. **********

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CITATION : NSW Crime Commission v Lee [2010] NSWSC 1159

Hamilton v Oades (1969) 166 CLR 486 Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512 International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49; (2009) 240 CLR 319 North Australian Territory Co. v Goldsbrough, Mort & Co. [1893] 2 Ch 381 CASES CITED : NSW Crime Commission v Bonaccorso [2010] NSWSC 876 Pickles v Gratzon (2002) 55 NSWLR 533 Re Auto Import Co. (Australia) Ltd (1924) 25 SR (NSW) 52 Re Hugh J Roberts Pty Ltd (In Liq) and the Companies Act (1969) 91 WN (NSW) 537 State Drug Crime Commission v Larsson (1991) 53 A Crim R 131

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