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[2015] FCA 404
Federal Court of Australia
2015-04-30
Mr J, Siopis J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 At a case management conference on 26 March 2015, the parties disagreed about the making of three directions proposed by the plaintiff. The disagreement between the parties was founded upon two issues of principle. I heard submissions from the parties in relation to each of the two issues.
penalty privilege 2 The first issue arises from the plaintiff seeking directions that before the commencement of the trial: (a) the defendants file a response to the plaintiff's statement of facts and contentions (proposed direction number 4); and (b) the defendants file the witness statements and expert reports as well as a list of documents upon which they wished to rely at the trial (proposed direction number 6). 3 The defendants resisted the making of the proposed directions. Rather the defendants contended for a direction which would limit each of the defendant's response to the plaintiff's statement of facts and contentions to one which did no more than admit, deny or not admit the plaintiff's statement of facts and contentions. Further, the defendants said that there should be no direction that the defendants file any evidence or list of documents before the commencement of the trial. 4 The defendants contended that they were entitled to rely upon the privilege against exposure to penalties in this proceeding. Accordingly, said the defendants, it was not appropriate at this stage for the Court to make orders that the defendants provide evidence or other information as to their position. Rather, said the defendants, they were entitled to say nothing and wait until the conclusion of the plaintiff's case to decide whether to go into evidence or not. Further, said the defendants, if such an election was made it might be necessary for there then to be an adjournment of the proceeding and for further directions to be given as to the filing of a response to the plaintiff's statement of facts and contentions and also as to the filing of any affidavit evidence. However, said the defendants, until such time, each of the defendant's privilege against exposure to penalties should be preserved. 5 In support of their contention, the defendants relied on the fact that in his statement of relief, the plaintiff seeks orders which would have the effect of disqualifying the defendants from acting as official liquidators or liquidators for a period of seven years. The defendants contended that such relief was in the nature of a penalty, and referred to Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 (Rich). 6 It is the case that in his amended statement of relief filed on 1 April 2015, the plaintiff seeks declarations that there are grounds for cancellation of the registration of each of the defendants as official liquidators pursuant to s 1291 of the Corporations Act 2001 (Cth), and further orders that each of the defendants request the Australian Securities and Investments Commission (ASIC) to cancel his registration as an official liquidator by lodging with ASIC a properly completed "Form 905A", together with the prescribed fee. The plaintiff also seeks orders that each of the defendants be prohibited for a period of seven years from applying to ASIC to be registered as a liquidator; alternatively, that ASIC be directed to suspend the registration of each defendant as a liquidator for five years. 7 I, therefore, accept the defendants' contention that the proceeding is one in which the plaintiff seeks a penalty to be imposed upon each of the defendants. 8 However, I do not accept the defendants' submission that each of the defendants is, therefore, entitled to rely upon penalty privilege to resist the making of the direction, sought by the plaintiff. 9 This is because of the terms of s 1349(1) of the Corporations Act which, relevantly, provides as follows: (1) In the case of: (a) a civil or criminal proceeding under, or arising out of, this Act or the ASIC Act; or (b) a proceeding before the Tribunal arising out of this Act or the ASIC Act; a person is not entitled to refuse or fail to comply with a requirement: (c) to answer a question or give information; or (d) to produce a book or any other thing; or (e) to do any other act whatever; on the ground that the answer or information, production of the book or other thing, or doing that other act, as the case may be, might tend to make the person liable to a penalty by way of: … (l) a cancellation or suspension under Division 3 of Part 9.2 of this Act… 10 Section 1349 was passed after the decision in Rich and, in my view, has the effect of abrogating penalty privilege in the circumstances prescribed in that section. 11 In my view, the provisions of s 1349(1)(l) apply in the circumstances of this case. This is because the proceeding is one which is brought under the Corporations Act, and as the defendants contended, the relief sought might tend to make each defendant liable to a penalty by way of the cancellation or suspension of his registration as a liquidator. Such a penalty is one which falls within the ambit of s 1349(1)(l). 12 It follows, therefore, that the defendants are not entitled to rely upon penalty privilege to resist the making of the directions in relation to the filing, before the commencement of the trial, of a response to the plaintiff's statement of facts and contentions, or in relation to the filing of evidence and the list of documents upon which they intend to rely. 13 The defendants argued in the alternative that the Court should as a matter of discretion make directions as if the defendants were entitled to penalty privilege. I will for the following reasons, not accede to the submission of the defendants. 14 First, the legislature has specifically provided by s 423 of the Corporations Act for an inquiry into the conduct of receivers and managers, and by s 1349(1) of the Corporations Act that the defendants to such a proceeding, should not, in specified circumstances, be entitled to rely upon penalty privilege. A court would not make a procedural direction which would have the effect of undermining the legislative intention expressed in s 423 and s 1349(1) in the absence of compelling circumstances. Such circumstances have not been demonstrated in this case. 15 Secondly, fairness in the conduct of adversarial litigation is generally best effected by making procedural directions which provide for each party disclosing its case to the other party prior to trial. Further, it should be borne in mind that, although penalties of the nature referred to above are sought in the plaintiff's statement of relief, the focus of the inquiry is essentially on the level of fees charged by the defendants in specific circumstances. The dispute is, therefore, of a nature which is apt to be fairly determined by the adoption of the usual adversarial procedures. 16 Thirdly, the approach proposed by the defendants would have the potential to bifurcate the proceeding because the defendants have contemplated that an adjournment might be required at the end of the plaintiff's case, to permit the defendants, if they so decided, to file a response to the plaintiff's statement of facts and contentions, and any evidence and list of documents upon which they intended to rely. In my view, the potential bifurcation of the proceeding is undesirable. 17 Accordingly, I will make the directions sought by the plaintiff in para 4 and para 6 of the plaintiff's minute of proposed directions.
the nature of the inquiry proceeding 18 The second issue in respect of which there was a dispute between the parties is related to the following direction (direction number 7) proposed by the plaintiff: The defendants present themselves to the Court for examination on 4 June 2015 and continued to attend from day-to-day unless excused by the Court or until the hearing of the matter is completed. 19 The plaintiff contended, in support of this direction, that because the Corporations Act specifically provided for an inquiry into the conduct of the defendants, it was implicit that the Court had the power to summons the defendants, on its own motion, to appear before the Court, so that the Court could conduct the examination prescribed by statute. Accordingly, said the plaintiff, the Court should exercise its discretion in determining the procedure for the conduct of the inquiry, by prescribing a procedure which would be effective in achieving the statutory purpose. 20 The limits on the exercise of the Court's power to prescribe the procedure for the conduct of an inquiry was discussed by Campbell J in Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16 at [147] and [148] as follows: 147 Notwithstanding the breadth of power conferred on the court by section 423, in a particular instance the court might be of the view that the appropriate way to exercise that power was by treating the complaint as though it instigated an ordinary piece of adversary litigation. Thus, in Burns Philp Investment Pty Ltd v Dickens [No 2] (1993) 31 NSWLR 280 Young J said, when granting an inquiry into whether a liquidator's costs and disbursements were justifiable, "The inquiry is really adversary proceedings between the plaintiff members and the liquidator personally." As well, the court will be conscious of its own practical limitations in conducting an inquiry by any means other than adversary procedures. As Marks J said in Commissioner for Corporate Affairs v Harvey, supra, at 687: ...fundamentally, this Court is not geared to arrange the presentation of evidence, to investigate its availability or to effect the calling of witnesses. 148 Another factor which, it seems to me, leads to the conclusion that an inquiry under section 423 need not proceed by means different to those used in ordinary adversary litigation, arises from the fact that the power under section 423 is conferred on "the Court". Section 58A Corporations Act 2001 defines "the Court" as including the Federal Court, and the Family Court. Those courts, exercising as they do the judicial power of the Commonwealth, would be incapable, when exercising their powers under section 423, of conducting an inquiry analogous to a Royal Commission, the direction and agenda of which was dictated by the court itself. If the Federal Court, in exercising powers under section 423, cannot conduct an inquiry of that kind, it must be open to the State court, under section 423, to actually not do so. (Original emphasis.) 21 These observations are particularly pertinent to this inquiry which, like the inquiry in Dickens, is primarily focused on the aspects of the level of fees charged by the defendants. In my view, the direction proposed by the plaintiff exceeds the bounds of a procedure consistent with the conduct of an adversarial proceeding. 22 It follows that I will not make the proposed direction number 7 sought by the plaintiff. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.
Oswal, in the matter of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed)
Carson, McEvoy and Theobald