Sankey v Whitlam [1998] FCA 470 | Case summary

Federal Court of Australia|1998-05-07|Before: Lehane J

REASONS FOR JUDGMENT The Australian Securities Commission (ASC) has produced a number of documents to the Court in accordance with subpoenas. The ASC objects to inspection by the parties of certain of those documents. The applicant sought orders that a number of those documents be made available for inspection by the parties. In the course of argument the number of documents in controversy was reduced: the applicant seeks access to three documents, which are described as file notes or summaries of an interview with Mr Donald Heller, a senior executive of the first respondent (identified as Items 28, 29 and 30 in an affidavit from Mr Peter Noel Riordan, a senior lawyer employed by the ASC, on 23 February 1998); it also seeks access to the transcript of an examination, under s 19 of the ASC Law, of Mr Robert Cowper (identified as Items 6 and 26 in Mr Riordan's affidavit). The ASC resists inspection of each of those documents on the ground of public interest immunity. It is supported, in relation to the documents concerning Mr Heller (the Heller documents), by the first and second respondents and by the fifth and sixth respondents in relation to the transcript of Mr Cowper's examination (the Cowper transcript). If the claim of public interest immunity is not upheld in relation to the Heller documents, it was not submitted that they should be withheld from inspection on any other basis. The fifth and sixth respondents, however, asked me to look at the Cowper transcript and, having done so, to order that it should not be made available for inspection on the basis that it is of no relevance to any issue in the proceeding. There is another document produced by the ASC, inspection of which is not actively opposed by the ASC, concerning which the fifth and sixth respondents make a similar submission. The applicant, while accepting that it is appropriate that I should look at the Cowper transcript and the other document, submits that, having done so, I should order that they be made available for inspection.

The Heller Documents I have not inspected the Heller documents and, for reasons which will appear, I think it is unnecessary at this stage that I do so. There is no controversy about their general nature or the circumstances in which they came into existence. During 1994 the ASC conducted, on a referral from the Australian Stock Exchange, an investigation of suspected contraventions of the provisions of the Corporations Law concerning insider trading. The suspected contraventions related to trading, during November 1993, in shares of the fifth respondent. The investigation has long since concluded. The dealings investigated by the ASC took place close to the time when the first and fifth respondents entered into a series of transactions by which, among other things, the first respondent took up shares in the fifth respondent and transferred to the fifth respondent all the issued shares of a company entitled to take up a satellite pay television licence; the first respondent had, very shortly beforehand, acquired the shares in that company from their previous holders, principal among whom was the applicant. The transactions between the applicant and the first respondent and between the first respondent and the fifth respondent are of central importance to issues in this proceeding. Mr Heller was one of the officers of the first respondent principally involved in negotiating and completing those transactions. In the course of its investigation, the ASC sought information from Mr Heller. Mr Heller provided information voluntarily, not under compulsion. He did so at an interview with officers of the ASC on 28 July 1994 and he provided further information in a nine page letter to the ASC dated 9 September 1994, by way of response to a series of detailed written questions from the ASC. The letter commences with a statement, in a series of numbered paragraphs, of the basis on which Mr Heller provided the information in it, followed by a suggestion that the ASC's retention of the letter "will be acceptance of the basis of our reply". The third of the numbered paragraphs is as follows: The information in this response is confidential and commercially sensitive. The ASC will hold it in the strictest confidence and will not make copies of the whole or any part of it and will not release or disclose the contents of the whole or any part of it to anyone outside the ASC. The ASC agrees that this letter is not subject to any power of disclosure the ASC may have under legislation (including section 25 of the ASC Law) or otherwise. The Heller documents, or copies of them, have not been produced on discovery: neither the first respondent nor Mr Heller has a copy of them. The letter of 9 September 1994 has been produced. Mr Heller (through his solicitors, who are also the solicitors for the first and second respondents) has notified the ASC that he objects to the release of the Heller documents on the basis that the information which they record was given to the ASC in confidence. Mr Riordan gave evidence that if Mr Heller consented to the release of the Heller documents the ASC would not object to their being made available for inspection. Since, however, Mr Heller does not consent, the ASC makes a claim of public interest immunity. Mr Riordan, in his affidavit, puts the claim of the ASC as follows: For its part, the ASC seeks to uphold a claim of public interest immunity on this material, on the basis that the information was given to it on a voluntary basis, was full and frank and of significant importance for the purpose of its investigation. The ASC is concerned that, should information so received be produced in Court, it will adversely affect the willingness of persons to give information on a voluntary basis. The principles relating to public interest immunity, as they emerge from the decisions of the High Court in Sankey v Whitlam (1978) 142 CLR 1 and Alister v The Queen (1984) 154 CLR 404, have been considered in a number of cases involving the ASC and its predecessor, particularly, by the Full Court of this Court, in Zarro v Australian Securities Commission (1992) 36 FCR 40 and Somerville v Australian Securities Commission (1995) 60 FCR 319. In Spargos Mining NL v Standard Chartered Aust. Ltd (No. 1) (1989) 1 ACSR 311, McLelland J said, at 312: In my opinion, documents within the possession of the Commission of a confidential nature recording information received by the Commission relating to possible offences or irregularities, or recording information received in the course of the investigation of possible offences or irregularities, including the identity of informants, and confidential documents recording the actual or possible course of such investigations or particulars of available or potentially available evidence, are in the public interest prima facie immune from compulsory disclosure, on the basis that such disclosure would be likely to seriously impede the ability of the Commission to fulfil its function of effectively investigating possible offences......and in appropriate cases instituting and prosecuting criminal or civil proceedings in the public interest. ...... Such immunity as I have described is, however, not absolute. It may in particular circumstances have to yield to the requirements of justice. In a proper case the court is required to perform what has been called a "balancing exercise" in which it considers the nature of the injury to the public interest which would be involved in disclosure as against the forensic importance of the documents in the circumstances of the particular litigation, and the nature of that litigation: .... Those are, in substance, the principles which the Full Court has applied: see particularly Somerville at 331, 353, 354. In Somerville at 331, Lockhart J described the process to be undertaken by the court as follows: Courts will not order the production of documents, although relevant and otherwise admissible, if it would be injurious to the public interest to disclose them and their contents. The Court must consider two conflicting aspects of the public interest: first, whether harm would be done by the production of the documents and secondly, whether it would impair the administration of justice if the documents were withheld. The Court must then engage in a balancing exercise and determine which of these elements predominates. There is no doubt that there is a public interest in, as counsel for the first respondent put it, upholding the confidence of people who visit the ASC and give it information voluntarily in order to assist the ASC in its investigations. That is because the ability of the ASC to perform its investigative functions effectively may be impaired if people are deterred from providing information voluntarily on what they believe to be a confidential basis. There is no evidence in this case that Mr Heller provided information, in the interview, on the express basis that he did so in confidence. It was suggested, however, and I am prepared to accept, that it may be inferred from the terms of the subsequent letter that Mr Heller's understanding of the process was that information which he provided would be treated as confidential. The authorities make it plain, however, that that is not the end of the matter and that there is a public interest also in the proper administration of justice to be weighed in the balance. The cumulative circumstances of this case are somewhat unusual. It is known that Mr Heller provided information to the ASC; significant information which he provided, in the form of the letter to the ASC, is already available to the applicant; it may be inferred that what Mr Heller said in the interview prompted the particular questions put to him by the ASC, to which in turn the September letter was a response. The matters concerning the fifth respondent in which Mr Heller was involved, on behalf of the first respondent, before and during the period covered by the investigation are of considerable importance in relation to the issues in this proceeding. The investigation itself concluded a considerable time ago, did not involve any contravention, suspected or alleged, against Mr Heller or the first respondent and resulted in no conclusion adverse to either. Mr Heller's account of the events in question, given in 1994, is, given the part played by him in the dealings with both the applicant and the fifth respondent, plainly of relevance in the proceeding; and part of that account, given in the letter, has already been disclosed. In all those circumstances, in my view, the disclosure of the Heller documents to the parties to this proceeding is likely to have only a slight deterrent effect, if any, on those who might in future contemplate voluntarily giving information to the ASC; on the other hand, the public interest in the proper administration of justice strongly suggests in the circumstances that the Heller documents should be disclosed. Mr Riordan, as well as giving evidence, appeared for the ASC and made submissions on its behalf. He informed me that the ASC's concern included the possible effect of an order permitting inspection on the way in which large commercial legal firms would approach requests from the ASC for voluntary assistance of their clients. The suggestion was that their readiness to provide (or, presumably, advise clients to provide) assistance voluntarily would diminish. The answer to that submission is, I think, again that the circumstances of this case, as I have described them, are unusual and special: my decision does not - and could not - cast any doubt on the existence of a prima facie immunity which has authoritatively been held to exist, but is simply that, in the particular circumstances, the public interest in the proper administration of justice prevails. For those reasons, I overrule the ASC's claim of public interest immunity in relation to the Heller documents; they may be inspected by the parties.

The Cowper Transcript Because Mr Cowper was examined under Pt 3 Div 2 of the ASC Law, the claim of public interest immunity was put on a somewhat different basis. Mr Riordan, in his affidavit, put that in this way: In the course of the examination ....., Mr Cowper was told that the examination was being held in "confidential circumstances", and that whatever he told the ASC would be "kept in confidence by the Commission". At this time, I have not yet attempted to contact Mr Cowper who, I understand, resides in Monaco. The ASC claims public interest immunity with respect to the transcript, on the basis that Mr Cowper's transcript contains material of a commercial nature, and his answers were given in circumstances where he understood that the answers would be kept in confidence by the ASC. It was submitted by the applicant that Mr Riordan did not there identify any public interest but merely the existence of a private treaty, as to confidentiality, made between the ASC and Mr Cowper in the course of an examination in which Mr Cowper was obliged to answer questions put to him. I think, however, that this is to take too narrow a view of it. If, at the request of an examinee and in the expectation that the investigation will be helped by giving an undertaking of confidence, the ASC gives such an undertaking, in my view a public interest arises in favour of protecting the confidence on much the same basis as the interest in protecting information voluntarily given from public disclosure. There being, in the case of the Cowper transcript, no such obvious potential relevance to the proceeding as there is in the case of the Heller documents, I have read the Cowper transcript. There is, I think, nothing in it even remotely of potential relevance to any issue in the proceeding. Certainly there is nothing in it, given prima facie immunity, which would justify a conclusion that the public interest in the proper administration of justice, as between the parties, overrides the public interest asserted by the ASC. In reaching that conclusion, I have had in mind the suggestion made by senior counsel for the applicant (who, of course, has not seen the Cowper transcript) that the Cowper transcript might assist in the identification, or in the establishment of a chain of inquiry leading to the identification, of transactions in shares in the fifth respondent engaged in by parties to the proceeding, or by persons associated with them, during the early weeks of November 1993: that in turn might be relevant to the question whether a transaction between the first and fifth respondents, though contemplated before 18 November 1993, was entered into only on that date or whether, on the other hand, it was entered into earlier. Having inspected the Cowper transcript, however, I cannot see anything in it which could be of assistance for those purposes. Accordingly, in relation to the Cowper transcript, I uphold the ASC's claim of public interest immunity. That document will not be made available for inspection.

The O'Halloran Documents The other document, to which I referred at the beginning of these reasons, comprises two sections, known respectively as Part A and Part E, of a record of a statement made to the ASC by Mr Sean O'Halloran, a former chief executive officer of the fifth respondent. The document is identified in an affidavit of Timothy Graham Phillips sworn on 28 January 1998. I dealt with questions relating to other parts of Mr O'Halloran's statement in brief reasons given on 19 February 1998. The ASC previously made a claim of public interest immunity in respect of Part A and Part E of the statement. It has now withdrawn that claim and does not, at least actively, oppose being required to produce those parts of the statement or their inspection by the parties. By a letter addressed to the solicitors for the fifth respondent, a copy of which was sent to the solicitors for the applicant, the ASC has, however, said this: It is difficult for the ASC to properly form a view as to whether or not the allegations made by Mr O'Halloran falling under headings "A" and "E" are relevant to the above proceedings, as it is not familiar with the pleadings. However, on its face, it would appear that section E is not relevant. It is less clear whether section A is relevant or not. The two sections of the statement have not been made available for inspection by any of the parties or their representatives. Senior counsel for the fifth respondent submitted that inspection should not be permitted, on the basis that Mr O'Halloran's term as chief executive covered a period so long after the events relevant to this case that anything he had to say about matters concerning those events must necessarily be hearsay. Senior counsel contended also that inspection of the documents should not be permitted, on the authorities, if their only potential relevance was as to the credit of persons who might give evidence in the proceeding. Senior counsel for the applicant, on the other hand, contended that inspection ought to be permitted because there was no opposition from those principally concerned, the ASC and Mr O'Halloran (there is evidence that Mr O'Halloran has informed the ASC that he has no objection to production and inspection). He contended also that, in addition to its possible use in cross-examination on credit - a legitimate forensic use to which the material might be put - the sections of the statement would be relevant to the extent that they cast light on management practices within the fifth respondent: those management practices might, in turn, provide an explanation of events after November 1993 relevant to the damages claimed by the applicant. It was not in dispute that the principles applicable to the question of inspection are those summarised by the New South Wales Court of Appeal in Waind v Hill [1978] 1 NSWLR 372 at 385, 386. It is unnecessary to repeat in full the summary given by Moffitt P, with whom Hutley and Glass JJA agreed. In brief, Moffitt P described a three stage process, the first stage being production of documents in obedience to a subpoena, the second stage (if there is an objection to inspection) being an examination of the documents produced to ensure that there is no abuse of the subpoena and to determine whether the documents appear relevant and the third stage being a ruling, when use is sought to be made of the documents, as to relevance or admissibility. His Honour said this in relation to the second stage, at 385: The judge is in some difficulty in determining whether documents are relevant prior to the presentation of the evidence or at the commencement of the case. If there is particular objection from the witness, or questions of privacy are involved, no doubt procedures can be adopted to ensure that only relevant documents are inspected. In other cases, it would appear appropriate to proceed to exercise the discretion [to permit inspection], provided the documents are apparently relevant or are on the subject matter of the litigation. However, the limitation on the exercise of the judge's discretion to allow inspection is that the document contains information of apparent relevance to the issues. Once the judge has that opinion, inspection will normally be allowed, notwithstanding that the document is not admissible as it stands, and notwithstanding that the party seeking inspection has not given any undertaking to tender it, or use it in cross-examination. Moffitt P proceeded to consider by whom an objection to inspection is properly taken, at 385, 386: The discretion is one concerning the invasion by the subpoena procedure of the rights of a stranger by the party who seeks inspection in aid of the presentation of his case to the court. No right of the opposing party is involved in making an order permitting inspection of a stranger's documents. It is difficult to see on what basis he can object. His right is to have only admissible evidence adduced. The exercise of the discretion does not involve the determination of an issue between the parties as to the relevance or admissibility of the document. It may well be, however, that the judge may hear, or indeed invite, comment from an opposing party, if the documents are such that elucidation of the truth may best be served by delaying inspection, or because the documents reveal matter private to such party or his associates and is irrelevant to the proceedings. This may well be the case where the documents are produced as earlier indicated by some public authority and contain private matter, but the authority raises no specific objection on the presumed basis that it is the court's responsibility to permit or refuse inspection. It follows that a party ... has no right to object to the judge allowing the other party .... to inspect a stranger's documents, or to appeal if the judge allows inspection. In this case, in my view, it was appropriate, as I did, to hear the fifth respondent. It might be expected that Mr O'Halloran's statement would, as in fact it does, deal with internal and private concerns of the fifth respondent; in the circumstances, Mr O'Halloran's lack of objection to inspection can hardly be regarded as conclusive and the public authority concerned, the ASC, has explicitly raised the question whether the sections of the statement have any relevance to any issue in the proceeding: a matter on which, as it properly points out, the ASC is not in a position to form a view. The test, then, is not admissibility but relevance in the sense of relating to the subject matter of the proceedings. I accept the submission of senior counsel for the applicant that, where there is no objection either from the ASC or from Mr O'Halloran, the court would be slow to preclude inspection; and I accept also, given the nature of the issues in this case (particularly, the allegations of conspiracy to defraud) and the extent to which findings are likely to depend upon views taken of inconsistent accounts of conversations largely unrecorded in contemporaneous notes, that the court will be all the more cautious in its approach. I do not doubt that inspection is not to be forbidden merely because it appears that the only "legitimate forensic endeavour" for which the documents may be employed is cross-examination as to credit (compare Maddison v Goldrick [1976] 1 NSWLR 651 at 668). Maddison, however, does not support the proposition that inspection should be permitted of a document, which does not relate to the issues in a proceeding, simply because it may contain material, unrelated to the issues, on which cross-examination as to credit might be founded; and the Waind requirement is that the documents relate to the issues in the proceeding. I have examined sections A and E of Mr O'Halloran's statement with those principles in mind. In my view neither meets the Waind test. They deal with events unrelated to, and occurring about four years after, those with which the proceeding is concerned. To a large extent (though by no means exclusively) they are based on hearsay. They do not, I think, cast any light on, or suggest any particular line of enquiry into, management practices of the sort to which senior counsel for the applicant referred. If it be assumed that the two sections of the statement include material which, if believed, might be capable of being thought discreditable of a particular respondent or of officers of a respondent (and I put it simply as an assumption: I say nothing as to whether the material includes matter of that sort) that does not make them relevant in the Waind sense where the material is unrelated to any issue in the proceeding. For those reasons I decline to permit inspection of any part of either Part A or Part E of the record of Mr O'Halloran's statement.

I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane

N.A. Cotman SC Counsel for the Applicant: D.A. Caspersonn

Solicitor for the Applicant: Garrett & Walmsley

Counsel for the First and Second Respondents: P.G. Hely QC R.M. Smith

Solicitor for the First and Second Respondents: Clayton Utz

Counsel for the Third and Fourth Respondents: J.V. Nicholas

Solicitor for the Third and Fourth Respondents: Phillips Fox

Counsel for the Fifth and Sixth Respondents: M.J. Slattery QC T.D. Castle

Solicitor for the Fifth and Sixth Respondents: Freehill Hollingdale & Page

Appearing for the Australian Securities Commission: P.N. Riordan

Date of Hearing: 29 April 1998

Date of Judgment: 7 May 1998

Sankey v Whitlam

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Cases Cited (4)

Cited By (1)