JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : THE STATE OF WESTERN AUSTRALIA -v- GALATI [No 3] [2017] WASC 15
CORAM : TOTTLE J
HEARD : 16 JANUARY 2017
DELIVERED : 1 FEBRUARY 2017
FILE NO/S : CIV 2545 of 2015
BETWEEN : THE STATE OF WESTERN AUSTRALIA
Plaintiff
AND
ANTONIO GALATI
First Defendant
GALATI NOMINEES PTY LTD
Second Defendant
Catchwords:
Evidence - Where the first defendant is entitled to penalty privilege - Privilege against self-incrimination - Where the second defendant can rely on the evidence adduced by the first defendant - Where the first defendant is the director of the second defendant - Whether the second defendant must file evidence that can be obtained from sources other than the first defendant
Practice and procedure - Obligations to disclose evidence in advance of hearing - Where an order has been made for the filing of affidavits in advance of the hearing - Where evidence cannot be adduced from a witness who has not filed an affidavit - Whether failure to disclose evidence would lead to unfairness - Trial by ambush
Legislation:
Marketing of Potatoes Amendment and Repeal Act 2016 (WA), s 46
Civil Judgments Enforcement Act 2004 (WA), s 98
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Ms G A Archer SC & Mr P D Lochore
First Defendant : Mr J C Giles SC & Mr P Van Der Zanden
Second Defendant : Mr J C Giles SC & Mr P Van Der Zanden
Solicitors:
Plaintiff : Kott Gunning
First Defendant : Hotchkin Hanly Lawyers
Second Defendant : Hotchkin Hanly Lawyers
Case(s) referred to in judgment(s):
ACCC v Eurong Beach Resort [2005] FCA 1134
ACCC v J McPhee & Son (Australia) Pty Ltd (1997) 77 FCR 217
ASIC v Mining Projects Group Ltd [No 1] [2007] FCA 1620
ASIC v Mining Projects Group Ltd [No 3] [2008] FCA 952
ASIC v Rich (2009) 236 FLR 1; [2009] NSWSC 1229
B v R [1992] HCA 88; (1992) 175 CLR 599
Potato Marketing Corporation of Western Australia v Galati [No 2] [2016] WASC 315
Willis v Bernard (1892) 8 Bing 376; 131 ER 439
Introduction
1 The plaintiff, the State, applies for orders that the first defendant, Mr Galati, and second defendant, Galati Nominees, be found guilty of contempt of court.
2 In the course of that application a procedural issue has arisen, namely, whether Galati Nominees is entitled to rely upon whatever evidence is adduced by Mr Galati if it does not adduce any evidence itself by filing and serving affidavits in accordance with directions made by me.
3 The State accepts that Mr Galati is entitled to penalty privilege and thus he is not obliged to disclose his evidence in advance of the hearing. If Galati Nominees does not adduce evidence itself but is permitted to rely upon whatever evidence might be adduced by Mr Galati, the State will not know the evidence put against it until after it has closed its case. It contends this would allow Galati Nominees to avoid the 'ordinary obligations of civil litigation', and allow it to conduct a trial by ambush.
4 Relevantly, for the purposes of these reasons, the State seeks an order that Galati Nominees not be permitted to rely upon any evidence adduced by Mr Galati without the leave of the court.
Background
5 The Potato Marketing Board of Western Australia (the Corporation) was abolished on 31 December 2016: see s 46 of the Marketing of Potatoes Amendment and Repeal Act 2016 (WA). Pursuant to s 49(1) of that Act, the assets and rights of the Corporation were vested in the State of Western Australia.
6 By a notice of motion issued on 1 June 2016, the Corporation alleged that Galati Nominees should be found guilty of contempt by reason of its disobedience of an order made by me on 11 November 2015, and that Mr Galati, being a director of Galati Nominees, be found guilty of contempt. Mr Galati is alleged to be guilty of any contempt of which Galati Nominees is found guilty pursuant to s 98(3) of the Civil Judgments Enforcement Act 2004 (WA), unless he satisfies the court of the matters set out in s 98(3)(a) and (b).
7 On 23 August 2016 I gave leave to the Corporation to amend the notice of motion: see Potato Marketing Corporation of Western Australia v Galati [No 2] [2016] WASC 315.
8 On 11 November 2016 I made orders for the filing and service by the Corporation and Galati Nominees of evidence and programmed the application to a hearing in June 2017. Order 6 of the 11 November 2016 orders requires Galati Nominees to file and serve any affidavits in response to the amended notice of motion by 10 February 2017. Another order provided that, except with leave of the court, neither the Corporation nor Galati Nominees may adduce evidence from any witness who has not filed an affidavit. Additionally, I made an order that the question of:
Whether the second defendant is entitled, without leave, to rely at the hearing upon evidence that is adduced or tendered on behalf of the first defendant (including evidence of the first defendant himself) after the plaintiff has closed its case, if that evidence could have been adduced or tendered on behalf of the second defendant by a person other than the first defendant pursuant to order 6 ('the Contested Issue')
9 be determined at a special appointment. An appointment was subsequently fixed for 16 January 2017.
10 At the commencement of the hearing on 16 January 2017 I ordered that the State be substituted as plaintiff in place of the Corporation.
The parties' submissions
11 Shortly summarised, the parties' submissions were as follows.
Plaintiff's submissions
1. Galati Nominees does not enjoy a penalty privilege and accordingly it must comply with the ordinary obligations of civil litigation, including the obligation to file and serve affidavits of its witnesses in advance of the hearing.
2. The only limitation on Galati Nominees' ability to comply with its obligations to disclose its evidence in advance of the hearing is that Mr Galati cannot be required to provide information that might infringe on his penalty privilege.
3. Accordingly, Galati Nominees is not required to include in the evidence it discloses in advance of the hearing any evidence for which Mr Galati is the only source.
4. Galati Nominees should not be permitted to avoid the ordinary obligations of civil litigation by not filing evidence that can be obtained from sources other than Mr Galati, and by relying on evidence adduced by Mr Galati in its own defence for no principled reasons because to do so would be to allow Galati Nominees to conduct a trial by ambush.
5. Whilst there is no authority directly on point, correctly understood, the authorities which discuss the directions that should be made for the disclosure of evidence where one of several defendants in penalty proceedings enjoys penalty privilege support the State's position.
Second defendant's submissions
1. The court does not have power to make an order of the nature sought by the State - it is in the nature of a preliminary ruling that would fetter how evidence, once admitted, might be used by the court.
2. The making of an order that will or may prevent Galati Nominees from relying on admissible and admitted evidence impinges on Galati Nominees' right to a fair trial.
3. One effect of the order sought by the State would be to compel Galati Nominees to defend itself in a particular way by compelling it to call witnesses when it may wish instead to rely upon Mr Galati's evidence.
4. If Galati Nominees decides not to produce its own evidence but to rely instead on that of Mr Galati, it is not to be compared to a party who breaches a procedural order for the filling and service of evidence.
5. Assuming, in the State's favour, both the existence of a power to make the order sought by it and existence of criteria enlivening the exercise of the power, then the following discretionary factors weigh against the making of such an order:
(a) the order will create practical difficulties at the hearing including the generation of collateral issues;
(b) if the guilt of the Mr Galati and Galati Nominees is to be determined, potentially, by different evidence, there is a risk of inconsistent or conflicting judgments;
(c) there is no trial by ambush because if the State is taken by surprise the court can grant an adjournment; and
(d) it is wrong to characterise the position that Galati Nominees might adopt of not going into evidence but relying instead on Mr Galati's evidence as creating a de facto privilege; it is simply a consequence of the plaintiff proceeding against both defendants in the one proceeding and the nature of s 98(3) of the Civil Judgments Enforcement Act 2004 (WA).
6. The authorities do not support the making of the order sought by the plaintiff.
Common ground
12 It is common ground that:
1. the contempt proceedings are civil proceedings;
2. the second defendant does not have a privilege against exposure to penalties or self-incrimination; and
3. generally there is benefit in having all evidence disclosed in advance of a hearing.
The authorities
13 The plaintiff relies on the observations made by Gordon J in ASIC v Mining Projects Group Ltd [No 3] [2008] FCA 952 (ASIC No 3) about the way in which courts fashion directions for the filing and service of evidence in penalty proceedings where one, but not all, respondents have the benefit of privilege. ASIC No 3 was one of a series of decisions concerning procedural issues that arose in penalty proceedings brought by ASIC against Mining Projects Group Ltd (MPG) and two of its directors.
14 In an earlier case in the series, ASIC v Mining Projects Group Ltd [No 1] [2007] FCA 1620, Finkelstein J had dealt with a dispute concerning the adequacy of the defences filed by the natural person defendants, both of whom were directors of MPG. His Honour observed that it was accepted that MPG did not have the benefit of penalty privilege but that this might not be of any assistance to ASIC if it successfully attacked the company's defence, because:
If MPG's defence is defective and it is required to provide further information, it may not be able to satisfy that requirement if the only source of its information is the director defendants and they are entitled to remain silent [5].
15 ASIC No 3 was a decision on the issue of whether MPG should pay the costs thrown away by reason of the trial date being vacated. For reasons that are not presently relevant, for the purposes of determining the costs issue, Gordon J was required to make a number of observations about the effect of the directors' penalty privilege on MPG's obligation to file and serve affidavits. The paragraphs of her Honour's reasons upon which the plaintiff relies are [11], [12] and [19]. The relevant parts of those paragraphs are as follows:
[11] In January 2008, the defendants sought a stay of the claims made against MPG by ASIC pending the hearing and determination of the claims made against the directors or a stay of the claims made against MPG by ASIC until the Court has made findings of fact in relation to the claims against the directors but before final orders. The application was supported by an affidavit sworn by a Mr Babbage, a non-executive director of MPG. The application was refused: ASIC No 2. In considering the application for stay, a number of principles informed that decision: see ASIC No 2 at [5] to [7]. They included:
1. The privilege against self-incrimination and penalty privilege apply to the directors but not MPG: ASIC No 1 at [5] and ASIC No 2 at [7].
2. A corporate defendant (such as MPG) 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.
3. 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 No 1 at [5].
4. 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 No 1 at [5].
5. 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 No 1 at [5]. No submission has been made to that effect in this case.
6. 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': ASIC No 1 at [5] (emphasis added). If the corporate defendant has other sources of information available from which it can comply with the direction, then it must do so.
[12] There was, and could be, no dispute that MPG could choose whether or not to lead evidence. However, if MPG intended at trial to rely on a statement or affidavit from a witness that could not or did not claim privilege, it could not refuse to comply with a direction for the filing of that evidence prior to trial: see [11(6)] above.
…
[19] … MPG, too, could have stood mute, not gone into evidence and simply relied upon whatever positive case the directors ran. But if MPG intended to go into evidence, it was subject to the principles summarised in [11(6)] above.
16 Senior counsel for the State, Ms Archer, accepted that the statement at [19] appeared to provide support for Galati Nominees' position, but submitted that to interpret that statement as permitting a corporate defendant to avoid the effect of an order for the filing of affidavits by relying upon the evidence of a director would not sit well with the statements made by her Honour at [11.6] (including the references to ACCC v Eurong Beach Resort [2005] FCA 1134 and ACCC v J McPhee & Son (Australia) Pty Ltd (1997) 77 FCR 217), and at [12], and indeed, would be inconsistent with the last sentence in [12]. Ms Archer also submitted that such an interpretation would be inconsistent with the undesirability of trial by ambush, the rejection of the application of penalty privilege to corporations, and the principle that a corporation is not free to structure its response to a legal requirement so as to allow it to effectively take advantage of a privilege afforded to a director.
17 In my view, the statements made by Gordon J at [11(6)] address the situation of a corporate defendant who wishes to go into evidence. This is made plain by the opening sentence of [12]. The statements in [11(6)] say nothing about a corporate defendant who does not wish to go into evidence. Read in context, the second sentence in [12]
However, if MPG intended at trial to rely on a statement or affidavit from a witness that could not or did not claim privilege, it could not refuse to comply with a direction for the filing of that evidence prior to trial …
18 is also directed to the possibility that MPG might adduce evidence on its own behalf and pointed out that if it wished to do so, it would have to comply with the directions made. I do not consider that Gordon J can be taken to be saying that MPG, or any corporate defendant in a like situation, could only rely on evidence if it had adduced that evidence itself. I consider that her Honour should be taken to have meant what she said at [19], namely, that MPG could have stood mute, not gone into evidence, and relied upon whatever positive case the director defendants ran.
19 In ACCC v J McPhee & Son (Australia) Pty Ltd Heerey J rescinded orders requiring individual respondents in penalty proceedings to file and serve witness statements, but allowed an order requiring the corporate respondent to stand. His Honour noted that there would be no breach of the direction for the filing and service of a witness statement by the corporate respondent if it failed to file and serve a statement by a proposed witness who claimed privilege. His Honour's reasons do not touch directly upon the issue raised in these proceedings.
20 In ACCC v Eurong Beach Resort Ltd, Kiefel J (as her Honour then was) was concerned, relevantly, with an application to vary directions that had been made by a registrar obliging the respondents to file and serve any affidavits upon which they intended to rely by a certain date, and providing that no affidavit filed after that date could be relied upon without leave of the court. The respondents included natural person respondents who had the benefit of penalty privilege and corporate respondents who did not. The natural person respondents proposed that they be subject to a direction to provide statements within a short period after the close of the ACCC's case against them. After referring to some of the authorities dealing with the general principles applicable to penalty privilege, including McPhee, her Honour stated:
[12] … I think it may be accepted that a Court would not make orders which would deny a person's privilege. But that has not occurred in this case. There has been no order requiring the individual respondents to file statements and thereby waive their privilege. The situation is simply that the corporate respondents have a decision to make about what evidence they will rely upon. If they determine not to put on affidavits of the individual respondents within the time limited for doing so, they will need the leave of the Court to do so at a later time. The present direction made by the Deputy District Registrar reads:
5. No affidavit filed by the respondents after 15 July 2005 may be relied upon without the leave of the Court first being obtained.
[13] The approach suggested by the respondents is to expressly except, from their obligation to identify the evidence they will rely upon, the evidence of the individual respondents. To make such an order is effectively to grant leave in advance and without consideration of all the relevant facts at the time reliance is sought to be placed upon any additional evidence. Decisions as to whether to claim privilege and apply for leave may sometimes be difficult in the context of litigation, but I do not think it appropriate for the Court to assist a party in delaying a decision, particularly when it is not aware of all the facts. I consider the present mechanism does not prejudice the corporate respondents. They may apply for leave if privilege first taken is later waived. The same reasoning should apply to the individual respondents' evidence. If they wish later to adduce evidence, they may apply for leave to do so. Obviously if they did so at the close of the ACCC's case they would need, at the least, to be in a position to proceed without delay.
21 The first sentence of [13] appears to provide some support for the plaintiff's position because it suggests that the corporate respondents must 'identify', and implicitly must disclose, the evidence to be given by the natural person respondents personally if they intend to rely upon it and, if they do not identify it, they cannot rely upon it without leave.
22 Once again, however, in my view, the context in which Kiefel J's statements were made is critical. Her Honour was dealing with an application to vary orders that applied if the parties wished to go into evidence themselves. The remarks are not directed to whether a respondent who does not adduce evidence on its own behalf is entitled to rely upon the evidence adduced by one of the other respondents.
23 In my view, neither McPhee nor Eurong Beach provide support for the State's position.
24 I do not accept the State's invocation of the principle that 'a corporation is not free to structure its response to a legal requirement so as to allow it to take advantage of a privilege afforded to a director' assists the State's argument. There is no relevant 'legal requirement'. Galati Nominees is not under a 'legal requirement' to adduce evidence itself.
25 The State also referred me to the decision of EM Heenan J in Woods v Skyridge Enterprises Pty Ltd [2012] WASC 4. At [13] - [14] and [25] his Honour made a number of observations about the relevance of penalty privilege to orders for the filing and service of evidence when that privilege is enjoyed by directors and proceedings are pursued against both directors and the company. His Honour's observations, however, do not address the issue that has arisen in these proceedings.
Disposition
26 I consider that Galati Nominees should be able to rely upon any evidence adduced by Mr Galati at the hearing in the event that it does not adduce evidence itself by filing and serving affidavits in accordance with the programming orders made by me. My process of reasoning is as follows.
27 First, allowing Galati Nominees to rely upon the evidence of Mr Galati accords with the general position that once evidence is admitted in a proceeding it is admitted for all purposes subject to the operation of any exclusionary or limiting principle: see the observations of Austin J in ASIC v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 [152], which although made in the context of the Uniform Evidence Act, reflect the principle at common law: cf Willis v Bernard (1892) 8 Bing 376, 383; 131 ER 439, 441; B v R [1992] HCA 88; (1992) 175 CLR 599, 607 (Brennan J), 619 (Dawson & Gaudron JJ) To deny a party a right to rely on relevant evidence adduced by another party is to deny the first party a fair trial.
28 Second, the State is unable to point to any established exclusionary or limiting principle to support its argument that Galati Nominees should not be able to rely upon the evidence adduced by Mr Galati simply because it has not adduced evidence itself. The situation is not one in which a party in breach of an applicable procedural requirement attempts to adduce evidence. In this context, it is to be noted that Galati Nominees accepts that if it wishes to adduce evidence it must comply with order 6 made by me on 11 November 2016 and file and serve the affidavits of its witnesses by 10 February 2017.
29 Third, the State's suggestion that Galati Nominees' ability to rely on evidence given by Mr Galati should be conditioned by reference to whether that evidence could have been adduced by Galati Nominees from a person other than Mr Galati involves an unwarranted intrusion into Galati Nominees' freedom to run its case as it chooses, and is fraught with practical difficulty. If adopted, the suggestion would have the capacity to compel Galati Nominees to adduce evidence from witnesses whom it would not call simply because those witnesses are capable of giving evidence about a matter on which the first defendant could also give evidence. There is a considerable danger that the hearing would be bedevilled by the necessity to resolve collateral issues as to whether particular evidence could have been adduced from someone other than Mr Galati.
30 Fourth, the State's position is not supported by clear authority. For the reasons I have canvassed, the statements made by Gordon J in ASIC No 3 support the proposition that a corporate defendant in penalty proceedings is entitled to not go into evidence and to rely on the evidence of a natural person co-defendant. The observations of Kiefel J in Eurong Beach do not engage directly with the issue that has been raised in this case.
31 Fifth, the case management principles that ordinarily require a party to disclose their witness statements or affidavits to the other party in advance of a hearing are recognised by order 6 of my orders of 11 November 2016. Having noted that, it must be accepted that Galati Nominees cannot be compelled to adduce evidence itself. The State accepts that the case management principles that support the disclosure of evidence prior to a hearing must be subordinated to the principles that underpin penalty privilege. By proceeding against both Mr Galati and Galati Nominees, the State has created the situation in which Galati Nominees may 'stand mute', not go into evidence and rely on Mr Galati's evidence. It may be accepted that the non-disclosure of the material upon which Mr Galati and Galati Nominees may rely may cause difficulties at the hearing for the State's witnesses and to a lesser extent counsel, but there is some capacity to address these difficulties by adjournments to alleviate any unfairness that might otherwise arise.
32 I will hear the parties as to costs.