FEDERAL COURT OF AUSTRALIA Woodroffe v National Crime Authority [1999] FCA 1689 APPEALS - application for leave to appeal - test to be applied when determining whether leave to appeal be allowed when appeal on interlocutory point - whether s 130 Evidence Act 1995 (Cth) or common law principle governs pre-trial inspection of documents the subject of a claim to public interest immunity - whether deponent of affidavit in support of claim to public interest immunity from production of documents for inspection should be examined on his affidavit - proper approach of Court to making orders for discovery. Federal Court of Australia Act 1976 (Cth) s 24(1A) Crimes Act 1914 (Cth) Evidence Act 1996 (Cth) ss 118, 119 and 130 Income Tax Assessment Act 1936 (Cth) s 166 Federal Court Rules O 35 r 7(2), O 35 r7(3) Décor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 applied Federal Commissioner of Taxation v Nestle Australia Ltd (1986) 69 ALR 445 cited Esso Australia Resources Ltd v Commissioner of Taxation (1998) 83 FCR 511 applied Eastman v R (1997) 76 FCR 9 applied Young v Quin (1984) 4 FCR 483 cited Hartogen Energy Ltd v Australian Gaslights Co (1992) 109 ALR 177 cited Compagnie Financiere et Commerciale Du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 cited Mulley v Manifold (1959) 103 CLR 341 cited Temsign Pty Ltd v Biscen Pty Ltd (Full Federal Court, 15 July 1996, unreported) cited JENNIFER JEAN WOODROFFE AND JAJ HOTELS PTY LTD v NATIONAL CRIME AUTHORITY, DEPUTY COMMISSIONER OF TAXATION AND MARK WILLIAMS S 24 OF 1999 DRUMMOND, SUNDBERG AND MARSHALL JJ 3 DECEMBER 1999 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 24 OF 1999 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JENNIFER JEAN WOODROFFE and JAJ HOTELS PTY LTD Applicants AND: NATIONAL CRIME AUTHORITY First Respondent DEPUTY COMMISSIONER OF TAXATION Second Respondent MARK WILLIAMS Third Respondent JUDGES: DRUMMOND, SUNDBERG AND MARSHALL JJ DATE: 3 DECEMBER 1999 PLACE: ADELAIDE REASONS FOR JUDGMENT THE COURT: 1 The applicants seek to have set aside three orders (numbered 3, 4 and 5) made by Mansfield J in the proceedings they have brought against the National Crime Authority ("NCA"), the Deputy Commissioner of Taxation ("DCT") and a South Australian police officer seconded to the NCA. By their amended application, they seek injunctions to prevent the respondents making any use of documents seized when a search warrant was executed at various premises in South Australia in May 1998, any use of certain documents obtained from the Police Credit Union and any use of information contained in or derived from those documents. Orders for delivery up of the documents and any copies made by the respondents and numerous declarations are also sought. 2 Orders 3 and 4 relate to discovery in the action. By Order 5, the learned primary judge refused to strike out certain paragraphs of the DCT's points of defence. The orders are interlocutory. Leave to appeal is therefore required. 3 After hearing senior counsel for the applicants yesterday on why leave to appeal each of these orders should be granted, the Court refused leave. What follows are the Court's reasons for making that order. 4 In refusing leave, the Court had regard to the principle referred to in Décor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398 - 399 and had regard to the policy of restraint reflected in the leave requirement for appeals from interlocutory decisions in s 24(1A) the Federal Court of Australia Act 1976 (Cth) that is referred to in Décor Corp at 399 - 400 and in Federal Commissioner of Taxation v Nestle Australia Ltd (1986) 69 ALR 445 at 451 - 452. 5 A major matter in contention in the proceedings that resulted in his Honour's judgment of 20 August 1999 was whether the first and third respondents were entitled to maintain their objections to production of certain of their discovered material on the ground of public interest immunity. This aspect of the case is dealt with by his Honour's Orders 1, 2 and 3. 6 By their notice of motion, the applicants seek leave to appeal only the third of these three orders. In arguing for leave to appeal, senior counsel for the applicants, however, contended that the learned primary judge did not accurately reflect in Order 1 the order he intended to make. Order 1, in effect, overrides the first and third respondents' claim to immunity from production of certain documents relevant to the warrant issued to the third respondent under the Crimes Act 1914 (Cth), but, in terms, it limits the applicants' access to documents the subject of the first and third respondents' claim to immunity from production "that record the process of decision of the third respondent to apply" for the issue of the warrant. 7 Applicants' counsel pointed to the statement by the learned primary judge in [56] of his reasons in which he recorded his satisfaction that "the applicants have made out a prima facie case of illegality in the third respondent applying for and executing the warrant". The submission is that the learned primary judge, by his Order 1, which overrides the first and third respondents' claim to immunity from production only in respect of documents that record the process of decision of the third respondent to apply for the issue of the warrant, failed to give effect to his conclusion that the applicants had made out a prima facie case of illegality that extended more widely than that. What his Honour regarded as the content of this prima facie case of illegality which he referred to in [56] is set out in [55]. Such illegality is limited firstly to the question of the third respondent's entitlement, once seconded to the first respondent, to apply for the warrant under the Crimes Act 1914 (Cth); if this contention of illegality is made good, it would constitute illegality on the part of the third respondent in applying for the warrant. Secondly, it is limited to the fact that certain alterations or deletions were made to the warrant, something which, if not lawfully authorised, may make execution of the warrant itself unlawful. 8 The prima facie case of illegality which his Honour accepted the applicants had made out is thus narrow in compass: contrary to counsel's submissions, it does not provide any basis for thinking that his Honour concluded that possible illegality in connection with the warrant required rejection of the relevant respondent's claim to immunity from production of a broad range of documents. It does appear, however, that his Honour probably intended, but failed, to make an order in terms of Order 1 which also required the first and third respondents to make available to the applicants for inspection such of the documents already discovered and in respect of which immunity had been claimed that relate to the making of the alterations to or deletions from the warrant referred to in [55] of his Honour's reasons. 9 As mentioned, this particular matter was not the subject of any claim by the applicants in their motion for leave to appeal, to which was attached their proposed notice of appeal, if given leave. As will appear, it is the only aspect of the decision which the Court thinks may need to be corrected. It appears to involve an accidental omission on the part of the learned primary judge. It is therefore inappropriate to grant the applicants leave to appeal for this limited purpose. The applicants should instead make application to the learned primary judge for appropriate relief under O 35 r 7(2) or (3) the Federal Court Rules. 10 In seeking leave to appeal Order 3, the applicants point to a number of considerations suggesting error. The learned primary judge disposed of the applicants' challenge to the first and third respondents' claim to public interest immunity as justifying their refusal to produce for inspection certain of the discovered documents by applying common law principles. He considered he was bound by the decision of this Court in Esso Australia Resources Ltd v Commissioner of Taxation (1998) 83 FCR 511 to reject the applicants' submission that the matter was to be resolved by the application of s 130 the Evidence Act 1995 (Cth). If there is any substance in the submission now made that his Honour was in error here, that might well provide good reason, in accordance with the principles already referred to, for granting leave to appeal Order 3. We do not think, however, that the learned primary judge's decision is attended by sufficient doubt to warrant leave to appeal. This Court in Esso dealt with ss 118 and 119 the Evidence Act, which prescribe the circumstances in which "evidence is not to be adduced" of certain communications and documents; the Court held that these provisions governed only the adducing of evidence of such communications and documents in court and did not deal with the circumstances in which non-production of discovered documents for inspection outside court would be justified on the ground of the various aspects of legal professional privilege in issue in that case. Section 130 is unambiguous in being directed only to the circumstances in which documents and information are not to be "adduced as evidence" where they are subject to the public interest in preserving secrecy or confidentiality in relation to such information or documents. The learned primary judge was in all probability right, in view of the decision in Esso, in refusing to give s 130 any more extensive area of application than ss 118 and 119 have: all are confined to regulating the production in evidence in court of documents and information. It is common law principles that govern when material need not be produced for inspection after discovery. 11 Even if it is assumed that the learned primary judge's refusal to apply s 130 to determine the two respondents' claims to immunity from production is wrong, it is very doubtful, notwithstanding the three points to the contrary advanced by the applicants, whether the applicants could show that any prejudice resulted to them from the learned primary judge determining the question of immunity by reference to the common law rather than the statutory provisions, given the close similarity between the two: s 130 was said by this Court in Eastman v R (1997) 76 FCR 9 at 63 to "closely reflect the common law position" in relation to public interest immunity. The result of applying s 130 to this case would very likely be that recorded in Orders 1 and 3. 12 The applicants also contend that leave to appeal Order 3 should be granted because the learned primary judge erroneously refused to permit them to cross-examine the first respondent's officer, Mr Irwin, who swore affidavits upon which the first and third respondents relied in claiming public interest immunity from production of the documents in question. 13 The learned primary judge recognised correctly that there was a discretion to permit cross-examination of a deponent in support of a claim to public interest immunity, observed that "those circumstances will be rare" in which cross-examination will be appropriate and said it will be a matter for the Court in each instance to address the particular circumstances to see if cross-examination should be permitted. His Honour referred to relevant authorities, including Young v Quin (1984) 4 FCR 483. The applicants rely on what Gummow J said in Hartogen Energy Ltd v Australian Gaslights Co (1992) 109 ALR 177 in support of a submission that the Court is now more ready to permit cross-examination of deponents in support of claims to privilege. But Hartogen concerned a claim to legal professional privilege. In Young v Quin, Bowen CJ, at 485 - 486, spoke of the special features of this head of immunity and of the Court having a role in determining whether a claim to that particular head of immunity should be recognised that is different from the Court's role in respect of claims arising inter partes. These are considerations that support the restrained approach to permitting cross-examination in respect of public interest immunity claims. In refusing permission to cross-examine Mr Irwin, his Honour was also said to have wrongly taken into account the consideration that cross-examination would expose the nature of the content of the material the subject of the claim for immunity. It was asserted, without reference to authority, that this was an error. But in Young v Quin at 489 it was said that this very consideration is one of the justifications for the Court's reluctance to permit cross-examination of a deponent in support of a claim to this particular immunity. See also Young v Quin at 487. 14 There is no good reason for doubting that his Honour applied the correct principles in coming to his conclusion that cross-examination of Mr Irwin should not be permitted. 15 His Honour then evaluated the considerations advanced by the applicants in support of their claim to cross-examine. 16 His Honour, in determining the claim to immunity, performed the balancing exercise required by the common law authorities. He did this in a case in which the applicants were challenging the lawfulness of the obtaining of material by a search warrant and otherwise and the lawfulness of the dissemination to and use by the second respondent of some of that material. No prosecution has been instituted against the applicants and, as the learned primary judge observed, the NCA's investigation is ongoing: it is not clear whether any prosecution will ensue. In performing the balancing exercise, his Honour therefore did not have to take into account the public interest in an accused's right to a fair trial, a consideration often relevant when claims to this immunity have to be determined and one which strongly favours disclosure. His Honour balanced considerations that the disclosure of the material in issue, during an ongoing investigation into possible criminal activities that may involve the applicants, would clearly be injurious to the public interest, with the consideration that that part of the applicants' claim to which the documents the subject of the claim of immunity were said to be relevant appeared to be essentially fishing: he had concluded, save in respect of one matter which led him to make Order 1, that the applicants were seeking access to the documents claimed to be immune from production in order to enable them to try to support what was no more than a speculative case. As a result, and subject to the one exception already referred to, his Honour concluded that the claim for public interest immunity was therefore made out, saying: "There is nothing of substance to suggest that their disclosure is required to serve the administration of justice in the particular circumstances." 17 There is no ground for doubting the correctness of his Honour's approach here. 18 The applicants' contention that his Honour erroneously considered the question of the first and third respondents' prima facie illegal conduct separately from the balancing exercise in upholding almost the whole of the claim to immunity made by those respondents was premised on the assumption that his Honour had found a much wider prima facie case of illegality than is the case. 19 The applicants have not made out a case for leave to appeal Order 3. 20 By Order 4, the learned primary judge rejected the applicants' claim for further and better discovery of seven categories of document listed in [58] of his reasons. The two contentions at the forefront of the applicants' argument for leave to appeal this order were that the learned primary judge misapprehended the applicants' case in a significant respect and that he disposed of their claim for further discovery by applying an erroneous test, viz, whether additional discovery was necessary. 21 The contention that the learned primary judge misapprehended the applicants' case and was thereby led into error in refusing further discovery misstates the position. Counsel fastens on what appears clearly enough to be a typographical error in the opening part of his Honour's quite lengthy reasons in which he summarised the claims made by the applicants in the action. In this summary, his Honour records what is an important allegation made by the applicants in their points of claim that the NCA and the DCT were not empowered to establish the joint task force, though he here omits the word "not". His Honour returned to this important allegation in [63], in reasoning his way to his conclusion that further discovery was not warranted. There, he accurately records the applicants' allegation of lack of power in the NCA and the DCT to establish the joint task force. He was under no misapprehension as to the applicants' case. 22 Nor did his Honour deal with the request for further discovery by determining whether it was necessary to make the order sought. What his Honour said was this, at [60]: "Pursuant to O 15 r 15 of the Rules, the Court should not make an order in the nature sought unless it is satisfied that the order is necessary at the time when the order is made. In determining that question, regard should be had to the interests of justice in the particular case so as to ensure a fair trial, and to the economic and efficient disposition of the case." 23 In our opinion, there is no error revealed in the way the learned primary judge approached the matter of further discovery. His comments show that he was well aware that the order was an interlocutory one on a matter of practice. As a matter of power, it is open to any single judge of the Court, if appropriate in the exercise of the judge's discretion, to vary or discharge an interlocutory order: see Temsign Pty Ltd v Biscen Pty Ltd (Full Federal Court, 15 July 1996, unreported) at p 10. The applicants are entitled to renew their request, if further circumstances emerge in the litigation that justify that course. Nor was his Honour in error in not determining the applicants' entitlement to further discovery by applying the rule in Compagnie Financiere et Commerciale Du Pacifique v Peruvian Guano Co (1882) 11 QBD 55, applied by Menzies J, sitting at first instance, in Mulley v Manifold (1959) 103 CLR 341 at 345. The approach this Court now takes in determining the entitlements of litigants to discovery under the rules of court is tailored to the nature of the particular case: it is stated in the Practice Note on discovery issued by the Chief Justice on 12 February 1999. It is an approach supported by the Court's case management procedures contained in Order 10. Discovery has, in fact, taken place in this case in accordance with the approach outlined in the Practice Note. 24 In refusing to order further discovery, the learned primary judge analysed the pleadings to identify the live issues in the case to which the further discovery sought might be relevant. He had regard to the principle that the affidavits of discovery already filed should not be treated as insufficient in the absence of material from the applicants' demonstrating clearly any such insufficiency and to the lack of such material. He also had regard to how an order for further discovery might, in one respect at least, conflict with his decision on the first respondent's claim for public interest immunity. 25 There is no good reason for thinking that, on the material presently before the learned primary judge, the correctness of his decision to refuse the further discovery sought now is sufficiently in doubt to warrant leave to appeal being given. The applicants are no doubt prejudiced by the order in the sense that it denies them access to material which they consider may be of assistance to them in the litigation. But the learned primary judge's view that, in part, the applicants' case is speculative, ie, that they want further access to the respondents' documents for the impermissible purpose of seeing if they can make a case against them is supported to a degree by the submissions made on the applicants' behalf. See, eg, notes 2 and 14 to their written submissions. 26 The applicants also submitted that, if his Honour's decision is incorrect, the consequence to them "is significant on the determination of substantive rights". It is well-established that courts are reluctant to grant leave to appeal interlocutory orders, particularly on matters of practice and procedure, though more ready to grant leave to appeal interlocutory orders determining substantive rights or where there is some other special consideration that justifies leave. Rulings on many matters of practice and procedure, including the discovery order of the kind here in question, have an impact, significant, to a greater or lesser extent, on the determination of the substantive rights of parties to the litigation. That does not mean that such orders can properly be characterised for the purposes of determining whether leave to appeal should be granted as orders determining substantive rights. There must be some additional consideration before leave to appeal such an order will be appropriate. We do not accept that there is any here. 27 As is made clear in Décor Corp at 399, there is an interaction between the two-limbed test for determining whether leave to appeal an interlocutory order should be granted. Having regard to the applicants' failure to demonstrate good reason for thinking the learned primary judge here fell into error and having regard also to the fact that his Honour's order was one with respect to a matter of practice and procedure and dealt with matters which the applicants are entitled to raise anew, if new circumstances emerge to justify that, the grant of the leave sought here is not justified. 28 By Order 5, the learned primary judge refused to strike out par 31 of the DCT's points of defence in which he asserts an entitlement to use documents provided to him by the NCA "whether or not their seizure dissemination (sic) was lawful". 29 His Honour correctly identified that the issue here raised involved the proper construction of s 166 the Income Tax Assessment Act 1936 (Cth). He refused to strike out this allegation because he did not regard the DCT's contention as to the true construction of the section as unarguable and because "as I indicated in the reasons for decision given on 21 May 1998, its outcome may depend upon the precise findings of fact". He considered that, as a matter of discretion, this question should be left to be decided after any relevant findings of fact were made. As the learned primary judge indicated, he had already heard and refused to deal with this same question as a separate issue for reasons he fully stated in his judgment of 21 May 1998. The strike-out application appears to be an attempt to circumvent this earlier interlocutory decision when it seems that there has, in the intervening period, been no relevant change of circumstances to justify the applicants in seeking to have the Court revisit the issue before final hearing. 30 But given his reasons, it is very difficult to say that the correctness of his Honour's refusal to strike out the paragraph is attended with any doubt. In any event, having regard to the interaction between the two-limbed test in Décor Corp and the absence of demonstrated prejudice the applicants will suffer if his Honour's decision is wrong, ie, if it is left to litigate this issue at the trial, there is no justification for this Court interfering with this aspect of Order 5. 31 By Order 5, the learned primary judge also refused to strike out paragraphs in the DCT's points of defence in which the DCT refuses to admit being an officer or agent of the Crown, while admitting his responsibility for the administration of certain taxation legislation referred to in the relevant part of the applicants' points of claim. His Honour adopted this course because he did not consider the DCT's pleading here was embarrassing, there being no issue as to the applicable statutory provisions, and "no suggestion of any additional fact which might inform the status of the first and second respondents". The applicants failed to make out any case for granting leave to appeal the learned primary judge's decision on this issue which is a decision on a matter of practice and procedure only. 32 The learned primary judge also refused to strike out par 28.3.1 of the DCT's points of defence, attacked as obliquely raising an unparticularised allegation that the applicants have engaged in fraud. The learned primary judge refused to strike out this paragraph because he read it as a responsive answer to the applicants' allegation that the DCT had made unfounded and improper allegations of tax fraud to the applicants' accountant and staff on a particular occasion. There is no reason to doubt the correctness of this comment by his Honour. More importantly, however, his Honour appears clearly enough to have regarded the allegation, one of many in lengthy points of claim which his Honour described as "a little difficult to understand fully … partly because they contain some general and unparticularised allegations of matters which do not apparently relate to the main thrust of their complaints", as irrelevant to the live issues for determination: his Honour referred to the absence of any clear case currently pleaded by the applicants of a cause of action against the DCT to which the DCT's allegations of tax fraud here referred to might be relevant. The Court can see no reason to doubt the correctness of his Honour's view. The applicants are not prejudiced by the decision. No basis for leave to appeal this aspect of Order 5 has been shown. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate: Dated: 3 December 1999 Counsel for the Applicants: Mr T Gray QC and with him Mr N Rochow and Ms E Holmes Solicitor for the Applicants: Douglas Wardle Counsel for the First and Third Respondents: Mr M Gray QC Solicitor for the First and Third Respondents: National Crime Authority Counsel for the Second Respondent: Ms A MacDonald Solicitor for the Second Respondent: Australian Government Solicitor Date of Hearing: 2 December 1999 Date of Judgment: 3 December 1999