FEDERAL COURT OF AUSTRALIA Australian Securities and Investment Commission v United Investment Funds Pty Ltd [2003] FCA 674 CORPORATIONS – investigation – order to provide information on affidavit – whether deponent can claim privilege against self-incrimination EVIDENCE - privilege against self-incrimination – sufficiency of material before the Court Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477 cited; Gamble v Jackson [1983] 2 VR 334 affirmed on appeal [1983] 1 VR 552 applied; Lamb v Munster (1882) 10 QBD 110 mentioned; Reg v Boyes (1861) 1 B&S 311 [121 ER 730] mentioned; Smith Kline & French Laboratories Ltd v Inter-Continental Pharmaceuticals (Australia) Pty Ltd (1969) 123 CLR 514 mentioned 8 Wigmore on Evidence §2250 (McNaughton rev. 1961) AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v UNITED INVESTMENT FUNDS PTY LTD AND OTHERS V 3114 of 2003 FINKELSTEIN J 4 JULY 2003 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V3114 of 2003 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: UNITED INVESTMENT FUNDS PTY LTD AND OTHERS (as listed in the Schedule of Respondents) Respondents JUDGE: FINKELSTEIN J DATE: 4 JULY 2003 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 In a criminal prosecution the Crown has the ultimate burden of proving its case before there is any expectation that the accused will be required to respond, whether by giving evidence himself or by calling witnesses. Another way of stating this proposition, in more popular terms, is that in a criminal case the accused has the benefit of the right to silence as well as its corollary, the protection against self-incrimination. The origins of the privilege against self-incrimination are examined in 8 Wigmore on Evidence §2250 (McNaughton rev. 1961), at 284 ff. It derives from the practices of the Star Chamber where a person could be called and examined without precise notice of the charge made against him. This had two consequences. One was that the accused had difficulty providing responses to a particular issue. The other was that the court could embark upon a fishing expedition. That is to say, the source of concern was really a dissatisfaction with the method of presenting a charge against an accused rather than with the fact that he was required to give evidence. 2 Notwithstanding these origins, the privilege soon developed a broader rationale. In Lamb v Munster (1882) 10 QBD 110, 112-3 Stephen J explained: "When the subject is fully examined, it will I think be found that the privilege extends to protect a man from answering any question which 'would in the opinion of the judge have a tendency to expose the witness, or the wife or husband of the witness, to any criminal charge'… That is what I understand by the phrase 'criminating himself'. It is not that a man must be guilty of an offence and say substantially, 'I am guilty of the offence, but am not going to furnish evidence of it.' I do not think that the privilege is so narrow as that, for then it would be illusory. The extent of the privilege is I think this: the man may say, 'If you are going to bring a criminal charge, or if I have reason to think a criminal charge is going to be brought against me, I will hold my tongue. Prove what you can, but I am protected from furnishing evidence against myself out of my own mouth'." 3 The question at issue on this application is whether the privilege can be claimed by respondents who wish to avoid stating what has become of a very large sum of money which the Australian Securities and Investment Commission asserts has been obtained as a result of what can best be described as a fraudulent conspiracy. The issue arises in the following way. ASIC has been conducting an investigation into the affairs of two of the corporate respondents, United Investment Funds Pty Ltd and AMCO Insurance Management Group Pty Ltd, and their relationship with a Bosnia and Herzegovina corporation, Grand Osiguranje AD Zvornik, which carries on an insurance business. The local corporations contend that they had authority to write insurance business for Grand. In furtherance of that purported authority they have, together with another of the corporate respondents, AMCO Group Pty Ltd, collected over $2.5 million in premiums from approximately 1,000 policy holders. The investigation suggests a darker picture. According to ASIC, Grand did not authorise the local corporations to act as its agents. Nor has Grand received any premiums from the insured. An examination of the local corporations' known bank accounts and other records indicates that the money which was collected as premiums, had originally been deposited into those accounts and has since been spent. To make matters worse the Assistant Compliance Manager of the Melbourne Crown Casino has deposed that a number of the individual respondents (being persons who have some connection with the local corporations) are prolific gamblers at the Casino. The volume of turnover (a figure which gives no indication of gain or loss) is of the following order: Aleksandar Banicevic - approximately $1.488m between August 2002 – May 2003; Nikola Banicevic - approximately $3.275m between February 2001 – May 2003; Radoslava Banicevic - approximately $2.153m between June 2000 – May 2003; and Vesna Banicevic - approximately $291,000 between June 2002 – March 2003. 4 ASIC brings this application to restrain the local corporations from writing any insurance as agent for Grand and to obtain an order that those, and other related corporate respondents, be wound up. Other relief is also sought. In view of the seriousness of the allegations, ASIC sought and obtained an ex parte order for the appointment of a receiver over certain identified bank accounts maintained by one or other respondent to prevent the dissipation of money in those accounts. It then moved on notice for the appointment of a provisional liquidator over the corporate respondents. The hearing of that application was adjourned at the request of the respondents. Nevertheless, the respondents did submit to an order that each of them would make and file an affidavit disclosing, among other information, any account that the respondents had with a bank, building society or financial institution, the deposits and all withdrawals from those accounts and all facts within their knowledge as to the whereabouts of the premiums and the proceeds of those premiums. The order was made on the basis that "[i]f a deponent seeks to claim privilege with respect to any matter required … to be disclosed the claim must be made, and the grounds for it stated, in the affidavit to be made filed and served … which[affidavit] shall include the facts and matters upon which reliance is placed for such claim." 5 In due course, affidavits were filed in purported compliance with the order. The affidavits contain no information concerning the whereabouts of the premiums. Each deponent has objected to providing that information on the ground that to do so (and here I will quote from one affidavit, the others being in common form) "may tend to incriminate [the deponent] in the commission of an offence against or arising under an Australian law or a law of a foreign country or alternatively may subject [him] to liability to a civil penalty." 6 ASIC contends that each respondent is in breach of the order by failing to provide the information therein specified. More particularly, ASIC says that the information should have been provided because the privilege has not been properly claimed as no deponent included in his or her affidavit "the facts and matters upon which" the claim for the privilege was based. 7 The matter was listed for hearing. The precise relief which ASIC sought was not made clear. In due course the parties agreed that upon it undertaking to file an appropriate motion, ASIC could move orally that each respondent be punished for contempt, the contempt being their failure to comply with the order, and that the motion should be heard and determined forthwith. This was a convenient and expeditious way for the dispute to be resolved. 8 Now that the arguments have been put, it is clear that no issue of principle separates the parties. It is accepted that, to obtain the protection which the privilege against self-incrimination affords, the person claiming the privilege has to satisfy the court that in the circumstances of the case, and having regard to the nature of the evidence that the person is required to give, there are reasonable grounds for apprehending a danger of prosecution arising from his compulsion to provide the information. When a witness is asked in court to answer a question which may tend to incriminate that person, all the court has to decide is whether it is satisfied on the oath of the witness that he objects to answer the question on the ground of self-incrimination, and that his objection is bona fide. In Reg v Boyes (1861) 1 B&S 311 [121 ER 730] it was contended that the mere possibility of prosecution was sufficient to entitle a witness to the protection and that the witness was the sole judge as to whether his evidence would put him at risk. Cockburn CJ did not agree. He said (1 B&S at 330; 121 ER at 738) that "the Court must see, from the circumstances of the case and the nature of the evidence which the witness is called to give, that there is reasonable ground to apprehend danger to the witness from his being compelled to answer …" and so that danger must be "real and appreciable". This decision was applied by the Chief Justice of the Supreme Court of Victoria in Jackson v Gamble [1983] 1 VR 552, whose summary of the law was itself approved by the Full Court: sub nom Gamble v Jackson [1983] 2 VR 334. In delivering the judgment of the Full Court, Starke J said (at 336): "His Honour's statement of the legal principles applicable appears to me with respect to be impeccable. Questions of an incriminating nature may be of two kinds. The first is where the question itself reveals that the material sought is of a criminal and therefore incriminating nature. In such a case no doubt the officer would usually not have to produce any material to establish that he had a lawful excuse. The second is where the question is innocent on its face but seeks after material which may form a link in a chain of incriminating material. In such a case the applicant in my opinion must be able to point to material which indicates the incriminating character of the material. Such material of course need not be itself of an incriminating nature. It will usually be sufficient to show what it is the Crown alleges." 9 While the parties are not in dispute about the applicable legal principles, they cannot agree on the application of those principles to the facts. To resolve the dispute I propose to divide the respondents into two groups because, as I see things, the members of each group have common characteristics which will permit me to resolve the case on a group basis. The first group comprises the individual respondents. The evidence tendered by ASIC shows that each individual respondent, at one time or another, was a director (or in the case of the ninth respondent, a secretary) of one or more of the corporate respondents. Moreover, ASIC contends (and there is some evidence to support its contention) that the individual respondents "effectively controlled" the corporate respondents. Indeed, in support of its application for the appointment of a receiver, ASIC maintained that replacing the individual respondents' control over the corporate respondents by the appointment of a receiver would provide a degree of independence "which is not possible in the present circumstances to protect adequately interests of the policy holders or to prevent the suffering of loss by those who may have proposed for insurance". It is clear that ASIC is of the view (and it is a view which has some foundation in the evidence) that the individual respondents have been directly involved in the alleged wrong doing. In these circumstances, there can be no doubt that the privilege is bona fide claimed by the individuals, at least as regards their claim of self-incrimination in Australia. That is to say, if the individual respondents provide the information required by the order, that information may tend to incriminate them here. I need not discuss the rather complicated question of the extent to which the privilege can be claimed in respect of foreign criminal law. 10 What I have said so far does not, however, answer the question whether the individual respondents are in breach of the order. On a strict view, they are in breach of the order because, according to its terms, if a deponent wishes to claim the privilege he or she is required to state "the facts and matters" upon which the claim is based. However, because I am satisfied that the objection is properly taken on the basis of there being reasonable grounds for the belief on the part of each deponent that he or she may be in peril of future criminal proceedings, nothing would be served by requiring the deponents to state the obvious, which is all that they would do if required to state "the facts and matters" which support their objection. 11 The second category comprises the corporate respondents. As corporations they cannot claim the privilege against self-incrimination on their own account because this privilege is not available to a corporation: Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477. What happened is that each corporation has selected one of the individual respondents to swear the affidavit on its behalf. The individual has then claimed the privilege on his own behalf with the consequence that the corporations have not provided the information required by the order. In my view, that is not a proper basis upon which the corporate respondents may withhold the information. It may be, indeed it is likely, that the information can be provided by the secretary, an employee, an agent or some other proper officer who is not implicated in the alleged wrong doing. That person need not have personal knowledge of the relevant facts. He must obtain, or make reasonable efforts to obtain, the information from the records of the corporation and from other officers and employees: Smith Kline & French Laboratories Ltd v Inter-Continental Pharmaceuticals (Australia) Pty Ltd (1969) 123 CLR 514, 519. The position would be different if no such person exists. But here there is no evidence to that effect. 12 Still, there is a further problem which must be addressed. Since the order was made, the corporate respondents have been placed into provisional liquidation. Accordingly, the provisional liquidator is now in effective control of those respondents and perhaps is the only person who can comply with the order on each corporation's behalf. Plainly there is no point in requiring the provisional liquidator to comply with the order for he knows nothing of the facts. For the order to be effective, it may be necessary to limit the powers of the provisional liquidator so that the control of aspects of each corporate respondent's affairs reverts to those who formerly controlled it so they may be called upon to ensure compliance with the order. Or it may be possible to achieve this result by some other order. 13 I will hear the parties on the orders that should be made to dispose of this application. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein . Associate: Dated: 4 July 2003 Counsel for the Applicant: A Kelly Solicitor for the Applicant: Australian Securities and Investment Commission Counsel for the Respondent: B Zichy-Woinarski QC S Hay Solicitor for the Respondent: Pryles & Defteros Counsel for Provisional Liquidator H N G Austin Solicitor for Provisional Liquidator Deacons Date of Hearing: 27 June 2003 Date of Judgment: 4 July 2003 SCHEDULE OF DEFENDANTS UNITED INVESTMENT FUNDS PTY LTD First Defendant ACN 099 353 750 AMCO INSURANCE MANAGEMENT GROUP PTY LTD ACN 100 639 512 Second Defendant AMCO GROUP PTY LTD ACN 097 634 734 Third Defendant ACC AMCO CONSORTIUM COMPANY PTY LTD ACN 085 376 496 Fourth Defendant NIKOLA BANICEVIC Fifth Defendant ALEKSANDAR BANICEVIC Sixth Defendant VESNA BANICEVIC Seventh Defendant FREDERICK CHRISTOPHER VANDERWERT Eighth Defendant DAVID MICHAEL CLARKE Ninth Defendant RADOSLAVA BANICEVIC Tenth Defendant ZDRAVKO ACIMOVIC Eleventh Defendant