FEDERAL COURT OF AUSTRALIA Kennedy v Wallace [2004] FCA 636 PRACTICE AND PROCEDURE – subpoenae to third party to produce documents and to give evidence before trial – circumstances in which appropriate COSTS – where third party has subpoenae set aside WORDS AND PHRASES – 'to give evidence' Federal Court Rules O 27 Hughes v Western Australian Cricket Association Inc (1986) 66 ALR 541 referred to Waind v Hill [1978] 1 NSWLR 372 applied TREVOR JOHN KENNEDY v ANDREW CHARLES VERSCHUER WALLACE, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION AND COMMISSIONER OF POLICE, AUSTRALIAN FEDERAL POLICE N 3065 OF 2003 GYLES J 21 MAY 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 3065 OF 2003 BETWEEN: TREVOR JOHN KENNEDY APPLICANT AND: ANDREW CHARLES VERSCHUER WALLACE FIRST RESPONDENT AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION SECOND RESPONDENT COMMISSIONER OF POLICE, AUSTRALIAN FEDERAL POLICE THIRD RESPONDENT JUDGE: GYLES J DATE OF ORDER: 21 MAY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: Australian Securities and Investments Commission pay the costs of Rene Walter Rivkin of the motion to set aside two subpoenae addressed to him, such costs to be taxed on a solicitor/client basis and paid forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 3065 OF 2003 BETWEEN: TREVOR JOHN KENNEDY APPLICANT AND: ANDREW CHARLES VERSCHUER WALLACE FIRST RESPONDENT AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION SECOND RESPONDENT COMMISSIONER OF POLICE, AUSTRALIAN FEDERAL POLICE THIRD RESPONDENT JUDGE: GYLES J DATE: 21 MAY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This motion raises somewhat unusual questions as to the circumstances under which a subpoena might properly be issued. The applicant on the motion is Rene Walter Rivkin (Rivkin). He was served on 27 November 2003 with a subpoena to attend for the purpose of giving evidence on Thursday 4 December at 12 o'clock midday until excused from further attendance, issued by the second respondent Australian Securities and Investments Commission (ASIC). He was served on the same day with a subpoena to attend and produce certain documents and things described in the Schedule to it on 2 December 2003 at 9.30 am until excused from further attendance, also issued by ASIC. The Schedule was as follows: '1. The original or copy of the transcript of interview, signed by Rene Rivkin, that was conducted in Zurich before District Prosecutor Nathan Landshut on 10 December 2002, where Rene Rivkin was examined as an interviewee. 2. The original or copy of the written summons addressed to Rene Rivkin to appear before the District Public Prosecutor Nathan Landshut on 10 December 2002.' 2 Rivkin filed a notice of motion seeking to set aside in whole each of those subpoenae and seeking costs of the motion on an indemnity basis. On 4 December 2003 each subpoena was set aside by consent. The issue is therefore one of costs. 3 On 30 October 2003 the Australian Financial Review published a series of articles relating to what it described as 'Rivkin's Swiss bank scandal'. A number of the published statements were said to have been made by Rivkin during a formal examination by Zurich District Prosecutor Nathan Landshut on 10 December 2002 in Switzerland. 4 On 5 November 2003 ASIC had obtained a copy of a document that purported to be a transcript of an interview (recorded in German) between Rivkin and Landshut, held on 10 December 2002, together with an English translation of the document. 5 On 13 November 2003 a search warrant was executed at Rivkin's private premises. The warrant referred to the existence of reasonable grounds for suspecting that evidence would derive from the search as to the commission of four identified offences by Rivkin. On the same day a search warrant had been executed at the private premises of Trevor John Kennedy as a result of which the principal proceeding was commenced by Kennedy on 19 November 2003. In the principal proceeding Kennedy claimed, amongst other things, legal professional privilege in documents seized in execution of the warrant. 6 By letter of 24 November 2003, the solicitors for Rivkin sought to dissuade ASIC from serving upon him any notices requiring his appearance for examination pursuant to s 19 of the Australian Securities and Investments Commission Act 2001 (Cth). The letter included the following statement: 'We anticipate that any examination into the conduct alleged against our client would also raise questions as to the scope of the protection from self incrimination in circumstances where the purpose of the investigation was, or appeared to be, directed to establishing whether evidence given by our client in June or September 1995 was "false and misleading".' 7 On 27 November a follow up letter included the following: 'We also advise that further to our letter of 24 November 2003, we propose to include in the proposed "representations" to the Commission, a copy of a number of medical reports pertaining to our client including but limited to the following: 1. Dr K Roberts 2. Dr C Teo 3. Dr P Langeluddecke 4. Dr R Fisher 5. Dr O'Sullivan' A subsequent letter of the same date acknowledged receipt of the subpoenae. 8 By letter of 28 November 2003 Rivkin's solicitor again wrote to ASIC as follows (omitting formal parts): 'We refer to our letter of 27 November 2003. Leaving aside other issues concerning the issue of each Subpoena (including, but not limited to the reports identified in our letter of 27 November 2003 addressed to Mr Turton), we are instructed to request that you identify fully and with precision what forensic purpose the documents sought to be produced under the Subpoena to Produce Documents addressed to Mr Rivkin are considered to have in relation to the [principal] proceedings. We also [sic] instructed to request that you identify fully and with precision what issues in relation to the [principal] proceedings it is anticipated oral evidence from Mr Rivkin could be relevant toward in the context of the [principal] proceedings. We understand that this morning, directions were made by the Court that ASIC provide the Applicant (Mr Kennedy) by 4.00pm on Tuesday, 2 December 2003 with an outline of the persons ASIC intends to call to give evidence at the final hearing on 4 December 2003 and the topics those persons will be called on to give evidence. [sic] Please confirm by return letter whether our understanding is correct. If so, and in light of the above, and pending your answer to the above requests, please advise whether ASIC will consent to the return date of the Subpoena to Produce Documents filed 26 November 2003 being adjourned to 12.00noon on Thursday, 4 December 2003. We request that you provide us with your urgent response to this letter by 12.00noon on Monday, 1 December 2003. If we do not receive a reply as requested, we shall seek instructions, without any further reference to ASIC, to apply to the Federal Court of Australia for appropriate orders in relation to the each [sic] subpoena. We reserve the right to tender a copy of this letter to the Court on the question of indemnity costs.' 9 The reply from ASIC of 1 December, after referring to the various letters, said: 'ASIC is presently giving attention to the representations you have made, and foreshadowed, in your letters. As ASIC has not yet received the medical reports foreshadowed in your correspondence, or any other representations you propose to make on behalf of Mr Rivkin, I invite you to make them available to ASIC as soon as possible. If (as appears to be implicit in your correspondence) Mr Rivkin intends to respond to the subpoenas by asserting: (a) an entitlement to privilege (including a privilege against self-incrimination); and (b) some form of medical incapacity said to provide a ground for him to be excused from giving evidence upon subpoena, I invite you to articulate that response as soon as possible so that ASIC can take it into account as well as other submissions you have made or foreshadowed. ASIC will consider its position in light of your response to this letter and your representations generally.' 10 A reply of 1 December from Rivkin's solicitors included the following: 'ASIC has served our client with two subpoenas to attend, respectively to produce documents and to give evidence, in a proceeding to which he is not a party. ASIC has not foreshadowed the matters upon which it proposes to endeavour to adduce evidence from him, or the forensic purpose for which it seeks access to the documents. In the absence of full particulars of those matters, our client is in no position to indicate the attitude that he will take. To the extent to which we presently understand the matters that are in issue in the proceedings, the only apparent relevance of the documents sought by subpoena, and evidence from our client, would be an endeavour to make good an allegation made by ASIC that a particular communication did not attract privilege because it was made in furtherance of crime or fraud. If, as appears, ASIC does not presently have evidence to make good that allegation, for it to endeavour to do so through evidence from our client, a party named in the search warrant that the proceeding relates to, would be improper, and an abuse of process. ASIC may assume that our client would exercise his rights to the fullest in response to such an approach. In relation to the suggestion on the second page of your letter that it is "implicit" in our correspondence that our client intends to assert privilege, including a privilege against self-incrimination, we are unable to discern the passages of that correspondence in which such a suggestion is said to be implicit. Please draw those passages to our attention so that we may respond more specifically, including in light of your response to our letter of 28 November 2003. In the meantime, we enclose the medical reports identified in our letter of 27 November 2003, together with the medical report of Dr Roberts of 28 November 2003.' 11 On 2 December Rivkin's solicitors appeared on the return of the Subpoena to Produce Documents. Rivkin's solicitor said that, without conceding the validity or propriety of the subpoena, no documents were produced, meaning that there were no documents of the kind specified in the Schedule to the subpoena in Rivkin's possession, custody or control in this jurisdiction and that further time was needed to ascertain whether such documents, if any, were in another jurisdiction. 12 A letter of 2 December from Rivkin's solicitors to ASIC included the following: 'We confirm that so far as the Subpoena to Give Evidence is concerned, ASIC will advise us by 5.00pm today whether the Subpoena will be called upon on Thursday, 4 December 2003 at 12 noon and whether Mr Rivkin is otherwise released (for present purposes) from attending to give evidence at that time. As discussed, we may have to proceed to protect our client's position and as foreshadowed, we enclose (as a matter of courtesy) a draft Notice of Motion which we will endeavour to file and serve tomorrow pending receipt of ASIC's advice by 5.00pm today. So far as the Subpoena for Production is concerned, that has been stood over to Thursday, 4 December 2003 at 12 noon and we will endeavour to advise ASIC of our client's position beforehand. Finally, and subject to our comments above in relation to the Subpoena to Give Evidence, we note that we are awaiting answers as follows to the remaining questions (ie questions 1, 2 & 3) in our letters of 28 November 2003 and 1 December 2003: 1 "That you identify fully and with precision what forensic purpose the documents sought to be produced under the Subpoena to Produce Documents addressed to Mr Rivkin are considered to have in relation to the above proceedings"; 2 "That you identify fully and with precision what issues in relation to the above proceedings it is anticipated oral evidence from Mr Rivkin could be relevant toward in the context of the above proceedings"; 3 "That you confirm whether 'directions were made by the Court that ASIC provide the Applicant (Mr Kennedy) by 4.00pm on Tuesday, 2 December 2003 with an outline of the persons ASIC intends to call to give evidence at the final hearing on 4 December 2003 and the topics those persons will be called on to give evidence"; and 4 Whether "ASIC will consent to the return date of the Subpoena to Produce Documents filed 26 November 2003 being adjourned to 12.00noon on Thursday, 4 December 2003". 13 A reply of 2 December included the following: 'I anticipate that the proceeding listed before Gyles J. at 12 noon on Thursday, 4 December 2003 will be the subject of a directions hearing at that time. I do not anticipate that Mr Rivkin will be called upon at that time to give evidence but directions may be sought in that connection. Whilst it is appropriate that Mr Rivkin be represented at this directions hearing, I do not expect that he will, on that occasion, be in personal attendance at it.' 14 On 4 December this motion was filed in court and made returnable instanter. Counsel for ASIC said '[i]n light of the material that has been provided to us we don't propose to press either subpoena so I'm not intending to call on them'. Each was formally set aside later in the day and this motion stood over until the following day for hearing. 15 On 4 December 2003 ASIC had supplied particulars in relation to the principal proceeding by Kennedy. One of the issues raised was whether legal professional privilege would attach to the documents the subject of that proceeding as it was contended by ASIC that there were reasonable grounds for believing that any communication effected by the documents was made for 'some illegal or improper purpose, that is, some purpose that is contrary to the public interest'. The particulars given of ulterior purpose were as follows: 'a. to hinder, obstruct or delay any investigation by the Second Respondent, or other Australian authorities, of his affairs, or the affairs any party associated with him or Mr Rene Rivkin, as a result of or in connection with the articles relating to Offset Alpine Printing Group Ltd ("OAP") published in the Australian Financial Review on 30 October 2003. b. to endeavour to induce banks or government authorities in Switzerland to decline any assistance that might be sought by the Second Respondent, or other Australian authorities, to obtain access to information relating to the affairs of the Applicant, Mr Rivkin, or any party associated with, or possibly associated with, OAP.' 16 One of the more detailed particulars of that allegation was as follows: 'e. The fact that on 10 December 2002 Mr Rivkin (and Mr Hafner, said to be a lawyer for both Mr Rivkin and the Applicant) gave evidence in Switzerland to the effect that the OAP shares were beneficially owned by Mr Rivkin, the Applicant and Mr Graham Richardson, and that Mr Hafner had received on their behalf proceeds of sale of the shares.' 17 Particulars were also given of the evidence upon which ASIC proposed to rely. This included: 'a. The responses of Mr Rivkin to subpoenas (issued on 26 November 2003) addressed to him in these proceedings … for the purpose of establishing an entitlement to rely upon the transcript of the examination of Messrs Rivkin and Hafner (on 10 December 2002) pursuant to the following provisions of the Evidence Act 1995: i. sections 48(1)(b), 48(1)(e) and 48(4), read with clause 5 of Part 2 of the Dictionary, subject to section 49. ii. section 63(2)(b), read with clause 4 of Part 2 of the Dictionary, subject to section 67. iii. alternatively, section 64(2)(b), subject to section 67. iv. section 69(1)-(2), read with the definition of "business" in clause 1 of Part 2 of the Dictionary, upon the basis that the expression "criminal proceeding" in section 69(3)(b) is confined to criminal proceedings in Australia. See the definitions of "criminal proceeding", "offence" and "Australian law" in Part 1 of the Dictionary. v. section 75. 10. In the application of these provisions of the Evidence Act 1995 the Second Respondent also relies upon sections 58 and 183 of the Act. 11. The tender of the transcript of the evidence of Messrs Rivkin and Hafner (by reference to sections 48, 63, 64, 69 and 75 of the Evidence Act 1995) is intended to address such, if any, requirement of the common law that the evidence upon which reasonable grounds for a belief that a communication was for an ulterior purpose must be "admissible" rather than "hearsay". See Propend at 188 CLR 514 (Brennan CJ), 522-524 (Dawson J), 532 and 534 (Toohey J), 545-547 (Gaudron J), 547 and 556-557 (McHugh J), 573 and 575-576 (Gummow J) and 592 (Kirby J).' 18 It was common ground between Rivkin and ASIC that the effect of the medical evidence was that Rivkin was not able to give evidence at that time that he had been called upon to appear. In view of that agreement there was no tender of medical reports and the issue was not investigated. 19 The contention for Rivkin is that the inference from the whole of the evidence was that neither subpoena was procured for the purpose contemplated by O 27 r 1 (as it stood prior to 1 March 2004), namely 'to attend … and produce a document or thing for the purpose of evidence' and 'to attend … for the purpose of giving evidence'. It was further submitted that there was a collateral purpose, namely to compel Rivkin to assert either or both of privilege and medical inability to give evidence and thereby to make other evidence admissible. The submission was that the Court's compulsory process was sought to be invoked for a purpose other than the only one permitted. Reliance was placed upon the judgment of Moffitt P in Waind v Hill [1978] 1 NSWLR 372 particularly at 381G–382F. 20 It is submitted on behalf of ASIC that there is no basis upon which it should be found that the subpoenas were not issued for the purpose of seeking to adduce evidence from, and the production of documents by Rivkin or, in the alternative, evidence as to the availability or unavailability of Rivkin and/or the documents for the purpose of evidence to be adduced in the principal proceedings. In particular it was submitted that each subpoena was issued for the purpose of having the document in the possession of ASIC that purported to be a copy of the transcript of the examination conducted in Switzerland of 10 December 2002 and the English version of it, admitted, or at least for the purpose of aiding the admission of those documents at the hearing of the principal proceeding. 21 Counsel for each party made a number of points in support of their respective submissions which I need not reproduce. There was debate as to how the various provisions of the Evidence Act that were identified in the particulars supplied by ASIC in the principal proceedings might or might not operate in the circumstances. It was independently argued for ASIC that the present application is misconceived because the question of costs is governed by the former O 27 r 4A which was in force prior to 1 March 2004. 22 The subpoena to produce documents appears conventional on its face. The documents called for would be relevant to the issues in the principal proceeding. There could be no suggestion that there was no proper basis for taking the view that Rivkin might have such a document in his possession or power. It is clearly and properly identified. It is appropriate, and in some circumstances necessary, that steps be taken to obtain an original before secondary evidence of a document might be led. Thus there was an appropriate forensic purpose for the subpoena whether or not it was answered by production of a document. In my opinion there could be no objection to ASIC serving this subpoena at an appropriate time, even if it might have been predicted that Rivkin would decline to produce any document in his possession or power on the basis that it might incriminate him. That was not to be prejudged by ASIC. It was entitled to make the call and have the response. The phrase 'to give evidence' is not to be construed too literally (see Waind v Hill at 381). 23 Rivkin's argument gains support, however, from the early stage that the principal proceeding had reached at the time when the subpoena was made returnable. Whilst there was at the relevant time no formal barrier to a subpoena to produce documents being returnable prior to the hearing (Hughes v Western Australian Cricket Association Inc (1986) 66 ALR 541; see now O 27 r 3(6)), a subpoena to a third party in circumstances where no trial date has been fixed requires some scrutiny. Further support for Rivkin's argument is drawn from the fact of abandonment of the subpoena by ASIC. It cannot be said that the without prejudice statement by Rivkin's solicitor on 2 December was an adequate answer to the subpoena to produce documents or that it purported to be. Further, any informal statements on Rivkin's behalf concerning his state of health or his intention to claim the privilege against self-incrimination would have little if any relevance at a trial at some future date and would not bind Kennedy. In addition, the subpoena was served at a time when Rivkin's solicitors had raised queries of relevance to the issue which had not been answered. There was no occasion to 'give evidence' even giving that phrase an expansive meaning. 24 In my opinion the service of the subpoena to attend and give evidence was clearly inappropriate. The principal proceeding had not been fixed for hearing and there was no relevant interlocutory hearing fixed for 4 December. The power to subpoena a third party to attend and give evidence is a powerful weapon which should only be used where essential for that purpose. 25 Further, there is some force in the argument that on 27 November ASIC would not have had any bona fide intention of calling Rivkin to give evidence and so making him its witness to be cross-examined on Kennedy's behalf. There was also Rivkin's stated position both as to his medical condition and self-incrimination to be taken into account. He was a target of ASIC at the relevant time. 26 All of these factors taken together lead me to the conclusion that service of these subpoenae together on 27 November 2003 was flawed and a misuse of the power to do so. It amounted to an inappropriate imposition upon a third party who was in a sensitive and vulnerable position vis-ŕ-vis ASIC at the time. At the very least, service of each of these subpoenae was premature. That would have been a sufficient basis to set each of them aside. The order to this effect which was made by consent was the appropriate order. 27 ASIC must pay Rivkin's costs of the motion. I do not agree that the former O 27 r 4A was the only, or the appropriate, source for an order of costs in this instance. However, a case for indemnity costs has not been established. If I had concluded that the exercise was designed by ASIC to apply pressure upon either or both of Rivkin or Kennedy rather than for a perceived appropriate forensic purpose, I would have required no persuasion to make such an order. I am not prepared to make that finding. The decision to serve the subpoenae might be seen as hasty and perhaps ill-considered but is quite explicable in the context of preparation of a case of considerable evidentiary complexity that was being dealt with with expedition. It was also argued that service of the subpoenae in the face of the correspondence from Rivkin's solicitors was itself a proper basis upon which to make an order for indemnity costs. I do not agree. The correspondence was primarily directed to other issues and was not in any sense a barrier to service of a subpoena at a time when that was appropriate. I further take note of the fact that the setting aside of the subpoenae by consent limited the adverse practical effect upon Rivkin of the service of them upon him. 28 I am thus not prepared to order indemnity costs on the basis of fault on the part of ASIC. On the other hand, there is no reason why a third party should be out of pocket through becoming involved in this way in another piece of litigation with no possible advantage to him, particularly where he was a target of ASIC at the time. It was reasonable that he take all available steps to protect his position. ASIC will be ordered to pay the taxed costs of Rivkin on this motion on a solicitor/client basis. Such costs should be taxed and paid forthwith. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 21 May 2004 Counsel for Rivkin: N Williams SC, S Pritchard Solicitor for Rivkin: Michell Sillar Counsel for ASIC: GC Lindsay SC, ML Sneddon Solicitor for ASIC: PN Riordan Date of Hearing: 4, 5 December 2004 Date of Last Written Submission: 19 December 2004 Date of Judgment: 21 May 2004