FEDERAL COURT OF AUSTRALIA Hadgkiss v Construction, Forestry, Mining and Energy Union [2005] FCA 1453 PRIVILEGE AGAINST EXPOSURE TO PENALTIES - application of privilege to pleadings PRACTICE AND PROCEDURE – application of privilege against exposure to penalties to defences to statements of claim seeking the imposition of civil penalties against natural person respondents in proceedings under the Workplace Relations Act 1996 (Cth) Workplace Relations Act 1996 (Cth) The Daniels Corporation International Pty Limited v Australian Competition and Consumer Commission (2002) 213 CLR 543 Rich v Australian Securities and Investments Commission (2004) 209 ALR 271 Redfern v Redfern [1891] P.139 Pyneboard Proprietary Limited v Trade Practices Commission (1983) 152 CLR 328 Bridal Fashions Pty Limited v Comptroller-General of Customs (1996) 135 FLR 100 Australian Competition & Consumer Commission v FFE Building Services Limited (2003) 130 FCR 37 HADGKISS v CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION & ORS NSD 1259 OF 2005 GRAHAM J 14 OCTOBER 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1259 OF 2005 BETWEEN: NIGEL HADGKISS APPLICANT AND: CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION FIRST RESPONDENT CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION (NEW SOUTH WALES BRANCH) SECOND RESPONDENT EDMOND CASPER THIRD RESPONDENT MICHAEL LANE FOURTH RESPONDENT JUDGE: GRAHAM J DATE OF ORDER: 14 OCTOBER 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Third and Fourth Respondents' Notice of Motion filed 15 September 2005 be dismissed. 2. The time for filing of defences by the Third and Fourth Respondents be extended until Friday, 4 November 2005. 3. The costs of the Motion be reserved with a direction that the parties file written submissions thereon within 7 days. 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 NSD 1259 OF 2005 BETWEEN: NIGEL HADGKISS APPLICANT AND: CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION FIRST RESPONDENT CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION (NEW SOUTH WALES BRANCH) SECOND RESPONDENT EDMOND CASPER THIRD RESPONDENT MICHAEL LANE FOURTH RESPONDENT JUDGE: GRAHAM J DATE: 14 OCTOBER 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The central issue in the application presently before the Court is whether in proceedings under the Workplace Relations Act 1996 ("the Act") in which the Applicant seeks the imposition of civil penalties against, inter alia, the natural person respondents (the Third and Fourth Respondents), such Respondents may decline to file Defences relying upon the privilege against exposure to penalties. 2 On 1 September 2005 the following orders were made: "1. Each Respondent file and serve … his defence to the Applicant's statement of claim filed on 27 July 2005 on or before 29 September 2005 … 7. In the event that the … Third and Fourth Respondents or some of them file and serve a Notice of Motion returnable before Justice Graham at 9.30 am on 26 September 2005 on or before 15 September 2005 seeking relief excusing the Third and Fourth Respondents from the obligation to file defences then Order(s) 1 … shall not apply against the Respondents seeking the relevant relief in the Notice of Motion until further order" 3 By Notice of Motion filed 15 September 2005 the Third and Fourth Respondents in the proceedings have moved the Court for the following orders:- "1. That the Third and fourth Respondents not be required to file a Defence to the Application and Statement of Claim filed on 27 July 2005. 2. That the orders made by Graham J on 1 September 2005 that the Third and Fourth Defendants file a Defence to the Application and Statement of Claim filed on 27 July 2005 be vacated. 3. Costs" 4 In the Application filed 27 July 2005 the Applicant seeks a declaration that by certain conduct pleaded in the Statement of Claim the Third Respondent contravened s298SC(c ) of the Act. The Applicant also seeks a declaration that by certain conduct pleaded in the Statement of Claim the Third Respondent contravened s298S(2)(a) of the Act. In relation to the alleged contraventions of the Act by the Third Respondent, the Applicant has sought orders under s298U of the Act imposing penalties on the Third Respondent and other relief. 5 In relation to the Fourth Respondent the Applicant seeks declarations that by conduct pleaded in the Statement of Claim the Fourth Respondent contravened s 298SC(c) of the Act, s 298S(2)(a) of the Act and also s170NC of the Act. In relation to the alleged contraventions by the Fourth Respondent of s298SC(c) and s298S(2)(a) of the Act, the Applicant has sought orders under s298U of the Act imposing penalties on the Fourth Respondent and other relief. In relation to the alleged contravention by the Fourth Respondent of s170NC of the Act the Applicant has sought orders under s170NF(1) of the Act imposing a penalty on the Fourth Respondent and other relief. 6 The sections referred to above and certain related sections of the Act relevantly provide as follows: "170NC (1) A person must not: (a) take or threaten to take any industrial action or other action; or (b) refrain or threaten to refrain from taking any action; with intent to coerce another person to agree, or not to agree, to: (c) making, varying or terminating, or extending the nominal expiry date of, an agreement under Division 2 or 3; or (d) approving any of the things mentioned in paragraph (c). (2) Subsection (1) does not apply to action, or industrial action, that is protected action (within the meaning of Division 8). (3) An employer must not coerce, or attempt to coerce, an employee of the employer: (a) not to make a request as mentioned in subsection 170LK(4) in relation to an agreement that the employer proposes to make; or (b) to withdraw such a request. 170ND For the purposes of this Division, each of the following is a penalty provision: (a) section 170MDA; (b) section 170MN; (c) section 170MU; (d) section 170NB; (e) section 170NC. … 170NF (1) A contravention of a penalty provision is not an offence. However, an eligible court may make an order imposing a penalty on a person who contravenes a penalty provision. … 298S(2) An industrial association, or an officer or member of an industrial association, must not: (a) advise, encourage or incite a person (whether an employer or not) to take discriminatory action against an eligible person because the eligible person is not a member of an industrial association; … … 298SC A person must not make a false or misleading representation about: … (c) another person's obligation to join an industrial association. 7 The privilege against exposure to penalties was originally recognised as a rule of equity relating to discovery, but has since been recognised by the common law (per Gleeson CJ, Gaudron, Gummow and Hayne JJ in The Daniels Corporation International Pty Limited v Australian Competition and Consumer Commission (2002) 213 CLR 543 ("Daniels") at p554 [13]). 8 The privilege is a separate and distinct privilege from the privilege against incrimination (Daniels at [12]). However, the privilege is one which bears some similarity to the privilege against incrimination. In Daniels, Gleeson CJ, Gaudron, Gummow and Hayne JJ said at p553 – 4 [13]:- "That privilege [against exposure to penalties] is one of a trilogy of privileges that bear some similarity with the privilege against incrimination. The other two are the privilege against exposure to forfeiture and the privilege against exposure to ecclesiastical censure." 9 The privilege against exposure to penalties serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it. (Per Gleeson CJ, Gaudron Gummow and Hayne JJ in Daniels at p559 [31]; see also Rich v Australian Securities and Investments Commission (2004) 209 ALR 271 at p278 [24]. 10 A party cannot be compelled to discover that which, if answered, would tend to subject him to any punishment, penalty, forfeiture, or ecclesiastical censure (per Bowen LJ in Redfern v Redfern [1891] P.139 at p147; see also per Mason ACJ, Wilson and Dawson JJ in Pyneboard Proprietary Limited v Trade Practices Commission (1983) 152 CLR 328 ["Pyneboard"] at p335). 11 Although the rule was originally expressed as one relating to discovery, it is necessarily a reflection of the law of privilege (per Mason ACJ, Wilson and Dawson JJ in Pyneboard at p336). 12 In a civil action brought merely to enforce a penalty the rule is that neither discovery nor interrogatories will be allowed (per Mason ACJ, Wilson and Dawson JJ in Pyneboard at p335-6). In an action for the recovery of a civil penalty in the absence of statutory provision to the contrary, the Court should refuse to make any order for discovery, production of documents or the provision of information for the reason that an intended consequence of the discovery, production of documents or provision of information is the imposition of the penalty, this being the object of the action (per Mason ACJ, Wilson and Dawson JJ in Pyneboard at p336). 13 In considering the application of the privilege against exposure to penalties to pleadings it is important to have regard to the terms of Order 11 rule 13 of the Federal Court Rules which, in dealing with admissions and traverse, relevantly provides as follows:- "13(1) … an allegation of fact made by a party in his pleading is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading or a joinder of issue under rule 14 operates as a denial of it. (2) a traverse may be made either by a specific denial or by a statement of specific non-admission …" 14 By virtue of Order 11 rule 1B of the Federal Court Rules a pleading must, when filed, be accompanied by a certificate in accordance with Form 15B where the pleading has been prepared by a legal practitioner representing a party. Form 15B requires the relevant legal practitioner to certify to the Court that in relation to the pleading the factual and legal material available to the practitioner at the time of his giving his certificate "… provides a proper basis for: (a) each allegation in the pleading; and (b) each denial in the pleading; and (c) each non-admission in the pleading." 15 In Bridal Fashions Pty Limited v Comptroller-General of Customs (1996) 135 FLR 100 ("Bridal Fashions"), a decision of the Full Court of the Supreme Court of Western Australia, it was held that the privilege against self-exposure to a penalty did not preclude a natural person defendant from pleading in the ordinary way to the allegations in the Statement of Claim. That case involved a customs prosecution under the Customs Act 1901 (Cth) where the recovery of civil penalties had been sought against Bridal Fashions Pty Limited and one of its directors, Mr Venturini. 16 The decision in Bridal Fashions may be distinguished on the basis that it concerned a defence to a customs prosecution to which s255 of the Customs Act applied. Section 255(1) of the Act provides:- "(1) In any Customs prosecution the averment of the prosecution or plaintiff contained in the information, complaint, declaration or claim shall be prima facie evidence of the matter or matters averred." 17 Bridal Fashions involved an appeal against the decision of a Master of the Supreme Court of Western Australia to strike out the defence of Bridal Fashions Pty Limited. There was a cross-appeal which, in essence, challenged the decision of the learned Master concerning the degree of detail required in the defence filed by the Second Respondent. 18 In his reasons for judgment the Master said:- "The privilege against self-incrimination which applies to discovery … and interrogatories … and also, I think, to a notice to produce documents or admit facts, does not apply to pleadings. No case has been cited to me on the point. Nevertheless I accept Mr Meagher's argument that, by analogy, it should apply to a defence such as the defence in this case. Odin Central Service said that an evasive defence should be struck out; the object being, of course to produce a positive defence, to get the defendant to admit matters in his defence which are clearly not in issue and thus reduce the number of issues at trial and save time and costs at the trial. I think it is a fair extension of that principle to say that it applies to this application, where the plaintiff wants the defendants to plead a positive defence. An admission in a defence is an admission … I consider that the reasons behind the privilege against self-incrimination can be extended to a pleading of a defence in a prosecution for a pecuniary penalty such as this one and I propose to reject the plaintiff's application to strike out the defence so far as it concerns the second defendant, Mr Venturini." (see Bridal Fashions at p102) 19 At p117 the Full Court said:- "It would be open to the defendant, if it chose, to admit, in its defence, the allegations in the statement of claim. An admission in those terms would constitute a waiver of the privilege against self-exposure to a penalty …" 20 Expressing itself in this way, it seems clear that the Full Court was of the view that rather than make an admission it would be open to a defendant to call in aid the privilege against exposure to penalties in his defence. 21 In the context of s255(1) of the Customs Act the Full Court said:- "… a plea that the defendant neither admits nor denies the allegations in the statement of claim would be an exercise in futility. Accordingly, there is no need, in practice, to consider the application of the privilege against self-exposure to a penalty … to a plea of this kind." (see p117) 22 The Full Court continued:- "It would be open to a defendant to plead a denial to the allegations made in the statement of claim. … In practice, however, the practical effect of s255(1) is that a defendant will ordinarily be required to raise an affirmative allegation in its defence. Without pleading the facts and circumstances of an affirmative case a defendant will not be able to tender positive exculpatory evidence. … A defendant could readily plead an affirmative case by averring, for example: 'If (which is denied or not admitted) the alleged facts was as pleaded in par X of the statement of claim, the defendant says …'. Should the defendant plead an affirmative case on this basis it would not thereby incriminate itself. On the contrary, the purpose of the affirmative case would be to set up a defence against the case brought against it by the prosecution." 23 In the end result the Full Court held that the Master should have held that the privilege had no application to the pleading of a defence to a Customs prosecution. 24 Whilst the observations of the learned Master and the Full Court are of assistance they are not determinative of the outcome of the issue tendered in the Motion presently before the Court. 25 In Australian Competition & Consumer Commission v FFE Building Services Limited (2003) 130 FCR 37 the Full Court found that the privilege of refusing to answer questions or provide information on the ground that the answers or the information might tend to expose a party to the imposition of a pecuniary penalty was not confined to discovery and interrogatories. It said:- "The rationale for the privilege is that an applicant must prove its own case and should not get any assistance from the respondent in proving its case …' (at p40, [13]) 26 The Court proceeded to find that a natural person respondent could not be required to file statements of evidence proposed to be given by witnesses to be called by that respondent at least prior to the closure of the applicant's case. At p41 [14] the Court said:- "14. By requiring an individual respondent, prior to the closure of an applicant's case, to file statements of evidence proposed to be given by witnesses to be called by that respondent, such a respondent would be exposed to the risk that indirect or derivative evidence, being evidence obtained by using the material disclosed in the statement as a basis of investigation, could be tendered against the respondent. The provisional disclosure of information may set in train a process that may lead to the imposition of a penalty or may lead to the discovery of real evidence in support of the imposition of a penalty …" 27 It seems to me that the privilege against exposure to penalties is directed at ensuring that the case of an applicant, seeking the imposition of penalties, is not advanced by admissions or other assistance provided with reluctance by a person from whom such penalties have been sought. 28 Plainly, a natural person respondent cannot be required to make admissions in answer to interrogatories nor can such a person be required to produce documents containing admissions. It would be quite inconsistent with the philosophy underlying the privilege if a natural person respondent were required to make admissions in responding to allegations of fact contained in an opponent's pleading. However, that is not what Order 11 rule 13 requires. 29 As was observed in Bridal Fashions, it would always be open to a person against whom it was sought to have a pecuniary penalty imposed, to waive his or her privilege and make an admission if he or she was minded to do so. 30 The question becomes whether persons in the position of the Third and Fourth Respondents should be required to plead at all, as contended by them, or whether they should be required to plead to each allegation of fact made by the Applicant seriatim, exercising their right to decline to make admissions in reliance upon the privilege against exposure to penalties to which they are entitled, when minded to do so. 31 In my opinion, the Third and Fourth Respondents can be required to file defences. Should they wish to waive the privilege to which they are entitled and make admissions, they may choose to do so either expressly or by refraining from pleading to specific allegations of fact in the Statement of Claim. 32 Plainly, should they choose to make specific denials or statements of specific non-admission, such a course would be consistent with their rights to rely upon their privilege against exposure to penalties. 33 It should be remembered that there is no requirement under the Rules for pleadings to be verified. 34 In the light of Order 11 rule 13(1) of the Rules, I do not consider that the Third and Fourth Respondents could refrain from pleading to discrete allegations in the Statement of Claim in words to the effect "I decline to plead to the facts and matters alleged in paragraph X of the Statement of Claim on the ground that to do so may expose me to liability for a penalty" without risking deemed admissions in accordance with the Rule. However, it would seem to me perfectly proper for statements of specific non-admission to be made in such circumstances and it would be a matter for the Respondents to decide whether the basis of the statements of non-admission was included in their pleading or not. 35 Either way, the conclusions which I have reached would appear to allay any concerns that their solicitor may have in discharging his obligations to the Court under Order 11 rule 1B of the Rules. 36 In my opinion, the Third and Fourth Respondents' Notices of Motion should be dismissed. 37 I will invite the parties to make brief written submissions on the question of costs. Unassisted by such submissions, my inclination would be to order that the Third and Fourth Respondents' costs of the Motion be the Third and Fourth Respondents' costs in the proceedings. Whilst nominally, they have lost, they have certainly secured findings which establish their right to invoke the privilege against exposure to penalties in formulating their defences. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate: Dated: 14 October 2005 Counsel for the Applicant: J J E Fernon SC and M S White Solicitor for the Applicant: Freehills Counsel for the Third and Fourth Respondents: J H Pearce Solicitor for the Third and Fourth Respondents: Taylor & Scott Date of Hearing: 26 September 2005 Date of Judgment: 14 October 2005