New South Wales Supreme Court CITATION : Sydney Water Corporation v The Persons Listed in the Schedules trading as PricewaterhouseCoopers [2008] NSWSC 361 HEARING DATE(S) : 16 April 2008 JUDGMENT DATE : 22 April 2008 JURISDICTION : Equity Division - Technology and Construction List JUDGMENT OF : Bergin J DECISION : Auditor-General required to comply with subpoena CATCHWORDS : [SUBPOENA] - subpoena to produce documents - whether Auditor-General required to produce documents in compliance with a subpoena - whether secrecy provisions in s 38(1) of the Public Finance and Audit Act 1983 prohibit compliance Corporations Act 2001 (Cth) Friendly Societies Act 1991 (Qld) Income Tax Assessment Act 1936 (Cth) Navigation Act 1912 (Cth) LEGISLATION CITED : Navigation (Marine Casualty) Regulations 1990 (Cth) Public Finance and Audit Act 1983 Taxation Administration Act 1953 (Cth) Telecommunications (Interception) Act 1979 (Cth) Telephonic Communications (Interception) Act 1960 (Cth) Uniform Civil Procedure Rules 2005 Abrook v Paterson (No 2) (1995) 59 FCR 364 Canadian Pacific Tobacco Co Ltd v Stapleton (1952) 86 CLR 1 Hilton v Wells (1985) 157 CLR 57 CASES CITED : Javorsky (in his capacity as liq of PLM Formwork Pty Ltd (in liq)) v Commissioner of Taxation (2005) 216 ALR 619 Miller v Miller (1978) 141 CLR 269 Re NSW Grains Board [2002] NSWSC 913 The Sanko Steamship Company Ltd v Sumitomo Australia Ltd (1992) 37 FCR 353 Waind v Hill & National Employer's Mutual Association Ltd [1978] 1 NSWLR 372 PARTIES : Sydney Water Corporation (Applicant) The Persons Listed in the Schedules t/as PricewaterhouseCoopers (Respondents/Defendants) FILE NUMBER(S) : SC 55026/03 C Hoy (Applicant) COUNSEL : J Williams (Respondents/Defendants) A Murray (Solicitor) (Plaintiff) IV Knight (Applicant) SOLICITORS : Mallesons Stephen Jaques (Respondents/Defendants) DLA Phillips Fox (Plaintiff) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST BERGIN J 22 APRIL 2007 55026 of 2003 SYDNEY WATER CORPORATION v THE PERSONS LISTED IN THE SCHEDULES t/as PRICEWATERHOUSECOOPERS JUDGMENT 1 This is an application by the Auditor-General of New South Wales (the applicant) to set aside a subpoena served on him by the respondents, PricewaterhouseCoopers, defendants in proceedings brought by the plaintiff, Sydney Water Corporation, which are listed for trial for 8 weeks commencing on 27 May 2008. 2 In the main proceedings, the plaintiff, Sydney Water Corporation, sues the defendants for damages in respect of a number of causes of action arising out of contracts and arrangements between them in respect of a project pursuant to which the defendant agreed to supply to the plaintiff what is known as the "Customer Information and Billing System" (the CIBS). The first of a series of contracts between the parties was entered into in 1999 and the plaintiff terminated the contractual relationship with the defendants in October 2002 on the basis that the defendants had wrongfully repudiated the contract. It is alleged, inter alia, that there were unjustified cost blowouts and delay caused by the defendants. The claims against the defendants include claims in negligence, for breach of contract and for misleading or deceptive conduct. The plaintiff commenced these proceedings in 2003. The Subpoena 3 The Subpoena which was issued on 31 January 2008 requires production of the following documents: 1. All originals or copies of any documents (including, but not limited to, letters or other correspondence, emails, file notes, handwritten notes, diary notes, minutes, agendas or notes of telephone conversations) comprising, recording, referring or relating to: (a) any meetings, discussions or interviews attended by; or (b) any communications between; the Auditor-General of New South Wales, or any representative or staff of the Auditor-General or of the Audit Office of New South Wales, and any current or former director(s), employee(s), officer(s) or contractor(s) of Sydney Water Corporation in relation to, or during the course of the preparation of, the review published by the Auditor-General in or about May 2003 entitled " Auditor General's Report to Parliament 2003 Volume One: Review of Sydney Water's Customer Information and Billing System" (" CIBS Review "). 2. All originals or copies of any documents (including, but not limited to, letters or other correspondence, emails, financial records, file notes, handwritten notes, diary notes, minutes, agendas, reports, memoranda or spreadsheets) provided to the Auditor-General of New South Wales, or any representative or staff of the Auditor-General or of the Audit Office of New South Wales, by any current or former director(s), employee(s), officer(s) or contractor(s) of Sydney Water Corporation in relation to, or during the course of the preparation of, the CIBS Review. The Motion 4 The applicant filed a Notice of Motion on 27 March 2008, returnable on 11 April 2008, in which the following orders were sought: 1. The Applicant be excused from producing the documents, described in the schedule to the subpoena issued to him on 31 January 2008 at the request of the Defendant and initially returnable on 21 February 2008, pursuant to Part 33 Rule 33.4 of the Uniform Civil Procedure Rules 2005 on the ground that production of the documents would breach section 38(1) of the Public Finance and Audit Act 1983 . 2. The Defendant pay the costs of this Motion. 3. In the event that the Court declines to make the order sought in paragraph 1 above, the Defendant pay the reasonable costs of the applicant incurred in complying with the subpoena, including the costs of obtaining legal advice as to its obligations pursuant to the subpoena. 4. Such further or other order as the Court may deem fit. 5 The Motion was heard on 16 April 2008 when Mr C Hoy, of counsel, appeared for the applicant and Mr J Williams, of counsel, appeared for the defendants/respondents. Although the plaintiff was not a respondent to the Motion, Mr A Murray, solicitor, appeared for the plaintiff but made no submissions. 6 There was no complaint raised in respect of the breadth of the subpoena nor was any issue raised in respect of the forensic purpose of the subpoena. It is also important to note that there was no claim for public interest immunity in respect of any of the documents if the applicant is unable to resist the production of the documents. The only basis upon which the applicant resists production is that he claims he would be in breach of s 38(1) of the Public Finance and Audit Act 1983 (the Act). Mr Hoy indicated that the applicant wishes to co-operate in the provision of the documents sought in the subpoena, but that he is concerned not to breach s 38(1) of the Act. 7 The Deputy Auditor-General of New South Wales, Anthony Thomas Whitfield, gave the following evidence in support of the application: 3. In October 2002 the Treasurer of New South Wales requested the Auditor-General to audit the Customer Information and Billing System ("CIBS") introduced by Sydney Water Corporation and report to the Parliament. This request was made pursuant to s 27B(3)(c) of the Public Finance and Audit Act 1983. 4. I swear that the documents in the possession of the Auditor-General of New South Wales which are described in the schedule to the subpoena in Annexure "A" were obtained by the Auditor-General in the course of the exercise of his functions in preparing the report requested by the Treasurer in October 2002. 8 Although the evidence was that the request was made pursuant to s 27B(3)(c) of the Act, it would appear that s 27B(3)(d) is also relevant. Those sections provide: (3) The Auditor-General's functions include the following: … (c) to provide any particular audit or audit-related service to the Treasurer at the request of the Treasurer or to any other Minister at the request of that other Minister, (d) to report to Parliament as required or authorised by law, 9 I raised the question of the applicant's powers to carry out a "particular audit" of the CIBS having regard to Division 4 of Part 3 of the Act which applies to a "Particular audit of statutory bodies, funds and accounts". The plaintiff is a "statutory body" as defined in s 44(1)(a) of the Act and s 45 provides as follows: 45 Particular audit (1) In accordance with the request of the Treasurer, a Minister or a person prescribed for the purposes of this section in relation to a statutory body, the Auditor-General is to inspect and audit: (a) in the case of a statutory body to which section 44(1)(a) applies – the financial report of the statutory body and the books and records of financial transactions of or relating to: (i) the statutory body, and (ii) assets of or in the custody of the body, and (b) in the case of a statutory body to which section 44(1)(b) applies – the financial report of the statutory body and the books and records of financial transactions of or relating to the fund or account under the control or management of the statutory body. (2) The Auditor-General or a person (being the Deputy Auditor-General or an auditor) authorised by the Auditor-General shall report to the statutory body, the Minister, the Treasurer and any person prescribed for the purposes of this section in relation to the statutory body as to the result of any such inspection and audit and as to such irregularities or other matters as in the judgment of the Auditor-General or authorised person call for special notice. (2A) The Auditor-General is to include a reference to any audit conducted under this section in the report referred to in section 52 (1). (3) Towards defraying the costs and expenses of any such inspection and audit, the statutory body shall pay to the Auditor-General such amounts, at such times, as the Treasurer decides. 10 It seemed to me that an audit of the CIBS may not have been a "particular audit" within the meaning of that term in s 45 of the Act. However no issue was raised as to the validity of the exercise of the applicant's powers and his entitlement to rely on s 38(1) of the Act for purposes other than resisting a subpoena. 11 The applicant submitted that unless any of the sub-paragraphs to s 38(2) of the Act apply, then s 38(1) of the Act prohibits the applicant from producing the documents called for by the subpoena, because he is prohibited from communicating to "any person" any matter or thing that came to his knowledge in the exercise of his functions. It was submitted that none of the exceptions listed in s 38(2) applies and therefore the applicant is bound by s 38(1). Section 38 provides as follows: 38 Secrecy (1) The Auditor-General, an auditor and an authorised person shall preserve and aid in preserving secrecy with respect to all matters and things that come to the knowledge of the Auditor-General, auditor or authorised person in the exercise of the functions of the Auditor-General, auditor or authorised person under this Act and the prescribed requirements and shall not communicate to any person any such matter or thing. (2) Nothing in subsection (1) applies to or in respect of: (a) the conduct of any matter necessary for the proper administration of this Act or the prescribed requirements, or (b) proceedings for an offence relating to public money, other money, public property or other property or for the recovery of public money, other money, public property or other property, or (c) disciplinary proceedings brought against an officer of an authority, or (d) a report or communication authorised or required to be made by or under this Act or the prescribed requirements, or (e) a report or communication that the Treasurer authorises the Auditor-General to make to a person for the purposes of a due diligence or similar process relating to the sale of any government undertaking. 12 The reason for such secrecy provisions probably stems from the applicant's very broad powers under the Act. The applicant "may require" a person to provide information and/or produce documents to him in certain circumstances: (s 36(2), (3)). The person so required to provide information and/or documents must comply with that requirement despite: (a) any rule of law which, in proceedings in a court of law, might justify an objection to access to books, records, documents or papers or information on grounds of public interest, or (b) any privilege of an authority which the authority might claim in a court of law, other than a claim based on legal professional privilege, or (c) any duty of secrecy or other restriction on disclosure applying to an authority or to an officer of an authority (s 36(5)). 13 Accordingly the applicant may come into possession of information and/or documents that may otherwise be the subject of privilege against self-incrimination, penalty privilege and secrecy provisions. The only privilege that seems able to be maintained is "legal professional privilege": s 36(5)(b). 14 The respondents submitted that compliance with the subpoena by provision of the documents to the Court is not a communication to or the provision of any thing to a "person" and thus the applicant is not prohibited from compliance with the subpoena. In support of this submission the respondents relied upon the decision of Sheppard J in The Sanko Steamship Company Ltd v Sumitomo Australia Ltd (1992) 37 FCR 353. In that case Sheppard J held (at 360) that the expression "any person" in regulation 15 of the Navigation (Marine Casualty) Regulations 1990 (Cth) made pursuant to s 425(1)(ea) of the Navigation Act 1912 (Cth) prohibiting certain officers from divulging certain records to "any person", did not "impair the courts' ordinary powers to compel the production of documents in a civil case which is to be heard by it". 15 In Hilton v Wells (1985) 157 CLR 57, the High Court considered the meaning of the words "a person shall not divulge or communicate to another person…" in s 7 of the Telecommunications (Interception) Act 1979 (Cth). Gibbs CJ, Wilson and Dawson JJ referred to Miller v Miller (1978) 141 CLR 269 in which the High Court considered a similar provision in s 5(3) of the Telephonic Communications (Interception) Act 1960 (Cth) and said at 277 "… I doubt whether a court is 'another person' within the meaning of the words, 'A person shall not divulge or communicate to another person …' in that sub-section." Gibbs CJ, Wilson and Dawson JJ went on to say at 76: This view was adopted and applied by Crawford J. in Reg v Padman [[1979] Tas R 37.] … [I]t is odd that the section does not contain any prohibition on divulging intercepted information to a court otherwise than in the circumstances prescribed in sub-s. (6). We incline to the view that this omission is merely a legislative oversight the result of which however is that relevant evidence obtained from intercepted communication may be given in a proceeding other than those mentioned in sub-s. (6) without the person giving it committing an offence under the Act. 16 Mason and Deane JJ said at 87: Another question relevant to the interrelation between the various sub-sections is whether the prohibition (in sub-s. (4)) against divulging or communicating information to "another person" applies in respect of the disclosure of such information in the course of giving evidence before a court. In our view it does not for the reason that, as a matter of ordinary language, the words "divulge or communicate to another person" are inappropriate to refer to the giving of evidence before a court "which would hardly be called" another person: see per Dixon C.J., Canadian Pacific Tobacco Co. Ltd. v. Stapleton [(1952) 86 CLR 1 at 6]; per Gibbs J, Miller v Miller [(1978) 141 CLR 269 at 277]. 17 In Abrook v Paterson (No 2) (1995) 59 FCR 364, O'Loughlin J considered a similar provision in s 8.11 of the Friendly Societies Act 1991 (Qld). His Honour referred to the passages of Miller v Miller and Hilton v Wells extracted above and said at 368: In my opinion, there is now no uncertainty. The decision in Hilton v Wells is authority for the proposition that the secrecy provisions in s 8.11 of the Friendly Societies Act do not extend to the disclosure of information to a court. 18 In Javorsky (in his capacity as liq of PLM Formwork Pty Ltd (in liq)) v Commissioner of Taxation (2005) 216 ALR 619, White J considered an application that the Commissioner give discovery of various categories of documents. The Commissioner resisted the application on the basis that he was prevented from doing so by reason of certain secrecy provisions of the Income Tax Assessment Act 1936 (Cth) and the Taxation Administration Act 1953 (Cth) that include a prohibition on divulging or communicating "to any person" (in s 16 of the Income Tax Assessment Act) or a "second person" (in s 3C of the Taxation Administration Act) certain information. White J said: [16] The prohibition against disclosure in ss 16(2) and 3C(2) is only against disclosure to "any person", in the case of s 16(2), or to a "second person", in the case of s 3C(2). [17] That prohibition does not apply to the divulging or communicating of information to a court: Hutchins v FCT (1986) 86 ATC 4549; Federal Commissioner of Taxation v Nestle Australia Ltd (1986) 12 FCR 257 at 262; 69 ALR 445 at 450. 19 White J referred to the fact that discovery required the provision of a list of documents to the other party and making the documents available for inspection and held that (at [18]): "the fact that disclosure to a court is not within the prohibition does not mean that compliance with an order for discovery would not involve disclosure of information to a person contrary to the subsections". 20 In support of its submissions, the applicant relied on Re NSW Grains Board [2002] NSWSC 913 in which Barrett J considered whether the secrecy obligation in s 38(1) would be a "reasonable excuse" within the meaning of s 597(7) of the Corporations Act 2001 (Cth). His Honour said: 96. If either of the Audit Office parties were summoned by the court under s.596A or s.596B on the application of the plaintiff, that person would be required by s.597 to attend, to produce books and to answer questions as directed by the court, unless relieved of those obligations by aspects of s.597 which used the words "without reasonable excuse" (see ss.597(6) and (7)). The question to be determined is therefore whether the existence and effect of s.38 of the Public Finance and Audit Act , as it operates upon and in relation to the Audit Office parties, would constitute "reasonable excuse". … 99. … The Prohibition imposed by s.38 of the Public Finance and Audit Act upon a person within the purview of that section, if applicable, is thus of its very nature a "reasonable excuse" when a provision of s.597 of the Corporations Law expressed to be subject to a "reasonable excuse" exception operates, on its face, to compel the person to do what s.38 prohibits. The present inquiry therefore resolves itself into the single question whether s.38 will operate as a prohibition upon the Audit Office parties. The immediate answer is that it will, unless, in the particular circumstances, a provision in s.38(2) causes the prohibition not to operate. 21 The respondents submitted that the present case is distinguishable from Re NSW Grains Board as there is no provision of "reasonable excuse" for non-compliance with a subpoena. I agree. The question in this case is not whether there is a "reasonable excuse" for the applicant not to comply with the subpoena, but rather whether the applicant is not compellable by reason of the provisions of s 38(1) of the Act. 22 The applicant submitted that the process of issuing a subpoena and requiring the applicant to produce documents to the Court would make the Court a mere conduit for the delivery of documents to "another person", being the respondents. It is unsurprising that the applicant did not have any authority for such a proposition. Indeed Sheppard J's observations in Sanko Steamship emphasised the importance of the courts' powers of compelling the production of documents. His Honour said at 360: Courts entrusted with the task of settling disputes between citizens have an important public function. There is a public interest in the proper administration of justice. The powers of courts to compel the production of documents have an ancient origin and have been restated and, in the case of courts having a statutory origin, re-enacted many times. 23 This Court's powers to compel production of documents to it pursuant to Part 33 of the Uniform Civil Procedure Rules 2005 make clear that it is production to the Court and not to the party who sought the order to compel such production. I am of the view that the applicant's argument that the Court would be a mere conduit if it required the applicant to produce the documents to it is misconceived. It may be that once the documents are produced to the Court the plaintiff will make application in relation to the extent of access to certain or all of the documents. Indeed it was indicated during argument on the Motion that the plaintiff may well make such applications (tr 9-10). That is understandable having regard to the applicant's broad powers of gathering information and documents referred to above. However such applications are quite different matters and are the second step in the procedure in relation to subpoenas for production, the first being production to the Court: Waind v Hill & National Employer's Mutual Association Ltd [1978] 1 NSWLR 372. 24 The real question in this application is about production to the Court and the authorities make it clear that the Court is not "any person" as that expression is used in s 38(1) of the Act. The applicant must comply with the subpoena and in doing so he will not be in breach of s 38(1) of the Act. In those circumstances it is unnecessary to deal with the respondents' submission that the main proceedings are for "the recovery of public money" as that term is used in s 38(2)(b) of the Act so as to exclude the application of s 38(1) of the Act to the subpoena. 25 Accordingly the Motion to set aside the subpoena on the ground that the applicant is prohibited by s 38(1) of the Act from complying with it is dismissed. The parties to the Motion should file Short Minutes of Order dismissing the Motion with an agreed order as to costs. They should also deal with the order sought by the applicant in relation to the costs of production and obtaining legal advice. If they are unable to agree on those orders I will hear argument when the matter is listed for directions on 2 May 2008 or such earlier date that the parties (including the plaintiff) may request, having regard to the impending trial date. ************************* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.