Ardina Electrical (Queensland) Pty Ltd, Re [1992] QSC 101

IN THE SUPREME COURT OF QUEENSLAND No. 256 of 1990 Before Mr. Justice G.N. Williams IN THE MATTER of The Companies (Queensland) Code -and- IN THE MATTER of ARDINA ELECTRICAL (QUEENSLAND) PTY. LTD. (now known as FUSED ELECTRICS PTY. LTD.) (IN LIQUIDATION) A.C.N. 009 752 087 JUDGMENT - G.N. WILLIAMS J. Delivered the 26th day of March, 1992. CATCHWORDS: Companies - examination s. 597 Corporations Law - criminalcharges pending- answers might further incriminate and prejudice fair trial of criminal charge - adjournment refused - Hamilton v. Oades (1989) 166 C.L.R. 486 applied. Counsel: Mr. D.R. Cooper for Appellant. Mr. D. Andrews for Respondent. Solicitors: Cleary & Hoare for Appellant. Bayliss Rodgers for Respondent. Hearing date: 24th March, 1992 -- 1 of 10 -- IN THE SUPREME COURT OF QUEENSLAND No. 256 of 1990 IN THE MATTER of The Companies (Queensland) Code -and- IN THE MATTER of ARDINA ELECTRICAL (QUEENSLAND) PTY. LTD. (now known as FUSED ELECTRICS PTY. LTD.) (IN LIQUIDATION) A.C.N. 009 752 087 JUDGMENT - G.N. WILLIAMS J. Delivered the 26th day of March, 1992. The Master declined to make an order that the examination of Ian Robert Donald, formerly a director of Ardina Electrical (Queensland) Pty. Ltd. -hereinafter referred to as "the company" - pursuant to s. 597 of the Corporations Law be adjourned until the determination of criminal proceedings against him pending in the District Court. I am concerned with an appeal by Donald from that decision. Mr. Cooper for the appellant relied on s. 597(17) of the Corporations Law which expressly empowers this Court (the court which made the order for the examination pursuant to s. 597) or the court before which the examination takes place, to adjourn, if it thinks fit, the examination from time to time. Because the order was sought pursuant to that subsection he submitted that the decision of the High Court in Hamilton v. Oades (1989) 166 C.L.R. 486 was distinguishable on the ground that it was concerned with an order made pursuant to s. 541 ( 5) of the Companies (N. S. W. ) Code, the current equivalent of which is s. 597(5). It was the view of the Master that the reasoning of -- 2 of 10 -- 3 the majority in Hamilton v. Oades precluded the appellant from succeeding on his application. There has been an important alteration in the law with respect to the use that may be made in criminal proceedings of matters ascertained in consequence of an examination of the type in question here. Section 5 41 ( 1 2) of the Code was in the following terms: "A person is not excused from answering a question put to him at an examination held pursuant to an order made under subsection ( 3) on the ground that the answer might tend to incriminate him but, where the person claims, before answering the question, that the answer might tend to incriminate him, the answer is not admissible in evidence against him in criminal proceedings other than proceedings under this section or other proceedings in respect of the falsity of the answer." In Hamilton v. Oades Mason C.J. observed that "the section gives no protection to the witness against the use in criminal proceedings of derivative evidence, i.e. , evidence which is obtained from other sources in consequence of answers given by the witness in his examination. It would be difficult for Parliament to provide for specific protection against derivative use of such answers given by a witness. Immunity from derivative use tends to be ineffective by reason of the problem of proving that other evidence is derivative". (496) The legislature obviously decided to take up the challenge of devising a provision which would give wider protection particularly with respect to "derivative evidence". Section 597(12) of the Corporations Law now provides: "A person is not excused from answering a question put to him or her at an examination held pursuant to an order made under subsection (3) on the ground that the answer might tend to incriminate him or her but, where the person claims, before answering the question, that -- 3 of 10 -- 4 the answer might tend to incriminate him or her, neither the answer, nor any information, document orthing obtained as a direct or indirect consequence ofthe person giving the answer, is admissible in evidence against the person in criminal proceedings other than proceedings under this section or other proceedings in respect of the falsity of the answer." That does not entirely overcome the problem of proving that evidence sought to be led on the subsequent criminal charge is "derivative", but that task is made easier here because the committal proceedings against the appellant have been completed. If, as must be assumed, the prosecution has discharged its duty by placing all relevant evidence against the appellant before the court in the committal proceedings, and such led to his being committed for trial, it can fairly be assumed that any additional evidence sought to be introduced after the examination pursuant to s. 597 would be evidence caught by s. 597 ( 12). To that extent the amendment referred to improves the position of the appellant so far as his criminal trial is concerned, but the corollary is that his argument in support of an adjournment of the examination is significantly weakened. The principal submission of the appellant is that the interests of justice dictate that, as his examination had not commenced when the application for adjournment was made, the examination should be adjourned to await the outcome of the criminal proceedings. He is facing trial on 52 offences said to involve sums in excess of $800,000.00 "in relation to the very matters about which the liquidator wishes to examine him". The material in no way suggests that the proposed examination by the liquidator is limited to such matters. The argument for the appellant is that if an adjournment was granted the liquidator's -- 4 of 10 -- 5 right to examine would not be frustrated but merely delayed, and there is no evidence (it is said) of prejudice if that course is adopted. In order to assess the merit of those submissions it is necessary to refer to the judgments of the majority (Mason C.J., Dawson and Toohey JJ.) in Hamilton v. Oades. In that case the director in question was facing committal proceedings with respect to 19 criminal offences relating to the affairs of the company. His examination pursuant to s. 541 of the Code commenced shortly before the hearing date fixed for the committal proceedings. The New South Wales Court of Appeal ordered that, during the pendency of the 19 charges and until and in the course of any trial until any further order or direction of that court, the respondent was not to be compelled in the course of the examination to answer any questions the answers to which may tend to incriminate him in respect of any of those charges and which would either concern those facts constituting the ingredients of the offences the subject of the charges or would tend to disclose a defence to the charges. The High Court held that the Court of Appeal was wrong in so ordering and allowed the examination to proceed unencumbered by any court order limiting questions which may be asked thereat. It should be noted that the Court of Appeal purported to make its order in the exercise of its "inherent power to control its own proceedings, with the object of avoiding the risk of injustice being caused by such proceedings". The fact that the court had so based its order was the subject of some elaboration by Mahoney J .A. in the subsequent case of Balog v. Independent Commission Against Corruption (1989) -- 5 of 10 -- 6 18 N.S.W.L.R. 356 especially at 374-7. But what is of more importance is what the majority of the High Court had to say on the issue. Mason C. J. stated that it was "plain that an examination under section 541 while charges are pending may expose the witness to the risks mentioned. To the extent only that under the section rights of an accused person are denied and protections removed, an examination may even amount to an interference with the administration of criminal justice". ( 494) Later His Honour pointed out (especially at 496) that the embargo on the use which may be made of information obtained upon the examination (subs . ( 1 2) ) and the power of the court to give directions concerning the examination (subs. (5)) "are designed to reduce any element of unfairness to the witness that may arise as a result of abrogation of the privilege". His Honour then went on to deal specifically at 497 with the exercise of the discretion under s. 541(5) of the Code; he said: " ... it would be going too far all together to view the existence of the discretion as requJ.rJ.ng ordinarily the giving of directions which will protectthe witness from the consequences of abrogation of the privilege insofar as they include the derivative use of the answers of the witness . To give such directions as a matter of course would be to frustrate the statutory purpose. Clearly the lengthy delay of an examination due to the pendency of criminal charges would be highly likely to frustrate the liquidator inthe carrying out of his duties towards the company and the creditors by denying him the use of a major instrument in the tracing of assets. The verypurpose of the section is to create a system ofdiscovery, which may cause defences to be discloses, for the purpose of bringing charges. The sectiongives to the liquidator rights not possessed by an ordinary litigant." He then went on to point out at 498 that the "court retains its power to give directions and to restrain questions in cases where -- 6 of 10 -- 7 the examination is being conducted for an improper purpose or constitutes an abuse of process. Again, the inherent powers of the court are retained and the duty of the court to ensure the proper administration of justice may require that orders be made of types other than those which restore the privilege against self-incrimination or which serve to defeat the purposes of the section". But as he went on to point out what may warrant the court ruling that particular questions ought not be answered on an examination "should not be predicted by a court in advance of their being asked". (499) Dawson J. arrived at the same conclusion; after considering the legislation in some detail he held that the fact that it was apprehended that answers given by a director upon his public examination might tend to incriminate him further, or might impair his right to a fair trial on the criminal charges was "an insufficient basis for the order having regard to the provisions of section 5 41" . ( 511 ) The most relevant passage for present purposes in the judgment of Toohey J. is that at 515: "A protection against self-incrimination in the terms enunciated by the Court of Appeal gives no effectiveoperation to section 541(12). And that is so notwithstanding the qualification expressed in the words 'concern those facts which constitute the ingredients of the offences The areas ofenquiry specified by the appellant liquidator may wellconcern those very facts. The power vested in the court by section 541(5) to give directions as to the matters to be enquired into may be used to ensure thatthe matters to be enquired into are relevant to the object of the examination. . . . a question may be so peripheral that it would be oppressive or unjust to require an answer. It is not hard to think ofexamples of oppression or injustice . . but it is not enough that the answer to a question may tend toincriminate the person examined. It is precisely this sort of answer that section 541(12) allows so that the -- 7 of 10 -- affairs of the investigated." 8 company may be relevantly The passage quoted above from the reasoning of Mason C.J. at 497 is of particular relevance here. Clearly His Honour was of the view that it would be wrong for the court, by exercising its power pursuant to s. 541(5), to create a lengthy delay in the examination due to the pendency of criminal charges such as would be likely to frustrate the liquidator in carrying out his duties. The question must then be asked, what is there about an adjournment pursuant to s. 597(17) which has a different consequence. Clearly this Court (and the court conducting the examination) has a power to adjourn the examination from time to time as it sees fit. But the only reason now advanced in support of an adjournment is that answers given on the examination by the appellant may prejudice the fair trial of the criminal proceedings against him because it may make known to prosecuting authorities possible defences or possible further lines of enquiry. As the passages quoted from Hamilton v. Oades clearly indicate, to accede to such a submission would be to "frustrate the statutory purpose" and to negate the statutory abrogation of the privilege against self-incrimination. Mr. Cooper relied heavily on the passage in the judgment of Mahoney J.A. in Balog to which I have referred above, but, as I have already noted, one must go to the reasoning of the High Court in the first instance. It is also not without significance to note that the decision in Balog was reversed by the High Court (Balog v. Independent Commission Against Corruption (1990) 169 C.L.R. 625), but the court did not find it necessary to comment at all on the passage from the judgment of Mahoney J.A. in issue -- 8 of 10 -- 9 here. It may well be, as Mahoney J.A. suggested at 376 that ·"self-incrimination apart" some particular questions should be disallowed on the examination because it would be "unjust" to force a person on oath to answer such a question given all the circumstances. That appears to me to be the same kind of observation as was made by Mason C.J. at 499 in Hamilton v. Oades; it will be remembered that there His Honour recognised that the court conducting the examination may rule that it would not permit a particular question to be asked. But such considerations do not, given the overall statutory purpose of s. 597, justify adjourning the examination until after the conclusion of the criminal proceedings. In my view it is not to the point that the liquidator has not placed material before the court establishing specific prejudice if the examination be adjourned. As Mason C. J. pointed out at 497 (the passage quoted above) any delay in the examination is likely to frustrate the liquidator in carrying out his duties towards the company and the creditors by denying him the use of a major instrument in the tracing of assets. Though the appellant has been committed for trial, no date has been fixed for trial and there could still be a not insignificant time lapse before that occurs. The final point raised by counsel for the appellant was that there had been some discussions between solicitors acting for the appellant and the liquidator with a view to obviating the necessity for an examination. Those discussions may well have been continuing at the time the liquidator obtained the order for the examination pursuant to s. 597. But I can see nothing in -- 9 of 10 -- 10 that conduct which suggests that "there is some collateral reason for the examination being undertaken" or which would provide a basis for the court, in the exercise of the discretion conferred on it by subs. (17), adjourning the examination. It follows that the appeal from the Master should be dismissed with costs. -- 10 of 10 --