The Australian Professional Liability Blog
Legal Services Commissioner seeks to overturn privilege against penalties
Posted: 07 Apr 2015 05:08 AM PDT
There is an old and well established privilege, the privilege against penalties, which is a relative of the privilege against self-incrimination. It entitles solicitors facing disciplinary prosecution to stay silent throughout the proceedings until the end of the Commissioner’s case unless the Tribunal makes an order requiring provision of written grounds and an outline of argument identifying in broad terms what is in issue. And even if such an order is made, compliance will not require the foreshadowing of any evidence or the admitting or denying of any facts.
The other day, a full frontal attack by the Legal Services Commissioner on the privilege in disciplinary prosecutions of solicitors did not result in it being distinguished out of existence. Though there was no contradictor in the hearing, the President of VCAT, Justice Greg Garde, gave the challenge short shrift in LSC v Spaulding [2015] VCAT 292.
Since practitioners started increasingly exercising their right to stay silent after the disciplinary investigation has concluded and before the conclusion of the Commissioner’s case, the Commissioner has begun increasingly to seek orders for the service of a notice to admit, despite the absence of any rule-based regime in VCAT governing the consequences of non-response to such notices. Some practitioners have consented to such orders and VCAT has made them. There may be grounds to review decisions in such cases where the practitioner did not ‘waive’ the privilege, since President Ross said:
‘in the absence of a statutory provision to the contrary, or waiver by a respondent, the effect of penalty privilege is that a respondent cannot be ordered to make discovery, produce documents, provide information or respond to a notice to admit.’
Waiver as a concept in the law generally requires a high level of deliberate abandonment. No doubt for that reason, the Commissioner began some time ago to alert practitioners to the existence of the privilege when proposing such orders.
President Garde has also made clear that the Tribunal itself has a duty ‘to ensure that a respondent is informed of the options in order to make an informed and voluntary decision whether or not to waive the privilege.’
The President also observed that many professionals will wish to make admissions if for no other reason than to be seen to be appropriately cooperative, and to attenuate the issues and so diminish the costs which will be payable if the practitioner loses. My clients often make extensive admissions, sometimes make denials, but often remain silent in relation to some issues and strenuously resist the characterisation of such silences the matters about which they have stayed silent as ‘denials’. There is, however, nothing to be gained from consenting to an order to provide a response to a notice to admit. When, as I have found to be the case, the notices are framed in a manner which purports to graft onto VCAT’s procedures a presumption of admission in the event of non-denial, great procedural uncertainty is generated, because, unlike in the state courts, there are no rules of procedure which provide a legal basis to generate such an admission. And it will often be more convenient for the practitioner to craft the admissions in the form he or she considers most appropriate, possibly in a discursive letter, and at a time convenient to him or her. Furthermore, the notices to admit usually track the allegations in the Application itself extremely closely, regardless of the admissions made during the investigation in correspondence which is annexed to the Application, so that the requirement to respond to the notice to admit is akin to a requirement to serve a defence, and the drafting, filing and service of the notice to admit generates a substantial cost on a party-party basis.
Finally, for some reason, no one ever seeks orders to serve notices to admit on the Commissioner. If, for some reason, one were to consent to orders for the provision of a response to a notice to admit, it would seem appropriate to me to reserve a right to reciprocity.
The privilege against penalties operates at least in proceedings in courts and tribunals and lasts until the applicant for relief in the nature of a penalty (e.g. a fine) has closed its case. Since the High Court’s decision in Daniels Corporation International Pty Ltd v ACCC (2002) 213 CLR 543 (see at 559), it has been well understood that the privilege against exposure to penalty ‘now serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it’ (in the words of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ with whom McHugh J agreed, in Rich v ASIC (2004) 220 CLR 129).
So too has it been well understood since Rich that the privilege has operation in relation to civil penalty provisions and to cases in which loss of office is sought. There has been a little controversy about whether suspension from practice is a penalty, but that was not treated in Justice Garde’s decision which is, in any event, consistent with the better view as to the resolution of that controversy.Even those penal proceedings thickly veiled in cloaks of ‘protective not punitive’ (a nonsense beautifully unpicked by McHugh J in his concurring reasons in Rich) are recognised as proceedings for a penalty. In that case, ASIC argued that proceedings by which no fine or civil pecuniary penalty was sought, but orders disqualifying Rich from being a director of a company were sought, were not proceedings for a penalty. The plurality of the High Court said something which is the judicial equivalent of:
‘Whoa! Steady on cowboy.’
Namely:
‘That stream of authority would suggest that for the Commission to seek an order disqualifying a person from acting in the management of a corporation on the ground that the person has contravened the law is to seek a penalty or forfeiture. The order is sought by a regulatory authority; its grant would be founded on demonstration of a contravention of the law; it is an order which leads to the vacation of existing offices in a corporation and imposition of a continuing disability for the duration of the order. What is it that would deny that conclusion?’
The privilege was given routine effect to in an appeal from a professional disciplinary prosecution in Towie v Medical Practitioners Board of Victoria [2008] VSCA 157 where the Court of Appeal unanimously reversed VCAT and admonished it for ignoring the privilege in formulating directions inconsistent with it, observing that it will ordinarily be inappropriate in disciplinary proceedings where the professional is exposed to a penalty to require provision of an outline of argument, or any other written material which contains a positive assertion or denial of facts or requires an election by the applicant as to whether he or she intends to go into evidence or requires any proposed evidence the applicant intends to call to be the subject of a witness statement which must be produced and served on the other side, before the disciplinary prosecutor has closed its case (at [9]).
The Commissioner’s attack on the privilege focused closely on the characteristics of the decision in Towie (only dicta, it was said, only a general observation, a case about a doctor, not a lawyer, and doctors do not have the same duty of candour towards the courts as lawyers do, which makes all the difference). But, as the President observed:
‘penalty privilege is firmly entrenched privilege underpinned by decisions of the High Court of Australia and Supreme Court of Victoria [and] the passage cited from Towie’s case represents the law in Victoria, and is not open to serious doubt’.
Interestingly, one of the Commissioner’s arguments against the penalties privilege was that it gives rise to the possibility of a split case, in which the Commissioner is forced to seek an adjournment once the respondent’s case comes out. I have never heard of the Commissioner actually doing this, and nor have I ever heard of any other person propounding a case for a penalty doing this, though my clients have sometimes stayed very silent and disclosed considerable information only after the close of the Commissioner’s case, and though there is talk of it from time to time. The Commissioner’s attack on the privilege was brought in a case in which there was no contradictor, because the practitioner, it was alleged, had left for the US and was not participating in the proceedings. Justice Garde did observe, by way of obiter dictum, that it would be ‘open to the Commissioner in an appropriate case to seek from the Tribunal the opportunity of presenting a case in reply, or directions for the provision of additional evidence’, e.g. where the practitioner ‘uses “ambush” tactics intended or likely to cause disadvantage or unfairness to the Commissioner’ (at [28]). And therein lies the real future battle ground. What will be an ‘appropriate case’? When will staying silent amount to ‘ambush tactics’? Since the whole point of the privilege is to put the person at risk of the penalty at liberty to stay silent except to the extent ordered by the Tribunal to disclose that which may properly be required to be disclosed consistently with observance of the privilege, and since adverse inferences ought not usually to be drawn against a citizen who exercises a forensic privilege, presumably mere exercise of the privilege will not amount to ‘ambush tactics’.
VCAT is a place where the courts’ rules of procedure apply only to the extent adopted by the Tribunal in a case by case basis, and whose own rules of procedure are, to say the least, amorphous (which is not to say that they are not rigorous, at least in theory, just that ascertaining their application to any particular scenario requires a broader enquiry than in courts bound by more closely worked out procedural rules). But even in such a place, it must be relatively unlikely that, having been obliged to come prepared to prove its case without assistance from the person from whom it seeks a penalty, having had every opportunity to compel the production of information, including information which would tend to incriminate the lawyer, during the investigation phase (a luxury the police could only dream of), and then having closed its case, it would properly be given leave to re-open its case, let alone be granted an adjournment to facilitate that, especially where the defence to be relied on was foreshadowed in the investigation phase, or the Commissioner should have been on notice of it as a result of matters which were foreshadowed during the investigation. If the police, without the benefit of a statutory phase of written interrogation prior to the commencement of proceedings, would not be permitted to do so in a murder trial, it is hard to see why a disciplinary prosecutor should be allowed to do so.
Watch this space, and please keep me posted in relation to your own experiences of the privilege being negotiated around in the Tribunal.
Finally, this is what Justice Garde said about the privilege:
‘Penalty privilege
In Rich v ASIC, [7] the High Court described penalty privilege as one of a trilogy of privileges[8] that bear some similarity with the privilege against incrimination.[9] The privilege against exposure to penalties has long been recognised by the common law. It is also recognised in equity.[10] In equity, an order for discovery or for the administration of interrogatories in favour of the prosecutor would generally not be made where the proceeding was of a nature that might result in a penalty or forfeiture.[11] The penalties which attract the privilege include monetary exactions, loss of office, and proceedings for disqualification orders against officers of corporations.[12]
The common law privilege against penalty comes from ‘the deep seated belief that those who allege the commission of a crime should prove it themselves and should not be able to compel the accused to provide proof against himself’. [13]
The content of penalty privilege is discussed in Pyneboard Pty Ltd v Trade Practices Commission.[14] In an action for penalty, the court should, in the absence of statutory provision to the contrary, 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.[15]
In addition to decisions of the High Court of Australia and elsewhere, penalty privilege has been given effect in a number of cases in the Supreme Court of Victoria.[16] In MH6 v Mental Health Review Board,[17] the Court held that an involuntary treatment order under the Mental Health Act 1986 (Vic) enlivened ‘those aspects of the hearing rule articulated in Towie’.[18] The consequences of an involuntary treatment rule include ‘the continued, indefinite and involuntary detention of the applicant’.[19] Procedural fairness would require that an involuntary detainee be given an opportunity to hear and respond to evidence that provides the jurisdictional basis for continued confinement.[20]
In Re Australian Property Holdings Limited (in liq) (No 2),[21] Robson J held that a number of principles were established by authority:
(a) in the case of self-incrimination privilege, the defendant must establish that the provision of information or the production of documents in the civil case leads to a real and appreciable risk of a criminal prosecution before the privilege can be invoked;
(b) in an action to recover a penalty it is not necessary for a defendant to establish that there is a risk the defendant will be subjected to a penalty by providing information to the plaintiff. The plaintiff is seeking the information for that very purpose;
(c) in civil actions, where no claim for penalty is made, the defendant must show that providing the information requested would tend to subject him to a penalty in separate proceedings before he can rely on the privilege;
(d) the privilege against exposure to penalty is a common law right of privilege that may be availed of as of right and is enforced and protected by the Court;
(e) the privilege against the exposure to penalty may be relied on by a defendant to a civil procedure in which a penalty is not sought (“the non-penalty civil proceeding”);
(f) the privilege against the exposure to penalty extends to the obligation upon a defendant to plead, give discovery and answer interrogatories in the non-penalty civil proceeding;
(g) as a general rule, the privilege does not entitle a defendant to a non-penalty civil proceeding to obtain an order in limine excusing him or her from giving discovery or answering interrogatories;
(h) in exceptional circumstances, a defendant may be entitled to such orders in limine;
(i) by extension, in exceptional circumstances, a defendant may be entitled to orders in limine that he may deliver a defence that departs from the Rules of Court only insofar as to protect his privilege against exposure to penalty;
(j) exceptional circumstances may exist where the defendant to the civil proceeding is also the subject of separate civil penalty proceedings alleging the same or similar conduct; and
(k) where a defendant seeks to take the privilege against exposure to penalty in a defence, the proper course is to plead accordingly and – if challenged – the defendant will be required to justify that the privilege is taken in good faith and on reasonable grounds for the privilege to stand. [22]
Robson J accepted that in a penalty proceeding a defendant should not be required to produce documents or disclose information so assisting in establishing the defendant’s liability to penalty.[23] The principle extends to proceedings which are not penalty proceedings.[24]
In Gemmell v Le Roi Homestyle Cookies Pty Ltd (in liq),[25] Ashley JA adopted a paraphrase of the propositions stated by Robson J, highlighting that the privilege against exposure to a penalty can only be successfully claimed where a person shows that to give an answer or answers would tend to subject him to a penalty in [the same] or separate proceedings.[26] The privileges can be abrogated by statute or waived.[27]
Having regard to the weight of authority in Australian courts, there is no doubt that the principles relating to penalty privilege are well entrenched in the law of Victoria and are applicable to proceedings in the Tribunal.
Effect of authority
It can be taken from the authorities as established that:
(1) penalty privilege will arise in proceedings of a disciplinary character against legal practitioners, health practitioners, and other persons, and in general in any proceedings where a monetary exaction, loss of office, forfeiture, or other penalty may result;
(2) penalty privilege will protect against the requirement to make discovery, produce documents, or give information that may assist in establishing liability to a penalty, such as that sought by a notice to admit;
(3) penalty privilege can be regarded as an extension of procedural fairness on the basis that it would be inconsistent with the respondent’s common law rights and privileges to be required to make discovery, produce documents or provide information which might assist in a proceeding against the respondent to recover a penalty;
(4) penalty privilege can be abrogated by statute or waived by the respondent;
(5) while it is accepted that legal practitioners have a duty to the court of open candour and frankness, this does not affect their common law and equitable right to penalty privilege; and
(6) Towie’s case does not stand alone but is consistent with, and well supported by, a considerable body of authority which is binding on the Tribunal.
Accordingly, I find in relation to the submissions made on behalf of the Commissioner that:
(1) penalty privilege is a firmly entrenched privilege underpinned by decisions of the High Court of Australia and Supreme Court of Victoria; [28]
(2) the passage cited from Towie’s case represents the law of Victoria,[29] and is not open to serious question or doubt;
(3) subject to any abrogation by statute, or waiver by a respondent, it is appropriate for members of the Tribunal sitting in the Legal Practice and Review and Regulation Lists to apply the law as set out in Towie;
(4) the Court of Appeal in Towie held that the provision by a respondent of written grounds and an outline of argument which identifies in broad terms what is in issue is consistent with penalty privilege;
(5) the standard Tribunal directions are consistent with the law relating to penalty privilege as found in Towie; and
(6) in the absence of a statutory provision to the contrary, or waiver by a respondent, the effect of penalty privilege is that a respondent cannot be ordered to make discovery, produce documents, provide information or respond to a notice to admit.
Notwithstanding the existence of penalty privilege, respondents may (and often this is the case) be desirous of producing documents and information on a voluntary basis in order to defend the charges laid against them, or reduce their significance or gravity. This however is a voluntary decision. The duty of the Tribunal is to ensure that a respondent is informed of the options in order to make an informed and voluntary decision whether or not to waive the privilege.
[7] [2004] HCA 42; (2004) 220 CLR 129 (‘Rich’).[8] The other two privileges are the privilege against exposure to forfeiture and the privilege against exposure to ecclesiastical censure.[9] [2004] HCA 42; (2004) 220 CLR 129, 141 [23] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) referring to Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543, 553-554 [13] and to Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328, 336.[10] Rich [23]-[24]. The history of the privilege is fully discussed by McColl JA in Rich and Silberman v ASIC [2003] NSWCA 342, [195]-[257].[11] Rich [24]; Naismith v McGovern [1953] HCA 59; (1953) 90 CLR 336, 341-342.
[12] Rich [26], [28], [34], [36].
[13] Environment Protection Authority v Caltex Refining Co Pty Ltd [1993] HCA 74; (1993) 178 CLR 477; quoted with approval in Trade Practices Commission v Abbco Iceworks Pty Limited & Ors [1994] FCA 1279; (1994) 52 FCR 96, 129; in turn cited with approval in Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129, 142.
[14] [1983] HCA 9; (1983) 152 CLR 328, 336 (Mason ACJ, Wilson and Dawson JJ).
[15] Ibid.
[16] For other jurisdictions see Valantine v Technical and Further Education Commission [2007] NSWCA 208 [51]; Bridal Fashions Pty Ltd v Comptroller – General of Customs (1996) 140 ALR 681, 690.
[17] [2009] VSCA 184; (2009) 25 VR 382.
[18] Ibid [26] (Redlich JA and Hargrave AJA).
[19] Ibid.
[20] Ibid.
[21] [2012] VSC 576; (2012) 93 ACSR 130 (‘Re APCH (No 2)’).
[22] Ibid [115] (citations omitted).
[23] Ibid [116].
[24] Ibid [86] referring to Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat & Livestock Corporation (1979) 42 FLR 204, 207-208 (Deane J).
[25] (2014) 102 ACSR 367 (Ashley and Neave JJA; Almond AJA).
[26] Ibid [85].
[27] Ibid [49]-[50], referring to Reid v Howard [1995] HCA 40; (1995) 184 CLR 1, 12.
[28] Above [11]-[18].
[29] Above [7].
[30] Towie [2008] VSCA 157 [9].’
