Supreme Court New South Wales Common Law Division

Case Title: Medium Neutral Citation: Hearing Date(s): Decision Date: Jurisdiction: Before: Decision:

Liu v Fairfax Media Publications Pty Ltd [2012] NSWCA 395 12 April 2012 26 April 2012 Common Law McCallum J Application by Australian Securities and Investments Commission for orders preventing the disclosure of discoverable documents refused PRACTICE AND PROCEDURE discovery and inspection application by non-party to prevent parties from discovering or inspecting discoverable documents on the grounds of public interest immunity whether disclosure of documents would harm the public interest Australian Securities and Investments Commission Act 2001 (Cth) Civil Procedure Act 1995 Evidence Act 1995 Supreme Court Act 1970 Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319 Corporate Affairs Commission v Bradley [1974] 1 NSWLR 391 David Syme & Co Ltd v Hore-Lacey [2000] VSCA 24 (2000) 1 VR 667 Derbas v R [2012] NSWCCA 14 Rushby v Roberts [1983] 1 NSWLR 350 Sankey v Whitlam [1978] HCA 43 State of New South Wales v Public
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Catchwords:

Legislation Cited:

Cases Cited:

Transport Ticketing Corporation [2011] NSWCA 60

Texts Cited: Category: Parties: Interlocutory applications Eugene Liu (plaintiff) Fairfax Media Publications Pty Ltd (defendant) Australian Securities and Investments Commission (applicant on motion)

Representation - Counsel: Counsel: A Abadee (Australian Securities and Investments Commission) M Richardson (plaintiff) TD Blackburn SC (defendant) Solicitors: Conrad Gray (Australian Securities and Investments Commission) Kennedys Lawyers (plaintiff) Johnson Winter & Slattery (defendant) 2010/350215 Not to be posted on the Internet

- Solicitors:

File number(s): Publication Restriction:

JUDGMENT
1 HER HONOUR: These are proceedings for defamation brought by Mr Eugene Liu against the publishers of The Sydney Morning Herald newspaper.

The application before the Court is a Notice of Motion filed by the Australian Securities and Investments Commission (ASIC), which is a stranger to the proceedings. In essence, the application seeks to prevent the disclosure of documents discovered by Mr Liu in the proceedings. The
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basis for the application is the contention that disclosure of the documents would be contrary to the public interest. ASICs status in the proceedings 3 At the outset of the hearing, I inquired whether ASIC required leave to intervene in order to obtain the relief sought. That proposition was not embraced with any enthusiasm by ASIC.

Upon further reflection, I have concluded that I should be given further assistance from ASIC on that issue. It is trite to observe that, ordinarily, only parties appear in litigation: Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319 at 331 per Dixon J. It is certainly not uncommon for the Court to entertain public interest immunity claims by non-parties, but such claims usually arise by way of resistance by the non-party to a process that has brought that person to court for the purpose of complying with a compulsory disclosure obligation (such as a subpoena to produce documents).

In the present case, ASIC is neither a party to the proceedings nor a person under an obligation to produce documents in its possession. Rather, ASIC seeks to be heard, on the grounds of public interest, as to the obligation and entitlement of the parties to give discovery and exercise their right to inspection respectively. It is doubtful whether the Court ought to entertain a persons appearance in such circumstances except by leave or pursuant to some statutory right to intervene.

The Court has a discretionary power under rule 6.24 of the Uniform Civil Procedure Rules 2005 to permit intervention by a non-party in a proper case. However, intervention under that rule is predicated upon the courts considering that the person ought to have been joined as a party or that his joinder is necessary to the determination of all matters in dispute in the proceedings.
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It has long been held that, if that power is exercised, the intervenor becomes a party to the proceedings and enjoys all of the privileges of a party including appealing, tendering evidence and participating in all aspects of the argument: see Corporate Affairs Commission v Bradley [1974] 1 NSWLR 391 at 396E per Hutley JA; Reynolds JA agreeing at 395A; Glass JA agreeing at 408B.

It was held further in Bradley that, in the absence of any express enabling power in the rules, there is no inherent power in the Supreme Court to permit intervention. That aspect of the decision has since been questioned, partly on the basis that no consideration was given to s 23 of the Supreme Court Act 1970: see Rushby v Roberts [1983] 1 NSWLR 350 at 353C per Street CJ; Hutley JA disagreeing at 360D. Separately, the proposition that an intervenor joined as a party in accordance with the rules is necessarily entitled to participate in all aspects of the argument probably warrants reconsideration in light of s 56 of the Civil Procedure Act 2005.

Since ASIC did not consider intervention to be necessary in the present case, the Court was not addressed on any of those issues or as to whether ASIC has any statutory right (without leave) to appear and be heard as if it were a party to the proceedings.

10

Apart from seeking to intervene as a party, ASIC could alternatively have sought leave to appear as amicus curiae but would not in that event be entitled to bring an appeal against this decision: see Bradley at 399C. In my view, the question of ASICs status should be determined before any orders are entered in respect of its application, so as to clarify (at least) whether or not it is precluded from seeking leave to appeal.

Circumstances in which the application is brought 11 Mr Lius claim in defamation arises out of the publication of a series of articles in the print and Internet versions of The Sydney Morning Herald
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newspaper concerning Mr Lius management of an investment fund. It is convenient to explain the issues in the case by reference to the first matter complained of. The thrust of that article was to express scepticism as to the ostensible good performance of the investment fund during the height of the global financial crisis. It was reported that ASIC had commenced an investigation into the fund following a clamp down on similar funds by US regulators in the wake of billion dollar fund collapses and the $US50 billion Ponzi scheme run by Bernie Madoff. The article later refers to charges filed against Mr Liu by the regulator in the equities division of the NSW Supreme Court.

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Mr Liu alleges that the article conveys a number of defamatory meanings about him, including that he was the subject of criminal charges filed against him by ASIC. The defendants have not pleaded the defence of truth but have pleaded defences of contextual truth as well as Hore Lacey meanings (David Syme & Co Ltd v Hore-Lacey [2000] VSCA 24; (2000) 1 VR 667). It is not necessary for present purposes to descend to the detail of those defences, save to observe that they raise the issue whether there were reasonable grounds to suspect that Mr Liu engaged in certain unlawful conduct. The issues raised by the defence have evidently prompted the plaintiff to include in his list of documents a number of documents that ASIC submits should not be disclosed to or inspected by the defendants or admitted into evidence.

13

I was informed by the parties that the documents in question are listed as being presently in the possession of the plaintiff. There is no question of ASIC being compelled to divulge documents in its possession. However, ASIC contends that disclosure of the documents by the plaintiff would be injurious or contrary to the public interest.

14

The orders sought by ASIC are:

(1)

The Plaintiff shall not give discovery to the Defendant of the documents described in the sealed list (being Exhibit
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A to this Notice of Motion) on the basis that discovery of the documents is contrary to the public interest. (2) In the alternative to 1, the Plaintiff shall not make available to the Defendant for inspection the documents described in the sealed list (being Exhibit A to this Notice of Motion) on the basis that inspection of the documents by the Defendant is contrary to the public interest. Neither the Plaintiff nor the Defendant shall adduce into evidence any of the documents described in the sealed list (being Exhibit A to this Notice of Motion) on the basis that disclosure into evidence of the documents is contrary to the public interest.

(3)

Principles by reference to which the application should be determined 15 ASIC asserted that its application falls to be determined by reference to the principles at common law rather than pursuant to the provisions of the Evidence Act 1995. As to orders (1) and (2) sought by ASIC (dealing with discovery and inspection), I agree. However, I think the position is otherwise as to order (3), which is directed to the admission of the documents into evidence.

16

Section 130 of the Evidence Act confers power on the court to exclude evidence that relates to matters of state if the public interest in admitting the evidence is outweighed by the public interest in secrecy or confidentiality in relation to the information or document in question. Section 131A extends that protection (with appropriate adaptation) to preliminary proceedings such as discovery and inspection. However, s 131A is not engaged in the present case, since ASIC is not a person required by a disclosure requirement [to produce the documents in question] within the meaning of the section. The relevant disclosure obligation in the present case is the plaintiffs (cf State of New South Wales v Public Transport Ticketing Corporation [2011] NSWCA 60 at [26] to [32] where there was an argument as to whether the State of New South Wales and the discovering party were the same person for the purpose of a public interest immunity claim).
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On that basis, I accept that it is appropriate to determine the application for orders (1) and (2) in the Notice of Motion by reference to the common law: Derbas v R [2012] NSWCCA 14 at [6] to [8] per Meagher JA; Hoeben and Rothman JJ agreeing at [48] and [49] respectively; cf Public Transport Ticketing Corporation at [41].

18

I should note, however, that it might be too late to make order (1). I was given to believe (although the relevant document was not tendered) that the plaintiff has already included the documents the subject of ASICs application in his list of documents served in the proceedings.

19

Conversely, I think it is too early to determine the application for order (3), which seeks to prohibit the tender of any of the documents in question into evidence. Contrary to the submission put by ASIC, that issue falls to be determined according to the Evidence Act, which expressly allows a nonparty to seek exclusion of the evidence in question and is not confined in the manner of s131A to persons required by a disclosure requirement to produce the documents. However, I do not think it is possible to perform the weighing exercise required by s 130 at this stage of the proceedings. The preferable approach, in my view, is to direct the parties to inform ASIC in the event that they propose to adduce evidence of the contents of any of the relevant documents so as to give ASIC an opportunity to be heard on that issue at the trial.

20

In those circumstances, I do not see any need at this stage for me to inspect the documents, as I was invited to do on behalf of ASIC. That they are discoverable cannot be disputed, having regard to the way in which they came into the plaintiffs possession and the contextual truth defence. Their importance as potential evidence can be assessed during the trial, if necessary.

Issues to be determined

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21

I return to consider the application to prevent discovery or inspection of the documents. The position at common law was stated by Gibbs ACJ in Sankey v Whitlam [1978] HCA 43; (1978) 142 CLR 1 at pages 38-39, as follows:

The general rule is that the court will not order the production of a document, although relevant and otherwise admissible, if it would be injurious to the public interest to disclose it. However the public interest has two aspects which may conflict. These were described by Lord Reid in Conway v Rimmer [footnote omitted], as follows: There is the public interest that harm shall not be done to the nation or the public service by disclosure of certain documents, and there is the public interest that the administration of justice shall not be frustrated by the withholding of documents which must be produced if justice is to be done. It is in all cases the duty of the court, and not the privilege of the executive government, to decide whether a document will be produced or may be withheld. The court must decide which aspect of the public interest predominates, or in other words whether the public interest which requires that the document should not be produced outweighs the public interest that a court of justice in performing its functions should not be denied access to relevant evidence. In some cases, therefore, the court must weight the one competing aspect of the public interest against the other, and decide where the balance lies.

22

Importantly, ASIC does not contend that the content of any of the documents the subject of the claim is sensitive or confidential, or that disclosure of the documents would prejudice any investigation of the plaintiff by ASIC. The basis for ASICs claim is, first, that disclosure of the documents carries a real risk that a source of information assisting ASIC with its investigations (and fulfilment of its statutory functions) will dry up and, secondly, that disclosure would involve ASIC breaking a promise of confidentiality. It is clear, on that basis, that there is no sensitivity as to the contents of the documents themselves. The sensitivity relates to their permitted use in the hands of the plaintiff.
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The threshold task is to determine whether discovery and inspection of the documents will harm the public interest on either of those grounds.

Evidence relied upon in support of the claim 25 The evidence establishes that ASIC is a member of the International Organisation of Securities Commissions (IOSCO), which sets international standards for securities markets. ASIC is also a signatory to IOSCOs Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMOU).

26

The Hong Kong Securities and Futures Commission (SFC) and the United States Securities & Exchange Commission (SEC) are also members of IOSCO and signatories to the MMOU. Separately, ASIC and the SEC have entered into a bilateral Memorandum of Understanding (the MOU).

27

The MMOU and the MOU were admitted into evidence in the proceedings before me on an open basis. For the most part, the balance of ASICs evidence in support of the application was admitted on a confidential basis. Care must accordingly be taken in recording my reasons for this decision. I have determined that the safest approach in the first instance is to record additional discussion of the evidence in a confidential annexure to this judgment. I will hear ASIC as to whether the annexure should be kept confidential.

[post script: after hearing ASIC further as to the confidentiality of the contents of the annexure, I have determined that there is no warrant for maintaining its confidentiality]

28

The documents the subject of the present application are numbered 1 to 30. Evidence was given at the hearing of the application by Ms Fiona Lourey, a senior lawyer employed by ASIC. In cross examination, Ms Lourey frankly acknowledged that, as to documents 1-14 on the list, some of the documents may have been put to the plaintiff during the course of
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his examination under section 19 of the Australian Securities and Investments Commission Act 2001 (Cth)(see T17.26-31). Following the section 19 examination, Mr Liu was restricted from disclosing any information about those documents only up until 15 June 2011. He is not presently subject to any restriction as to disclosure of the contents of those documents. Further, as already noted, ASIC does not contend that their contents are sensitive or confidential in any respect. 29 Ms Lourey noted that documents 15-30 on the list would not have been shown to Mr Liu during the section 19 examination, since they had not come into ASICs possession by that time. However, ASIC openly acknowledged during the hearing that those documents are all emails to or from Mr Liu. It follows that Mr Liu is under no confidentiality obligation as to the contents of those documents. He may have been liable to discover the emails independently, had they been in his possession. I was informed, however, that the copies identified by Mr Liu in his list of documents were obtained by him from another source in the circumstances described in the confidential schedule to this judgment. Determination of the claim 30 I am not persuaded that there will be any harm to the public interest if the documents are discovered and inspected in the proceedings. As already noted, ASICs objection to discovery and inspection of the documents is twofold. First, it derives from a concern that an important source of information to ASIC may dry up if discovery is allowed. For the reasons identified in the schedule to this judgment, I consider that concern to be misplaced.

31

Secondly, ASIC has expressed the concern that disclosure of the documents would involve a breach of the MMOU or the MOU. I consider that concern also to be misplaced. As already noted, ASIC is a stranger to these proceedings. It is not in possession of the relevant documents and it is neither obliged nor entitled to regulate their disclosure by the plaintiff in
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accordance with his discovery obligations. Accordingly there would be no warrant, in my view, for any person to take the view that discovery and inspection of the documents (by the plaintiff and the defendants respectively) constitutes any breach by ASIC of its undertakings recorded in the two memorandums.

32

Indeed, it could rather be concluded that, in bringing the present application, ASIC has demonstrated its preparedness to take every conceivable step to uphold the spirit of those arrangements, and has even gone beyond what should reasonably be required of it to maintain the confidentiality of documents in an instance where the contents of the documents have no independent sensitivity.

33

For those reasons (as expanded upon in the confidential annexure to this judgment) I am of the view that ASICs application should be dismissed.

34

I will hear ASIC and the parties as to the appropriate form of orders and as to costs.

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ANNEXURE TO JUDGMENT
[post script: after hearing ASIC further as to the confidentiality of the contents of this annexure, I have determined that there is no warrant for maintaining its confidentiality]

35

The arrangements recorded in the MMOU and the MOU enable ASIC to make requests for information to assist it in its investigation and enforcement activities where evidence is not within the jurisdiction.

36

The plaintiff is a person of interest to ASIC in an ongoing investigation in respect of his management of the investment fund the subject of the articles sued on in these proceedings. To date, no charges have been brought against the plaintiff arising from that investigation. During the course of ASICs investigation of the plaintiff, documents were obtained from the SFC and the SEC pursuant to the arrangements referred to above. The permissible uses of information obtained in response to such requests are governed by the MMOU and the MOU. Permissible uses include the use of the information for the purpose of assisting in a criminal investigation. The two memorandums thus plainly contemplate that information obtained pursuant to a request may at some stage become publicly available (for example, if tendered during a trial).

37

38

After successfully negotiating a guilty plea with another person the subject of its investigation, ASIC sought to explore whether a similar guilty plea could be entered into with Mr Liu for his alleged involvement in the arrangement. Curiously, ASIC sought to negotiate a plea with Mr Liu without having brought any charges against him.

39

In the course of the plea negotiations, a brief of documents was provided to Mr Lius solicitor to indicate the key evidence that the ASIC would be able to adduce in the event that criminal charges were brought against Mr
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Liu. The documents provided included the documents obtained from the SFC and the SEC pursuant to the MMOU and the MOU. Those are the documents the subject of the present application.

40

ASIC considered the provision of the documents to be within the permissible uses of the information in accordance with the MMOU and the MOU.

41

The provision of the documents evidently failed to persuade Mr Liu to plead guilty to the proposed charges. As already noted, no charges have been laid against him.

42

The MMOU and the MOU require ASIC to keep confidential requests made under the memorandums and not to disclose non-public information received under the memorandums except as contemplated in the provisions relating to permitted uses of the information or in response to a legally enforceable demand. The memorandums further require ASIC, in the event of receipt of a legally enforceable demand, to notify the authority from which the information was obtained and to use its best efforts to protect the confidentiality of the information, including by asserting such appropriate legal exemptions or privileges as may be available. As noted in the open part of this judgment, ASICs application derives in part from a concern that an important source of information to ASIC may dry up if discovery is allowed. I consider that concern to be misplaced.

43

44

ASIC evidently took the view that, once it was on notice of the proposed discovery of the documents (there is no evidence before me as to how that came about), it was obliged to use its best efforts to prevent that from occurring, even though the potential disclosure of the documents did not derive from any legally enforceable demand against ASIC itself.

45

In those circumstances, ASIC contacted the two sources of the documents and sought their views as to disclosure of the documents. They in turn
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requested ASIC to seek to maintain the confidentiality of the documents and indeed ventured the view that disclosure of the documents may harm the future efficacy of the arrangements contemplated in the two memorandums. A similar view was expressed by one of ASICs witnesses, Kim Holmes, who has considerable experience in the area of investigation. Whilst I can understand ASICs approach, it seems to me that it reflected an overly cautious analysis of ASICs obligations under the two memorandums. Having deployed the information obtained from the two other authorities in accordance with the permitted uses, I do not think that ASIC is required in accordance with the terms of the memorandums to police the use of the information in the hands of others.

46

47

Further, after careful deliberation of the content of the relevant correspondence, I think that the concerns expressed by the sources should be allayed once it is appreciated that the documents were provided to the plaintiff in accordance with their permitted uses under the MMOU and the MOU and, further, that ASIC is neither entitled nor obliged to regulate the discovery obligations of the parties to these proceedings.

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I certify that this and the 13 preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice McCallum. 26 April 2012. Associate: N Sinclair

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