Supreme CourtNew South WalesCommon Law Division

Case Title: Liu v Fairfax Media Publications Pty Ltd

Medium Neutral Citation: [2012] NSWCA 395

Hearing Date(s): 12 April 2012

Decision Date: 26 April 2012

Jurisdiction: Common Law

Before: McCallum J

Decision: Application by Australian Securities and Investments Commission for orders preventing the disclosure of discoverable documents refused

Catchwords: 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

Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth)Civil Procedure Act 1995Evidence Act 1995Supreme Court Act 1970

Cases Cited: Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319Corporate Affairs Commission v Bradley [1974] 1 NSWLR 391David Syme & Co Ltd v Hore-Lacey [2000] VSCA 24 (2000) 1 VR 667Derbas v R [2012] NSWCCA 14Rushby v Roberts [1983] 1 NSWLR 350Sankey v Whitlam [1978] HCA 43State of New South Wales v Public

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Transport Ticketing Corporation [2011] NSWCA 60

Texts Cited:

Category: Interlocutory applications

Parties: 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: Solicitors:Conrad Gray (Australian Securities and Investments Commission)Kennedys Lawyers (plaintiff)Johnson Winter & Slattery (defendant)

File number(s): 2010/350215

Publication Restriction: Not to be posted on the Internet

JUDGMENT

1 HER HONOUR: These are proceedings for defamation brought by Mr

Eugene Liu against the publishers of The Sydney Morning Herald

newspaper.

2 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.

ASIC’s 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.

4 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).

5 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 person’s appearance in such circumstances except by leave

or pursuant to some statutory right to intervene.

6 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 court’s

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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7 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.

8 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.

9 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 ASIC’s 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 Liu’s claim in defamation arises out of the publication of a series of

articles in the print and Internet versions of The Sydney Morning Herald - 4 -

newspaper concerning Mr Liu’s 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”.

12 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.

(3) 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.

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 plaintiff’s (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). - 6 -

17 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 ASIC’s

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 non-

party 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 plaintiff’s 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.

23 The basis for ASIC’s 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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24 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 IOSCO’s

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 ASIC’s

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 - 9 -

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 ASIC’s 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, ASIC’s 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 ASIC’s 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.

37 During the course of ASIC’s 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).

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 Liu’s 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.

43 As noted in the open part of this judgment, ASIC’s 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.

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 - 13 -

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 ASIC’s witnesses,

Kim Holmes, who has considerable experience in the area of investigation.

46 Whilst I can understand ASIC’s approach, it seems to me that it reflected

an overly cautious analysis of ASIC’s 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.

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.

**********

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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