Involved or not involved? That is the question for partners.
It is well established that the privilege against self-incrimination and privilege from exposure to civil penalties can be claimed by natural persons and are not available to corporations.
However, the position is not yet settled insofar as it relates to partnerships. More specifically, whether all partners can claim the privileges or whether it can only be claimed by those partners who were directly involved in the alleged wrongdoing.
This was the very issue which came to be determined by the Court in the matter of Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (No 3)[1]. The proceedings concern an ongoing class action brought by Sadie Ville in which it sought the production of certain documents from Deloitte, in relation to its role as auditor of the now collapsed Hastie Group Ltd.
Following orders for discovery, all of the Deloitte partners (including all those who were directly involved in the audits as well as those who were not involved) sought to claim the privilege against self-incrimination and the privilege against exposure to penalties to resist the production of certain documents.
The Court’s determination regarding the involved partners
Justice Moshinsky first considered the position of the involved partners (i.e. those who were directly involved in the conduct of the audits). Even though there was no indication that ASIC or the CDPP were presently investigating or considering prosecution, the Court acknowledged this could change and was satisfied that the production of the documents in question would give rise to a “real and appreciable” risk of prosecution or the institution of proceedings for a pecuniary penalty in relation to the involved partners.[2]
The Court’s determination regarding the non-involved partners
However, in so far as the non-involved partners were concerned, His Honour held that the production of the documents would not give rise to a real and appreciable risk of prosecution or the institution of proceedings for a pecuniary penalty in relation to those partners.[3] His Honour considered that the prospect of prosecution of a non-involved partner to be “theoretical rather than real“.[4]
The outcome
The involved partners were therefore excused from producing the requested documents, however, his Honour made orders that the non-involved partners were required to produce the documents (the Production Order).[5]
What happened next?
In a subsequent “extraordinary and troubling” turn of events, the non-involved partners returned to the Court a few months later seeking to be excused from complying with the Production Order.[6] The basis for making the application was that one of the involved partners had obtained possession or control of the documents and was refusing to release them to the non-involved partners.
The circumstances by which the involved partner had come into possession or control of the documents was not made clear to the Court or, indeed, (it appears) the subject of appropriate inquiry.
His Honour observed that the “[t]he circumstances appear to be designed to bring about a situation where the Uninvolved Partners can argue (as they have on this application) that they are unable to produce the documents in accordance with their discovery obligations“.[7]
In the absence of a detailed explanation as to how the involved partner obtained the documents, the Court was not satisfied that the non-involved partners were unable to produce the documents and refused Deloitte’s application.[8]
Key Takeaway
In order to validly make out a claim of privilege against self-incrimination or privilege from exposure to civil penalties, there must be a “real and appreciable risk” of prosecution or institution of penalty proceedings.
As a result of the personal nature of these privileges, individual partners must be able to show that producing the documents or providing the information in question would give rise to that “real and appreciable risk”. That may not be able to be established for those who were not directly involved in the alleged wrongdoing.
His Honour’s decision is the subject of an appeal by Deloitte, that was heard on 6 May 2019. As at the date of writing, judgment is reserved.
[1] [2018] FCA 1107.
[2] Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (No 3) [2018] FCA 1107 at [105].
[3][3] Ibid at [106].
[4] Ibid at [107], [110] and [112].
[5] Ibid at [119].
[6] Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (A Firm) (No 5) [2018] FCA 2066.
[7] Ibid at [54].
[8] Ibid at [57].
Get in touch
- Scott Couper
- Partner, Brisbane
- +61 7 3231 1651
- scott.couper@gadens.com
