VCAT reversed for ignoring penalty privilege in merits review of disciplinary proceeding

CT v Medical Practitioners Board [2008] VSCA 157 is a very important ruling for the world of professional discipline, and its intersection with the world of VCAT. A doctor sought merits review of a disciplinary decision of the Board. The Court of Appeal made clear that the penalty privilege (a close relation of the privilege against self-incrimination), when applied to disciplinary hearings where a penalty such as a fine or a suspension from practice may be imposed (including rehearings such as merits reviews in VCAT), means that VCAT ought not give directions which:

‘require the applicant for review to provide 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 case advanced against the applicant has been completed.’

The Court of Appeal overturned a decision of VCAT’s Vice-President Harbison dismissing without a trial a doctor’s application for merits review of a disciplinary finding against him by the Medical Practitioners Board. The summary dismissal was based on the doctor’s supposed failure to comply with an earlier order of Acting President Bowman.  The orders set the matter down for trial a bit more than 2 months later.  The Board was to give a statement under s. 49 of the VCAT Act (as to which, see below).  Then the doctor had to file ‘witness statements and any further documents upon which he intended to rely within a fortnight.  Then the Board had to file and serve any material on which it intended to rely within about a month.  The day after that deadline was a Friday, and the four day trial was to start on the Monday.  If the parties desired to rely on any evidence not in a witness statement, or any documents not previously exchanged, they had to seek leave of the decision maker at the trial. The Court of Appeal noted counsel’s submission that these were standard orders in merits review cases.

Justices of Appeal Redlich and Weinberg, and Acting Justice of Appeal Mandie (who delivered the joint judgment) found that the summary dismissal was wrong because there had been no non-compliance by the doctor.  Though he had not filed any witness statements or documents to be relied on, that was his choice, so long as he had not yet decided whether or not to do so.  The possibility of seeking leave at trial to rely on undisclosed evidence, once he had evaluated the evidence against him, was open to him on the orders.

In view of the privilege against penalties which entitles a respondent to a claim for a penalty to require the applicant to prove its case without assistance from him, the Court of Appeal implied, a professional who waited until the evidence against him had been laid out before deciding whether to give evidence should not be criticised.  The unanimous Court cited with approval a decision of the Federal Court’s Justice Finkelstein in Australian Securities & Investments Commission v Mining Projects Group Ltd [2007] FCA 1620 (‘and the cases therein cited’, notably Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129).  Their Honours specifically reproduced the following passage from paras [12]–[13] of Finkelstein J’s reasons (from which I have set out a longer passage at the end of this post, namely the concise, lucid, current exposition of the penalty privilege which I have been looking for in vain for the past few months):

‘the plaintiff must prove his case without any assistance from the defendant … What should occur is that the defendant should be entitled to rely on the privilege until the plaintiff’s case is concluded. If at that point the defendant decides to run a positive case he can deliver an amended defence that will outline his case. In an exceptional case the Judge may grant a short adjournment to allow the plaintiff time to prepare, if he is otherwise taken by surprise. In most cases that will not be necessary. By the time the plaintiff has closed his case the nature of the defence will usually be apparent.’

The exchange between the Vice President and the doctor is set out at length.  The appeal judges were not impressed.  VCAT had rescheduled the trial at very short notice and had not consulted with the doctor about the new date with the result that neither his solicitor nor barrister could attend.  When the doctor turned up alone to ask for an adjournment, the Board’s barrister made an oral application to strike out his application for a review of its decision. The adjournment application was initially granted until the next morning (the Vice-President quipped ‘There are many barristers at the Bar’), but then when the doctor sought to make some points about the matter, the Vice-President deemed him to desire to go ahead with the hearing, the Board’s summary judgment application was heard, and it succeeded. I do not mean ‘summary judgment’ in the usual sense.  This was an application under s. 78 of the VCAT Act for the dismissal of the whole proceeding essentially for disregard by the doctor of the Court’s orders.  The Court of Appeal held that VCAT should have granted the adjournment, citing McColl v Lehmann [1987] VR 503, 506 (Kaye J); Collection House Limited v Taylor [2004] VSC 49, [23] (Nettle JA); Lewis v State of Western Australia [No 2] [2008] WASCA 155, [42]–[46].

I said I would expand on the reference to s. 49 of the VCAT Act.  The person affected by an administrative decision may seek a statement of reasons under s. 46. They may do so before commencing VCAT proceedings. If they do so, then what must be provided under s. 49 within a fortnight of merits review proceedings being brought is a copy of the reasons and all documents considered by the decision maker to be relevant.  If the person did not seek reasons under s. 46, what must be provided under s. 49 is essentially the same kind of statement of reasons, together with all documents considered relevant by the decision maker.

Here is the passage from Justice Finkelstein’s judgment, as promised above:

‘7 By way of introduction, it is necessary to say a word or two about each privilege. Each privilege operates to excuse a person from being compelled to answer any question or produce any document if doing so would have the tendency in one case to expose that person either directly or indirectly to a criminal charge and in the other to a penalty. Though often said to be analogous and based on the same rationale, the privileges are quite distinct. The privilege against self-incrimination is a “fundamental… bulwark of liberty” (Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328, 340) that “protects personal freedom, privacy and human dignity” (Caltex Refining [1993] HCA 74; 178 CLR 477, 500) and is “deeply ingrained in the common law” (Sorby v The Commonwealth [1983] HCA 10; (1983) 152 CLR 281, 309). It applies in curial proceedings, including procedures related to curial proceedings, and non-curial proceedings: Pyneboard 152 CLR 328, 340-341; Sorby [1983] HCA 10; 152 CLR 281, 309. By contrast, the penalty privilege is different in several fundamental respects. The penalty privilege is not a substantive rule of law: Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129, 142 and 179. It is merely a procedural rule that applies in curial proceedings to require the plaintiff to prove his case without any assistance from the defendant: Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543, 559.

8 In view of the claims made by ASIC, each privilege is engaged. Penalty privilege is engaged because ASIC seeks orders for pecuniary penalties under s 1317G and non-pecuniary penalties under s 206C (an order to disqualify a person from managing a corporation is a penalty for the purposes of the privilege: Rich [2004] HCA 42; 220 CLR 129, 147). Self-incrimination privilege is also engaged. ASIC’s allegations of insider trading and breach of directors’ duties suggest that the directors are exposed to criminal charges being laid. The kinds of charges available include obtaining property by deception, obtaining financial advantage by deception and fraudulently inducing persons to invest money: Crimes Act 1958 (Vic) ss 81, 82 and 191 respectively.

9 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: Rio Tinto Zinc Corp v Westinghouse Electric Corp [1978] AC 547, 574; Rank Film Distributors Ltd v Video Information Centre [1982] AC 380, 392; Sorby [1983] HCA 10; 152 CLR 281, 290 and 294. That will not be difficult to show when, as here, the proceeding is aimed at proving that the directors engaged in conduct which would establish, or go a long way toward establishing, that they had also committed criminal acts.

10 The manner in which penalty privilege is to be claimed depends upon the type of proceeding in which the claim is made. In R v Associated Northern Collieries [1910] HCA 61; (1910) 11 CLR 738, Isaacs J drew attention (at 742) to the “inherent distinction between a civil action to prevent or redress a civil injury on the one hand, and a civil action to recover a penalty on the other. In the latter case the whole and avowed object of the proceeding is the infliction of the penalty”. See also Mayor of Derby County Borough v Derbyshire County Council [1897] AC 550, 552; Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation (1979) 42 FLR 204, 207. In an action to recover a penalty it is not necessary for the defendant to establish that there is a risk he will be subjected to a penalty by providing information to the plaintiff. The plaintiff is seeking the information for that very purpose. It does not matter that in the proceeding the plaintiff also claims other relief: Birrell v Australian National Airlines Commission (1984) 1 FCR 526, 530. In civil actions where no claim for a 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.

11 The circumstances in which penalty privilege may be claimed are not settled. In the past penalty privilege has been raised to prevent a plaintiff obtaining an order for discovery of documents or the administration of interrogatories: see eg Naismith v McGovern [1953] HCA 59; (1953) 90 CLR 336, 341-342. It is clear, however, that the privilege has a wider scope. It will operate, for example, to prevent an order being made for the provision of witness statements (Australian Competition and Consumer Commission v FFE Building Services Ltd [2003] FCAFC 132; (2003) 130 FCR 37) or for the production of documents on subpoena (Caltex Refining [1993] HCA 74; 178 CLR 477, 560). In Refrigerated Express 42 FLR 204, 207-208 Deane J said that the privilege operates to prevent a plaintiff obtaining any information that will assist in establishing the defendant’s liability to a penalty.

12 That the rule has a wider application than merely preventing a plaintiff from obtaining discovery or interrogatories reflects the broad object of penalty privilege. In Daniels Corporation [2002] HCA 49; 213 CLR 543, 559 Gleeson CJ, Gaudron, Gummow and Hayne JJ said that penalty privilege “serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it.” That is, the plaintiff must prove his case without any assistance from the defendant: Abbco Iceworks 52 FCR 96, 129; Rich [2004] HCA 42; 220 CLR 129, 142. So it has been held that although in a civil action a defendant is required to deliver a defence he cannot be compelled to make any admissions in relation to the matters alleged against him. That is, penalty privilege operates to relieve a defendant from the need to deliver a defence that complies with the pleading rules if the rules would override the privilege. To the extent that pleading rules purport to impose such an obligation they must give way to the privilege: Hadgkiss v Construction, Forestry, Mining and Energy Union (2005) 146 IR 106, 111-112; A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union (2005) 226 ALR 247, 251.

13 There is a potential problem if, as in this case, a defendant wishes to run a positive case. Ordinarily a positive case must be raised in the defence. Whether it must be raised in a defence in a civil action to recover a penalty is by no means clear. The view I favour is that there can be no such requirement as it would be inconsistent with the privilege. On the other hand, if a defendant who wishes to run a positive case is required to plead his case that can be accommodated while maintaining the privilege. What should occur is that the defendant should be entitled to rely on the privilege until the plaintiff’s case is concluded. If at that point the defendant decides to run a positive case he can deliver an amended defence that will outline his case. In an exceptional case the judge may grant a short adjournment to allow the plaintiff time to prepare, if he is otherwise taken by surprise. In most cases that will not be necessary. By the time the plaintiff has closed his case the nature of the defence will usually be apparent. That is the experience of those who prosecute criminal cases. The advocate who runs a civil penalty proceeding should be equally adept at dealing with the defendant and his witnesses without knowing in advance every word they are about to say.

both penalty privilege and self-incrimination privilege protect not only against the risk of exposure to penalty or incrimination by direct evidence but also by indirect or derivative evidence. Disclosing a positive case at the pleadings stage will often provide the plaintiff with an opportunity to follow leads and open up fresh fields of inquiry. A defendant cannot be required to provide information that may be the basis of an investigation that may lead to the discovery of real evidence: Reid v Howard [1995] HCA 40; (1995) 184 CLR 1, 6-7. If a defendant is required to plead a positive case there is a risk of that happening: Chief Executive Officer of Customs v Camile Pty Ltd (2004) 58 ATR 163, 169.

17 … a defendant can rely on the privilege up to the point he decides to go into evidence. It is only at that moment, if the defendant elects to run a positive case, that he must give up the privilege and file a defence that outlines the case he intends to run.’

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