The recent Victorian Supreme Court decision of Le Roi Homestyle Cookies Pty Ltd (in liquidation) v Gemmell [2013] VSC 452 determined that a person who does not claim privilege when being publicly examined by a liquidator will not be allowed to avoid pleading and providing discovery in subsequent civil proceedings on the basis that complying may expose them to a civil penalty or criminal sanction.

Facts

The defendants were alleged former de facto and shadow directors of Le Roi Homestyle Pty Ltd.

The liquidators of Le Roi Homestyle Pty Ltd conducted public examinations of each of the defendants pursuant to s 597 of the Corporations Act 2001 (Cth). Under s 597, examinees are required to answer questions even if the answers might expose them to penalty or criminal prosecution. However, if examinees claim penalty privilege or privilege against self-incrimination, their answers may not be used against them in criminal or penalty proceedings.

At the commencement of each defendant’s public examination, the presiding Associate Judge gave the defendants a warning about their answers and informed them of their rights in respect of privilege. Neither defendant claimed privilege at any stage of the public examinations.

The liquidators subsequently brought proceedings against the defendants alleging that the defendants had contravened the insolvent trading provisions of the Corporations Act 2001 (Cth). The proceedings were based largely on the answers given by the defendants in the course of the public examinations.

The defendants applied for orders relieving them from complying with their pleading and discovery obligations to the extent that compliance might have a tendency to expose them to a civil penalty or criminal sanction. An Associate Judge dismissed the application and ordered that defences be filed and that all parties make discovery.

The defendants appealed those orders.

Decision

On appeal, Ferguson J noted that the defendants had had their rights clearly explained to them at the beginning of their public examinations but they did not claim privilege and instead gave sworn answers to the questions they were asked.

Her Honour also observed that the amended statement of claim and the transcript of the examinations revealed that the pleaded allegations and particulars were to a large degree based on the sworn examination answers given by the defendants. The defendants did not submit that in pleading their defences and making discovery they would have to go beyond the information that they provided during their examinations and there was no suggestion that the defendants would expose themselves to any different penalty or criminal proceeding to which they were not already exposed.

On this basis, Ferguson J considered that the defendants had waived the right to claim privilege in respect of the answers they gave during their public examinations and there was no justification for relieving them of their obligations to comply with the pleading and discovery rules. Her Honour added that if the defendants were to be excused from pleading the matters about which they had already answered questions in their public examinations, the outcome would be irrational.

The appeal was dismissed.

Comment

This case is a clear illustration of the consequences of failing to claim privilege during public examinations. If a person has been informed of his or her rights before being publicly examined then a failure to claim privilege in respect of the answers given during his or her examination will be deemed to be a waiver of privilege. Provided any subsequent civil proceedings do not go beyond the information provided during the public examination, that person cannot at a later stage assert privilege to avoid making pleadings and discovery. That person would have already lost the protection that they now seek.

Therefore, any person under public examination should, before answering any questions, be mindful of the potential ramifications of not claiming privilege in respect of their answers.