QC Resource Investments Pty Ltd (In Liq) v Mulligan [2016] FCA 813

FEDERAL COURT OF AUSTRALIA

QC Resource Investments Pty Ltd (In Liq) v Mulligan [2016] FCA 813 File number: QUD 41 of 2016

Judge: EDELMAN J

Date of judgment: 15 July 2016

Catchwords: EVIDENCE – claim to privilege against self-exposure to a penalty or self-incrimination – extent to which a claim for privilege needs to be supported by evidence and submissions in order for a claimant to be relieved from rules concerning pleading – different considerations in the two different circumstances in which privilege is claimed – circumstance concerned with possible exposure to a penalty in other proceedings – where other proceedings have not been commenced or foreshadowed and claims to privilege are unsupported by affidavit evidence explaining the reasonable grounds for each claim of privilege

Legislation: Corporations Act 2001 (Cth) ss 180(1), 181(1), 588G, 588G(2), 588M(2), 1317E, 1317K Federal Court of Australia Act 1976 (Cth) ss 37AF, 37AI Legal Profession Act 2004 (NSW) s 347 Trade Practices Act 1974 (Cth) Federal Court Rules 2011 (Cth) rr 1.32, 2.32(1)(a), 16.02(1)(d), 16.02(2)(e), 16.03(1)(b), 16.07, 16.08, 20.03

Cases cited: Gemmell & Anor v Le Roi Homestyle Cookies Pty Ltd v Anor [2014] VSCA 182; (2014) 102 ACSR 367 Le Roi Homestyle Cookies Pty Ltd (in liq) v Gemmell [2013] VSC 452 One.Tel Ltd (in liq) v Rich & Ors [2005] NSWSC 226; (2005) 190 FLR 443 Pascoe v Divisional Security Group Pty Ltd [2007] NSWSC 211; (2007) 209 FLR 197 Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328 Re Australian Property Custodian Holdings Ltd (in liq) (recs and mrgs apptd) (controllers apptd) (No 2) [2012] VSC 576; (2012) 93 ACSR 130 Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat & Livestock Corporation (1979) 42 FLR 204 Reid v Howard [1995] HCA 40; (1995) 184 CLR 1

Date of hearing: 15 July 2016

Registry: Queensland

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 49

Counsel for the Applicants: Mr A Pomerenke QC with Mr S Cooper

Solicitor for the Applicants: Johnson Winter and Slattery

Counsel for the Respondent: Mr DS Piggott

Solicitor for the Respondent: Tucker and Cowen Solicitors

ORDERS QUD 41 of 2016

BETWEEN: QC RESOURCE INVESTMENTS PTY LTD (IN LIQ) First Applicant

MICHAEL OWEN AND DAVID LEIGH AS LIQUIDATORS OF QC RESOURCE INVESTMENTS PTY LTD (IN LIQ) Second Applicant

AND: GRAHAM MULLIGAN Respondent

JUDGE: EDELMAN J DATE OF ORDER: 15 JULY 2016

THE COURT ORDERS THAT:

1. By 22 July 2016, the applicants write to the respondent identifying any claim for privilege made in the defence filed on 18 March 2016 which they do not challenge. 2. By 29 July 2016, the respondent provide to the applicants an affidavit setting out in relation to each allegation, or category of allegations, in the statement of claim for which he maintains a claim for privilege (save for those identified by the applicants in response to paragraph 1 above): (a) the particular pleading rule or rules within the Federal Court Rules 2011 (Cth) in respect of which he seeks a dispensation from compliance; and (b) the basis upon which he apprehends that compliance with the particular rule or rules would tend to incriminate him or expose him to a penalty. 3. By 5 August 2016, counsel for the applicants and the respondent confer about the matters in order 2 above. 4. By 12 August 2016, the parties are to inform the Associate to the Hon Justice Edelman of the outcome of the process in 1 to 3. 5. The proceedings be listed for further directions on Wednesday 17 August at 9.15am. 6. The respondent pay the applicants' costs of and incidental to the applicants' application filed on 12 July 2016. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

EDELMAN J: 1 This interlocutory application is concerned with whether the respondent, Mr Mulligan, can decline to plead to 92 paragraphs of a statement of claim by making a sweeping claim alleging that if he were required to plead to those paragraphs then he might be exposed to a penalty in other, unspecified litigation which has not been threatened or commenced. 2 The applicants in this proceeding are QC Resource Investments Pty Ltd (QCRI) and its liquidators. They seek declarations that Mr Mulligan has contravened ss 180(1), 181(1), and 588G(2) of the Corporations Act 2001 (Cth). Each of those provisions is a civil penalty provision (s 1317E) but the applicants do not seek any civil penalties. Mr Mulligan has filed a defence which, on 92 occasions, does not admit allegations contained in a particular paragraph of the statement of claim. On each occasion the defence asserts a claim to privilege against self-exposure to a penalty or privilege against self-incrimination. But at no time prior to this hearing did the respondent identify any particular basis for any reasonable grounds upon which the privilege is claimed in relation to specific paragraphs in the statement of claim. 3 The dispute between the parties only emerged clearly after submissions were filed yesterday afternoon. Essentially, Mr Mulligan submitted that the ordinary pleading rules should give way to his claim of privilege in 92 instances without Mr Mulligan descending to the detail of the reasonable basis upon which he claims a privilege as a basis for relief from pleading a response to any of those paragraphs. The careful written and oral submissions by counsel for Mr Mulligan were more nuanced than this, and the position in the authorities, to which he comprehensively referred, is not wholly pellucid. But this is the broad nature of the dispute as it currently exists. 4 Mr Mulligan's submission is not correct. He should be required to file and serve a defence that complies with the Federal Court Rules 2011 (Cth) unless he provides affidavit evidence which provides sufficient support in the circumstances of each contested claim for privilege.

Summary of the proceeding 5 In very broad outline, the allegations by QCRI and the liquidators, which Mr Mulligan emphasised in this proceeding, involve the following. 6 Mr Mulligan was the sole director of QCRI. While he was the director, QCRI negotiated to purchase assets from two companies, described as SRA and Dysart, for $203 million and $209 million respectively. 7 QCRI and the liquidators plead that between August 2011 and February 2013, Mr Mulligan, on behalf of QCRI, "made, caused, authorised or allowed" various classes of payments by QCRI. 8 One class of payments was payments to SRA and Dysart under Heads of Agreement or amended Heads of Agreement amounting to (i) $490,056, (ii) $510,000, (iii) $263,478.38, (iv) $200,000, (v) $250,000 in respect of exclusivity arrangements between QCRI, SRA and Dysart. 9 Another class of payments was further payments of $1,325,000 to SRA or Dysart. 10 Another class of payments was nearly $3 million to a company (Citadel) and more than $700,000 to another company (Argent Mayfair) allegedly without any invoice from Citadel or Argent Mayfair and in circumstances in which QCRI did not owe any money to Citadel or Argent Mayfair, nor had received any services from either company. 11 Another class of payments were payments amounting to $594,000 to Mr Mulligan's service company, Vantara, received in respect of services provided by Mr Mulligan to QCRI. 12 The applicants say that Mr Mulligan authorised persons who "went by the name of" Mr Paul Wilson and Mr Nathan Collins to seek to raise capital or finance on behalf of QCRI. It is alleged that Mr Mulligan knew or ought to have known that: (1) Mr Wilson and Mr Collins were not persons who had access to any materially relevant capital markets or necessary contacts or connections such that they would be able or likely to raise the capital required; (2) three attempts by "the person who went by the name of Mr Paul Wilson" to raise capital on behalf of QCRI had been unsuccessful; and (3) the entities from whom Mr Paul Wilson had attempted to raise finance had not been genuinely interested in investing capital in QCRI or providing finance to QCRI (as the case may be). 13 Based on these allegations and other matters, QCRI and the liquidators say that (i) Mr Mulligan permitted QCRI to trade whilst insolvent in circumstances which include an allegation that Mr Mulligan had reasonable grounds for suspecting insolvency (s 588G(2) of the Corporations Act), (ii) Mr Mulligan failed to exercise his powers and discharge his duties with care and diligence as required by s 180(1) of the Corporations Act, and (iii) Mr Mulligan failed to exercise his powers and discharge his duties in good faith and in the best interests of QCRI and for a proper purpose consistently with the terms of s 181(1) of the Corporations Act.

The overarching assertion of privilege by Mr Mulligan 14 Mr Mulligan submits that the six-year time limit for ASIC to bring penalty proceedings against him has not expired (s 1317K of the Corporations Act). He says that ASIC has not informed him that penalty proceedings will not be brought. He submits that he does not know if QCRI or the liquidators or any creditors of QCRI alleged to be funding this proceeding have reported the subject matter of their claims to ASIC. Mr Mulligan's solicitor has also deposed that all of Mr Mulligan's claims of privilege are bona fide. 15 On the basis of this overarching position, Mr Mulligan asserts a privilege in blanket terms which he says is sufficient to relieve him from compliance with all of the court rules. That blanket claim is as follows: The Respondent claims (and reserves his right to claim) privilege against self-exposure to a penalty and further or in the alternative privilege against self-incrimination. Where in this defence the Respondent refers to privilege, the privilege referred to is privilege against self-exposure to penalty and further or in the alternative privilege against self-incrimination. 16 Nowhere in Mr Mulligan's affidavit evidence, nor in submissions, does he attempt to associate any of those pleadings of fact with any of the penalty provisions. Nowhere does he attempt to explain how any of those facts, if admitted, might lead to a train of enquiry which could expose him to a penalty. Nor does he explain how any matter of fact pleaded in defence might lead to a train of enquiry which could expose him to a penalty. As I explain below, there may be some circumstances where it is sufficient to identify these matters in very broad terms, or possibly even by assertion. But each fact must be assessed individually. 17 The 92 paragraphs in the statement of claim over which Mr Mulligan claims privilege are varied. For example, a small selection of the paragraphs that Mr Mulligan does not admit and claims privilege over include the following: (1) paragraph 13 of the statement of claim, which provides: "At all material times, the total purchase price which QCRI was required to pay in order to secure a transfer of the EPC Assets from SRA and Dysart was AUD $412,000,000"; (2) paragraph 15 of the statement of claim, which provides: "The SRA Term Sheet was executed by Mr Mulligan on behalf of QCRI"; (3) paragraph 17 of the statement of claim, which provides: The effect of the Term Sheet was to provide that upon payment by QCRI of $100,000 as a non-refundable deposit, QCRI would have approximately a 7-day exclusivity period in which to finalise the terms of the Transaction Documents which required QCRI to commit to a payment to SRA of $203,000,000. (4) paragraph 18 of the statement of claim, which provides: "In the events that happened, QCRI did not make any payment to SRA in respect of the Term Sheet"; (5) paragraph 39 of the statement of claim, which provides: "On or about July 2012, QCRI entered into an amendment agreement with SRA (Amendment Agreement)"; (6) paragraph 46 of the statement of claim, which provides: "In the events that happened, on 25 April 2012, QCRI paid $250,000.00 to Dysart in consideration for the exclusivity provided in the Second Dysart [Heads of Agreement]"; (7) paragraph 48 of the statement of claim, which provides: From June 2011, Mr Mulligan on behalf of QCRI authorised, alternatively allowed a person that went by the name Mr Nathan Collins to seek to raise capital or finance on behalf of QCRI. (8) paragraph 56 of the statement of claim, which provides: "At no time did Mr Mulligan on behalf of QCRI seek to withdraw the person that was known as Mr Nathan Collins' authority to seek to raise capital or finance on behalf of QCRI"; (9) paragraph 57 of the statement of claim, which provides: "At all material times, QCRI did not have access to sufficient or adequate capital in which to pay any deposit required by the [business sale agreement]or relevant transaction documents for the [Exploration Permits for Coal] Assets"; (10) paragraph 76 of the statement of claim, which provides: The Citadel Payments were made by QCRI at the time of the payments without QCRI having received an invoice from Citadel. PARTICULARS 1. Email from Paul Wilson to Warren Bamford dated 30 July 2012. 2. Email from Warren Bamford to Paul Wilson dated 30 August 2012. 3. Email from Warren Bamford to Nathan Collins copying Graham Mulligan dated 5 November 2012. 4. Email from Warren Bamford to Graham Mulligan dated 18 December 2012. 5. Email from Warren Bamford to Graham Mulligan dated 27 October 2013. (11) paragraph 101 of the statement of claim, which provides: On 26 November 2012, Mr Mulligan sent an email to Mr Kamal Alam to the effect that: a. the situation with QCRI's creditors was "pretty ugly"; and b. Mr Mulligan is counting on the funds of $2 million from AMESS. (12) paragraph 128 of the statement of claim, which provides: "In the premises, Mr Mulligan is liable to pay the Insolvent Debts to QCRI pursuant to s 588M(2) of the Corporations Act." 18 As QCRI and the liquidators submit, the 92 paragraphs which involve non-admissions and pleas of privilege may each require relief from the rules of pleading in the Federal Court Rules on the basis that they: (1) do not state the material facts on which Mr Mulligan relies that are necessary to give the applicants fair notice of the case to be made against them at trial (r 16.02(1)(d)); (2) fail to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading (r 16.02(2)(e)); (3) fail to plead facts that might take the applicants by surprise (r 16.03(1)(b)); (4) fail to admit specifically or deny specifically allegations of fact (r 16.07); and (5) fail to plead matters of fact or law which might take the applicants by surprise if later pleaded (r 16.08).

Two different circumstances in which the privilege against exposure to a penalty arises 19 The starting point for consideration of this issue is the statement of Deane J in Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat & Livestock Corporation (1979) 42 FLR 204, 210-211 (emphasis added): These strongly worded statements plainly establish the general rule that a party to proceedings which are for civil redress and not for a penalty ought not ordinarily be excused, in limine, from giving discovery or answering interrogatories but should be left to object to producing particular documents or answering particular questions on the ground that such production or answer might tend to expose him to liability to a penalty… That general approach is not however, as a matter of law, necessarily appropriate to all circumstances… If circumstances arose where the only means of protecting the right against self-incrimination and self-penalization were to excuse a party in limine from discovery or interrogatories, such circumstances should, in my view, be seen as exceptional and as justifying a departure from the general rule. In particular, if it appeared to the court that the making of an affidavit of discovery as distinct from producing the documents referred to in such an affidavit would tend to expose a party to a penalty, any order for discovery should be adjusted to the extent necessary to preclude that tendency. It is, perhaps, conceivable that circumstances could arise where the mere making of an order for interrogatories might have a similar tendency. The cases where the making of an order for discovery or interrogatories will, in itself, involve exposing a party to self-incrimination or self-penalization must, however, be rare indeed in view of the fact that the party will remain entitled to refuse to answer questions asked or produce documents discovered if the answers or production might tend to incriminate him or expose him to a penalty. 20 That case concerned injunctive relief and damages against corporate and personal defendants under the Trade Practices Act 1974 (Cth). The proceeding was a civil proceeding. It involved no claim for a penalty. But the respondents all asserted that, based upon a blanket claim of exposure to a penalty in other possible proceedings, they should be excused from discovery, production of documents, and answering interrogatories. That assertion was rejected. The case was not exceptional even though the whole basis of the action was alleging contravention of a provision which was punishable by a penalty. The respondents were required to object to producing particular documents or object to answering particular interrogatories. Justice Deane held (at 212) that if the mere description of a document over which objection to discovery was taken could tend to render the respondent liable for a penalty then the respondent could use less precision in the description, or could apply to the court to modify the order for discovery. 21 In Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328, 335-336, Mason ACJ, Wilson and Dawson JJ referred to the decision in Refrigerated Express Lines with approval for the distinction between (i) refusing discovery in a mere action for a penalty, and (ii) requiring objection to particular documents in an action which was not for a penalty (the result of which might be used to establish a party's liability to a penalty in other proceedings). 22 The rationale for the distinction between these two circumstances is obvious and capable of application to other circumstances such as dispensation from rules of pleading. In the first case, where the proceedings are themselves for a penalty then any fact which is admitted, or any positive fact which is pleaded in response, might easily be seen immediately to expose the respondent to a penalty. There will be exceptions. For instance, if the respondent's position were that there was some basic legal basis upon which the applicants' claim for a penalty was defective, independently of any facts, then that should be pleaded. 23 In contrast, in a civil case which does not seek any penalty something more will be required before dispensation from pleading rules can be given. The reason why something more is required is because any effects of pleadings upon privilege will usually be less direct. For instance, a pleaded admission that is not admissible in separate penalty proceedings might expose the respondent to a penalty if it could start a train of enquiry that would lead to a penalty. I do not accept the submission by senior counsel for QCRI and the liquidators that this could never occur. To the contrary, it is easy to imagine circumstances in which a partial admission could substantially change the complexion of the case and lead to a train of enquiry which exposes the respondent to a penalty. As I explain below, in cases where separate penalty proceedings have already been commenced, some courts have effectively inferred that any admission or any pleading of fact might lead to a train of enquiry which could expose the respondent to a penalty. For such an inference to be made, and dispensation to be given entirely from pleading a defence, the circumstances must be exceptional. But far less exceptional circumstances are required where what is sought is dispensation merely from admitting or not admitting a fact, or from pleading to a fact, particularly where (i) the fact is central to the proceeding, and (ii) the circumstances and seriousness of the allegations have the effect that a penalty proceeding may be likely. 24 For these reasons, in the second case, where the proceeding does not seek a penalty, the "something more" which is required before dispensation from the rules is granted will depend on all the circumstances of the case and upon the rules of pleading from which dispensation is sought. In a case such as this where the allegations are very serious, the circumstances will colour the extent to which a respondent must descend into detail to show a reasonable basis for dispensation. But it is not enough simply to allege that there is a possibility of ASIC commencing penalty proceedings. It is necessary to descend to the detail of each claim for privilege. As Robson J said in Re Australian Property Custodian Holdings Ltd (in liq) (recs and mrgs apptd) (controllers apptd) (No 2) [2012] VSC 576; (2012) 93 ACSR 130, 155 [119]: In my view, as a general rule, the proper course to be adopted is that where a defendant in the non penalty proceeding believes he has good grounds to rely on the privilege in pleading his defence, then he should plead according to the rules, but taking the privilege where appropriate. If the pleadings in that form are then challenged by the plaintiff, then the proper course is for the defence and its justification in taking the privilege to be ruled on by the court with the defendant bearing the onus of establishing a bona fide and reasonable basis for taking the privilege. 25 This is not to say that Mr Mulligan is required to provide affidavit evidence or submissions in relation to all 92 pleas, and in relation to each of the five matters upon which relief is sought. If (as would seem unlikely) QCRI and the liquidators choose to challenge the privilege as a basis for any dispensation from the rules in all 92 cases, then the proper course would be to collect in groups common issues arising from (i) the categories of pleaded fact from which relief is sought, and (ii) the different types of relief which is sought. Some instances might require little justification. Others will require more. My present view is that there are some of the 92 paragraphs from which dispensation from all of the five categories of rules would be very difficult to justify.

The authorities relied upon by Mr Mulligan 26 Mr Mulligan essentially relied upon two decisions: One.Tel Ltd (in liq) v Rich & Ors [2005] NSWSC 226; (2005) 190 FLR 443 and Le Roi Homestyle Cookies Pty Ltd (in liq) v Gemmell [2013] VSC 452. 27 The proceeding in One.Tel, like this proceeding, was a civil action alleging contravention of provisions which could render the respondents liable to a civil penalty in other proceedings. The primary judge, Bergin J, relied upon Refrigerated Express Lines and upheld an objection to an order for provision of evidence on the basis that it might be used to establish the liability of the respondents to a penalty in other proceedings. Importantly, as White J explained in Pascoe v Divisional Security Group Pty Ltd [2007] NSWSC 211; (2007) 209 FLR 197, 207 [31], at the time of the application in One.Tel, proceedings against a respondent, Mr Rich, had been commenced by ASIC in which Mr Rich was entitled to the privilege which applies to proceedings for the recovery of a penalty. 28 In Pascoe, the decision in One.Tel was therefore distinguished as exceptional for this reason. In Pascoe, the plaintiff liquidator and company sought to amend their claim to raise a claim alleging contravention of s 588G(2) of the Corporations Act. One issue was whether the defendant could rely on the privilege against exposure to a penalty (which might arise in other proceedings) to avoid filing and serving a defence, or filing a defence not verified by affidavit and without a certificate required under s 347 of Legal Profession Act 2004 (NSW). 29 At 207 [32], White J explained that the orders that the natural defendants were not required to serve evidence prior to the close of the plaintiff's case may have been based on the exceptional circumstance of other proceedings of a penal character being then pending against one of the defendants. His Honour concluded (at 207-208 [33]): In my view, One.Tel Ltd (in liq) v Rich is one of the exceptional cases referred to by Deane J in Refrigerated Express. If that were not so, I would be respectfully of the view that it is not in accordance with appellate authority by which I am bound. Being such an exceptional case, it is distinguishable. No exceptional circumstances apply in the present case. It is not suggested that proceedings for a pecuniary penalty order or a disqualification order have been brought or foreshadowed by ASIC. The third defendant may be entitled in these proceedings to object to answering particular questions on the grounds that answers may expose him to a civil penalty. He may be entitled to object to producing particular documents for inspection on the same grounds, provided, in each case, that he swears to a belief that to answer the questions, or to produce the documents, would tend to expose him to that jeopardy, and the Court is satisfied that the objection is well taken. 30 His Honour said that the same principles applied to the question whether the third defendant should be required to file and serve a defence. Exceptional circumstances were required before a blanket order would be made dispensing the defendant from compliance with that obligation. Relevantly, there is a distinction between admitting a fact in a pleading and asserting a fact in a pleading (208 [34]): Admissions in a defence would not tend to expose the third defendant to liability for a civil penalty. The purpose of pleadings is to define the issues for the trial. Whilst a defendant who makes any allegations of fact in the defence is required to depose that he or she believes the allegations to be true, a defendant is not required to depose that he or she believes allegations of fact in the statement of claim, which are admitted, to be true… 31 His Honour refused the application, saying (at 208 [35]-[36]): The filing of an unverified defence is unlikely to create a risk of exposure to a civil penalty (Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 86), although it is possible to conceive of circumstances where unverified allegations of fact in a defence may lead to a train of enquiry by ASIC which could have that tendency (Chief Executive Officer of Customs v Camile Trading Pty Ltd (2004) 58 ATR 163 at [32]). It may be that the pleading of verified allegations of fact or verified non-admissions could have a tendency to expose the third defendant to liability for a civil penalty. However, the third defendant is not to be excused in limine from filing a verified and certified pleading. As the proceedings are not proceedings for the imposition of a penalty, it was necessary for the third defendant to depose on affidavit that the verification of the defence could tend to prove that he was liable to a civil penalty, and for the Court to be satisfied that there were reasonable grounds for that belief. No affidavit was relied upon on this application. 32 With respect, I agree entirely with these observations. However, I do not accept the submission by senior counsel for QCRI and the liquidators that orders should necessarily be made in the same terms as Pascoe which compel Mr Mulligan to provide a defence which complies with all of the Court rules. It would be unjust to deny Mr Mulligan the opportunity to articulate the reasonable basis for his claim to privilege. This case is not, as senior counsel submitted, analogous to a circumstance where a witness is giving evidence and an immediate ruling is required. The pleadings in this case have not been concluded and no trial date has even been set. 33 The other decision relied upon by Mr Mulligan was Le Roi Homestyle Cookies Pty Ltd (in liq) v Gemmell [2013] VSC 452. In that case, liquidators of Le Roi commenced proceedings against the defendants alleging contravention of s 588G of the Corporations Act. An Associate Justice held that the defendants' failure to claim privilege in public examinations had not waived their claims to privilege so they were required to plead a defence in the proceedings. 34 The defendants appealed and the appeal was heard by Ferguson J. Her Honour explained that the central issue was whether "having failed to claim either penalty privilege or privilege against self-incrimination during the course of their public examinations, the Defendants may now invoke those privileges, and avoid filing fully responsive defences or making discovery" (at [3]). Her Honour concluded that privilege had been waived. A subsequent appeal to the Court of Appeal was allowed but the dispensation from pleading was confined to only those matters not contained in answers given at the public examinations unless the except where the pleading would cause exposure to greater jeopardy: Gemmell & Anor v Le Roi Homestyle Cookies Pty Ltd v Anor [2014] VSCA 182; (2014) 102 ACSR 367. 35 The issue in Le Roi has no relevance to this hearing. There is no issue of waiver in this case. However, Mr Mulligan relied upon two statements made by Ferguson J which do not appear to have been a matter in dispute. Not only were those statements not in dispute but they are entirely consistent with the decision of White J in Pascoe. 36 The first statement Mr Mulligan relied upon from Le Roi was (at [12]): In Australian Securities and Investments Commission v Mining Projects Group Ltd [(2007) 164 FCR 132], ASIC had brought a civil penalty proceeding against the defendants. Finkelstein J observed that it will not be difficult to show that the provision of information or the production of documents in a civil case leads to a real and appreciable risk of a criminal prosecution when 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. 37 That proposition is well established. It can also apply to the provision of information in a defence where that information could commence a train of enquiry which could expose the respondent to a penalty. But this does not mean that a respondent is absolved from descending to the detail of each matter upon which privilege is claimed in order to show reasonable grounds for his belief that he would be exposed to a penalty by responding. 38 The other passage upon which Mr Mulligan relied was (at [17]): In my opinion, if the Liquidators establish their claim against the Defendants, it is almost inevitable that the facts necessary for the imposition of a civil penalty will also be established. It would also be likely to establish at least some of the elements that would need to be proved in a criminal prosecution. ASIC has not given any indication as to whether penalty proceedings would be instituted, nor has the Director of Public Prosecutions ruled out criminal proceedings.… Whilst as a matter of practical reality the likelihood of penalty proceedings (or for that matter, criminal proceedings) being brought may be low, I do not think that it can be discounted sufficiently to render it 'so improbable as to be virtually without substance'. In my opinion, in the absence of a positive indication from ASIC that penalty proceedings will not be brought, it is not possible to say that the risk of penalty proceedings is so low as to be of no consequence. Similarly, in respect of criminal proceedings, in the absence of a prior conviction for the offence or an immunity from prosecution having been given or other similar circumstances, the risk is not sufficiently low to warrant ignoring it. It should not be forgotten that it is not for the Liquidators, nor for the Court, to determine whether penalty proceedings or a criminal prosecution ought be brought — those are matters for ASIC and the relevant prosecuting authority. 39 These passages again concern the process and standard by which a claim for privilege is adjudicated. At no point did Ferguson J suggest that a respondent was entitled simply to assert privilege to resist production of a defence. Indeed, her Honour ordered that the respondents provide a defence. Further, there appears to have been no issue between the parties about whether, if privilege had not been waived, there should be wholesale dispensation from filing of a defence. Finally, on appeal at [20(i)], Ashley JA (with whom Neave JA and Almond AJA agreed) described the findings of Ferguson J, without disapproval, as including: (i) ... in exceptional circumstances, a defendant may be entitled to orders in limine that he may deliver a defence that departs from the Rules of Court only insofar as to protect his privilege against exposure to penalty. (j) Exceptional circumstances may exist where the defendant to the civil proceeding is also the subject of separate civil penalty proceedings alleging the same or similar conduct. (k) Where a defendant seeks to take the privilege against exposure to a penalty in a defence, the proper course is to plead accordingly and – if challenged – the defendant will be required to justify that the privilege is taken in good faith and on reasonable grounds for the privilege to stand. 40 Exceptional circumstances do not exist in this case such as would permit departure from the rules without descending into any particular details of the particular dispensations sought on each occasion. Mr Mulligan must provide reasonable grounds, by affidavit or submission, for each of the occasions upon which he claims privilege where that privilege is challenged.

Conclusion 41 These proceedings have been delayed for too long. Mr Mulligan has had considerable time to consider the pleading against him. If he wishes to seek leave to be relieved from the rules of pleading then he should make an application to do so very soon. That application should be supported by affidavit evidence and submissions explaining the reasonable grounds for each claim. Some claims might not require substantial, or any, further evidence from that already filed. Others may require some evidence or some submissions. 42 It is also appropriate that counsel for QCRI and the liquidators confer with counsel for Mr Mulligan prior to his application. There may be a number of the 92 occasions where there is no real dispute about the claim for privilege. This conferral has not yet taken place because of the broad-based approach that Mr Mulligan took to his claims of privilege. This conferral should take place between counsel rather than solicitors. This is for reasons which I raised at the hearing concerning the unfortunate deterioration of the relationship between the solicitors. It can only be hoped that this state of affairs no longer continues. 43 Counsel for Mr Mulligan quite properly accepted that the process of conferral and identification of any remaining areas of dispute could be done within a week. I will make directions after hearing from the parties about a timetable for this process. 44 There are other matters which counsel for the parties might consider prior to conferral. One of those is whether confidentiality orders, and related orders, under the Federal Court of Australia Act 1976 (Cth) ss 37AF, 37AI, and Federal Court Rules 2011 (Cth) rr 1.32, 2.32(1)(a) and 20.03 might ameliorate the possibility of any exposure to a penalty. At this hearing, Mr Mulligan's response was that he maintained, effectively, a blanket application for privilege as a basis for dispensation from the rules of court for all 92 paragraphs. Of course, if and to the extent that that privilege was proved, he could not be compelled to waive it: Reid v Howard [1995] HCA 40; (1995) 184 CLR 1, 17 (Toohey, Gaudron, McHugh and Gummow JJ). But there will be cases where a respondent seeks orders to protect his rights and ensure an efficient hearing, rather than to contest in detail whether he should be required to raise substantive factual matters of defence which he might seek to raise in any event at trial. 45 As to costs, counsel for Mr Mulligan submitted that costs should be reserved to be determined after Mr Mulligan had descended to the necessary detail of identifying the reasonable grounds upon which privilege was claimed as the basis for relief from each of the five categories identified in the Federal Court Rules. As counsel suggested during submissions, an efficient manner in which it could have been performed might have been by grouping together various pleaded facts and also grouping together the various rules from which dispensation was sought where issues are common. 46 I do not accept this submission for two reasons. 47 First, the exercise described by counsel for Mr Mulligan is one that should have been performed from the outset. If this exercise had been performed, and if the QCRI and the liquidators had taken an unreasonable or uncooperative approach in response then Mr Mulligan would probably have been awarded his costs of this application. But, as counsel for Mr Mulligan quite properly accepted, despite a directions hearing at which orders were made for filing of a defence (where no issue of privilege was raised), and despite correspondence between the parties, the basis for Mr Mulligan's assertion that the privilege entitled him to resist complying with the rules of procedure only emerged two days ago in counsel's responsive submissions to the applicants' interlocutory application. 48 Secondly, as Mr Mulligan's proposed orders made plain, this application was fought on the basis that Mr Mulligan was entitled to be relieved from the rules of pleading in the 92 cases en masse. That was also the effect of Mr Mulligan's submissions. And it was the subject of the responsive submissions yesterday by QCRI and the liquidators once the basis for the claim emerged. On this essential point in the application, QCRI and the liquidators have been successful. No subsequent application will affect that matter. 49 Mr Mulligan should pay the costs of the QCRI and the liquidators of this application. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edelman.

Associate: Dated: 15 July 2016