Mortimer v Brown [1970] HCA 4; (1970) 122 CLR 493 (19 February 1970)

HIGH COURT OF AUSTRALIA

MORTIMER v. BROWN [1970] HCA 4; (1970) 122 CLR 493

Companies

High Court of Australia
Barwick C.J.(1), Kitto(2), Windeyer(3), Owen(4) and Walsh(5) JJ.

CATCHWORDS

Companies - Winding up - Public examination - Promotion trade dealings affairs or property of the company - Questions to &which answers may tend to incriminate examinee - Whether authorized - The Companies Acts, 1961 to 1964 (Q.), ss. 250 (3), (4).*

HEARING

Sydney, 1969, December 5;
Melbourne, 1970, February 19. 19:2:1970
APPLICATIONS for special leave to appeal from the Supreme Court of Queensland.

DECISION

1970, February 19.
The following written judgments were delivered : -
BARWICK C.J. I have had the advantage of reading the reasons for judgment agree with the conclusion that special leave should be refused and with all their Honours' reasons for so concluding. I also agree with my brother Walsh's comments on the arguments presented and the authorities cited on behalf of the appellant. I have therefore no need to do more in relation to the dismissal of the appeals than to express my concurrence. (at p492)

2. I also agree with my brother Walsh's observations on the use of the discretion which s. 250 of The Companies Acts, 1961 to 1964 (Q.) reposes in the presiding judge to allow or disallow a question sought to be put to the person being examined pursuant to the provisions of the section. But I wish to say something myself on that matter. As appears from the reasons of my brothers the language of the statute makes the answering of every question imperative. The Parliament has made it abundantly clear that the so-called right to be silent which the common law sought to protect was not to be available to the examinee : and, as both my brother Kitto and my brother Walsh observe, the very purpose of the inquiry makes such a course inevitable if that purpose is not frustrated and the inquiry rendered nugatory. The common law cannot maintain a right in the citizen to refuse to make incriminating answers in the face of a statute which by its expression clearly intends, as does the present, that all questions allowed to be put shall be answered. (at p495)

3. In Rees v. Kratzmann [1965] HCA 49; (1965) 114 CLR 63 , in relation to this question, I said (1965) 114 CLR, at p 66 :

"Subsection (4) enforces answers by the examinees to
questions upon and related to these topics, but the legislature
has reposed in the judge presiding at the interrogation, the
traditional judicial function of ensuring that the examination
is not made an instrument of oppression, injustice, or of
needless injury to the individual." (at p495)

4. It seems to me that this expresses the real basis or limitation of the discretion confided to the presiding judge. In my opinion, it being the question and not the answer with which he is primarily concerned, the mere circumstances that a question appropriate to the nature and the stage of the particular inquiry might or certainly would incriminate the examinee could rarely, if ever, be itself a reason for disallowance of the question. But, of course, the question may be so peripheral, or seek merely confirmation of facts of which proof is already firmly in the hands of the liquidator or that some other circumstance exists that it would be oppressive or unjust to place the examinee in the position of being bound by his answer to incriminate himself, or even placed in jeopardy of doing so. (at p495)

KITTO J. Even if the dissenting opinion which I expressed in Rees v. Kratzmann (1) had been shared by the other members of the Court, I should have agreed, as I do, that this appeal should fail. If the cases had arisen in reverse order I should have thought in Rees v. Kratzmann [1965] HCA 49; (1965) 114 CLR 63 that the unavailability of an objection by a person under examination to being compelled to incur a danger of incriminating himself provided an additional reason for inferring that s. 250 intended the power of public examination under its provisions to be limited to matters referred to in the liquidators' further report. But however this may be, on the question that is now before us the circumstance which I find compelling is that the evident purpose of the section, primarily even if not wholly, is to enable a suggestion of fraud or concealment of a material fact to be fully investigated by means of the public examination of certain classes of persons. Such a question in its nature must frequently involve consideration of evidence tending to incriminate individuals. To read down the wide terms of the section so as to allow a danger of self-incrimination as a valid ground for refusing to answer a question would render the provision relatively valueless in the very cases which call most loudly for investigation. By providing in sub-s. (7) (c) that notes of a person's examination may thereafter be used in evidence in any legal proceedings against him, the section shows that the possibility of self-incrimination is contemplated as being inherent in the kind of examination that is authorized. In the light of that provision the absence of an express saving of the ordinary right of objection, coupled with the conferring upon the court in unqualified terms of a general discretion as to the questions that must be answered, leaves no room for an inference, which there is nothing to suggest unless it be the fact that the examination is before a court, that a tendency to incriminate is a valid ground for refusing to answer a question even where the court would be prepared to allow it in the exercise of a discretion. (at p496)

2. The responsibility which is thus placed upon the court is heavy, for cases are bound to arise in which immense harm may be done, on the one hand to the person being examined and on the other hand to other individuals or to the community, by the allowing or disallowing of questions. This is specially true where questions are asked, on the authority of Rees v. Kratzmann [1965] HCA 49; (1965) 114 CLR 63 , which go beyond the subject matter of the liquidators' report. The intention of the legislature, however, seems to me too clear for doubt upon the point we are here invited to determine. (at p496)

3. In my opinion the decisions below were correct, and special leave to appeal should be refused in both cases. (at p496)

WINDEYER J. I have had an opportunity of reading the judgment of my brother Walsh. I agree in it. I do not think I need say more as his Honour's conclusion accords entirely with the view I take of the purpose and policy of the Act as manifested by its provisions. (at p497)

OWEN J. In my opinion each of these applications should be dismissed for the reasons given by my brother Walsh with which I agree. (at p497)

WALSH J. The respondents to these applications were appointed liquidators of a company in voluntary liquidation. They made a report pursuant to s. 235 (2) of The Companies Act of 1961 (Q.) (see also s. 269 (1) (b)), expressing the opinion that certain persons had concealed material facts and/or committed acts of fraud in relation to the company. The present applicants had, at all material times, been directors of the company and they were named in the report. Upon application by the respondents the Supreme Court of Queensland made an order pursuant to s. 250 (1) of the said Act (with which should be read s. 274) by which the applicants were required to attend before the Court and be examined as to the formation of the company and the conduct of its business and as to his or her conduct and dealings as a director or officer of the company. (at p497)

2. Subsequently the examinations of the applicants came before W. B. Campbell J. in the Supreme Court of Queensland. In the course of the examination of the applicant Stanley Vernon Mortimer, counsel for the liquidators asked him a question which he declined to answer, on the ground that it would tend to incriminate him. The question was whether or not the company, at the time it went into liquidation, owned a Holden motor vehicle. In the course of the examination of the applicant Robyn Gail Mortimer, she was asked how a certain sum of money became due to her from the company and she refused to answer that question on the same ground. On each of these occasions the learned judge was requested to order that the question be answered, and after hearing argument and considering the matter he did so, and he gave leave to appeal to the Full Court of the Supreme Court of Queensland. In each case, an appeal was made to that Court, and these appeals were dismissed by an order of the Full Court made on 4th September 1969. Each of the applicants has sought special leave to appeal to this Court against that order of the Full Court. (at p497)

3. The contention on behalf of the applicants that the decision of the Full Court was wrong raises a question as to the proper construction of s. 250 of the Act and, in particular, of sub-ss. (3) and (4) thereof. It is desirable to quote these subsections and also sub-s. (7). These subsections are in the following terms : -

"(3) The Court may put or allow to be put such questions to
the person examined as the Court thinks fit."
"(4) The person examined shall be examined on oath and
shall answer all such questions as the Court puts or
allows to be put to him."
"(7) Notes of the examination -
(a) shall be reduced to writing ;
(b) shall be read over to or by and signed by the
person examined ;
(c) may thereafter be used in evidence in any legal
proceedings against him ; and
(d) shall be open to the inspection of any creditor or
contributory at all reasonable times."

The only limit which is, in terms, placed upon the questions which may be put to a person being examined, and which he is commanded by the section to answer, is expressed in the words, "such questions . . . as the Court thinks fit". The questions which may be put are the questions which answer that description and by sub-s. (4) the person examined is commanded to answer all such questions. The argument for the applicants is that the provision should be construed in a way which restricts its operation so as to preserve the traditional right or privilege against compulsory self-incrimination, which has commonly been recognized as available to witnesses in judicial proceedings. It is said that in the absence of an abrogation in express terms of this privilege, the provision should be construed as not disclosing an intention to take it away from persons who are required to submit themselves to examination. (at p498)

4. In my opinion the character and purpose of the provision are such that a construction which would curtail its operation in the manner and for the reason suggested ought not to be adopted. Section 250 has already been considered by this Court in Rees v. Kratzmann [1965] HCA 49; (1965) 114 CLR 63 . In that case an attempt to narrow the scope of its operation, by limiting the matters to which the interrogation could extend to those matters to which the report of the liquidator referred, proved unsuccessful. By a majority the Court refused to put that limited construction on s. 250. The question was, of course, a different one from that which is now raised but, nevertheless, I think the case is important for present purposes. The approach adopted by the majority of the Court was that the language of the section should not be read down by implication, in order to give protection against injustice or oppression which, it was contended, would be caused by it to the individual concerned unless its operation were so confined. Although the need was recognized to take into account, when construing the provision, any infringement of individual rights and any injustice which could be caused by it, the provision was regarded as containing a safeguard against these evils, because it entrusted the control of the proceedings to a judge. See the observations of Barwick C.J. (1965) 114 CLR, at p 66 and of Menzies J. (1965) 114 CLR, at p 78 . The reasons of Windeyer J. contained statements which bear directly upon the present problem. His Honour referred (1965) 114 CLR, at p 80 to decisions that a debtor upon his public examination in bankruptcy cannot refuse to answer questions on the ground that the answers may incriminate him and his Honour considered that the idea underlying those decisions, namely that the purpose of the bankruptcy statute was to secure a full disclosure of facts in the interests of the public, was reflected also in The Companies Act. His Honour added:

"The honest conduct of the affairs of companies is a matter
of great public concern today. If the legislature thinks
that in this field the public interest overcomes some of the
common law's traditional consideration for the individual,
then effect must be given to the statute which embodies this
policy"
(1965) 114 CLR, at p 80
.

This view, with which I am in respectful agreement, means that, having regard to the purpose of s. 250 and to the public interest which it is intended to serve, the contention should not be accepted that there should be applied to its construction the principle that a statute should not be construed as being intended to take away common law rights unless that intention is specifically stated. (at p499)

5. Counsel for the applicants was conscious of the obstacles placed in his path by the decisions (see In re Atherton (1912) 2 KB 251 and earlier cases therein cited and In re Paget (1927) 2 Ch 85 ) that a bankrupt is compellable to give an answer which may incriminate him and by the fact that the same rule was asserted by Lord Halsbury in Ex parte Barnes (1896) AC 146, at p 152 to be applicable to an examination under s. 8 of the Companies (Winding-up) Act, 1890 (U.K.). But counsel argued that this rule should not be applied to s. 250. It was submitted that the operation of s. 250, in its present form, extends beyond that of its earlier counterparts and that these extensions render inapplicable the reasons for which the earlier provisions were regarded as imposing an obligation to answer questions notwithstanding that the answers might tend to incriminate. The extensions relied on were that the class of person who may be examined is wider than that to which the earlier statutes referred and that (as has been decided in Rees v. Kratzmann [1965] HCA 49; (1965) 114 CLR 63 ) the matters upon which questions may be asked are not confined to matters mentioned in the liquidators' report. (at p500)

6. I think it is not necessary for present purposes to trace the history of the English and local Acts. An account of the differences between s. 250 and s. 8 of the English Act of 1890 may be found in the judgment of Kitto J. in Rees v. Kratzmann (1). For the purpose of these applications it is sufficient to say that I do not find in the changes that have been made any warrant for concluding that the provisions as to the questions which may be put and which must be answered should now be given a different meaning from that which was previously attributed to them. (at p500)

7. Counsel for the applicants endeavoured to obtain support for the limited construction for which he contended by referring to other provisions of the Act. Reference was made to s. 249 and it was said that the view has been commonly taken that a person examined under that section, or its counterparts in other legislation, is not bound to incriminate himself. Whether this be correct or not, I find it of no assistance in relation to s. 250 since s. 249 has no provisions corresponding to sub-ss. (3) and (4) of s. 250. (at p500)

8. On behalf of the applicants reference was made also to the powers conferred upon inspectors appointed under ss. 169, 170 or 173 of the Act to investigate the affairs of a company and to the specific provisions contained in s. 171 relating to the compellability of answers which might tend to incriminate a person being examined. It was said that in the history of the legislation these special provisions were introduced at the same time as were the provisions which extended the operation of an examination under s. 250 in the manner to which reference has already been made. It was submitted that the failure by the legislature to introduce into s. 250 when it was enacted in this extended form any specific provisions as to self-incrimination, coupled with the insertion in s. 171 of such specific provisions, should lead to the conclusion that the former construction of the prototypes of s. 250 should not now be adopted and that section should not be regarded as abrogating the common-law protection against self-incrimination. Reference was made also to the express provisions relevant to this question which have been commonly inserted in bankruptcy legislation, e.g., in the Bankruptcy Act 1924 (Cth), s. 70 and in the Bankruptcy Act 1966 (Cth), s. 69. (at p501)

9. In my opinion these considerations do not lead to the conclusion that the language of s. 250 should now be construed as having a different meaning and operation. An examination under s. 171 is not, as is an examination under s. 250, under judicial control and under the latter provision there is compulsion to answer only those questions which the court allows to be put. The witness is safeguarded to that extent, but it is expressly provided in s. 250 (7) that the notes of the examination may thereafter be used in evidence in any legal proceedings against him. A decision that in the exercise of a common-law right retained by the person examined notwithstanding the language of the section, he may decline to answer any question the answer to which might tend to incriminate him, would frustrate the purpose of the provisions contained in it, as well as being inconsistent with their language. (at p501)

10. In the course of the argument the suggestion was made that the provision of sub-s. (3) of s. 250 that the court may put or allow to be put such questions as the court thinks fit should be read as proceeding upon the assumption that the court would allow only such questions to be put as would ordinarily be allowed by a court acting in accordance with established principles applicable in judicial proceedings and would, therefore, be bound to exclude questions the answers to which might tend to incriminate the person being examined. But, in my opinion, the purpose of an examination under s. 250, both in cases where it is a former officer of the company, and in cases where it is a member of the wider class of persons described in s. 250 who is being examined, is such that the principle of the law against self-incrimination does not justify a construction which would limit the examination in that way. In relation to the bankruptcy legislation it was held that this principle must give way to the requirement that a bankrupt should make full disclosure of his affairs, but that in the case of other witnesses no such requirement operated to override the common-law principle. See Ex parte Schofield; In re Firth (1877) 6 Ch D 230 . But in my opinion a corresponding distinction should not be applied to s. 250, which should be regarded as intended to ensure a full disclosure of relevant facts by any person within the classes described in it, provided that it seemed right to the court to direct that that person be examined and subject to the control of the proceedings entrusted by sub-s. (3) to the court. It may be added that even if a distinction analogous to that made in Ex parte Schofield (1877) 6 Ch D 230 should be made in relation to s. 250, this would not avail the applicants, both of whom were directors of the company. (at p502)

11. I conclude that it cannot be maintained that the decision of the learned judge conducting the examination to order the applicants to answer the questions was contrary to law. (at p502)

12. I have referred to the opinions expressed in Rees v. Kratzmann [1965] HCA 49; (1965) 114 CLR 63 that the discretionary control of the proceedings by the court is a safeguard against the use of the section in an oppressive or unjust way. Although in form the discretion is a discretion as to allowing questions to be put and not as to compelling them to be answered, it seems clear that if a question be asked and objection be taken, on this or on any other ground, the court has a discretion to decide whether or not the question is a proper one and if it decides it is not, no answer need then be given. This is a judicial discretion, which may in appropriate cases be reviewed by an appellate court. In particular circumstances if the court declined to require an answer because of a claim that it might incriminate the witness, it might be held that the discretion had not been properly exercised and that the court should reconsider that decision. See In re Paget (1927) 2 Ch 85 . I think that in deciding whether a particular line of questioning, to which objection is taken, should be allowed, the court may sometimes take into account the fact, if it be a fact, that the answers might tend to incriminate the witness. But in my opinion it would not be in accordance with the plain language of the section to hold that the possibility of self-incrimination must be regarded by the court as decisive against allowing a question to be put. This can never be more than one factor, to be considered with others, in deciding as a matter of discretion whether to allow or to disallow a question. Indeed, in many cases, the possibility or even the certainty that an answer would incriminate the person being examined would not itself provide a sufficient reason for disallowing the question, since questions will normally be directed to the investigation of all the relevant facts in order that it may be ascertained whether or not there has been fraud or concealment of material facts. I think it is the intention disclosed by the section that any questions which will be of real assistance towards the fulfilment of that purpose should be answered. There may, however, be some cases in which it appears to the court that a particular question or a particular line of questioning has such a remote or doubtful bearing upon the investigation with which the court is concerned that the harm that may be done to the individual will outweigh any benefit to be obtained and that, therefore, that question or line of questioning ought to be disallowed. The section gives to the court an unqualified discretion. In the present case it is not necessary to examine more fully the manner in which this discretion should be exercised. No argument has here been raised and none could be successfully raised that the learned judge conducting the examination exercised upon wrong principles a discretion vested in him. The argument is that he had no power at all to direct that the questions be answered and, in my opinion, this argument cannot be accepted. (at p503)

13. In my opinion the decision of the Full Court of Queensland was clearly right. Special leave to appeal should be refused. (at p503)

ORDER

Application for special leave to appeal in each case refused with costs.