In recent times, the application of the common law privileges against self-incrimination and self-exposure to a penalty have attracted significant interest.

In the case of Meneses & Anor v Directed Electronics OE Pty Ltd [2019] FCAFC 190, the Full Federal Court confirmed that these privileges can only be invoked by individuals (not corporations). This creates a curious situation in the case of a one-person company, which the Court indicated could be managed by the appointment of a receiver to produce the relevant documents. In doing so, the Court emphasised that the effect of the act of production (rather than the nature of the documents themselves), as well the question of who has "control" of the documents, are the proper enquiries to be made for these classes of privilege.

Background

Mr Meneses was the sole director and shareholder of OE Solutions Pty Ltd (OE Solutions). Directed Electronics OE Pty Ltd (Directed OE) commenced proceedings against OE Solutions alleging, among other things, breaches of directors' duties and fiduciary duties by Mr Meneses. On application by Directed OE, a judge of the Federal Court issued a search order directed to seven named individuals and corporations, including Mr Meneses and OE Solutions.

Mr Meneses and OE Solutions sought to resist the production of particular documents that had been obtained during the search on the basis of the common law privileges against self-incrimination and self-exposure to penalties.

Directed OE challenged the privilege claims in the Federal Court. The primary judge determined in Directed OE's favour. Mr Meneses and OE Solutions appealed to the Full Federal Court.

Decision of the Full Federal Court

The Full Federal Court allowed the appeal, finding that the privilege claims were valid. The decision was based upon three key findings as follows:

  1. the primary judge erred in directing attention to the question of whether the relevant documents were "of" Mr Meneses or a company. The correct question, in accordance with the wording of rules 20.16 and 20.17 of the Federal Court Rules, was whether the relevant documents were in the "control" of OE Solutions ([149]-[150])
  2. the primary judge erred in focussing on whether the nature of the documents themselves gave rise to a claim of privilege, rather than whether the act of production would give rise to a real and appreciable risk of self-incrimination or self-exposure to penalties. The relevant question in determining claims made under the privileges against self-incrimination and self-exposure to penalties is the effect of the act of production, not the nature of the documents themselves ([151])
  3. the primary judge erred in ordering that Mr Meneses (in addition to OE Solutions) should personally produce the documents. It is not open to order an individual to produce documents in circumstances where that production will result in the individual's self-incrimination or self-exposure to penalties ([152]).

The Court went on to discuss the implications of the third finding above in situations where a company is run by a sole director and shareholder (i.e. in the case of "one-person" companies). The Court noted that the privileges against self-incrimination and self-exposure to penalties are only available to natural persons, not companies. Therefore, OE Solutions was not entitled to rely on the privileges held by Mr Meneses to resist production of documents in its control. Given that OE Solutions was effectively a one-person company, and that Mr Meneses was entitled to rely on the privileges to resist production of the documents, other mechanisms needed to be explored to facilitate the production of the documents by OE Solutions (without Mr Meneses producing the documents on its behalf). In this context, the Court considered that a receiver could be appointed by the Court to produce the documents on the company's behalf ([153]).

The availability of this mechanism is important, as without it one-person companies would effectively enjoy the privileges against self-incrimination and self-exposure to penalties (by being immune from producing documents in its control) despite not being entitled to claim these privileges ([153]).

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