Judge not impressed with evidence hide and seek

An application by Deloitte partners to be excused from compliance with, or otherwise to discharge an order requiring them to produce documents was dismissed with order for costs on standard basis.

This is a class action on behalf of shareholders of Hastie Group Ltd (in liq), against the company’s former auditor (Deloitte). Deloitte had previously resisted producing its audit file for inspection, on the grounds of privilege against self-incrimination and/or privilege against exposure to a penalty. In two earlier judgments (Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (No 3) (2018) 357 ALR 695; [2018] FCA 1107 and (No 4) [2018] FCA 1218) Moshinsky J held that:

  • the partners of Deloitte who were directly involved in the conduct of the audits (primarily Mr Saayman) were entitled to resist production on the grounds of such privilege; but
  • the other partners of Deloitte who were not directly involved in the conduct of the audits (Uninvolved Partners) were not entitled to resist production (and his Honour therefore made an order requiring them to produce the files in question).

In this judgment, his Honour dealt with an application by the Uninvolved Partners to be excused from compliance with that order and/or that the order be discharged. The evidence indicated that the files in question were in the sole custody of Mr Saayman (in the case of hard copy documents) or had been encrypted by him (in the case of soft copy documents), and that he had refused to make them (or the encryption password) available to the Uninvolved Partners to enable them to comply with the order. That, however, appeared to be contrary to the evidence given during the course of the earlier hearings, which indicated that the files were in the custody of Deloitte’s in-house legal team, and were held in a secure ‘litigation room’. No evidence was led to indicate how and when the files had now come to be in Mr Saayman’s custody, nor how he had been able to encrypt them.

His Honour was unimpressed, and said (at [54]-[60]):

"The circumstances described above are extraordinary and troubling. An order was made for production of certain relevant documents by the Uninvolved Partners. The documents were, at least at the time that the respondents’ list of documents was prepared, held by DTT’s in-house lawyers on behalf of DTT. The documents were located in the secure Litigation Room, access to which was limited to DTT’s litigation team by a swipe card access system. Yet somehow the documents have been obtained by Mr Saayman and he is refusing to release them. The circumstances appear to be designed to bring about a situation where the Uninvolved Partners can argue (as they have on this application) that they are unable to produce the documents in accordance with their discovery obligations.

"The circumstances in which Mr Saayman obtained the documents from the Litigation Room have not been explained in any detail in the material before the Court. Remarkably, very little, if anything, has been done to investigate how Mr Saayman obtained the documents…

"In the absence of a detailed explanation of how Mr Saayman obtained the documents, I am not satisfied that the Uninvolved Partners are unable to produce the documents. The series of events appears to have been designed to bring about a situation where the Uninvolved Partners could argue that they are unable to produce the documents. If the events were so designed, and involved not just Mr Saayman but others as well, it may well be the case that the Uninvolved Partners can produce the documents. In circumstances where the Uninvolved Partners have not provided a full explanation of how Mr Saayman obtained the documents – or even made inquiries to try to find this out – I am not satisfied that they are unable to produce the documents. The Uninvolved Partners are seeking to be excused from complying with the Production Order. Alternatively, they seek an order that the Production Order be discharged. It is incumbent on the Uninvolved Partners on an application such as this to demonstrate that they are unable to comply with the order. For the reasons indicated, the Uninvolved Partners have not satisfied me that they are unable to produce the documents.

"Further and in any event, the evidence indicates that there are, or may well be, other copies of the relevant documents accessible to the Uninvolved Partners…

"Generally, one gets the impression that it is convenient for the Uninvolved Partners if they are unable to get the documents and they have not tried very hard to overcome the present impediments."

His Honour therefore dismissed the application made by the Uninvolved Partners, and also ordered the Uninvolved Partners to pay the applicant’s costs of the application (but declined to order that those costs be paid on an indemnity basis, or that they be payable forthwith).

Case details

Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (No 5) [2018] FCA 2066 and (No 6) [2019] FCA 132
Federal Court of Australia, Moshinsky J, 24 December 2018 and 18 February 2019
Applicant’s Solicitors: Phi Finney McDonald;
Respondent’s Solicitors: Clifford Chance;
Applicant’s Funder: IMF Bentham Ltd

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