CC Containers Pty Ltd & ors v Lee & ors (No. 2) 
In CC Containers Pty Ltd ors v Lee & ors (No. 2), the
plaintiffs made serious allegations of fraud against the defendants
in connection with a shipping container repair and storage
business. These included allegations that invoices inflating the
cost of repairs and duplicated invoices had been issued to and paid
by the plaintiffs.
The plaintiffs' claim included the tort of conspiracy by
unlawful means. They alleged that the unlawfulness of the invoices
arose under provisions of the Crimes Act 1958 (Vic) relating to
obtaining financial advantage by deception, false accounting, and
the falsification of documents.
Some of the defendants filed a non-responsive defence, on the
basis that the allegations against them, if proven, might lead to
criminal charges or civil penalty claims. The defendants claimed
that they were not required to plead substantive defences, because
they were entitled to rely on the privilege against self
incrimination and penalty privilege. The plaintiffs applied to have
the defence struck out.
The privilege against self incrimination may generally be
invoked if there is a real and appreciable risk that by answering
questions or producing documents a person may face criminal
prosecution. Penalty privilege may apply if a person establishes
that answering questions or producing documents may tend to subject
them to a civil penalty.
It had previously been determined by Finkelstein J in Australian
Securities and Investments Commission v Mining Projects Group Ltd
& Ors that the privileges can in certain circumstances relieve
a defendant from having to comply with pleading rules when filing a
defence, unless and until the plaintiff's case has concluded at
trial. If at that time, after hearing the plaintiff's evidence,
the defendant decides to run a positive case, he or she can deliver
an amended defence.
In the case of CC Containers, the plaintiffs submitted that
because other proceedings for the imposition of a penalty or
prosecution had not been issued, and there was no evidence before
the Court that the matter had been investigated by any enforcement
agency, the defendants ought not be relieved from their ordinary
Justice Ferguson considered the allegations to be of a serious
nature, entailing alleged systematic fraud, and therefore there was
a real and appreciable risk of criminal prosecution or penalty
proceedings should the allegations be proven. Thus, Her Honour
ruled that the defendants were not required to file a responsive
defence until the plaintiffs' case had concluded at trial.
Further, Her Honour ruled that if, after the plaintiffs
concluded their case, the defendants wished to amend their defence
to plead a positive case, it would be a matter for the trial judge
to determine whether to grant them leave to do so and if so on what
terms, taking into account all the relevant circumstances at that
In certain cases where allegations of fraud are made, the very
nature of the allegations may demonstrate that if they are proven
at trial there is a real and appreciable risk of criminal
prosecution or penalty proceedings being issued against a
defendant. In those instances, a defendant may in the first
instance file a non-responsive defence, asserting privilege against
self incrimination and penalty privilege, without filing affidavit
material to establish the risk of criminal or civil
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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