- The Full Federal Court's decision puts a brake on class action promoters being able to free-ride on a regulator's investigatory efforts.
A unanimous Full Federal Court sided with the Australian Securities and Investments Commission and found that the public interest in encouraging whistleblowers to come forward outweighed a class action applicant's interest in obtaining the materials for its proceedings.
The ASIC Chairman Mr Tony D'Aloisio welcomed the outcome, commenting that "Otherwise, there is the risk that fewer people would report matters to us". The protection of an informer's identity removes that potential disincentive to those people coming forward.
The Full Federal Court's decision puts a brake on class action promoters being able to free-ride on a regulator's investigatory efforts. However, material obtained by a regulator from a corporation through the regulator's compulsory examination and document production powers may still be sought by class action promoters through a subpoena or statutory provisions (eg. Australian Securities and Investments Commissions Act 2001 (Cth), section 25(1)).
In Australian Securities & Investment Commission v P Dawson Nominees Pty Ltd  FCAFC 123 the applicant in a class action issued a subpoena to ASIC seeking access to transcripts of oral examinations conducted by ASIC and related documents, that arose due to an ASIC investigation that resulted in an enforceable undertaking. ASIC opposed producing the documents on the basis of public interest immunity - requiring disclosure would reveal the identity of an informer.
ASIC's claim for public interest immunity was unsuccessful at first instance in the Federal Court. ASIC appealed to the Full Court of the Federal Court.
Full Federal Court of Australia reasoning
The Full Federal Court applied a balancing test of "whether the public interest which requires that the document should not be produced outweighs the public interest that a court of justice in performing its functions should not be denied access to relevant evidence".
The public interest in not allowing disclosure was summarised as follows:
- protecting informers, and encouraging future informers, is as important to a regulatory agency such as ASIC as it is to police in their traditional role.
- ASIC's regulatory role is vital to the proper functioning of the Australian financial and investment system, on which the prosperity of the Australian community is dependent. Fraud and incompetence can cause catastrophic damage to thousands of individuals.
- Confidential disclosure to ASIC has particular benefits, given its area of responsibility:
- Misconduct that ASIC might not otherwise be aware of is brought to its attention;
- Timely investigation enables ASIC to move quickly, obtaining interlocutory injunctions, freezing assets before dissipation and preventing implicated parties fleeing the jurisdiction;
- Information from knowledgeable persons enables ASIC to target its investigations to particular documents, transactions and persons, thus saving time and money and preventing further loss;
- Witnesses can be interviewed while events are still fresh in their mind and business records still available.
To be weighed against this was the disadvantage that the applicant would suffer in its litigation against the respondent by not getting access to the documents in question. The Full Court found that the documents in question were relevant to, but not of sufficient importance to, the class action so as to outweigh the public interest in protecting ASIC's informers.
The Full Court upheld the claim of public interest immunity despite the identity of the informer being known to the officers and directors of the company subject to the enforceable undertaking and the class action, and ASIC's imposition of confidentiality on the examinees had expired on 5 March 2007. This was because partial disclosure of the informer's identity did not result in the loss of the immunity.
The Full Court's finding may be contrasted with the decision of a single judge in Cadbury Schweppes Pty Ltd v Amcor Limited  FCA 88, although Cadbury Schweppes was not referred to by the Full Court. In Cadbury Schweppes the ACCC's claim of public interest immunity in relation to cartel whistleblowers was rejected because the whistleblowers did not seek nor could they reasonably have expected that information they provided to the ACCC would remain confidential. Notably the Cadbury Schweppes case focused on the protection of the information supplied by the whistleblower rather than the identity of the whistleblower. Further, the Full Court has placed far less emphasis on the need for confidentiality than the judge in Cadbury Schweppes, for whom a lack of confidentiality was fatal to the immunity.
The ramifications of the decision are:
- Regulators such as ASIC and the ACCC can protect whistleblowers' or immunity applicants' identities which will remove a potential disincentive to those people coming forward.
- To the extent there is any doubt about the application of the decision to the ACCC, immunity applicants may seek formal confidentiality undertakings from the ACCC. Further, the ACCC may seek statutory protection for immunity applicants similar to that provided by Part 9.4AAA of the Corporations Act.
- The rise of the class action in the corporate and competition law areas has created a potential conflict between enforcement of statutory requirements by regulators such as ASIC and the ACCC, with class action promoters, such as litigation funders, seeking to recover damages.
- Class action promoters can still access material provided by a corporation that is investigated by a regulator through subpoena or statutory provisions (eg Australian Securities and Investments Commissions Act 2001 (Cth), section 25(1)), which may chill co-operation with the regulator.
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.