Penalty privilege – one says hello, the other says goodbye

There are at least two unsatisfactory stories in this. The first one first.

The High Court’s decision in Rich v ASIC was big news in 2004, finding as it did that “penalty privilege”, a component of the common law right to refuse to self-incriminate, extended to disciplinary and disqualification proceedings.

The government responded in 2007, on sound policy grounds, by abrogating the privilege where necessary in respect of investigative actions, under s 1349 of the Corporations Act and other sections, and also under the ASIC Act and the Australian Consumer Law. Relevantly, the privilege was removed so that it could not be raised by liquidators in ASIC’s disciplinary proceedings brought against them in the then Companies Auditors and Liquidators Disciplinary Board.

But the government and others forgot to remove the privilege of trustees in bankruptcy, who are often also liquidators, in disciplinary proceedings against them.

The government and its advisers also forgot about bankruptcy trustees throughout the painstaking process leading to the Insolvency Law Reform Act 2016.  Priority attention was probably given to the more important issues of corporate insolvency process and ASIC forms.  

Section 1349 was carefully amended to remove the privilege in relation to three areas of liquidator discipline:

  1. preliminary discipline actions – a direction to a liquidator by ASIC under section 40-15 not to accept further appointments; 
  2. discipline proceedings – a decision of a discipline committee under section 40-55; and 
  3. disciplinary findings and outcomes – the cancellation or suspension of a liquidator’s registration under Division 40.  

No parallel ‘harmonised’ amendments were made in bankruptcy.  The privilege therefore appears to remain in relation to a trustee’s response to a direction by the Inspector-General in Bankruptcy not to accept further appointments, to the conduct of trustee discipline committee proceedings, and to any contemplated decision to terminate or suspend a trustee’s registration. (These, helpfully, all come under the same harmonised section numbers as in corporate).

How or whether the privilege is exercised by trustees, and how the Inspector-General and the industry bodies can respond, will depend. 

The further legal implications may soon be explained.  

As to the second sad story … and maybe a third ….  

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published.