Swiss bank accounts, Australian commercial litigation and the privilege against self-incrimination revisited

Switzerland pic 310817

In happier times the De Lutis brothers built up a Melbourne property empire worth (according to this Age story) $500 million. But now the pair has fallen out.

Younger brother Paul wants his share of the financial pie and is suing older brother Colin in the Victorian Supreme Court. It seems that the pie includes $18 million which has sloshed through various bank accounts in Switzerland, Singapore, the British Virgin Islands and Hong Kong since the 1980’s.

As plaintiff, Paul wants to detail these funds and transactions to the judge now trying the matter but is apparently concerned that his evidence might attract some unwelcome scrutiny from the Australian Taxation Office.

What to do?

Section 128 of the Evidence Act permits a court to issue a certificate which will prevent a witness’s evidence being directly or indirectly used against that witness in a subsequent criminal prosecution. The section is predicated (see s. 128(1)) upon the witness objecting to giving evidence on the ground that such evidence might tend to prove that the witness has herself committed an offence or be liable to a civil penalty.

Paul has already received one s. 128 certificate about an unrelated matter in this litigation. Last week he sought another concerning the itinerant $18 mil.

This week, the trial judge Justice James Elliott refused that application.

In a pithy ruling (De Lutis v De Lutis & Ors [2017] VSC 505) Elliott J observed that in civil litigation a plaintiff is free to prosecute his own case if and how he chooses. As there is no element of legal compulsion in the evidence Paul might choose to give in chief, he can scarcely choose to give evidence of a particular matter and simultaneously object to doing so.

Absent a valid objection to the giving of evidence, a witness has no entitlement to a s. 128 certificate. Hence no s. 128 certificate for Paul concerning his proposed evidence in chief.

Elliott J also observed that the cat was arguably out of the bag anyway. The $18 million had already been referred to in evidence earlier in the proceeding and “… where so much of the subject matter had [already] been disclosed voluntarily, it is difficult to see how this further [proposed potentially self-incriminating] evidence would materially alter Paul’s position.”

The lessons from this? Several occur to me:

  1. Prospective civil litigants in commercial litigation should weigh up the potential longer term ramifications of their evidence. In particular, will they be embarrassed (or worse) if the transcript from a civil trial finds its way into the tax man’s hands? If so, steering clear of commercial litigation might be a prudent way to minimise the risk of a later criminal prosecution.
  2. The risks of having an application for a s.128 certificate refused apply to both prospective plaintiffs and defendants but are probably more pronounced for plaintiffs who are almost by definition volunteering from the very outset to give their evidence. Similarly, different considerations are likely to apply to evidence given by a witness under cross-examination rather than during evidence in chief.
  3. If your client might need a s. 128 certificate, seek it early. Don’t run the risk of having the judge rule that the self-incrimination horse has already bolted. (Also, even an early failed128 certificate application might have forensic advantages given the possibility of such failed objections being retrospectively upheld – see 128(6) of the Evidence Act.)
  4. Finally, any family that has had $18 million lying idle in its various Swiss and Caribbean bank accounts for decades is clearly long overdue for a holiday together skiing in Zermatt or sailing off Barbados. Inter alia, both destinations are likely to be much more entertaining and much less expensive than a protracted intra-family dispute in the Supreme Court.

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