Adelaide Brighton Cement Ltd v Burgess
[2018] SASC 134
•11 September 2018
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ADELAIDE BRIGHTON CEMENT LTD v BURGESS
[2018] SASC 134
Judgment of Judge Dart a Master of the Supreme Court
11 September 2018
CRIMINAL LAW - PROCEDURE - ADJOURNMENT, STAY OF PROCEEDINGS OR ORDER RESTRAINING PROCEEDINGS
Possibility of criminal proceedings - civil proceeding has same factual basis - risk of prejudice to defendant - whether civil proceeding should be stayed - whether any terms should be imposed as a result of granting stay.
Held: Appropriate to stay civil proceedings.
Crime Commission Act 1985 (NSW); Proceeds of Crime Act 2002 (Cth), referred to.
Zhao & Anor v Commissioner of the Australian Federal Police (2014) 43 VR 187; Commissioner of the Australian Federal Police v Zhao & Another (2015) 255 CLR 46, applied.
Lee v R (No 2) (2014) 308 ALR 252; McMahon v Gould (1982) 7 ACLR 202; Re AWB Limited (No 1) (2008) 21 VR 252; Reid v Howard (1995) 184 CLR 1, considered.
ADELAIDE BRIGHTON CEMENT LTD v BURGESS
[2018] SASC 134JUDGE DART:
These reasons deal with the defendant’s application for a stay of the action.[1] For the reasons that follow, it is appropriate that the matter be stayed. I will hear the parties as to the length of the stay and any conditions that should be imposed on the defendant arising from the Court acquiescing to her request for a stay.
[1] Defendant's application for a stay filed 2 August 2018, FDN11.
Background
The plaintiff is a limited liability company. It is a wholly-owned subsidiary of Adelaide Brighton Limited, a publicly listed company. The defendant was employed by the plaintiff for 18 years as a Credit Manager in the Accounts Receivable Department. Her employment was terminated in February.
In these proceedings the plaintiff alleges that, by reason of misconduct and breach of duty by the defendant, it has suffered a loss. The loss is alleged to be in the amount of $12,477,879.
The loss is said to have arisen by reason of transactions over a period of time with a customer of the plaintiff, Concrete Supply Pty Ltd (“Concrete Supply”). It is alleged that the defendant, as Credit Manager, misallocated payments made by other customers of the plaintiff to the credit of Concrete Supply. It is also alleged that the defendant transferred the indebtedness of Concrete Supply by creating journal entries which recorded significant payments which were not in fact made.
The allegations are denied by the defendant. The Statement of Claim is very detailed. The Defence filed is perfunctory and does not, at the moment, do much more than deny critical matters pleaded in the Statement of Claim.
The plaintiff applied for summary judgment. On 23 May 2018 orders were made to prepare the matter for the summary judgment argument, which was listed for 9 August 2018.[2] The timetable required the defendant to file any responding affidavits by 9 July 2018. By consent, on 11 July 2018, the time within which the defendant was to file responding affidavits was extended for 21 days.
[2] Plaintiff’s application for summary judgment filed 25 May 2018, FDN9.
SAPOL conducted a search of the defendant’s residential property on 21 July 2018. The police took away from the search the defendant’s laptop and other electronic devices. It was the police search that led to an application being filed on 2 August 2018 seeking to stay this action. The defendant has not yet filed an affidavit in opposition to the summary judgment application. The defendant filed an affidavit in support of the stay application.[3] The hearing on 9 August 2018 only dealt with the application for a stay.
[3] Affidavit of Glenda Ivy Burgess filed 2 August 2018, FDN12.
In her affidavit the defendant deposes the fact she is concerned SAPOL may be intending to charge her with offences arising from the subject matter of these proceedings. It appears that the plaintiff has been cooperating with SAPOL in respect of the matter generally.
The defendant’s concerns are set out in paragraphs 15 and 16 of her affidavit:[4]
15.If criminal proceedings are brought against me, I expect that they will relate to the very same matters and circumstances which are alleged in the statement of claim in these proceedings.
16.If I am now required to defend these proceedings, including to defend the application by ABCL for summary judgment, I will be required to address the matters alleged against me both by addressing the allegations in an affidavit and by way of argument on the summary judgment application in a manner that will interfere with my right to silence in the criminal prosecution that I am concerned is imminent. I do not wish to waive my right to silence.
The plaintiff says the affidavit does not go far enough in setting out the prejudice the defendant will suffer if the matter proceeds. It is sufficient in my opinion.
[4] Affidavit of Glenda Ivy Burgess filed 2 August 2018, FDN12.
Concrete Supply Pty Ltd
The alleged beneficiary of the defendant’s conduct, Concrete Supply, went in to administration in November 2017. The directors of that company proposed an arrangement whereby it would enter into a deed of company arrangement (“DOCA”). The administrators recommended to the creditors that they enter into the proposed DOCA. The second meeting of Concrete Supply’s creditors was held on 19 December 2017. At that meeting a majority in number of the creditors supported the company entering into a DOCA. A minority of creditors, including the plaintiff, who held the majority of the value of the debt, voted against the resolution. The administrator conducting the meeting exercised his casting vote to carry the resolution. The plaintiff’s proof was admitted, for the purpose of voting at the meeting, for the full amount of the debt claimed in these proceedings.
The plaintiff subsequently commenced proceedings in the Federal Court against a number of defendants, including Concrete Supply and its administrators. The other defendants are the directors of Concrete Supply. Wide-ranging relief is sought by the plaintiff in the Federal Court. It seeks to set aside the resolution in respect of the DOCA. It wants Concrete Supply to be wound up and a liquidator appointed. Further, relief is sought against the directors by way of compensation. The Federal Court action is listed for trial in December 2018.
Authorities on staying of proceedings
There is considerable case law in respect of the circumstances in which it is appropriate to stay civil proceedings pending the resolution of related criminal proceedings.
The foundation authority is McMahon v Gould.[5]His Honour Wootten J said:[6]
[5] (1982) 7 ACLR 202.
[6] McMahon v Gould (1982) 7 ACLR 202 at 206-7.
I approach the decision of this matter with the following guidelines:
(a) Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court (Rochfort v John Fairfax & Sons Ltd at 19);
(b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds (ibid);
(c) The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with (Jefferson v Bhetcha at 905);
(d) Neither an accused (ibid) nor the Crown (Rochfort v John Fairfax & Sons Ltd at 21) are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;
(e) The court’s task is one of “the balancing of justice between the parties” (Jefferson Ltd v Betcha at 904), taking account of all relevant factors (ibid at 905);
(f) Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors (ibid at 905);
(g) One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused’s “right of silence”, and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding (ibid at 904). I return to this subject below;
(h) However, the so-called “right of silence” does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding (ibid at 904-5);
(i) The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings (ibid at 905);
(j) In this regard factors which may be relevant include:
(i)the possibility of publicity that might reach and influence jurors in the civil proceedings (ibid at 905);
(ii)the proximity of the criminal hearing (ibid at 905);
(iii)the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid at 905);
(iv)the burden on the defendant of preparing for both sets of proceedings concurrently (Beecee Group v Barton);
(v)whether the defendant has already disclosed his defence to the allegations (Caesar v Somner at 932; Re Saltergate Insurance Co Ltd at 736);
(vi)the conduct of the defendant, including his own prior invocation of civil process when it suited him (cf Saltergate Insurance Co Ltd at 735-6);
(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant’s obligation to the plaintiff;
(l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed (Beece Group v Barton).
What McMahon v Gould sets out is a series of criteria to be weighed in the balance to determine whether or not a stay should be granted in circumstances where there are criminal proceedings. The right to silence is treated as one of the factors to be considered. The law has continued to evolve since McMahon v Gould.
One more recent case is Re AWB Limited (No 1)[7] where Robson J said, in response to the submission that McMahon v Gould set out principles which are well-established and ought to be followed:[8]
There are, however, indications that the principles may require review by an appellate court. In Yuill v Spedley Securities Ltd[9] Kirby P referred to McMahon v Gould[10] as “the existing law.” His Honour indicated, however, that one day it may be appropriate for the guidelines referred to by Wootten J in McMahon v Gould[11] to be reconsidered. Kirby P said that the guidelines do not take specifically into account the primacy of the administration of criminal justice in our legal system. In Niven v SS[12] Beazley JA of the New South Wales Court of Appeal said there was force in Kirby’s opinion although he case before him was not the case to reconsider McMahon v Gould.[13] In Baker v The Commissioner of Federal Police[14] Gyles J said that in view of Reid v Howard[15] there was some merit in the view that there should be reconsideration of the manner in which the McMahon v Gould[16] line of authorities is now applied so as to decide whether too little weight is given to the practical as well as legal prejudice to the accused and to the primacy of criminal proceedings in our justice system.[17] Gyles J said:
The applicants rely upon the decision of the High Court in Reid v Howard[18] to suggest that the line of authority commencing with McMahon v Gould has given insufficient weight to, and has not fully appreciated the extent of, the privilege against self-incrimination. There is no doubt that Reid v Howard does re-affirm the importance of the privilege against self-incrimination, and does not give any encouragement to think that any devaluation of the principle which may apply in the United Kingdom will be applied in Australia.[19]
[7] (2008) 21 VR 252.
[8] Re AWB Limited (No 1) (2008) 21 VR 252.
[9] Yuill v Spedley Securities Ltd (1992) 8 ACSR 272.
[10] (1982) 7 ACLR 202.
[11] (1982) 7 ACLR 202.
[12] [2006] NSWCA 338.
[13] (1982) 7 ACLR 202.
[14] (2000) 104 FCR 359.
[15] (1995) 184 CLR 1.
[16] (1982) 7 ACLR 202.
[17] Baker v Commissioner of Australian Federal Police (2000) 104 FCR 359 at [34].
[18] (1994) 184 CLR 1.
[19] Baker v Commissioner of Australian Federal Police (2000) 104 FCR 359 at [32].
The impetus for the reconsideration of the McMahon v Gould principles arose in part because of the decision of the High Court in Reid v Howard.[20] In that case the High Court confirmed the fundamental importance of the privilege against self-incrimination. Deane J said:[21]
I agree with the other members of the Court that, for the reasons which they give, both Powell J and the Court of Appeal were correct in refusing to deny the benefit of the privilege against self-incrimination to a trustee (or other fiduciary) who is involved in civil litigation with a beneficiary. “The privilege against self-incrimination is deeply ingrained in the common law.”[22] It reflects “a cardinal principle”[23] which lies at the heart of the administration of the criminal law in this country. It can be, and has increasingly been, overridden or modified by the legislature. It can be waived by the person entitled to claim it. Otherwise, it is unqualified. In particular, it should not be modified by judicially devised exceptions or qualifications. Unless it appears that the assertion of potential incrimination is unsustainable, a claim to the benefit of the privilege cannot, in the absence of statutory warrant, properly be disregarded or overridden by the courts.
[20] (1995) 184 CLR 1.
[21] Reid v Howard (1995) 184 CLR 1 at 4-5.
[22] Sorby v The Commonwealth (1983) 152 CLR 281 at 309, per Mason, Wilson and Dawson Jelil.
[23] Sorby v The Commonwealth (1983) 152 CLR 281 at 294, per Gibbs CJ.
Perhaps the clearest example of the evolution of the criteria relevant to determining whether to stay an action to permit criminal proceedings to be completed is found in Zhao & Anor v Commissioner of the Australian Federal Police.[24] It was a decision of the Court of Appeal in Victoria on appeal from the decision of a County Court Judge who declined to stay civil proceedings.
[24] (2014) 43 VR 187.
The civil matter was a forfeiture of proceeds of crime action. One of the applicants for a stay was charged with dealing with the proceeds of crime. It was alleged that he was a brothel owner who had engaged illegal sex workers. The allegations were denied and the criminal matter was, at the time of the Court of Appeal decision, still awaiting trial. The Commissioner of the Australian Federal Police (“the Commissioner”) applied in the County Court for the forfeiture of property, including real property, owned by the accused and his wife. A restraining order had been made under the Proceeds of Crime Act 2002 (Cth) and the Commissioner sought a forfeiture order.
The Court of Appeal delivered a joint judgment. The Justices considered the McMahon v Gould guidelines and said:[25]
Judged according to those observations, the judge in this case would not have been wrong in refusing a stay of the forfeiture proceedings.
[25] Zhao & Anor v Commissioner of the Australian Federal Police (2014) 43 VR 187 at [20].
Notwithstanding that comment, the Court of Appeal found that the Judge had been wrong to decline to stay the proceedings. That would appear to mean that the McMahon v Gould guidelines should no longer be regarded as the guiding principles in an application for a stay of civil proceedings.
The Court of Appeal considered a number of recent authorities. One of those was Lee v R (No 2).[26]That was a decision of the High Court dealing with particular circumstances arising from a compulsory examination of the accused under the provisions of the Crime Commission Act 1985 (NSW). The relevant provision abrogated the privilege against self-incrimination by requiring an examinee to answer all questions. The legislation provided some protection by way of allowing the Crime Commission to direct that the evidence not be published. The Commission made such an order, but transcript of the examination nonetheless found its way to the prosecutor. The High Court quashed the conviction as being unfair, the provision of the transcript having fundamentally altered the position between prosecutor and accused at trial.
[26] (2014) 308 ALR 252.
The Court of Appeal stated that the principles to be taken from Lee were as follows:[27]
We do not consider that Lee No 2 can or should be distinguished on that basis. Although it was concerned with compulsory examination, and so in a sense only with a situation where the privilege against self-incrimination is expressly abrogated by statute, logically the High Court’s reasoning in Lee No 2 appears to dictate that:
a) the privilege against self-incrimination consists as much of the right of an accused to require the Crown to prove its case without the accused’s assistance as it does of the accused’s right to refuse to answer incriminating questions;[28]
b) as a constituent of the privilege against self-incrimination, the right to require the Crown to prove its case without the accused’s assistance, like the right to refuse to answer incriminating questions, may only be abrogated by statute;[29] and
c) perforce of the principle of legality, as a constituent of the privilege against self-incrimination the right to require the Crown to prove its case without the assistance of the accused may only be abrogated by express statutory terms or clear necessary statutory implication.[30]
[27] Zhao & Anor v Commissioner of the Australian Federal Police (2014) 43 VR 187 at [53].
[28] At 260, [32].
[29] At 261, [36] and 261-2, [39].
[30] At 263, [46], 264, [49] and 264, [51].
The Court went on to say:[31]
If so, it follows from the logic of Lee No 2 that the court is bound to do what it can to protect the accused’s right to require the Crown to prove its case without the accused’s assistance. And, if the facts are such that the only way in which that can be achieved is by staying forfeiture proceedings until after the related criminal proceedings have been heard and determined, the court is bound to adopt that course.
[31] Zhao & Anor v Commissioner of the Australian Federal Police (2014) 43 VR 187 at [58].
The Commissioner appealed to the High Court.[32] In the result, the High Court dismissed the appeal of the Commissioner. The Court said in a joint judgment:[33]
The assumptions upon which the POC Act is founded in this regard are not novel. They are reflected in s 319, but a provision of this kind is strictly unnecessary. Courts will not grant a stay of civil proceedings merely because related charges have been brought against a person and criminal proceedings are pending. More is required. To warrant a stay of the forfeiture proceedings, it must be apparent that the person whose property is in question is at risk of prejudice in the conduct of his or her defence in the criminal trial.
[32] Commissioner of the Australian Federal Police v Zhao and Another (2015) 255 CLR 46.
[33] Commissioner of the Australian Federal Police v Zhao and Another (2015) 255 CLR 46 at [35].
The High Court considered the issues of risk and prejudice. The Court found that there was no particular prejudice in delaying the civil proceedings. In respect of prejudice they said:[34]
The risk of prejudice to the second respondent if a stay is not granted in the forfeiture proceedings and the exclusion proceedings is plain. It is not necessary for the second respondent to say any more than he did on the application for a stay in order to identify that risk, given that the offences and the circumstances relevant to both proceedings are substantially identical.
[34] Commissioner of the Australian Federal Police v Zhao and Another (2015) 255 CLR 46 at [42].
The basis of the plaintiff’s opposition
It is true that a number of the authorities referred to above were not ordinary civil proceedings. Even so, the principles set out in those authorities are capable of general application to ordinary civil proceedings. There is no reason to read down the principles as applying only to a particular type of non-criminal proceeding.
What the authorities establish is that the position has moved on since McMahon v Gould, where the court held that the privilege against self‑incrimination was one of the relevant considerations in deciding whether or not to stay civil proceedings. The latter authorities make clear that it is the primary consideration and outweighs other considerations. It includes an entitlement not to be forced to take any step that affects the balance between prosecutor and accused or to limit the forensic choices that are available to an accused at trial.
Notwithstanding that the privilege against self-incrimination is the primary consideration, it is still necessary to establish that a party will suffer prejudice if civil proceedings are allowed to continue. It might be that, in the usual case, it will be relatively straightforward to establish that obliging a defendant in civil proceedings to file a defence or affidavit setting out the defence will amount to the necessary prejudice.
This is a matter in which the factual issues in any future criminal proceedings will be predominantly the same as involved in this civil dispute. The plaintiff wishes to press its summary judgment application. To oppose that, the defendant will have to file an affidavit setting out in some detail her defence to the claim. The plaintiff may wish to cross-examine the defendant on her affidavit. Even if the summary judgment application fails, there will be ongoing obligations such as the making of disclosure. The making of disclosure in civil proceedings affects the balance between an accused and the prosecution. It does so by alerting the prosecution to the categories of documents an accused says are relevant to the factual issues in dispute.
Counsel for the plaintiff submitted that there were four reasons why the defendant’s application for a stay should be dismissed. They were that:
1The Zhao authority is not relevant.
2McMahon v Gould remains the relevant test in this matter.
3In any event, whatever the relevant criteria, it is too late to protect the defendant in these proceedings. The submission was put on the basis that she has filed a defence and, further, commenced proceedings in the South Australian Employment Tribunal (“SAET”) in relation to her termination of employment.
4The Court should also decline the application on discretionary grounds. Whilst still employed the defendant was interviewed by her employer, whilst accompanied by a solicitor, at some length. The interviews have been transcribed. There was no claim of privilege at that time.
It is not necessary when considering an application to stay civil proceedings that the criminal proceedings have already commenced. It is sufficient if, on the facts of the matter, criminal proceedings are “on the cards”, in that is there is a reasonable possibility that criminal proceedings will be instituted.[35] I accept that to be the case here.
[35] Re AWB Limited (No 1) (2008) 21 VR 252 at [100].
It appears that Points 1 and 2 rise or fall together. The plaintiff submits that McMahon v Gould remains the relevant authority and the Court should determine the defendant’s application in accordance with that case. The change of focus in the later cases is not relevant to the situation here, says the plaintiff.
In my opinion, it is not appropriate to read the more recent authorities in a narrow way. What the High Court has made clear is that the privilege against self-incrimination is a “cardinal principle” laying at the heart of the administration of criminal law. To accede to the plaintiff’s submission would be to relegate that “cardinal principle” to simply one of a basket of issues to be considered in the balance when determining whether or not to stay a matter. That approach is not consistent with the more recent authorities. As the High Court said in Reid the privilege is not one which a court should disregard or override.
In my opinion, there is more substance in points 3 and 4. The defendant has filed a defence in this proceeding and has instituted proceedings in SAET. That must mean that, to some extent, the privilege against self-incrimination has been affected. At the time each of those steps were taken, the defendant was unaware that criminal proceedings were a possibility. She says that it was only the recent police search of her property that has alerted her to the risk of criminal proceedings.
I do not think temporal considerations should play a significant part. If the civil proceeding is stayed now, the position of the defendant may not be pristine, but the risk of further prejudice can be avoided.
The submission of the plaintiff on points 3 and 4 amounts to this, because of the chronology of events, the defendant has already suffered the prejudice and there is therefore no proper basis on which to stay the matter now. That overlooks the fact that it is appropriate to grant a stay where to do so means that the defendant will not suffer further prejudice in respect of the possible criminal proceedings. The defendant was interviewed on several occasions by her employer and the answers transcribed without any claim of privilege being made. That has clearly caused some prejudice to the defendant. The filing of an affidavit setting out the facts and circumstances said to amount to a defence, and the possibility of that evidence being tested by cross-examination, would cause significant additional prejudice being suffered by the defendant.
The grant of a stay is an indulgence granted by the Court to protect the defendant’s position in the criminal proceedings. It is the correct thing to do where the interests of justice require it. In my opinion, that is the case here. That said, an indulgence granted by the Court in favour of one party should, to the extent possible, not cause detriment to another party. That will often mean that the party obtaining the indulgence may have to pay a price for that indulgence.
The prejudice to the plaintiff is the delay in finalising this matter. That in itself is not a significant prejudice, but must still be considered. The position of the plaintiff could be significantly prejudiced if the capacity of the defendant to meet any judgment ultimately obtained by the plaintiff deteriorates because of the delay in finalising the matter.
I am satisfied that it is appropriate to grant a stay. I will hear the parties as to the length of the stay that is appropriate in the circumstances and what orders, if any, should be made to protect the position of the plaintiff in these proceedings.
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