Cameron's Unit Services Pty Ltd v Whelpton & Associates Pty Ltd and Anor

Re: CAMERON'S UNIT SERVICES PTY LIMITED
And: KEVIN R WHELPTON AND ASSOCIATES (AUSTRALIA) PTY LIMITED AND ANOTHER
No. G276 of 1984
Practice and Procedure
4 FCR 428

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.(1)

CATCHWORDS

Practice - Application for stay of proceedings - Pending criminal charges raising factual issues similar to those in civil action - Effect on "right of silence" of respondent - Danger of injustice in criminal proceedings - Effect of respondents dilemma upon civil proceedings themselves - Distinction between civil proceedings and Royal Commission.

Jefferson Limited v Bhetcha (1979) 1 WLR 898, Re Saltergate Insurance Company (1980) 4 ACLR 733, Beecee Group Limited v Barton (1980) 5 ACLR 33, McMahon v Gould (1982) 1 ACLR 98, Hammond v Commonwealth of Australia (1982) 56 ALJR 767

Practice and Procedure - Exercise of discretion to stay civil proceedings pending trial of criminal charges raising similar issues - The right of silence - Likelihood of injustice to the accused.

HEADNOTE

Held: (1) When there are pending criminal charges against a party to civil proceedings involving substantially the same issues, the civil court should only exercise its discretion to stay its own proceedings when there is a likelihood of injustice being caused to the accused in the hearing of the criminal charges.

(2) Factors relevant to a decision upon the likelihood of causing injustice in the criminal proceedings include the possibility of prejudicial publicity, the imminence of the trial, and the burden upon the accused of preparing two sets of proceedings concurrently.

(3) If an accused person chooses to defend civil proceedings and thereby discloses the substance of his defence in the criminal proceedings, he has also thereby chosen to waive his right of silence. The fact that civil proceedings may result in such a decision being made is not in itself sufficient reason to stay the civil proceedings.

Jefferson Ltd v. Bhetcha (1979) 1 WLR 898; Re Saltergate Insurance Co (1980) 4 ACLR 733; Beecee Group Ltd v. Barton (1980) 5 ACLR 33; McMahon v. Gould (1982) 7 ACLC 202; Rochfort v. John Fairfax and Sons Ltd (1972) 1 NSWLR 16; Hammond v. Commonwealth of Australia (1982) 56 ALJR 767, referred to.

HEARING

1984, December 19. #DATE 19:12:1984

MOTION

Motion seeking, inter alia, an order staying further steps in the proceedings until criminal proceedings had been completed.

A J L Bannon, for the applicant.

L C Gruzman QC and A Gruzman, for the respondents.

Solicitors for the applicants: Mansell & Norton

Solicitors for the respondents: J R Tesoriero, Kwan & Co.

SW

ORDER

The application for a stay of proceedings be refused.

The respondents in the principal proceedings, applicants upon the Notice of Motion, pay the costs of the applicants in the principal proceedings of the Notice of Motion.

Orders accordingly

JUDGE1

This is an application made by Notice of Motion dated 23 November 1984 whereby the respondents in the principal proceedings seek the vacation of orders made by me on 19 October 1984 in connection with the use of affidavit evidence and for an order staying any further steps in the proceedings until certain criminal proceedings have been completed.

The principal proceedings were commenced on 8 August 1984. The application and the statement of claim were each amended on 29 August. A defence and cross-claim were filed on 26 September 1984 and a defence to the cross-claim on 9 October 1984. On 19 October 1984 I directed that the hearing proceed upon the basis of affidavit evidence subject to cross-examination as may be required, and I specified dates by which the affidavits of the respective parties should be filed and served. At that time it was contemplated by myself and, I believe, by counsel then appearing that a hearing would take place early in 1985.
The applicants are a company, Cameron's Unit Services Pty Limited, and a director of that company, Donald Cameron. The applicant company is said to carry on the business of a managing agent of home units by contract with strata plan proprietors or home unit companies. The respondent company, Kevin R Whelpton and Associates (Australia) Pty Limited is admitted to carry on the business of an insurance broker. The second respondent, Kevin Whelpton, is a director of that company. The claim arises out of arrangements made between the applicants and the respondents in relation to the insurance of home units managed by the applicant. It is common ground that the respondents negotiated insurance cover under a master insurance policy with Colonial Mutual General Insurance Company Limited.
The applicants allege, but the respondents either deny or do not admit, the following conduct of the respondents in relation to that policy, that:

(a) The respondents represented that premiums required to be paid under the master policy were particular amounts as invoiced;

(b) The invoices fairly represented the premiums actually payable;

(c) The amounts shown on the invoices overstated the amounts payable;

(d) The applicant company forwarded the invoices to its clients which paid those amounts;

(e) The applicant company paid to the respondents the premiums as paid less a commission which it believed to be payable to it by agreement with the respondent company, being one half of the usual broker's commission on the insurance.

This is said to constitute misleading or deceptive conduct within the meaning of s. 52 of the Trade Practices Act and to constitute the making in trade or commerce, in connection with the supply of services or the promotion of the supply of or use of services, of a false or misleading statement with respect to the price of services. The applicants allege that the second respondent aided, abetted, counselled or procured, and was directly or indirectly knowingly concerned in, the conduct referred to.
By way of causes of action alternative to those arising under the Trade Practices Act, the applicants allege negligent misrepresentation, breach of contract, payment under a mistake of fact, and moneys had and received.
The applicants claim to recover the sum of $85,384.39, the amount of the alleged over payment, together with general damages for the loss of goodwill and of business said to have been suffered by them as a result of the conduct of the respondents.
By their defence the respondents put in issue all of the substantial allegations made against them. Additionally, they bring a cross-claim in which they seek to recover a balance of $21,207.30 said to be payable for premiums due under the master policy together with general damages in respect of misleading conduct said to have been engaged in by the applicants in respect of certain letters sent by them and relating to the respondents. The substance of the cross-claim is denied by the applicants.
The evidence filed in support of the Notice of Motion reveals that on 21 August 1984 the solicitors acting for the applicants wrote a letter on their behalf to the Commissioner of Police enclosing a copy of the Statement of Claim. On 25 October 1984 Mr Whelpton was charged with having conspired between 1 January and 1 May 1981 with Mr Cameron to cheat and defraud the proprietors of a certain strata plan. He was also charged with three offences of obtaining money by deception in breach of s. 178BA of the Crimes Act 1900 (NSW). Subsequently, on 7 November 1984 the police announced that they proposed to bring a further 340 charges against Mr Whelpton under s. 178BA and this has now occurred. The police have also charged Mr Cameron with conspiracy and with a similar number of charges under s. 178BA. The prosecutor informed the presiding magistrate that he wished to proceed initially with the conspiracy charges against both men and intended to call approximately 20 witnesses. No hearing date has yet been fixed.
Counsel for the respondents contend that the proceedings in this Court should be stayed until the completion of the criminal proceedings. They argue that the issues involved in the civil proceedings are substantially similar to those involved in the criminal proceedings so that a full and active defence of the civil proceedings, particularly one involving evidence from Mr Whelpton himself, would necessarily involve some disclosure of his defence to the criminal charges. He would be compelled, it is said, to choose between maintaining his defence to the civil action or maintaining his right of silence in relation to the criminal proceedings.
I think that the situation is as suggested by counsel for the respondents, but the authorities make clear that those facts do not necessarily mean that the proper course is to stay the civil action - see the decision of the English Court of Appeal in Jefferson Limited v Bhetcha (1979) 1 WLR 898 at p 904. The matter is one of discretion for the court, "the burden" according to Megaw LJ in Bhetcha at p 905, being "on the defendant in the civil action to show it is just and convenient that the plaintiff's ordinary rights of having his claim processed and heard and decided should be interfered with". One relevant factor, he added, is whether there is a danger of causing injustice in the criminal proceedings, perhaps because of publicity accorded to the civil proceedings.
The approach adopted in Bhetcha has been applied in three decisions in the Supreme Court of New South Wales to which I have been referred. In Re Saltergate Insurance Company (1980) 4 ACLR 733, Needham J applied the words of Megaw LJ in refusing to stay misfeasance proceedings brought by a liquidator against a company director who stood charged with various criminal offences arising out of his activities in that capacity. However, the circumstances were unusual in that the applicant had already given evidence in the proceedings; distinguishing that case from what his Honour called "the ordinary case of a man faced with two separate proceedings, one civil and one criminal, in which the court proceedings are sought to be stayed in limine to protect his defence to the criminal charges."
In Beecee Group Limited v Barton (1980) 5ACLR 33, Waddell J had to decide whether to stay proceedings brought at the instigation of the Corporate Affairs Commission for the recovery of certain moneys because of the pendency of criminal proceedings against the defendants relating to the same transactions. His Honour held that there was no possibility of prejudice to the defendants from a continuation of the interlocutory steps necessary to prepare the civil action to proceed to trial before the disposal of the criminal proceedings It was not necessary, at that stage of the proceedings, to consider under what circumstances (if any) it would be appropriate to stay the trial itself.
However, in McMahon v Gould (1982) 1ACLR 98, Wootton J was confronted with an application involving not only interlocutory steps but the hearing itself. In an elaborate judgement, his Honour reviewed the authorities relating to the so-called "felonious tort" rule - that is the old rule that a plaintiff against whom a felony has been committed by the defendant cannot make that felony the foundation of a cause of action unless the defendant has been prosecuted or a reasonable excuse has been shown for his not having been prosecuted - and referred to the principle enunciated by the New South Wales Court of Appeal in Rochfort v John Fairfax and Sons Limited (1972) 1 NSWLR 16, that a plaintiff is entitled to have his action tried in the ordinary course of business of the court, subject only to the court's inherent jurisdiction to grant the stay of proceedings in the interests of justice when there are proper grounds for doing so.
Wootten J then set out some principles, distilled by him from the authorities, to guide the exercise of the court's discretion in the situation before him. Those principles were as follows:

"(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 at p 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 (Bhetcha at p 905);

(d) Neither an accused (ibid) nor the Crown (Rochfort at p 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" (Bhetcha at p 904), taking account of all relevant factors (ibid p 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 p 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 p 904) . . .

(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 judgement, 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 pp 904-905);

(i) The Court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings (ibid p 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 p 905);

(ii) the proximity of the criminal hearing (ibid p 905);

(iii)the possibility of miscarriage of justice e.g. by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid p 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 Sommer

(1980) 2 NSWLR 929 at p 932, Re Saltergate Insurance Co. Ltd. at p 736);

(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant . . .

(l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, e.g., setting down for trial, and then stayed (Beecee Group v Barton)."

Those principles are equally applicable to the present application. I gratefully adopt them as a guide to the exercise of the court's discretion in this case. The matters which emerge from this analysis as potentially supporting the application for a stay are those contained in paras. (g) and (i): the effect upon the accused's "right of silence", and the dangers of injustice in the criminal proceedings.
In McMahon v Gould, Wootten J, at pp 102 to 103, went on to discuss the rationale and scope of the "right of silence":

"In considering the reasons why 'the right of silence' exists (para. (g) above), one enters a realm of controversy (see, for example, the discussion of the Eleventh Report of the English Criminal Law Revision Committee

(1972) Cmnd. 4991 in The Right of Silence, being papers presented at a seminar of the Sydney University Law School Institute of Criminology in June 1973). The phrase is a convenient rubric for several rules and practices which have various origins and serve various purposes. In the process of investigation of crime and the interrogation of suspects it comprehends the fact that it is not normally an offence to refuse to answer questions or to fail to provide an explanation or account of events. Not only is refusal or failure not an offence, but it cannot be used to draw an adverse inference against the person concerned at his trial. This aspect of the right of silence was greatly strengthened by the Judge's Rules which provided for the cautioning of suspects. Serving some of the same purposes but of different origin is the law relating to confessions in criminal cases, which cannot be used unless they are fully voluntary.

In terms of procedure at a criminal trial, the 'right of silence' covers the situation that the accused is not obliged to give evidence - indeed he may make an unsworn statement about which he cannot be questioned - and for the most part no comment can be made to the jury on his failure to go in the box.

Finally, in legal proceedings generally, civil and criminal, a witness has a privilege to refuse to answer a question which might tend to incriminate him. Naturally this does not apply to a defendant who chooses to give evidence in a criminal case.

The various rules that may be grouped under the 'right of silence' have, as I have said, various origins, and some of the historic conditions that gave rise to them - e.g. the inability of a man to give evidence at his trial, the use of torture, religious persecution, are no longer with us (Neasey The rights of the Accused and the Interests of the Community (1969) 43 ALJ 482; Hobsen et al., The Silence of the Accused (1970); Stephen, History of the Criminal Law (1883) Vol. 1 Ch XI and XII). In considering why the 'right of silence' exists, it is more fruitful to consider the reasons now argued in support of it, whether generally accepted or not. Many of them, and in particular those relating to the process of criminal investigation, are of no obvious relevance to the present problem. I refer to matters such as unfair pressure on a suspect in custody; the discouragement of improper police methods; the inducement of unreliable evidence; the absence of satisfactory methods of recording statements; the lack of time for reflection or of opportunity to take legal advice; the abhorrence of forcing a man to convict himself ('the cruel simple expedient' as Warren C.J. called it in the Miranda case

(1966) 384 U.S. 436), and the maintenance of dignity and humanity in criminal trials. Perhaps the most relevant is the argument that because of the possibility that an innocent man forced into the box may give an impression of guilt through being stupid, slow, overawed or simply nervous, he should have the choice of whether he gives evidence or not, without the risk of adverse comment.

On the other hand, the scope and role of 'the right of silence' in the criminal process should not be exaggerated. As Lord Devlin has observed: 'while the English system undoubtedly does give the accused man the right to say nothing, it does nothing to urge him to take advantage of his right or even to make that course invariably the attractive one' (The Criminal Prosecution in England

(1960) p 50). Nor has 'the right' been understood to give a man freedom from being confronted at his trial with prior inconsistent statements of his own, provided they were made voluntarily. Even at the high point of its protection of the 'right of silence' in the Miranda case, the Supreme Court of the United States held that statements made voluntarily but barred by the Miranda case could be used for purposes of cross-examination. In Harris v New York

(1971) 401 U.S. 222 the Court said:

'The shield provided by Miranda cannot be perverted into a license to use perjury by way of a defense, free from the risk of a confrontation with prior inconsistent utterances.'

In this context there are some consequences of the 'right of silence' which no one, so far as I am aware, puts forward as legitimate reasons for its existence. These include the opportunity it may give the accused to remain silent till the end of the evidence against him at the trial, and then produce a fabricated story perfectly tailored to meet that evidence. They include the possibility of depriving the prosecution of any opportunity to check the accused's story and obtain evidence to refute it before the trial is over. In one particular matter - the last minute production of alibis - the injustice was so frequent and obvious that the legislature made an inroad into the 'right of silence' by requiring notice of such an intended defence.

These are advantages which 'the right of silence' gives to an accused, but they cannot reasonably be regarded as part of the reason why the right exists. In exercising its discretion to stay civil proceedings the Court need not be concerned to preserve these advantages. It should be concerned to avoid the causing of unjust prejudice by the continuance of the civil proceedings, not to preserve the tactical status quo in the criminal proceedings whether it be just or unjust."

I agree with the view expressed at the conclusion of this passage. The "right of silence" is a right which a person has in relation to present or anticipated criminal proceedings. As a matter of everyday experience, suspects or accused persons waive the right by giving an explanation of their conduct during the course of interrogation by police or other investigating authorities or in evidence at their trial. No doubt the right is often waived incautiously or through ignorance, but it is also deliberately waived by informed persons who take the view that waiver will best serve their interests overall. The conflicts of interest which give rise to waiver already exist; the law does not step in to prevent those conflicts or to deny the ability to waive the right. The existence of a civil action which an accused person may wish to defend provides simply another example of a conflict of interest between maintaining silence and disclosing the substance of the defence in the criminal proceedings. I see no basis for the view that the Court should intervene to relieve against this particular conflict, when it does not relieve against others. The fact that the existence of the civil action may result in a decision by the accused person to waive his right of silence is not, in itself, a sufficient reason to stay that action. The real question must be the likelihood of causing injustice in the criminal proceedings: para (i) above.
The factors relevant to the likelihood of causing injustice in the criminal proceedings must vary according to circumstances. The imminence of the criminal trial and the possibility of prejudicial publicity will always be matters for consideration. In the present case any trial of Mr Whelpton is in the distant future. The delays customarily experienced in the finalization of criminal proceedings in New South Wales in matters such as these are such that it is likely that a trial - if one occurs at all - is at least two years into the future. It is possible that the civil proceedings would receive some publicity but, providing that they are completed promptly, that publicity is unlikely to affect a jury sitting in a trial a couple of years hence. There is a much greater likelihood that the jury would be affected by publicity about the committal proceedings, which will be both closer in point of time to the trial and more directly related to the criminal charges. The preliminary proceedings before the magistrate have so far attracted some newspaper attention; the proceedings in this Court have not. No other factor, whether amongst those mentioned by Wooten J or not, has been referred to in relation to the danger of injustice in the criminal proceedings. I discern none. I see no particular burden in Mr Whelpton having to defend this action in this Court whilst awaiting the commencement of the committal proceedings; the preparation for each matter will substantially overlap.
Counsel for the respondent mentioned one other matter, not referred to in the authorities I have cited: the danger of injustice in the civil action itself. It is said on behalf of the respondents that, confronted with a choice between defending this application on the merits or maintaining his right of silence, Mr Whelpton is likely to choose the latter course. The result, it is said, is that justice will not be done in the civil action. This may be so, but the failure of the respondents to advance the case necessary for the Court to determine the matter on its merits will be the result of a conscious choice by them to prefer a higher interest. It is not unusual for people to choose not to bring, not to maintain, or not to defend, civil proceedings - or not to adduce particular evidence - because to do so may conflict with some higher interest. And, in this case, any notion of postponing the civil trial so as to increase the possibility of achieving perfect justice in the evidentiary sense runs into the difficulty that to do so necessarily involves the visitation upon the applicants of the very considerable prejudice of delay. The applicants claim to be out of pocket in respect of a significant sum; they claim to have suffered in their business and goodwill from the conduct of the respondents. To compel them to wait two or three years for a determination of those claims is to compel them to submit to a substantial injustice; even complete vindication at that time must leave them significantly disadvantaged in their reputation. In a choice between the parties compelled to shoulder some prejudice in the civil action the burden must be put upon the respondents; it is they who would, on this view of the matter, cause the problem by Mr Whelpton's insistence upon maintaining his right of silence.
Counsel for the respondents referred to various authorities in which there is discussion relating to the circumstances in which Royal Commissions may compel from witnesses answers to questions which may incriminate the witness. In Hammond v Commonwealth of Australia (1982) 56 ALJR 767 the High Court of Australia affirmed the principle that a witness may not be compelled to give evidence which might incriminate him in respect of matters already charged against him. However, the basis of that decision is that the witness is "bound, on pain of punishment, to answer questions designed to establish that he is guilty of the offence with which he is charged"; per Gibbs CJ at p 770. See also per Brennan J at p 772 and per Deane J at p 774. The principle has no application to the subject case. Mr Whelpton is not compelled to give evidence in this Court. Should he elect to do so he will nevertheless be entitled to refuse to answer any particular question the answer to which may incriminate him.
In my view the Court's discretion should be exercised in favour of refusing the application for a stay of civil action. The existence of the criminal proceedings is an additional reason for taking all necessary steps to ensure a speedy determination of the civil proceedings. I adhere to the view that the trial should proceed by way of affidavit evidence, subject to cross-examination. I vary the directions made by me on 19 October 1984 so as to require that the applicants file and serve upon the respondents copies of all affidavits upon which they propose to rely on or before 11 January 1985, that the respondents file and serve upon the applicants copies of all affidavits upon which they propose to rely on or before 1 February 1985 and that the applicants file and serve upon the respondents copies of all affidavits in reply on or before 8 February 1985.
All parties may have leave to administer interrogatories, such interrogatories to be delivered not later than 18 January 1985 and to be answered not later than 1 February 1985. I propose to discuss with counsel the question of a date for hearing. The respondents in the principal proceedings - applicants upon the motion - must pay the costs of the applicants in the principal proceedings of this motion.

[1984] FCA 481

19 DECEMBER 1984