Clayton Utz (a Firm) v Dale
[2015] VSCA 186
•23 July 2015
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2014 0141 | |
| CLAYTON UTZ (A FIRM) | Applicant |
| v | |
| CHRISTOPHER ANTONY DALE | Respondent |
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| JUDGES: | ASHLEY, TATE and FERGUSON JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 6 February 2015 |
| DATE OF JUDGMENT: | 23 July 2015 |
| MEDIUM NEUTRAL CITATION: | [2015] VSCA 186 |
| JUDGMENT APPEALED FROM: | [2014] VSC 517 (Croft J) |
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CONTRACT – Breach of contract – Partnership agreement – Expulsion from partnership following allegations that partner guilty of criminal and unlawful conduct and breaches of fiduciary duties – Claim for damages for wrongful repudiation of partnership agreement – Claim that partnership failed to comply with implied contractual obligation of procedural fairness in exercising powers of expulsion – Damages – Causation.
PRACTICE – Whether trial judge erred in permitting plaintiff to ‘split’ trial to enable plaintiff to lead evidence in rebuttal on certain issues – Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187, applied – Frenchv Triple M [2008] VSC 548; S, DJv Channel Seven (2009) 260 LSJS 287, considered – Trial judge correct to ‘split’ trial – Plaintiff otherwise obliged to prove a negative without knowledge of basis of case against him.
EVIDENCE – Privilege against self-incrimination – Whether by commencing proceedings raising issues of plaintiff’s allegedly incriminating conduct plaintiff waives privilege in respect of those issues – Origins and history of privilege against self-incrimination, discussed – Privilege against self-incrimination available to plaintiff in civil proceedings at common law – Song v Ying (2010) 79 NSWLR 442; Rowell v Larter (1986) 6 NSWLR 21; Chong v CC Containers Pty Ltd [2015] VSCA 137, considered – Evidence Act 2008 s 128.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr J H Karkar QC with Mr N P De Young | Minter Ellison |
| For the Respondent | Mr S K Wilson QC with Mr P L Ehrlich | O’Donnell Salzano Lawyers |
ASHLEY JA:
I agree in the reasons of Tate JA and with the orders which her Honour proposes.
TATE JA:
TABLE OF CONTENTS
Introduction and Summary ..……………………………………………….. 2 Dale’s proceedings — repudiation of the partnership agreement ………. 3 The application to ‘split’ Dale’s case and to rely on the privilege against self-incrimination ………………………………………………….. 17
The judge’s reasons …………………………………………………………... 19 The grounds of appeal ………………………………………………………. 25 Did the judge misapply the principles of Protean Holdings? …………… 30 (i) What is a Protean Holdings ‘split’? ……………………........... 30 (ii) What are the boundaries of Dale’s case?……………………….. 40 (iii) Was a ‘split’ inappropriate? ………………………….............. 47 The effect of the tender of the Fagan memorandum ……………………… 48 (i) Was there an implied admission of the allegations in the Fagan memorandum? …………………………………………………. 48
(ii) Conclusion on the tender ……………………………………… 50 The timing of the order ……………………………………………………… 50 (i) Should the judge have waited to hear the formal openings?....... 50 (ii) Conclusion on timing …………………………………………. 51 Conclusion on the Protean Holdings ‘split’ ………………………………. 51 Is the privilege against self-incrimination available to a plaintiff? …… 51 (i) Origins of the privilege against self-incrimination ……………. 52 (ii) Privilege claimed by defendant in equity/ plaintiff at law …….. 57 (iii) The Evidence Act of 1851 — compellability of parties …….. 61 (iv) Section 128 of the Evidence Act ………………………………. 68 (v) Can an adverse inference be drawn? ………………………….. 78
(vi) The reliance by others upon the privilege ……………………… 86 (vii) Conclusion on availability of the privilege to a plaintiff ………. 87 Is commencing a proceeding inconsistent with the privilege?………………………………………………………………………. 88 (i) Waiver over foundation of plaintiff’s claim?...................................
(ii) Conclusion on commencing proceedings………………….……...
88
92Is there a real risk of Dale being subject to incrimination or penalties? 92 (i) Inferences drawn by the judge …………………………………. 93 (ii) Conclusion on Dale’s risk ………………………………........... 94 Conclusion on privilege …………………………………………………….. 94 Conclusion on the application for leave to appeal and the appeal ……. 95
Introduction and summary
Christopher Dale (‘Dale’) has brought proceedings in the Trial Division of the Supreme Court for damages for wrongful repudiation of a partnership agreement. The partnership was between legal practitioners in the firm known as Clayton Utz (‘the firm’). A decision was made by the Board of the firm (‘the Board’) on 7 September 2005 expelling Dale from the partnership (‘the expulsion decision’). Interlocutory orders were made[1] permitting Dale to ‘split’ his case based on the rule of practice explained by Marks J in Protean (Holdings) Ltd v American Home Assurance Co[2] and allowing Dale to rely upon the privileges against self-incrimination and exposure to a penalty.[3] The firm now seeks leave to appeal[4] the orders made below, and, if leave is granted, for the appeal to be allowed. The application for leave to appeal was heard at the same time as the appeal.
[1]The orders were made on 19 November 2014, supported by reasons made 22 October 2014: Dale v Clayton Utz(a firm) [No 2] [2014] VSC 517 (‘Reasons’).
[2][1985] VR 187 (‘Protean Holdings’).
[3]In what follows I use the expression ‘the privilege against self-incrimination’ to include the privilege against exposure to a penalty unless the context requires a distinction to be drawn.
[4]The application for leave to appeal was sought ‘to the extent necessary’. The firm submitted that leave was not required with respect to the determination on privilege. The application for leave to appeal was made by summons dated 5 November 2014. It is governed by the principles in Niemann v Electronic Industries Ltd [1978] VR 431, 433 (McInerney J), 441–2 (Murphy J), namely, that leave to appeal from an interlocutory order shall be granted only where: (1) the decision was wrong, or attended with sufficient doubt, to warrant a grant of leave; and (2) substantial injustice would be done by leaving the decision unreversed. The application preceded the amendments to the Supreme Court Act 1986, and the amendments to the Supreme Court (General Civil Procedure) Rules2005 which came into effect on 10 November 2014, whereby leave to appeal is to be determined by a single-limbed test, namely, whether the Court is satisfied that there is a real prospect of success on the appeal: see Supreme Court Act, s 14C.
For the reasons that follow, I would grant leave to appeal, to the extent necessary, and allow the appeal only to the extent required to vary the orders made by the judge, in the manner I have set out below.[5]
[5]See [225] below.
I consider that the judge was correct to order a Protean Holdings ‘split’ of the trial but not wholly on the basis of the reasons he gave.
I also consider that the judge was correct to conclude that the privilege against self-incrimination is available to a plaintiff and that Dale can rely upon the privilege until and unless he decides to give evidence to conduct a positive case in rebuttal of allegations made against him.
Dale’s proceedings — repudiation of the partnership agreement
The expulsion decision was made pursuant to cl 16.1 of the firm’s partnership agreement, which relevantly reads:
[T]he Board has the power to make a Decision requiring a Partner to leave the Partnership if:
(a)(i) in the opinion of the Board she or he wilfully or persistently acts in a manner contrary to her or his obligations under this agreement or the Partnership Handbook or is guilty of any serious professional misconduct;
(ii) she or he is convicted (unless quashed on appeal) of any criminal offence involving dishonesty or if she or he acts in a manner which has caused, or is likely to cause, serious prejudice to the reputation of the Partnership.
Clause 5.6(a) provided that all decisions made by the Board bind the partners. A decision requiring a partner to leave the partnership was ‘a Board Matter’, pursuant to cl 7.1(d).
Other relevant provisions of the partnership agreement included the obligation on directors of the Board to act in good faith, pursuant to cl 11.7:
(a)Each of the Internal Directors and the CEP [the Chief Executive Partner] must exercise her or his powers and discharge her or his duties as a Director in good faith in the best interests of the Partnership and for a proper purpose;
(b)It must be a condition of the appointment of each External Director that she or he agree to exercise her or his powers and discharge her or his duties as a Director in good faith in the best interests of the Partnership and for a proper purpose.
In his statement of claim, Dale alleges that each of the members of the Board was required to exercise the power of expulsion in utmost good faith, in the best interests of the partnership, and for a proper purpose.[6] He alleges that, in making the expulsion decision, the Board was required under the partnership agreement to comply with the requirements of natural justice and procedural fairness so as to provide him with a full opportunity of defending himself and explaining his conduct.[7] In argument, Dale, relying on Kerr v Morris,[8] submits that the obligation of good faith, applied in the context of a decision requiring a partner to leave, incorporated a contractual duty to accord the partner an opportunity to be heard.
[6]The obligations were argued to be imposed pursuant to cl 11.7 and implied.
[7]Statement of claim, [5], [14]. The requirement was alleged to be implied by law and imposed pursuant to cl 11.7 of the partnership agreement. This was denied by the firm. See [21] below.
[8][1987] Ch 90; [1986] 3 All ER 217.
Clause 16.2 provided that ‘[w]hen the Board makes a Decision under sub-clause 16.1, the affected Partner must leave the Partnership in accordance with sub-clause 19.2’. Clause 19.2 governed the date on which a decision requiring a partner to leave takes effect; a decision based on sub-cl 16.1 takes effect ‘on any date on or after the Board tells the Partner of the Decision’.
At the time the expulsion decision was made by the Board it had before it a memorandum prepared by David Fagan (‘Fagan’), then the Chief Executive Partner
of the firm (‘the Fagan memorandum’).[9] The Fagan memorandum set out a number of conclusions to the effect that Dale was guilty of criminal and unlawful conduct and breaches of fiduciary duties he owed to the firm.
[9]The Fagan memorandum was dated 26 August 2005. Fagan had already placed Dale on ‘administrative leave’ by letter dated 15 August 2005.
Before delivery of the Fagan memorandum to the Board, a search warrant had been executed at the firm’s Melbourne office by members of Victoria police[10] in relation to the matter of Cheuna Schmidt (née Won) (‘Schmidt’) (‘the Won matter’). The firm acted for Schmidt in various pre-action discovery applications and related proceedings she brought against her brother, Che Sul Won (‘Won’) alleging that she might have a cause of action against him for breach of trust and breach of fiduciary duty arising out of the suspected misapplication of assets of the estate of their father, being real property in South Korea, and a misappropriation of some or all of the proceeds which had been brought to Australia and used to acquire valuable assets in New South Wales.[11] Dale was the partner of the firm responsible for the conduct and supervision of the Won matter.
[10]The warrant was issued pursuant to s 465 of the Crimes Act 1958.
[11]The assets were alleged to include a nursing home, luxury cars, jewellery and the like. See Schmidt v Won [1998] 3 VR 435.
Dale alleges that the Fagan memorandum concluded that he had engaged in criminal conduct when these allegations were untested and unproved. The allegedly criminal conduct included obtaining information from Victoria police unlawfully by having unauthorised searches made of Won and, knowing that the information was unlawfully obtained, using ‘rogue’ police officers in Victoria and New South Wales to intimidate Won into agreeing to a settlement with Schmidt. More particularly, Dale alleges that the Fagan memorandum arrived at very serious and prejudicial conclusions including that:
(a)the plaintiff [Dale] had ‘breach[ed] his fiduciary and other duties to the defendant firm.’
(b)the plaintiff had engaged in criminal conduct involving receipt, retention and use of ‘a confidential document of Victoria police’ that was said to have been ‘leaked to him, i.e. obtained unlawfully.’
(c)the plaintiff had ‘requested Milte[12] to conduct unauthorised activity searches of Won … [and] knowing that the searches so made were unlawful, nonetheless used the material obtained.’
(d)‘Dale was involved with Milte in retaining “rogue” police officers in Victoria and NSW and others to intimidate Won so that he would settle with Schmidt.’
(e)the plaintiff had given ‘Milte $50,000 of his personal funds on 19 April 2002 … in an attempt to prevent Schmidt from raising complaints against Dale and Milte with the police, the media and the firm’ and that the ‘transaction was the subject of a misleading notation later made by Dale in a chronology of events that he prepared in relation to the matter.’
(f)the plaintiff ‘has exposed the firm to the risk of prosecution’ by ‘failing to properly record in the firm’s transit register 6 cheques which he had obtained from Schmidt.’
(g)the plaintiff had failed ‘to disclose until on 23 August 2003 (via his lawyer) the existence of numerous unusual transactions in the nature of loans and other payments involving Dale, Schmidt and Milte’, that ‘the true nature of these transactions was not recorded in the firm’s records’ and that ‘Dale recorded them in a way that was designed to mask and had the effect of masking their true character’ thus raising a ‘serious issue as to whether there has been a defalcation’ and another issue as to whether ‘false documents have been created.’
(h)the plaintiff had given Mr Fagan ‘inconsistent explanations as to pivotal facts.’
(i)the plaintiff had ‘on 10 December 2002 [received] an amount of $180,000 by way of a loan from the client in contravention of Rule 8 of the Professional Conduct and Practice Rules then in force.’
(j)the plaintiff had not provided ‘a true explanation to the client of the source of the monies’ [the $180,000] … and that ‘the need for Dale to put money of his own into the client’s trust account raises a question as to what happened to the $200,000 paid by the client.’
(k)the plaintiff had included a ‘number of misleading inclusions’ in a chronology of events that was prepared by Dale and given to’ Mr Fagan.[13]
[12]In the Fagan memorandum Kerry Milte (‘Milte’) was described as a former federal police officer, ex barrister and undischarged bankrupt who was involved in the conduct of the Won matter and who had been charged with various offences.
[13]Statement of claim, [13]. These conclusions were alleged to arise from para [15](a)–(k) of the Fagan memorandum.
Dale further alleges that the Board, in determining whether to exercise its powers under cl 16.1(a) to require Dale to leave the partnership, was obliged to provide him with a ‘full opportunity [for] stating his case in defence’ of the allegations in the Fagan memorandum and of explaining his conduct. This was put on the basis either of flowing from cl 11.7 alone[14] or from cl 11.7 in circumstances where there had been no charges laid against Dale in respect of any criminal offences involving dishonesty; Dale had not been convicted of any criminal offence involving dishonesty; Dale had not been referred to the Legal Profession Tribunal, or equivalent, for professional misconduct; and there had been no finding of professional misconduct by that Tribunal or equivalent.
[14]See [8] above.
The statement of claim goes on to allege, amongst other things, a repudiation of the partnership agreement on the ground of a breach of procedural fairness[15] arising from the following factual circumstances:
[15]This was expressly alleged in [43] of the statement of claim.
(1) Dale was a patient at a psychiatric hospital between 26 August and 4 September 2005 and was unable to provide proper instructions to his legal advisers.
(2) Dale’s then solicitors received a letter from the chairman of the Board, Allan Blaikie (‘Blaikie’), dated 30 August 2005 inviting any written submissions from Dale in response to the Fagan memorandum, which had been earlier provided to them, by 9:00am on 1 September 2005, the day on which the Board was to start considering the Fagan memorandum.
(3) Dale’s then solicitors received from Fagan a memorandum of a telephone conversation between Fagan, Commander Terry Purton, and Vince Annetta (‘the Annetta memorandum’) whereby Commander Purton is reported to have said, in response to a question as to whether Dale would be charged, that ‘the brief would deal with the issue of whether Chris Dale had conspired with Kerry Milte to pervert the course of justice’ and that:
Commander Purton confirmed that Chris Dale recently drafted a letter on behalf of Kerry Milte sent to Mrs Schmidt. In the letter Kerry Milte offered to repay to Mrs Schmidt the $110,000 which Mrs Schmidt had paid to Mr Milte. Commander Purton said that they have intercept material which establishes this and also establishes that the purpose of the repayment was to prevent Mrs Schmidt from raising the matter with the police or the Law Institute.
(4) Annexed to the Fagan memorandum were two memoranda of advice dated 23 and 24 August 2005 prepared by Paul Lawrie of counsel (‘Lawrie’), (collectively, ‘the Lawrie memorandum’) that concluded that ‘[t]he firm should be gravely concerned that Dale may be charged with serious criminal offences connected with the activities of Milte and perhaps others. The timing of this likely event is impossible to estimate’. At no relevant time had Lawrie met, or sought to meet with, Dale.
(5) On 1 September 2005 the then solicitors for Dale sent to Blaikie a document headed ‘Submission to the Board of Clayton Utz on behalf of Christopher Antony Dale’ advising him that Dale was confined to a psychiatric clinic and was presently incapable of giving proper instructions to those retained by him. The submission sought ‘a further thirty days in which to make responses to the Fagan Memo’, stating that Dale ‘only seeks a proper opportunity to defend himself, to be heard, and for the Board to be able to fairly and properly consider his position’. The submission also contained observations concerning the Annetta memorandum and the Lawrie memorandum, and, with respect to the latter, said:
The opinion is highly speculative and most prejudicial — it could hardly be called an independent assessment of the material, and it confesses to being based on only a few documents in more than 11,000. If the opinion is to be used to justify a decision to expel a partner from the firm, it falls far short of what is required on any objective basis.
(6) Fagan notified the then solicitors for Dale that the Board meeting had been adjourned until 7 September 2005.
(7) On 5 September 2005 Blaikie notified the then solicitors for Dale that the Board had also considered an oral report from Barry O’Keefe AM QC (‘O’Keefe’) that had been ‘put into writing’ and was attached (‘the O’Keefe memorandum’). There was also a letter from Brendan Murphy QC. Blaikie invited Dale to provide any further responses before 9:00am on 7 September 2005.
(8) The O’Keefe memorandum included the statements that:
Milte was a friend of CD [Christopher Dale] and had been for some years.
…
In June 2002 a Victoria Police document was given by Commander Lambert to Milte, he in turn faxed the document to CD. It was a document of a kind that Lambert had no authority to give to Milte. It was a ‘leaked’ document. It was sent to CD with a notation that it was ‘very confidential’. The nature of the document and the covering facsimile should have made it clear that the document had not been obtained regularly. Its purpose was to provide material to be used by CD for the client.
The correspondence to and from CD in my opinion reveals a relationship between CD and Milte that went far beyond that of Solicitor and independent contractor. It reveals that CD and Milte were working in concert, pursuant to arrangements that involved police who were working unofficially (a foreign order) to put pressure on Mr Won to settle.
…
Any assurances given by CD to the contrary to the foregoing are not, in my opinion, honest. Furthermore, a number of references in a chronology prepared by CD at the request of the CEP … were misleading.
…
The strategy that was applied to Mr Won was that he was made to think that there was an official Police investigation into his activities with a view to a prosecution being mounted against him. To use police, whether officially or unofficially … for the purposes of forcing a settlement of a civil matter is both unlawful and not in accordance with the proper standards of conduct for a solicitor nor with the obligations of a partner of Clayton Utz under the Partnership Agreement or the Partnership Handbook.
…
CD received and accepted a loan of $180,000 from the client on 10 December 2002. The Professional Conduct and Practice Rules 2000 that then applied specifically prohibited a solicitor from directly or indirectly borrowing money or receiving finance from a client (Rule 8(1)(a)).
…
Subsequently, a former Federal Police officer was charged with leaking sensitive information from the Department of Immigration’s database. This is a breach of section 70 of the Crimes Act (Cth). It has been confirmed that one of the charges relates to information concerning Mr Won and the date to which the charge relates, namely 2 September 2003, confirms that the information the subject of the particular charge was the information obtained by Milte which was thereafter conveyed to CD and used by him.
Conduct of such a kind is contrary to the proper standards of conduct for a solicitor and to the highest ethical standards that are expressed as one of the core values referred to in the Partnership Agreement and as ‘the foundation value’ in the Partnership Handbook.
…
Following a complaint made against CD by the client the CEP requested CD to compile a chronology of events relating to the client’s matter involving Mr Won. There are several entries that are misleading.
…
The various events referred to above may be considered individually, i.e. a reductionist approach. In such a case a number of them bespeak conduct on the part of CD that is inconsistent with that standard of conduct expected from a solicitor. They also bespeak conduct that is contrary to the provisions of the Partnership Agreement and Partnership Handbook. There are other events that also involve breaches of statutory obligations imposed on solicitors. However, in assessing whether the indicia detailed in clause 16.1 (a1 or a2) have been met, it is appropriate to look at CD’s conduct in a global or overall manner. When this is done, the picture that emerges is even more serious. CD can be seen to have persistently acted in a manner that is contrary to his obligations under the Partnership Agreement and Partnership Handbook. Furthermore he can be seen to have acted in a manner that is likely to cause serious prejudice to the Partnership.
(9) At no relevant time did O’Keefe meet with, or seek to meet with, Dale.
(10) The then solicitors for Dale sent a document headed, ‘Second Submission to the Board of Clayton Utz on behalf of Christopher Antony Dale’ that referred to the earlier request for an adjournment and stated that:
(a)[W]hilst Mr Dale had been ‘discharged’ from the Albert Clinic on 4 September 2005, ‘he is under continuing treatment from [his medical practitioners] … and their preliminary view is that Mr Dale is suffering from a deep psychiatric depression’;
(b)‘Mr Dale is presently able to provide ‘(only) limited instructions to those assisting him’;
(c)‘It remains for Mr Dale to respond in detail to each of the matters alleged against him …’
(d) ‘Mr Dale is a man who is seriously ill’;
(e)‘It is self evident that the matters raised in the Board Documents require a considered reply after proper investigation’ and that ‘the time afforded by the Board to do that’ is … ‘hopelessly short’ and ‘not fair’;
(f) Mr Dale does not admit any ‘wrongdoing’;
(g)‘Mr Dale’s position is that the refusal of the Board to accede to the request’ for an adjournment and ‘its decision to grant to him a period of a further three business days in which to respond to the Board Documents represents a disregard of his rights as a partner, and is a breach of the obligations owed to Mr Dale by each of his partners, and the Board’;
(h) ‘Mr Dale reserves his rights’.[16]
(11) On 7 September 2005 Blaikie informed Dale’s then solicitors that the Board at a meeting held on 7 September 2005 had made the expulsion decision, pursuant to sub-cls 16.1(a)(i) and (ii) of the partnership agreement requiring Dale to leave the partnership on 8 October 2005.[17]
[16]Statement of claim, [32].
[17]Pursuant to cl 19.2 Dale ceased to be a partner of the firm on 8 October 2005. See [10] above.
The alleged breach of procedural fairness was thus put on the basis of a breach of contract. In addition to the alleged breach of procedural fairness, Dale relies on other grounds as providing the basis for the repudiation of the partnership agreement. At the hearing of the appeal there was a contest as to precisely what it was Dale intends to rely upon, particularly with respect to [42] of the statement of claim which reads:
Further to paragraph 38 above [the allegation that the Board, in making the expulsion decision, acted unlawfully and in breach of the partnership agreement], insofar as the Board (or alternatively each of the Directors who voted in favour of the Expulsion Decision or signed a document stating that they were in favour of the Expulsion Decision) purported to rely upon any or all of the powers contained in sub-clauses 16.1(a)(i) and (ii) of the partnership agreement, the Expulsion Decision was unlawful and in breach of the partnership agreement because no Director acting in utmost good faith could have reasonably formed the opinion, on the information provided to and considered by the Board that, in the absence of an explanation by the plaintiff, the plaintiff:
(a)had wilfully or persistently acted in a manner contrary to his obligations under the partnership agreement or the Partnership Handbook; or
(b) was guilty of any serious professional misconduct; or
(c)had acted in a manner which had caused, or was likely to cause, serious prejudice to the reputation of the partnership.
The firm submits that [42] amounts implicitly to a claim of Wednesbury unreasonableness.[18] On the appeal senior counsel for Dale stated unequivocally that he did not seek to rely upon Wednesbury unreasonableness, and repeated the disavowal he had expressed before the judge.
[18]Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, 229–30.
In his statement of claim, Dale also raises a question of the construction of sub-cls 16.1(a)(i) and (ii) and alleges that the Board was not entitled to rely upon the power contained in the second limb of sub-cl 16.1(a)(i)[19] absent ‘a finding of actual guilt of professional misconduct (or its equivalent) by a relevant regulatory authority or court’, and there had been, at the time of the expulsion decision (or since), no such finding of guilt.[20] He further alleges that the Board, in making the expulsion decision, acted for an improper purpose, being the removal of Dale from the partnership before the matters in the Fagan memorandum became public and on the assumption that all or certain of those matters would become public.[21] He also alleges that the Board, in making the expulsion decision, acted with actual or apprehended bias.[22]
[19]See [6] above.
[20]Statement of claim, [44].
[21]Ibid [45].
[22]Ibid [46].
In [48] of the statement of claim, Dales alleges that, as a result of the breach of the partnership agreement, Dale suffered loss and damage for which he seeks damages, interest and costs:
By reason of the repudiatory conduct … which has been accepted by the plaintiff … the plaintiff has been wrongfully deprived of his membership in the defendant firm and has thereby suffered and will continue to suffer loss and damage.[23]
[23]Ibid [48].
Dale submits that damages for the breach of contract should be assessed on the basis of his salary as an equity partner from the date of the expulsion decision up until the date on which he would have retired were it not for the expulsion decision. It is implicit in the claim that by reason of the repudiation by the firm Dale ‘thereby’ suffered loss, that Dale alleges a causal connection between the repudiatory conduct of the firm and the loss and damage he suffered,[24] being the loss of his partnership income over the relevant time. This issue has some significance in the discussion below.
[24]As recognised by the judge: see Reasons [2].
In its defence,[25] the firm denies that the Board was required to comply with the requirements of natural justice and procedural fairness in making the expulsion decision[26] and further points to the availability under cl 9.2 of the partnership agreement of a procedure whereby a partner in relation to whom a decision has been made by the Board pursuant to sub-cl 16.1 can call a meeting of all the partners:
A Partner in relation to whom the Board has made a Decision pursuant to sub-clause 16.1 of the Partnership Agreement can call a meeting of Partners at any time within one month after being told of the Decision. The Board must then cause that meeting to be held not more than one month later and at that meeting the Partners must consider whether or not to make a Decision confirming the Board’s Decision.
[25]Amended defence dated 3 October 2013.
[26]Ibid [5], [14].
The firm also points to the dispute resolution mechanism under the partnership agreement to resolve, amongst other things, alleged breaches of the partnership that could be the subject of litigation by mediation and arbitration.[27]
[27]Clause 25 of the partnership agreement.
The firm alleges that Dale failed to avail himself of the procedure to call a meeting of partners or the dispute resolution mechanism.[28]
[28]Amended defence, [14].
The firm denies, or does not admit, many of the allegations in Dale’s statement of claim and asserts, in particular, that the Legal Services Commissioner made a finding that Dale was guilty of unsatisfactory conduct and reprimanded him.[29] More generally, in [49], it responds by asserting that the expulsion decision was made in good faith and that the requirements for the exercise of the power under cl 16.1(a) were met:
[29]Ibid [47](c).
Further, the Board’s decision to require the plaintiff to leave the Partnership was made in good faith in the best interests of the Partnership and in accordance with the power expressly conferred by clause 16.1 of the Partnership Agreement and:
(a)the Board held an opinion that the plaintiff had wilfully or persistently acted in a manner contrary to his obligations under the Partnership Agreement or the Partnership Handbook or was guilty of serious professional misconduct within the meaning of clause 16.1(a)(i) of the Partnership Agreement; and/or
Particulars
The above opinion was bona fide held by each of the Board members based on the materials before them at the time of making the [Expulsion] Decision, including the Fagan Memorandum and annexures which made reference to the conduct of the plaintiff alleged in paragraphs 50 to 101 below.
(b)that by engaging in the conduct alleged in paragraphs 50 to 144 below, the plaintiff had prior to the making of the Decision acted in a manner which had caused or was likely to cause serious prejudice to the reputation of the Partnership within the meaning of clause 16.1(a)(ii) of the Partnership Agreement.
Paragraphs 50–100 of the defence consist of detailed allegations against Dale that he breached numerous obligations arising from his acting for Schmidt against her brother Won, and in relation to a pro-bono retainer for Mr and Mrs Ebner (‘the Ebner matters’). These included obligations on Dale under the Partnership Act 1958, the Legal Practice Act 1996, the Legal Profession Act2004,[30] and the relevant rules,[31] to give true accounts and full information affecting the partnership to another partner; as soon as practicable after receiving trust money, to deposit such money in a general trust account; to keep detailed and accurate accounts of all dealings with trust money; in communication with another person on behalf of a client: (1) not to make any statement that is calculated to mislead or intimidate the other person and which grossly exceeds the legitimate assertion of the right or entitlement of a client, and (2) not to threaten the institution of criminal proceedings against the other person in default of the person’s satisfying a concurrent civil liability to the client; not to engage in conduct that is dishonest; and not to directly or indirectly borrow money from a client.[32] These allegations are relied upon as providing the basis on which the requirements under cl 16.1(a) were met.
[30]These obligations under Victorian legislation are in addition to obligations owed under comparable legislation in other States and the Australian Capital Territory.
[31]These include the Professional Conduct and Practice Rules 2000, Professional Conduct and Practice Rules 2005 and the Solicitors’ (Professional Conduct and Practice) Rules 1984.
[32]Amended defence, [3B].
The allegations supporting the expulsion decision include the allegation that Dale caused Won to be threatened with the institution of criminal proceedings if Won refused to satisfy a civil liability allegedly owed to Schmidt; the obtaining of confidential immigration information and an internal police memorandum through unlawful or improper means; receiving cheques from Schmidt that were not deposited in the firm’s general trust account; giving his own funds to Schmidt while falsely recording the transactions in the partnership transit register; and paying various members of counsel from his own funds. The Ebner matters include allegations that Dale falsely represented the extent of the firm’s exposure for disbursements.
The firm further alleges that Dale has refused to provide the firm with the transcript or audiotapes of the interview he gave to members of Victoria police on 12 and 15 August 2015 (‘the police interview’).[33]
[33]Ibid [101].
It also alleges that, after the expulsion decision, the Board became aware of others matters about Dale’s conduct which justified the reaching of the relevant opinion under cl 16.1(a)(i) and/or demonstrated that Dale had acted in a manner which had caused, or was likely to cause, serious prejudice to the reputation of the partnership within the meaning of cl 16.1(a)(ii).[34] These matters related to the obtaining through unlawful or improper means additional confidential information, and filing affidavits in the Federal Court that failed to disclose the inquiries that had been undertaken.[35] There are also allegations in relation to the billing of a company in provisional liquidation (‘the Homesafe matters’)[36] and the false recording of cheques.[37]
[34]Ibid [102].
[35]Ibid [103]–[109].
[36]Ibid [110]–[119].
[37]Ibid [121]–[144].
The defence concludes with a denial that Dale has suffered any loss by reason of the failure to provide him with a proper opportunity to be heard (if established) or otherwise. Paragraph 145 reads:
Further and alternatively, if (which is denied) the matters alleged in the plaintiff’s statement of claim are established, by reason of:
(a)the circumstance that the allowing of any further time to the plaintiff would not have resulted in the Board not making a Decision to require the plaintiff to leave the Partnership;
(b)the plaintiff’s failure to call a meeting of Partners to consider whether or not to make a Decision confirming the Board’s Decision to require the plaintiff to leave the Partnership pursuant to clause 9.12 of the Partnership Agreement;
(c)the matters alleged in paragraphs 49 to 101 above [the allegations relating to Dale’s conduct in respect of the proceeding between Schmidt and Won, the Ebner matters and the failure to produce records of the police interview];
(d)the matters alleged in paragraphs 102 to 119 above [improperly obtaining confidential information, filing misleading affidavits and the allegations in relation to the Homesafe matters]; and/or
(e)the matters alleged in paragraphs 120 to 144 above [the false recording of cheques];
the plaintiff:
(i)has not suffered any loss and damage as a result of the Board’s Decision to require him to leave the Partnership;
(ii)alternatively, the plaintiff has not suffered any loss and damage as a result of the Board’s Decision to require him to leave the Partnership on 8 October 2005; and/or
(iii)further and alternatively, the plaintiff’s claimed loss and damage should be wholly or substantially reduced to reflect the circumstance that the plaintiff would have been required to leave the Partnership in any event by subsequent decision of the Board after 7 September 2005.
The firm relies upon [145] in the appeal as contesting causation; that is, as contesting the proposition that any breach of the partnership agreement arising from a failure to accord Dale a hearing, even if established, caused him loss and damage. In effect [145] asserts that, even had Dale been afforded a proper opportunity to be heard, the Board would nevertheless have been justified in making the expulsion decision (either from the information it had or the information it later acquired) and thus no loss flowed from any failure to accord natural justice.
The firm also relies upon [145] as demonstrating that the allegations made in the statement of claim, and those made in the defence, were inextricably intertwined. This had implications for the application made by Dale for a ProteanHoldings ‘split’ of the trial.
The application to ‘split’ Dale’s case and rely on the privilege against self-incrimination
By summons dated 10 July 2014, Dale applied to ‘split’ the trial so that he would not be required to lead evidence directed to: (1) the allegations relating to his conduct in respect of the proceeding between Schmidt and Won; (2) the Ebner matters; (3) the failure to produce records of the police interview; (4) the allegation that he improperly obtained confidential information and filed misleading affidavits; (5) the Homesafe matters; and (6) the false recording of cheques, but that he be permitted to lead evidence in rebuttal on those issues, if he so chose.
He also sought to be excused from compliance with various rules of the Supreme Court (General Civil Procedure) Rules 2005 (‘Rules of Court’) to the extent that compliance would have a tendency to expose him directly or indirectly to a civil penalty or a criminal proceeding. The summons also sought an order permitting Dale to file a limited reply and to file a further amended reply at the close of the firm’s case.
In particular, the summons sought orders that:
1. The plaintiff have leave to file and serve the draft amended reply[[38]] …
[38]The draft amended reply was exhibited as ‘CAT–2’ to the affidavit of Carole Agnes Timmins sworn 9 July 2014. The terms of the orders sought are set out in the form ultimately made by the judge on 19 November 2014.
2. The trial of the proceeding be split on the basis that:
(a) in the plaintiff’s case:
(i)the plaintiff not be required to lead evidence directed to any issue on which the defendant has the onus of proof, being the issues pleaded in paragraphs 49 to 145 of the amended defence;
(ii)unless the plaintiff has led evidence on the issue, there be no cross-examination of the plaintiff or any of his witnesses in relation to any issue upon which the defendant has the burden of proof, being the issues pleaded in paragraphs 49 to 145 of the amended defence …
(b)unless the plaintiff has led evidence on the issue, the plaintiff may have a case in rebuttal on any issue on which the defendant has the onus of proof, being the issues pleaded in paragraphs 49 to 145 of the amended defence;
(c)the plaintiff have leave to file a further amended reply at the conclusion of the defendant’s case in relation to any issue on which the defendant has the burden of proof, being the issues pleaded in paragraphs 49 to 145 of the amended defence.
3.The plaintiff be excused from compliance with the requirements of Supreme Court (General Civil Procedure) Rules 13.07, 13.10, 13.12 and [O] 29 to the extent that compliance with those Rules may have a tendency to expose the plaintiff directly or indirectly to a civil penalty or a criminal proceeding in respect of the subject matter of this proceeding.
Dale’s application was opposed by the firm. The judge acceded to the application and made orders in the terms sought, including an order for discovery of documents that allowed Dale to be excused from compliance with rr 13.07 (Matter which must be Pleaded), 13.10 (Particulars of Pleading), 13.12 (Admission and Denials) and O 29 (Discovery and Inspection of Documents). The ProteanHoldings ‘split’ which the judge ordered consisted in his permitting Dale not to lead evidence in his case on matters on which the firm has the burden of proof, and providing Dale with an opportunity for rebuttal after the firm has closed its case, including, if he chooses, to go into evidence at that stage.
The judge’s reasons
The judge, who heard the application in a managed list,[39] emphasised the limited ambit of Dale’s case. He quoted from senior counsel for Dale who before him explained that he would not be inviting his Honour to embark on the merits of the Fagan memorandum, in terms of its underlying truth, to prove Dale’s loss.[40] Nor was it put ‘on the basis that we [Dale] will try to establish that had we given all the explanations the Board would have decided differently.’[41] Rather, Dale would seek to establish that the making of the expulsion decision was a breach of contract because it had been made, contrary to the obligations under the contract, in breach of procedural fairness and was thus a ‘nullity’. As the judge said:
The plaintiff emphasised in oral submissions that his case is a relatively simple and confined case. In essence, he says, it is a claim for damages for repudiation of the Partnership Agreement — namely the expulsion of the plaintiff from the partnership on the basis of the [Expulsion] Decision which was a nullity as a result of a denial of natural justice and procedural fairness. Thus it is said it matters not that the plaintiff might, as the defendant says, have appealed the Decision to a meeting of the full partnership of the defendant firm. Why, the plaintiff says rhetorically, should he have appealed a decision which is a nullity — even assuming he was at the relevant time in a physical or mental state which would have enabled him to do so.[42]
[39]This meant that he would be the trial judge.
[40]Reasons [15].
[41]Ibid [16], quoting senior counsel for Dale, Simon Wilson QC, during argument.
[42]Reasons [14].
To prove his case, the judge noted, Dale would rely upon the ‘incontrovertible objective facts’; significant admissions made in the defence, including admissions that Dale’s legal advisers requested adjournments, on the basis of Dale’s then psychiatric condition and hospitalisation, and an appropriate time to prepare and put on Dale’s response, which requests were denied; the Fagan memorandum (as a record); the Annetta memorandum (as a record); and the expulsion decision (as a record). Before the judge, Dale had not yet determined (and has still not determined) whether he will give evidence. Dale was likely to call only his then medical advisers, who would give factual evidence of Dale’s then psychiatric condition, hospitalisation and inability to assist in a response to the expulsion decision, and his then legal advisers, who would give evidence of their inability to obtain instructions.
Before the judge, Dale sought to characterise the allegations in [49]–[144] of the defence as constituting a positive case on behalf of the firm, seeking to justify the expulsion decision. Dale argued that the firm carries the burden of proof on its positive case including proof of the allegations that go beyond the conduct actually relied on when the decision was made. At [145] the same positive case is relied upon to challenge the loss and damage Dale has allegedly suffered, even if Dale establishes his case.
The firm contended, before the judge, that it is Dale who has assumed the obligation of proving that the circumstances identified in the Fagan memorandum are so unsubstantiated or uncertain that no Board acting in good faith could have formed the opinion that the requirements in cl 16.1(a)(i) or (ii) had been satisfied. With respect to the alleged loss and damage Dale suffered, the firm submitted that it
would be necessary for Dale, in his case, to prove that had he been afforded a proper opportunity to be heard he would not have been expelled. In its written submissions, as quoted by the judge, the firm said:
Further, to prove his claimed loss and damage, the plaintiff must prove — in his case — that the Board would not have decided to expel him had he been afforded the alleged procedural fairness and natural justice (i.e., a further 30 days in which to make responses to the Fagan Memorandum). For that purpose, if the plaintiff wishes to establish his claim for damages, he must again come forward and seek to challenge the bona fides of what is alleged in paragraphs 50 to 145 of the Defence.[43]
[43]Ibid [25].
The judge rejected the firm’s contention and held that all that Dale would need to prove in his case was the denial of natural justice. He said:
For the reasons which follow, I am of the view that the defendant mischaracterises the plaintiff’s case. As indicated in the submissions of the plaintiff to which reference has been made and as emphasised in the plaintiff’s oral reply submissions, his case is much narrower. It is a case founded on a denial of natural justice, a denial of procedural fairness. The plaintiff’s pleadings — in claim and reply — are, in my view, entirely consistent with this position. Moreover, in oral reply submissions — many of the relevant parts of which are set out above — Mr Wilson QC expressly stated the limitations of the plaintiff’s case and committed the plaintiff to a case in these terms — as, in effect, by way of a statement of case definition in the plaintiff’s opening. As observed previously, this is particularly significant as it is a statement made to the trial judge, the judge hearing the present application in what are judge-managed proceedings.[44]
[44]Ibid [26].
The judge considered the principles applicable to a Protean Holdings ‘split’, which I discuss further below,[45] including its status as an exception to the general rule of practice which prevents a plaintiff from dividing his or her case. He identified as a limiting factor, rendering a Protean Holdings ‘split’ inappropriate, those circumstances where a plaintiff’s and a defendant’s case are so intertwined or ‘entangled’ that it would not be possible to disentangle them to avoid the plaintiff leading evidence on matters upon which the defendant has the onus of proof. He then considered whether Dale’s case and the firm’s case were so prohibitively ‘entangled’.
[45]See [56]–[77] below.
The judge held that the parties’ cases were not relevantly entangled but rather were separate and distinct; they could proceed in sequence, with Dale, if he chooses to give evidence in his case, not being permitted to be cross-examined on any of the issues in the firm’s case. He emphasised the unfairness of Dale otherwise being obliged to prove a negative, namely, that the requirements of cl 16.1(a) were not met before hearing, or testing, the evidence the firm sought to rely upon as in effect the justification for the expulsion decision. Moreover, if a ‘split’ was not ordered, Dale would be required to meet a ‘hypothetical’ negative given that the firm sought to justify its decision in part on information that it did not possess at the time of the expulsion decision and that it claims it could have relied upon at some future date to expel Dale.[46] He went on to refer to Dale’s submission that he should not be cross-examined on the issues raised by the firm’s defence before he has heard the evidence the firm intends to call to prove its case:
[T]he plaintiff submits that the case must be the subject of a Protean Holdings ‘split’ and that he must be permitted a case in rebuttal to the matters raised in the defendant’s case. Moreover, it is submitted that the plaintiff should not be required to prove a negative in his case or be subjected to cross-examination on the defendant’s positive case before it has been opened and before the defendant has called evidence in support of its case. The plaintiff submits that the defendant really opposes this application because it wishes to strip away his right to put the defendant to its proof and his right to make an election at the conclusion of the defendant’s case. It is submitted that this is not fair in the context of a proceeding of this kind where the plaintiff is accused of serious professional misconduct and serious criminal conduct. The defendant should not, it is contended, be entitled to seek to prove its case through cross-examination without having opened its case and called evidence in support of its case.[47]
[46]See Reasons [35]. See [28] above.
[47]Reasons [36].
He noted that Dale reiterated that his case and that of the firm were not intertwined:
The matters raised by paragraphs 101 to 144 of the Defence are, it is said, not factually intertwined and the [defendant] misconceives the plaintiff’s case, which is a process complaint not a merits review. In this respect, the plaintiff reaffirms that he will not be seeking to demonstrate what his defence would have been had he been provided with the natural justice and procedural fairness he was denied. Moreover the plaintiff says that the only witness who might conceivably give evidence twice is the plaintiff himself, and his evidence in his case will not deal with the defendant’s positive case if a Protean Holdings ‘split’ is ordered.[48]
[48]Ibid [38] (emphasis added).
The firm contended that Dale’s characterisation of his case as involving a process complaint and not a merits review was not accurate given the way his case was pleaded. The judge rejected the firm’s submission:
In my opinion, the defendant’s assessment of the nature and extent of the plaintiff’s case is not correct. In my view, on the basis of the plaintiff’s pleadings, both by way of claim and reply, and the way in which the plaintiff’s claim has been stated and constrained by senior counsel, in submissions before the judge who will hear the trial, the plaintiff’s case is constrained as he contends. … [W]ere this not abundantly clear, it is, in my view, made clear by the statements of his senior counsel with respect to the nature and ambit of his case, statements and assurances to, in effect, the trial judge by way of opening; matters from which it would not be possible to resile except in unusual circumstances.[49]
[49]Ibid [43].
With respect to the scope of cross-examination of Dale that would be permitted, the judge considered that the ‘whole point’ of a Protean Holdings ‘split’ was that a plaintiff who chose to go into evidence could not be cross-examined on issues on which the defendant bore the onus of proof:
It is also a matter for trial whether or not the plaintiff decides to give evidence in his own case … [I]f a Protean Holdings ‘split’ is ordered, then if the plaintiff did decide to give evidence in his own case then he could, of course, be cross-examined in the usual way on the issues relevant to that case, but he could not be cross-examined on issues upon which the defendant bears the onus of proof in its case. This is, of course, the whole point of the Protean Holdings ‘split’.[50]
[50]Ibid [48].
He drew an analogy with defamation litigation, citing French v Triple MMelbourne Pty Ltd Ruling [No 2],[51] where a ‘split’ was ordered in respect of certain expert evidence (not the plaintiff’s evidence) in the context of a defamation proceeding where the defence was one of justification. He distinguished S, DJ v Channel Seven Adelaide Pty Ltd and Australian Broadcasting Corporation,[52] also a proceeding in defamation, where Bleby J refused to make the directions sought for a Protean Holdings ‘split’ because the case of the plaintiff and defendant were too intertwined. The judge distinguished S, DJ v Channel Seven on the basis that, with respect to Dale’s case and the firm’s case, ‘there is no “intertwining” of the plaintiff’s and the defendant’s cases, and the analogy with defamation cases in general remains apposite’.[53]
[51][2008] VSC 548 (J Forrest J) (‘French v Triple M’). This is discussed at [67]–[69] below.
[52](2009) 260 LSJS 287 (‘S, DJ v Channel Seven’). This is discussed at [70]–[76] below.
[53]Reasons [53].
The judge addressed the question of whether, if a Protean Holdings ‘split’ was ordered, Dale would be unable to prove his loss and damage in his case. He considered that this would ultimately be an issue to be determined at trial:
It is then said against the plaintiff that if he were to proceed to trial in the manner contemplated by the plaintiff, he would be bound to lose and would probably be ‘no cased’. The defendant says that evidence of the matters upon which the plaintiff would seek to confine his case will be insufficient to establish his alleged breach of the Partnership Agreement or his claimed loss and damage. … If the plaintiff chooses to limit his case, by pleadings and openings, as indicated, then it is, in my opinion, quite a constrained and discrete case which does focus on process, the procedural fairness which he was or was not afforded by the defendant in the course of making the decision. It is, naturally, a matter for trial as to whether or not that allegation and the plaintiff’s case is established.[54]
[54]Ibid [47].
He repeated this view when concluding that the matter was appropriate for a Protean Holdings ‘split’ because Dale’s case, if established, would demonstrate that the expulsion decision was a ‘nullity’ and Dale’s case and that of the firm were relevantly separate:
[T]he point is made in the defendant’s submissions that if the plaintiff were to confine its case and run its case as proposed, it would be the subject of a ’no case’ submission because no loss and damage would be established. In my view, the plaintiff’s contentions make it clear that this is by no means the necessary result of its constrained case and a Protean Holdings ‘split’. Put quite simply, the plaintiff’s case is that he was denied procedural fairness; the decision of the Board was, consequently, a nullity; there was no basis to appeal to the full Partnership of the defendant firm from a decision which was a ‘nullity’, even assuming that he then had the capacity to do so; and that it followed that when the defendant removed him from the partnership, that was done in breach of the provisions of the Partnership Agreement, there having been no valid decision which would justify such action, with the result that the defendant repudiated the Partnership Agreement; the plaintiff accepted the repudiation and is, consequently, now entitled to repudiation damages. That is the beginning and end of the plaintiff’s case. It may be that the defendant is successful in proving its case and that, consequently, the plaintiff is denied relief in whole or in part. Nevertheless all these matters are matters for trial and not speculation or unhelpful observations at this stage. Nevertheless, without in any way expressing a view or pre-empting the trial, I do, for these reasons, reject the defendant’s contention that it would necessarily follow that the plaintiff’s case would fail with respect to loss and damage and, therefore, inevitably there will be a ‘no case’ submission.
…
[F]airness requires that each party, the plaintiff and the defendant, be required to lead in chief the evidence which they seek to rely upon to prove their cases which are, in my opinion, relevantly separate.[55]
[55]Ibid [55], [57].
With respect to the question of privilege, the judge concluded that the privilege against self-incrimination is available to be relied upon by a plaintiff with respect to issues arising in a proceeding, and that the privilege applies not only to oral evidence but also to the discovery and production of documents. He held that it was not the case that a person who commences proceedings as a plaintiff might thereby be said to have voluntarily waived the privilege against self-incrimination.[56] Tying the issue of the privilege against self-incrimination to the issue of the Protean Holdings ‘split’, he characterised Dale as ‘in substance … a defendant’ who would be entitled to invoke the privilege:
[Dale] is not a ‘volunteer’ to this case as a plaintiff might be seen with respect to his, her or its own case. Consequently, even if I were of the opinion that the privileges could only be invoked by a defendant, it would truly be a triumph of form over ‘a fundamental … bulwark of liberty’ if a plaintiff in the position of Mr Dale could not invoke the privileges in response to the defendant’s case against him. Moreover, having regard to the manner in which the plaintiff’s case is put and the defendant’s pleading of a discrete and positive case against him, no unfairness or injustice arises for the defendant in the conduct of the firm’s case as a result of the plaintiff invoking the privileges.[57]
[56]Ibid [89].
[57]Ibid [104].
The grounds of appeal
The firm relied on multiple grounds of appeal,[58] many of which are inter-related:
[58]The firm filed a draft Notice of Appeal to be relied on in the event that leave was granted. The grounds have been adapted to reflect matters already defined.
Ground 1: The judge misunderstood and/or misapplied the ruling in Protean Holdings in that:
(a) contrary to the Protean Holdings ruling, the effect of the judge’s decision was to permit Dale impermissibly to split his case by embarking upon evidence in relation to a principal issue but also allowing him to call further evidence after the firm in relation to that issue;
(b) the judge erroneously held that the ‘whole point’ of the Protean Holdings ‘split’ was that, even where Dale gives evidence and tenders the Fagan memorandum in his own case, he could not be cross-examined on issues on which the firm bears the onus of proof, with the consequence that the firm will be precluded from cross-examining Dale on the matters set out in that memorandum which grounded the firm’s decision to require Dale to leave the partnership; and
(c) the judge permitted a Protean Holdings ‘split’ when the firm’s defence, in substantial part, did not involve a plea of confession and avoidance but denied the essence of Dale’s case.
Ground 2. The judge erred in characterising Dale’s pleaded case as ‘a process complaint not a merits review’ and as constrained and confined to a denial of natural justice and procedural fairness claim, in circumstances where:
(a) Dale’s pleaded case travels beyond allegations of denial of natural justice and procedural fairness;
(b) Dale’s senior counsel told his Honour that ‘almost every one of’ Dale’s claims, but not all, were based on ‘bias’ and a determination to ‘get rid of’ Dale; and
(c) the judge contemplated that Dale may be able to ‘resile’ from the alleged case in ‘unusual circumstances’.
Ground 3. The judge erred by misreading and/or ignoring Dale’s pleaded case and treating it as a narrow, confined and constrained case.
Ground 4. The judge erred in law by holding that Dale’s pleaded case does not require him, in his case, to seek to:
(a) state his case and/or explain his conduct in respect of the matters set out in the Fagan memorandum;
(b) state his case and/or explain his conduct in respect of the matters alleged in [49]–[101] and/or [102]–[144] of the firm’s defence; and
(c) prove that the Board of the firm would not have made a decision to require him to leave the partnership had he been provided with the natural justice and procedural fairness he claims was denied (ie, a further 30 days in which to state his case and explain his conduct).
Ground 5. The judge erred in holding that there is no ‘intertwining’ between Dale’s claim and the allegations in [49]–[101] of the firm’s defence.
Ground 6. In circumstances where Dale’s case, as pleaded in his statement of claim, includes a claim for loss and damage comprising lost income as a partner of the firm from the date the decision of the Board requiring him to leave the partnership took effect ‘until the date he would have retired as a partner’, the judge erred in failing to find, and ought to have found, that:
(a) Dale’s case requires him to seek to establish that the Board would not have made the decision to require him to leave the partnership had he been provided with the natural justice and the procedural fairness he claims was denied;
(b) there was ‘intertwining’ between Dale’s claim and the allegations in [49]–[144] of the firm’s defence; and
(c) it was not appropriate to permit Dale to ‘split’ his case so as to have a case in rebuttal in respect of the matters alleged in [49]–[144] of the firm’s defence.
Ground 7. The judge erred in holding that Dale’s senior counsel had constrained the ambit of Dale’s case in oral submissions so as not to require him to seek to establish the matters referred to in ground 6 in circumstances where Dale did not seek to amend or abandon his pleaded claim for loss and damage.
Ground 8. The judge erred in law in failing to deal with or address the effect of the tender of the Fagan memorandum upon the application for a Protean Holdings ‘split’ or the conduct of the trial, including whether the tender of the memorandum involves an embarking by Dale upon evidence in relation to issues raised in the firm’s case in [49]–[101] of the defence.
Ground 9. The judge confused public/administrative law concepts with breach of contract/private law concepts.
Ground 10. The judge erred in characterising the decision of the Board to give notice to Dale to leave the partnership as a ‘nullity’, whereas Dale’s pleaded case is that the giving of the notice constituted repudiation of the partnership agreement.
Ground 11. The judge erred in law, and his discretion miscarried, in ordering a Protean Holdings ‘split’, prior to trial or prior to the parties’ formal openings of their respective cases, and in treating Dale’s submissions at the hearing of the application as an opening at trial.
Ground 12. The judge erred in holding that the decision of this Court in Gemmell vLe Roi Homestyle Cookies Pty Ltd (in liq)[59] establishes that there is no such thing as ‘issue’ waiver in respect of the privileges against self-incrimination and self-exposure to a penalty.
[59](2014) 102 ACSR 367, 386 [84] (‘Gemmell’).
Ground 13. The judge erred in failing to find, and ought to have found, that:
(a) the privileges against self-incrimination and self-exposure to a penalty do not apply to a plaintiff with respect to the issues arising in his or her case;
(b) a person who commences proceedings as a plaintiff waives the privileges against self-incrimination and self-exposure to a penalty with respect to issues arising in his or her case;
(c) by commending the proceeding, Dale waived privileges against self-incrimination including the matters alleged in [49]–[101] and/or [102]–[144] of the firm’s defence;
(d) Dale waived the privileges against self-incrimination and self-exposure by voluntarily submitting to a two-day police interview on 12 and 15 August 2005;
(e) having regard to the passage of time since the occurrence of relevant events and the police interview, there is no real or appreciable risk of Dale being subjected to criminal or civil penalty proceedings; and
(f) having regard to the said passage of time, compliance with the Rules of Court by Dale will not increase the jeopardy to which he is already exposed or exposed himself.
Grounds 1–11 consist in a challenge to the order to permit a Protean Holdings ‘split’. More particularly, grounds 1–7, and 9–10, in effect assert that the judge misconstrued Dale’s case, wrongly characterising it as limited and confined and not intertwined with the firm’s case when he should have recognised that Dale’s case, and in particular his claim for loss and damage,[60] require him to establish that the Board would not have made the expulsion decision had he been afforded an adequate opportunity to be heard. On the basis of this misunderstanding, the judge is alleged to have misapplied the principles in Protean Holdings. The issue raised by these grounds can be addressed together.
[60]Grounds 6 and 7 emphasise the significance of Dale’s claim as one for loss and damage.
Ground 8 raises the issue of the effect of Dale’s tendering of the Fagan memorandum.
Ground 11 raises the question of the appropriateness of the timing of the order and implicitly queries whether the determination of the application for a Protean Holdings ‘split’ should have been delayed until after formal openings of the parties’ respective cases.
Grounds 12 and 13 challenge the order permitting non-compliance with various Rules of Court on the ground of privilege against self-incrimination. They assert in effect that the privilege against self-incrimination is not available to a plaintiff with respect to the issues raised in his or her case and there is no real risk of Dale being subject to incrimination or penalties.
Did the judge misapply the principles of Protean Holdings?
To determine precisely the rationale, and the manner of operation, of a Protean Holdings ‘split’, it is necessary to examine closely what was decided in Protean Holdings.
(i) What is a Protean Holdings ‘split’?
Protean (Holdings) Ltd (‘Protean’) was the owner of a block of land in Brooklyn and the owner of the abattoirs constructed on the land and the associated plant, equipment and stock. Protean insured the abattoirs and its contents with American Home Assurance Co (‘AHA’). In July 1982 a fire that had been deliberately lit severely damaged the property. Protean claimed indemnity under its policy with AHA. AHA declined to accept liability. Protean brought a proceeding against AHA seeking a declaration that AHA was obliged to indemnify it under the policy. There was no issue about the existence of the policy or the fire damage to the premises. However, Protean was put to its proof in respect of the terms of the policy and privity of contract. Protean conceded it had the burden of proof on those matters.[61]
[61]Protean Holdings [1985] VR 187, 189.
AHA contended that it was entitled to avoid the policy on the basis of any one or more of its three defences: (1) the misrepresentation defence (namely, that Protean had falsely represented that it had been innocently caught up in a horse meat scandal); (2) the non-disclosure defence (namely, that Protean had failed to disclose to AHA material facts); and (3) the arson defence (namely, that Protean had lit the fire itself or connived in the lighting of it). It was clear, and it was conceded, that AHA had the burden of establishing its defences.[62] The trial judge (Marks J) permitted Protean to split its case and only to adduce evidence directed to the three particular defences after AHA had closed its case, subject to the condition that Protean had to begin in respect of issues upon which it had the burden of proof and that once it had embarked upon evidence in relation to an issue, Protean was obliged to call all its desired evidence in relation to that issue.
[62]Ibid.
Marks J made his direction on the basis of what he described as a ‘rule … of practice and not law, and that is consistent with an exercise of discretion being involved in a ruling as to the order of presentation of evidence’.[63] He identified a summary of the practice in the statement of Stawell CJ in Wharton v Tuohy[64] that:
No rule of practice is better known than that prohibiting a plaintiff from dividing his case; on the other hand, a plaintiff is clearly entitled to reserve, for the purpose of rebutting new matter, evidence which, if he, the plaintiff, were disposed, he might give in the first instance by way of anticipation. The correctness of rejecting or receiving the evidence in question depends, therefore, upon whether that evidence, if received, would or would not, have formed a rebutting case, properly speaking.[65]
[63]Ibid 191.
[64](1862) 1 W & W (L) 217.
[65]Protean Holdings [1985] VR 187, 189–90, quoting Wharton v Tuohy (1862) 1 W & W (L) 217, 219.
He also referred to the statement of the rule by Pollock CB in Shaw v Beck:[66]
Where there are several issues, some of which are upon the plaintiff and some upon the defendant, the plaintiff may begin by proving those only which are upon him leaving it to the defendant to give evidence in support of those issues upon which he intends to rely; and the plaintiff may then rebut the facts which the defendant has adduced in support of his defence.[67]
[66](1853) 8 Exch 392; 155 ER 1401.
[67]Protean Holdings [1985] VR 187, 190, quoting Shaw v Beck (1853) 8 Exch 392, 398; 155 ER 1401, 1403.
The critical factor in applying this rule of practice thus appears to be whether the evidence which the plaintiff seeks to reserve is properly ‘a rebutting case’ or whether it forms part of the plaintiff’s own case.
Marks J cited the use of the rule in libel cases, as recognised by Lord Abbott CJ in Browne v Murray:[68]
In actions of this nature, the plaintiff may, if he thinks fit, content himself with proof of the libel, and leave it to the defendant to make out his justification, and then the plaintiff may, in reply, rebut the evidence produced by the defendant.[69]
[68](1825) Ry & Mood 254; 171 ER 1012 (‘Browne v Murray’).
[69]Protean Holdings [1985] VR 187, 190, quoting Browne v Murray (1825) Ry & Mood 254, 254; 171 ER 1012, 1012.
As Marks J observed, Lord Abbott CJ ‘went on to say … the plaintiff cannot split his case, so that once he enters upon evidence in relation to an issue he cannot seek to call further evidence after the defendant to supplement it’.[70] Marks J identified a guiding principle for the exercise of this discretionary power as the extent to which the plaintiff would otherwise be obliged to prove a negative:
In the exercise of a discretion, I think it is proper to take into account the extent to which this so-called proof of a negative would be placed on a plaintiff. This aspect in this case, I think, is highly pertinent and of considerable weight.[71]
[70]Protean Holdings [1985] VR 187, 190.
[71]Ibid 191.
The vice of having to prove a negative had been remarked upon before, as Marks J observed:
I place some importance on what was said in McLaren & Sons v Davis by Cave J as a member of a bench of three Judges in the Queen’s Bench Division: ‘It was never convenient to prove a negative. When the defendant had set up something affirmative then was the time to dispose of it. The learned Baron … had exercised an erroneous discretion in refusing to allow the rebutting evidence’.
Further, in Jerome v Anderson Cartwright J observed: ‘In view of the nature of the particulars of the plea of justification delivered in this action, it would, I think, have been highly inconvenient to call upon the plaintiff to prove the negative of that issue before having heard the evidence offered by the defendants in support of it’.
In each case, emphasis was laid on the burden which the plaintiff is likely to have of proving a negative if he is to go first in relation to issues on which the defendant has the burden of proof.[72]
[72]Ibid (citations omitted).
Marks J considered that it would be ‘quite unfair and contrary to the interests of justice if the plaintiffs are called upon to adduce all their evidence in disproof of a case with respect to which they have heard no evidence’.[73] This was reinforced by the consideration that there was ‘very little difficulty in separating out the issues with respect to which the plaintiffs have the burden of proof, and permitting them to lead the whole of their evidence in relation to them without embarking on evidence to counter anticipated evidence of the defendant’.[74]
[73]Ibid.
[74]Ibid 191–2.
In the first part of its case Protean called evidence to establish that the insurance contract was made, that the fire occurred and that it was interested in the relief claimed under the contract of insurance. It called no evidence in relation to the three defences until all the evidence from AHA was in. At the close of AHA’s case, Protean submitted that it had no case to answer in respect of the defences. The judge allowed Protean to make that submission without putting it to its election of whether it would call evidence in relation to the defences. The judge upheld the no case submission and gave judgment for the plaintiff.[75]
[75]There was an appeal to the Full Court of the Supreme Court which was dismissed (Protean Holdings [1985] VR 187, 214ff). No issue was taken with respect to the grant of the plaintiff’s application to lead his evidence on the issues raised by the defendant in rebuttal. The focus of the appeal was on whether the judge was correct in finding there was no case to answer, not on the question of the ‘split’. Fullagar J (with whom Young CJ (at 216) and Tadgell J (at 237, 240) agreed) held that the judge was right in concluding that there was no case to answer in respect of either innocent or fraudulent representation: at 225. He also held that the judge was correct in finding that there was no evidence supporting a finding of the facts asserted and in finding that AHA had actual notice of all the matters it relied on in support of its non-disclosure defence: at 226, 233. He further held that the judge was correct in his conclusion that the evidence was incapable of supporting a finding that Protean either lit or connived at the lighting of the fire which destroyed the abattoir at Brooklyn. As Fullagar J remarked, there was no criticism of the judge in allowing Protean, at the close of AHA’s case, to make a ‘no case’ submission without being required to elect as to whether it would call evidence: at 236. Most of the authorities that have applied Protean Holdings have done so with respect to the ‘no case’ question (see also Naxakis v Western General Hospital (1999) 197 CLR 269 where Protean Holdings was distinguished).
An application for a ‘split’ based on Protean Holdings was granted in French v Triple M[76] and denied in S, DJ v Channel Seven,[77] both cases involving proceedings for defamation.
[76][2008] VSC 548.
[77](2009) 260 LSJS 287. The judge below referred to both Frenchv Triple M and S, DJv Channel Seven: see [46] above.
In French v Triple M the defendants pleaded the defence of justification with respect to three imputations, underlying two[78] of which was the allegation that the plaintiff had taken drugs to enhance his performance as a cyclist. The plaintiff sought to rely upon the expert evidence of three witnesses to support the proposition that there was a real prospect of cross contamination in the samples analysed by reason of the circumstances in which the samples were obtained and the analysis undertaken. The plaintiff contended that, as the defendants had the burden of proof on the defence of justification, he should be permitted to call his expert witnesses to give rebuttal evidence to the defendants’ case.
[78]J Forrest J considering that such allegations underlay ‘at least one … and probably two’ of the imputations: at [2].
J Forrest J identified what he took to be the relevant principles as follows:
(a)in normal circumstances a plaintiff will not be permitted to split his or her case;
(b)however in some cases particularly where the burden of proof shifts to the defendant a court will entertain the splitting of the case to enable the plaintiff to rebut evidence led on a particular issue by the defendant. This is a rule of practice, not one of substantive law;
(c)the paramount question is how are the interests of justice best served. This discretionary consideration includes taking into account the interests of the parties and also the orderly presentation of evidence before the jury. Two relevant considerations as disclosed by the authorities in relation to the exercise of the discretion are —
(i) the inconvenience to a party in proving a negative;
(ii)where a plea of justification in a libel action is raised a plaintiff will not have had the opportunity to hear the evidence said to justify the alleged defamatory matter. In those circumstances a court may permit the splitting of the case. Indeed, the earlier authorities indicate that in such cases this was the norm rather than the exception.[79]
[79][2008] VSC 548, [8].
J Forrest J considered most persuasive the fact that, although by reason of the Rules of Court, each party knew what its opponent contended, ‘the plaintiff is required to prove a negative; that is, the prospect of cross contamination or unsatisfactory analysis by calling his witnesses first’ where ‘the plaintiff’s expert witnesses, if giving evidence first, will be giving evidence at least to some degree in a factual vacuum’.[80] Furthermore, it was not sought to divide the evidence that would be given from the plaintiff.
[80]Ibid [13]. He also considered that the orderly presentation of the trial would not be disrupted, there would be no real lack of coherence in the presentation before the jury as the witnesses would give evidence effectively in a group on one discrete issue and there would be a real risk of injustice to the plaintiff if the application were not acceded to: at [13].
In S, DJ v Channel Seven, the plaintiff alleged that the imputation of a promotion for a television program was that he was a suspect in a murder case and that there were reasonable grounds for him being a suspect. The first defendant, Channel Seven, pleaded justification and qualified privilege. The plaintiff sought orders that he would open his case and lead evidence on all issues, including damages, except justification and qualified privilege. The plaintiff would at this stage not be able to be cross-examined on matters relating to justification and qualified privilege. Subject to any submission of no case to answer, the plaintiff would then present his case on justification and qualified privilege.
[222]While it was unnecessary for the Court in Chong to decide, it arrived at the tentative view ‘that the privilege, if properly claimed pursuant to s 128, would not have precluded the application of the rule in Jones v Dunkel to a party or witness who fails to give evidence’: at [229]. In the circumstances of the case the appellant Neale had not effectively claimed the privilege and thus the Court did not express a concluded view on the question.
[223](1993) 36 NSWLR 87 (‘Antico’).
[224](1722) 1 Str 505; 93 ER 664. This is the principle that the keeping back of evidence must be taken most strongly against the person who does so.
[225]Antico (1993) 36 NSWLR 87, 94 (citations omitted), as quoted in Chong [2015] VSCA 137, [216].
Dale does not dispute the proposition that a plaintiff who elects not to give evidence in a proceeding cannot point to the privilege as the basis for escaping the drawing of an adverse inference, based on Jones v Dunkel, from his or her failure to give evidence.[226] He submits that the proposition for which Rowell v Larter stands, and Tim Barr, goes no further than this and, in particular, does not support the primary submission of the firm. For the reasons stated above, I agree.
[226]Reasons [62]. See also Chong [2015] VSCA 137, [221]–[222]; Respondent’s Note on Chong, [8]–[10].
Furthermore, as the judge recognised,[227] the permissibility of drawing a relevant adverse inference from a failure to give evidence is compatible with the maintenance of the privilege by the plaintiff for it remains the case that a plaintiff is not compelled to answer questions he or she does not wish to answer nor, in the context of discovery, compelled to produce documents he or she does not wish to produce. It is also important to recognise that an adverse inference based on Jones v Dunkel does not supply evidence to fill a gap in a defendant’s case.
[227]Reasons [62]–[64].
It is necessary to keep firmly in mind, as Dale emphasised, that, as yet, no trial has been had. It is unclear whether Dale will elect to give evidence or whether, if he does so, he will refuse to answer questions claiming the privilege. Questions concerning the permissibility of drawing adverse inferences are thus premature and speculative. The relevance of Rowell v Larter is strictly confined to the issue contended for by the firm, namely, that it supports its primary submission that the privilege is not available to a plaintiff because the bringing of proceedings impliedly constitutes a waiver of the privilege. For the reasons I have given, including observations on the history of the privilege, I reject that view.
(vi) The reliance by others upon the privilege
Unsurprisingly, there has been a number of cases historically where the defendant in proceedings has successfully relied upon the privilege against self-incrimination or exposure to civil penalty.[228] So too there is a vast number of modern authorities.[229] Cases where the defendant has unsuccessfully invoked the privilege often involve an assessment by the court that the contention that the defendant was subject to punishment or penalties was not arguable,[230] or the court has drawn upon exceptions or qualifications to the general rule.[231] There has also been a number of cases where a non-party witness to the proceedings relied upon the privilege, either successfully[232] or unsuccessfully.[233]
(vii) Conclusion on availability of the privilege to a plaintiff
[228]See, eg, Bird v Hardwicke (1682) 1 Vern 109; 23 ER 349; R v Newel (1707) Park 269; 145 ER 777; Attorney-General v Cresner (1710) Park 279; 145 ER 779; Attorney-General v Vincent (1724) Bunb 192; 145 ER 644; Wrottesley v Bendish (1733) 3 P Wms 235; 24 ER 1042; Sharp v Carter (1735) 3 P Wms 375; 24 ER 1108; Smith v Read (1736) 1 Atk 527; 26 ER 332; Duncalf v Blake (1737) 1 Atk 52; 26 ER 35; Baker v Pritchard (1742) 2 Atk 387; 26 ER 634; Chauncey v Tahourden (1742) 2 Atk 392; 26 ER 637; Boteler v Allington (1746) 3 Atk 453; 26 ER 1061; Lord Uxbridge v Staveland (1747) 1 Ves Sen 56; 27 ER 888; East India Company v Campbell (1749) 1 Ves Sen 246; 27 ER 1010; Brownsword v Edwards (1751) 2 Ves Sen 243; 28 ER 157; Harrison v Southcote (1751) 1 Atk 528; 26 ER 333; Chancey v Fenhoulet (1751) 2 Ves Sen 265; 28 ER 171; Chetwynd v Lindon (1752) 2 Ves Sen 450; 28 ER 288; Cartwright v Green (1803) 8 Ves Jr 405; 32 ER 412; Paxton v Douglas (1812) 19 Ves Jun 225; 34 ER 502; MacCallum v Turton (1828) 2 Y & J 183; 148 ER 883; Nelme v Newton, noted as a footnote to MacCallum v Turton (1828) 148 ER 883, 884; Lee v Read (1842) 5 Beav 381; 49 ER 625; Lamb v Munster (1882) 10 QBD 110.
[229]Modern authorities include Reid v Howard (1995) 184 CLR 1; Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; CC Containers Pty Ltd v Lee [No 2] [2012] VSC 149; Re Australian Property Custodian Holdings (in liq) (rec and mgr apptd) (controllers apptd) [No 2] (2012) 93 ACSR 130.
[230]See, eg, Finch v Finch (1752) 2 Ves Sen 491; 28 ER 315; Grey v Hesketh [1755] Amb 268; 27 ER 178; East India Company v Neave (1800) 5 Ves Jr 173; 31 ER 530. A modern instance is Charara v Commissioner of Police (2008) 182 A Crim R 64 (privilege against self incrimination had no role to play in the taking of a hair sample).
[231]For historical exceptions to the rule, see African Company v Parish (1691) 2 Vern 244; 23 ER 758; Heathcote v Fleete (1702) 2 Vern 442; 23 ER 883; Morse v Buckworth (1703) 2 Vern 442; 23 ER 883; Earl of Suffolk v Green (1739) 1 Atk 450; 26 ER 286; Lucas v Evans (1745) 3 Atk 260; 26 ER 951. For modern exceptions to, and qualifications of, the rule, see King v McLellan [1974] VR 773 (privilege not applicable to taking of a breath sample for analysis); EPA (1993) 178 CLR 477 (non-availability of the privilege against self-incrimination to a corporation); Trade Practices Commission v Abbco Ice Works Pty Ltd (1994) 52 FCR 96 (non-availability of the privilege against exposure to a civil penalty to a corporation); Cornwell v The Queen (2007) 231 CLR 260 (evidence of admissions made at first trial can be led at retrial on same charge); Ewin v Vergara [No 2] (2012) 209 FCR 288 (waiver of privilege).
[232]See, eg, Jackson v Benson (1826) 1 Y & J 32; 148 ER 574. For modern instances, see, eg, Rio Tinto Zinc Corporation v Westinghouse Electric Corporation [Nos 1 and 2] [1978] AC 547; 1 All ER 434; Accident Insurance Mutual Holdings Ltd v McFadden (1993) 31 NSWLR 412; Workcover Authority of New South Wales (Inspector Carmody) v Tsougranis (2002) 117 IR 203; Australian Securities and Investments Commission v Plymin (2002) 4 VR 168 (privilege against exposure to penalty extends to defendants required to provide evidence by way of other witnesses, including expert witnesses).
[233]See, eg, Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328.
In my view, the history of the origins of the privilege against self-incrimination, and its subsequent development, make it clear that it is a privilege that is available to a plaintiff. The status of Dale as a plaintiff is not sufficient in itself to preclude him from relying upon the privilege. In my view, the judge was correct in concluding that Dale is entitled to claim the privilege against self-incrimination.
The question remains: Even if the status of Dale as a plaintiff does not preclude him from relying on the privilege, does the fact that the very issues raised in the proceedings he commenced relate to the incriminating conduct in which he was alleged to have engaged, constitute a waiver of the privilege against self-incrimination on those issues? Similarly, did the fact that Dale voluntarily gave an extended interview to the police amount to a waiver of privilege on the issues canvassed in the police interview? [234]
[234]Reasons [80], [89].
Is commencing a proceeding inconsistent with the privilege?
(i) Waiver over foundation of plaintiff’s claim?
The firm accepts that the privilege against self-incrimination may be available to a plaintiff on issues of credit or on collateral issues in a proceeding but not with respect to the issues that form the foundation of the plaintiff’s claim. It maintains its primary submission that when a plaintiff chooses to commence a civil proceeding it thereby waives the privilege against self-incrimination with respect to the claims in that proceeding. To urge that the commencement of a proceeding constitutes a waiver is in effect to deny the availability of the privilege against self-incrimination to a plaintiff. I have already concluded that the privilege is available to a plaintiff and thus reject the broad proposition that a plaintiff, by commencing a proceeding, thereby waives the privilege on the issues arising in the proceeding. It remains to examine directly whether the commencement of proceedings by Dale, or the voluntary participation in the police interview, constituted a waiver of the privilege.
The firm contends that there is no doubt that privilege may be waived[235] and that waiver occurs where the party entitled to the privilege performs an act which is inconsistent with the confidence preserved by it. As the High Court stated in Mann v Carnell,[236] in the context of considering waiver of legal professional privilege:
At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that ‘waiver’ is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client’s version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer’s evidence as to advice given to the client will be received.[237]
[235]Reid v Howard (1995) 184 CLR 1, 5, 12; BTR Engineering (Australia) v Patterson (1990) 20 NSWLR 724, 727–8; Registrar, Court of Appeal (NSW) v Craven (1994) 126 ALR 668, 685–6.
[236](1999) 201 CLR 1.
[237]Ibid 13 [28] (citations omitted). See also Osland v Secretary, Department of Justice (2008) 234 CLR 275, 292–3 [35], 296–7 [44]–[46], 298–9 [49]–[50].
In the context of legal professional privilege a party to a legal proceeding, by pleadings or evidence, may ‘open … up for investigation and testing the source of and basis for its belief on a particular issue’.[238] If the party does so, ‘inspection of documents relevant to that issue cannot be denied by a claim of legal professional privilege’.[239] For example, a party may expressly or impliedly make an assertion about the contents of privileged communications on an issue that may give rise to an inconsistency with the maintenance of the privilege causing unfairness to the other party.
[238]BT Australasia Pty Ltd v State of New South Wales [No 7] (1998) 153 ALR 722, 725 (Sackville J).
[239]Ibid.
The firm submits that the same principle applies in the context of the privilege against self-incrimination as applies to legal professional privilege. It relies upon Rowlands v State of New South Wales[240] where Hodgson JA[241] held that waiver of privilege against self-incrimination raises questions of the same kind as those raised with respect to the waiver of legal professional privilege.
[240](2009) 74 NSWLR 715 (‘Rowlands’).
[241]With whom Allsop P and Tobias JA relevantly agreed.
If a party elects to conduct a positive case in rebuttal of allegations made against him or her, the party will have acted inconsistently with the privilege in the sense described in Mann v Carnell and the privilege will be impliedly waived with respect to the issues canvassed in the positive case. This proposition is confirmed by Chong, in which one of the appellants, Neale, had ultimately presented at trial a positive case in his defence to a proceeding in tort; namely, conspiring to injure corporations by means of fraud with respect to the repair of shipping containers. The Court held that one of the consequences of the manner in which Neale’s case was presented was that there had been an implied waiver of the privilege. The Court said:
Firstly, the manner in which the defence of Neale was conducted constituted the advancement of a positive defence inconsistent with the maintenance of the privilege, assuming that it had been validly claimed. It may therefore be characterised as a waiver of his privilege. As observed in Reid v Howard, privilege against self-incrimination may be waived. Fairness is central to the question whether a party’s conduct should be construed as waiving their privilege. If a party by his or her conduct expressly or impliedly discloses or makes an assertion about matters to which privilege would apply, fairness to the other party may dictate that the party’s conduct should be taken as a waiver of any privilege attaching to that matter. In Mann v Carnell, Gleeson CJ, Gaudron, Gummow and Callinan JJ stated, in the context of legal professional privilege, that it is ‘inconsistency … between the conduct of the client and maintenance of the confidentiality’ which effects a waiver of the privilege. The making of express or implied assertions about the content of the subject matter of the privilege while at the same time seeking to maintain the privilege gives rise to the inconsistency. Had Neale wished to preserve the benefit of his claim of privilege, and in due course object to answering particular questions, his counsel would have been entitled to inform the judge that he would undertake no cross-examination of witnesses that involved advancing any affirmative case. That he did not do but rather … sought to place his affirmative case before the trial judge. His reliance upon the privilege was impliedly waived.[242]
[242]Chong [2015] VSCA 137, [200] (citations omitted). See also ASIC v Mining Projects Group Ltd (2007) 65 ACSR 264 where Finkelstein J said: ‘ … a defendant can rely on the privilege up to the point he decides to go into evidence. It is only at that moment, if the defendant elects to run a positive case, that he must give up the privilege and file a defence that outlines the case he intends to run’: at 270 [17].
The firm submits that Chong supports its submission that by bringing these proceedings, Dale has impliedly waived the privilege with respect to all the issues properly arising in the proceedings.[243] It reiterates its broad submission that the commencement of proceedings by Dale amounts to placing an affirmative case before the Court.
[243]Although Chong was delivered after the hearing of the appeal, the parties were granted leave to make brief written submissions on the relevance of Chong to the appeal.
Dale submits that Chong raises no issue relevant to the disposition of the appeal because it is not in dispute that a party who elects to conduct a positive case in rebuttal of allegations made against him or her, in circumstances that would otherwise engage the privilege, impliedly waives the privilege. He submits that the contest between him and the firm lies in the question of whether, by commencing the proceedings, he has made an election to conduct a positive case in rebuttal of the allegations made against him in the Fagan memorandum, and other sources. He argues that he has not.
I agree.
The statements made by Dale in his pleadings do not go beyond a recitation of the allegations made against him, principally in the Fagan memorandum and its attachments, and most clearly do not amount to admissions in relation to his conduct. It is important to recognise that Dale relies upon the recitation of the allegations in the Fagan memorandum for a limited forensic purpose.[244] More generally, it is necessary in assessing whether conduct amounts to a waiver of the privilege to be alert to the specific context in which the conduct occurs, including, if relevant, the statutory context. This is the force of Gemmell.[245] In my view, there was no waiver of all the ‘issues’ identified in the pleadings merely by Dale’s commencement of the proceedings. To accede to the firm’s view would be to accept a proposition I have already rejected, namely, that the privilege is not available to a plaintiff. The firm’s submission on Chong effectively collapses into the same contention which I consider to be without merit. In my view, until and unless Dale elects to run a positive case, his conduct is not relevantly inconsistent with his maintenance of the privilege.
[244]See also [105] above with respect to orders that can limit the use to which the Fagan memorandum can be put, once adduced into evidence by Dale.
[245]In Gemmell Ashley JA held that a claim made under s 597(12A) of the Corporations Act 2001 (Cth), before answering a question, is not equivalent to a claim of privilege because the claim protects the person only from the direct use of the answer in a criminal proceeding or a proceeding for the imposition of a penalty; it does not provide, as the privilege does, an immunity from the derivative use of the answer in other proceedings (including, in proceedings for insolvent trading). As such, a failure to make a claim under s 597(12A) cannot be held to be a waiver of the privilege.
Furthermore, there was no evidence before the judge that the statements made by Dale in the police interview were incriminating; Dale’s responses were exculpatory, not incriminating. Dale denied wrongdoing.[246] Moreover, Dale submitted that the police interview dealt only with limited aspects of the firm’s positive defence (which, as noted above,[247] seeks to cover additional allegations to those made in the Fagan memorandum) and none of [102]–[150] of the defence. This was recognised by the firm.[248] The fact that Dale voluntarily submitted to the police interview does not provide a proper basis for inferring that he has thereby waived the privilege on the ‘issues’ canvassed in that interview.
(ii) Conclusion on commencing proceedings
[246]For example, in response to the question: ‘I’ll put it to you that the purpose of contacting Won and attempting to get Lambert to Sydney was part of your overall plan to intimidate Won into settling his civil matter with Cheuna Schmidt’ Dale said: ‘Well, I deny that. I’m not even sure whether Lambert ever made contact with Won.’ Exhibit to Defendant’s Written Submission dated 19 September 2014, 333 (excerpts of record of police interview). Reasons [79].
[247]See [28] above.
[248]In this respect the firm acknowledged that its submissions based on waiver did not apply to the additional allegations; for those allegations it fell back on its principal submission that the privilege is not available to a plaintiff with respect to the issues in the proceeding he or she has voluntarily brought.
In my view, the judge was correct to conclude that neither the commencement of civil proceedings by Dale, nor his voluntary participation in the police interview, constituted a waiver of the privilege with respect to the ‘issues’ raised by the proceedings or in the interview. The recitation of the allegations in the pleadings, and the participation in the police interview in relation to which there was no evidence of admissions, are, in my view, not inconsistent with the maintenance of the privilege and do not give rise to a loss of the privilege on the issues upon which they touch on the ground of unfairness[249] or otherwise.
[249]Attorney-General (NT) v Maurice (1986) 161 CLR 475.
I consider that the privilege is available to Dale until and unless he elects to conduct a positive case in rebuttal of allegations made against him in circumstances that would otherwise engage the privilege.
Is there a real risk of Dale being subject to incrimination or penalties?
The judge found that Dale demonstrated a real and appreciable risk of being subject to criminal or civil penalty proceedings so as to justify the protection of the privilege in this proceeding, and that, having regard to Dale’s case as articulated by his senior counsel as confined and limited in the manner described above,[250] no unfairness or injustice arises for the firm in the conduct of its case as a result of Dale invoking the privilege.[251]
(i) Inferences drawn by the judge
[250]For example, see [36] above.
[251]Reasons [104].
The judge found that there was nothing tenuous or illusory about Dale’s continuing risk of criminal prosecution. He said:
In this case, the defendant directly alleges serious professional misconduct which could lead to obvious civil penalties and also serious criminal conduct which could lead to criminal charges. There is clearly nothing tenuous or illusory or without substance in the nature of the allegations which are raised against the plaintiff. I say this, of course, on the basis that I have no view one way or the other as to whether there is any veracity in these allegations or whether they might ultimately be proved. That is, however, not the point in the context of an application of this kind and there is no suggestion in the authorities that the basis or bases of the privileges against self-incrimination, when claimed, are to be assessed in terms of their substance. It is a matter of assessing degree of risk, as indicated in the authorities.
In this application, the defendant seeks to tender police interviews which, in my view, simply serve to emphasise the serious nature of the allegations made by the defendant against the plaintiff and the ramifications for the plaintiff if he is required to comply with the rules of Court dealing with disclosure requirements. It is obviously the case that effluxion of time since the critical events or allegations may be a circumstance relevant to the assessment of risk. In this case, however, I accept that effluxion of time is not a relevant factor having regard to the seriousness of the allegations made against the plaintiff as an officer of this Court, particularly having regard to the inherent jurisdiction of the Court to discipline solicitors, including by removing them from the Roll. Moreover, the defendant‘s submissions with respect to effluxion of time do overlook the fact that the defence raises serious issues which have not thus far been investigated and which, in my view, clearly raise relevant risks as far as the plaintiff is concerned in terms of the assessment of the justification for the claimed privileges. In terms of risk, the defendant also sought to place reliance on the evidence of a senior police officer involved in the investigation. Even if evidence of this kind were regarded as relevant and carrying weight in relation to the assessment of risk, there is no information as to why there was no prosecution or what might be the position with respect to prosecution if further incriminating evidence arose. In other words, this evidence is of no assistance in terms of risk assessment.[252]
[252]Ibid [100]–[101] (citations omitted).
The firm contends that the risk of prosecution is now remote because the allegedly offending conduct is ‘stale’. At least some of the disciplinary proceedings have already been completed resulting in a minor penalty, being a reprimand for unsatisfactory conduct.
I do not consider the risk of criminal prosecution, or further disciplinary proceedings, to be so remote as to preclude the finding that Dale remains at risk of being subject to criminal or civil penalty proceedings. This is especially so, as the judge recognised, with respect to the additional allegations made in [102]–[150] of the defence.
(ii) Conclusion on Dale’s risk
In my view, the judge did not err in finding that there was a real and appreciable risk that Dale would be subject to criminal or civil penalty proceedings so as to justify the protection of the privilege.
Conclusion on Privilege
I have concluded that Dale’s status as a plaintiff does not preclude his reliance on the privilege and that, in the circumstances, he has not waived the privilege. I see no error in the orders made by the judge excusing Dale from compliance with the Rules of Court on the ground that they may have a tendency to expose Dale directly or indirectly to a civil penalty or a criminal proceeding in respect of the subject matter of this proceeding.
With respect to the orders of the judge excusing Dale from compliance with the Rules of Court relating to the matters to be pleaded, particulars of pleading, admissions and denials, and discovery and inspection of documents, I would grant leave to appeal on the basis that the uncertainty in the law concerning a plaintiff’s eligibility to claim the privilege against self-incrimination renders the decision one about which there could be sufficient doubt to warrant a grant of leave. If an error had been made, substantial injustice would have followed had the error not been reversed.
However, I would reject the grounds of appeal challenging the findings on the privilege.
Conclusion on the application for leave to appeal and the appeal
I would grant leave to appeal and allow the appeal in so far as this is necessary to vary his Honour’s orders.
With respect to the Protean Holdings ‘split’ directed by the judge, some of the difficulties in the reasoning were reflected in the terms of the orders.[253] I consider that the orders made by the judge should be set aside and in lieu of [2] of the orders the following order be made:
[253]See the orders sought (and made) at [34]–[35] above.
2. The trial of the proceeding be split on the basis that:
(a) in the plaintiff’s case:
(i) the plaintiff will not be required to lead evidence directed to the issues pleaded in [48] of the statement of claim or [49]–[145] of the amended defence;
(ii) unless the plaintiff has led evidence on the issue, there be no cross-examination of the plaintiff or any of his witnesses in relation to the issues pleaded in [48] of the statement of claim or [49]–[145] of the amended defence.
(b) unless the plaintiff has led evidence on the issue, the plaintiff may have a case in rebuttal on the issues pleaded in [48] of the statement of claim and [49]–[145] of the amended defence;
(c) the plaintiff have leave to file a further amended reply at the conclusion of the defendant’s case in relation to the issues pleaded in [48] of the statement of claim and [49]–[145] of the amended defence.
This will mean that the question of the impropriety or illegality of Dale’s conduct, as alleged by the firm, is not part of Dale’s preliminary proof. It will not be incumbent upon Dale, in his preliminary proof, to explain or justify his conduct, or
rebut the allegations made in the Fagan memorandum, the Annetta memorandum, the Lawrie memorandum, the O’Keefe memorandum, or the allegations concerning his conduct of which the firm alleges it became aware after the expulsion decision. It also means that causation is not part of Dale’s preliminary proof. It follows that the firm cannot make a ‘no case’ submission at the end of so much of Dale’s case as precedes the firm’s calling of evidence.
With respect to the issue of privilege, I consider that the privilege against self-incrimination is available to a plaintiff, and the judge was correct in so concluding, and that Dale can rely upon the privilege until and unless he decides to give evidence to conduct a positive case in rebuttal of allegations made against him.
FERGUSON JA:
I have had the advantage of reading the reasons of Tate JA in draft.
So far as grounds 1–11 are concerned, I would refuse leave to appeal. Assuming, for the purposes of the argument, that there was an error on the part of the judge, no substantial injustice flows from leaving the orders unreversed. The orders that were made are purely procedural and this Court will exercise particular caution before disturbing a decision of that type.[254] They go to the order in which evidence will be given at the trial. Each party will have the opportunity to present the evidence and its case. No-one will be shut out from doing so. If the orders remain as they are until the conclusion of the trial, no harm will be done.
[254]Adam P Brown Male Fashions Pty Ltd v Philip Morris Incorporated (1981) 148 CLR 170, 177.
In any event, the case is being managed by a Commercial Court judge. He will likely be the trial judge. As the matter progresses towards trial and during the trial itself, he will have the opportunity to revisit the orders that he has made (they being interlocutory). He may vary and adapt them to suit the circumstances of the case as they unfold. Orders of this type are quintessentially matters best left to the managing judge. Modern litigation is dynamic. It is not static. Commercial Court
judges are proactive in the management of cases. They are well placed to make decisions as to the order of evidence to be given at trial.
I am not persuaded that there is any substantial injustice in leaving the orders in place. Had I been minded to grant leave to appeal, I would have dismissed the appeal.
In respect of grounds 12 and 13, I agree with Tate JA, substantially for the reasons that her Honour gives, that leave to appeal should be granted but that the appeal should be dismissed.
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