Commonwealth Bank of Aust, Scott and Brown v Heinrich No. Scciv-02-822

[2002] SASC 263

COMMONWEALTH BANK OF AUSTRALIA, SCOTT & BROWN  v HEINRICH
[2002] SASC 263

Civil

1. MULLIGHAN J                 The plaintiffs have made an application for an interim order for a stay of proceedings commenced by the defendant in the Adelaide Magistrates Court (“the criminal proceedings”) in which they are charged with various offences under the Crimes Act 1914 (Cth). The application is properly made as a matter of urgency. The criminal proceedings are due to be heard on 9^th August 2002.

2. There is a long history of litigation between the first plaintiff, the Commonwealth Bank of Australia (“the Bank”) and the defendant. The Bank brought an action in this Court in 1993 claiming monies alleged to be due by the defendant to the Bank. The defendant defended those proceedings and made a counterclaim alleging fraud by an officer of the Bank and indebtedness by the Bank to him. In 1998, the defendant brought an action against the Bank seeking declarations as to the breach of its accounting and taxation obligations and raising issues which were common to issues in the earlier proceedings brought by the Bank. In essence, these proceedings arose out of financial transactions between the Bank and the defendant, it being alleged by the Bank that it had made substantial loans to the defendant which had not been repaid.

3. After a trial the plaintiff, on 24^th February 2000, obtained judgment against the defendant in the sum of $673,358.81. In order to enforce the judgment, the plaintiff commenced bankruptcy proceedings against the defendant in the Federal Court and a sequestration order was made on 6^th September 2000. The defendant appealed to the Full Court of the Federal Court and sought a mutual accounting between the Bank and the defendant pursuant to s 86 of the Bankruptcy Act 1966. The appeal and the application for a mutual accounting were dismissed.

4. The second plaintiff is the trustee in bankruptcy of the defendant appointed when the Bank obtained the sequestration order.  The third plaintiff is the solicitor of the trustee in bankruptcy.

5. The defendant applied to the High Court of Australia for an Order for Mandamus against the Judges comprising the Full Court of the Federal Court, which application was dismissed. The second plaintiff commenced proceedings in the Federal Magistrates Court for public examination of the defendant and there have been a series of public examinations.

6. The defendant commenced the criminal proceedings in the Adelaide Magistrates Court on 20^th March 2002 against each of the plaintiffs. They commenced this action in this Court on 20^th June 2002 seeking orders that the criminal proceedings be permanently stayed, an order prohibiting the defendant from instituting further proceedings without the leave of this Court and for costs. They sought an urgent interim order for a stay of the criminal proceedings which were listed before a Magistrate in the Adelaide Magistrates Court on 12^th July 2002.

7. I accept that this Court has inherent jurisdiction to entertain the application for a stay of the proceedings in the Magistrates Court in circumstances where the proceedings would amount to an abuse of process of that Court:  Williams & Ors v Spautz (1992) 174 CLR 509 at 518-519. In that case, like the present case, the Supreme Court of New South Wales and the High Court on appeal were concerned with a stay of committal proceedings before a Magistrate brought by a private person. Mason CJ, Dawson, Toohey and McHugh JJ held that the power extends to the prevention of an abuse of process resulting in oppression, even if the moving party (here the defendant) has a prima facie case or must be assumed to have a prima facie case.  They gave the following example at 522:

   “He or she can establish a prima facie case against the defendant but has no intention of prosecuting the proceedings to a conclusion because he or she wishes to use them only as a means of extorting a pecuniary benefit from the defendant.  It would be extraordinary if the court lacked power to prevent the abuse of process in these circumstances.”

   Earlier in their joint judgment, their Honours adopted the following observation of Reg v Humphrys [1977] AC 1 at 46:

   “For a man to be harassed and put to the expense of perhaps a long trial and then given an absolute discharge is hardly from any point of view an effective substitute for the exercise by the court of the power to which I have referred.”

   He was there referring to the inherent powers of the Court to prevent abuse of its process.

8. It would be an abuse of process if the proceedings were instituted for a collateral purpose.  Such a purpose is recognised by the tort of collateral abuse of process. It was held in Williams v Spautz that if the purpose of bringing the proceedings is not to bring about a result for which the law provides but for some collateral advantage beyond what the law offers, the proceedings may be stayed as an abuse of process. The latter must be established to be the predominant purpose: pp526-528.

9. The criminal proceedings are again listed for hearing on 9^th August 2002. The plaintiffs have asked that their applications be resolved, at least on an interim basis, before that date.

10. A vast amount of documentary material has been placed before me, mainly by the Bank and the defendant. The matter was extensively argued on 12^th July 2002. At the conclusion of the hearing on that day, I intimated that the defendant could supplement the written and oral submissions which had been given with further written submissions which had to be provided to me and the plaintiffs by the close of business on Friday, 26^th July 2002. At the request of Mr Wrenn, I extended that time until 29^th July 2002. He has provided further submissions together with an affidavit of the defendant with 16 exhibits in the nature of documents which he seeks to use as evidence on this application.

11. Although the application came before me in a general chamber list and the substantive action is in an early procedural stage, I asked the parties if they wished me to resolve the matter on a final, rather than an interim, basis in view of the substantial amount of evidence and the extensive submissions which I had received. Both Mr Lunn, for the Bank, and Mr Lane, for the second and third plaintiffs, indicated that their clients were willing for the matter to be resolved on a final basis provided that the defendant did not want to adduce further evidence at this stage. Mr Wrenn, who appeared for the defendant, indicated that it would be preferable that such a course was taken but it depended upon whether the plaintiffs were co-operative and provided certain accounts to the defendant. He said that he may wish to present materials about that matter to me. The exhibits to the affidavit relate to other matters.

12. The consequence is that the defendant does not want me to deal with the matter on a final basis and, it seems, requires these proceedings to run their course. Therefore, I may only deal with the application for an interim order. This action must proceed to trial and it will be for the trial Judge to decide what, if any, order should be made on a permanent basis.

13. I prefer to say as little as possible about the merits of the application as I do not wish to give the appearance of comprising the decision of the Trial Judge in any way.

14. Having considered all of the evidence placed before me and the extensive submissions, I am satisfied that there is a sound basis to make an interim order that the proceedings in the Magistrates Court be stayed as an abuse of process until this action comes to trial and the Trial Judge can consider all of the evidence adduced by the parties. Having considered the similarity of the issues resolved in the civil trial and those sought to be raised in the criminal proceedings and statements made by the defendant during his public examination in the bankruptcy proceedings, there is a case for the defendant to answer that he commenced the criminal proceedings for a collateral, and therefore improper, purpose. I do not set out the evidential basis of that conclusion for the reason which I have mentioned, but I say that if it is not successfully rebutted at the trial, the Trial Judge may well be justified in making a final order in favour of the plaintiffs.

15. I am satisfied that if the criminal proceedings continue contemporaneously with this action, there will be considerable expenses incurred by the plaintiffs. Also, it is likely that they will suffer adverse and harmful publicity, particularly the second and third plaintiffs which may eventually be shown to have been unwarranted and without foundation.

16. In the circumstances, the justice of the case requires an order that the criminal proceedings be stayed until the trial of this action or otherwise until further order.

17. I direct that the action be referred to a Master for a directions hearing.  I adjourn further consideration of this application and I give all parties liberty to apply on seven days’ notice to the other parties.