Eunice Daphne Washington (By Her Litigation Guardian Edward Michael Byrt) v Titan Fan Products Australia Ltd

[2020] SASC 230

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

EUNICE DAPHNE WASHINGTON (BY HER LITIGATION GUARDIAN EDWARD MICHAEL BYRT) v TITAN FAN PRODUCTS AUSTRALIA LTD & ORS

[2020] SASC 230

Reasons for Decision of The Honourable Justice Stanley

3 December 2020

PROCEDURE - STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY - INHERENT AND GENERAL STATUTORY POWERS - TO STAY OR DISMISS ORDERS OR PROCEEDINGS GENERALLY

CRIMINAL LAW - GENERAL MATTERS - OTHER GENERAL MATTERS - STAY OF CIVIL PROCEEDINGS PENDING CRIMINAL PROCEEDINGS

The fourth respondent filed an interlocutory application seeking a stay of civil proceedings in this Court.  The fourth respondent applied for an order pursuant to r 12.1 of the Uniform Civil Rules 2020 (SA) (UCR) for a stay of action No 969 of 2017 (the 2017 action) and action No 1070 of 2019 (the 2019 action) brought by the applicant by her litigation guardian, against the fourth respondent and three companies under her control, Titan Fan Products Australia Ltd (the first respondent), Titan Poultry Equipment Ltd (the second respondent), and Icelin Nominees Pty Ltd (the third respondent). 

The civil proceedings concern, inter alia, disputes between the fourth respondent and the applicant over control of assets including the family business that was established by the applicant and her husband who is now deceased, and his estate.  In January 2019 the applicant’s daughter-in-law, on behalf of the applicant, made a complaint to the police concerning the fourth respondent’s conduct

The application by the fourth respondent sought a temporary stay of the civil proceedings until the criminal investigation and trial process is finalised.  The civil proceedings were listed for trial commencing on 23 November 2020.

Held:

1. The Court has a wide jurisdiction to stay proceedings in the interests of justice. The following relevant principles can be identified from recent case law:

1.1  Courts have the power to control their proceedings and to order a stay in an appropriate case.  It will be appropriate to do so where the interests of justice require such an order.

1.2  A plaintiff is prima facie entitled to have civil proceedings tried in the ordinary course.  Accordingly, a stay requires justification on proper grounds.

1.3  The burden of demonstrating the existence of proper grounds for a stay is on the applicant.

1.4  A court will not grant a stay of a civil proceeding merely because related charges have been brought against an accused and criminal proceedings are pending.  A stay of civil proceedings may be warranted if it is apparent that the accused is at risk of prejudice in the conduct of his or her defence in a criminal trial.

1.5  The risk of prejudice must be real, and in considering what the interests of justice require, that risk is to be weighed against the prejudice that a stay of the civil proceedings would occasion.

1.6  Prejudice to the accused’s right to silence or privilege against self incrimination is a relevant and important factor in the exercise of the discretion. 

1.7  It may not be necessary for the applicant seeking the stay to state the specific matters of prejudice before a stay could be contemplated. 

1.8  It is not necessary for the applicant for the stay to have been charged with a criminal offence.  The real risk of prejudice or injustice can relate to an actual or potential criminal proceeding.  It is sufficient that a criminal charge or charges is or are “on the cards”.  The expression “on the cards” has been interpreted to mean reasonably possible or a reasonable possibility.  Where allegations in a civil proceeding are of a very serious nature and magnitude, the pleading alone may be sufficient to establish that there is a real risk of criminal prosecution should the matters alleged be proven.

2.  The relevant test for granting a stay in these circumstances is whether, on the evidence before the Court, a stay is necessary to ensure that the fourth respondent is not placed at a real risk of self-incrimination in defending the civil proceedings involving the same or similar subject matter.  If a stay was not granted the fourth respondent faced the real risk of self-incrimination or depriving herself of a proper defence of the civil proceedings in order to avoid that risk.  At least for the moment that prejudice outweighs the prejudice that the stay of the proceedings will occasion the applicant.

3.  If the Court is disposed to grant a stay, as it was in this case, the entitlement to a stay should not be made conditional on compliance with other orders made by the Court.  However, the Court may make other orders in conjunction with the grant of a stay which achieves a fair and just balance of the competing interests that are involved in these proceedings.

4.  In this case these orders include the appointment of an administrator pendente lite to estate of the applicant’s husband and for the payment into Court by the fourth respondent of the $80,000.

Uniform Civil Rules 2020 (SA) r 12.1, referred to.
Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46; McMahon v Gould (1982) 7 ACLR 202; CFMEU v ACCC (2016) 242 FCR 153; Ransley v Commissioner of Taxation [2016] FCA 778; Obeid v Commissioner of Taxation [2017] FCA 1135; McLachlan v Browne (No 9) [2019] NSWSC 10; Websyte Corporation Pty Ltd v Alexander (No. 2) [2012] FCA 562; ASIC v ActiveSuper Pty Ltd (No. 5) [2013] FCA 369 [2013] FCA 369; Citation Resources Ltd v Landau (2016) 116 ACSR 410; CC Containers Pty Ltd & Ors v Lee & Ors (No. 2) [2012] VSC 149; ASIC v Craigside Company Ltd (2013) 93 ACSR 176; In the Matter of Plutus Payroll Australia Pty Ltd [2017] NSWSC 1854, considered.

EUNICE DAPHNE WASHINGTON (BY HER LITIGATION GUARDIAN EDWARD MICHAEL BYRT) v TITAN FAN PRODUCTS AUSTRALIA LTD & ORS
[2020] SASC 230

Civil:        Interlocutory Application

STANLEY J:

Introduction

1. The fourth respondent, Julie Washington (Julie) filed an interlocutory application seeking a stay of civil proceedings in this Court.  Julie applied for an order pursuant to r 12.1 of the Uniform Civil Rules 2020 (SA) (UCR) for a stay of action No 969 of 2017 (the 2017 action) and action No 1070 of 2019 (the 2019 action) brought by her mother, Eunice Washington (Eunice) by her litigation guardian Edward Byrt, against Julie and three companies under her control, Titan Fan Products Australia Ltd (the first respondent), Titan Poultry Equipment Ltd (the second respondent), and Icelin Nominees Pty Ltd (the third respondent). 

2. The application sought a temporary stay of the civil proceedings until a criminal investigation and any trial process are finalised.  The evidence supports a finding that the criminal investigation generally concerns much the same matters to be decided in the civil proceedings.  The civil proceedings were listed for trial commencing on 23 November 2020. 

3. For the following reasons I ordered a temporary stay of the civil proceedings.

   Principles relevant to the grant of a stay of proceedings

4. The Court has a wide jurisdiction to stay proceedings in the interests of justice.  The relevant approach in considering whether to grant a stay in the interests of justice has been considered in a number of recent judgments, including by the High Court in Commissioner of The Australian Federal Police v Zhao.[1]Those judgments concern applications for a stay of civil proceedings pending criminal proceedings.  Almost without fail, the starting point for consideration of whether it is appropriate to exercise the discretion to stay civil proceedings pending the outcome of criminal proceedings are the guidelines laid down by Wootten J in McMahon v Gould.[2]Equally, recent judgments emphasise the importance of recognising that these are merely guidelines.  While they may offer some assistance, they need to be read in light of subsequent decisions.

   [1] [2015] HCA 5, (2015) 255 CLR 46.

   [2] (1982) 7 ACLR 202 at 206-207.

5. In my view, the following relevant principles can be identified:

   1.Courts have the power to control their proceedings and to order a stay in an appropriate case.  It will be appropriate to do so where the interests of justice require such an order.[3]

   2.A plaintiff is prima facie entitled to have civil proceedings tried in the ordinary course.  Accordingly, a stay requires justification on proper grounds.[4]

   3.The burden of demonstrating the existence of proper grounds for a stay is on the applicant.[5]

   4.A court will not grant a stay of a civil proceeding merely because related charges have been brought against an accused and criminal proceedings are pending.  A stay of civil proceedings may be warranted if it is apparent that the accused is at risk of prejudice in the conduct of his or her defence in a criminal trial.[6]

   5.The risk of prejudice must be real, and in considering what the interests of justice require, that risk is to be weighed against the prejudice that a stay of the civil proceedings would occasion.[7]

   6.Prejudice to the accused’s right to silence or privilege against self‑incrimination is a relevant and important factor in the exercise of the discretion.[8]  Some cases place this as the paramount consideration in the assessment of whether to grant a stay.[9]

   7.It may not be necessary for the applicant seeking the stay to state the specific matters of prejudice before a stay could be contemplated.  As the High Court said in Zhao:[10]

   To require the second respondent to do so would be to make the risk of prejudice a reality by requiring him to reveal information about his defence, the very situation which an order for a stay seeks to avoid.

   8.It is not necessary for the applicant for the stay to have been charged with a criminal offence.  The real risk of prejudice or injustice can relate to an actual or potential criminal proceeding.[11]  It is sufficient that a criminal charge or charges is or are “on the cards”.  The expression “on the cards” has been interpreted to mean reasonably possible or a reasonable possibility.[12]  Where allegations in a civil proceeding are of a very serious nature and magnitude, the pleading alone may be sufficient to establish that there is a real risk of criminal prosecution should the matters alleged be proven.[13]

   [3]    Commissioner of the Australian Federal Police v Zhao [2015] HCA 5 at [36], (2015) 255 CLR 46 at 58; CFMEU v ACCC [2016] FCAFC 97 at [22], (2016) 242 FCR 153 at 160.

   [4]    McMahon v Gould (1982) 7 ACLR 202 at 206.

   [5]    McMahon v Gould (1982) 7 ACLR 202 at 206.

   [6]    Commissioner of the Australian Federal Police v Zhao [2015] HCA 5 at [35], (2015) 255 CLR 46 at 58; CFMEU v ACCC [2016] FCAFC 97 at [22], (2016) 242 FCR 153 at 160.

   [7]    Commissioner of the Australian Federal Police v Zhao [2015] HCA 5 at [47], (2015) 255 CLR 46 at 60-61; CFMEU v ACCC [2016] FCAFC 97 at [22], (2016) 242 FCR 153 at 160; Ransley v Commissioner of Taxation [2016] FCA 778 at [22].

   [8]    Commissioner of the Australian Federal Police v Zhao [2015] HCA 5 at [42]-[47], (2015) 255 CLR 46 at 59-61; CFMEU v ACCC [2016] FCAFC 97 at [23], (2016) 242 FCR 153 at 160; Ransley v Commissioner of Taxation [2016] FCA 778 at [24]-[30]; Obeid v Commissioner of Taxation [2017] FCA 1135 at [4].

   [9]    McLachlan v Browne (No 9) [2019] NSWSC 10 at [47].

   [10] Commissioner of the Australian Federal Police v Zhao [2015] HCA 5 at [43], (2015) 255 CLR 46 at 59-60.

   [11] Websyte Corporation Pty Ltd v Alexander (No. 2) [2012] FCA 562 at [117].

   [12] ASIC v ActiveSuper Pty Ltd (No. 5) [2013] FCA 369 at [18]; Citation Resources Ltd v Landau [2016] FCA 1114 at [49], (2016) 116 ACSR 410 at 423.

   [13] CC Containers Pty Ltd & Ors v Lee & Ors (No. 2) [2012] VSC 149 at [18].

   Why the Court granted a stay

6. The civil proceedings concern, inter alia, disputes between Julie and Eunice over control of assets including the family business that was established by Eunice and her husband, Lincoln Washington (Lincoln), who is now deceased, and his estate.  In January 2019 Eunice’s daughter-in-law, Karen Washington (Karen), on behalf of Eunice, made a complaint to the police concerning Julie’s conduct.  At the hearing of this matter there was an issue as to whether the subject matter of the criminal investigation concerned the subject matter of the civil proceedings. 

7. I am satisfied that the subject matter of the criminal investigation generally concerns much the same matters the subject of the civil proceedings.  In the civil proceedings, Eunice alleges that Julie has unlawfully taken control of certain of Eunice’s bank accounts and made transfers from those accounts without any lawful authority.  Eunice also alleges that Julie placed her in a nursing home without her consent, deprived her of her liberty and caused her emotional distress.  These are serious allegations of unlawful conduct by Julie.  The evidence before the Court is that the police instituted an investigation generally into these matters. That investigation was initiated by the complaint made by Karen that, inter alia, between early 2017 and January 2019 Julie had taken personal property of Eunice without permission and subjected her to what can be described as elder abuse.  That complaint reflected the general basis of the allegations in the civil proceedings.  That investigation is continuing.  The evidence of the chief investigating officer, Brevet Sergeant Rivett, does not expressly disclose whether any criminal charges will result from this investigation.  Certainly his evidence does not exclude that possibility.  Whether the risk of criminal proceedings is “on the cards” necessarily involves an evaluative judgment.  I am satisfied on the evidence that Julie is exposed to a real risk of criminal charges as a result of the investigation.  I find that criminal proceedings in respect of some of the same subject matter as the civil proceedings are “on the cards”.

8. Julie contended that the Court should stay the civil proceedings until the risk of criminal proceedings against her in respect of the same subject matter as the civil proceedings no longer exists.  She contended that she could not obtain a fair trial of the civil proceedings if she wishes to maintain her right to silence in the context of the criminal investigation.  If the civil proceedings are not stayed she would find herself in the dilemma that in order to defend the civil proceedings she must place herself at risk of self-incrimination in the context of the criminal investigation in mounting a defence to the civil proceedings.  This is the very prejudice referred to in ASIC v Craigside Company Ltd.[14]

   [14] [2013] FCA 201 at [22], (2013) 93 ACSR 176 at 185.

9. Eunice contended that this dilemma did not arise because criminal charges have not been laid and the evidence does not establish that they will be.  As a consequence, Julie is not placed in jeopardy by defending the civil proceedings.  For the reasons set out above,  I do not accept this submission. 

10. I am satisfied that the relevant test for granting a stay in these circumstances is whether, on the evidence before the Court, a stay is necessary to ensure that Julie is not placed at a real risk of self-incrimination in defending the civil proceedings involving the same or similar subject matter.  The alternative was that Julie would have had to defend the civil proceedings with one hand tied behind her back, the very position identified in McLachlan v Browne (No. 9).[15]I was satisfied that if a stay was not granted Julie faced the real risk of self-incrimination or depriving herself of a proper defence of the civil proceedings in order to avoid that risk.  At least for the moment that prejudice outweighs the prejudice that the stay of the proceedings will occasion Eunice.  Accordingly, I made an order staying the civil proceedings temporarily until 17 December 2020 or until further order of the Court.  I did so on the basis that in three months the Court can review the position in relation to the progress of the criminal investigation and reassess whether the risk to a fair trial continues to exist. 

    [15] [2019] NSWSC 10 at [41].

    Other orders

11. Eunice contended that if the Court granted a stay of the civil proceedings it should do so on conditions.  The conditions sought were:  first, that the Court should appoint an administrator pendente lite to Lincoln’s estate;  second, that an order should be made that Julie pays into Court the sum of $80,000 which is the subject of dispute in the civil proceedings on the basis that Eunice alleges she revoked the trust pursuant to which Julie asserts she holds these monies transferred to her by Eunice;  third, that the Court should appoint a provisional liquidator and/or an interim receiver to the first, second and third respondents. 

12. I am not satisfied that the stay of the civil proceedings should be conditional.  I determined whether a stay should be granted on the merits of the application per se.  If the Court is disposed to grant a stay, as it was in this case, the entitlement to a stay should not be made conditional on compliance with other orders made by the Court.   On the other hand, the Court may make other orders in conjunction with the grant of a stay which achieves a fair and just balance of the competing interests that are involved in these proceedings.[16] 

    [16]  In the Matter of Plutus Payroll Australia Pty Ltd [2017] NSWSC 1854 at [68].

13. In these circumstances I made orders for the appointment of an administrator pendente lite to Lincoln’s estate and for the payment into Court by Julie of the $80,000.  I made those orders in order to do justice between the parties in circumstances where the stay is being granted. 

14. Eunice is aged 87.  She is the sole residuary beneficiary under Lincoln’s will.  She should not be unnecessarily and unreasonably prejudiced in relation to his estate by the grant of the stay.  The appointment of an administrator will afford her a chance of enjoying her entitlement to his estate, notwithstanding the stay.  When and how the estate will be administered will be a matter for the administrator.  The Court appointed Timothy Donlan, an administrator who is independent.  The administrator can come to Court and seek advice and direction as necessary.  Julie opposed the appointment on the basis that there is no need to get in the estate.  While I accept that premise I do not accept the conclusion.  The fact that the estate consists of cash and that it is not necessary to get it in does not detract from the interests of justice in seeing the estate administered expeditiously so that Eunice can enjoy the benefit of her entitlement under Lincoln’s will. 

15. I ordered Julie to pay into Court the $80,000 which is in dispute.  She opposed the application on the basis that it would represent an impermissible order for the payment of security in respect of Eunice’s claim.  I do not accept that submission.  In circumstances where a stay was granted, the order for payment into Court is justified by the need to balance the competing interests and do justice between the parties in circumstances where the Court cannot know how soon the dispute in relation to the $80,000 will be resolved.

16. On the other hand, I was not prepared to make orders for the appointment of a provisional liquidator or an interim receiver.  In my view, the imperative at this stage, where a stay is being granted, is to preserve the status quo.  The Court heard evidence from a forensic accountant, Mr Camens, that the companies in the three years to 30 June 2019 have been trading at a loss; that their net equity position is continuing to deteriorate;  that they are unlikely to be able to obtain advances from a bank;  and that they may be trading while insolvent.  He is of the opinion that if a provisional liquidator or an interim receiver was appointed the companies would be wound up.  In circumstances where the companies continue to trade and employ employees, I was not prepared to make either of the appointments sought where the risk was that doing so would have had an irreversible, adverse and prejudicial impact.  It would not have been consistent with maintaining the status quo.  However, again, in order to balance the competing interests of the parties I ordered that the respondents produce to the Court management accounts on a quarterly basis.  That will enable Eunice and the Court to monitor the performance of the companies and to assess whether to take any and, if so, what steps to protect Eunice’s interests. 

    Conclusion

1. For these reasons I made an order granting a stay of the civil proceedings until 17 December 2020 or earlier order of the Court.  I also made an order requiring the respondents to provide management accounts on a quarterly basis as follows:

   ·    On 21 October 2020 the fourth respondent is to serve on the applicant management accounts of the first respondent, the second respondent and the Titan Family Trust for the quarter 1 July 2020 to 30 September 2020, such management accounts to comprise a profit and loss statement, cash flow statement, balance sheet, aged payables statement, and aged receivable statement; and

   ·    the solicitors for the applicant, and Mr Camens, shall not disclose the management accounts and information contained therein provided by the first, second and third respondent pursuant to these orders to any person other than to counsel retained in the matter and Mr Camens, until further order.

2. I also have made orders for the payment into Court by Julie of $80,000 and for the appointment of an administrator pendente lite to Lincoln’s estate.