Kavanagh & Anor v Australian Securities Commission; Tunbridge v Australian Securities Commission; Donovan v Australian Securities Commission
[1994] HCATrans 251
•
. • '
.,.
| IN THE HIGH COURT OF AUSTRALIA | • |
| Office of the Registry |
Melbourne No M145 of 1993 B e t w e e n -
JOHN PATRICK KAVANAGH and
ROBERT RALPH WILLIAMS
Applicants
and
AUSTRALIAN SECURITIES
COMMISSION
Respondent
Office of the Registry
Melbourne No M146 of 1993 B e t w e e n -
JOHN RONALD TUNBRIDGE
Applicant
and
AUSTRALIAN SECURITIES
COMMISSION
Respondent
Office of the Registry
Melbourne No M149 of 1993 B e t w e e n -
| Kavanagh | 1 | 11/3/94 |
| MASON CJ | ||
| TOOHEY J | ||
| McHUGH J |
KEVIN PATRICK DONOVAN
Applicant
and
AUSTRALIAN SECURITIES
COMMISSION
Respondent
Applications for special leave
to appeal
TRANSCRIPT OF PROCEEDINGS
AT MELBOURNE ON FRIDAY, 11 MARCH 1994, AT 11.51 AM
Copyright in the High Court of Australia
| MR A.J. MYERS, QC: | May it please | the Court, I appear with |
MS E.J. HOLLINGWORTH for the applicants in the first of those matters. (instructed by Phillips Fox)
| MR M.S. WEINBERG, QC: | May it please the Court, I appear on |
behalf of the applicant, Tunbridge, together with my learned friend, MR B.M. GRIFFIN, in the second
of the matters. (instructed by Rigby Cooke). I appear on behalf of the applicant Donovan, together
with my learned friend, MS E.J. HOLLINGWORTH, inthe third of the matters before the Court.
(instructed by Arnold Bloch Leibler)
| MR G.A.A. NETTLE, QC: | May it please the Court, I appear |
with my learned friend, MR K. BAKER, in each of
those matters for the respondent. (instructed bythe Australian Securities Commission (Victoria))
MASON CJ: | Mr Myers, I see there are three applications before the Court. | They each raise the same |
questions.
| MR MYERS: | Yes, they do. |
MASON CJ: It seems to me that the three applications ought,
in combination, to be capable of presentation with
20 minutes. In other words, I do not propose to
give - - -
| MR MYERS: | I agree with that, Your Honour. | In this matter |
the ASC issued a summons claiming relief against five respondents, the directors and the auditor,
under section 554 of the Companies Code. They sought a declaration in wide terms which is
contained in the appeal book at page 94. Then a defence was delivered. It was a formal defence
containing, in substance, denials. Thereafter, in
| Kavanagh | 2 | 11/3/94 |
September, the ASC, through Mr Whitehouse, charged
the persons against whom it had commenced criminal
proceedings with criminal offences.
Mr Justice Hayne was correct in saying that
the two proceedings raise identical issues. The criminal proceedings had a wider scope but they
encompassed the whole area covered by the civil
proceedings. One of the reasons for the ASC commencing the civil proceedings is set out in the
application book at page 42 in the writtensubmissions before Mr Justice Hayne. It was said:
As a matter of public interest it is not
proper for a person charged with criminal
offences to use money for his defence which he
has obtained by reason of the criminal
conduct. The money rightfully belongs to the
company which suffered the loss and it is not
right that the defendants in the criminal
proceedings should be using other people's
money to defend themselves.
The matter before Mr Justice Hayne proceeded
on the basis that the old tort felony rule was not
the law; that it was a matter of determining the
justice of the occasion to see whether the civil
proceedings should be postponed to the outcome of
the criminal trial.
His Honour made at least two errors of law which raise matters of principle. His Honour gave,
in substance, no weight to the consideration that
the ASC was both plaintiff and prosecutor. That
was indeed the fact, as appears from the
application book at page 55, His Honour found that,
and at pages 56 and 57 His Honour said that -
page 56, line 10:
the significance that should be attached to
the fact that the ASC is the moving force
behind both sets of proceedings is much reduced (if not eliminated) when regard is had to the fact that the civil proceedings have as their objective the making of orders for the benefit of the company.
Then on page 57 line 13 he said:
I do not regard that submission -
concerning the purpose of the proceedings that I
have read to the Court -
on behalf of ASC_ as having any application in
the present matter -
| Kavanagh | 3 | 11/3/94 |
We.say that this is an important consideration, a
crucial consideration, which His Honour in effect
brushed aside. No earlier case has embodied this
feature that the civil litigant is the same person,in truth and substance, as the criminal prosecutor.
What is presented here is a view of the future
where the ASC, or another body having like powers
to bring civil proceedings, may institute the civil
proceedings, effectively strip the defendant of the
means to defend and then proceed with the
prosecution.
The Full Court, in dealing with the
application for leave to appeal from
Mr Justice Hayne simply did not refer to this
matter. It was put to them and there is not a word in their reasons about it.
The second matter to which His Honour did not
have any, or any sufficient regard, and which
raises a question of principle, is the matter of
the injustice in the civil proceeding. The applications that have been made in the past, at
least those that are reported, all proceed on the
basis of the injustice that will be caused in the
criminal proceeding as the only basis of the stay.
In this matter, it was put to His Honour, first,
that he should have regard to the fact that as a
practical matter none of the accused, in his own
interests in the civil proceeding, could give
evidence on oath which could then be used adversely
to him in the criminal proceeding.
The second matter, and this is also quite
novel, was that four directors and the auditor are
charged together. So that director 1 will not be able to call directors 2, 3 and 4, or the auditor,
in the defence of the civil proceeding. I beg your pardon, the auditor has not been charged; I
withdraw what I said about the auditor; the otherdirectors. This is a factor which has not been
considered in any earlier case and His Honour Mr Justice Hayne, we say, simply did not give it
any, or any sufficient, weight. It is a critical
matter.
The third matter to which I wish to refer
concerns the starting point of His Honour's
analysis. May I take the Court to page 54 of the application book. At line 17 His Honour said:
In my view it is therefore clear that unless
reason is shown to the contrary, a plaintiff
is entitled to have its action tried in the
ordinary course of the procedure and business
of the Court -
| Kavanagh | 4 | 11/3/94 |
which is no doubt true -
and that it is a grave matter to interfere
with that entitlement by a stay of proceedings
the grant of which would require justification
on proper grounds.
That is in substance saying that, prima facie, one
does not stay the civil proceedings, "it is a grave
matter to interfere". Then His Honour goes on and
poses what we would say is really the correct
test.
In the end the task is one of the balancing of justice between the parties taking account of all relevant factors and judging the case on
its own merits.
But if one starts off with the misapprehension that
it is a grave matter to interfere with the
entitlement of the litigant in the civil
proceedings, one is not engaged merely upon a task
of balancing justice between the parties.
Your Honours, we say therefore that
Mr Justice Hayne was wrong. The Full Court - or the appeal division was wrong in not giving leave.
There are issues of principle involved of general
importance and this is a matter, therefore, which
is apt for special leave. May it please the Court.
MASON CJ: Yes, Mr Weinberg ..
| MR WEINBERG: | If the Court pleases, we adopt the submissions |
made by our learned friend, Mr Myers, in so far as
they are applicable to our clients. May we add, however, one or two matters that might be of
additional significance.
We agree, with respect, that the balancing process which His Honour carried out did not start
with the scales at equilibrium, rather those scales were heavily weighted in favour of the ASC and its
right to pursue its civil proceedings,
notwithstanding the fact that it was also, through
its delegate, the prosecutor in relation to
criminal charges which were, in all relevant
respects, identical to the matters alleged in the
civil proceedings.
We say that His Honour's refusal to grant what
was, after all, only a request for a temporary
stay involved an error of principle for either of
two reasons: either, a, that the principles laid
down in McMahon v Gou)d and the cases which have
followed that approach are flawed, that a wholly
different line of authority based on more
| Kavanagh | 11/3/94 |
traditional doctrine is to be preferred.
His Honour's attention was not drawn to the fact that there is, in fact, a wholly different line of authority in this country in recent years,
including Atkins v Minister of Community Welfare
and Crow - - -
| MASON CJ: | But why should we pick the case up in order to |
determine a question of principle which was not
argued in the courts below?
| MR WEINBERG: | Because, Your Honour, if our second identified error is made out, namely that His Honour erred in | |
| and we would wish to say, upon the appeal, if the | ||
| Court granted special leave, that that line of | ||
| ||
| concede that the attack on McMahon v Gould was not | ||
| directly made, either before the trial judge or the | ||
| Full Court, but we say it will be inevitable that | ||
| this Court will have to consider that matter, if | ||
| our second discernible error of principle is made out. |
That second error of principle is the one that
my learned friend, Mr Myers, has correctly
identified, namely that even if the principles laid
down in McMahon v Gould are correct, they had no
application to the wholly different position
confronting His Honour in this case, for the
reasons advanced by my learned friend, Mr Myers.
The authorities cited by His Honour in favour
of the weighted balance approach, which we describe
it as, did not involve anything like the present
circumstance. There is a very significant
difference, in our submission, between permitting a private plaintiff, unconnected with those
responsible for the prosecution who has commenced
civil proceedings, to continue his action, and
permitting a prosecutor who has also launched civil
proceedings to bring those civil proceedings first.
Private litigants who have chosen to invoke the judicial process are entitled, it may be said, to
pursue their claims unimpeded by whatever police
officers or law enforcement officials do or may
choose to do. Police officers and law enforcement
officials who have chosen to invoke civil
proceedings on behalf of others without, it may be
noted, any need for their consent or approval, and
no evidence that such. a consent or approval wasgiven, and who are given specific statutory
authority to bring such civil proceedings are not
| Kavanagh | 6 | 11/3/94 |
to be equated with private litigants. This is so,
eve.1 if one of the results of successful litigation
may be the recovery of money for those private
litigants.
It must also be remembered that the ASC is
seeking declaratory relief and, in effect,
declarations that the defendants have committed
criminal offences, the precise criminal offences
which they have been charged with.
The old tort felony rule was inflexible. It
seems no longer to be good law. That may be
regretted by some. None the less, it had survived for a very long time. It may be that the rule made good sense when trials could be brought on fairly
quickly. I am reminded that Dr Crippin was arrested in August, tried in October, the appeal
was heard in November and he was executed in
December.
| McHUGH J: | I think that explains the Roger case would have |
even quicker times.
| MR WEINBERG: | And the trial of the ..... occurred in one day, |
Your Honour, but putting those matters to one side,
there was a special problem in New South Wales
which arose in the late 1970s and 1980s of criminal
trials taking years and years to get on, and one
can understand the policy reasons behind the
erosion of the tort felony rule, putting aside
altogether the abolition of the distinction between
felonies and misdemeanours. But, in our respectful
submission, to move to the other extreme, which is
what seems to have happened through the McMahon v
Gould line and the other cases which His Honour
cited in support of that line, and to reach a
position where there is a heavy onus resting upon a
party who is facing both concurrent civil and
criminal proceedings in respect of the same matter
brought by the same prosecutor plaintiff carries
the law, we say, in the wrong direction and raises fundamental questions of principle.
To describe these defendants as not being
subject to substantial injustice, but rather being
put in a less advantageous position than they might
otherwise have been, as Mr Justice Fullagar did on
the appeal, is to do great disservice to the
English language, in our respectful submission. It
is no answer to say that the defendants can go into
the witness box, give evidence, and then claim the
privilege against self-incrimination in respect of
any answer they do not want to provide because, of
course, once they hav~ answered the critical
question they are, in fact, in our respectful
submission, either exposed to having to answer
| Kavanagh | 11/3/94 |
questions on the specific matters they have already
given evidence about or thei~ evidence becomes
absolutely worthless, even - - -
| McHUGH J: | Mr We~nberg, I get the impression that the way |
the case has been argued here by both Mr Myers and
yourself is different from the way it was argued in
the Full Court. If one looks at page 84 in
Mr Justice Fullagar's judgment he said, at line 23:
No attack before us has been mounted upon the
validity or correctness of the principles
which are laid down by those two judges. That is by Chief Justice Young and
Mr Justice Wootten and he thought that was "a
matter of importance". It seemed to be treated
really as a factual matter.
| MR WEINBERG: | Your Honour, I did not appear in the matter at |
trial or on appeal -
| McHUGH J: | I appreciate that. |
| MR WEINBERG: | - - -but Mr Myers assures me that there was a |
direct attack upon the applicability of the McMahon
v Gould principles to the circumstances of this
case. There was no attack upon the correctness of
those principles in the abstract. It may be that
that is simply an explanation for that particular
passage in His Honour's judgment. But the court
was told, and the basis of the argument was, "This
is a very different case. McMahon v Gould and that line of authority have no application whatever to
this kind of situation." And to that extent we
say, certainly, there was an attack made, and a
very direct attack, upon what Mr Justice Hayne did,
and we say we are entitled to make that attack
before this Court.
We say that the ASC itself, in its capacity as
corporate regulator and law enforcement body, has insisted that these civil proceedings go first. It
has thereby ensured that the defendants are
handicapped in the civil proceeding and are likely
to be disadvantaged in the later criminal
proceedings. All that just so that the civil
proceedings which relate to events of about sixyears ago are not postponed for a period which
His Honour found to be about a year. That, we say,
is extraordinary.
The ASC is vested with wide powers and great
responsibilities. The rights of creditors and shareholders of companies are, of course, to be
accorded proper weight. So, also, we say are the
rights of defendants to procedural fairness. The
| Kavanagh | 11/3/94 |
weighted balance approach of the kind adopted by
His Honour Mr Justi=e HayPe is, in our submission,
anathema to the proper exercise of discretion in
concurrent civil criminal proceeding cases of this
kind. There should be, at the very least, an
unimpeded weighing of factors, or preferably, in
our submission, an onus - using that terms
loosely - should rest upon the regulator to justify
having civil proceedings, which he has brought
himself, heard before criminal charges which he haslaid himself, if they involve identical matters.
| McHUGH J: | It would be still open to you in the civil |
proceedings, would it not, to seek orders that
documents discovered, answers to interrogatories,
and even evidence given in the civil proceedings is
not to be used by the ASC in - - -
| MR WEINBERG: | It is very difficult, Your Honour, when the |
ASC is the other party in the court, and the kind
of protective mechanisms that Your Honour refers
to, we say, are very difficult to apply in the
context of a case of this kind.
We would ask the Court to note one or two
other matters. There is a special position so far
as the applicant, Tunbridge, is concerned. He has
not been charged with any offences at all. He has been required to give discovery to the ASC and to
the other defendants but he gets no discovery fromthe other defendants. It is an unusual case in
that regard. He has a separate position and separate interests and he is required to give one- sided discovery. There is evidence, and there was
evidence before Mr Justice Hayne - it is not a
matter of speculation - that the other defendants
who have been charged in the criminal proceedings
but are not defendants to these matters will not
give evidence in these proceedings. Mr Tunbridge cannot effectively present his defence to these
civil allegations in a situation where there is
joint and several liability, and he faces the possibility of an award of up to $15 million being
made against him. He cannot give evidence, he cannot present his case and his defence effectively
or properly because he does not know about many of
the matters that are within the exclusive knowledge
of the directors or within the exclusive knowledge
of those other persons who have been charged.
In our respectful submission, the order made
by Mr Justice Hayne involved a fundamental error of
principle and, in our respectful submission, it is
of general importance. It involves what we submit
may, in the future, be a practice that develops if
principles are not laid down which we say modify
the rigours of the McMahon v Gould rule which was
| Kavanagh | 9 | 11/3/94 |
developed for an entirely different kind of case.
Those are our submissions.
| McHUGH J: | The actual decision only deals with the stay. |
It would still be open to you to seek to have the
civil proceedings adjourned. It may fail, I appreciate that.
| MR WEINBERG: | It is the same thing, Your Honour, in our |
respectful submission.
McHUGH J: Not necessarily.
| MR WEINBERG: | It was a temporary stay that was sought. We |
submit that going back to Mr Justice Hayne and
saying, "We came here last time for a stay, but it
is now an adjournment" is not likely to provoke a
kind response from His Honour. The principles, we say, are the same. It is called a stay but it is a temporary stay. It is a stay until the hearing and determination of the criminal matter which, on the
material before His Honour, was to be - the
committal is scheduled for July. The trial, His Honour found, was to take place in 1995. No evidence of any prejudice to the ASC was presented
to His Honour.
If the Court pleases, those are our
submissions.
MASON CJ: Thank you, Mr Weinberg. Yes, Mr Nettle.
| MR NETTLE: | May it please the Court, we advance four |
submissions in support of our contention that the
application for leave ought be refused. The first, made below were made on the basis that they were
and most fundamental, is that the applications
below were made on the basis that the McMahon v
applicable. And judged according to those guidelines, the decisions below, it is submitted,
were clearly right or at least not affected by sufficient doubt to warrant the grant of special
leave which is sought. Contrary to the - - -
McHUGH J: But the point that is put against you is that, in
effect, only lip service was given to them and that
they were not properly applied and as a result
there was a miscarriage of justice.
MR NETTLE: With respect, that contention is rejected as
unsupportable because amongst the other
considerations which were given to each of the
submissions advanced below to that effect, one
finds in the judgment_of Mr Justice Hayne the
passages which are noted very briefly in footnote 4
on page 6 of our outline of argument, that is to
| Kavanagh | 10 | 11/3/94 |
say it is submitted it is clear from a fulJ reading
of his reasons for judgment that he considered each
of the submissions which were made seriatira,
weighed the competing considerations which arose as
a result, and reached a view, on the basis of the
balance of justice, which was against the stay
which was sought. It is just wrong and contrary to the fact for the applicants to assert that he
failed to give consideration to the submissions
which are now being agitated here.
Equally, when the application for leave was made to the appeal divisions, all of the arguments
put below, plus some more to the same effect, were
agitated and again, the Full Court having heard
what was said, was not persuaded that there was
sufficient doubt about the validity of
Mr Justice Hayne's decision to warrant the grant of
leave. They took the view, rightly, because they
were encouraged by the submissions to do so, that
the whole of the matter was governed by the McMahon
v Gould guidelines and that judged according to
those guidelines the decision was right because it
proceeded upon the correct, as we would submit,
assumption that there is, prima facie, a right in aplaintiff to have his case conducted in accordance
with the ordinary practices of the court - - -
McHUGH J: But this is a unique plaintiff. Is there any
case comparable to this case?
MR NETTLE: There are any number of cases, it is submitted.
It is by no means unique. Frequently the case
arises where the Commissioner of Taxation is
pursuing a Part V or Part IVC appeal whilst at the
same time the Commonwealth Crown is prosecuting the
taxpayer for offences arising out of the facts the
subject of the taxation appeal. There have been
any number of applications for stay of the Part V or Part IV proceeding very much along the sort of
lines which have been advanced here, and almost
without exception they have been refused in accordance with the McMahon v Gould guidelines. We have noted each of those in our outlines of
submission.There is only one which we can find, and
apparently the applicants can find, and that is the
decision of Mr Justice Hill in Hurley v
Commissioner of Taxation, and that alone stands as
a single judge decision which turns on its own
facts. There is the decision of Mr Justice Ryan in
Ahern's case, there is the decision of
Mr Justice Sheppard in Alvaro's case, there is the
decision of Mr Justice O'Loughlin in Baker: re
Flatwash, all of which are cases in which applications for stay of the Part V proceeding were
| Kavanagh | 11 | 11/3/94 |
made because of the pendency of criminal
proceedings instituted by the Commonwealth Crown,
where the application was refused based upon an
application of the McMahon v Gould guidelines.
No doubt there are other cases also but, by
way of submission, we make the point that in
addition this sort of case is by no means unique in
the United States of America where it has arisenfor consideration over a very long period and,
since 1912, the law has been clear, as established
by the United States Supreme Court, namely that
simultaneous government litigation at both a civil
and criminal level is not to result in a stay of
the civil proceeding simply because both plaintiff
and prosecutor are government. Those decisions,
most recently confirmed by the United States
Supreme Court's decision in 1980 to refuse
certiorari in Dresser, a decision of the United
States District Appeals Court, confirmed that
unless there is very substantial risk of injustice,
there will be no stay. Thus the test, it is
submitted, in that country, just as it is in thiscountry is, is there a real risk of injustice. And
unless there is, the court will refuse it.
The point is perhaps best made immediately by
going to the decision of the United States Supreme Court in Standard Sanitary Manufacturing Company v
United States of America, 226 US 20. The relevant
passage appears at pages 52 to 53 of the report
where, in a case which involved simultaneous
pursuit by the United States Government of both
civil and criminal process under the Sherman Act,
it was said that there had been no error in
refusing the stay which had been sought. At
page 51, right-hand column, about point 5, it is
said:
Error is assigned on the action of the
Circuit Court in not granting a motion made by
defendants for an enlargement of time to take testimony on the ground that they had been prevented, by the action of the Government, in instituting criminal proceedings, from properly presenting their defense.
At the bottom of the page, last paragraph:
Whether the testimony, if given, would
have conferred immunity we are not called upon
to determine. The only question is as to the extent of the court's discretion in such
circumstances. The Sherman Act provides for a criminal proceeding to punish violations and
suits in equity to restrain such violations,
and the suits may be brought simultaneously -
| Kavanagh | 12 | 11/3/94 |
and the whole of the paragraph down to the next
heading is most important.
Similarly, when the matter was considered
again by the United States Supreme Court in United
States v Kordel, 397 US 1, the court said at
pages 10 and 11, beginning on page 10 under the
subheading II:The respondents urge that even if the Government's conduct did not violate their
Fifth Amendment privilege against compulsory self-incrimination, it nonetheless reflected
such unfairness and want of consideration for
justice as independently to require the
reversal of their convictions. On the record before us, we cannot agree that the
respondents have made out either a violation
of due process or a departure from proper
standards in the administration of justice
requiring the exercise of our supervisorypower. The public interest in protecting
consumers throughout the Nation from
misbranded drugs requires prompt action by the
agency charged with responsibility for
administration of the federal food and drug
laws. But a rational decision whether to
proceed criminally against those responsible
for the misbranding may have to awaitconsideration of a fuller record than that before the agency at the time of the civil seizure of the offending products. It would
stultify enforcement of federal law to require
a governmental agency such as the FDA
invariably to choose either to forgo
recommendation of a criminal prosecution once
it seeks civil relief, or to defer civil
proceedings pending the ultimate outcome of a
criminal trial.
And again those very words were affirmed by the
United States District Court of Appeal in United States v Private Sanitation Industry,
811 F Supp 802, especially at 805.
The consequence, Your Honours, of that body of
law in the United States of America is that
regularly in the United States applications for
stay of civil proceeding before indictment in
pending criminal proceedings are regularly refused.
And that is the position here. There has been no
committal hearing even yet, nor will there be one,
in all probability, until October; even less a
committal on the charges. Hence it is submitted
that here, as in the United States, this Court
would take the view, consistently with the sort of
approach that is adopted in cases such as Jago and
| Kavanagh | 13 | 11/3/94 |
Dietrich, that unless there is substantial risk of
injustice, there ought be no stay, and because
there can be no substantial risk of injustice, this
application ought be refused.
If I may come back to our submissions.
Your Honours, the second submission we would make,
if Your Honours please, is that this Court ought
not now entertain this so-called new question of
principle which is sought to be agitated. It ought
not do so because the position about the raising of
such points is made clear in the judgment of
Your Honour the Chief Justice and Justice Brennan
in Pantorno v Reg that normally this Court will not
set aside a judgment, correctly and regularly
pronounced, on a ground of appeal raised for the
first time in this Court.
Now, of course, there are circumstances where
the Court will depart from that practice where the
interests of justice require it. But it is
submitted that in this case, no more than in the
case which was before the New South Welsh Court of
Appeal in Yuill v Spedley Securities, do the
interests of justice require that the Court adopt a
practice different to its ordinary practice to
entertain a consideration of a question of
principle which is raised for the first time on
appeal.
In Yuill v Spedley Securities it was sought
before the New South Welsh Court of Appeal to
advance a submission very similar to that sought to
be advanced here, that the McMahon v Gould
guidelines are inapplicable in a case of this kind,
and yet the application was rejected unanimously by
Their Honours of the Court of Appeal for the very reason that the point had not been argued below.
The third submission we advance, may it please the Court, is that in any event this Court ought
not be persuaded that there is in truth a question of principle for it to consider. Reduced to essentials, the McMahon v Gould guidelines amount,
it is submitted, to this test: stay of civil
proceedings ought be refused unless there is a
real, as opposed to notional, risk of injustice.
| McHUGH J: | You mean application for a stay. |
MR NETTLE: Application, I beg your pardon. Now, this
Court, it is submitted, has repeatedly adopted a
similar sort of approach to justice considerations,
albeit in different areas, in cases like Jago andin Dietrich. If this.Court has reached that view
in those sorts of cases, namely it is a question of
substantial justice always, the result is that it
| Kavanagh | 14 | 11/3/94 |
has in effect already decided that it should
confirm the principle laid down in McMahon v Gould,
namely that there ought not be a stay unless there
is a substantial risk of injustice. Accordingly,
if this appeal were permitted to proceed, it wculd
not be a debate about a question of principle,
because has already been decided, it would be a
debate about whether or not the two courts below
erred in the exercise of judicial discretion inreaching the view that there was not a significant
risk of injustice.
Fourthly, if the Court pleases, we want to
make the point as strongly as we can that it ought
not for a moment to be seen to make an atom of
difference that the Australian Securities
Commission is both plaintiff in the civil
proceeding and was the informant which gave rise to
the charges now being prosecuted by the Director or for this reason: the Australian Securities
Commission, just like the liquidator in Halabi's
case, brings this proceeding to recover damages for
the company, its members, and its creditors. It
gains nothing from it itself, nor does it gain
anything for it for the government.
Now, in point of principle, there is no
difference. By parity of example with the tax cases to which I have referred it should not make
any difference. And by invocation of principles applied in other jurisdictions to which this Court
might have regard, namely the United States of
America, it does make no difference because even
there, with the far-reaching protections afforded
by the Fifth and Fourteenth Amendments, the courts,.
indeed the United States Supreme Court, has said
repeatedly that the fact that it is the government
that is pursuing both civil and criminal remedies
is not, in itself, sufficient ground for a stay.
It is inherent in the applicants' submissions
that there is a body of law or, indeed, a principle
or general rule that civil proceedings ought
precede the hearing of the criminal proceeding.
The proposition appears to be based upon what was
said by Mr President Kirby in Yuill v Spedley
Securities that, as a general practice, criminal
proceedings are heard and determined before the
civil proceedings. But, with great respect, there
is no such body of law in this country and the most
that can be said about the dicta of His Honour the
President is that he makes reference to a few decisions which establish the proposition that in
some jurisdictions in this country there is a
practice that contempt proceedings arising out of
matters the subject of a criminal proceeding are
| Kavanagh | 15 | 11/3/94 |
normally deferred until after the criminal
proceeding is heard. There is nothing in them
which stands as any authority for the proposition
that a civil proceeding must await the outcome of a
criminal proceeding.
We seek, with respect, to lean heavily upon
the observations which have been made in the
United States, which is a jurisdiction which has
had the most concern with questions of this kind,to the effect that it is the duty of a government
agency, if it sees that the appropriate
circumstances exist, to pursue both civil and
criminal remedies; that it is not incumbent upon itand, indeed, it would be improper for it to hold
its hand on civil proceedings until the criminal
proceedings are heard and determined; and that
unless there is substantial risk of injustice at
the point at which application for stay is made,
application ought be refused.
Now here, at the point at which this
application was made to Mr Justice Hayne, and later
renewed before the appeal division, there was no
risk of substantial injustice. There had been no
committal, there had been no committal hearing.
The respondents below, and the applicants here, had
expressly not been ordered to give discovery or to
answer interrogatories and the applicants below position had been expressly protected by orders
that their evidence, as opposed to other parties,
would not be by way of affidavit but could be
adduced viva voce at the trial. Now, the position
therefore remains that these applicants still have
unimpeached their privilege against self-
incrimination, which they can invoke as they
choose; they are not in any way compelled to
disclose their hand, either before or during the
hearing of the civil proceeding, and they are not
in any wise more prejudiced by their inability, as
they contend, to call other witnesses because, as
Mr Justice Hayne said, even if there had been no charges laid, the nature of the civil proceeding is
such as to have been likely to promote in the
breast of those who might be called concerns that
they would be charged and thus to cause them to
invoke their privilege against self-incrimination.
McHUGH J: Yes, but if the criminal proceeding were disposed
of first, that point cannot arise in the civil
proceeding.
MR NETTLE: That is true, and cannot be denied. If the
Court please, we make these points. The applicants have not yet been committed for trial; there is no
discovery required of.them; they are free to invoke
the privilege against self-incrimination; and the
| Kavanagh | 16 | 11/3/94 |
civil trial is likely to conclude even before the
committal hearing begins. It is submitted,
therefore, there is no real risk of injustice which
warrants the grant of special leave and,
accordingly, whether this application is to be
determined on the basis that it was argued below,
namely that the McMahon v Gould guidelines are
applicable, or whether it is to be determined on
the basis that this Court should question again
those guidelines, the result is the same because,in the end, the test is one of substantial
injustice and none, or not sufficient, has been
demonstrated to warrant the grant of leave. May it please the Court.
| MASON CJ: | Thank you, Mr Nettle. | Mr Myers. |
| MR MYERS: | Your Honour, below what was done was to say that |
there are features of this matter which distinguish
it from the other cases. Surely there was not an
attack on McMahon v Gould as such. What was said
is that this is a different case for two main
reasons, because the ASC is the civil plaintiff and
the prosecutor and because of the effect upon the
civil proceedings rather than the criminal
proceedings. The latter Mr Justice Hayne described as novel. My friend has referred to taxation cases where
there have been prosecutions for criminal offences
and proceedings by the Commissioner of Taxation.
The fact of it is that though proceedings under the
Income Tax Assessment Act have to be instituted and
maintained by the taxpayer, now the taxpayer can
hardly complain if he institutes and maintains
those proceedings as the appellant, as would always
be the case. The other distinguishing feature is that in fact the Commissioner of Taxation is not the same person as the Australian Federal Police who brought the prosecutions in the cases to which
he referred. It is quite a different position from
the present. My friend referred to United States authorities. They are complicated by the existence
of the constitutional guarantees and the
constitutional position in the United States, as
was pointed out in Halabi in the Court of Appeal in
New South Wales; indeed, by Your Honour
Mr Justice McHugh. The United States cases that my friend refers to were cases were stays were being
sought before any charges had been laid; different
from here.
The next matter that my friend referred to was
this: he said that it.makes no difference that the
ASC is the informant and the civil plaintiff. The
| Kavanagh | 17 | 11/3/94 |
first thing that we draw attention to, yet again,
is there is a declaration sought in the civil
proceedings, in effect in terms that the defendants
are liable for criminal offences. There was anattempt, unsuccessful, to strike out that claim for
a declaration. That was resisted, and
Mr Justice Hayne, at another stage of these
proceedings, would not strike out the declaration,
so the proceedings for the declaration remain as
the foundation of the civil proceedings.
This is not a case in which, after five or six
years after the events, the subject of the civil
litigation and the criminal proceedings occurred,
where the company has itself sued. The ASC has taken upon itself to sue for what the company could
sue for. The company is in receivership. It simply has not instituted any proceedings which
were open to it. In the end, we say that abalancing of the justice of the case would require that the civil proceedings can wait. No prejudice
is shown. May it please the Court.
| MR WEINBERG: | Would Your Honours hear me for the remaining |
30 seconds before the red light goes on?
| MASON CJ: | Yes. | You will observe that time limit though, |
Mr Weinberg.
| MR WEINBERG: | I will, Your Honour. | I understand I am |
permitted to complete my sentence and I am minded
to create a sentence of the kind that James Joyce
would have initiated.
My learned friend relies heavily upon the
United States authorities. Could we invite
Your Honours to note that at page 59 of Halabi,
17 NSWLR 26, Your Honour Mr Justice McHugh, after a
very extensive review of the history and an
analysis of the authorities, concluded that thevery case that my learned friend relies upon
represented not the same principle as that laid down in McMahon v Gould but a very different
approach to the exercise of discretion which, in
fact, it does. The United States cases do not
uniformly point in the direction of a weighted
balance at all. Many of them talk about the need
to balance from a position of equilibrium. And
Your Honour noted that, and noted it correctly,
unlike my learned friend who relies on the United
States authorities as supporting McMahon v Gould.
It just does not, and Your Honour so found in the
Halabi case yourself, and Your Honour said so
expressly. If the Court pleases, I think I
have - - -
| Kavanagh | 18 | 11/3/94 |
MASON CJ: Mr Wein~erg, your time has not expired, therefore
I can ask you a question. I want to direct your attention to page 76 of the application book where
the proposed grounds of appeal in Tunbridge are set
out. There is absolutely no indication whatsoeverin those grounds of appeal that a challenge was
being made to the correctness of the princ~ples
espoused in McMahon and Philippine Air or is there
any indication that there is a contention that
those principles are not applicable. The grounds,
one after the other, go to matters of insufficient
weight, too much weight, and in that light I would
have thought it is perfectly clear that
Mr Justice Fullagar was entitled to take the view
that there was no challenge to the principles in
the two cases and no challenge to their
application. He says so in express terms.
| MR WEINBERG: | Your Honour, the red light is on. | May I |
answer Your Honour's question.
MASON CJ: Certainly. Perhaps the red light is on in
another way as well.
| MR WEINBERG: | Your Honour, we hope not, even at this point. |
There is no doubt whatever, Your Honour - and I say
this on the basis of not having appeared before
Mr Justice Hayne or having appeared before the Full
Court - there is no doubt whatsoever that the
argument as advanced, both before Mr Justice Hayne
and before the Full Court, consisted of saying,
this case is a very different case. It is
different for the reasons that Mr Myers has
advanced to the Court. It involves the ASC as a
plaintiff prosecutor. That takes it outside, we
say by necessary implication, when you say it is a
different case, different from everything else, and
significantly different - - -
| MASON CJ: | I know you are saying that, but what I am saying |
to you is I can well understand why
Mr Justice Fullagar took the approach to the case that he did and thought there was no challenge to the relevant principles.
MR WEINBERG: | His Honour did not, with respect, say that the case was not argued on the basis that McMahon v | |
| Gould was not applicable; what he said was there | ||
| was no challenge to the correctness of McMahon v | ||
|
MASON CJ: But by implication, he obviously was saying there
was an acceptance of the application of the
principles in - - -
MR WEINBERG: With respect, Your Honour - - -
| Kavanagh | 19 | 11/3/94 |
MASON CJ: Well why did he not say it?
| MR WEINBERG: | Your Honour, I cannot speak for |
Mr Justice Fullagar, but the fact remains that that
was the argument that was advanced, that the
principles in that case and the line of authority
thereafter were not applicable to these
circumstances. I have that on the authority of Mr Myers. He will get up and say it again, if the
Court needs it to be said. But that was the whole
of the argument that was advanced. That was thesubstance of the argument advanced. It was not a
case in which Mr Myers or anyone on behalf of any
of these applicants got up and said, by the way,McMahon v Gould and those other cases are wrong and
we say that the Full Court should interfere. It
would have been difficult to say that before
Mr Justice Hayne. He was a judge at first instance. There was a decision of the New South
Wales Court of Appeal which endorsed McMahon v
Gould, but there was no argument before the Full
Court, we accept, that McMahon v Gould was wrong.
We would like to be able to agitate that point before this Court, if leave were granted,
ultimately because we say it is necessary, if this
Court is to determine what was argued below, namely
the applicability of that line of authority, for it
to say what the limits of those principles are and
those cases are. Those points were argued. I say
that absolutely and unequivocally, whateverMr Justice Fullagar said, and it would not be the
first time in history that counsel has been
verballed by the Full Court, if I may say so.
MASON CJ: Yes, but what you do in those circumstances is go·
back to the court below and ask them to correct
what they have said. You do not ask this Court to
make a ruling on it, that is clear.
MR WEINBERG: With respect, Your Honour, I can only say that
the point was argued before the Full Court and Mr Myers has said it was argued. If it is not in Mr Tunbridge's grounds as expressed before the Full
Court, it was argued before the Full Court. It is
a major part of the grounds certainly in respect to
Mr Donovan; it is a major part of the grounds in
respect of the other two applicants for whom
Mr Myers acts, and His Honour Mr Justice Hayne did
say that if the others were to have the civil
proceedings stayed, so would Mr Tunbridge. His
position could not be that the trial against himwould proceed whilst the others got a stay.
So whether or not Mr Tunbridge ultimately did,
in his grounds and submissions, raise the point in
a sense we would say is academic. The point was
| Kavanagh | 20 | 11/3/94 |
certainly raised, and is raised, in the grounds
advanced on behalf of Mr ¥avanagh and in relation
to Mr Donovan. I cannot do any better than that,
Your Honour, and I have gone a long way past the
red light. But we do say that was the gist of the appeal below, that those cases had no application
whatever to these principles. If the Court
pleases.
| MR NETTLE: | If the Court pleases, might I say one word. |
MASON CJ: Yes, Mr Nettle.
| MR NETTLE: | Would the Court look at what Mr Justice Ormiston |
said at page 85 at line 25. If the Court pleases.
| MASON CJ: | We will give our decision in this matter after |
the adjournment at quarter past 2.
AT 12.41 PM THE MATTER WAS ADJOURNED
UNTIL LATER THE SAME DAY
UPON RESUMING AT 2.17 PM:
MASON CJ: It is only in exceptional circumstances that this
Court will grant special leave to appeal in an
interlocutory matter and the proceedings in the
courts below were interlocutory. That is not the
only obstacle facing the applicants. In the Appeal Division there was no attack upon the principles
which the primary judge had applied, though it is
now suggested that it was contended that those
principles had no application, a contention which
we find difficult to understand having regard to
the terms of Mr Justice Fullagar's judgment and
particularly to the observations of Mr Justice Ormiston at pages 85.and 86 of the
application book. His Honour said:
"In each case, no attempt has been made to
criticize or seek to review the principles
McMahon v. Gould principles which have, as appears from the judgment of Hayne, J., been applied on at
stated in (1982)
7 A.C.L.R 202 and in Philippine Airlines v.
least four other occasions in this country.
In the light of the applicants' implicit
acceptance of those principles, I am,
likewise, not persuaded that there was any
error in their application."
| Kavanagh | 21 | 11/3/94 |
It seems that a direct challenge to the
principles in McMahon v Gould (1982) 7 ACLR 202 and
Philippine Airlines v Goldair Aust. Pty. Ltd (1990)
VR 385 is made in this Court for the first time.
In any event, we are no~ persuaded that a question of general principle does arise, except in the
sense that the court below were concerned to
ascertain whether the hearing of the civil
proceedings first would result in an injustice
which called for a stay.
In substance, the challenge otherwise comes
down to an attack on the primary judge's exercise
of discretion and, in this respect, particularly
having regard to the fact that the committal
proceedings have not yet begun, we are not
persuaded that the Appeal Division erred in
principle in refusing to grant leave to review the
exercise of discretion. The applications for special leave to appeal are therefore refused.
MR NETTLE: | If the Court pleases, we seek an order for costs of the applications. |
| MASON CJ: | The order for costs is not opposed, I take it? |
The applications are refused with costs.
AT 2.20 PM THE MATTER WAS ADJOURNED SINE DIE
| Kavanagh | 22 | 11/3/94 |
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