Sharma v Yeo
[2013] FCCA 444
•31 May 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SHARMA v YEO & ANOR | [2013] FCCA 444 |
| Catchwords: BANKRUPTCY – Review of decision of a Registrar in relation to objections to subpoenas and as to conduct of an oral examination of the bankrupt. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.81, 81(11AA) |
| General Manager of the Fair Work Commission v Thomson [2013] FCA 380 Karounos v Official Trustee (1988) 19 FCR 330 McMahon v Gould (1982) 7 ACLR 202 Re AWB Limited (No 1) (2008) 21 VR 252 Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562 |
| Applicant: | SAVADA NAND SHARMA |
| Respondent: | ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI IN THEIR CAPACITY AS TRUSTEES OF THE BANKRUPT ESTATE OF SAVADA NAND SHARMA |
| File Number: | MLG 1665 of 2012 |
| Judgment of: | Judge Burchardt |
| Hearing dates: | 2 and 16 May 2013 |
| Date of Last Submission: | 16 May 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 31 May 2013 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the Respondent: | Ms Flanagan |
| Solicitors for the Respondent: | Macpherson + Kelley Lawyers |
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1665 of 2012
| SAVADA NAND SHARMA |
Applicant
And
| ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI IN THEIR CAPACITY AS TRUSTEES OF THE BANKRUPT ESTATE OF SAVADA NAND SHARMA |
Respondent
REASONS FOR JUDGMENT
These reasons for judgment are being given orally because if it were not the case, it would not prove practicable to determine Mr Sharma’s application that his oral examination not proceed next month, because it would take longer than that to give judgment. The reasons will be revised from transcript within very limited parameters permitted by authority.
The matter before the Court is an application for review of an order made by Registrar Allaway. The registrar ordered that summonses be issued against the applicant, Mr Sharma, and his wife on 15 February 2013. From the affidavit filed on behalf of the trustee, it is clear that the trustee seeks to examine Mr Sharma about the transfer of the former matrimonial property owned by him and his wife, and also possibly about what might be described as professional misconduct giving rise to benefit to Mr Sharma. I use that broad phrase to avoid revealing in any way the contents of the affidavit. It is also desired, in a fairly conventional way, to examine Mr Sharma as to his affairs generally.
The summonses issued on 18 February 2013 covered the matters I have just described. Subpoenas were then issued relevantly to Victoria Police, Scammell Black Mileo, who had acted for Mr Sharma in family law proceedings, and Dribbin & Brown Criminal Law who, I would infer, are the applicant’s criminal law lawyers. Objection was taken by Scammell Black Mileo. A letter from Scammell Black Mileo dated 4 April 2013 asserted solicitor-client privilege, a tendency of the documents the subject of subpoena to incriminate Mr Sharma, and pointed out that the petitioning creditor is a witness in the criminal proceeding. Messrs Dribbin & Brown asserted client legal privilege. So far as I understand it, Dribbin & Brown are no longer in issue.
On 22 April 2013, the matter came before Registrar Allaway. An affidavit of Anne Maree Flanagan was filed in court. In effect, that affidavit asserted that the trustees were prepared to pay to obtain an electronic copy of the police brief. Registrar Allaway made orders, the subject of this application for review, which I will read out. The registrar ordered that:
Upon the applicants by their counsel undertaking in relation to the CD ROM produced by Savada Nand Sharma and marked “Copy Police vs Savada Sharma Defence Brief of Evidence” which is exhibit MFI 4 in this proceeding (“CD ROM”) that:
(a) the CD ROM will only be examined by the applicants, their employees and legal advisors;
(b) the material on the CD ROM will only be used by the applicants in performance of their duties under the Bankruptcy Act; and
(c) the information on the CD ROM will not be provided to any third party unless directed or compelled by an order of the Court,
THE COURT ORDERS THAT:
1. The applicants have leave to uplift, inspect and copy the CD ROM, the CD ROM to be returned to Mr Sharma within seven days of uplift.
2.There be a stay of paragraph 1 of these orders of 21 days.
The registrar went on to make further orders relating to various documents, the subject of the claimed privilege of Messrs Scammell Black Mileo. The oral examination, which had proceeded in part, as I understand it, on that day, was adjourned to 12 June 2013. That makes this matter urgent, and that is why these reasons for judgment are being given orally.
The applicant’s interim application, filed on 23 April 2013, seeks that the orders made by Registrar Allaway be put on hold. The application asserts that there will be prejudice to the right to a fair trial. It is further asserted that the police brief was prepared for Mr Sharma, not for third parties. The affidavit in support, filed likewise on 23 April 2013, refers to the judgment of Jessup J in Craig Thomson’s case and refers to the charter of human rights, albeit it has never been articulated in exactly what way the charter of human rights might operate in any practical way on the matters before me. The other remarks set out in the affidavit are not presently relevant.
On 2 May 2013, I ordered that any further affidavits be filed by 10 May, but for reasons it is not necessary to rehash, in fact Mr Sharma’s further affidavit was filed at court on 16 May 2013. This affidavit asserts that the applicant is impecunious. It asserts he will be forced to disclose his defence in criminal proceedings. It asserts that Registrar Allaway’s orders challenge the applicant’s legal professional privilege. The affidavit refers to authority, including McMahon v Gould (1982) 7 ACLR 202. The affidavit also asserts that the safeguards put in place by Registrar Allaway may not be sufficient, and points to the case of Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562 as a case in which the sort of safeguards put in place by Registrar Allaway failed to be sufficient.
The issues that arise for the Court to determine, as I see it, are as follows. First, should the oral examination be stayed pending the outcome of the criminal case, which at this stage is only at the committal mention stage according to Mr Sharma’s affidavit. Second, should the police brief be released to the trustee with or without further conditions. Third, should the orders made about Messrs Scammell Black’s material be allowed to stand.
There are some overarching matters. There are two potentially competing aspects of the case. On the one hand, there is s.81 of the Bankruptcy Act. On the other hand, there is the right to the privilege against incrimination and the associated right to a fair trial. Section 81 of the Bankruptcy Act was considered by the Full Court of the Federal Court in the case of Karounos v Official Trustee (1988) 19 FCR 330. This is paraphrased in McQuade and Gronow, sixth edition, Australian Bankruptcy Law and Practice, paragraph 81.1.15 as follows:
1.The power given by s 81 of the Act is an unusual and far reaching one and its use could easily become oppressive and vexatious if it is not approached responsibly by applicants for summonses, and controlled carefully by the registrar and court.
I interpolate and say I am omitting all references to authority.
2.However the power is exercised in the interests of creditors, and those interests should not be defeated by an unduly technical or restrictive approach to the use of the power. The procedure is basically designed to establish what assets the bankrupt had, what has happened to those assets, and whether action should be begun (or continued) to recover them.
3.The grounds stated in the application for a summons must clearly identify which part of para (b) of s 81(1) is relied upon and provide sufficient information to show how the knowledge, suspicion or supposition referred to in that paragraph has been arrived at. The statement of grounds need not be compendious.
4.The summons itself should be expressed in terms which make the intended areas of inquiry as clear as the circumstances of the case permit, and which specify as clearly as possible any books and records which the person summoned has to produce.
5.The registrar should examine the application and the form of summons carefully to satisfy himself that the grounds of the application are sufficiently clear and the form of the summons is not oppressive or vexatious, by reason of being uncertain, too wide or otherwise objectionable.
6.If the application and summons are in proper form (in the sense just indicated) the registrar should issue the summons. He is under no duty to inquire whether there may be some further circumstance which would make compliance with the summons oppressive for a particular reason, or at a particular time, or with regards to particular books or records.
7.If a person summoned believes that compliance with the summons would be oppressive or vexatious, he can apply to the court to have a summons set aside or adjourned to a more convenient time. Such an application to the court will usually be determined on a broad view of the issues in the particular case and a weighing of the competing principles.
8.Discharge or adjournment of a summons may be appropriate where there is litigation pending or likely to be instituted and it is alleged:
(a) the summons is being improperly sought as an aid to that litigation, where ordinary procedures of discovery, interrogation or subpoena would be fairer and more appropriate,; or
(b) it would be more just and equitable to defer the examination under s 81 of the Act until the particular piece of litigation has been disposed of.
9.If such an application is made to the court by a person summoned the court may consider afresh, on the material before it, whether the summons should be set aside or adjourned to a more convenient time. It is not merely deciding whether, on the material before the registrar, he correctly exercised his discretion.
10.There is no difference in principle between cases where proceedings have actually been instituted and where they are merely in contemplation; but where litigation is afoot the issues will be clearer, procedures of discovery, inspection and subpoena available, and a time of hearing more certain. Any of these factors may affect the court’s decision in a particular case.
11.Where litigation is pending or likely to be brought and the information sought under a summons could affect that litigation, there is no presumption that the summons will be set aside or adjourned. It would normally only be set aside if the application were defective in some way or the court found some improper motive behind the application. It would be adjourned if the balance of justice and convenience in the particular case so required. In some cases it might be appropriate to defer examination on a particular topic. In all cases the registrar or the court would be careful to see that injustice is not occasioned in the course of examination by the particular questions asked.
12.Both the registrar and the court will give due weight to the fact that a summons is sought by the Official Trustee, who will not be presumed to have acted unfairly or for an improper purpose except on convincing evidence. The same is true of an official liquidator. But an application by the Official Trustee will still be subject to proper scrutiny and will be refused if the registrar or court is not satisfied that it should be granted.
I am sorry, that is a relatively lengthy extract, but it is an authoritative statement of the Full Court. That decision, namely Karounos, of course predated the insertion of s.81(11AA) of the Bankruptcy Act in 1990, which I will read out
Subject to any contrary direction by the Court, the Registrar or the magistrate, the relevant person is not excused from answering a question merely because to do so might tend to incriminate the relevant person.
Clearly the Court therefore retains an overarching discretion to permit or not permit any particular question that may be asked, but it is clear that the general purpose of s.81 is to facilitate an appropriately prompt administration of the bankrupt’s estate I should note at this point that the summonses as issued by the Registrar seem entirely appropriate in their scope and terms and conformable with the terms to s.81 as illuminated by the decision of the Full Court in Karounos.
I come to the question of the privilege against self-incrimination, it is appropriate to consider the decision of Jessup J in the case to which Mr Sharma referred me, namely the General Manager of the Fair Work Commission v Thomson [2013] FCA 380. I respectfully refer to and, as it were, incorporate the entirety of his Honour’s reasons, but I will read out in particular paragraph [14] where his Honour was dealing with the decision of McMahon v Gould:
The respondent contends that the remainder of the proceeding should also be stayed in accordance with the principles expressed in McMahon v Gould (1982) 7 ACLR 202, 206-207:
(a) Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court;
I should say, once again, I am going to omit all reference to authority:
(b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds;
(c) The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with;
(d) Neither an accused nor the Crown are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;
(e) The court’s task is one of “the balancing the justice between the parties”, taking account of all relevant factors;
(f) Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are relevant factors;
(g) One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused’s “right of silence”, and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding;
(h) However, the so-called “right of silence” does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding;
(i) The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings;
(j) In this regard factors which may be relevant include:
(i) the possibility of publicity that might reach and influence jurors in the civil proceedings;
(ii)the proximity of the criminal hearing;
(iii)the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses;
(iv)the burden on the defendant of preparing for both sets of proceedings concurrently;
(v)whether the defendant has already disclosed his defence to the allegations;
(vi)the conduct of the defendant, including his own prior invocation of civil process when it suited him;
(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant…
(l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed.
I refer also to the decision referred to by Mr Sharma, that of Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562, a judgment of Dodds-Streeton J. Her Honour conducted a comprehensive review of the authorities at [53]-[92] which I refer to and incorporate in my decision. I would read out paragraphs 109 to 116, which read as follows:
The court has a discretion to grant a stay of civil proceedings when criminal proceedings involving the same subject matter are on foot or “on the cards”. The court’s discretion should not be exercised lightly in this context, but each case will be determined on its merits. The overriding principle is balancing the interests of justice between the parties.
The court will consider, according to the various formulations, whether there is a real and not merely notional danger of injustice in the criminal proceedings, a likelihood of causing injustice in the criminal proceedings, or a real prospect of substantial injustice therein if the civil proceeding continues. The plaintiff’s entitlement to bring and prosecute its case is also an important consideration in this context.
The defendant bears the onus of establishing that it is in the interests of justice to stay the civil proceeding which the plaintiff is prima facie entitled to bring and maintain.
A criminal charge under s 247G of the Crimes Act has now been laid against the respondents, which involves the same subject matter and similar or parallel allegations to those in this proceeding. Further, additional criminal charges based on the same subject matter have been investigated and contemplated by the Victoria Police on the complaint of the applicant, and there is nothing to suggest that interest in bringing further charges has ceased.
On the present state of the law, there is no automatic entitlement to a stay of a civil proceeding simply because there are or may be parallel criminal proceedings involving the same or related subject matter.
While many courts have recognised tension between Wootten J’s approach in McMahon v Gould to the right of silence in a parallel civil proceeding and the High Court’s approach to the privilege against self-incrimination in Reid v Howard, it has been recognised that any authoritative re-evaluation of McMahon v Gould should be made only by an appellate court, or perhaps the High Court itself.
While McMahon v Gould, unless authoritatively re-evaluated, remains applicable, Wootten J did not purport to establish a rigid code, but expressly recognised that the relevant considerations will vary according to the individual case and that his guidelines were not exhaustive. It is also important to observe that Wootten J did not suggest that potential impact on the privilege against self-incrimination was irrelevant in this context. His Honour expressly recognised that the right of silence and the reasons for that right in a criminal trial, were relevant to a stay of civil proceedings. His Honour went on to observe that the right of silence had both legitimate rationales and illegitimate consequences and courts should not be concerned to preserve the latter in exercising its discretion to stay civil proceedings. He stated that the civil proceeding should not be stayed merely because the defendant (if he wished to defend) would have to disclose his probable defence in the criminal action.
Wootten J thus concluded that potential compromise of the right of silence in the criminal proceeding by disclosure of the defence in the civil proceeding (where this could deprive the defendant of tactical advantages of the right of silence in the criminal proceeding) would not automatically, in itself, justify a stay. His Honour did not exclude, however, as a consideration favouring a stay, a risk of prejudice in criminal proceedings constituted by impact on legitimate goals of the right of silence or the privilege against self-incrimination. His Honour did not state that the impact on the right of silence by way of witness statements or evidence at trial was not a relevant consideration favouring a stay. Indeed, Wootten J recognised that it may be appropriate to stay the civil proceeding at the point of setting the matter down for trial.
Now, I should emphasise that those remarks were not made, of course, in the context of s.81(11AA), which clearly does abrogate the common law, albeit while the Court retains a residual discretion. I note that in the Websyte case, the undertakings given to the Court were breached because the director of the plaintiff went to the police and disclosed protected information. Here, the police have already laid charges and the creditor is already a witness for the prosecution, assuming that Mr Sharma’s affidavit to this effect is correct.
I would make the following points. First, prima facie the plaintiff is entitled to proceed in the ordinary way. Second, this is perhaps more so in relation to proceedings under s.81 of the Bankruptcy Act, particularly where, as here, Mr Sharma has not filed his statement of affairs. Third, the creditors need resolution. Fourth, the matters raised against the applicant are clearly relevant to any sensible and proper administration of the bankrupt estate. Fifth, there is no risk at present of Mr Sharma having to conduct two trials at the same time. The oral examination is due to start again in June, and the criminal trial is only at the committal mention stage in May.
Sixth, it is difficult to see how the matters raised by the summons for oral examination – for example, family law matters – can have any impact on Mr Sharma’s trial, except that the misconduct issue – which is what the police brief must be about – may be affected. I note that Mr Sharma’s affidavit and oral submissions referred to “keeping my options open.” This is scarcely a precise point.
Next, there is no suggestion that the oral examination will engender publicity that could, of itself, prejudice a trial, but I note that in any event the registrar can control this aspect of the matter by having a hearing in camera should it be appropriate.
But on the other side of the ledger, there are also things to be said. First, the applicant says the brief has statements by witnesses, and there are also bank statements he has not gone through. In my view, he will have time to do so.
Next, the trustee is acting for one creditor only. It is possible that others will come into court or otherwise be alerted to material that should otherwise perhaps be not made available to them.
Next, in my view, even not having seen the police brief, there must be a real chance that the matters in the police brief will involve matters “substantially the same”, to use the phrase used by Jessup J in Craig Thomson’s case, as matters raised in the trustee’s affidavit in support of the application.
Next, the applicant is likely, if questions arise out of the police brief, or even otherwise about the misconduct matters, to be asked questions that might tend to incriminate him. It is, however, impossible to evaluate with any certainty these matters, as the applicant’s defence is not known. Next, it will be difficult if not impossible for Mr Sharma, who is self-represented, to formulate objections on the run to seek to engage the Court’s residual discretion under s.81(11AA).
Balancing all these things together, I think that the oral examination should proceed and the police brief should be released, subject to the conditions imposed by Registrar Allaway. The police brief was not, contrary to Mr Sharma’s assertion, produced for him. It was produced for the prosecution and given to him as a matter of fairness. It is not possible to say whether the police brief will be relevant to Mr Sharma’s examination, but in the light of the matters indicated in the trustee’s affidavit, the chances of it being so are, to me, high enough to justify the restricted release of the material.
However, in order to ensure that Mr Sharma is not unfairly prejudiced in the conduct of his criminal trial, I will make an overarching order pursuant to s.136 of the Evidence Act. Section 136 reads as follows:
The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might:
(a) be unfairly prejudicial to a party, or
(b) misleading or confusing.
I note that the commentary on that section suggests uses of another sort, but the terms of the legislation are not limited. In my view, I can protect Mr Sharma’s position by use of an order made under that section. I will order that no material produced by Mr Sharma and or any oral evidence given in the oral examinations may be used in any other proceeding without leave of the Court.
Robson J in Re AWB Limited (No 1) (2008) 21 VR 252 said – and this was quoted by Dodds-Streeton J in Websyte – at [47]-[48], as follows:
The principles in McMahon v Gould provide guidelines on whether to stay a civil proceeding because of pending criminal proceedings. They provide that a plaintiff is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose what his defence is likely to be in the criminal proceeding. Another relevant factor is whether the defendant has already disclosed his defence to the allegation. In Australian Securities Commission v Kavanagh, Hayne J said, after reviewing the principles to be applied in determining the applications for a stay, that:
“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 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. 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 merits.”
ASIC concedes however, that these statements of principle should be refined by reason of the High Court of Australia decision in Reid v Howard. There, the High Court confirmed the fundamental importance of the privilege against self-incrimination and in particular that it cannot be abrogated other than by statute.
In my view, the approach I have indicated achieves these purposes. I note that the registrar can, and no doubt will, control the proceeding properly. The applicant can object to questions if they tend to incriminate him. The registrar can close the court or exclude third parties. It is clear that the material in the police brief should be released, and it is clear that the oral examination should proceed.
I understand that there are two copies of the police brief, one provided by the police in response to the subpoena and one handed to Registrar Allaway. I will hear from the parties as to that matter.
The final issue is the material from Scammell Black Mileo. I have looked at these materials. In my view, it is clear they do not attract client legal privilege within the meaning of Part 3.10 of the Evidence Act, and the application for a review of the registrar’s decision will not succeed.
So putting the matter shortly, I am going to release the material, subject to the orders or qualifications made by Registrar Allaway. I am not going to overturn the registrar’s decision in relation to Scammell Black Mileo, but I am going to order that nothing that is said in the oral examination can be used in any way in any other proceeding at all, subject to leave of the court. There may be good reason why leave should be given at some later point, but it certainly will not be before any criminal trial so there is no risk of any prejudice arising out of the limited release of the materials.
I certify that the preceding twenty nine (29) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Date: 4 June 2013
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