Vestergaard v G Media Pty Ltd
[2009] FMCA 1154
•11 December 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VESTERGAARD v G MEDIA PTY LTD & ANOR | [2009] FMCA 1154 |
| TRADE PRACTICES – Application to stay proceeding – employment contract – arbitration clause in contract invoked – stay sought based upon provision for arbitration – potential for criminal proceedings – stay sought based upon right of silence – stay granted. |
| Classification (Publications, Films and Computer Games) Enforcement Act 1995 (VIC), ss.3, 24 Commercial Arbitration Act 1984 (Vic), ss.53, 53(1)(b) Fair Trading Act 1999, s.9 Trade Practices Act 1974, ss.51A, 52 |
| Beecee Group v Barton (1980) 5 ACLR 33 Caesar v Somner [1980] 2 NSWLR 929 Jefferson v Bhetcha [1979] 1 WLR 898 McMahon v Gould (1982) 7 ACLR 202 Re AWB Ltd v Flugge (2008) 252 ALR 566 ReSaltergate Insurance Co Ltd (1980) 4 ACLR 733 Reid v Howard (1995) 184 CLR 1 Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 |
| Applicant: | STEEN VESTERGAARD |
| First Respondent: | G MEDIA PTY LTD |
| Second Respondent: | GARION HALL |
| File Number: | MLG 491 of 2009 |
| Judgment of: | O’Dwyer FM |
| Hearing date: | 22 October 2009 |
| Date of Last Submission: | 22 October 2009 |
| Delivered at: | Melbourne |
| Delivered on: | 11 December 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Follett |
| Solicitors for the Applicant: | Harmers Workplace Lawyers |
| Counsel for the Respondents: | Mr J. Burnside QC, with Mr O’Grady |
| Solicitors for the Respondents: | Meerkin & Apel |
ORDERS THAT:
The proceeding is stayed until further order of the Court.
Liberty to apply on not less than 3 working days notice.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 491 of 2009
| STEEN VESTERGAARD |
Applicant
And
| G MEDIA PTY LTD |
First Respondent
| GARION HALL |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This matter comes before me on an application by the respondents (G Media and Hall) seeking a stay of the proceeding. The two grounds relied upon in support of the stay are:
a)the matters alleged in the substantive application are the subject of an arbitration agreement contained in a written contract of employment (or for services), and pursuant to a notice of dispute given under the contract by which the arbitration provision is enlivened, the proceeding should be stayed as provided in s.53 of Commercial Arbitration Act 1984 (Vic (the CA Act)); and
b)the facts alleged in the statement of claim (the claim) are potentially the subject of a criminal prosecution and to protect Hall’s right of silence, the proceeding should be stayed.
Statement of Claim and background
In the claim filed in this proceeding, the following relevant background is alleged:
a)G Media is in the business, among other things, of producing erotic films and related media for reward and/or gain (paragraph 1 (b));
b)in that business, it produced “objectionable films” within the meaning of section 3 of the Classification (Publications, Films and Computer Games) Enforcement Act 1995 (VIC) (the Classification Act) (paragraph 1 (d));
c)Hall was the sole director, secretary, shareholder and managing director of G Media, and in those roles was responsible for the overall management and supervision of G Media (paragraph 2);
d)significantly, it is alleged that by reason of the role played by Hall, he was the directing mind and will of G Media (paragraph 2 (f));
e)Vestergaard was employed by G Media as a production manager and in that capacity was involved in the production of a number of erotic films (paragraphs 3,4 & 5);
f)as a response to the expressed concern of Vestergaard, and as an inducement to him to become G Media’s production manager, Hall made various representations. Significantly for the purposes of this proceeding, he allegedly represented that the activity of producing the films would be lawful (paragraphs 9 – 27, 28-30);
g)a number of the films produced by G Media, where the applicant acted as production manager, had been classified by the Office Classification Board as “X18+”, which classification allegedly determines that the films are “objectionable” within the meaning of the Classification Act and their production may constitute a criminal offence under section 24 of that Act (paragraph 1 (d)); and
h)Vestergaard alleges that the representations made to him in regards to the lawfulness of the activity of G Media in which he would be involved were misrepresentations and in breach of sections 52 and 51A of the Trade Practices Act 1974 (Cth) and/or section 9 of the Fair Trading Act 1999 (Vic).
The applicant was employed by G Media from 17 August 2007 until, by G Media’s understanding, 27 February 2009 and by the applicant’s understanding, 14 April 2009. That employment was pursuant to a number of alleged contracts, one of which specifically had provision for an arbitration process, which, if invoked, would entitle a party to seek a stay of any proceedings.
On 15 June 2009 the Victoria Police raided the offices of G Media and seized the subject films and is presently investigating whether criminal proceedings will be brought against Hall; or indeed, against any others, including Vestergaard.
None of the parties was able to inform me as to when the police will make a determination as to whether or not criminal proceedings will be brought against Hall.
The submissions
The arbitration provision
There are potentially three relevant contracts of employment, or service contracts. The first contract of employment was between G Media and Vestergaard. The second was between G Media and Blemishmap Pty Ltd, a company through which Vestergaard structured his employment with G Media. It was the contract with Blemishmap that was in writing and in which the agreement to arbitrate appears. G Media contends that the provision appearing in the Blemishmap contract has application for all periods of work performed by Vestergaard for G Media. The nature of the employment relationship between Vestergaard, Blemishmap and G Media remains an extant issue for determination. Nevertheless, G Media contends the arbitration agreement has been enlivened and warrants the stay sought.
However, even should I find that the arbitration clause has been enlivened and that it captures the whole of Vestergaard’s employment (whether as an individual or through Blemishmap), I am not persuaded by this contention for the simple reason that the arbitration would necessitate Hall’s involvement to the extent that would place him in the same jeopardy that he (and G Media) relies on in support of the other ground for the stay. In other words, Hall runs the same risk of self-incrimination through that process as he would in the substantive proceeding. He cannot, in my view, argue on the one hand that his right of silence is jeopardised should the substantive proceeding be allowed to continue, and at the same time argue it should be stayed in order to pursue an arbitration process where he would, it is highly probable, either have to waive his right of silence, or be forced to argue that his participation in the arbitration would jeopardise that right. Section 53(1)(b) of the CA Act provides, as a pre-condition to the exercise of the power to grant a stay, that the applicant for the stay “still remains ready and willing to do all things necessary for the proper conduct of the arbitration”. As the respondents generally seek to rely on Hall’s right of silence as a basis to stay the proceeding because of those integral and pivotal representations allegedly made about the legality of G Media’s activity in which Vestergaard was engaged, the need to do so would not be diminished because the process is one of arbitration as opposed to a court hearing. In my view, it beggars belief that either respondent would be “ready and willing to do all things necessary for the proper conduct of the arbitration.”(emphasis added).
The respondents’ contention in support of this ground for a stay is, in my view, disingenuous and has no merit.
In any event, I understood the respondents’ principal ground relied on was that based upon the prospect of a criminal prosecution against Hall.
The right of silence
The submission which carries the day in the final analysis is that which relates to the privilege claimed by Hall; that he should not be put in a position where he may incriminate himself in relation to a potential criminal proceeding.
The law governing the issue of whether a stay should be granted in these circumstances is found in McMahon v Gould (1982) 7 ACLR 202.
The McMahon guidelines are as follows:
(a) Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the Court (Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16, 19);
(b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds (ibid);
(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 (Jefferson v Bhetcha [1979] 1 WLR 898,905);
(d) Neither an accused (ibid) nor the Crown (Rochford v John Fairfax & Sons Ltd, 21) are entitled as of right to have a civil proceedings stayed because of a pending or possible criminal proceeding;
(e) The Court’s task is one ‘of the balancing of justice between the parties’ (Jefferson v Bhetcha at 904, taking account of all relevant factors (ibid), 905);
(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 the relevant factors (ibid, 905);
(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 (ibid, 904);
(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 barred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant having to disclose, in resisting an application for summary judgment, either in the pleading of his defence or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding (ibid, 904-5);
(j) In this regard factors which may be relevant include:
(i) the possibility of publicity that might reach and influence jurors in the criminal proceedings (ibid, 905);
(ii) the proximity of the criminal hearing (ibid, 905);
(iii) the possibility of miscarriage of justice, for example, by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid, 905);
(iv) the burden on the defendant of preparing for both sets of proceedings concurrently (Beecee Group v Barton (1980) 5 ACLR 33);
(v) whether the defendant has already disclosed his defence to the allegations (Caesar v Somner [1980] 2 NSWLR 929, 932; ReSaltergate Insurance Co Ltd (1980) 4 ACLR 733 at 735-6); and
(vi)the conduct of the defendant, including his own prior invocation of civil process when it suited him (cf Re Saltergate Insurance Co Ltd at 735-6).
(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant; and
(l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, e.g., setting down for trial, and then stayed. (Beecee Group v Barton).
The overriding principle, however, is that the interests of justice govern the decision whether to grant or refuse a stay of civil proceedings, in circumstances where there are threatened or actual related criminal proceedings against a party.
The Full Court of the High Court in Reid v Howard (1995) 184 CLR 1 at 11-12 (per Toohey, Gaudron, McHugh and Gummow JJ), when considering the significance of the right of silence, said:
“The privilege which has been described as a “fundamental … bulwark of liberty”, is not simply a rule of evidence, but a basic and substantive common law right. It developed after the abolition of the Star Chamber by the Long Parliament in 1641, and, by 1737, it was said that “there [was] no rule more established in equity”. More recently, the privilege has been described as “deeply ingrained in the common law”. It operates so that a person cannot be compelled “to answer any question, or to produce any document or thing, if to do so “may tend to bring him into the peril and possibility of being convicted as a criminal”.
His Honour Deane J in Reid v Howard also said:
“The protection which the privilege against self-incrimination confers extends not only to the risk of incrimination by direct evidence (i.e. evidence of the fact of disclosure and the material disclosed) but also to incrimination by indirect or ‘derivative’ evidence (i.e. ‘evidence obtained by using’ the disclosed material ‘as a basis of investigation’)”. [7]
I was urged by the respondents to be cognisant of the views of the High Court when applying the McMahon guidelines, in the context of the alleged facts of this case, and give significantly more weight to the guideline directed to the question of Hall’s right of silence. I believe there is merit in this contention.
As against that, Vestergaard contended that the fundamental defect in the respondents’ case for a stay was the fact that “75% of the relevant allegations in the proceeding are against” G Media and, as G Media is a corporation that does not enjoy any privilege against self-incrimination in relation to any potential criminal proceeding, G Media cannot be said to suffer any prejudice and there is, therefore, no basis for a stay against G Media.
To further buttress this submission Vestergaard submitted that there was not sufficient evidence that criminal proceedings would be initiated against Hall. There was, for instance, no evidence before me from the police as to what their intentions may be.
Further, Vestergaard relies upon a failure by the respondents to articulate how the giving of evidence in this proceeding would jeopardise Hall’s right of silence. It is to be noted that the respondents have not filed a defence and did not articulate how, by stating the nature of the evidence to be led by either respondent, they would be prejudiced should the substantive hearing proceed. Plainly, the respondents have not spelt out the evidence they would give in support of their contention that such evidence would be, in respect of Hall, self-incriminating. In my view, to insist on the respondents, particularly Hall, giving details of the evidence which is claimed to amount to self-incrimination would be a total denial of the principle of a right of silence. I cannot sensibly take the respondents’ silence as to the evidence that might be given as an indication of a lack of merit in respect of their application for a stay.
There is sufficient evidence before me to find the police have embarked upon a course of action (search warrants, seizure of goods and interviews of witnesses) consistent with mounting a criminal prosecution. Further, Vestergaard’s case is that the activities of the respondents were illegal and it ill-behoves him now to argue there is insufficient evidence for me to conclude that there is a probability that police proceedings against Hall may ensue.
Indeed, Vestergaard’s submissions, seemingly by way of an alternative proposition, go so far as to suggest the criminality of the activities of the respondents is beyond doubt and that there is nothing to be gained by extending to Hall the right of silence – to deny Hall the right of silence, Vestergaard would suggest, in circumstances where the activity is manifestly illegal, is not prejudicial to him. I cannot accept this.
The respondents’ submissions in support of the stay are succinctly set out in [16] – [18] of their written submissions:
16.The central allegation in this proceeding is that the respondents engaged in conduct which constituted a criminal offence pursuant to s.24 of the Classification (Publications, Films and Computer Games) (Enforcement) Act 1995 (Vic). That allegation is the foundation on which the breach of contract and misleading and deceptive conduct claims rely. If not made out, those claims must fail.
17.If Mr Hall wishes to maintain his substantive common law right and rely on the privilege, the Respondents cannot meet the central allegation in this proceeding. To defend the proceeding properly would involve (at a minimum) the corporate Respondent giving discovery and Mr Hall giving evidence, If the allegations in the Statement of Claim are well founded, then giving discovery and giving evidence would involve incriminating Mr Hall, thus destroying his privilege. On the other hand, if the allegations are not well founded then the Applicant loses nothing by the proceeding being stayed.
18.If Mr Hall does waive the privilege, there is every prospect that he will provide proof against himself in the criminal proceeding or derivative evidence. See also Re AWB Ltd v Flugge (2008) 252 ALR 566 at 588, [49] and [96]
These submissions, in my view, are persuasive.
Vestergaard significantly alleges in the claim that Hall was “the directing mind and will of G Media”. By that assertion the two respondents become as one, so to speak, and an examination of the role of G Media by necessity involves an examination of Hall’s role. It is self-evident that the alleged representations made by Hall are those relied upon by Vestergaard to prove his case against both respondents. Should Hall go into the witness box, as he will necessarily have to do if he wishes to defend this claim, whether on his own behalf or that of G Media, his time in the witness box will, without doubt, be utilised by Vestergaard to question him about the legality of the activities of G Media in which Vestergaard was involved, and also his knowledge of such. That would place Hall not only in an invidious situation, but in one where his right of silence is seriously jeopardised.
It is common knowledge that it may take some considerable time for the police to formulate their attitude to prosecution and should they determine to prosecute Hall, there are lengthy processes involved before Hall’s criminality would be determined, one way or the other. It is not unreasonable, in my view, to suggest it might take some years before any criminal proceeding has been finalised. On the other hand, the police may not choose to prosecute and that decision might be made in the relatively near future.
Although there is a real prospect that any criminal proceeding may take a long time to be determined, the prejudice caused by the delay to the applicant is not such as cannot be compensated by interest on any award otherwise now due to him. He will, of course, have the frustration of the delay, but measured against Hall’s right of silence, such frustration must be considered secondary.
Neither Hall nor G Media have filed a defence, nor made discovery. The proceeding is in the early procedural phase of litigation. It is, however, not a proceeding that lends itself to be progressed to a stage at which a stay should be granted to protect the right of silence. To allow the proceeding to progress further places Hall’s right of silence in jeopardy and may force him to incriminate himself should a defence be filed or discovery be pursued as would be the normal course of events. This is particularly so in this instance because of the nature of the allegations made against Hall, both in respect of the representations allegedly made and the nature of his role and relationship with G Media as pleaded in the claim.
Conclusion
Whilst it is acknowledged that the applicant is prima facie entitled to have his 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, the respondents have, in my view, satisfied their burden to show that it is just and convenient to stay the proceeding when considered against Hall’s right of silence. On the question of the balance of justice between the parties, the scales, in my view, fall in favour of Hall and necessitate a stay.
In light of the above, I intend to make a stay order.
I have also made provision for liberty to apply. Any party could apply to discharge the stay order once the question of criminal proceedings has been resolved, whether that be by an indication the police will not prosecute Hall, or the prosecution of Hall has been finalised.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of O’Dwyer FM
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