Western Freight Management Pty Ltd v Hyde

[2023] NSWSC 1247

Supreme Court

New South Wales

Medium Neutral Citation:

Western Freight Management Pty Ltd v Hyde [2023] NSWSC 1247

Hearing dates:

19 and 20 October 2023

Date of orders:

20 October 2023

Decision date:

20 October 2023

Jurisdiction:

Equity - Duty List

Before:

Henry J

Decision:

Proceedings stayed pending final determination of criminal matters brought against the defendant subject to conditions.

Catchwords:

CIVIL PROCEDURE — Stay of proceedings — Concurrent civil and criminal proceedings — Same subject matter — Prejudice to defendant — Where factual issues in civil and criminal proceedings overlap — Where parties accept some form of stay should be granted — Whether conditions should apply in relation to the stay — Whether discovery and subpoena orders should be made

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Crimes Act 1900 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd (2019) 138 ACSR 42; [2019] FCA 964

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410

Gregg v Fairfax Media Publications Pty Ltd [2017] FCA 440

National Australia Bank Ltd v Human Group Pty Ltd [2019] NSWSC 1404

Re Plutus Payroll Australia Pty Ltd [2017] NSWSC 1854

Category:

Procedural rulings

Parties:

Western Freight Management Pty Ltd (Plaintiff)
Katherine Maree Hyde (Defendant)

Representation:

Counsel:
J J Young (Plaintiff)
J D Cook (Defendant)

Solicitors:
TPS&Co Lawyers (Plaintiff)
Cheney Suthers Lawyers (Defendant)

File Number(s):

2023/00252954

Publication restriction:

Nil

JUDGMENT – EX tempore (revised)

1. This is an application made by the defendant, Katherine Hyde, for an order that these proceedings be stayed pursuant to s 67 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) or in the Court’s inherent jurisdiction. The application is brought in circumstances where the defendant has been charged with offences under the Crimes Act 1900 (NSW) for obtaining financial advantage by deception in the amount of $291,615.98 in connection with her role as Central West Area Regional Manager of Western Freight Management Pty Ltd, the plaintiff in these proceedings.

2. It is common ground that the facts which give rise to the criminal proceedings brought against the defendant overlap with and concern the same subject matter as the allegations raised in these proceedings, and that some form of stay should be ordered. The dispute between the parties concerns what, if any, conditions should apply to the stay.

3. The background to the application can be summarised as follows.

4. On 9 August 2023, the defendant was served with a Future Court Attendance Notice in relation to the criminal charges with a first return date in the Local Court of New South Wales, Orange Registry of 28 September 2023 (Criminal Proceedings).

5. Also on 9 August 2023, the plaintiff commenced proceedings in this Court on an urgent ex parte basis, with the Court making a freezing order against the defendant. On 11 August 2023, the freezing order was extended until further order and the plaintiff was ordered to file and serve a statement of claim.

6. On 31 August 2023, the plaintiff filed its statement of claim. In summary, the plaintiff claims that the defendant is liable for the sum of $291,615.98 (the same amount the subject of the Criminal Proceedings) on the basis that she misappropriated that amount by causing her own bank account details and not that of the plaintiff to be recorded on invoices issued by the plaintiff to a third party, Orange Scrap Recyclers (OSR). The plaintiff claims that the moneys the defendant received are held on trust for the plaintiff or that she is liable to account or pay equitable damages and/or contractual damages to the plaintiff.

7. On 28 September 2023, being the first return date of the Criminal Proceedings, the defendant entered a plea of not guilty. Orders were made providing for the service of the brief of evidence by the New South Wales Police on the defendant by 26 October 2023 and for the matter to be listed for further mention on 16 November 2023. The evidence on this application indicates that the Criminal Proceedings are likely to be listed for hearing sometime after March or April 2024.

8. On 13 October 2023, the defendant filed a notice of motion seeking a stay of these proceedings in view of the Criminal Proceedings.

9. The legal principles relevant to this application were not in dispute. The parties accepted that the applicable principles were those set out in National Australia Bank Ltd v Human Group Pty Ltd [2019] NSWSC 1404 (NAB v Human Group) at [35]–[39].

10. Those principles recognise that:

1. by virtue of the inherent power of this Court to control its proceedings or pursuant to s 67 of the Civil Procedure Act, the Court may stay proceedings either permanently or until a specified time;

2. a stay of the civil proceedings may be warranted if it is apparent that an accused is at risk of real prejudice in the conduct of their defence in a criminal trial: Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd (2019) 138 ACSR 42; [2019] FCA 964 at [55];

3. the exercise of the Court’s discretion to stay proceedings involves an assessment as to whether the dictates of justice require such a remedy which involves consideration of the just, quick and cheap resolution of the real issues in civil proceedings; and

4. the Court’s inherent power to stay proceedings carries with it the power to impose conditions on, or in respect of, any order staying proceedings.

11. The Courts have approached the imposition of conditions in respect of a stay in different ways having regard to the facts before them and the position of the parties: Gregg v Fairfax Media Publications Pty Ltd [2017] FCA 440 at [25]; and Re Plutus Payroll Pty Ltd [2017] NSWSC 1854.

12. In NAB v Human Group, the Court granted a stay of civil proceedings insofar as they applied to an individual litigant pending final determination of criminal proceedings brought against her. NAB consented to a stay being granted on the basis that she had exercised her right to silence and intended to plead not guilty to any charges. The issue in that case was whether a stay should also be granted in relation to the corporate defendant, Human Group Pty Ltd, and whether NAB should have access to documents already produced under subpoena by a bank.

13. The Court ordered a limited stay in relation to the corporate defendant, that it not be required to file a commercial list response or affidavit evidence until further order, for reasons relating to the risk of prejudice to the individual’s defence in the criminal proceedings and case management. The Court accepted that NAB should be entitled to use the processes of the Court to obtain access to the documents already produced under subpoena and also contemplated that NAB may be entitled to seek disclosure of documents by issuing subpoenas to other third parties at a future stage in the proceedings. It did so in the context where: the proceedings involved serious allegations made against the individual and corporate defendant in relation to a fraudulent scheme involving approximately $43.4 million; the proceedings included proprietary claims and tracing remedies to seek to identify and ultimately recoup moneys which NAB alleged were part of the fraudulent scheme; the implied undertaking was considered to provide protection against risk of disclosure of the documents produced under subpoena; and NAB was prepared to consent to a suppression order over any documents that had already been produced.

14. Turning to the present application before the Court, the plaintiff accepted that it is appropriate to grant a stay of these proceedings pending the outcome of the Criminal Proceedings such that the defendant is not required to file her defence, prepare evidence or prepare for and appear at a final hearing. It recognises, appropriately, that requiring the defendant to take steps to defend these proceedings would likely impinge on her right to silence and her plea of not guilty. As already noted, the dispute concerns what, if any, conditions should be granted in relation to that stay. In particular, whether orders should be made in relation to discovery and the issuance of subpoenas by the plaintiff.

15. The defendant contends that a stay should be granted subject to the plaintiff being granted liberty to apply on the basis that the plaintiff has not identified with any specificity what interlocutory steps would be appropriate in this case.

16. The plaintiff’s position is that the stay should be granted subject to the following orders:

(2)   The parties agree categories of documents for discovery by 26 October 2023;

(3) The parties provide verified discovery in accordance with those categories and the Uniform Civil Procedure Rules ("UCPR") by 9 November 2023;

(4) The plaintiff may, in accordance with the UCPR, issue such subpoenas as it sees fit; such subpoenas to be made returnable on a date fixed by the court;

(5)   The plaintiff may file and serve any Notice of Motion for leave to amend the Statement of Claim on or before 23 November 2023, such Notice of Motion to be made returnable for directions before the Registrar on 30 November 2023 to be heard and determined in the normal way;

(6)   The proceedings are listed for further directions, including for the service of evidence by the plaintiff only, before the Registrar on 30 November 2023;

17. At the hearing, the defendant accepted a stay being subject to orders that provide for the plaintiff to seek leave to amend the statement of claim and for the plaintiff to serve further evidence, along the lines of (5) and (6) above. However, she contests the proposed orders in respect of discovery and subpoenas.

18. The plaintiff submits that orders providing for discovery and subpoenas should be made to enable it to progress its case. As to discovery, in its written submissions, the plaintiff contended that the scope of discovery should be determined in the usual way, which I understand to mean in accordance with the orders proposed, by way of categories of documents and verified discovery. In broad terms, the plaintiff seeks discovery of the defendant’s bank statements to establish where the alleged misappropriated funds have gone and discovery of correspondence and other documents between the defendant and OSR which led to the creation and performance of the agreement pleaded in the statement of claim. The plaintiff submits that making orders for discovery of such documents should not prejudice the defendant given the plaintiff would be bound by the implied undertaking not to use them for purposes other than in relation to these proceedings.

19. The defendant submits that it would be antithetical to the grant of a stay, which recognises that the defendant will not be filing a defence, any evidence or taking steps to defend the proceedings pending the outcome of the Criminal Proceedings, if the Court were to order her to undertake verified discovery at this stage of the case. She also submits that it would be premature to make orders for discovery as the facts in issue have yet to be determined.

20. Having considered the parties’ submissions, I have concluded that it is not in the interests of justice or consistent with the overriding purpose set out in s 56 of the Civil Procedure Act for the just, quick and cheap resolution of the real issues in these proceedings to make the stay conditional on the defendant giving discovery.

21. I accept that the implied undertaking should provide some protection to the defendant. However, I am not persuaded that the plaintiff has demonstrated that the circumstances of this case warrant an order for discovery otherwise than in accordance with the usual practice of this Court, namely, that discovery will usually be ordered after pleadings have closed, the parties have served their evidence and the real issues in dispute are known.

22. Practice Note SC Eq 11 (Disclosure in the Equity Division) provides that the Court will not make an order for disclosure of documents until the parties have served their evidence unless there are exceptional circumstances necessitating disclosure and it is necessary for the resolution of the real issues in dispute: at [4]. Relevantly, and although not determinative of this application, the plaintiff did not comply with the requirements of the Practice Note; its application for orders for disclosure were not supported by an affidavit setting out the reasons why disclosure is necessary for the resolution of the real issues in dispute and did not identify the classes of documents in respect of which disclosure is sought nor the likely cost of such disclosure: at [6].

23. The purpose of pleadings and the service of evidence prior to discovery is to enable the identification of the real issues in dispute to ensure that litigation is conducted in accordance with the objects of s 56 of the Civil Procedure Act.

24. Rule 21.2(4) of the Uniform Civil Procedure Rules 2005 (NSW) also specifies that an order for discovery may not be made in respect of a document unless the document is relevant to a fact in issue. I do not accept the plaintiff’s submission that it is appropriate for the parties to undertake discovery on the assumption that all matters are in issue.

25. In the absence of a defence, it is not possible to identify what facts will be in issue in this case so as to put some appropriate bounds on a discovery order, even in relation to the alleged agreement between the defendant and OSR. Further, and as the defendant contended, the matters revealed during the Criminal Proceedings and the outcome of that process may impact the issues in dispute in these proceedings, which would likely affect the nature of the defence to be filed and, as a consequence, the necessity for and scope of any discovery by the parties in these proceedings.

26. The plaintiff’s evidence did not identify any particular disadvantage or prejudice if discovery is not granted at this stage, although I accept that the delay in these proceedings occasioned by reason of the stay may involve some general prejudice to the plaintiff. That said, the evidence on the application does not suggest that the Criminal Proceedings are being dealt with other than in a timely manner.

27. Further, the plaintiff has the protection of the freezing order that attaches to the property of the defendant and has also been served with an affidavit in relation to the defendant’s assets which identifies the defendant as the proprietor of real property. The freezing order has also been varied by consent since it was made to enable the defendant to sell that property and it is agreed that the net sale proceeds are to be held in her solicitor’s trust account with that sum being the subject of the freezing order.

28. I am also unpersuaded by the plaintiff’s submission that the Court should make the orders sought for the plaintiff to issue such subpoenas as it sees fit, with those subpoenas to be made returnable on a date fixed by this Court. In my view, it is premature to make an order in those terms at this stage of the proceedings.

29. The plaintiff’s written submissions referred to the plaintiff contemplating issuing subpoenas to OSR and to another third party, Cadia Holdings Pty Ltd, with the documents sought being described as those relating to the circumstances of the making and execution of the agreements with OSR and Cadia. At the hearing, the plaintiff also referred to issuing subpoenas to “banks”.

30. I am not prepared to grant leave to the plaintiff to issue subpoenas as it sees fit nor to be named parties in the absence of a draft schedule identifying with specificity what documents are sought or the plaintiff’s articulation of how the documents sought are relevant to a fact in issue. The defendant should also be provided with an opportunity to consider her position, rather than having to deal with the issues about subpoenas on the run at the hearing of this application.

31. Further, as the defendant submitted, unlike the position in NAB v Human Group, in this case, the plaintiff’s statement of claim makes no allegation of fraud and seeks no tracing relief such that it is difficult to see why leave should be granted to the plaintiff to issue subpoenas to banks at this stage. The plaintiff’s counsel candidly accepted at the hearing that also relevant to the Court’s consideration of whether and when the plaintiff should be granted leave to issue subpoenas is the principle that a subpoena process should not be used as a substitute for discovery or discovery against a third party: Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410 at [126] and the cases there cited.

32. Accordingly, I will grant the defendant’s application for a stay subject to conditions that will enable the plaintiff to seek to amend its statement of claim and file its further evidence, but I refuse to make the stay conditional on any discovery by the defendant. As to subpoenas, if the plaintiff wishes to issue any, it will need to seek leave from the Court to do so having provided notice to the defendant so that she and the Court may consider the application having regard to the scope of the documents sought, the issues to which they relate and what protections are to be put in place, if any, over and above the implied undertaking to deal with any risk of prejudice to the defendant.

33. [Parties address on costs]

34. Having heard the parties’ submissions on costs, I have concluded that the costs of the defendant’s notice of motion should be reserved. There was force to the defendant’s contention that some form of consent to the stay should have been forthcoming from the plaintiff prior to 17 October 2023 and that she has had success on the issue of discovery. However, as the plaintiff’s counsel submitted, the Court did not order a blanket stay and has not precluded the plaintiff from seeking leave to issue subpoenas in the future by reference to a process that identifies with specificity the documents that it seeks, the issues to which they relate and gives the defendant an opportunity to properly consider the application.

35. Bearing those matters in mind and the nature of the claims in these proceedings, I consider that it is more appropriate that costs of the motion be determined as part of the proceedings.

36. For these reasons, I make the following orders:

1. Subject to the following orders, pursuant to s 67 of the Civil Procedure Act 2005 (NSW), the proceedings be stayed pending final determination of criminal matters brought against the defendant in proceedings R v Hyde, Local Court, Orange, H93275020, or until further order of the Court.

2. Grant leave to the plaintiff to file and serve Notice of Motion to amend the Statement of Claim on or before 23 November 2023, such Notice of Motion to be made returnable for directions before the Equity Registrar on 30 November 2023 and thereafter to be heard and determined in the usual way.

3. Grant leave to the plaintiff to seek further directions before the Equity Registrar on 30 November 2023 for the service of evidence by the plaintiff only.

4. Note that the plaintiff will require leave of the Court if it wishes to issue any subpoenas to third parties.

5. Liberty to the plaintiff to apply on three days’ notice.

6. Costs of the defendant’s notice of motion filed 13 October 2023 are reserved.

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Decision last updated: 25 October 2023