Weston v Beaufils

[1993] FCA 474

LAWRENCE KEITH WESTON v. STEPHEN WAYNE BEAUFILS; ANTHONY BROWNLEE; RHONDA
BROWNLEE; THE REGISTRAR GENERAL; ENTERA PTY LIMITED AND OTHERS
No. NG455 of 1992
FED No. 474
Number of pages - 8
Practice and Procedure
(1993) 43 FCR 292

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J(1)

CATCHWORDS

Practice and Procedure - motion to stay an action on ground of pending committal hearing in serious criminal proceedings - principles applicable - applicant's prima facie right to a hearing in ordinary course - whether the ordinary course includes expedition upon a basis which would ordinarily lead to expedition - application of guidelines in McMahon v. Gould on basis that ultimately the question is whether the prima facie right of the applicant should be modified in order to fulfil the requirements of justice overall.

Practice and Procedure - security for costs - natural person entitled to rely on rule that poverty is no bar to a litigant - relevance of fact that financial difficulties arose out of the matters in dispute - order refused.

Federal Court of Australia Act 1976 (Cth), s. 56

Federal Court Rules, Order 28 r. 3(1)(b)

Rochfort v. John Fairfax and Sons Ltd (1972) 1 NSWLR 16

McMahon v. Gould (1982) 7 ACLR 202

Cameron's Unit Services Pty Ltd v. Whelpton and Associates Pty Ltd (1984) 59 ALR 754

Cameron's Unit Services Pty Ltd v. Kevin R. Whelpton and Associates (Australia) Pty Ltd (1986) 13 FCR 46

Halabi v. Westpac Banking Corporation (1989) 17 NSWLR 26

Yuill v. Spedley Securities Ltd (in liq.) (1992) 8 ACSR 272

Hurley v. Federal Commissioner of Taxation (1992) 92 ATC 4,471

Barton v. Minister for Foreign Affairs (1984) 2 FCR 463

HEARING

SYDNEY, 30 June and 9 July 1993

#DATE 16:7:1993

Counsel and solicitors for Mr DF Rofe QC with
the applicant: Mr RS Bell instructed by

Messrs O'Hara and Company

Counsel and solicitors for Mr VR Gray instructed by
the first respondent: Messrs Watkins Tapsell and Nolan

Counsel and solicitors for Mr GJ Stanton instructed
the second, fifth, eighth, by Messrs Peter Bouzanis and eleventh respondents: and Co.

Counsel and solicitors for Mr GJ Kennedy instructed by
the third respondent: Messrs McLaughlins

Counsel and solicitors for Mr GJ Kennedy instructed by
the tenth respondent: Messrs Axtens and Co.

Solicitor for the twelfth Ms R Pinter of Messrs
respondent: Gye Perkes and Stone

ORDER

The Court orders that:<:

1. The motion for a stay be dismissed with costs.

2. The motion for security for costs be dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

BURCHETT J This is an application, brought by notice of motion, for a stay of proceedings pending the conclusion of a committal hearing before a Magistrate, which is set down for hearing next December, and alternatively for an order for security for costs.

1. The principal proceeding in which the application arises was commenced by the filing of an application and statement of claim on 3 July 1992. On 17 July 1992, Beaumont J granted a number of interlocutory orders for the protection of proprietary interests claimed by the applicant. On 1 September 1992, after an interlocutory hearing, Morling J continued those orders until the final hearing of the proceedings. On 30 October 1992 a further amended statement of claim was filed, and on 21 and 22 December 1992 statements of defence were filed, although I note that each of the statements of defence, notwithstanding that they were filed by different solicitors, claimed in its heading to include the ninth respondent as a respondent on behalf of whom the particular statement of defence was filed. No doubt an error occurred, which will need correction. I also note that the statement of defence filed on 21 December 1992 commences with certain admissions said to be made on behalf of the first, sixth and ninth respondents, although the sixth respondent is not mentioned in the heading as a respondent on behalf of whom the document was filed, and the ninth is not mentioned at the conclusion as a respondent on behalf of whom the solicitor signed the document.

2. The further amended statement of claim runs to some 170 paragraphs. It is not necessary for present purposes to analyse it in detail. Its complexities all appear to have grown from the multitudinous divarications stemming from the retainer of the first respondent Mr Beaufils, a solicitor, by the applicant Mr Weston to advise on Mr Weston's very substantial taxation and other problems. These problems concerned various bank accounts held in fictitious names, and certain real estate of which Mr Weston was the beneficial owner, although a number of the properties were held in other names. The money in the bank accounts totalled in excess of $1.25 million and the properties were valued at several million dollars. There were in all some 24 properties. It is alleged that Mr Beaufils introduced Mr Weston to the respondent Mr Brownlee, a management and corporate consultant and adviser who held himself out as expert in taxation and related matters. Various representations are alleged to have been made by Mr Beaufils and Mr Brownlee, upon which the moneys and numerous title deeds in respect of the real estate were handed over to Mr Beaufils. Various documents are alleged to have been signed on the faith of the advice of Mr Beaufils. Mr Beaufils and Mr Brownlee are alleged to have concerted in the arranging of an assortment of property dealings. It is alleged that properties were transferred to a number of companies incorporated by or on behalf of Mr Beaufils and Mr Brownlee, or Mrs Brownlee, and controlled by them. Large sums of money are stated to have been raised by mortgages over these properties and not accounted for. By his action in this Court, the applicant seeks to recover the properties and to obtain an account of the moneys due to him, relying upon a number of different causes of action. Various other forms of relief are also sought.

3. Although Morling J recorded in his reasons for judgment, on the application for interlocutory relief, that a general answer to the applicant's claims was asserted on behalf of the respondents to be that he and the first respondent had together embarked upon an illegal course of activity designed to defraud the Commissioner of Taxation, no such defence has been filed in answer to this further amended statement of claim. It is, however, not in dispute that the applicant's situation was that he had failed to disclose income for taxation purposes over a substantial period, during which he had accumulated very considerable assets which he feared might be lost to him should the Commissioner of Taxation learn the truth. A disclosure has since been made, I was informed, to the Commissioner of Taxation, and a number of amended taxation returns have been lodged. The possible financial burden to which this situation may give rise is a basis of the application for security for costs.

4. A particular section of the further amended statement of claim (consisting of paras. 67 to 90) alleges a separate act of fraud in connection with a particular property, 1079 Canterbury Road, Punchbowl. The allegations made in these paragraphs include an allegation of forgery of the signature of Mr Weston on a form of transfer purportedly witnessed by Mr Brownlee. The property in question was valued at $600,000. Mr Beaufils is alleged to have falsely represented that the purported signature of Mr Weston was in fact a genuine signature.

5. The applicant claims that the action is now ready for hearing, or at least that it can be got ready at very short notice. He seeks the earliest available date, and if necessary an order for expedition.

6. It is in this situation that the respondents, Messrs Beaufils and Brownlee, say that they have been charged with committing a criminal offence under s. 178BA of the Crimes Act 1900 (NSW), in respect of the transaction referred to in paras. 67 to 90 of the further amended statement of claim. The committal proceeding is due to commence in December next. They say that the hearing of that committal proceeding will entail an investigation of the relationship between Mr Weston and Mr Beaufils which is at the heart of the civil proceeding in this Court. It will also, of course, entail an investigation of the particular transaction, alleged to have involved a forgery, upon which both the prosecution and one section of the civil proceedings centre. In those circumstances, it is urged that the civil proceedings should be stayed until after the conclusion of the committal hearing. Any attempt to delay the civil proceeding for the possibly two years which might elapse if Messrs Beaufils and Brownlee are committed for trial is expressly disavowed. It is said that is not the present application, although counsel was not prepared to say that no such application would ever be made.

7. A passing note should perhaps be made that there is a third proceeding arising out of the circumstances, which has been adjourned pending determination of the prosecution. That proceeding concerns a complaint to the Law Society; and its adjournment was on the basis that Mr Beaufils will not practice law during the adjournment.

8. At the forefront of the submissions put on behalf of Messrs Beaufils and Brownlee, was the proposition that a civil hearing prior to the committal hearing would prejudice what was described as their "right of silence". It was also said that no great delay would arise from a deferment of the civil hearing until after the committal hearing, which might result in dismissal of the charges, and that there was a risk Mr Weston might change his evidence if Messrs Beaufils and Brownlee were cross examined before he gave his evidence in the committal proceeding. It is suggested that Mr Weston instigated the criminal investigation, and also or alternatively the action of the Law Society, for the specific purpose of embarrassing or obstructing his opponents in the present litigation. (I should say at once that I do not reach that conclusion.) It is pointed out that the criminal charges are serious, and it is suggested there is no countervailing prejudice of any equivalent extent to Mr Weston. A claim of financial difficulty in defending both proceedings at the same time is also made, but without detailed substantiation.

9. In answer to the motion, counsel for Mr Weston emphasizes his prima facie right to have his case heard without impediment by virtue of other proceedings. He submits that delay would cause very great prejudice to Mr Weston because of the large number of parcels of real estate the title and control of which remain in doubt or dispute, which are subject to heavy recurring burdens by virtue of the mortgages which Mr Beaufils and Mr Brownlee are said to have raised over them. I accept that, on the assumption of course that Mr Weston has a good claim, it is a very considerable prejudice for him to be kept out of the exercise of his rights in respect of the properties for any lengthy period, during which problems of management must arise and the value of his rights may be diminished. Counsel for Mr Weston argues that it is quite unreal to look upon this motion as concerned only with a delay of some six months or so. If there is a committal, after the Magistrate has heard both the direct evidence of Mr Weston and the expert handwriting evidence to substantiate the alleged forgery and other elements of the charge, and cross-examination, the nearer the approach of a criminal trial, the stronger will be any case Messrs Beaufils and Brownlee have for a stay pending the conclusion of that trial. The Court should therefore take account of at least the significant risk that any stay granted now would, in practical terms, be likely to persist for a period of no less than two years.

10. I was referred to a number of authorities. I think the starting point is the decision of the Court of Appeal division of the Supreme Court of New South Wales in Rochfort v. John Fairfax and Sons Ltd (1972) 1 NSWLR 16, where Sugerman ACJ (with whom Holmes and Mason JJA agreed) referred (at 19) to
    

"the fundamental principle that a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court, subject only to an exercise of judicial discretion on proper grounds as part of the court's inherent powers".

Taking this statement as a starting point, Wootten J in McMahon v. Gould (1982) 7 ACLR 202 set out (at 206-207) what he described as "guidelines" for the exercise of the court's discretion upon an application such as that now before me. It is unnecessary to repeat these guidelines, which are well known, and have been set out again subsequently, particularly in Cameron's Unit Services Pty Ltd v. Whelpton and Associates Pty Ltd (1984) 59 ALR 754 at 757-758. It is sufficient for the present to note that the guidelines commence, as I have indicated, with the prima facie entitlement established by Rochfort, drawing the conclusion that "(i)t is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds", but they acknowledge that the court's task is the balancing of justice between the parties, taking account of all relevant factors. Those factors include the right of silence, as it has been called, which, however, "does not extend to give ... a defendant as a matter of right the same protection in contemporaneous civil proceedings", so that:

"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". (Emphasis original.)

1. Each of the cases I have mentioned has been cited on numerous occasions since. It is unnecessary to go through all the references. I will however refer to Philippine Airlines v. Goldair (Aust.) Pty. Ltd. (1990) VR 385, a decision of Young CJ in which the claim of a right of silence was discussed in some detail. Young CJ concluded (at 390) that it was
   

"a right which relates to criminal proceedings and it would need a very strong case indeed before the court should intervene solely on that ground to stay civil proceedings pending the determination of criminal proceedings."

1. In two recent decisions, the Court of Appeal division of the Supreme Court of New South Wales has returned to the subject: Halabi v. Westpac Banking Corporation (1989) 17 NSWLR 26 and Yuill v. Spedley Securities Ltd (in liq.) (1992) 8 ACSR 272. In each of these cases McMahon v. Gould was accepted as stating the law. In the former, McHugh JA (at 59) referred to the approach evinced in McMahon v. Gould as "the established direction of the Australian law on this subject". Samuels JA (at 48) agreed with McHugh JA on that aspect of the case. Kirby P reached the same result without referring to McMahon v. Gould. In Yuill, Kirby P did refer to McMahon v. Gould (at 274) as expressing "the existing law", although he indicated he thought that "(o)ne day it may be appropriate for this court to reconsider the guidelines" there stated. However, Priestley JA (at 275), apart from what seems to me, with respect, to be a merely verbal reformulation, held the guidelines to be "irreproachable". Meagher JA (at 276) thought there was no occasion to reconsider McMahon v. Gould.

2. An even more recent decision is that of Hill J in Hurley v. Federal Commissioner of Taxation (1992) 92 ATC 4,471. As it happens, that case involved the very same charge with which the present case is concerned, under s. 178BA of the Crimes Act 1900. Hill J referred (at 4,473) to a list of cases in which Cameron's Unit Services Pty Ltd has been followed. Referring to the "guidelines", he pointed out they do not deny that the matter remains one for the discretion of the court. In the context of a taxpayer's application for a stay of a taxation appeal pending the conclusion of a prosecution against him, Hill J said:
   

"The true position, in my view, is that the court must weigh up against the Commissioner's right to have the taxpayer's application heard and decided, the danger that prejudice or injustice may be caused to the taxpayer in the criminal proceedings. What must be considered is what Sheppard J referred to in Sterling (Sterling Industries Ltd v. Nim Services Pty Ltd (1986) 66 ALR 657) and in Baker (Baker: Re Flatwash Pty Ltd v. Federal Commissioner of Taxation (1987) ATC 4,626) as 'the requirements of justice overall'."

1. In my opinion, the correct approach is to use the guidelines as appropriate assistance for the Court, remembering that ultimately the question is whether the prima facie right established in Rochfort should be modified in order to fulfil the principle of justice emphasized by Hill J, that is, to achieve the requirements of justice overall.

2. In pressing his submissions based on the "right of silence", counsel for Messrs Beaufils and Brownlee referred me to the rule stated in the High Court of Australia in Pyneboard Proprietary Limited v. Trade Practices Commission (1983) 152 CLR 328 at 340, where it was said:
   

"The rule of the common law nemo tenetur seipsum accusare is seen as too fundamental a bulwark of liberty to be categorised simply as a rule of evidence applicable to judicial and quasi-judicial proceedings."

Notwithstanding the principle there affirmed, which is a fundamental rule in the administration of the criminal law: Petty v. The Queen (1991) 173 CLR 95 at 99, Deane J in Hammond v. The Commonwealth of Australia (1982) 152 CLR 188 at 206 did not see any conflict ordinarily arising between contemporaneous committal proceedings and a court hearing of a civil claim based on the subject matter of the committal proceedings.

1. In my opinion, the pendency of the committal proceeding in the present matter is not a factor which should be allowed to override Mr Weston's prima facie entitlement to proceed to a hearing. Although statements of the rule (including the statement in Rochfort) refer to the ordinary course of litigation in the court, I do not think that language is intended to exclude cases where there is a grant of expedition on the basis that the principles ordinarily applied in the court would require such a grant to be made. Mr Weston's prima facie entitlement is to a hearing in accordance with the practice of the court as it would apply in the circumstances which in fact relate to his particular case. In my opinion, the serious prejudice to very valuable property rights, in the circumstances of this case, must be thrown into the scales in aid of the right which Rochfort establishes. The matters put on behalf of Messrs Beaufils and Brownlee do not outweigh Mr Weston's claim to have his case heard. In particular, the argument that Mr Weston may change his story is quite exiguous; in the civil action, he will be cross-examined before Mr Beaufils has to give evidence, and his story can be elicited in whatever detail Mr Beaufils's counsel thinks appropriate. Taking into account the matters referred to in the guidelines established by McMahon v. Gould, and in all the circumstances of this case, I exercise my discretion against the grant of a stay.

2. The motion for a stay will therefore be refused, and I turn to the motion for security for costs. This application is grounded upon s. 56 of the Federal Court of Australia Act 1976. It is made against a natural person, Mr Weston, not a corporation, and Mr Weston is a person resident within Australia. However, reliance is placed on Order 28 r. 3(1)(b) on the basis that Mr Weston is suing for the benefit of a corporation, Wan-Chi Pty Limited, in which some of his real estate was vested prior to the events on which the statement of claim is based. It is argued that Mr Weston may be unable to pay the costs of the respondents to the action, if ordered to do so, because of his potential liability to be required to pay fines and penalties in respect of his taxation affairs.

1. However, on the facts, I am not persuaded that there is, within the meaning of r. 3(1)(b), reason to believe that Mr Weston will be unable to pay the costs of the respondents if ordered to do so. His assets are plainly very considerable, and there has been no serious attempt to delimit their extent. His outstanding tax bill, though large, on the evidence before me, does not appear to be enormous in comparative terms.

2. Even if I should regard Mr Weston as in the relevant sense impecunious, I would not make an order for security for costs. There is a very important principle that an impecunious natural person is entitled to rely on the general rule that poverty is no bar to a litigant: Barton v. Minister for Foreign Affairs (1984) 2 FCR 463 at 469: Cameron's Unit Services Pty Ltd v. Kevin R. Whelpton and Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 53. Furthermore, it is a relevant circumstance, which may warrant the refusal of an application for security, that a plaintiff's financial difficulties stemmed from the very transactions the subject of the proceedings: Cameron's Unit Services (the 1986 case) at 52; Jodast Pty Ltd v. A and J Blattner Pty Ltd (1991) 104 ALR 248. While any difficulties Mr Weston may have are partly of his own making, the arrangements with respect to his affairs which have led to this action must be accorded a considerable role.

3. I do not think the case falls within r. 3(1)(b). Mr Weston is seeking to recover on his own behalf, not on behalf of a company which, on the evidence, never held beneficial title, but was merely the repository of legal title as trustee for Mr Weston. That is not the situation of which the rule speaks. In any case, I do not think this is a matter in which I should exercise my discretion in favour of the making of an order. The application for security for costs will be dismissed.

4. As both aspects of the motion have failed, the proper order as to costs is that the applicants in the motion should pay the costs of Mr Weston.