Zuce Tech Pty Ltd v Ebert

Case [2024] QCA 219

SUPREME COURT OF QUEENSLAND

CITATION:

Zuce Tech Pty Ltd v Ebert [2024] QCA 219

PARTIES:

ZUCE TECH PTY LTD
ACN 624 749 257
(appellant)
v
GLEN IAN EBERT
(respondent)

FILE NO/S:

Appeal No 12833 of 2024
SC No 11846 of 2024

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – Unreported, 23 September 2024 (Wilson J)

DELIVERED ON:

8 November 2024

DELIVERED AT:

Brisbane

HEARING DATE:

21 October 2024; 31 October 2024

JUDGES:

Bond and Flanagan and Boddice JJA

ORDERS:

1.   The appeal is allowed.

2.   The orders below set aside.

3.   The application for a stay is dismissed.

4.   The respondent pay the appellant’s costs of the application below and of this appeal, to be assessed on the standard basis.

CATCHWORDS:

PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – INHERENT AND GENERAL STATUTORY POWERS – TO STAY OR DISMISS ORDERS OR PROCEEDINGS GENERALLY – STAY OF PROCEEDINGS – SELF-INCRIMINATION PRIVILEDGE – INTERFERENCE WITH DISCRETION OF COURT BELOW – where the primary judge granted a stay of proceedings for six months, or until further order – where there is a significant factual overlap between the proceeding and a criminal investigation – where the stay was granted on the basis the respondent was prejudiced if required to defend the civil proceeding, in circumstances where the appellant had elected to make a criminal complaint and any prejudice to the appellant from a stay, was not significant and could be met by an award of damages – where the primary judge applied the companion principle in the exercise of discretion – where the respondent had not been criminally charged – where evidence had not been led that the respondent would be able to meet any award of damages – whether the primary judge erred in exercising the discretion to grant a stay of the proceedings

Charara v Commissioner of Police (2008) 182 A Crim R 64; [2008] NSWCA 22, cited
McMahon v Gould (1982) 7 ACLR 202, considered
R v Independent Broad-Based Anti-Corruption Commissioner (2016) 256 CLR 459; [2016] HCA 8, applied
Smith v Kelsey (2020) 4 QR 1; [2020] QCA 55, considered
Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562, considered

COUNSEL:

N H Ferrett KC, with J P Hastie, for the appellant
P K O’Higgins KC, with L E Gamble, for the respondent

SOLICITORS:

Macpherson Kelley for the appellant
JCL Law Partners for the respondent

  1. THE COURT:  By originating application, filed 6 September 2024, the appellant sought interlocutory and other relief in relation to confidential information, equipment and other property, said to have been unlawfully taken by the respondent.

  2. By application filed 17 September 2024, the respondent sought an order that the proceeding be stayed until the completion of any criminal investigation or prosecution of him, in respect of a complaint made to police, in relation to the confidential information and other property.

  3. On 23 September 2024, the primary judge ordered that…

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Zuce Tech Pty Ltd v Ebert [2024] QCA 219
Case
[2024] QCA 219
Decision Date

CaseChat Overview and Summary

In the case of Zuce Tech Pty Ltd v Ebert, the appellant sought to challenge a decision of the primary judge who granted a stay of proceedings for six months. The dispute centred on whether the primary judge correctly exercised his discretion to grant a stay in light of a significant factual overlap between the civil proceeding and a related criminal investigation. The appellant argued that the stay was inappropriate due to the absence of any charges against the respondent, the lack of evidence regarding the respondent's ability to pay any damages, and the potential for prejudice to the appellant if the stay was not granted.

The primary legal issue was whether the primary judge correctly exercised his discretion to grant a stay of proceedings, considering the principles governing such discretion and the specific circumstances of this case. The court needed to determine whether the primary judge applied the correct legal principles and balanced the competing interests of the parties appropriately.

The primary judge found that there was a substantial overlap between the civil proceeding and the criminal investigation, which could prejudice the respondent if the civil proceedings continued. The judge acknowledged that the respondent had not been charged but noted that a warrant had been issued for a search, indicating an ongoing investigation. The judge also highlighted the respondent's right to silence and the risk of self-incrimination if he were compelled to provide information in the civil proceedings. The judge concluded that the balance of justice favoured granting a stay, as the respondent faced a real risk of prejudice if required to defend the civil proceeding while also facing a criminal investigation.

The court allowed the appeal and set aside the orders below. The stay was dismissed, and the respondent was ordered to pay the appellant's costs of the application below and of this appeal. The decision underscored the importance of balancing the rights of the parties and ensuring that any stay of proceedings is justified by a real risk of prejudice to the party seeking the stay.

Orders

Orders of the court

1. The appeal is allowed.

2. The orders below set aside.

3. The application for a stay is dismissed.

4. The respondent pay the appellant’s costs of the application below and of this appeal, to be assessed on the standard basis.

Background

Background to the litigation

The appellant’s second further amended notice of appeal relies on eight grounds. First, that the primary judge erred by accepting that it was sufficient for the respondent to demonstrate a substantial overlapping of facts in the proceeding and the apprehended criminal proceedings. Second, that the primary judge erred in regarding the fact that the appellant made the complaint to the police as a factor favouring the grant of a stay. Third, that the primary judge erred in failing to take into account the appellant offered a worthwhile undertaking. Fourth, that the primary judge erred by failing to take into account the appellant’s interests in obtaining interlocutory protection and the failure by the respondent to put on any evidence of ability to meet any damages awarded. Fifth, that the primary judge erred in not applying the guidelines relevant to the exercise of the discretion to stay a civil proceeding pending resolution of related criminal proceedings and thereby acted on a wrong principle. Sixth, that the primary judge erred by taking into account that any prejudice suffered by the appellant could be adequately compensated by an award of damages when there was no evidence of the respondent’s ability to meet any anticipated damages. Seventh, that the primary judge’s order was unreasonable. Eighth that the primary judge erred by holding that the rule that a person charged with a crime cannot be compelled to assist the prosecution, applied in circumstances where the respondent had not been charged with any crime.Facts The appellant was incorporated on 1 March 2018. Shortly after its incorporation, its sole director and shareholder, Glen Hadden, agreed with the respondent (who had previously been employed by Mr Hadden in other businesses) that the respondent would acquire two shares in the appellant, thereby holding 20 per cent of its issued share capital. As part of that shareholders’ agreement, the respondent assumed the role of General Manager of the business, having access to its books, records, accounts and confidential information. In or about May 2018, the appellant commenced operating a business supplying motor vehicle tuning services to customers, as well as distributing hardware and software manufactured by an Italian company known as Alientech and supplying training services in respect of its products. The appellant was the only authorised distributor of those products in Australia and the only authorised supplier of training in the southern hemisphere. As part of that business, the appellant used Alientech hardware and software, accessing an electronic database using a unique login name and password. In February 2024, Mr Hadden was seriously injured in a major accident. He was in a coma for two weeks and remained in hospital for a further 12 weeks. During that period, the respondent continued to operate the appellant’s business.Originating application The appellant’s affidavit material alleged that from about May 2024, the respondent began to express discontent in respect to the operation of the business and its structure. The respondent also complained that Mr Hadden had been taking money out of the business. Proposals were circulated by the respondent for either taking control of the appellant, or acquiring additional shares. None of the proposals were acceptable to Mr Hadden.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The basis for the stay was that there was a significant factual overlap between the proceeding and the criminal investigation, such that the respondent was prejudiced if required to defend the civil proceeding, in circumstances where the appellant had elected to make a criminal complaint and any prejudice to the appellant from a stay, was not significant and could be met by an award of damages.Primary judge’s decision The primary judge summarised the relevant evidence and the relief sought, noting that the interlocutory relief included delivery up by the respondent of any equipment and stock in his possession or control and any materials which recorded or contained the whole or any part of the confidential information, together with a restraint from using, copying or disclosing to any person, any of the confidential information. The primary judge also summarised the relevant principles for the exercise of a power to grant a stay of civil proceedings when a party is faced with the prospect of criminal proceedings, in respect of the same conduct. The primary judge found: that there was a substantial overlap between the complaint to police and the proceeding; that whilst the respondent had not been charged, a warrant had been issued authorising the search of the appellant’s home for the relevant property and confidential information; that police had subsequently offered the respondent an interview, with the respondent exercising his right to silence; that police were continuing to investigate the complaint; and that in those circumstances, the respondent did face potential criminal proceedings. After noting that police were contacted about a criminal complaint and the appellant then commenced the proceeding, the primary judge found:“… this is not a case in which the litigants’ competing rights are in jeopardy because others have caused the pursuit of a criminal case which happens to have some partial factual overlap with civil case pursued by the applicant. … in this case the police were contacted prior to the applicant commencing the proceedings in this court. During the hearing, I observed that the respondent had been checkmated in that if he engages with the civil proceedings he would abrogate his right to silence. Or if he maintains his right to silence, then the civil proceedings would continue without meaningful contest.”[1][1]AB 16/41–AB 17/2. After recording the submissions of the parties, including the appellant’s submission that the complaint to police was not an attempt to leave the respondent in a position where he could not respond to the allegations, the primary judge found:“This … is not about stopping the criminal investigation. It is about whether in the interests of justice, the civil proceeding should be stayed due to the criminal investigation. I should also make it clear that upon considering the material, there is insufficient evidence for me to conclude that the [appellant] embarked on a deliberate forensic strategy to checkmate the respondent.But the fact does remain that there are civil proceedings on foot where [the appellant] seeks interlocutory orders that would mandate the respondent to do certain things at the same time he faces a criminal investigation brought about by [the appellant]. As the respondent states this, that all I have to be satisfied is the facts are that there are two parallel proceedings in the effect of, ‘it is what we say it is.’ The fact that whether it was deliberate, not deliberate, done on advice, not done on advice, does not really matter if [the appellant] has chosen to do these things and certain consequences flow from that. In this case, the respondent states the balance of justice between the parties favours the granting of a stay, pending the disposition of any criminal investigation and proceeding.”[2][2]AB 18/21–AB 18/37.

Ratio Decidendi

Legal Principle Established

After recording the parties’ submissions as to the consequence should no stay of proceedings be ordered, the primary judge found:“… in my view, the respondent will suffer prejudice if the stay is not granted. The interlocutory relief [the appellant] seeks is the [indistinct] of certain items and confidential information and the restraint of use of confidential information. I note that a search warrant was executed in relation to the respondent about a Criminal Code offence of stealing by clerks and servants.…[The appellant] states that their main concern of the interlocutory application is for the deliver up of the items and confidential information. In particular, the deliver up of the confidential information.…In my view any order requiring the respondent to deliver up items would compel him to deliver up many items if he has them that the police were, indeed, searching for pursuant to the search warrant. Further, an order requiring the respondent to deliver up the confidential information would be an order compelling the respondent to do something that may very well incriminate himself. That is, if he is in possession of such information which the applicant states that it owns. That is, the respondent would be in possession of the applicant’s property in the context of the police investigating him for stealing as a servant of the respondent.…In Australian Securities and Investment Commissioner v Taylor [2023] FCAFC 189, Mortimer CJ and Abraham J referred to the privilege against self-incrimination and the associate rate of silence and observed that ‘It is important that underpinning those concepts is the prosecution cannot compel a person charged with a criminal offence to assist in the discharge of its onus of proof. A fundamental principle of the common law is that it is for the prosecution to prove the guilt of an accused person, an aspect of the accusatorial nature of a criminal trial in our system of criminal justice. That is referred to as the companion principle, and it is a companion of criminal trials and it is engaged when there is a prosecution pending.’Any order for the respondent to deliver up equipment and stock and confidential information would be compelling the respondent to assist the police investigation and prosecution in a discharge of its onus of proof.…In this case, I note that the circumstances relevant to both the civil proceedings and the criminal investigation are substantially identical, and as the High Court said in Zhao, it was not necessary for the respondent to state the specific matters of prejudice before a stay could be contemplated. To require the respondent to do so would be to make the risk of prejudice a reality by requiring him to reveal information about his defence, the very situation which an order for a stay seeks to avoid. The burden is on the respondent to show that it is just and convenient that [the appellant’s] ordinary rights should be interfered with. The court must balance justice between the parties, taking into account all of the relevant factors, including of which the consideration of the respondent’s right to silence in the criminal proceedings, all of which I’ve done. This is, as I’ve said, not a case in which the litigant’s competing rights are in jeopardy because third parties have caused the pursuit of a criminal case with a civil case pursued by [the appellant].I am satisfied that in this case the risk of prejudice to the respondent is real. There is a significant factual overlap between these proceedings that have been brought by [the appellant] and the criminal investigation that the respondent faces. The respondent has not already disclosed his defence in these proceedings. In order to respond to the civil proceeding it can be inferred that it would be necessary for him to provide evidence in response to Mr Hadden’s affidavits, including their conversations and communications, their agreements, the physical dealing with property monies including the respondent’s documentary evidence of those matters. The prejudice to the respondent, in my view, is obvious. He is in a position where he must make the invidious choice to make – either effectively waive his right to silence or be substantially prejudiced in these proceedings, being unable to dispose to a stab standard response. And, further, if he was required to deliver up items or confidential information it would be compelling him to assist the police in their investigation. I note even if matters disclosed in the course of the civil proceedings are not admissible against the respondent any criminal proceedings prejudice may result from indirect evidence.On the other hand of the – on – I do note that on the material, I do acknowledge that a stay would significantly delay the resolution of the civil proceedings and, further, Mr Hadden, on behalf of [the appellant], deposes to significant impacts on its business. And he sets out the financial loss. In my view, any risk of prejudice [the appellant] can adequately be compensated by damages. I note that any loss to [the appellant] – if the respondent is using its confidential information, equipment and/or stock to compete against it – is capable of being readily quantified. And that is the submission that the respondent’s counsel makes.[The appellant] states, however, that in the absence of evidence that demonstrates the respondent would be able to meet any award for damages, if that’s all left in circumstances where the applicant doesn’t get it is properly importantly confidential information back and to which the respondent states its – to which the respondent states it has never been the case that the absence of an ability of a defendant to meet an award for damages is sufficient for the court to enjoin them. That is not a basis for an injunction. If damages are what is sought, and that is the remedy that is sought, that is not a basis for injunction. So you cannot say, well, you have not said that you have got enough money, therefore I have an injunction.In my view, the balancing of justice between the parties requires the granting of a stay now, not at some later point. The question is how long the stay should be in place for. The respondent’s criminal solicitor deposed in his affidavit that, in his experience, in the ordinary run of case a delay in the commencement of a prosecution of six months or more may mean that the decision not to prosecute has been made. And, in my view, the stay – the proceedings is stayed for a pre – a period of six months or until further order, with the parties having liberty to apply on seven days’ notice.”[3][3]AB 19/20–AB 20/4; AB 21/36–AB 22/20; AB 23/5–AB 24/18.Consideration