Cassaniti v McEntee & Anor

Mr T Molomby with Mr M Thangaraj COUNSEL : (Plaintiff)

Mr A Bell (Defendants) Stoikovich Banfield Macri (Plaintiff) SOLICITORS : Crown solicitors (Defendant)

CATCHWORDS : Separate determination of liability - Part 31 r 2 - alleged misfeasance in public office LEGISLATION CITED : Taxation Administration Act - ss 8XA & 8XB Income Administration Act - s 16 Idoport Pty Ltd & Anor v National Bank Ltd & Ors [2000] NSWSC 1215 CASES CITED : Tepko Pty Ltd v Water Board [2001] HCA 19; 75 ALR 775 Nominal Defendant v Niko Cencic [2001] NSWCA 69 Northern Territory v Mengel (1996) 185 CLR 307 DECISION : (1) Paragraph (2) of the plaintiff's notice of motion filed 26 October 2001 is dismissed; (2) The plaintiff is to pay the defendants' costs.

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON FRIDAY, 14 DECEMBER 2001 20494/98 - SAM PETER CASSANITI v ALAN McENTEE

Judgment (Separate determination of liability - Part 31 r 2; alleged misfeasance in public office)

1 MASTER: By notice of motion filed 26 October 2001 the plaintiff seeks order that pursuant to Part 31 r 2 of the Supreme Court Rules (SCR) there be a separate decision, prior to the decision of any other question, as to whether the supply by the first defendant to officers of the New South Wales Police Service of information acquired in the course of his employment as an auditor with the Australian Tax Office about either the plaintiff or his clients was contrary to law. The plaintiff relied on his affidavit sworn 25 October 2001. The Commonwealth was recently joined as the second defendant. The defendants oppose this application. 2 The first defendant is employed as an auditor in the Australian Taxation Office. The second defendant, the Commonwealth of Australia, is the plaintiff's employer. The plaintiff alleges that in 1995 an officer of the Australian Taxation Office (the officer) improperly and maliciously disclosed information about the financial and taxation affairs of the plaintiff to officers of the New South Wales Police Service. It is also alleged that the officer breached his statutory duties, namely ss 8XA and 8XB of the Taxation Administration Act and s 16 of the Income Tax Assessment Act.

The law 3 Part 31 r 2(a) (SCR) provides: "2. The Court may make orders for -

(a) the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings." 4 In Idoport Pty Ltd & Anor v National Bank Ltd & Ors [2000] NSWSC 1215, Einstein J helpfully summarises the authorities on separate determination of issues. The summation by his Honour is as follows: "Without examining specific cases in relation to the power conferred on the Court in Part 31, Rule 2, I proceed on the basis of the following principles. (1) The power of the Court to order the separate determination of an issue is a discretionary power which must be exercised judicially, but cannot otherwise be fettered: Dunstan v Simmie & Co Pty Ltd [1978] VR 699 at 670 per Young CJ and Jenkinson J.

(2) In exercising the power under Part 31, Rule 2, the Court is now enjoined to give effect to the overriding purpose of the Supreme Court Rules ; namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings and cannot be stated in a more confined way: Part 1, Rule 3 (1), (2) Supreme Court Rules . (3) The Court begins with the proposition that it is ordinarily appropriate that all issues in a proceeding should be disposed of at the one time: Tallglen v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141 per Giles CJ in Comm D, Hadid v Australis Media Ltd (unreported, Supreme Court of NSW, 29 March 1996 per Rolfe J). Accordingly, it is for the party who wishes to have a question separately determined to show that it is desirable for that to occur. (4) Without being exhaustive, the separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances: (a) where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy: CBS Productions Pty Ltd v O'Neil [1985] 1 NSWLR 601 at 606 per Kirby P, Dunstan v Simmie & Co Pty Ltd (supra, at 671 per Young CJ and Jenkinson J); (b) where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their dispute themselves and thus avoid further litigation: Tallglen v Pay TV Holdings (supra, at 141 - 142 per Giles CJ in Comm D); (c) where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses: CBS Productions Pty Ltd v O'Neil (supra, at 606 per Kirby P), Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Rajski v Carson (1988) 15 NSWLR 84 at 88 per Kirby P and Hope JA. (5) Conversely, the separate determination of an issue will rarely be an appropriate procedure where: (a) there are intertwined issues of fact or law between the separated question and the other questions such that the determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation: Law Society of NSW v Bruce (unreported, Supreme Court of NSW, 23 April 1996, per Rolfe J), Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J). (b) where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witness, thus possibly precluding that same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 441: Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of NSW 15 November 1994, per Rolfe J), Century Medical v THLD [2000] NSWSC 5; (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J). (c) there is a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from that decision in relation to that separate issue, creating a multiplicity of proceedings, interruption to the court and undesirable fragmentation of the proceedings: Story of Sydney Pty Ltd v Ling (supra), Century Medical v THLD (supra). (6) The experience of courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated, but often has the reverse effect, merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings: Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Parramatta Stadium Trust v Civil and Civic Pty Ltd (supra), Century Medical v THLD (supra). As Giles CJ in Comm. D (as his Honour then was) said in Tallglen (supra, at 142): "Part 31, rule 2 of the rules empowers the court to make orders for the decision of any questions separately from any other question, whether before, at or after any trial or for the trial in the proceedings, and for the statement of a case and the question for decision. In the ordinary course, all issues in proceedings should be decided at the one-time, but separate decision of a question may be appropriate where, for example, the decision of the question is critical to the outcome of the proceedings and (at least if decided in one-way) will bring the proceedings to an end. In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions, but such occasions must be carefully controlled lest fragmentation of the proceedings (particularly when the exercise of right of appeal is borne in mind) brings delay, expense and hardship - that which the making of an order was intended to avoid. It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties dispute." 5 More recently in Tepko Pty Ltd v Water Board [2001] HCA 19; 75 ALR 775, Callan and Kirby JJ made critical comments as to when it is appropriate to order that a preliminary issue be determined. At 168 to 172 their Honours stated: "The appeal should be allowed. However, we should not leave this case without making four comments. Both Mason P and Fitzgerald JA were critical of the course of limiting the issues to be tried that the primary judge adopted. In Perre v Apand Pty Ltd attention was drawn to difficulties that can be caused when that course is adopted. In light of the experience in this case, what was there said should be restated with emphasis. The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap.

The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court's, rather than the parties', interests.

Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question.

The fourth of our comments is related to evidence compiled, committed to writing and filed in advance of the hearing. Parties frequently, either together or separately, compile "books of documents". Although most of these have the potential to be admitted in evidence, often they are defective in form. Many of them are often irrelevant, or their significance is either not recognized or adverted to during the hearing. Their status, as in the case of the letter written by Mr Rhodes, can be ambiguous. Discrimination and economy should be exercised by those who prepare cases in which documentary evidence is likely to be extensive and important. Those who conduct such cases should ensure that what is actually in evidence, and its relevance and significance, are clearly identified." 6 In a recent Court of Appeal decision in the Nominal Defendant v Niko Cencic [2001] NSWCA 69, Meagher J expressed a similar view when he said "Great caution must be exercised when separating an issue for determination." 7 The critical paragraphs of the amended statement of claim are pleaded at 6 and 7. They are: "6. The first defendant contrary to his duty disclosed certain information about the financial and taxation affairs of the plaintiff and some of his clients (including confidential client STAC reports and a spreadsheet summarising details of the plaintiff's clients prepared on his own computer at the ATO) to members of the New South Wales Police Force. 7. The first defendant engaged in misfeasance in his public office by maliciously disclosing certain information about the financial and taxation affairs of the plaintiff and some of his clients (including confidential client STAC reports and a spreadsheet summarising details of the plaintiff's clients prepared on his own computer at the ATO) to members of the New south Wales Police Force." 8 As a result of the investigation the plaintiff pleaded that he has suffered damages, special damages (financial loss) and exemplary damages. 9 The ATO allegedly provided information to the Police which showed that the ATO forwarded tax refund cheques addressed clients of the plaintiff to the plaintiff. The plaintiff allegedly deposited the cheques into his account and forwarded to his clients cheques for a smaller amounts than the refund account. 10 In 1995 a search warrant was issued. Subsequently the warrant was set aside in the Court of Criminal Appeal. On 24 July 2001 the business premises and residential premises of the plaintiff were again the subject of search warrants. Up to 40 officers from the New South Wales Police Service, the New South Wales Crime Commission and the National Crime Authority remained upon the business premises from 10.00 am to 10.00 pm. Officers from the Australian Taxation Office were also present. The plaintiff's solicitor was at the premises during part of the execution of the warrants. A large bundle of records was removed. On 26 July 2001 a further warrant was executed at the business premises. 11 There is an ongoing investigation by the Police into the plaintiff's business affairs. The Police have been excused from answering a subpoena it was held to be an abuse of process - see judgment of Master Malpass dated 15 December 2000. The plaintiff submits that he will have difficulty in preparing his case on damages while the Police retain possession of his documents during their ongoing investigation. 12 The elements of the tort of misfeasance in public office were considered in the High Court: in Northern Territory v Mengel (1996) 185 CLR 307. In that case the court considered that the acts of the brucellosis inspectors were done in the mistaken belief that they had authority to impose restrictions of movement of cattle. There was, however, no act amounting to a tort of misfeasance in public office even though they acted without authority. There can be no tortious liability where the act is a valid exercise of power: Mengel. The tort is a deliberate tort in the sense that it requires an act which the public officer knows is beyond power and which involves a foreseeable risk of harm: Mengel at 347. Constructive knowledge of lack of authority is not sufficient knowledge to constitute the tort of misfeasance in public office: Mengel at 349. There must be an intention to cause harm and act which the officer knows is beyond power. 13 The plaintiff submitted that the trial on liability would take two days whereas the trial on damages will involve expert evidence from accountants, lay evidence. The damages part of the trial will be lengthy. The plaintiff conceded that the first defendant's evidence will overlap both liability and quantum issues, namely, the issue of misfeasance in public office and in particular the malicious disclosure of information and the claim for exemplary damages. The issue of intention to cause harm is relevant to both liability and damages. However, if liability were resolved in favour of the defendant, the proceedings would be at an end. It is not likely that even if liability is determined in the plaintiff's favour that the parties would be able to negotiate a settlement, although if the plaintiff loses liability the proceedings would be at an end. However, there could be two appeals instead of one. It is my view that it is not clear that a separate determination is a desirable course to adopt. Even though the plaintiff may have difficulties obtaining access to his documentation from the Police and thus there may be a corresponding delay, I am still not satisfied that the determination of liability separately would benefit the court and the parties. It is not clear that the separate determination would save court time and the parties' expenses. I dismiss paragraph (2) of the plaintiff's notice of motion filed 26 October 2001. 14 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendant's costs. 15 The court orders: (1) Paragraph (2) of the plaintiff's notice of motion filed 26 October 2001 is dismissed.

(2) The plaintiff is to pay the defendants' costs. **********

Last Modified: 12/17/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.