Commonwealth Life Assurance Society Limited v Brain [1935] HCA 30

Commonwealth Life Assurance Society Limited v Brain [1935] HCA 30 - HCA 1935 case summary — Zoe

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The first question put to the jury was founded, no doubt, upon the decision of this Court in Davis v. Gell (1). There is an Indian case, Balbhaddar Singh v. Badri Sah (2), which may require consideration on some future occasion, though happily that occasion - is not now, for the jury's answer to the first question, which is warranted by the evidence, relieves us of that duty in this case, The Indian case is, however, little if at all known in Australia, and - an outline of the facts and the decision may be useful. It was an appeal from the Judicial Commissioners of Oudh to the Privy - Council, which I noticed in The Times Weekly Edition, dated 25th - March 1926, at p. 260, but which, so far as I know, is not reported _ in the Indian Appeals or in any other series of reports. The suit | was one for damages for malicious accusation of murder, and seems _ analogous to, if not identical with, the action for malicious prosecution - known to the English law. (See Pollock on Torts, 13th ed. (1929), p. ' 660 ; India Civil Wrongs Bill, sec. 42). The crucial averment was that - the respondent, Badri Sah, had tutored certain persons to say that - the appellants were implicated in a murder, and that these persons made a statement to the police accordingly. The statement was laid before a magistrate by the police, who, after examining some - other witnesses, issued a warrant for the arrest of the appellants. - The appellants were not arrested, but appeared voluntarily before the magistrate and were discharged. Subsequently the civil suit" was raised for damages for malicious accusation of murder, or shortly, malicious prosecution. On appeal from a subordinate Judge, the Judicial Commissioners of Oudh held that " the plaintifis"

the appellants before the Judicial Committee - * have failed to prove their innocence of the crime." On appeal to the Privy Council, Viscount Dunedin, in delivering the judgment of their Lordships, said : - '' Unfortunately, however, they " (the Judicial Commissioners

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"took a completely wrong view of the law. In their they put the matter thus: 'In an action for malicious rosecution, the plaintiff has to prove - (1) That he was prosecuted e defendant; (2) that he was innocent of the charge upon h he was tried ; (3) that the prosecution was instituted against without any reasonable and probable cause ; (4) that it was due a malicious intention of the defendant, and not with a mere intention of carrying the law into effect.' Proposition (2), as stated, vas quite erroneous. It should be ' That the proceedings complained nated in favour of the plaintiff if from their nature they were e of so terminating." In any country where, as in India, d Viscount Dunedin, prosecution was not private, an action malicious prosecution in the most literal sense of the word could be raised against any private individual. But giving information the authorities which naturally led to prosecution was just the thing. Pandit Gaya Parshad Tewari v. Sardar Bhagat Singh (1), in Davis v. Gell (2), puts this latter proposition somewhat more ly. But in the present case the first question was rightly put the jury in view of the decision of this Court in Davis v. Gell. e second question was challenged, and the answer, it was nded, was contrary to the evidence. Detective-Sergeant ence actually laid the charge of conspiracy against the appellant, 1 he stoutly maintained that, in laying the information, he was moved or influenced in any way by the appellant or its officers. is not enough to say that the prosecution was instituted and ed by the police. '' The mere setting of the law in motion ot the criterion" ; the conduct of the appellant " before and after the charge must also be taken into consideration." A person giving nation to the police is by no means necessarily a prosecutor. question in all cases of this kind must be - Who was the or ? and the answer must depend on the whole circumstances e case" (Davis v. Gell (2), citing Pandit Gaya Parshad Tewari Bhagat Singh (1) ). In my opinion, there was evidence in ent case fit to be submitted to the jury that the appellant prosecutor. I shall not go in detail through that evidence,

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relation between the wrong done and the solatium applied." The relevant facts here are as follows: - About the year 1926 two companies, known respectively as the Commonwealth Life Assurance - Society Ltd., and the Citizens and Graziers' Life Assurance Co. Ltd., sold and transferred their assets and business, and their undertakings

with an exception immaterial to matters now in hand - to the Commonwealth Life (Amalgamated) Assurances Ltd. The Common- - wealth Life Assurance Society Ltd. held 103,000 out of 155,778 | shares in the Amalgamated company, and therefore controlled it. In 1932 a proposal was made by the Associated Dominions Assurance Society Ltd., of which one Page was the managing director, to purchase the business of the Commonwealth Life (Amalgamated) Assurances Ltd. According to Page, the proposal was made upon the suggestion of one Sydney Smith, conveyed to Page by one Partridge. The proposal was declined, and not without good reason. The Associated Dominions Assurance Society Ltd. was quite unable to finance any such transaction out of its own funds. It proposed, as I gather the facts, to raise the cash required from some bank or other financial institution, and secure the sum so raised by assets it obtained from the Amalgamated company. Partridge, who assisted in the proposal, was a man with whom no reputable business man desired _ to be associated, and Smith was a man whose life, according to himself, - was devoted to the purpose of "bettering the shareholders and policy holders in the Amalgamated company." He was not a shareholder or policy holder, but he took an interest in members of the Bank Officers' Association, some of whom, apparently, were shareholders in the Commonwealth Life Assurance Society Ltd., _ and his father held 100 shares, paid up to 18s., in that company. He knew nothing of the financial position of the Associated Dominion Assurance Society. Smith was by no means satisfied when proposal of the latter society was declined. In November of 193

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ge for shares which it issued. The uncalled capital of each e constituent companies was to be at the command of the mated company. This Court has already been called upon to der some of the difficulties to which the arrangement has given and in doing so has discussed more at large the nature and the of the combination between the original companies (Citizens aziers' Life Assurance Co. vy. Commonwealth Life (Amalgamated) es Ltd. (1) ). The directors of the Amalgamated company, oat its inception were four in number, consisted for the first three years of two named members of the respective boards of directors of the two constituent companies. The prosecution of which the pondent has complained with so much success was instituted on Mth February 1932 against him and three others for a conspiracy supposed object of which was to bring about a change in the ontrol of the appellant company so as to force the Amalgamated ny to dispose of its business to another insurance company to lich the ultimate design was imputed of distributing the funds at the of the policy holders. The charge laid in the information that they did amongst themselves conspire together to cheat defraud divers shareholders and policy holders of the Common- Ith Life (Amalgamated) Assurances Ltd. of divers large sums of y.. The respondent's connection with the appellant company n with its formation in 1926, when he was appointed a director. same year he was appointed for five years upon the staff of the gamated company. He had been seriously ill and had lost his » Inthe following year a new general manager was appointed ie Amalgamated company. Very soon the new general manager. name was James 8. Inch, objected to the position occupied 'the respondent. After a correspondence in which Inch's views ere expressed without much restraint, the respondent's employment rminated as from 4th May 1929. In the previous year under the manager of the Amalgamated company some dissatisfaction ted among a section of shareholders in the appellant company, of whom were members of the Bank Officers' Association. The tary of that body, Sydney Smith by name, one of the three charged with the respondent, took occasion to busy himself

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of the proposal. The principal concern of the directors of the constituent companies was a notice, which, in July, each company had received from the Amalgamated company, requiring it to make a shilling call upon its shares in order to provide in part for a deficiency of £60,660 disclosed by the actuarial calculation, or ascertainment, of the liability of the Amalgamated company. The directors of the | appellant company, including the respondent Brain, resolved to make the call, and, on 12th July 1932, sent a circular to their share -_ holders explaining that it was necessitated by the actuarial disclosure _ of the Amalgamated company's position coupled with the unexpected reduction of interest upon the company's Government securities _

an explanation which, no doubt, the directors were impelled to - make in view of their chairman's circular of 25th November of the previous year stating that they were unlikely to make a call in the immediate future. But the Citizens and Graziers' Co, delayed compliance with the Amalgamated company's request. At length, on 10th October 1932 at a board meeting of the Amalgamated company Mr. Cohen said that he had been directed to obtain counsel's opinion on the question whether the Citizens and Graziers Co. was bound to make the call, but that the board of that company unanimously undertook that, if counsel's advice was that the Amalgamated com- pany could enforce against that company an obligation to make a call, the board would make it without further controversy and pay it over. While matters were in this position, the respondent Brain suddenly revived the question of Inch's appointment as managing director. On 2nd November 1932 he sent a request in writing that a meeting of the board of the appellant company should be convened. At the meeting, which took place on 4th November, he moved that Inch be informed that the directors of the appellant company had decided to exercise their right to call upon him to re-transfer the 506 shares in the Amalgamated company which had been transferred into his name to qualify him to sit on the board of the Amalgamated com- pany. The motion was rejected. ; About this time, a circular letter to the shareholders of the appellant company was put in preparation. It was expressed to come from Sydney Smith "as chairman of the shareholders' committee" and

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send it. Brain says it was drawn up before he " came into it." sent in his resignation as a director of the appellant company ani dated it also 22nd November 1932. His resignation was accepted on 28th November, and on 10th December Higgs, who resigned th secretaryship, was appointed in Brain's place. Inch was appointed general secretary. At the previous meeting of the board, which - took place on 5th December, Inch had produced copies of the circulars which had come into his hands and the board resolved that he, actuary and Higgs be appointed a committee to take whatever action and to incur any expense they might think necessary to protect the : interests of shareholders and policy holders. Late in November, according to Inch's report to his directors, a Mr. J. Sutherland - interviewed Inch and said that he had come from New Zealand, that he was acting on behalf of a syndicate which proposed to amal- gamate a number of life offices and that gentlemen named Cull, Clapham and Sawyer would become the directors if the Amalgamated company was acquired. He offered first £25,000 and then £35,000 for its business. On 6th December Sergeant Lawrence and Sergeant Clifford were called in. Sergeant Lawrence interviewed Sutherland at the Amal- gamated company's office. He does not appear to have obtained much information from him. But from that time Lawrence under- took the investigation of the relations of Page, Smith and Brain to the Commonwealth life companies. k In the office of the Associated Dominions Assurance Society Ltd. was an accountant named Sayers, who had formerly been employed - by the People's Prudential Insurance Co. and had given evidence for the Crown in the prosecutions which arose out of that compat collapse. According to Lawrence, he had seen Sayers not long before in relation to some other matter. Sayers now communicated with him and told him that mysterious people were coming and g from the company's office, including Brain and Partridge, and th Corkhill, the secretary, was very worried. Later on he produced - a paper containing a copy of a letter which he said he had copied from some new carbon paper used in a typewriter which Corkhill's typist used. W. T. Page was away in Melbourne and the appeared to be from Corkhill to him. The original paper said

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Bear, lame and Brain were concerned and the police intended to take criminal - Soarmry, Lr. proceedings against them. He said that the volume of material Brary. and the unfamiliarity of the police with such matters made it desir- Dixon J. able to have legal assistance in the conduct of proceedings and asked Senator McLachlan to put the board's solicitor at their service and to provide counsel. Senator McLachlan consulted the Commissioner of Police. The prosecution of Page and Corkhill upon Frank Page's information for a false balance-sheet was conducted by counsel briefed by the appellant's solicitors at its expense, and after the Crown Solicitor had given his concurrence this course was followed in the subsequent prosecution for conspiracy. The general meeting summoned in compliance with the requisitions handed in by the respondent, Brain, was held on 2nd February 1933, So far from removing directors. resolutions were passed in favour of the existing board, which had obtained a large number of proxies, The proxies obtained by Smith and Brain which had been seized were not surrendered to them. What else happened in the eight days between the meeting and 10th February 1933, when the informa- tion against Page, Corkhill, Smith and Brain for conspiracy was laid by Lawrence, does not clearly appear. The detective-inspector : of police in charge of the Criminal Investigation Department gave evidence that, at a time he fixed as about the middle of January, Lawrence and Clifford discussed with him "the matter of Brain - and Smith endeavouring to obtain proxies to get the voting power of the Commonwealth Life Association and that another man, named Partridge, was in the background and that there was no evidence against him." They produced some statements, all of which he did not read. He authorized a prosecution for conspiracy. Other evidence was given that the counsel instructed by the company's - solicitors advised that there was no evidence against Partridge. Both prosecutions resulted in committals for trial. But in each - case the Attorney-General refused to file an indictment. Upon the charge of conspiracy to defraud the policy holders and shareholders : of the Amalgamated company the four defendants were committed on -

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the proceedings. The verdict found could not now be supported upon the ground that it implies findings sufficient for that count. The legal standard of liability for a prosecution which is instituted neither by the defendant nor by his servant is open to criticism on the ground of indefiniteness. It is clear that no responsibility is incurred by one who confines himself to bringing before some proper authority information which he does not disbelieve, even although in the hope that a prosecution will be instituted, if it is actually 'instituted as the result of an independent discretion on the part of that authority (Danby v. Beardsley (1); Fanzelow v. Kerr (2) ). But, if the discretion is misled by false information, or is otherwise practised upon in order to procure the laying of the charge, those who thus brought about the prosecution are responsible (Pandit Gaya Parshad Tewari v. Sardar Bhagat Singh (3) ; Black v. Mackenzie (4)). Further, the Privy Council has said in a judgment delivered by Lord Dunedin : - ' In any country where, as in India, prosecution _ is not private an action for malicious prosecution in the most literal 'sense of the word cannot be raised against any private individual. But giving information to the authorities which naturally leads to "prosecution is just the same thing. If that is done and trouble ~eaused an action will lie." Their Lordships, however, held in the 2 case before them that, as the information supplied to the police was _ ample cause for the initiation of prosecution proceedings, the plaintiff

must, in order to succeed in his action, go the whole way of showing that it was false to the defendant's knowledge (Balbhaddar Singh vy. Badri Sah (5), a case containing dicta apparently inconsistent "with the decision of this Court in Davis v. Gell (6)). The rule appears to be that those who counsel and persuade the actual prosecutor to _ institute proceedings or procure him to do so by dishonestly prejudic- _ ing his judgment are vicariously responsible for the proceedings. If the actual prosecutor acts maliciously and without reasonable and probable cause, those who aid and abet him in doing so are joint wrongdoers with him.

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uestion submitted to the jury was aptly framed to obtain their H.C. oF A. pinion as to the existence of the requisite belief. If that belief 'M% d been found to exist, the question would have remained whether Commoy- » materials were enough to arouse it in a man of reasonable prudence - bes judgment, and this latter question it would have been for the - _ to decide. It is a question which might well be answered Brats. t the appellant company. It depends entirely upon the reason- Dixon J. s of an inference from the circumstances that Brain was privy any purpose of cheating and defrauding the shareholders or policy of the Amalgamated company, if such a purpose existed in the minds of others. In the statement that I have made of the of the case, the distinction is not made between matters known the time of the institution of the prosecution and those subse- uently ascertained. I think that Inch was unaware of very few the facts I have set out. Senator McLachlan, perhaps, was less well informed. Of course, the more extensive the accuser's know- ledge of facts which may reasonably be considered incriminatory, the greater the difficulty on the part of the accused in discharging, 8 plaintiff, the onus of establishing an absence of reasonable and probable cause. But the accuser's knowledge of exculpatory facts is to his disadvantage. The less he knows of these, unless it appears _ he ought to have known or discovered them, the greater a plaintiff's "difficulty. In the present case, the point seems to lie in Brain's complicity in the alleged purpose to cheat and defraud, supposing it : Hosriat. It would not have been unreasonable to infer that he was in combination with Sydney Smith and Page in an attempt to supplant the directors of the appellant company, and that he was doing so with the ultimate purpose of bringing about a sale of the _ Amalgamated company's business to Page's company. Such a trans- action might or might not be for the advantage of the shareholders or policy holders. Probably the advantage, if any, to shareholders would be immediate and would be accompanied, even if good faith observed, by a corresponding disadvantage to policy holders, and until it was countervailed by an expanding premium e. The purpose of cheating and defrauding policy holders, if entertained, could not be carried into effect until the business been transferred. It would require some fraudulent or illegal

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impression, and would perhaps justify the worse construction ofambig- uous conduct. But none of these things is illegal, although, perhaps, that they are not so is a reproach to the law of New South Wales. None involves a fraudulent application of money for his own benefit. All the facts of the case were consistent with the view that, although _ Page would permit himself any latitude in an endeavour to absorb other concerns and amplify the enterprise he controlled, he did not intend any definite fraud upon policy holders, still less shareholders. After all, the charge was conspiracy to cheat and defraud and this means a purpose of fraudulent gain. But, whatever inference might reasonably be drawn as to Page's intent, there is less ground for attributing such a purpose to Brain. Inch himself had described him as totally deaf and possibly at the mercy of the group that Page led. He had long evinced a hostility to Inch, a hostility originating in the way in which Inch had terminated his services in May 1929. His views and proceedings had been antagonistic to the board. The opinion that he professed that, in the interest of shareholders of the constitutent companies, the Amalgamated company should sell was not irrational. Brain had long been associated with the Common- wealth companies and his character had been found not incompatible with the office of director. In all these circumstances, I think a Court might hesitate to hold that, even if the person responsible for the prosecution of Brain acted upon an honest belief in his probable guilt of the charge preferred, his belief was based upon sufficient - grounds. But the jury have taken the view that such a belief was not held in fact. The finding means, I think, that Inch did not believe that the prosecution of Brain was justified. Upon the circumstances of the case I think they were at liberty so todo. At the trial, the good faith of Inch's proceedings was attacked, and from an early stage. He was not called as a witness, and the jury did not

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on by the respondent's counsel. But the materials which were ~~ C - ble or said to be available to Inch before the prosecution were Comaox- fore the jury. They may well have appeared a slender foundation "ee ae 'a belief that Brain was privy to any intent to defraud or cheat. a was open to the jury to find that Inch had attempted in sard of the facts to implicate Stack in the same charge. Todo Mixon J. may have thought that he used the fictitious telegram, in 'authenticity of which the jury may have considered that he ( never have believed. They might reasonably think that he 'ould not have been bona fide in his use of the police against Sharpe nd Stack in reference to their circular and that, again, he was willing any means to implicate opponents in the charge. Among the tements put forward as existing information sufficient to justify e prosecution was that of Frank Page, which might reasonably be und to be of later date and yet antedated. Negatively, the jury have disbelieved much of the evidence of Lawrence and Clifford. the renewal of the negotiations with Page and the conversation 'Smith suggesting the dropping of the charge might be taken fo account as tending to support the view that Inch took no very us view of the actions of Page and of Smith, the leader and the enant. Yet, on his own statement, he regarded Brain as "at mercy of the group." All these were matters for the jury, and, y opinion, they could not be withdrawn from it. The learned Judge's charge to the jury upon this issue was d upon this appeal, but I do not think it was calculated to them in any material matter. It was unfortunate that the n was at first made to appear to the jury as if it were alterna- ve with that relating to malice ; and perhaps it would have been e satisfactory if the learned Judge had given them a further ion when he asked them to reconsider it. But it must be d that upon the facts of this case the issue of malice was not so remote from that of the honest belief of Inch in the justness of the prosecution. The case made against him, in brief, was that 'caused a charge in which he did not believe to be preferred in to suppress a movement against himself and some of his

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It is clear that, if A and B conjointly decide to prosecute 0 upon a criminal charge, and C subsequently brings an action against A for malicious prosecution, the latter makes no answer by relying upon the fact that B has not been joined with him as a defendant, If Inch, who was the appellant's agent, combined with the detectives to procure the arrest by warrant on the information of Lawrence and to carry on the proceedings thereby initiated, the appellants became liable to be sued alone without the necessity of joining the detectives as defendants. In our opinion, there was abundant evidence upon which the jury could find that, by the conjoint action of Inch and the detectives, the plaintiff was arrested, brought before the magistrate and committed for trial ; and that the dominant member of this combination was Inch. The jury had before them evidence of the proceedings against Page and Corkhill in relation to the false balance-sheets. In those proceedings, although Frank Page was the selected informant, it is not disputed that the real prosecutor was Inch. Yet Inch had the active support and co-operation of Lawrence in such prosecution, although on that occasion Lawrence did not lay the information. It is significant that Frank Page got in touch with the detectives, not directly, but only through the intervention of the solicitors of the defendant company, who were responsible to Inch. The prosecution of W. T. Page and Corkhill in respect of the false balance-sheets cannot be dissociated from the subsequent prosecution of the same two persons together with Brain and Smith. There is sufficient evidence to support a finding that the detectives either acted under Inch's direction, or allowed Inch to assume control at a very early stage of the matter. Although Inch was not the informant in his own name, it was for the jury to determine whether, at the time of the plaintiff's arrest, Lawrence and Inch were working together, so that the former was to all intents and purposes Inch's agent and instrument. The decision of the Crown's legal advisers to convert what appeared on the surface to be a police prosecution into a private prosecution is only explicable because those advisers acted upon the information and report of Lawrence ; but the decision tends to corroborate the jury's finding that, from first to last, the prosecution was in reality a private, and not a police, prosecution. In our opinion, the jury were entitled to

At a glance

Court

Decision date

Before

Source

Judgment (456 paragraphs)

) (1878) 8 Q.B.D., at p. 171. (2) (1982) 48 C.L.R., at p. 106,

H.C.or A. - Partridge's association with the combination was alleged to be 1934-1935.