Midnight Seas Pty Limited v St George Bank Limited

CATCHWORDS : PRACTICE AND PROCEDURE - Stay of proceedings pending prosecution of witness - Defendants 2 and 3 applied for stay - Police prosecution of Sam Cassaniti, not a party to these proceedings, pending on three charges of fraudulently misappropriating cheques - Cheques were paid into D2 company bank account of accounting practice conducted by D3 and plaintiff sued for amounts of cheques claiming that Sam Cassaniti was instructed to pay the cheques to Australian Taxation Office - D2 and D3 unable to obtain information from Sam Cassaniti while prosecution pending - Consideration of principles relating to protection of right to silence - HELD D2 and D3 not entitled to protection of another person's right to silence and on consideration of difficulties of either side, D2 and D3 faced ordinary vicissitudes of litigation. Stay refused.

Civil Procedure Act s 56(3). Crimes Act 1900 s 178A LEGISLATION CITED : Evidence Act s 128 Trade Practices Act 1975 (Cth) s 51A UCPR 14.14(2)

Edelstein v Richmond (1987) 11 NSWLR 51 Hammond v The Commonwealth (1982) 152 CLR 188 Lee v Director of Public Prosecutions (Cth) [2009] NSWCA 347 CASES CITED : McMahon v Gould (1982) 7 ACLR 202 Niven v SS [2006] NSWCA 338 Oades v Hamilton (1987) 11 NSWLR 138 Reid v Howard (1995) 184 CLR 1 Yuill v Spedleys Securities Limited (in liq) (1992) 8 ACSR 272

MIDNIGHT SEAS PTY LIMITED (plaintiff) PARTIES : ST GEORGE BANK LIMITED (first defendant) ARMSTRONG SCALISI PTY LIMITED t/as CAP Accounting (second defendant) David Salvatore CASSANITI (third defendant)

D A ALLEN (D2 and D3/ Applicants on N/Motion) COUNSEL : C CASSIMATIS (P/ respondent on N/Motion) Ms J PARKIN - (D1 neither consents nor opposes)

Sweeney Tiggermann (plaintiff) SOLICITORS : Kemp Strang (first defendant) Proctor & Associates (second and third defendants)

• 10 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/289564 MIDNIGHT SEAS PTY LIMITED v ST GEORGE BANK LIMITED and two others JUDGMENT 1 Two interlocutory Notices of Motion in these proceedings were heard on 23 February 2010. By their Notice of Motion of 13 August 2009 the second and third defendants applied for a stay of the proceedings. By their Notice of Motion of 22 October 2009 these defendants applied for orders setting aside subpoenas for the production issued by the plaintiff to the Commissioner of New South Wales Police and the Tax Agents Board of New south Wales. 2 The third defendant Mr David Cassaniti is the director and shareholder of the second defendant and conducts an accounting practice. Mr Sam Cassaniti, who is not a party to these proceedings, is David Cassaniti's cousin. At present Police are prosecuting Mr Sam Cassaniti for three alleged offences under Crimes Act 1900 s 178A, fraudulently misappropriating valuable security. The charges are that Mr Sam Cassaniti fraudulently misappropriated to the use of Armstrong Scalisi Holdings Pty Limited (not exactly the same name as the second defendant) three cheques drawn on the account of Midnight Seas Pty Limited the plaintiff; a cheque for $9,008 misappropriated on 10 August 2008, a cheque for $282,799.35 misappropriated on 19 August 2008 and a cheque for $11,026 misappropriated on 21 September 2008. 3 Police Fact Sheets relating to the prosecution state to the effect that on 10 August 2008 Sam Cassaniti told Mr Antonio Ferraro, who is a director of Midnight Seas Pty Limited that money was payable to Australian Taxation Office and obtained a cheque for $9,008 from Mr Ferraro with instructions to make payment to Australian Taxation Office which he said he would do. At that time Sam Cassaniti was at the office of Midnight Seas Pty Limited performing accounting work. Later he obtained the other two cheques in a similar way. The cheques were not paid to the Australian Taxation Office but were deposited into a bank account of Armstrong Scalisi Pty Limited. There is nothing in the fact sheet and nothing in the evidence which shows how Sam Cassaniti's alleged actions were connected with David Cassaniti or with the accounting practice, except that the cheques were paid into the company's bank account. 4 There is next to no evidence about what has happened in the prosecution. The evidence of Mr Kekatos solicitor shows that he acted for Sam Cassaniti in the prosecution proceedings. After Mr Kekatos saw the Statement of Claim he said to Sam Cassaniti, in July 2009, "do you have any problem with me acting in the matter brought by Midnight Seas against David Cassaniti and CAP Accounting" to which Sam Cassaniti replied "No, so long as you do not use what I have said to you in the case until after my trial." Mr Kekatos now acts for the second and third defendants in these proceedings, and also acts for Mr Sam Cassaniti in the prosecutions. 5 The central issue in the prosecutions, but not the only issue, is what Mr Ferrero told Sam Cassaniti was to be done with each of the three cheques. Of course Mr Ferrero is the Crown's primary witness in the prosecution. 6 Evidence shows that at the commencement of the prosecution detectives arrested Sam Cassaniti on 29 December 2009. While in custody he was offered the opportunity to participate in an electronically recorded interview, and he declined to answer questions. 7 Mr David Cassaniti's evidence shows that on 19 March 2009 when he and Sam Cassaniti were at the Downing Centre Local Court they were approached by Detective Whitehouse who told David Cassaniti "I need to ask you various questions because you too are a person of interest in this matter". David Cassaniti said "OK do you mean that you wish to charge me also?" Detective Whitehouse said "yes, but I would like to give you the opportunity of giving me a statement first". David Cassaniti said "Before I say anything, I should obtain legal advice". There has not been any further police interview and I infer that no further steps have been taken to charge Mr David Cassaniti. 8 On the facts before me there is no reasonable ground to apprehend that he will be charged with offences; it is not claimed that Mr Ferrero gave David Cassaniti any instruction about dealing with the cheques. The application for a stay was not based on protection of David Cassaniti against compulsion to make any potentially incriminatory statements. 9 There is no evidence at all about any later step in the prosecution of Sam Cassaniti after he was at Downing Centre Local Court on 19 March 2009. I am to infer from his conversation with Mr Kekatos in July 2009 that the prosecution was still then pending. Further I infer that it still is pending, in the absence of any information otherwise, but there is no evidence indicating what steps have been taken, whether there has been any committal for trial, or whether or when any trial may take place. The application for stay is not of course an application for a permanent stay, but it is an application for an indefinite stay, which it would be necessary for the Court to keep under review at directions hearings from time to time. 10 No Defence has been filed by any defendant. The solicitor representing St George Bank the first defendant did not take an active part, except that she made it clear that she did not consent to a stay of the proceedings, nor did she support a stay, and she said to the effect that her client would wish the proceedings to come on for hearing at a reasonable time and not to be unduly deferred. 11 The central difficulty for the second and third defendants in the conduct of the proceedings is that they cannot reasonably expect, and they cannot compel Sam Cassaniti to give them any statement about the relevant facts until the prosecutions have been disposed of. Sam Cassaniti did not make any statement to police and he gave instructions for Mr Kekatos which, appropriately, limit the use which Mr Kekatos can make of any information he is given relating to the prosecution. If Mr Kekatos did not act in both matters these defendants' access to information from Sam Cassaniti would be no better. These defendants cannot as a practical matter obtain information from Sam Cassaniti for the purpose of considering, obtaining advice on, drafting or verifying their Defences, nor for any other preparatory steps for hearing. This inability would control and limit preparatory steps such as interrogatories, discovery and preparing to adduce evidence, and would also have significant effect on the conduct of the hearing, in the absence of a known state of facts. No statement of facts from Sam Cassaniti which could be positively advocated or could form the basis for cross-examination, a procedure of primary importance. These defendants' counsel illustrated fully their difficulty of conducting the hearing, drafting pleadings and conducting the hearing without information from Mr Sam Cassaniti. I add that it would be difficult to know what were appropriate admissions to make. A Defence with verification could be limited to a lame series of statements of non-admission. Counsel referred to the need to expose the substance of the Defence in the pleading, and referred to UCPR 14.14(2) and to Civil Procedure Act s 56(3). 12 The difficulties of these defendants at a hearing include the possible imposition on them of an onus of proof under s 51A of the Trade Practices Act 1975 (Cth), if and insofar as the case presented at the hearing involved, as the Statement of Claim seems to indicate, a representation of a future matter. 13 Courts have often addressed the difficulties of balancing a plaintiff's entitlement to have a case brought on for hearing and determined with a defendant's entitlement to be silent and not to make incriminating statements; the conflict is particularly acute where there actually is a pending prosecution. The present application is not particularly close or analogous to such cases because there is no prosecution against the defendants, it was not contended that there is a reasonable apprehension of one, and the defendants are not entitled to seek protection in the interests of Sam Cassaniti, who is not a party or an applicant before me. The present case seems to me rather to raise considerations on which the Court should act in adjourning a civil trial, or in deferring an appointment for trial, because of difficulties of preparation which befall one of the parties. 14 These defendants offer no evidence to the effect that they have no information and have never had any information from Sam Cassaniti about the relevant circumstances. When he attended Court on 19 March 2009 he made it clear that he would not make information available, to David Cassaniti or to anybody else, relating to the significant events including dealings with Mr Ferrero; probably the position was the same from the time of his arrest. However the plaintiff simply offers no evidence about whether or not relevant information has been made available to it by Sam Cassaniti, at earlier times; or on whether or not he participated, and in what way, in the business and affairs of these defendants. This leaves a very large gap in the depiction of what difficulties are caused by Mr Sam Cassaniti's circumstances in knowing the events and conducting the defence of the proceedings. 15 The judgment of Wootten J in McMahon v Gould (1982) 7 ACLR 202 and especially the passage at 206-7 where his Honour stated the guidelines which he applied have been particularly influential in the law of New South Wales and they have often been referred to. In Reid v Howard (1995) 184 CLR 1 at 14 the High Court made a forceful statement of the privilege which protects against self-incrimination in the absence of statutory authorisation for compulsion, continuing earlier statements which were hardly less strong: Hammond v The Commonwealth (1982) 152 CLR 188 at 198 (Gibbs CJ) and see Edelstein v Richmond (1987) 11 NSWLR 51, Oades v Hamilton (1987) 11 NSWLR 138. There have been judicial observations which suggest that Wootten J's guidelines may not have been sufficiently strong in the protection of the right to silence, particularly his Honour's passage (h) at p 206; see Yuill v Spedleys Securities Limited (in liq) (1992) 8 ACSR 272 (Kirby P); see too Niven v SS [2006] NSWCA 338 and Lee v Director of Public Prosecutions (Cth) [2009] NSWCA 347 at [87]-[89] (Basten JA). However in my opinion McMahon v Gould continues to state the law; it has not been overruled or commented on adversely by the Court of Appeal. 16 I must attribute to David Cassaniti knowledge of facts relevant to whether and how Sam Cassaniti operated within the organisation of the accountancy practice, although this does not extend to what in particular Sam Cassaniti did when conducting business with Mr Ferrero. 17 Counsel for these defendants observed that it was in the public interest that Sam Cassaniti have a fair trial and that his right to silence not be eroded. The observation is correct but has only a very indirect bearing on the conduct of the present proceedings. 18 Plaintiff's counsel pointed out that difficulties with witnesses are an ordinary vicissitude of litigation; witnesses who cannot be found, absent themselves, refuse co-operation or display unreasonable hostility are hazards to which litigants are from time to time exposed, irrespective of the merits of their cases. Plaintiff's counsel pointed to the opportunity for these defendants to compel Sam Cassaniti to attend as a witness on subpoena, require him to be sworn and then examine him in chief to find out what he said; this passage in counsel's submissions served rather to emphasise the difficulties of the position than to show any possible solution. There is of course the possibility that the court of trial would compel the witness to answer upon certificates under s 128 of the Evidence Act, but if the witness were awaiting trial on criminal charges specifically relating to the subject matter of the questions, I regard it as unlikely that a court would proceed that way because of the hazard to the witness of his defence of facts becoming known even though evidence of his having stated those facts could not be directly tendered in the prosecution. 19 Counsel for the plaintiff made a number of observations to the effect that Sam Cassaniti is not a party, does not make the present application, that these defendants are not in a position to represent his interests or to seek orders for their protection and that the interests involved and to be balanced are those of the parties now before the Court. There is an entitlement to go to trial with due procedure and in the ordinary course. 20 The plaintiff has put in evidence some highly general material relating to its obligation to make payments to the Australian Taxation Office, arrangements with the Taxation Office about payment and (it should be inferred) difficulties which delay imposes on the plaintiff. This body of evidence suffers from being imparticular, but the difficulty depicted is of a kind which it is easy to accept and could be supposed would occur, even if no evidence had dealt with it. 21 In the circumstances in my judgment it is not now appropriate to order a stay of proceedings. Preparation for hearing should proceed in the ordinary course and each party must endure ordinary vicissitudes of litigation, such as the present difficulties are. When the time comes to appoint the hearing date some allowance may have to be made, for example to avoid conflicting hearings, but otherwise the facts now under consideration will have very little impact. Conflicting appointments for the hearing of proceedings would be avoided but otherwise the difficulties confronting the witness and those who wish to adduce his evidence, or to find out what it might be, would have only relatively small influence on the Court's choice of appointment date; the appointment would not be deferred for many months, or indefinitely. 22 The second Notice of Motion relates to subpoenas. One subpoena was issued to the Tax Agents Board of New South Wales and required, in highly general terms, production of documents; the response to the subpoena was a letter to the plaintiff's solicitors from the Australian Government Solicitor indicating grounds upon which response to the subpoena was resisted, and indicating the possibility of an application to the Court dealing with the response. No documents were produced and counsel for the plaintiff informed me that the plaintiff does not propose to take steps to compel response to the subpoena any further. In the circumstances I need not give it any further attention. 23 The other subpoena was directed to the Commissioner of Police and calls for production of these documents: SCHEDULE

The documents or things you must produce are as follows:

1. All documents relating to the prosecution and/or convictions of Sam Peter Cassaniti of 20 Mimosa Road Greenacre, also known as Sam Cassaniti, in the state of New South Wales, including all police briefs of evidence, relating to those prosecutions and/or convictions.

2. All documents relating to the prosecution and/or convictions of David Salvatore Cassiniti of suite 1, level 1, 106 Moore Street Liverpool also known as David Cassaniti, in the state of New South Wales, including all police briefs of evidence relating to those prosecutions and/or convictions.

Note Either or both Sam Cassaniti and David Cassaniti are the subject of a criminal investigation and prosecution in respect of which Detective Ben Whitehouse of Leichhardt station is the informant. 24 This schedule of requisitions for production appears to me to state, in terms appropriate for a text book or an examination paper, the kind of subpoena which should not be issued and which would be set aside by the Court on application by the party receiving it. It constitutes discovery against a third party and is on its face, a fishing subpoena. It also involves potentially public interest questions about the requirements which should be made of persons conducting a prosecution about the disclosure of information available to them. However, the Commissioner did not take any such position but sent a large bundle of copy documents to the Court in answer to the subpoena without any accompanying objection to their production or, so far as I can see, to their inspection by the parties. 25 I do not know what led the Commissioner of Police to respond in this way, but his response might have been influenced by the very wide extent of the requirement for production of information to the defence in the prosecution, which may have deprived disclosure of the information on subpoena of some of its importance. However that may be, the documents were produced to the Court, without objection and without any application to set the subpoena aside. 26 I am informed that a Deputy Registrar decided against allowing inspection by the parties. The question of allowing inspection is a matter of doubt and difficulty on which a Deputy Registrar would, I would think, ordinarily withhold inspection, requiring an application to an Associate Judge or Judge. However I have now seen the documents and, although the subpoena is not one which I would myself have enforced, but rather would have set aside on the application of the party to whom it was addressed, the documents having been produced I regard it as appropriate that they be available for inspection by the parties. 27 The defendants have no standing to ask the Court to set aside the subpoena. That Notice of Motion will be dismissed. 28 My orders are: (1) On each Notice of Motion: Dismiss the Notice of Motion with costs. (2) On my own motion, grant to each party leave to inspect documents produced on subpoena by Commissioner of Police. **********

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