Plaintiff v Defendant

54 In Philippine Airlines v Goldair (Aust) Pty Ltd,[89] Young CJ held that the privilege against self-incrimination is a right of a defendant in criminal proceedings and does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings. He refused an application for a stay of civil proceedings until completion of criminal proceedings where the alleged offences arose out of the same conduct impugned in the civil proceedings. He accepted the principles set out in McMahon v Gould "as a useful guide to the exercise of the court's discretion in cases of this kind."[90] He cited Jefferson Ltd v Bhetcha[91] where Megaw LJ held the "right of silence" is a right of a defendant in criminal proceedings and does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings. Megaw LJ said:

There is, I say again, in my judgment, no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant, if he wished to defend the action, having to disclose, by an affidavit under order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceeding. The protection which is at present given to one facing a criminal charge - the so-called 'right of silence' - does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings.[92]

55 Young CJ said he found the observations of Megaw LJ "highly persuasive." After referring to R v BBC; ex parte Lavelle[93] and Caesar v Sommer[94] and Wootten J's discussion of the "right of silence" in McMahon v Gould,[95] Young CJ concluded that the "right of silence" is a right which relates to criminal proceedings and held it would need a very strong case indeed before the court should intervene solely on that ground to stay civil proceedings pending determination of criminal proceedings.[96]

56 It might be thought that the proposition that the right of silence does not extend to civil proceedings thereby denying the defendant the same rights as in a criminal proceeding does not sit easily with the High Court decision in Reid v Howard[97] and Rich v ASIC.[98] In Reid v Howard,[99] Toohey, Gaudron, McHugh and Gummow JJ held that the privilege is not simply a rule of evidence but a basic and substantive common law right.[100] Reid v Howard[101] held that the right can only be abrogated by a statute. It cannot be abrogated by the courts under any discretion or case management basis. As the majority said:

There is simply no scope for an exception to the privilege, other than by statute.[102]

Moreover and of more importance, the inherent power and the jurisdiction conferred by s 23 of the Supreme Court Act are to be exercised only as necessary for the administration of justice. Quite apart from the difficulties which the orders of the Supreme Court present for the administration of justice, to which reference has already been made, it is inimical to the administration of justice for a civil court to compel self-incriminatory disclosures, while fashioning orders to prevent the use of the information thus obtained in a court vested with criminal jurisdiction with respect to the matters disclosed. Nor is justice served by the ad hoc modification or abrogation of a right of general application, particularly not one as fundamental and as important as the privilege against self-incrimination.[103]

57 Further, as quoted above, the High Court has expressly said it would be

... anomalous to allow that a person would refuse to answer questions in criminal proceedings ... if that person could be compelled to answer interrogatories or otherwise make disclosure with respect to the same matter in civil proceedings.[104]

58 For the purposes of this case I assume I am bound to follow the McMahon v Gould[105] line of authorities. Nevertheless, I wish to add my voice to those at first instance suggesting that an appellate court may wish to reconsider McMahon v Gould.[106] In particular, an appellate court may consider that the right of silence should not only be recognised but protected by the courts by preventing a defendant from being effectively compelled to waive his right of silence and thereby help those who seek to prove an offence by requiring him to defend civil actions relating to the same or similar conduct the subject of existing or potential criminal proceedings before those civil proceedings are completed. Compelling the defendant to defend civil proceedings, particularly those which impose a penalty, may assist the Crown in its prosecution by putting the Crown onto a train of inquiry or enable it to adjust its case to meet the anticipated defence in advance. It might be thought that such a circumstance denies the defendant his or her basic common law right to have the Crown establish its case against him or her without any assistance from the defendant.

STAY PRINCIPLES AND ASIC v HLP FINANCIAL PLANNING[107]

59 Each of the defendants contends that ASIC v HLP Financial Planning (Aust) Pty Ltd[108] supports his claim to a stay. An accurate summary of the case is contained in the headnote, which I adopt, as follows. ASIC brought proceedings against the defendants, the HLP group of companies and Peter Berlowitz, alleging that they had operated an unregistered managed investment scheme. ASIC sought declarations that the scheme was an unregistered managed investment scheme and that Mr Berlowitz operated the illegal scheme and conducted a financial services business without an Australian Financial Services licence. ASIC also sought an injunction against Mr Berlowitz, permanently restraining him from operating a financial services business or from seeking funds from investors for an unregistered managed investment scheme. Finkelstein J held, allowing the application in part:

(1) The scheme operated by Mr Berlowitz and the HLP group of companies satisfied the definition of "managed investment scheme" under s 9 of the Corporations Act 2001.

(2) It was appropriate to make the declarations sought against the HLP group of companies.

(3) Although the court had the power to make the declaration and to grant an injunction against Mr Berlowitz in a civil proceeding, it was not appropriate to exercise that jurisdiction in the circumstances of the case. Finkelstein J declined to do so as a criminal prosecution against Mr Berlowitz had been foreshadowed, the facts were not agreed and there was potential for an adverse impact on the jury or that the declaration in the civil proceeding would be falsified by the verdict in the criminal prosecution. Finkelstein J held that the appropriate course was to stand the matter over until a final decision was made about the prosecution of Mr Berlowitz.

60 In his judgment, Finkelstein J did not consider the McMahon v Gould[109] principles. The issue before Finkelstein J was whether he should consider making a declaration that Mr Berlowitz had operated a scheme in contravention of s 601ED(5) of the Corporations Act 2001 and grant perpetual restraining orders against him. A contravention of s 601ED(5) did not expose Mr Berlowitz to a civil penalty, but to criminal penalties. Finkelstein J relied on a line of authorities holding that generally civil courts do not make a declaration and grant an injunction restraining criminal conduct as that is a matter for the criminal law.

61 In his judgment, Finkelstein J considered the range of enforcement provisions in the Corporations Act 2001 when considering whether the declarations sought should be made. His examination of those provisions is of relevance to this case. It is an extensive quote, but to summarise would not do it justice. He said:

[40] Still, there is a need to rethink the position in company cases. The need arises because the Corporations Act now allows, indeed contemplates, the enforcement of most of its provisions (including those creating criminal offences) by a court in the exercise of its civil jurisdiction granting relief by way of injunctions, what are known as "civil penalties" and other remedies appropriate to the circumstances. To understand how this has come about it is necessary to go back to the 1970s.

[41] A Senate Select Committee on Securities and Exchange was appointed on 19 March 1970 under the chairmanship of Senator Rae to inquire into the desirability of establishing a securities and exchange commission that would be empowered to act against improper practices in relation to the shares and securities of public companies. The Committee's investigation revealed that corporate fraud, misconduct and incompetence were pervasive in a series of corporate collapses that occurred during the speculative boom in mining shares in the late 1960s and early 1970s. In its report handed down on 18 July 1974, the Committee's major recommendation was that a national corporate regulator should be established in order to prohibit undesirable market practices and thereby restore public confidence in the stock market and protect those who invest in the securities of public companies. This led to the creation of the National Companies and Securities Commission (the NCSC) (a predecessor of ASIC). The NCSC was granted broad investigatory powers. Parliament wanted to avoid a situation where the regulator's investigation into misconduct had no practical benefits and amounted to nothing more than a public record of breaches: Cth Hansard, Senate, 5 December 1974, 3240 (Lionel Murphy, Attorney-General). As a result the NCSC was given the power to commence or intervene in proceedings in a wide range of circumstances.

[42] It was also thought appropriate to give to the NCSC, as well as to persons affected by a contravention, power to obtain an injunction to prevent contraventions of the Companies Code and related legislation. The first attempt to introduce such a provision in the mid 1970s failed: see the Corporations and Securities Industry Bill 1974 (Cth) cl 274. But when the co-operative scheme legislation was enacted between 1979 and 1981 the power to grant an injunction was included in the Companies Code (s 574) and the Securities Industry Code (s 149). The Companies (Acquisition of Shares) Code introduced a more far-reaching set of powers to deal with contraventions of that statute. The powers included the right to restrain the disposal of shares, to restrain voting rights on shares and to restrain a company from making payment of any sums due in respect of shares: ss 45, 46 and 47.

[43] The co-operative scheme legislation was replaced by the Corporations Law, which came into operation in 1990 and 1991. Instead of several statutes regulating the affairs of companies and dealings in securities there was, from that point, as there had been in the past, one statute. The enforcement provisions that had been in the co-operative scheme legislation were found in s 1324 (injunctions) and ss 737-744 (orders for contraventions of the acquisition of shares provisions) of the Corporations Law. In the current legislation the successor provisions are ss 1324 (injunctions) and 1325A (remedial orders for contraventions of Chs 6 (takeovers), 6A (compulsory acquisitions and buy-outs), 6B (rights and liabilities in relation to Chs 6 and 6A) and 6C (information about ownership of listed companies and managed investment schemes)).

[44] Later, the shift to civil enforcement received a sharp boost. This resulted from the report of the Senate Standing Committee on Legal and Constitutional Affairs, chaired by Senator Cooney, known as the "Report on the Social and Fiduciary Duties and Obligations of Company Directors" (1989). The report stated, p.190, that criminal penalties were a necessary means of enforcing the companies legislation for conduct that involves fraud and dishonesty and is "genuinely criminal in nature". The report recommended, p.191, however, that the companies legislation be amended to include "civil penalties" for breaches by directors where no criminality is involved. The result was the introduction by the Corporate Law Reform Act 1992 (Cth) of a civil penalty regime. This was a scheme by which certain breaches of the Corporations Law were to be dealt with by a court exercising civil jurisdiction operating alongside the criminal courts.

[45] Under the scheme certain provisions, most of which dealt with the duties and liabilities of corporate officers, were designated as "civil penalty provisions": s 1317DA of the Corporations Law; see now s 1317E of the Corporations Act. The court was given power to declare that a person had contravened a civil penalty provision. The power was mandatory where the court was satisfied a contravention had occurred: (CL s 1317EA(2); CA s 1317E(1)). A person who contravened a civil penalty provision was exposed to a number of "civil penalty orders" (CL ss 1317EA-1317EH; CA ss 1317E-1317HA). If the contravener was dishonest and intended to gain an advantage or intended to deceive or defraud someone, he was also liable to be prosecuted in criminal proceedings (CL s 1317FA and Sch 3). Although the same conduct could give rise to both civil penalties and criminal sanctions (CL s 1317EA(1)), civil penalty proceedings and criminal proceedings were, in most cases, mutually exclusive. This was because criminal proceedings could not be brought if civil penalty proceedings had already commenced: (CL s 1317FB). Likewise civil penalty proceedings could not be brought after criminal proceedings had commenced, except in very limited circumstances (CL ss 1317GC and 1317GD). Effectively it was necessary to make a choice between civil penalties and criminal sanctions.

[46] The scheme was changed by the Corporate Law Economic Reform Program Act 1999 (Cth). The principal change was that a criminal proceeding could now be commenced during the currency of a civil penalty proceeding (CL s 1317N; CA s 1317N) or after such proceedings had been disposed of, whatever the outcome (CL s 1317P; CA s 1317P). And the criminal court was given priority over its civil counterparts. Thus, civil penalty proceedings would be stayed if criminal proceedings were begun (CL s 1317N; CA s 1317N). There was, though, a practical limitation to the commencement of a criminal proceeding. Evidence of information given or documents produced by an individual in proceedings for a civil penalty was not admissible in criminal proceedings against the individual (CL s 1317Q; CA s 1317Q). The other side of the coin was that a civil penalty proceeding could not be brought if the offender was convicted of an offence (CL s 1317M; CA s 1317M).

[47] The orders that may now be made in a civil penalty proceeding, in addition to a declaration of contravention, are that the person pay a pecuniary penalty of up to $200,000 (s 1317G) and that the person pay compensation to a corporation or registered scheme that has suffered loss because of the contravention (ss 1317H and 1317HA). If a declaration of contravention is made the court may also order that the person be disqualified from managing a corporation (s 206C). A declaration of contravention must specify the things mentioned in s 1317E(2), including identifying the person who contravened the relevant provision and describing the conduct that constituted the contravention. The declaration is conclusive evidence of those things (s 1317F). So, the declaration may be used to prove those things in other civil proceedings.

[48] To this point, the discussion has been about the way in which a court exercising its civil jurisdiction in a civil penalty proceeding is able to grant relief in company cases, that is supplemental to criminal law. It is also worthwhile making reference to the ever increasing range of civil remedies that may be granted by a civil court in the event of a breach of the Corporations Act. Some, such as an order to disclose information or publish advertisements under s 1324B, apply only to certain kinds of breaches. Others, like the power to prohibit a person who contravened a provision of the Corporations Act from disposing of his assets under s 1323(1), apply to contraventions of any provision. Then there are the remedies available to a person who has suffered loss from a breach. For example: s 1325(5)(e) permits the recovery of damages resulting from a breach of a provision in Chs 5C (managed investment schemes), 6CA (continuous disclosure), 6D (fundraising) or Pt 7.10 (market misconduct and other prohibited conduct relating to financial products and financial services); ss 1317H and 1317HA allow the recovery of damages for a breach of a civil penalty provision; s 670B provides for compensation for loss caused by misstatements in or omissions from takeover documents.

[49] The expanding power of the court on its civil side to deal with criminal conduct made a clash with the criminal court inevitable. Parliament was alert to the problem. Since 1981 there has been a provision in the companies legislation that civil proceedings are not to be stayed merely because the proceeding discloses or arises out of an offence (Companies Code s543; CL s 1331; CA s 1331). Without such a provision courts might not allow a civil proceeding to go ahead until the criminal law had played itself out.

[50] The current regime of corporate regulation is, as the Cooney Committee's report observed (at p 190), characterised by a "pyramid of enforcement". The basic premise is that to deter breaches of the legislation, there should be various levels of enforcement that correspond to the seriousness of the contravention. There are three levels to this pyramid: civil remedies at the base, civil penalties in the middle and criminal sanctions at the top. But it is the court exercising its civil jurisdiction that is the primary means of enforcement. Only the most serious contraventions now end up before a criminal court. Nonetheless when a criminal proceeding is commenced the criminal court should be given (and in many cases is expressly given) priority over civil litigation.[110]

62 Finkelstein J cited with approval Fryberg J in ASIC v Intertax Holdings Pty Ltd[111] where Fryberg J refused to grant a declaration which in substance amounted to a declaration that the defendant had committed a crime.

63 Finkelstein J summarised the position as follows:

The English and Australian authorities that warn of the dangers of a civil court becoming involved in criminal conduct continue to apply in an appropriate company case. The general rule in a company case is that a civil court will usually be the appropriate court to deal with a contravention of the Corporations Act. But the court should be wary of granting relief, including the grant of a declaration or an injunction, if the case is likely to end up before a criminal court. Ordinarily, a civil court should not intervene in those circumstances unless its failure to do so will result in irreparable injury. That strict rule need not be applied if the case involves undisputed facts and the issue raised gives rise to a question of pure law. Then a declaration can be a very useful remedy. As Barwick CJ said in Commonwealth v Sterling Nicholas Duty Free Pty Ltd[112] that is the kind of case "which contributes enormously to the utility of the jurisdiction."[113]

64 The defendants contend that, although the plaintiff seeks declarations in respect of civil penalty provisions of ss 180 and 181, nevertheless the facts relied upon by ASIC to make out those claims effectively constitute the criminal offence found in s 184. The defendants submit that under s 1317E(2), if there is a declaration of contravention, the Court in this case must specify the civil penalty provision that has been contravened; the person who contravenes the provision; the conduct that constituted the contravention and the corporation to which the conduct related. A declaration of contravention is conclusive evidence of the matters referred to in s 1317E(2).[114] In particular, the defendants point out that the alleged contraventions under ss 180 and 181 are based on allegations that the defendants knew or ought to have known that the payment of the inland transportation fee was a sham designed to avoid the UN Resolutions and was thereby, if proven, a contravention of s 184(1). The defendants contend that a declaration to that effect will, in substance, be a declaration that each defendant was reckless or intentionally dishonest and failed to exercise his powers and discharge his duties in good faith in the best interests of the corporation, or for a proper purpose as provided in s 184.

65 ASIC contends that a declaration of contravention of s 180(1) or s 181(1) and (2) is no more than a declaration that the defendant has contravened those provisions. ASIC contends there is no prospect of falsification of a jury's verdict. ASIC also contends that in the HLP case, the Court did not grant a stay of the civil proceeding before the civil proceeding commenced, but after the evidence had been heard, the Court declined to entertain on a final basis the application for declaratory and injunctive relief against Mr Berlowitz and stood the matter over until a final decision was taken as regards a criminal prosecution.

66 The HLP case[115] involved a civil claim that there was a breach of a criminal offence and not a civil penalty claim. Under Part 9.4B, the Court must make a declaration of contravention if it is satisfied a person has contravened, inter alia, s 180(1) and s 181(1) and sub-s (2). There may be substance in the defendants' contention that in this matter the Court is being invited to make a declaration that in substance the defendants committed a criminal offence under s 184. For reasons that will become apparent in my conclusions, it is unnecessary for me to decide whether ASIC's claim should be stayed on the principles enunciated in the HLP case.[116]

CHARTER OF HUMAN RIGHTS AND RESPONSIBILITIES ACT 2006 (VIC)

67 After the hearing concluded, Mr Flugge sought leave to make submissions that he will not receive a fair hearing if he is forced to give up his right of silence and reveal his defence to the potential criminal charges he faces in the civil proceeding. Mr Ingelby adopted Mr Flugge submissions. Mr Flugge submits that under the Charter, the Court has a duty to enforce his right to a fair hearing. As I have granted Mr Flugge's and Mr Ingelby's applications for a stay, it is unnecessary for me to decide this issue in relation to them.

68 Mr Lindberg did not adopt the submissions. As indicated below, the proceedings against Mr Lindberg are to continue. I do not consider it appropriate to consider whether Mr Lindberg can avail himself of the Charter and the Court's assistance without Mr Lindberg raising the issue and making submissions on why he alleges he will be denied a fair hearing in the civil proceedings or in any potential criminal proceedings.

69 Returning to the principles in the McMahon v Gould[117] line of authorities, ASIC submits that the court must weight up any disclosure which a defendant has made of his defence against the extent to which the defendant may be required to make disclosure in the civil penalty proceedings. ASIC referred to ASC v Kavanagh[118] where Hayne J took into account the fact that the defendants had already made some disclosure of their defence in the civil proceeding and also to McMahon v Gould[119] where Wootten J referred to the fact that the defendant had already given evidence about the same subject matter in different proceedings. In Reid v Howard[120] the defendant had already given a statement to the police. Nevertheless, the High Court conceded there were further details that were needed and for that reason the police had not been able to formulate criminal charges against him.[121]

70 In the case of Mr Flugge, ASIC submits that any benefit Mr Flugge may have had by remaining silent has been severely compromised. In particular:

(a) Mr Flugge provided three witness statements to the inquiry carried out by The Hon. T R H Cole AO RFD QC ("Cole Commission") and gave sworn evidence over three days;[122]

(b) Mr Flugge was examined on a wide range of matters including matters relevant to the civil penalty proceeding;[123]

(c) Mr Flugge's statements and transcripts of examination have been available publicly on the Cole Commission website;[124]

(d) the hearings of the Cole Commission were held in public or were made public later.[125] Mr Flugge's examination occurred during a public hearing;[126]

(e) the media coverage of the Cole Commission was extensive;[127]

(f) the findings of the Cole Commission contain detailed discussion of the evidence given by Mr Flugge and other witnesses who implicate Mr Flugge.[128]

71 ASIC contends that Mr Flugge will not be required to make discovery and will not be ordered to file witness statements prior to the close of ASIC's case in the civil penalty proceeding. ASIC assumes that Mr Flugge would be required to file a defence, but only in the limited McDonald[129] form, which is designed to protect his right of silence and the penalty privilege.

72 ASIC makes similar submissions with respect to the other defendants as follows:

(a) Mr Lindberg gave two witness statements to the Cole Commission.[130]

(b) Mr Lindberg gave sworn evidence at the Cole Commission over eight days.[131]

(c) Mr Lindberg's examination occurred during a public hearing.[132]

(d) Mr Lindberg's statements and transcript of his evidence have been and continue to be available publicly at the Cole Commission's website.[133]

(a) Mr Stott gave two witness statements to the Cole Commission.[134]

(b) Mr Stott gave sworn evidence at the Cole Commission over nine days.[135]

(c) The findings made by Commissioner Cole as outlined in the Cole Commission report.[136]

73 ASIC submits their right of silence has been significantly undermined in the same way as the other defendants. None of these submissions were contested by the defendants.

74 Each of the defendants concedes that s 1317Q of the Act prohibits the use of the defendant's evidence in any subsequent prosecution. They submit that there is still a very real risk of the derivative use of evidence circumventing the accused's right to silence and point to R v Coroner; Ex parte Alexander[137] which referred to the decision of R v Boyes[138] as authority for that proposition in which Cockburn CJ stated;

a question which might appear at first sight a very innocent one, might, by affording a link in a chain of evidence, become the means of bringing home an offence to the party answering.[139]

75 The defendants submit that to prove the contentions made by ASIC that there was a breach of duties pursuant to ss 180 and 181, it is alleged, inter alia, by ASIC that each of the defendants knowingly permitted or assisted:

(a) AWB to make payments that, to his knowledge, were or were likely to be paid to the Government of Iraq in contravention of UN Resolution 661; and

(b) AWB to obtain funds to which it was not entitled, from the UN escrow Account in contravention of UN Resolution 986.

76 The defendants submit that to compel the defendant to make positive assertions of fact to allegations in the Statement of Claim touching on matters which are relevant to possible criminal charges entails the risk of providing ASIC with an opportunity to establish linkages in the chain of evidence.[140]

77 ASIC concedes that the provisions of the Corporations Act 2001 have adjusted the McMahon v Gould principles in connection with civil penalty proceedings and the like.[141] Under the McMahon v Gould[142] line of authorities, prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court. Section 1317N abolishes this prima facie right if criminal proceedings are started or have already been started against the person for an offence and the offence is constituted by conduct that is substantially the same as the conduct alleged to constitute the contravention. Further, proceedings for a declaration or order may be resumed if the person is not convicted of the offence. Otherwise, the proceedings for the declaration or order are dismissed.[143] Under s 1317P, criminal proceedings may be started after civil proceedings, but a court must not make a declaration of contravention or a pecuniary penalty order if the person has been convicted of an offence by conduct that is substantially the same as conduct constituting the contravention.[144]

78 Thus, the legislation provides ASIC with a limited right to seek a civil penalty. ASIC is not able to seek a civil penalty if criminal proceedings in respect of substantially the same conduct is on foot. Further, ASIC's right to obtain a civil penalty is lost if a conviction has been obtained in respect of substantially the same conduct.

79 In the exercise of the court's discretion to stay the civil proceedings it is appropriate for the court to keep in mind the statutory connection between the civil penalty proceedings and any criminal proceedings in respect of substantially the same conduct. It is also appropriate for the court to keep in mind the statutory limitation of the McMahon v Gould[145] line of authorities in the case of civil penalty proceedings.

80 ASIC contends that the fact that the statutory stay did not extend to situations where criminal proceedings were "on the cards" indicates an intention that a stay should not be granted. On the other hand, s 1317N directs that the court "must" apply the rules of evidence and procedure when hearing proceedings for a pecuniary penalty order. The rules of procedure include the court's power to order a stay where the interests of justice require a stay in the circumstances. Accordingly, I do not draw any limitation on the court's power by reason of s 1317N. On the contrary, I believe the existence of s 1317N highlights a concern by the legislature that it would be unfair for a person to be tried for an offence and at the same time be sued for a civil penalty order or, if the conviction is obtained, be further subject to a civil penalty order.

81 In this context, ASIC also rely on s 1331 in Part 9.6 Proceedings which provides that no civil proceedings under this Act are to be stayed merely because the proceeding discloses, or arises out of, the commission of an offence. ASIC accepts that, despite s 1331, the McMahon v Gould[146] discretion still exists.[147] ASIC says, however, that s 1331 is relevant and supports ASIC's contention that the defendants' submissions do not reflect the law. Section 1331 is in Part 9.6. It is not in Part 9.4B which deals with civil consequences of contravening civil penalty provisions. Usually, the general should give way to the particular and, in this instance, in my opinion, s 1331 does not limit s 1317L.

Inconvenience to the defendants and the court

82 Each of the defendants contends that unless the civil penalty proceedings are stayed, he will be likely to incur unnecessary and substantial legal costs in preparing for and conducting the civil proceedings that will be automatically stayed if the threatened criminal proceedings are instituted. Further, the defendants face the burden of unnecessary duplication of proceedings. Each of the defendants contends that these are relevant considerations in determining where the balance of justice lies. In addition to the costs to the defendants, which are likely to be wasted, the court will also waste resources that are needed elsewhere. Each of the defendants submits that criminal proceedings are reasonably possible . Mr Stott has been informed charges are probable.

83 The defendants contend that ASIC will not suffer any prejudice. If the criminal proceedings do not eventuate, ASIC may continue to pursue a civil penalty. If the criminal proceedings do eventuate, the civil proceedings must be stayed in any event (unless the civil proceedings are completed before the criminal proceedings are started). ASIC does not seek to recover any damages for AWB, but merely seeks a pecuniary penalty and an order that the defendants be disqualified from managing a corporation (which has been determined by the High Court to also constitute a penalty).[148] ASIC is not seeking to right a wrong. It seeks to pursue the defendants by imposing civil penalties on the defendants. Each of the defendants submits the court should consider the public purse and the imposition on the limited resources available to the courts and the inefficient waste of resources that would eventuate if the proceedings were not stayed.

84 The defendants submit that very little weight should be given to any prima facie entitlement of ASIC to have the action tried in the ordinary course of the procedure and business of the court, by reason of the nature of these proceedings. First, it is said that civil penalty proceedings are of a fundamentally different nature to ordinary civil cases. It is said there is an "inherent distinction between a civil action to prevent or redress a civil injury on the one hand and a civil action to recover a penalty on the other. In the latter case, the whole and avowed object of the proceeding is the infliction of the penalty."[149]

85 The defendants submit that the timing of the commencement of the civil penalty proceedings by ASIC was driven by the application of limitation periods.[150] They say it was for this reason that the civil penalty proceedings were given priority over possible criminal proceedings.[151] There is weight in these submissions and in my opinion they are relevant matters to consider in exercising my discretion.

86 Each defendant submits that criminal proceedings are on the cards. Finkelstein J made reference to criminal proceedings as being "on the cards." As indicated above, both Cummins J[152] and Bell J[153] have interpreted "on the cards" to mean "a reasonable possibility." In this case, I accept that criminal proceedings are a reasonable possibility for each defendant save Mr Lindberg.

87 Mr Ingelby submits that the decision in McMahon v Gould[154] was wrongly decided, or if it did correctly state the law in 1982, it does not state the law today by reason of Reid v Howard,[155] or, if it was correctly decided, has no application in these proceedings.[156] For reasons expressed elsewhere, I do not need to decide whether McMahon v Gould was correctly decided or whether it is still good law.

88 Mr Ingelby submits that, even if the McMahon v Gould[157] guidelines were to be applied, a stay should be granted.[158] He argues that the plaintiff's prima facie entitlement should be considered primarily where the plaintiff is a party in an ordinary civil action concerning the recovery of money and not in proceedings, such as these, where the plaintiff is a statutory authority seeking civil penalties. Further Mr Ingelby submits that there is a real danger of injustice to the defendant in the event of a criminal proceeding commencing which arises in three ways.[159]

1. If the civil penalty proceedings continue, the defendant will be required to file his defence. The filing of the defence before the resolution of the criminal proceedings will impinge upon the defendant's right of silence and his privilege against self incrimination.

(2) Whilst the statutory regime permits, in certain circumstances[160] two sets of penalties (criminal and civil penalty) being imposed in respect of the same conduct, that is not desirable and should be avoided if possible[161].

(3) The proceedings and underlying events have received considerable publicity. It is ASIC's case that the public revelation of the alleged breaches of the UN sanctions has caused loss of share price in AWB, loss of confidence in AWB by the Australian wheat growers, staff disruption and loss of the single desk[162]. Mr Ingelby submits that in such circumstances, a court should be wary of granting civil relief in cases where criminal proceedings, arising out of substantially the same conduct, "are on the cards" because of the potential adverse effect on the jury.[163] This adverse effect, as submitted by Mr Ingelby can be attributed to the publicity surrounding the proceeding and the requirement of the court to make determinations in the civil proceeding as to the honesty of the defendant in respect of certain conduct.

There may be merit in each of these submissions. It is not necessary, however, for me to decide his application on these grounds.

89 The defendants contend that the statutory scheme weakens the principle of double jeopardy by permitting criminal proceedings to follow civil penalty proceedings, and similarly permits a civil penalty proceeding to follow an acquittal of criminal charges, notwithstanding such proceedings rely on substantially the same conduct. They contend that the principle of double jeopardy is recognised by s 1317M that prohibits a declaration of contravention or a pecuniary penalty order following a conviction of an offence constituted by conduct that is substantially the same as the conduct constituting the contravention.

90 The defendants submit that if a criminal prosecution is reasonably possible, then the significant burdens upon the citizen akin to those that form the rationale for the principle of double jeopardy should weigh heavily in favour of a stay of the civil penalty proceedings.

91 In any event, even it if could be demonstrated that civil penalty provisions are, sufficiently enough, analogous to a criminal penalty provision to enliven the right against double jeopardy, none of the defendants has been prosecuted for any offence and has not been a party to any other civil proceeding relating to the conduct in question.[164]

92 The right against double jeopardy is not relevant in this case where civil proceedings are on foot, notwithstanding the remedies sought are relying on civil penalty provisions.

93 I have not found these applications easy to decide. Nevertheless, I have come to a firm conclusion. For reasons which will become apparent, I will deal with the applications of Mr Flugge, Mr Ingelby, Mr Stott, Mr Long and Mr Geary separately from the application of Mr Lindberg.

94 I accept that the court's inherent jurisdiction confers on me discretion to grant a stay of the civil penalty proceedings against the defendants where criminal proceedings are threatened for conduct that is substantially the same as the conduct constituting the contravention alleged in the civil claim. I accept that discretion is preserved by s 1317L. I assume that in exercising that discretion, I am bound by the McMahon v Gould[165] line of authorities. Although ASIC has accepted that these principles require refinement in view of Reid v Howard,[166] ASIC has not suggested what refinement this might be.

95 McMahon v Gould[167] makes clear that a plaintiff 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 the action, what his defence is likely to be in the criminal proceeding. Further, McMahon v Gould[168] makes clear that the Court is not concerned to preserve any tactical advantages flowing from the right of silence to the defendant in the criminal proceedings.

96 McMahon v Gould[169] suggests the Court is to consider whether there is a real and not merely notional danger of injustice in the criminal proceeding. In this regard, the Court may have regard to several specified factors which include whether the defendant has already disclosed her or his defence to the allegation. The factors specified in McMahon v Gould do not include that to defend the civil proceeding the defendant may be compelled, in a practical sense, to waive his "right of silence" and thereby provide proof against himself in the criminal proceeding by direct evidence or derivative evidence. This consideration may lead a superior court to make a refinement to the McMahon v Gould principles in the light of Reid v Howard.[170] As it is, I do not need to apply any principles other than those applied in the McMahon v Gould line of authority.

97 The critical difference between these civil penalty proceedings and the typical civil action where the criminal proceedings arise out of the same conduct that constitutes the civil cause of action, is that the statutory scheme in Part 9.4B overrides the principles in McMahon v Gould where criminal proceedings are started. The legislation prevents a civil penalty being imposed where a criminal conviction is obtained and provides that a civil penalty proceeding may not be continued once the criminal proceedings have started. Although Part 9.4B is silent on the position where criminal proceedings are threatened as opposed to started, the granting of a stay where criminal proceedings are threatened is not inconsistent with the purpose and object of s 1317N.

98 The features of Part 9.4B indicate that the civil penalty proceedings should not be treated as a separate civil right that a litigant has and the issue before the Court on a stay application is only the timing of the hearing of the civil claim. Rather, in my opinion, the civil penalty proceedings are one part of a punishment and enforcement regime imposed on company officers who fail to observe their obligations under the Corporations Act 2001. That regime is a mixture of civil, civil penalty and criminal procedure.[171] It is relevant, therefore, in applying the McMahon v Gould[172] guidelines to take account of the interrelationship between civil penalty proceedings and criminal proceedings as set out in Part 9.4B of the Corporations Act 2001 and the effective statutory amendment of those principles.

99 Applying the McMahon v Gould[173] principles, subject to the refinement in Part 9.4B, I take into account that the guiding principle is the interests of justice and that each case is to be judged on its merits. In particular, I consider whether there is a real and not merely a notional danger of injustice in the criminal proceedings.

100 In my view, there is such a risk in the case of each defendant, other than Mr Lindberg. In each case, the criminal proceedings are "on the cards." If the civil proceedings have not been heard and determined, at trial and on appeal (if any), the result of the criminal proceedings starting will be to stay the civil penalty proceedings. The defendants may have expended not insignificant resources to defend themselves from pecuniary penalties which probably will be wasted. I expect that the defendants do not have unlimited resources. I do not consider it either fair or just that a defendant should have to waste resources, that could be used in defending the criminal proceedings, in defending civil penalty proceedings that are likely to be terminated in consequence of a decision of the plaintiff, or another arm of the State, to institute criminal proceedings for an offence that is constituted by conduct that is substantially the same as the conduct alleged to constitute the contravention alleged in the civil penalty proceedings. I do not consider it fair or just that the defendant may have to unnecessarily duplicate the defence of his actions. The matter is not made any fairer by the fact that if the State fails in the criminal proceedings, it can continue to pursue the civil penalty proceedings.

101 The McMahon v Gould[174] principles require the effect on the plaintiff be considered and weighed against the effects on the defendant. It is also relevant to consider the nature of the defendant's obligation to the plaintiff. ASIC instituted the civil proceedings at this stage, as the limitation period was about to expire. ASIC is not seeking to right a wrong to AWB. It is pursuing the public good of seeking to punish the defendants for their alleged contravention of their duties as officers of AWB and to restrain them from managing a corporation. The defendants owe no obligation to ASIC (other than their civic duties to the State and to its laws). I also take into account that the civil penalty proceedings and the criminal proceedings will be brought by the same party, the State, or an emanation of the State. Accordingly, for these reasons, I intend to stay the civil proceedings. The stay will remain in force unless and until the State, through one or other of its responsible emanations, indicates to the defendants that no criminal proceedings will be instituted against the defendants that relies on conduct of the defendant that is substantially the same as that alleged by ASIC herein.

102 Mr Lindberg is in a different position. I find that criminal proceedings are not "on the cards" against him. Mr Cole found on the material before him that Mr Lindberg had not been guilty of any criminal conduct. Accordingly, on the evidence before me, it is unlikely criminal proceedings will be instituted against him and thus the civil penalty proceedings be stayed. He is not likely to bear the burden of preparing for two sets of proceedings. His right of silence and his privilege against self-exposure to a penalty will be fully protected in the civil proceedings.

103 It follows that in relation to the applications of the defendants other than Mr Lindberg, I do not need to decide whether the HLP case has any and if so what relevance to the stay application it has on this stage of the proceedings. In relation to Mr Lindberg's application, I have already found that on the evidence before me, a criminal prosecution is not "on the cards." Accordingly, in my view, it is premature to consider whether the proceedings against Mr Lindberg should be stayed on the grounds identified by Finkelstein J in the HLP case. For reasons expressed above, I do not need to deal with the issues in respect of the Charter of Human Rights and Responsibilities Act 2006.

104 All defendants, save Mr Lindberg, sought an order that they be excused from filing a defence at this stage. In view of the orders I propose to make, it is unnecessary for me to decide that issue. In the case of Mr Lindberg, I propose to make directions for the hearing of the claims against him. If any issue about a defence arises, I will deal with it at that time.

105 Accordingly, I propose to make the following orders. In each of the applications by Mr Flugge, Mr Ingelby, Mr Stott, Mr Geary and Mr Long, I stay the civil penalty proceedings herein until and unless ASIC, the Oil-for-Food Task Force or the DPP of the Commonwealth advise the defendant that no criminal proceeding will be instituted against him that relies on conduct of the defendant that is substantially the same as that alleged by ASIC herein, or until further order. I order that the costs of each application be costs in the cause.

106 Mr Lindberg's application is dismissed. I order that the costs of his application be costs in the cause. I direct that a directions hearing be held as soon as possible for the disposition of ASIC's civil penalty proceedings against Mr Lindberg.

[1] Commonwealth, Inquiry into certain Australian Companies in relation to the UN Oil-For-Food Programme, Report (2006) vol 1.

[2] Commonwealth, Inquiry into certain Australian Companies in relation to the UN Oil-For-Food Programme, Report (2006) vol 1, xiii-xiv.

[5] The establishment of the Oil-for Food Task Force is discussed below.

[6] Alia Transportation and General Trade Co of Jordan

[7] Commonwealth, Inquiry into certain Australian Companies in relation to the UN Oil-For-Food Programme, Report (2006) vol 4, p 261-262

[8] (1982) 7 ACLR 202

[12] [1995] HCA 40; (1995) 184 CLR 1

[13] (1982) 7 ACLR 202

[14] [1995] HCA 40; (1995) 184 CLR 1

[15] [2007] FCA 1868; (2007) 164 FCR 487

[16] Charter of Human Rights and Responsibilities Act 2006 (Vic)

[17] [1995] HCA 40; (1995) 184 CLR 1

[18] [2007] FCA 1868; (2007) 164 FCR 487

[19] (1982) 7 ACLR 202

[21] Corporations Act 2001 (Cth) s 1317N

[22] Corporations Act 2001 (Cth) s 1317N(2)

[23] Corporations Act 2001 (Cth) s 1317M

[24] (1982) 7 ACLR 202

[25] McMahon v Gould (1982) 7 ACLR 202 at 205; quoting Sugerman ACJ in Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 at 19.

[26] (1982) 7 ACLR 202

[27] The reference should be to criminal proceedings.

[29] See for example, Philippine Airlines v Goldair (Aust) Pty Ltd [1990] VicRp 34; [1990] VR 385 at 387 and 389-90 per Young CJ; Halabi v Westpac Banking Corporation (1989) 17 NSWLR 26, 58 per McHugh JA; Yuill v Spedley Securities Ltd (1992) 8 ACSR 272, 275 per Priestley JA; Australian Securities Commission v Kavanagh (1993)12 ACSR 69 at 72, 75-76 per Hayne J; Griffin v Sogelease Australia Ltd [2002] NSWCA 421 at [5] - [14] per Sheller, Ipp JA and Davies AJA; Guglielmin v Trescowthick (No 3) [2005] FCA 139; (2005) 220 ALR 535 per Mansfield J at [9] - [12]; Niven v SS [2006] NSWCA 338 at [25] - [35] per Tobias JA (Giles JA agreeing); Gallaher v Collins [2006] VSC 139 at [27] per Hargrave J; Trade World Enterprise Pty Ltd v DCT [2006] VSCA 191; (2006) 64 ATR 316 at [12] per Chernov JA (Nettle and Redlich JJA agreeing); Commonwealth Bank of Australia v May [2007] NSWSC 490 per Einstein J at [5] to [7]; Osric Investments Pty Ltd v Probst [2007] QSC 293 per Daubney J at [11] to [12]. See also Elliot v Australian Prudential Regulation Authority [2004] FCA 586; French J.

[30] Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [135].

[31] Yuill v Spedley Securities Ltd (1992) 8 ACSR 272

[32] (1982) 7 ACLR 202

[33] (1982) 7 ACLR 202

[34] [2006] NSWCA 338

[35] (1982) 7 ACLR 202

[36] [2000] FCA 1339; (2000) 104 FCR 359

[37] [1995] HCA 40; (1995) 184 CLR 1

[38] (1982) 7 ACLR 202

[39] Baker v Commissioner of Australian Federal Police [2000] FCA 1339; (2000) 104 FCR 359 at [34]

[40] [1995] HCA 40; (1995) 184 CLR 1

[41] Baker v Commissioner of Australian Federal Police [2000] FCA 1339; (2000) 104 FCR 359 at [32]

[42] (1982) 7 ACLR 202

[43] [2004] FCA 586 at [16] - [19]

[44] (1982) 7 ACLR 202

[45] Elliot v Australian Prudential Regulation Authority [2004] FCA 586 at [18]

[46] [2005] FCA 139; (2005) 220 ALR 535 at 541

[47] Trade World Enterprise Pty Ltd v DCT [2006] VSCA 191; (2006) 64 ATR 316 at [12]

[48] [1990] VicRp 34; [1990] VR 385

[49] )1982) 7 ACLR 202

[50] Adapted from Mr Flugge's written submissions of 18 May 2008

[52] Corporations Act 2001 (Cth) s1317P

[53] Corporations Act 2001 (Cth) s 1317M

[54] Corporations Act 2001 (Cth) s 1317N

[55] Corporations Act 2001 (Cth) s 1317P

[56] Corporations Act 2001 (Cth) s 1317Q

[57] Corporations Act 2001 (Cth) s 1317L

[58] See Adler v ASIC [2003] NSWCA 131; (2003) 46 ACSR 504 at [660]; ASIC v Rich (No. 3) [2003] NSWSC 328; (2003) 45 ACSR 305 at [24], [26]; Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129 at [19], [20], [24], [25]; ASIC v Krecichwost [2007] NSWSC 1458 at [34].

[59] [2007] NSWSC 39

[60] [1995] HCA 40; (1995) 184 CLR 1

[61] (1982) 7 ACLR 202

[62] (1993) 12 ACSR 69

[64] [1995] HCA 40; (1995) 184 CLR 1

[65] Sorby v The Commonwealth [1983] HCA 10; (1983) 152 CLR 281 at 309 per Mason, Wilson and Dawson JJ

[67] [1995] HCA 40; (1995) 184 CLR 1 at 5

[68] Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328 at 340

[69] Reid v Howard [1995] HCA 40; (1995) 184 CLR 1 at 11

[70] [1983] HCA 9; (1983) 152 CLR 328 at 346

[71] Lamb v Munster (1882) 10 QBD 110 at 111

[72] Reid v Howard [1995] HCA 40; (1995) 184 CLR 1 at 14

[74] [1983] HCA 10; (1983) 152 CLR 281 at 294-295

[76] Sorby v The Commonwealth [1983] HCA 10; (1983) 152 CLR 281 at 312 per Murphy J

[77] (1982) AC 380 at 443

[78] Reid v Howard [1995] HCA 40; (1995) 184 CLR 1 at 6 per Deane J

[79] (1982) 7 ACLR 202

[80] [1995] HCA 40; (1995) 184 CLR 1

[81] [1984] FCA 406; (1984) 4 FCR 428

[83] (1982) 7 ACLR 202

[84] (1993) 12 ACSR 69

[85] (1982) 7 ACLR 202

[87] Australian Securities Commission v Kavanagh (1993) 12 ACSR 69 at 76

[89] [1990] VicRp 34; [1990] VR 385

[91] [1979] 1 WLR 898

[92] Cited in Philippine Airlines v Goldair (Aust) Pty Ltd [1990] VicRp 34; [1990] VR 385 at 389

[93] [1983] 1 WLR 23 at 39 per Woolf J

[94] [1980] 2 NSWLR 929

[95] (1982) 7 ACLR 202

[96] [1990] VicRp 34; [1990] VR 385 at 390

[97] [1995] HCA 40; (1995) 184 CLR 1

[98] [2004] HCA 42; (2004) 220 CLR 129

[99] [1995] HCA 40; (1995) 184 CLR 1

[104] Ibid 14 per Toohey, Gaudron, McHugh and Gummow JJ

[105] (1982) 7 ACLR 202

[107] [2007] FCA 1868; (2007) 164 FCR 487

[109] (1982) 7 ACLR 202

[110] ASIC v HLP Financial Planning (Aust) Pty Ltd [2007] FCA 1868; (2007) 164 FCR 487, 499-502

[111] [2006] QSC 276

[112] [1972] HCA 19; (1972) 126 CLR 297 at 305

[113] ASIC v HLP Financial Planning (Aust) Pty Ltd [2007] FCA 1868; (2007) 164 FCR 487 at [58]

[114] Corporations Act 2001 (Cth) s 1317F

[115] (2007) 164 CLR 487

[117] (1982) 7 ACLR 202

[118] 12 ACSR 69 at 75

[119] 7 ACLR 202 at 208

[120] [1995] HCA 40; (1995) 184 CLR 1

[122] Kotsopoulos affidavit, paragraph 7

[123] Kotsopoulos affidavit, paragraph 8

[124] Kotsopoulos affidavit, paragraphs 3 to 6, CJK-3 at 7.25 to 7.26

[125] Kotsopoulos affidavit, CJK-3 at 7.14 to 7.16, 7.22 and 7.26

[126] Kotsopoulos affidavit, paragraph 7; CJK-3 at 7.16

[129] MacDonald v ASIC [2007] NSWCA 304; (2007) 65 ACSR 299

[130] Kotsopoulos affidavit, paragraph 7

[131] Kotsopoulos affidavit, paragraph 7

[132] Kotsopoulos affidavit, paragraph 7; CJK-3 at 7.15 and 7.16

[133] See above, paragraph 21(c) and (d). The same references apply in relation to the affidavit sworn in Mr Lindberg's proceeding. Mr Lindberg was examined during the public hearings. See Kotsopoulos affidavit, paragraph 7; CJK-3 at 7.16

[134] Kotsopoulos affidavit, paragraph 7

[135] Kotsopoulos affidavit, paragraph 7 and 9; CJK-2

[136] Kotsopoulos affidavit, CJK-4 at 31.495, 31.506 to 341.516

[137] [1982] VicRp 73; [1982] VR 731

[138] (1861) 1B & S 311

[139] Cited in R v Coroner; Ex parte Alexander [1982] VicRp 73; [1982] VR 731 at 736. See also Deane J in Reid v Howard [1995] HCA 40; (1995) 184 CLR 1 at 6

[142] (1982) 7 ACLR 202

[143] Corporations Act 2001 (Cth) s 1317N(2)

[144] Corporations Act 2001 (Cth) s 1317M

[145] (1982) 7 ACLR 202

[148] Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129 where the High Court set aside the orders of the New South Wales Court of Appeal on the basis that the disqualification proceedings were in fact punitive and penal in nature and not merely protective

[149] R v Associated Northern Colliers [1910] HCA 61; (1910) 11 CLR 738 at 742, cited with approval by Finkelstein in ASIC v Mining Projects Group Ltd [2007] FCA 1620; (2007) 164 FCR 32 at [10]; Refrigerated Express Lines (Australasia) Pty Ltd v Meat and Livestock Corporation (1979) 42 FLR 204 at 207-8

[152] DPP v Selway [2007] VSC 244; (2007) 16 VR 508

[153] Ragg v Magistrates' Court of Victoria & Corcoris [2008] VSC 1 at [92]- [95]

[154] (1982) 7 ACLR 202

[155] [1995] HCA 40; (1995) 184 CLR 1

[157] (1982) 7 ACLR 202

[158] Outline of Submission of the defendant (Ingelby), p 6 [18].

[159] Outline of Submission of the defendant (Ingelby), p 8 [28].

[160] Corporations Act 2001 (Cth) s 1317P

[161] See Pearce v R (1998) 194 CLR 610 at 614 per McHugh, Hayne and Callinan JJ

[162] Paragraphs 66 (C)(F), (G) and (GG).

[163] Outline of Submission of the defendant (Ingelby), p 10 [37].

[164] Finkelstein J in ASIC v Vizard [2005] FCA 1037; (2005) 145 FCR 57 at [40] observed that 'A civil penalty provision lies somewhere between a provision contravention of which is an offence, and a provision contravention of which can lead only to civil proceedings.'

[165] (1982) 7 ACLR 202

[166] [1995] HCA 40; (1995) 184 CLR 1

[167] (1982) 7 ACLR 202

[169] (1982) 7 ACLR 202

[170] [1995] HCA 40; (1995) 184 CLR 1

[171] See ASIC v HLP Financial Services [2007] FCA 1868; (2007) 164 FCR 487 at [40]- [50]

[172] (1982) 7 ACLR 202