Plaintiffs v Defendants

Plaintiffs v Defendants - [2005] VSC 438 - VSC 2005 case summary — Zoe

[23]

Mr PH Clarke SC had been senior counsel for the NAB in the possession proceedings.

14 On 31 July 2002, following the judgment in the possession proceedings, the defendants laid two charges against the second plaintiff, Mr Cicutto, alleging, first, that on 10 April 2002 he "committed wilfull [sic] perjury in an affidavit filed in the Supreme Court of Victoria" and, secondly, that on the same day he attempted to pervert the course of justice "by perjury." Mr Cicutto was summoned to appear at the Magistrates' Court of Victoria at Melbourne on 27 August 2002.

15 Also on 31 July 2002, the defendants laid three charges against the third plaintiff, Mr Main, alleging, first, that on 18 July 2002 he "committed wilfull [sic] perjury in an affidavit filed in the Court of Appeal", secondly, that on 10 April 2002 he attempted to pervert the course of justice "by preparing an affidavit for Francis John Cicutto", and thirdly, that on 10 April 2002 he "aided and abetted Francis John Cicutto to commit perjury and attempt to pervert the course of justice." Mr Main was also summoned to appear at the Magistrates' Court of Victoria at Melbourne on 27 August 2002.

16 It was not completely clear what affidavit material supported the charges. There was in evidence a document called "Affidavit", but without any Court heading, which Mr McFarlane affirmed on 30 July 2002. It set out the background to the charges against Mr Main and identified the matters giving rise to the allegations by placing the charge number in brackets following the relevant paragraph of the affidavit. Mrs McFarlane affirmed a single line affidavit on 31 July 2002 which said that she confirmed and relied upon Mr McFarlane's affidavit. No affidavit of Mr McFarlane affirmed on 30 July 2002 outlining the basis for the charges against Mr Cicutto went into evidence. However, there were two affidavits of Mr McFarlane affirmed on 19 September 2002 in evidence in this proceeding. As the 19 September 2002 affidavit regarding Mr Main was in identical terms to the 30 July 2002 affidavit, it seems reasonable to assume that if an affidavit regarding the charges laid against Mr Cicutto was also affirmed by Mr McFarlane on 30 July 2002 it would have been in identical terms to that affirmed on 19 September 2002.

17 The 30 July 2002 affidavit regarding Mr Main outlined that the main allegation of perjury against him stemmed from the defendants' belief that they had not been given an original hand-amended copy of Mr Cicutto's affidavit of 10 April 2002, as Mr Main swore on 18 July 2002 (see paragraph 11 above), but rather that they had been given a photocopy of an amended affidavit and that as a result the 18 July 2002 affidavit was false. The relevant paragraphs of Mr McFarlane's 30 July 2002 affidavit state:

[28]

19 Following service of the respective informations and summonses, Dr DJ Neal of counsel was briefed to represent the second and third plaintiffs. On 16 August 2002 Dr Neal wrote to the Director of Public Prosecutions ("the DPP"), Mr Paul Coghlan QC, requesting that he take over the prosecutions. He enclosed the summonses, the supporting affidavits and exhibits.

20 On 26 August 2002 Ms T Heffernan, then Associate to the DPP, wrote to both the defendants and Dr Neal, informing them that the DPP had examined a copy of the material served on Mr Cicutto and Mr Main and had come to the conclusion "that the charges cannot be sustained in law." Ms Heffernan advised that it was the DPP's intention "pursuant to s.22(1)(b)(ii) of the Public Prosecutions Act 1994 (Vic) to take over the prosecutions and discontinue them." The defendants replied by letter dated 27 August 2002 advising that any attempt by the DPP "to interfere, take over, discontinue or otherwise Pervert the Course of Justice in these matters" might lead to charges being brought against him. On the same day the private informations against Mr Cicutto and Mr Main were struck out in the Melbourne Magistrates' Court on the application of the DPP.

21 Ms Heffernan gave evidence that a private criminal information was subsequently laid against the DPP by the defendants charging him with attempting to pervert the course of justice. These charges were taken over by the Attorney-General for Victoria and struck out in the Magistrates' Court of Victoria on 21 March 2003.

22 For reasons which it is unnecessary to traverse at this stage, the McFarlanes' attempts to lodge notices of appeal from Byrne J's judgment in the possession proceedings were unsuccessful and as a consequence they were required to apply for extensions of time within which to apply for leave to appeal. Those applications were heard by the Court of Appeal, consisting of Ormiston and Vincent JJA, on 20 September 2002, at the same time as an application by the McFarlanes for leave to appeal against the dismissal by Beach J of the appeal in the Ballarat proceeding. It is important to note how the Court of Appeal treated the applications arising out of the possession proceedings. Vincent JA, with whom Ormiston JA agreed, stated in his reasons as follows:

[32]

26 On 28 November 2002 the defendants wrote to Mr Grant Sutherland and Mr Geoff Sutherland of Sutherland Farrelly advising them of their "actions" in the High Court and of the various charges that had been brought against Mr Cicutto and Mr Main. They advised of the possibility of charges being brought against the Magistrate who allowed the DPP to discontinue the charges, and against the DPP and against the staff of the Court of Appeal with respect to the grand jury application. The letter then stated that the defendants reserved their rights to charge the Sutherlands also with attempting to pervert the course of justice, if they persisted with the sale of the property, and referred to the potential punishment for that crime as 15 years' imprisonment. The defendants concluded with the statement that: "We still have plenty of blank Charge and Summons forms."

27 Mr Geoffrey Sutherland gave evidence that because he was concerned about the content of the letter he obtained legal advice from Mr Main regarding it and then proceeded with the sale. Mr Sutherland also gave evidence alleging that the defendants placed a large corrugated iron sign on the property stating it could not be sold, or words to that effect. He said that this caused concern amongst potential buyers. Nevertheless, he said that the price eventually received of $95,100 was a very good price for the property given the very severe drought at that time. Subsequently, the other property was sold by Sutherland Farrelly on behalf of the NAB.

28 On 13 December 2002 further charges were laid against each of the second and third plaintiffs. In this second set of informations Mr Cicutto was charged that "on 11 April 2002 in a judgment of Byrne J, in the Supreme Court of Victoria, and by your refusal to give evidence on the fraudulent practice of unlawful credit creation on promissory notes, without the knowledge of the registered proprietors, you Obtained Property by Deception" and Mr Main was charged with aiding and abetting the obtaining of property by deception, for his part in assisting Mr Cicutto's refusal to give evidence. Initially, the names and signatures of both defendants appeared as the informants, but Mr McFarlane's name and signature were then crossed out. When and why that was done was not clear. It may be that it was thought that as a bankrupt Mr McFarlane could not complain about property being obtained by deception.

29 Again the second and third plaintiffs engaged Dr Neal who wrote to the DPP on 17 December 2002 outlining the nature of the new charges and their relationship to those laid on 31 July 2002, and requesting that these charges also be taken over and discontinued by the DPP.

30 However, on 20 December 2002 the plaintiffs issued the current proceeding, and on the same day they applied ex parte to Beach J. His Honour ordered that the charges and summonses issued on 13 December 2002 against the second and third plaintiffs be stayed until further order and that the defendants be restrained until further order from laying or preferring any charges against the plaintiffs, and from interfering with the sale of both the Angle Road and Mystic Park properties.

31 On 29 January 2003 the plaintiffs' application for interlocutory injunctions came before Bongiorno J. His Honour ordered:

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38 I am satisfied that, as far as the second and third plaintiffs are concerned, the first element is made out. There is no doubt that on 31 July 2002 each of the defendants brought the two charges against Mr Cicutto and the three charges against Mr Main. Equally, there is no doubt that on 13 December 2002 Mrs McFarlane brought the further charges against Mr Cicutto and against Mr Main. Mr McFarlane, representing both defendants, did not quarrel with this aspect. Indeed, allegations to this effect were admitted by the defendants in both their defence and their amended defence.

39 With respect to the second element, Mr McFarlane made the point that it was not possible to say finally whether the charges against Mr Cicutto and Mr Main were determined in their favour because they had never had their "day in court." On the other hand, counsel for the plaintiffs submitted that the discontinuation of the charges against both Mr Cicutto and Mr Main, first by the DPP under s.22(1)(b)(ii) of the Public Prosecutions Act 1994 and then by Mrs McFarlane pursuant to the order of Bongiorno J, was sufficient to make clear that each of the previous proceedings was terminated in favour of the person against whom it was brought. The fact of discontinuation had been evidenced by certificates from a Registrar of the Magistrates' Court of Victoria and in respect of the first set of informations by admissions in the defendants' defence and amended defence.

40 The discontinuation of the previous proceedings in this case can be contrasted with situations such as those where the plaintiff cannot prove malicious prosecution because the charges have resulted in a conviction[10], or where even though the information was dismissed the charges were found to be proved but without a conviction being entered.[11] In Commonwealth Life Assurance Society Ltd v Smith[12] the High Court of Australia explained "the reason of the rule" by reference to three different considerations. First, to prevent a retrial of the merits of the previous proceedings by collateral rather than appellate review. Secondly, to prevent imputations in one proceeding against the justice of another proceeding still on foot or of a judicial determination still in force. And thirdly, because it is only where the previous proceedings have been determined in the plaintiff's favour that those proceedings can be seen to be without proper foundation. [13]

41 In my opinion, the actions of the DPP in discontinuing the first set of informations and that of Bongiorno J in ordering that the second set of informations be discontinued and the consequent orders of the Magistrates' Court are sufficient to establish that the previous proceedings were terminated in favour of the second and third plaintiffs. In both situations the charges were assessed and resolved according to law by individuals legally and routinely empowered to determine them. As previously stated, the evidence was that the DPP had concluded that the first set of informations could not be "sustained in law." Bongiorno J was even stronger in his rejection of the validity of the second set of informations. His Honour said:

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44 When Mr Cicutto gave evidence in response to a subpoena he denied committing perjury. He asserted that his affidavit was true in that at the relevant time he had no knowledge of "fractional reserve banking" with which to assist the court in the possession proceedings. Mr Cicutto gave evidence that he had contacted the NAB's then chief economist, Mr Alan Oster, in the course of preparing his affidavit and that Mr Oster had told him that he also had no knowledge of "fractional reserve banking." Mr Cicutto gave evidence that the phrase "fractional reserve banking" was not a technical expression with which he had familiarity. In answer to questions from Mr McFarlane, Mr Cicutto said that while the NAB loaned out more money than it held in deposits, as a result of the use of equity derived from shareholders and borrowings from other financial institutions, at all times the NAB remained within the lending ratio limits required by prudential regulators.

45 Mr McFarlane submitted that the defendants only acted out of a genuine belief that Mr Cicutto had broken the law, and made reference to a duty to prevent criminal conduct. He submitted that any ordinary prudent person would have believed that there was a basis for a criminal charge of perjury when Mr Ciccuto, then Managing Director of the NAB, stated that he had no knowledge of "fractional reserve banking."

46 It has long been held that for the purposes of malicious prosecution where the prosecutor of the previous proceedings has a genuine and reasonable belief in the existence of facts which would justify prosecution, reasonable and probable cause for bringing the prosecution may be found even if those facts do not exist.[17] But here, there was no evidence that either of the defendants held a genuine belief in the guilt of Mr Cicutto as neither of them gave evidence.

47 Even if the McFarlanes had such a belief, I am satisfied that it was not a reasonable belief. In order to establish a reasonable basis for the belief, the standard of inquiry required of the prosecutor of the previous proceedings is only that of the reasonable, prudent and discreet person. That person is not expected to have the ability to assess the likelihood of a prosecution being successful that a lawyer might bring to the task.[18] Nonetheless, the law does require that the reasonable and prudent person also be cautious, and that the prosecutor weigh the evidence carefully, making reasonable inquiry into the state of the case so that there is a genuine belief that there exists sufficient evidence to sustain a conviction. Consequently, though the prosecutor need not have the knowledge of a lawyer, it would be prudent for a reasonable and cautious potential prosecutor to seek legal advice to ensure that sufficient evidence to sustain a prosecution did exist. Indeed, in finding that a lack of reasonable or probable cause did not exist in QIW Retailers Ltd v Felview Pty Ltd[19], Macrossen J emphasised that the defendant proceeded carefully in the previous proceeding, guided and assisted by the advice of solicitors.

48 Here there was no evidence that the defendants, acting as prosecutors in the previous proceedings, had sought legal advice as to the likely success of a prosecution. Such legal advice would have informed them that the law of perjury, as stated in s.314 of the Crimes Act 1958, requires that the accused knowingly wilfully and corruptly upon oath, affirmation or declaration deposes, swears to or makes a false statement. This would involve the prosecutor in proving beyond reasonable doubt that Mr Cicutto intentionally gave false evidence and that he knew that the evidence was false. On the evidence I do not consider that a reasonable, prudent and cautious person would believe that Mr Cicutto was guilty of perjury or of attempting to pervert the course of justice. The charges against Mr Main of attempting to pervert the course of justice and aiding and abetting Mr Cicutto were also brought without reasonable and probable cause for the same reason.

49 The accusation of perjury against Mr Main centred on how Mr Cicutto's affidavit was prepared and the nature of the copy supplied to the McFarlanes during the possession proceedings. As set out in paragraph 11 above, on 10 April 2002 Mr Main provided the McFarlanes with a copy of the affidavit of Mr Cicutto with the amendments made by hand and the details of jurat indicated in an abbreviated form. Evidence was given by both Mr Main and Dr Neal that this was standard practice where exact copies of a sworn statement could be supplied to the opposing party in a proceeding due to practical limitations, such as time. Contrary to Mr McFarlane's assertion, I find that the document given to him was not a photocopy. That document, which was marked with a green circle by the McFarlanes' assistant, Mr Smart, at the time it was served, was presumably one of the several copies of the draft affidavit which had been brought to Mr Main at court. The handwritten additions were original markings. While knowledge of the common practice of marking up copy affidavits may not have been known to the plaintiffs, and may not be known by an ordinary prudent person without legal training or experience, in my opinion, had the defendants acted in a cautious manner and made the degree of inquiry that the law expects, this would have been revealed. Thus, even if there had been evidence of an honest belief in the guilt of Mr Main, the prosecution would not have been brought with reasonable and probable cause because an ordinary, prudent and cautious person would not have concluded that he had done anything wrong in terms of serving a copy of Mr Cicutto's affidavit on the McFarlanes.

50 Further, the second round of informations brought against Mr Cicutto and Mr Main in December of 2002 for the alleged obtaining of property by deception suffer from this same fault. There was no evidence of a genuine belief by the defendants of the validity of these particular charges, which is hardly surprising. Further, the degree of inquiry required of the ordinary prudent and cautious person to gauge whether there was a reasonable and probable cause for bringing these private criminal informations would have revealed that they were not appropriate. In my opinion, these two charges were clearly without reasonable and probable cause when objectively assessed. Appropriate inquiries into the circumstances of the charges would have revealed that insufficient evidence existed to sustain a conviction. Without canvassing all the elements of the crimes charged, it can be seen immediately that these charges were quite misguided. The property in question was obtained by the NAB after the defendants defaulted on their mortgage, and after a full hearing of the dispute had been conducted in this Court. To ascribe the obtaining of the property to the possibility of Mr Cicutto's affidavit being in some part false or misleading, and to charge Mr Main with aiding and abetting that crime as a result of his preparing that affidavit in the manner described, could not reasonably have been considered to fulfil the requirements of s.81 of the Crimes Act 1958. However unfortunate it was that the home of the defendants was lost to them, presumably as a result of their inability to repay the NAB, it was not the correct response to the loss of their property for the defendants to allege serious criminal conduct by individuals involved in the legitimate furtherance of the NAB's position.

51 This leads inevitably to the next question of whether the defendants in laying the charges were actuated by malice. A crucial consideration here is that the presence of malice for the purposes of malicious prosecution is not solely indicated by actual spite or ill-will. In Stevens v The Midland Counties Railway Company[20], Alderson B said that

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54 The passage clearly demonstrates that the primary matter at issue here was the attempted retention of the properties the subject of the possession proceedings. The criminal charges were laid in an attempt to prove that the NAB's position was unsupportable and that the fundamental basis of the mortgage transaction through which the NAB eventually came into possession of the defendant's properties was unfair, unjust or illegal. Relying on the authorities quoted above, it is not necessary to take the matter further and assess whether this led to ill-will or spite on behalf of the defendants as the prosecutors of these private informations. It is certainly the case, in my opinion, that part of the motivation for the bringing of the charges was to alter the course of the NAB's dealing with the defendants' properties.

55 In his final submissions, Mr McFarlane denied that there was "any spite or any malicious purpose" in he and his wife laying the private informations. He said that they were merely "seeking of justice." Once again, this statement suffered from the fact that it was not on oath and subject to cross-examination and therefore part of the evidence. Accordingly, I am satisfied that it has been established that in bringing the first set of informations the defendants were activated by malice and that the same applied to the second defendant in respect of the second set of informations.

56 The final requirement that must be proved by the plaintiffs to establish malicious prosecution is that of having suffered damage of a kind relevant to or compensable by the tort of malicious prosecution. Holt CJ in Savile v Roberts[26] set out the three types of damage that are compensable under the tort of malicious prosecution, namely damage to the person, property or reputation. This statement was endorsed by the joint judgment of Rich, Dixon, Evatt and McTiernan JJ in Commonwealth Life Assurance Society Ltd v Smith[27].

57 It was submitted for the plaintiffs that there was damage to property, in the form of legal fees incurred in defence of the charges, and damage to reputation. The evidence of Mr Lawson, the Deputy Chief General Counsel of the NAB, was that legal fees in the amount of $19,616 were paid by the NAB on behalf of the second and third plaintiffs in defending the private prosecutions and that a further $24,000 approximately was paid in legal fees by the NAB in obtaining advice as to the effect that a conviction of the chief executive officer would have on the NAB in the numerous countries in which it or its subsidiaries operated. However, all of that expense was incurred by the NAB, not by Mr Cicutto or Mr Main who were the persons subjected to the malicious prosecutions.

58 Nevertheless, I respectfully agree with Ormiston J that:

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61 In my opinion, this essential element of the tort of abuse of process is met by the finding of malice already made above. Even if the defendants genuinely believed that a crime may have been committed, their indirect purpose in using charges against the second and third plaintiffs to attempt to prevent the loss of their properties is enough to constitute the tort of abuse of process.

62 Unlike malicious prosecution, it is not necessary for the plaintiff in an action for abuse of process to show that the previous proceeding terminated in his or her favour nor that the proceeding was initiated without reasonable and probable cause.[31] It seems to me that these differences mean that the NAB is able to establish that it has a claim for collateral abuse of process against the defendants for their wrongful prosecution of its chief executive officer and solicitor in an attempt to force it to stop its efforts to gain possession of, and sell, the defendants' properties, whereas it could not make out a claim for malicious prosecution because it had not been the subject of any prosecution by the defendants.

The Claim for Injunctive Relief

63 Two final matters must be discussed in deciding whether injunctive relief is appropriate in this case, and if so what relief should be ordered. The first of these matters is whether there is evidence of an ongoing threat of further charges being brought by these defendants.

64 An unfortunate aspect of this case is that whatever may have been the defendants' beliefs about the "injustice" of not being permitted to call Mr Cicutto to give evidence about "fractional reserve banking", it is clear that the bringing of charges became the defendants' modus operandi whenever a step adverse to their interests was taken in the conduct of any of the litigation involving the NAB's attempts to sell their properties. This is evidenced by the charge laid against the DPP, the accusation made against counsel who appeared for the NAB in the possession proceedings, the threats made against staff of the Court of Appeal, the threats made to the real estate agent Mr Sutherland and the second set of charges that alleged obtaining property by deception despite the discontinuance of the original charges on which they relied. The strongest evidence in this regard was a letter written by the defendants to Sutherland Farrelly in which they referred to the possibility of bringing private informations against the DPP, the Magistrate who allowed the DPP to discontinue the first round of charges, and staff of the Court of Appeal of the Supreme Court of Victoria for the charge of attempting to pervert the course of justice, included copies of the charges laid against Mr Cicutto and Mr Main, and then stated:

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65 The mere possession of blank charge and summons forms is in no way indicative of a future risk of malicious prosecution. However, the use of those documents as a form of threat in an attempt to prevent an agent of the NAB following his client's instructions does indicate a pattern of behaviour of bringing private informations for an indirect or ulterior purpose. As the defendants did not themselves give evidence, it was also submitted for the plaintiffs that the rule in Jones v Dunkel[32] could be applied, in that it could be taken into account in the drawing of any inferences from this evidence that the defendants did not dispute that a continuing threat does exist. There is little doubt in this case that the self-represented defendants' knowledge of the law did not extend to a full understanding of the implications of not giving evidence. However, in my opinion, the defendants should have understood that making a statement under oath that no further prosecutions would be brought, or at least that none would be brought without proper foundation (and assisted by full and appropriate inquiry into the likelihood of a prosecution being successful), would be good evidence against the plaintiffs' need for ongoing injunctive protection. Indeed, it was submitted by the defendants that they still wish to have a full hearing of the matters raised by the charges, irrespective of the discontinuance of those charges by the DPP and Bongiorno J. Thus, as a matter of common sense, the Jones v Dunkel rule can be applied here, at least in as much as it allows the conclusion to be drawn that the defendants would not have completely denied, or been able to present compelling evidence against, the inference which is open on the evidence set out above that a continuing threat of malicious prosecution does exist. I am satisfied that there is such a threat of further baseless prosecutions if injunctive relief is not granted.

66 The other matter which must be explored is the identification of the appropriate beneficiaries of the injunctive relief and the terms of that relief. It was submitted for the plaintiffs that an injunction against further prosecution should be ordered which would restrain the defendants from bringing any private informations against Mr Cicutto and Mr Main (the second and third plaintiffs), the NAB (the first plaintiff), all persons acting as the NAB's agents such as the real estate agents Sutherland Farrelly and its solicitors Russell Kennedy and counsel briefed to represent the plaintiffs in the possession proceedings and this proceeding, and all employees, servants or agents of those persons or entities.

67 Mr Cicutto and Mr Main have both made out a case of malicious prosecution and there is no difficulty in identifying them as persons who cannot be subjected to further criminal charges by the defendants. However, as discussed above, no private prosecution has been brought by the defendants against the NAB itself. Yet, as Bongiorno J said, it is "the principal target of the defendants' discontent."[33] Mr Cicutto and Mr Main were charged because of their involvement in the NAB's attempts to gain possession of the defendants' properties. Mr Sutherland was threatened with prosecution because he was acting as the NAB's real estate agent in selling the defendants' properties. It seems to me, therefore, that it is appropriate for the NAB, on the basis of the tort of collateral abuse of process, to be given protection against further unwarranted charges being brought against its employees and agents.

68 The difficulty with such a large class of persons being included in the terms of an injunction is the possibility that the restraint would unfairly extend to situations not related to the past conduct of the defendants which has led to this proceeding. All employees and agents of a company as large as the NAB is a considerable number of people. Should the defendants have an entirely separate basis for legitimately bringing criminal charges, such as if a person employed by the NAB harmed them in an unrelated circumstance, for example by assaulting them, the defendants might be deprived of their right to seek redress for criminal behaviour if the police were unable or unwilling to do so. However, in my opinion, it was correctly submitted for the plaintiffs that the injunction could be worded in such a way that in the event of such circumstances arising in the future, the injunction could be amended by the Court on the presentation of new evidence. Given the defendants' past attitude and conduct, it would be very difficult to draft an injunction in some other way that would still give the plaintiffs the protection to which, I have found, they are entitled.

69 Consequently, I propose to order that, until further order, the defendants, whether by their employees or agents or howsoever otherwise, be restrained from laying or preferring any charges for summary or indictable offences in the Magistrates' Court of Victoria or any other court against the first plaintiff, its solicitors or barristers or estate agents or any employee or agent of the first plaintiff, its solicitors or barristers or estate agents or against the second plaintiff or against the third plaintiff.

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Cases Cited (6)