Relevant legal principles and case law
53 It is well established that this court has an extensive jurisdiction to stay proceedings in the interests of justice and that "the matter is one of judicial discretion" (See Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 at [19] and [21] per Sugerman ACJ (with whom Holmes and Mason JJA agreed)).
54 In Rochfort, the Court of Appeal allowed the appeal against an order granting the defendant newspaper a stay of the plaintiff's defamation action until after the plaintiff's criminal trial on charges of conspiracy had been determined (the subject matter of which the defendant newspaper had reported).
55 In Rochfort, the stay was not sought, but rather resisted, by the party subject to criminal charges. The defendant newspaper sought the stay until after the conclusion of the criminal trial on grounds of public interest and its own alleged loss of advantage in the conduct of the civil action, should it be tried first.
56 Sugerman ACJ (with whom Holmes and Mason JJA agreed) acknowledged the "fundamental principle that a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court, subject only to an exercise of judicial discretion on proper grounds as part of the court's inherent powers…" (at 19).
57 His Honour acknowledged a plaintiff's right of access to the courts to bring and prosecute an action, observing that while stays could be granted in the interests of justice, restraint of the plaintiff's right was a grave matter requiring the existence of proper grounds.
58 Sugerman ACJ referred to the historical rule (sometimes called "the felonious tort rule") which required the postponement of a civil action for a felonious wrong until after prosecution for the felony. His Honour observed that the rule was artificial, abrogated in England and largely unnecessary, because it was directed to a historical situation which no longer applied, where the initiation of a prosecution for felony was principally left to private individuals, who could elect to proceed either civilly or criminally.
59 Sugerman ACJ reasoned that the court's independent discretion to stay proceedings was unrelated to the archaic felonious tort rule.
60 Subsequently in McMahon v Gould (1982) 7 ACLR 202, Wootten J referred to Sugerman ACJ's discussion of the historical rule and a number of other decisions in which it was "pronounced dead" or otherwise not applied.
61 Wootten J also referred to Jefferson Ltd v Bhetcha [1979] 1 WLR 898, which he described as an application of the discretion to stay proceedings in the interests of justice. His Honour discussed in considerable detail the factors relevant to exercising the discretion to stay a civil proceeding when a defendant faced actual or possible criminal proceedings involving the same subject matter.
62 Wootten J stated (at 206):
I approach the decision of this matter with the following guidelines:
(a) Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court (Rochfort v John Fairfax & Sons Ltd at 19);
(b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds (ibid);
(c) The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff's ordinary rights should be interfered with (Jefferson v Bhetcha at 905);
(d) Neither an accused (ibid) nor the Crown (Rochfort v John Fairfax & Sons Ltd at 21) are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;
(e) The court's task is one of "the balancing of justice between the parties" (Jefferson Ltd v Bhetcha at 904), taking account of all relevant factors (ibid at 905);
(f) Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors (ibid at 905);
(g) One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused's "right of silence", and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding (ibid at 904). I return to this subject below;
(h) However, the so-called "right of silence" does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action 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 an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding (ibid at 904-5);
(i) The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings (ibid at 905);
(j) In this regard factors which may be relevant include:
(i) the possibility of publicity that might reach and influence jurors in the civil proceedings (ibid at 905);
(ii) the proximity of the criminal hearing (ibid at 905);
(iii) the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid at 905);
(iv) the burden on the defendant of preparing for both sets of proceedings concurrently (Beecee Group v Barton);
(v) whether the defendant has already disclosed his defence to the allegations (Caesar v Somner at 932; Re Saltergate Insurance Co Ltd at 736);
(vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him (cf Re Saltergate Insurance Co Ltd at 735-6);
(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant's obligation to the plaintiff;
(1) In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed (Beecee Group v Barton).
63 Wootten J discussed in detail "the right of silence", which he described as a convenient rubric for several rules and practices of various origins and purposes, which provoked controversy. His Honour noted, inter alia, that some advantages conferred by the right of silence were not justifications for its existence. Such tactical advantages included depriving the prosecution of the opportunity to check the defendant's story or to stay silent until the end and then fabricate a story or last minute alibi.
64 Wootten J stated (at 208):
In exercising its discretion to stay civil proceedings the court need not be concerned to preserve these advantages. It should be concerned to avoid the causing of unjust prejudice by the continuance of the civil proceedings, not to preserve the tactical status quo in the criminal proceedings whether it be just or unjust.
65 His Honour concluded that, in the case before him, the defendant had not demonstrated such a real risk of injustice as to justify denying the plaintiff his fundamental right to a hearing in the ordinary course. There was no evidence that the civil case was likely to attract prejudicial publicity, that the criminal trial was imminent, that disclosure of the accused's case might give rise to malpractice in the criminal trial or that he might suffer unfairly in cross-examination (at 208). The possibility of prejudice to the defendant therefore did not outweigh the interests of the liquidator (acting on behalf of creditors and shareholders) to call the defendant to account.
66 In Rural Export Trading (WA) Pty Ltd v Hahnheuser [2004] FCA 1053, Gray J refused to stay civil proceedings against a respondent, who was currently subject to criminal prosecution for an offence connected with the same subject matter.
67 His Honour stated at [5] to [6] the law no longer recognised an automatic entitlement to a stay of civil proceedings due to the existence, or even the threat, of a parallel criminal proceeding concerned with the same subject matter, against the defendant.
68 Gray J stated at [5] - [6]:
The law has developed, however, so that there is no longer any automatic entitlement to a stay of the civil proceeding. The development began with a case called McMahon v Gould (1982) 7 ACLR 202. The line of authority was summarised by Gyles J in Baker v Commissioner of Federal Police [2000] FCA 1339; (2000) 104 FCR 359 at [27] as follows:
There is a long line of authority which establishes that the granting of a stay of civil proceedings in those circumstances is discretionary in the civil court and that the choice of either fully pursuing a civil claim or a defence to a civil claim or not doing so to avoid the risk of self-incrimination is not sufficient in itself to warrant a stay.
There have been various formulations in the authorities as to the proper test to be applied. In Cameron's Unit Services Pty Ltd v Kevin R Whelpton & Associates (Australia) Pty Ltd (1984) 4 FCR 428 at 434, Wilcox J spoke of the likelihood of causing injustice in the criminal proceedings. More recently, in Golden City Car & Truck Centre Pty Ltd v Deputy Commissioner of Taxation [1999] FCA 922; (1999) 42 ATR 379 at [13], Cooper J spoke of the need to establish a 'real prospect of substantial prejudice in the criminal proceedings if the civil action continues.'
69 His Honour concluded that the requirement was not satisfied in the case before him, as there was nothing to persuade the judge that the first respondent would be prejudiced. The relevant respondent had "not even seen fit to swear an affidavit to the effect that he would be prejudiced by abandoning his right of silence in the criminal proceeding" (at [7]).
70 In Reid v Howard (1995) 184 CLR 1, the High Court did not refer to McMahon v Gould or the principles relevant to a stay of civil proceedings when there are actual or potential criminal proceedings involving the same subject matter. It nevertheless strongly acknowledged the importance of the privilege against self-incrimination in terms which have been suggested to be in tension with the statements in McMahon v Gould about the right of silence. In Reid v Howard, the High Court allowed an appeal from the New South Wales Court of Appeal. While recognising that the appellant, a trustee, was entitled to maintain his privilege against self-incrimination in civil proceedings for default brought by beneficiaries, the Court of Appeal required him to swear affidavits disclosing what was done with various assets, subject to a protective regime imposed to limit the disclosure and the use of the material in the affidavits.
71 Deane J held that the Court of Appeal's orders were vitiated by error of law, although he did not think that the Court of Appeal lacked jurisdiction to make them. His Honour stated (at 5):
…both Powell J and the Court of Appeal were correct in refusing to deny the benefit of the privilege against self-incrimination to a trustee (or other fiduciary) who is involved in civil litigation with a beneficiary. "The privilege against self-incrimination is deeply ingrained in the common law." It reflects "a cardinal principle" which lies at the heart of the administration of the criminal law in this country. It can be, and has increasingly been, overridden or modified by the legislature. It can be waived by the person entitled to claim it. Otherwise, it is unqualified. In particular, it should not be modified by judicially devised exceptions or qualifications. Unless it appears that the assertion of potential incrimination is unsustainable, a claim to the benefit of the privilege cannot, in the absence of statutory warrant, properly be disregarded or overridden by the courts.
72 Deane J concluded that the ordered disclosure "represents a significant overriding of the appellant's privilege against self-incrimination regardless of whether the fact of involuntary disclosure and the matters disclosed would themselves be admissible against the appellant in any subsequent criminal proceedings" (at 6). His Honour observed that the protection of the privilege against self-incrimination extended not only to the risk of incrimination by direct evidence, but also by indirect or derivative evidence (at 6).
73 In Reid v Howard, the plurality (Toohey, Gaudron, McHugh and Gummow JJ) stated that (at 11):
The privilege, which has been described as a "fundamental … bulwark of liberty", is not simply a rule of evidence, but a basic and substantive common law right.
74 Their Honours further stated (at 14):
There is simply no scope for an exception to the privilege, other than by statute. At common law, it is necessarily of general application - a universal right which, as Murphy J pointed out in Pyneboard Pty Ltd v Trade Practices Commission, protects the innocent and the guilty. There is no basis for accepting any class or category of person whether by reference to legal status, legal relationship or, even, the offence in which he or she might be incriminated because, as already indicated, its purpose is the completely general purpose of protecting against "the peril and possibility of being convicted as a criminal". For the same reason, there can be no exception in civil proceedings, whether generally or of one kind or another. Moreover, it would be anomalous to allow that a person could refuse to answer questions in criminal proceedings or before investigative bodies where the privilege has not been abrogated if that person could be compelled to answer interrogatories or otherwise make disclosure with respect to the same matter in civil proceedings.
75 The plurality concluded that the Court of Appeal did not have power to make the relevant orders (at 16).
76 In Re AWB Ltd (No 1) (2008) 21 VR 252, in December 2007, ASIC brought civil proceedings seeking declarations, civil penalties and injunctions against directors and officers of AWB Ltd for contravention of ss 180(1) and 181(1) of the Corporations Act 2001 (Cth) ("the Corporations Act") for breach of duty in relation to AWB's contracts with Iraq under the United Nations Oil for Food Programme.
77 The defendants sought a stay of the civil proceedings pending decision by ASIC and the Oil-for-Food Task Force on whether criminal proceedings should be brought against them. ASIC acknowledged the common law discretion to stay civil proceedings in the interests of justice if criminal proceedings could be commenced against a defendant for an offence constituted by substantially the same conduct raised in the civil proceeding (at 259).
78 ASIC also conceded that a refinement of the principles in McMahon v Gould should be made, by reason of the High Court's decision in Reid v Howard (at [19]).
79 In contrast to the present case, in Re AWB Ltd (No 1), no charges had yet been laid and the civil action would terminate if that occurred. This was due to provisions of the Corporations Act which abolished the right to seek a civil penalty if criminal proceedings in respect of substantially the same conduct were on foot and terminated ASIC's right to obtain a civil penalty if a conviction were obtained in respect of such conduct. The McMahon v Gould line of authorities was thus subject to a statutory limitation in the case of civil penalty proceedings (at [78]-[79]).
80 In Re AWB Ltd (No 1), the defendants submitted that criminal proceedings were "on the cards", which Robson J construed as meaning that they were a reasonable possibility (at [86]).
81 Robson J stated (at [99]):
Applying the McMahon v Gould principles, subject to the refinement in Pt 9.4B [of the Corporations Act], 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.
82 His Honour concluded that there was a real risk that criminal proceedings were "on the cards" for most defendants, that the civil proceedings would be stayed if not determined before the criminal proceedings commenced, and the defendants would thereby potentially waste significant expenditure on the civil proceedings. Robson J also weighed the effect on the plaintiff, noting that ASIC was pursuing the public good in the civil action, the defendants owed no obligation to ASIC, and both the civil and criminal proceedings would be brought by an emanation of the State.
83 In contrast, his Honour considered that it would be premature to grant a stay in relation to one defendant, Mr Lindberg, as criminal proceedings against him were not "on the cards".
84 In the course of his reasons, Robson J extensively analysed the relevant authorities and observed that McMahon v Gould and Reid v Howard did not sit easily together (at [56]).
85 His Honour stated (at [47] to [48]):
The principles in McMahon v Gould provide guidelines on whether to stay a civil proceeding because of pending criminal proceedings. They provide 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 what his defence is likely to be in the criminal proceeding. Another relevant factor is whether the defendant has already disclosed his defence to the allegation. In Australian Securities Commission v Kavanagh, Hayne J said, after reviewing the principles to be applied in determining the applications for a stay, that:
In my view, it is therefore clear that unless reason is shown to the contrary, a plaintiff is entitled to have its action tried in the ordinary course of the procedure and business of the court and that it is a grave matter to interfere with that entitlement by a stay of proceedings the grant of which would require justification on proper grounds. In the end the task is one of the balancing of justice between the parties taking account of all relevant factors and judging the case on its merits.
ASIC concedes however, that these statements of principle should be refined by reason of the High Court of Australia decision in Reid v Howard. There, the High Court confirmed the fundamental importance of the privilege against self-incrimination and, in particular, that it cannot be abrogated other than by statute.
86 His Honour discussed Reid v Howard in detail and cited authorities which in terms dealt with compulsory disclosure leading to incrimination, albeit by direct or indirect evidence.
87 His Honour stated (at [50] to [51]):
I have already referred to the doubts expressed about McMahon v Gould particularly since the decision in Reid v Howard. The guidelines give little weight to the fact that the defendant may be compelled to waive his right of silence if he wishes to defend the civil action. In Cameron's Unit Services Pty Ltd v Kevin R Whelpton Associates (Aust) Pty Ltd, Wilcox J said:
The fact that the existence of the civil action may result in a decision by the accused person to waive his right of silence is not, in itself, a sufficient reason to stay that action. The real question must be the likelihood of causing injustice in the criminal proceedings …
Accordingly, on this approach the right of silence is not infringed if the defendant elects to waive his right of silence to defend the civil proceedings by raising and running a positive defence. In this case, the defendants are alleged to have contravened ss 180 and 181 of the Corporations Act. The statutory defences to s 180(1) include the business judgment rule in s 180(2) and the honesty defence in s 1317S. The business judgment rule requires the defendant to establish he made the judgment in question in good faith for a proper purpose. The honesty defence requires the defendant to establish he acted honestly. These defences to the civil proceedings would squarely raise the additional elements that the prosecution of the defendants under s 184 would raise and impose on the prosecution, that is, dishonesty and lack of good faith. The defendants who were directors may also rely on s 189 which imposes on the defendant an obligation to establish good faith. The defendants argue that it is a relevant consideration that the defence of the civil proceedings may require the defendants to forego or waive their right to silence with the adverse consequences that may follow to the defendant in the subsequent criminal proceedings. The McMahon v Gould line of authorities provides little support for this view.
88 His Honour referred to Australian Securities Commission v Kavanagh (1993) 12 ACSR 69 and Philippine Airlines v Goldair Australia Pty Ltd [1990] VR 385, where Young CJ approved the statement of Megaw LJ in Jefferson Ltd v Bhetcha [1979] 1 WLR 898 that (at [54]):
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 proceedings. 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.
89 Robson J concluded at [58]:
For the purposes of this case, I assume I am bound to follow the McMahon v Gould 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. 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.
90 In Naidu v The Queen [2011] VSCA 14, Maxwell P referred to the authorities reviewed by Robson J, which in Maxwell P's view, showed that the courts should be astute to protect a defendant from prejudice in the present context by staying the civil proceeding. His Honour stated at [23]:
There is, I think, an instructive parallel between the position of the present applicant and the position of a defendant in a civil proceeding who is, or is likely to become, a defendant to criminal charges relating to the same subject-matter. As appears from the authorities reviewed by Robson J in Australian Securities and Investments Commission v Geary, the court will be astute to protect such a defendant against prejudice in the criminal proceeding, by the grant of a stay of the civil proceeding. The justification for such an order is that the defendant should not be put in a position where he/she is obliged to disclose in the civil proceeding matters which may affect his/her defence in the criminal proceeding. Similar considerations applied here.
91 In De Simone v Bevnol Constructions and Developments Pty Ltd [2010] VSCA 231, the Victorian Court of Appeal (Redlich, Mandie and Hansen JJA) (at [6]) identified the "ultimate question" in McMahon v Gould as:
… has there been demonstrated such a real risk of injustice to the defendant that the court would be justified in denying the plaintiff his fundamental right to a hearing in ordinary course?
92 Their Honours stated (at [7] - [9]):
The McMahon v Gould guidelines have been applied in Australian courts many times. Young CJ did so in Philippine Airlines v Goldair. Often the case will be determined without express reference to the guidelines but by reference to the justice of the situation, and in that sense such cases follow the McMahon v Gould line of authority.
Counsel for the Attorney-General provided us with a lever arch file of authorities which reflected the wide acceptance of the McMahon v Gould guidelines. Some of the cases contain expressions of concern that the guidelines may not appropriately accommodate the privilege against self-incrimination particularly in view of the reminder in Reid v Howard that the privilege is a common law right which applies unless excepted by statute or waiver. Hence there have been suggestions in some cases that McMahon v Gould should be reconsidered "so as to decide whether too little weight is given to the practical as well as legal prejudice to the accused and to the primacy of criminal proceedings in our justice system".
Notwithstanding such concerns, the McMahon v Gould line of authority remains firmly established and the guidelines have not been modified by an appellate court. It is apparent, as has been acknowledged by judges, including in appellate decisions that the suggested reconsideration of McMahon v Gould and the subsequent line of authority therefrom, could only be performed by an appellate court and it may be by the High Court. It is axiomatic that any such reconsideration should occur in a case in which the facts and circumstances render it appropriate to undertake the reconsideration. Overwhelmingly, the present is not such a case.