Case: McMahon v Gould (1982) 7 ACLR 202
Outcome: considered
Jefferson Ltd v Bhetcha , its initial Australian reception and the relationship, if any, between the discretion described by Megaw LJ in the passage quoted and the "felonious tort rule" were considered by Wootten J in McMahon v Gould (1982) 7 ACLR 202 in what has proved to be an influential judgment. In that case Mr McMahon, in his capacity as the liquidator of The Dominion Insurance Company of Australia Limited commenced proceedings against the directors of that company, including Mr Gould, for the recovery of sums of money. He alleged that the sums of money in question had been withdrawn from the company's account and misapplied and as a result the directors were guilty of fraud and breach of duty owed to the company. Mr Gould was, at the time already facing criminal proceedings directly related to the sums in question. He applied to the Supreme Court for a general stay of the liquidator's proceedings pending the termination of those criminal proceedings. 21 Against this background, Wootten J (at 206-207) made the following observations: 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 &amp; 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 &amp; 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 S altergate 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 ). (Citations of authorities mentioned omitted). 22 The first reported consideration in Queensland of the discretion described by Megaw LJ in Jefferson Ltd v Bhetcha is the judgment of Connolly J in Black &amp; White Cab Co Limited v Kelk [1984] 2 Qd R 484. That case was a civil proceeding in which Mr Kelk was a defendant to a claim for an injunction to restrain the use of allegedly confidential knowledge and damages for an alleged breach of his duty of trust and confidence. Though he had entered an appearance, he had filed no defence. In the meantime an indictment had been presented against him alleging an offence of making improper use as an employee of corporate information to gain an advantage for himself or another person. His Honour (at 485) described the passage which I have quoted above from the judgment of Megaw LJ in Jefferson Ltd v Bhetcha as "highly persuasive" and decided (at 487) to follow it. McMahon v Gould does not appear to have been drawn to his Honour's attention although two earlier New South Wales decisions in which Jefferson Ltd v Bhetcha had been considered and which were in turn considered by Wootten J were. In the result, Connolly J dismissed the stay application, fixed a time for the filing of a defence and counterclaim and permitted the entry of interlocutory judgement for damages to be assessed in default of the delivery of the same. His Honour allowed (at 488) that, if the criminal trial were imminent, it may well be the proper course to postpone the trial of the civil action until after verdict observing that this was a matter which could be resolved when the civil action was closer to trial. 23 Later factual exemplars of the application of the discretion described by Megaw LJ in Jefferson Ltd v Bhetcha and of the guidelines set out by Wootten J in McMahon v Gould abound. The most recent of these appears to be a judgment delivered last month by Robson J of the Victorian Supreme Court in Australian Securities and Investments Commission v Flugge [2008] VSC 473. That case is noteworthy for a number of reasons. Firstly, it exemplifies that an exercise of the discretion in question in a civil proceeding may be sought even where related criminal proceedings have not been instituted but are instead "on the cards", i.e. a "reasonable possibility". Secondly, it contains a reflective discussion of whether the guidelines stated in McMahon v Gould should continue to be applied in light of later High Court authority. Thirdly, there is to be found in it consideration of observations made by Finkelstein J of this Court concerning the danger of a civil court's making declaratory judgments or granting injunctive relief if a matter is likely to end up before a criminal court. 24 As to the second of these noteworthy features, the following passage from the reasons for judgment of Robson J (at [30] to [32]) should be set out: Authority of McMahon v Gould [30] ASIC submits the principles set out above are well established and have been applied in numerous other cases. It submits they should be followed in the present case. There are, however, indications that the principles may require review by an appellate court. In Yuill v Spedley Securities Ltd Kirby P referred to McMahon v Gould as "the existing law." His Honour indicated, however, that one day it may be appropriate for the guidelines referred to by Wootten J in McMahon v Gould to be reconsidered. Kirby P said that the guidelines do not take specifically into account the primacy of the administration of criminal justice in our legal system. In Niven v SS Beazley JA of the New South Wales Court of Appeal said there was force in Kirby's opinion although the case before him was not the case to reconsider McMahon v Gould . In Baker v The Commissioner of Federal Police Gyles J said that in view of Reid v Howard there was some merit in the view that there should be reconsideration of the manner in which the McMahon v Gould line of authorities is now applied 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. Gyles J said: The applicants rely upon the decision of the High Court in Reid v Howard to suggest that the line of authority commencing with McMahon v Gould has given insufficient weight to, and has not fully appreciated the extent of, the privilege against self-incrimination. There is no doubt that Reid v Howard does re-affirm the importance of the privilege against self-incrimination, and does not give any encouragement to think that any devaluation of the principle which may apply in the United Kingdom will be applied in Australia. [31] Gyles J said, however, that any such reconsideration would need to be undertaken either by the Full Court of the Federal Court of Australia or the High Court. This approach to McMahon v Gould was also adopted by Gray J in Elliot v APRA . Gray J did hold that the line of authority in McMahon v Gould was not constructed by way of any exception to the privilege against self-incrimination or self-exposure to a penalty. He said: Rather, it represents a means which the courts have developed to deal with the possible conflict between actual pending criminal proceedings and civil proceedings or administrative processes. The approach taken by Gyles J was also adopted by Mansfield J in Guglielmin v Trescowthick (No 3). [32] Nevertheless, in Trade World Enterprises Pty Ltd v DCT Nettle JA (with whom Redlich JA agreed) said the relevant principles applicable to the exercise of discretion on an application for adjournment or stay were conveniently set out by Young CJ in Philippine Airlines v Goldair (Aust) Pty Ltd where Young CJ cited with approval the guidelines in McMahon v Gould . There was no examination of the reservations referred to by Kirby P. (Internal footnote references omitted) 25 In the result, Robson J (at [58]) felt that he was bound to follow what he described as the " McMahon v Gould line of authorities". So do I. Locally in Queensland, Daubney J reached a like conclusion last year in Osric Investments v Probst [2007] QSC 293 at [12]. 26 In Australian Securities and Investments Commission v Flugge , Robson J felt constrained, as had others before him, to suggest that an appellate court may wish to reconsider McMahon v Gould . Insofar as McMahon v Gould recognises the existence of a power which a court has to control proceedings in a civil action by the granting of a stay of those proceedings where the interests of justice so require, I respectfully doubt whether there is any general need for a reconsideration of that case. It is important not to elevate particular factual circumstances calling or not calling for the exercise of that power into statements of principle. It seems to me that Wootten J was not endeavouring to do anything other than to set out guidelines. I do not approach this matter on the basis that the occasions for the exercise of the power are closed. What is required is a balancing of the interests of the applicant and respondent in a civil proceeding having regard to any statutory context relevant to that civil proceeding and to any impending or prospective criminal proceeding. A separate but not unrelated consideration is whether the civil proceeding or at least its then prosecution might be regarded as an abuse of the process of the court. Such considerations will especially loom where the applicant in a civil proceeding is an emanation of the Crown and seeks declaratory relief and the imposition of pecuniary penalties in circumstances where a respondent is or is in jeopardy of facing criminal proceedings in respect of substantially the same conduct. I note that such a prospect particularly influenced Robson J in his suggestion that McMahon v Gould may need to be reconsidered by an appellate court.