In the matter of Gap Constructions Pty Limited [2013] NSWSC 1262

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Gap Constructions Pty Limited [2013] NSWSC 1262 Hearing dates: 30 August 2013 Decision date: 30 August 2013 Jurisdiction: Equity Division Before: Kunc J Decision: Civil proceedings stayed Catchwords: PRACTICE - Concurrent civil and criminal proceedings - Same subject matter - Defendant established prejudice - Stay granted Cases Cited: Hearne v Street [2008] HCA 36; (2008) 235 CLR 125; (2008) 248 ALR 609; (2008) 82 ALJR 1 259 McMahon v Gould (1982) 7 ACLR 282 Category: Procedural and other rulings Parties: Gap Constructions Pty Limited (ACN 122 350 038) (Plaintiff) Vigar Pty Limited (ACN 070 145 452) (In liquidation) (First Defendant) Bega Group Pty Limited (ACN 139 252 529) (Second Defendant) Con Bosganas (Third Defendant) Bugong Pty Limited (ACN 089 116 405) (In liquidation) (Fourth Defendant) Representation: Counsel: A. Hourigan - Plaintiff Solicitors: Sarvaas Ciappara Lawyers - Plaintiff Horowitz & Bilinsky Solicitors - Third Defendant File Number(s): 2011/198502 Publication restriction: No

EX TEMPORE Judgment 1HIS HONOUR: These proceedings were commenced on 17 June 2011. Since then they have had a long and tortured interlocutory history in both this Court and the Court of Appeal. It is unnecessary for me to set out that history in any particular detail. 2For present purposes it is sufficient that I note that the active parties remaining in these proceedings are the plaintiff, the third defendant Mr Bosganas and his corporate vehicle the second defendant. 3On 18 January 2012 Mr Bosganas was charged with a number of criminal offences. It is common ground between the parties that the subject matter of the present civil proceedings and the subject matter of the criminal charges against Mr Bosganas is, for all intents and purposes, identical. 4There are before the Court today two notices of motion. The first is a motion filed on behalf of Mr Bosganas for orders that these proceedings be stayed until the finalisation of the criminal proceedings against him in the District Court. Those proceedings were, on 31 May 2013, fixed for hearing in the District Court commencing on 8 October 2013. Having regard to the possibility that the criminal trial will take some 10 weeks, Mr Bosganas's motion proposes that these proceedings then be adjourned for further directions to 4 December 2013. 5The plaintiff filed a motion on 8 August 2013 which is responsive to Mr Bosganas's motion. I give it that description because on 30 May 2013, Rein J, on Mr Bosganas's application, ordered the plaintiff to provide security for costs in these proceedings in the sum of $100,000. That security has been provided by the plaintiff. By its motion filed on 8 August 2013 the plaintiff seeks orders that, if the proceedings are stayed pending resolution of the criminal prosecution, the $100,000 which the plaintiff has provided by way of security and any interest accrued thereon be returned to the first plaintiff. In doing so, the plaintiff does not cavil with the order for security. Rather, the plaintiff submits that the financial burden, such as it is, for the plaintiff represented by the cost of having provided the security ought to be suspended for the duration of any stay of these proceedings while the criminal proceedings run their course. 6The principles to be applied in relation to an application for a stay of civil proceedings pending resolution of criminal proceedings which involve the same subject matter were set out by Wooton J in McMahon v Gould (1982) 7 ACLR 202 at paragraphs 206-207: 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; (l) 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 [sic]). 7Having regard to those principles, Mr Bosganas relies on certain particular matters in support of his application for a stay. 8First, these proceedings are at the stage where the plaintiff has filed its evidence and the next logical step would be for an order to be made for Mr Bosganas to file his evidence in defence. It is submitted on behalf of Mr Bosganas that between now and the criminal hearing in October and, obviously enough, during the hearing itself, his attention and that of his legal advisers will be fully focused on dealing with the criminal prosecution. That is undoubtedly a relevant factor in the exercise of the Court's discretion to stay civil proceedings. 9Second, it is submitted on behalf of Mr Bosganas that the period of the stay, as matters presently stand, is likely to be relatively short when measured against the already lengthy history of these proceedings in this Court. It is said that insofar as there may be some prejudice to the plaintiff by the delay in the prosecution of the civil proceedings, given the matter has been on foot since 2011, a delay of a few months until December is not sufficient to negative what might otherwise be a favourable exercise of the discretion for Mr Bosganas to have these proceedings stayed. 10A third matter to which the Court's attention has been drawn relates to two affidavits that were ordered to be filed and served, but were never read, in relation to an earlier aspect of these proceedings. The evidence before me discloses that those affidavits, which apparently were only ever served on the plaintiff's solicitors, found their way into the police brief of evidence in the criminal proceedings. The police apparently are unable to account for how they received those affidavits. 11Prima facie, the provision of those affidavits to the police by someone, the inference which I am asked to draw is that that someone was a person acting for or on behalf of the plaintiff (but I make no finding to that effect), raises the spectre of a possible breach of the implied undertaking most recently considered by the High Court in Hearne v Street (2008) 235 CLR 125; (2008) 248 ALR 609; (2008) 82 ALJR 1 259; [2008] HCA 36. 12It is not necessary for me in this application, nor do I have sufficient evidence, to determine finally whether such a breach occurred. Nevertheless, the prospect of evidence filed by a defendant in civil proceedings being used against that defendant in criminal proceedings (where the defendant enjoys a right of silence) is also a relevant factor for the Court in considering whether or not to stay civil proceedings pending a criminal trial. It is sufficient for present purposes that I am satisfied, by reason of the overlap of facts between the civil and criminal proceedings and the possibility that there has been a breach of the implied undertaking, that there is an appreciable risk of forensic disadvantage to Mr Bosganas in the criminal proceedings if orders were made requiring him to file his evidence in these proceedings in the next few weeks. 13Against these considerations, the plaintiff draws attention to what has been described as a change of position which Mr Bosganas made in about October of last year. It is necessary that I explain that further. 14It is common ground that in January 2012 Mr Bosganas filed a notice of motion which sought security for costs, stay of a contempt motion that was then extant and also for a stay of the proceedings generally pending resolution of the criminal charges against him. Various parts of that motion have been dealt with at different times in the history of these proceedings. No formal order was made for a stay of these proceedings based upon the motion filed on 25 January 2012. 15Nevertheless, the plaintiff submits that between about February and October 2012 the parties agreed, at least de facto, for a stay to remain in place. The change of position, as alleged by the plaintiff, came by a letter from Mr Bosganas's solicitor to the plaintiff's solicitors on 18 October 2012 in the following terms: There were initially discussions about staying these proceedings until the criminal proceedings brought against Mr Bosganas were finalised. In view of the changed circumstances in the criminal proceedings brought against Mr Bosganas and in these proceedings, we are of the view that there should be no stay and on the next occasion we will be seeking directions that the Plaintiff file its evidence within a reasonable time and that there be further directions as to the running of this matter. Whilst there were discussions about staying the proceedings, our counsel's recollection and our recollection is that no such orders were made. 16As a result of Mr Bosganas's solicitor re-agitating the progress of the matter, orders were made for the filing of evidence. The plaintiff did in fact in January of this year file its evidence in these proceedings. Other interlocutory distractions, including the argument before Rein J for security for costs, meant that compliance with any earlier order for Mr Bosganas to file his evidence fell by the wayside. 17The plaintiff submits that in those circumstances, i.e. an apparent stay of some months agreed between the parties and then resiled from, Mr Bosganas ought not be allowed to change his position again and have the benefit of a stay of these proceedings. 18The difficulty with this submission is that I am not satisfied on the evidence that there was in fact an agreement between the parties that resulted in a practical stay of the proceedings between February and October. Rather, the impression I have of the evidence is that while a stay was certainly on the cards in January 2012 flowing from Mr Bosganas's motion, the proceedings simply seem not to have been prosecuted for reasons that are not apparent. In the first instance that is a matter that I would lay at the feet of the plaintiff, who has first responsibility for the progress of the litigation. The plaintiff is unable to point to any evidence to explain why it apparently ceased to agitate for progress in the matter during a large part of 2012. 19I am therefore not satisfied that the supposed earlier stay is in fact something which would weigh against the exercise of the Court's discretion in favour of Mr Bosganas' application. Nor is there anything else in the evidence or submissions of the plaintiff that would persuade me that it is inappropriate, in circumstances where both principle and practicality suggest that Mr Bosganas ought have a stay, that that result should not follow. I therefore propose to order a stay of the proceedings pending resolution of the criminal charges against Mr Bosganas. 20That then brings me to the question of the plaintiff's responsive motion asking for, in effect, a suspension of the effect of the order for security for costs. The plaintiff relies upon the well-recognised proposition that interlocutory orders of the Court should remain in place unless one side or the other is able to point to a relevant change in circumstances from those which applied at the time the interlocutory order was made. The change in circumstances must, in my view, have some logical relationship with the facts and circumstances that gave rise to or underpinned the making of whatever interlocutory order is subsequently sought to be varied. 21As I understand the plaintiff's submissions, the essential change in circumstance relied upon is the stay that I propose to order. I do not think that circumstance is a change that logically or necessarily relates to the matters which gave rise to the order for security. I say this, in particular, because the judgment of Rein J (30 May 2013) at paragraph 23 makes it clear that the order for security which his Honour then made was calculated by reference to, and intended to give Mr Bosganas security for, costs orders that had already been made in his favour against the plaintiff. If the order for security in fact related to future costs, then the staying of these proceedings may have had, or may have satisfied the necessity for, a logical connection between that order and the change in circumstance. 22However, I do not see how the fact that these proceedings are to be stayed for some months changes anything that relates to his Honour's decision to order security for costs in Mr Bosganas's favour in respect of costs orders of which he already had the benefit. He will continue to have the benefit of those orders whether or not these proceedings are stayed. In those circumstances I do not see why he should be deprived of the benefit of an order for security, and of the security itself that has now been provided, because these proceedings will be stayed for a few months. 23The other matter which tells against the relief sought by the plaintiff is the absence of evidence that the costs associated with providing the security are a source of any particular hardship or difficulty for the plaintiff. No submission was made by the plaintiff that there was any special hardship that it would suffer by having to continue to provide the security. 24The Court's orders are: (1)These proceedings are stayed until further order. (2)The plaintiff's notice of motion filed 8 August 2013 is dismissed. (3)Grant liberty to any party to apply on seven days' notice to the registrar. (4)The plaintiff pay the defendant's costs of and incidental to the defendant's motion filed 30 July 2013. (5)The plaintiff pay the defendant's costs of and incidental to the plaintiff's motion filed 8 August 2013. (6)List the proceedings for directions before the Registrar on 4 December 2013.