Zuce Tech Pty Ltd v Ebert[2024] QCA 219

SUPREME COURT OF QUEENSLAND

1. [1]
   THE COURT:  By originating application, filed 6 September 2024, the appellant sought interlocutory and other relief in relation to confidential information, equipment and other property, said to have been unlawfully taken by the respondent.
2. [2]
   By application filed 17 September 2024, the respondent sought an order that the proceeding be stayed until the completion of any criminal investigation or prosecution of him, in respect of a complaint made to police, in relation to the confidential information and other property.
3. [3]
   On 23 September 2024, the primary judge ordered that the proceeding be stayed for a period of six months, or until further order.  The primary judge also ordered that the appellant pay the respondent’s costs of the application, on the standard basis.
4. [4]
   The appellant appeals those orders.  At issue is whether the primary judge erred in exercising the discretion to stay the proceedings.
5. [5]
   For the reasons that follow, we would allow the appeal, set aside the orders below, and order that the application for a stay be dismissed.

Grounds

6. [6]
   The appellant’s second further amended notice of appeal relies on eight grounds.  First, that the primary judge erred by accepting that it was sufficient for the respondent to demonstrate a substantial overlapping of facts in the proceeding and the apprehended criminal proceedings.  Second, that the primary judge erred in regarding the fact that the appellant made the complaint to the police as a factor favouring the grant of a stay.  Third, that the primary judge erred in failing to take into account the appellant offered a worthwhile undertaking.  Fourth, that the primary judge erred by failing to take into account the appellant’s interests in obtaining interlocutory protection and the failure by the respondent to put on any evidence of ability to meet any damages awarded.  Fifth, that the primary judge erred in not applying the guidelines relevant to the exercise of the discretion to stay a civil proceeding pending resolution of related criminal proceedings and thereby acted on a wrong principle.  Sixth, that the primary judge erred by taking into account that any prejudice suffered by the appellant could be adequately compensated by an award of damages when there was no evidence of the respondent’s ability to meet any anticipated damages.  Seventh, that the primary judge’s order was unreasonable.  Eighth that the primary judge erred by holding that the rule that a person charged with a crime cannot be compelled to assist the prosecution, applied in circumstances where the respondent had not been charged with any crime.

Facts

7. [7]
   The appellant was incorporated on 1 March 2018.  Shortly after its incorporation, its sole director and shareholder, Glen Hadden, agreed with the respondent (who had previously been employed by Mr Hadden in other businesses) that the respondent would acquire two shares in the appellant, thereby holding 20 per cent of its issued share capital.  As part of that shareholders’ agreement, the respondent assumed the role of General Manager of the business, having access to its books, records, accounts and confidential information.
8. [8]
   In or about May 2018, the appellant commenced operating a business supplying motor vehicle tuning services to customers, as well as distributing hardware and software manufactured by an Italian company known as Alientech and supplying training services in respect of its products.  The appellant was the only authorised distributor of those products in Australia and the only authorised supplier of training in the southern hemisphere.  As part of that business, the appellant used Alientech hardware and software, accessing an electronic database using a unique login name and password.
9. [9]
   In February 2024, Mr Hadden was seriously injured in a major accident.  He was in a coma for two weeks and remained in hospital for a further 12 weeks.  During that period, the respondent continued to operate the appellant’s business.

Originating application

10. [10]
    The appellant’s affidavit material alleged that from about May 2024, the respondent began to express discontent in respect to the operation of the business and its structure.  The respondent also complained that Mr Hadden had been taking money out of the business.  Proposals were circulated by the respondent for either taking control of the appellant, or acquiring additional shares.  None of the proposals were acceptable to Mr Hadden.
11. [11]
    The appellant alleged that whilst Mr Hadden was hospitalised, the respondent removed all of the appellant’s equipment and stock from its premises, including mobile phones and computers; copied and subsequently deleted its confidential information from the mobile phones and computers and then returned them to the appellant; procured the resignation of the appellant’s employees; and commenced operating a new business trading under the name Alientech Tools.  Alientech’s website was updated to replace reference to the appellant with reference to Alientech Tools.
12. [12]
    The appellant further alleged that when Mr Hadden attended the appellant’s premises on 6 August 2024, he discovered the removal of the confidential information, mobile phones, computers, equipment and other property.  The following day the respondent’s wife returned the mobile phones and computers to the appellant, and they were subsequently found to have had their data wiped and to have been returned to factory settings.  Several days thereafter, Mr Hadden’s wife made a complaint to the Queensland Police Service.  Shortly after that complaint was made, the appellant’s solicitors wrote to the respondent demanding the return of the property and threatening proceedings if that demand was not met.
13. [13]
    The appellant’s affidavit material also contained documentary material such as invoices and text messages, alleged to be from the respondent and dated 5 and 6 August 2024, to support the taking of the confidential information and property.  If genuine, the documentary material suggests that the real issue in the civil dispute between the parties may not be whether the alleged company property was taken, but whether the respondent was justified in taking it.  An affidavit from a former employer of the appellant’s business, was also relied upon, detailing steps said to have been taken by the respondent to have him resign from the appellant’s business, urgently and before Mr Hadden could attend the premises.
14. [14]
    Finally, the appellant’s material established that on the same day its application was filed, police obtained a warrant to search the respondent’s home.  The search warrant alleged an offence that, between 4 August 2024 and 7 August 2024, the respondent, being the servant of the appellant, stole tools, equipment and stock that was the property of the appellant, which had come into the respondent’s possession on account of the appellant.
15. [15]
    That search warrant was executed at the respondent’s home on 11 September 2024, one day after the originating application and affidavit were served on the respondent.  No items were seized during the execution of the warrant, although photographs were taken of a number of items found at the respondent’s home.  Thereafter, police invited the respondent to participate in a record of interview.  The respondent’s solicitors informed police that the respondent would exercise his right to silence.  On the same day, the respondent gave notice of an intention to seek a stay of the proceedings.

Stay application

16. [16]
    The respondent filed no affidavit, but relied on affidavit material from his solicitors as to the search of his home and notification of his intention to apply for a stay of the proceeding.
17. [17]
    The basis for the stay was that there was a significant factual overlap between the proceeding and the criminal investigation, such that the respondent was prejudiced if required to defend the civil proceeding, in circumstances where the appellant had elected to make a criminal complaint and any prejudice to the appellant from a stay, was not significant and could be met by an award of damages.

Primary judge’s decision

18. [18]
    The primary judge summarised the relevant evidence and the relief sought, noting that the interlocutory relief included delivery up by the respondent of any equipment and stock in his possession or control and any materials which recorded or contained the whole or any part of the confidential information, together with a restraint from using, copying or disclosing to any person, any of the confidential information.  The primary judge also summarised the relevant principles for the exercise of a power to grant a stay of civil proceedings when a party is faced with the prospect of criminal proceedings, in respect of the same conduct.
19. [19]
    The primary judge found: that there was a substantial overlap between the complaint to police and the proceeding; that whilst the respondent had not been charged, a warrant had been issued authorising the search of the appellant’s home for the relevant property and confidential information; that police had subsequently offered the respondent an interview, with the respondent exercising his right to silence; that police were continuing to investigate the complaint; and that in those circumstances, the respondent did face potential criminal proceedings.
20. [20]
    After noting that police were contacted about a criminal complaint and the appellant then commenced the proceeding, the primary judge found:

“… this is not a case in which the litigants’ competing rights are in jeopardy because others have caused the pursuit of a criminal case which happens to have some partial factual overlap with civil case pursued by the applicant. … in this case the police were contacted prior to the applicant commencing the proceedings in this court.  During the hearing, I observed that the respondent had been checkmated in that if he engages with the civil proceedings he would abrogate his right to silence.  Or if he maintains his right to silence, then the civil proceedings would continue without meaningful contest.”^[1]

21. [21]
    After recording the submissions of the parties, including the appellant’s submission that the complaint to police was not an attempt to leave the respondent in a position where he could not respond to the allegations, the primary judge found:

“This … is not about stopping the criminal investigation.  It is about whether in the interests of justice, the civil proceeding should be stayed due to the criminal investigation.  I should also make it clear that upon considering the material, there is insufficient evidence for me to conclude that the [appellant] embarked on a deliberate forensic strategy to checkmate the respondent.

But the fact does remain that there are civil proceedings on foot where [the appellant] seeks interlocutory orders that would mandate the respondent to do certain things at the same time he faces a criminal investigation brought about by [the appellant].  As the respondent states this, that all I have to be satisfied is the facts are that there are two parallel proceedings in the effect of, ‘it is what we say it is.’  The fact that whether it was deliberate, not deliberate, done on advice, not done on advice, does not really matter if [the appellant] has chosen to do these things and certain consequences flow from that.  In this case, the respondent states the balance of justice between the parties favours the granting of a stay, pending the disposition of any criminal investigation and proceeding.”^[2]

22. [22]
    After recording the parties’ submissions as to the consequence should no stay of proceedings be ordered, the primary judge found:

“… in my view, the respondent will suffer prejudice if the stay is not granted.  The interlocutory relief [the appellant] seeks is the [indistinct] of certain items and confidential information and the restraint of use of confidential information.  I note that a search warrant was executed in relation to the respondent about a Criminal Code offence of stealing by clerks and servants.

…

[The appellant] states that their main concern of the interlocutory application is for the deliver up of the items and confidential information.  In particular, the deliver up of the confidential information.

…

In my view any order requiring the respondent to deliver up items would compel him to deliver up many items if he has them that the police were, indeed, searching for pursuant to the search warrant.  Further, an order requiring the respondent to deliver up the confidential information would be an order compelling the respondent to do something that may very well incriminate himself.  That is, if he is in possession of such information which the applicant states that it owns.  That is, the respondent would be in possession of the applicant’s property in the context of the police investigating him for stealing as a servant of the respondent.

…

In Australian Securities and Investment Commissioner v Taylor [2023] FCAFC 189, Mortimer CJ and Abraham J referred to the privilege against self-incrimination and the associate rate of silence and observed that ‘It is important that underpinning those concepts is the prosecution cannot compel a person charged with a criminal offence to assist in the discharge of its onus of proof.  A fundamental principle of the common law is that it is for the prosecution to prove the guilt of an accused person, an aspect of the accusatorial nature of a criminal trial in our system of criminal justice.  That is referred to as the companion principle, and it is a companion of criminal trials and it is engaged when there is a prosecution pending.’

Any order for the respondent to deliver up equipment and stock and confidential information would be compelling the respondent to assist the police investigation and prosecution in a discharge of its onus of proof.

…

In this case, I note that the circumstances relevant to both the civil proceedings and the criminal investigation are substantially identical, and as the High Court said in Zhao, it was not necessary for the respondent to state the specific matters of prejudice before a stay could be contemplated.  To require the respondent to do so would be to make the risk of prejudice a reality by requiring him to reveal information about his defence, the very situation which an order for a stay seeks to avoid.  The burden is on the respondent to show that it is just and convenient that [the appellant’s] ordinary rights should be interfered with.  The court must balance justice between the parties, taking into account all of the relevant factors, including of which the consideration of the respondent’s right to silence in the criminal proceedings, all of which I’ve done.  This is, as I’ve said, not a case in which the litigant’s competing rights are in jeopardy because third parties have caused the pursuit of a criminal case with a civil case pursued by [the appellant].

I am satisfied that in this case the risk of prejudice to the respondent is real.  There is a significant factual overlap between these proceedings that have been brought by [the appellant] and the criminal investigation that the respondent faces.  The respondent has not already disclosed his defence in these proceedings.  In order to respond to the civil proceeding it can be inferred that it would be necessary for him to provide evidence in response to Mr Hadden’s affidavits, including their conversations and communications, their agreements, the physical dealing with property monies including the respondent’s documentary evidence of those matters.  The prejudice to the respondent, in my view, is obvious.  He is in a position where he must make the invidious choice to make – either effectively waive his right to silence or be substantially prejudiced in these proceedings, being unable to dispose to a stab standard response.  And, further, if he was required to deliver up items or confidential information it would be compelling him to assist the police in their investigation.  I note even if matters disclosed in the course of the civil proceedings are not admissible against the respondent any criminal proceedings prejudice may result from indirect evidence.

On the other hand of the – on – I do note that on the material, I do acknowledge that a stay would significantly delay the resolution of the civil proceedings and, further, Mr Hadden, on behalf of [the appellant], deposes to significant impacts on its business.  And he sets out the financial loss.  In my view, any risk of prejudice [the appellant] can adequately be compensated by damages.  I note that any loss to [the appellant] – if the respondent is using its confidential information, equipment and/or stock to compete against it – is capable of being readily quantified.  And that is the submission that the respondent’s counsel makes.

[The appellant] states, however, that in the absence of evidence that demonstrates the respondent would be able to meet any award for damages, if that’s all left in circumstances where the applicant doesn’t get it is properly importantly confidential information back and to which the respondent states its – to which the respondent states it has never been the case that the absence of an ability of a defendant to meet an award for damages is sufficient for the court to enjoin them.  That is not a basis for an injunction.  If damages are what is sought, and that is the remedy that is sought, that is not a basis for injunction.  So you cannot say, well, you have not said that you have got enough money, therefore I have an injunction.

In my view, the balancing of justice between the parties requires the granting of a stay now, not at some later point.  The question is how long the stay should be in place for.  The respondent’s criminal solicitor deposed in his affidavit that, in his experience, in the ordinary run of case a delay in the commencement of a prosecution of six months or more may mean that the decision not to prosecute has been made.  And, in my view, the stay – the proceedings is stayed for a pre – a period of six months or until further order, with the parties having liberty to apply on seven days’ notice.”^[3]

Consideration

23. [23]
    In our view, the primary judge erred in two respects in exercising the discretion to grant a stay of the proceeding.
24. [24]
    First, the primary judge exercised the discretion on the basis that the principle that a person charged with a crime cannot be compelled to assist the prosecution (the companion principle), applied in the present case.  The operation of that principle is broader than the operation of the privilege against self-incrimination, since it enables an accused to resist being compelled to give evidence which, even though it might not tend to incriminate them, might nevertheless assist the prosecution, for example by –

    1. enabling the prosecution to frame charges with the benefit of the accused’s evidence;
    2. enabling the prosecution to use evidence from the civil proceeding to aid the criminal investigation;
    3. enabling prosecution witnesses to use evidence from the civil proceeding to craft their testimony in the criminal trial.
25. [25]
    Importantly however, the companion principle is not engaged until an accused has been charged and there is a prosecution pending.  The principle had no application in the present case as the respondent has not been made the subject to criminal prosecution as he has not been charged.
26. [26]
    In R v Independent Broad-Based Anti-Corruption Commissioner (IBAC),^[4] the plurality observed that the companion principle is an adjunct to the rights of an accused person within the system of criminal justice.  As such, its application depends upon the judicial process having been engaged because it is an aspect of that process.
27. [27]
    The plurality specifically rejected any extension of the principle to circumstances where no prosecution was pending:

“In the present case, the companion principle is not engaged because the appellants have not been charged; and there is no prosecution pending.  The appellants urge the Court to extend the principle.  For a number of reasons, that suggestion should not be accepted.”^[5]

28. [28]
    Second, the discretion miscarried by reason of the primary judge’s finding that any risk of prejudice to the appellant could be adequately compensated by damages.  There was no evidential basis for that finding.
29. [29]
    There was no evidence that the respondent would be able to meet any award of damages.  Further, whilst there was an assertion that the respondent was conducting a similar business to that previously operated by the appellant, nothing in the evidence supported a finding that an award of damages would be adequate compensation.
30. [30]
    These conclusions render it unnecessary to consider the remaining grounds of appeal.
31. [31]
    As the discretion miscarried, it is necessary for this Court to consider whether the stay should be set aside or maintained.
32. [32]
    In Smith v Kelsey^[6], this Court referred with apparent approval to the guidance to be found in relation to the exercise of discretion in McMahon v Gould^[7], namely –

1.  prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the Court;

2.  it is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds;

3.  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;

4.  neither an accused nor the Crown are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;

5.  the Court’s task is one of “the balancing of justice between the parties”, taking account of all relevant factors;

6.  each case must be judged on its merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors;

7.  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;

8.  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;

9.  the Court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings;

10.  in this regard factors which may be relevant include:

1.  the possibility of publicity that might reach and influence jurors in the criminal proceeding;

2.  the proximity of the criminal proceeding;

3.  the possibility of miscarriage of justice, e.g. disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses;

4.  the burden on the defendant of preparing for both sets of proceedings concurrently;

5.  whether the defendant has already disclosed his defence to the allegations;

6.  the conduct of the defendant, including his own prior invocation of civil process when it suited him;

11.  the effect on the plaintiff must also be considered and weighed against the effect on the defendant; it may be relevant to consider the nature of the defendant’s obligation to the plaintiff; and

12.  in an appropriate case the proceedings may be allowed to proceed to a certain stage, e.g. setting down for a trial, and then stayed.

33. [33]
    The Court also referred to and acknowledged the observations made by Dodds-Streeton J in Websyte Corporation Pty Ltd v Alexander (No 2), including the observation that:^[8]

“While many courts have recognised tension between Wootten J’s approach in McMahon v Gould to the right of silence in a parallel civil proceeding and the High Court’s approach to the privilege against civil incrimination in Reid v Howard, it has been recognised that any authoritative re-evaluation of McMahon v Gould should be made only by an appellate court, or perhaps the High Court itself.”

34. [34]
    The Court in Smith v Kelsey did not seek to resolve the tension identified in Websyte.  Nor will we.  We accept that the importance of the privilege against self-incrimination must be acknowledged and taken into account in any exercise of the present discretion.  We observe, however, that when considering the factors relevant to that task it is important not to attribute to the person seeking the stay the benefit of the companion principle when that principle has not yet been engaged.
35. [35]
    The respondent submitted that a consideration in favour of granting the stay of the appellant’s interlocutory injunction – at least insofar as it sought an order for the interim return by the respondent of certain specified equipment and stock – was that any such relief could never be granted because the making of such an order would necessarily infringe the respondent’s privilege against self-incrimination.
36. [36]
    Although that submission was advanced orally in this Court, it was not argued below, or dealt with by the primary judge.  As already indicated, the argument below and the decision of the primary judge focussed on the broader considerations that might have been relevant had the companion principle operated.  The argument was not addressed in any rigorous way in argument before this Court.
37. [37]
    We do not consider the argument is a sufficient justification for a stay of the interlocutory application in the present case.  Indeed, we think that the better course is for any argument about the possible operation of the privilege against self-incrimination to be dealt with by the judge of the trial division who considers the merits of the appellant’s interlocutory injunction application and the nature of any orders which might properly be made in response.
38. [38]
    Whether the privilege against self-incrimination operates in the way suggested by the respondent, will require careful consideration, including by addressing:

    1. Whether, as suggested in Cross on Evidence^[9], approved in Charara v Commissioner of Police^[10], the rule prevents oral and documentary disclosures only and does not operate to prevent disclosure of real evidence by the person asserting the privilege.^[11]
    2. Whether, having regard to the legal elements of the presently posited basis for self-incrimination, namely the offence of stealing, interim production of equipment and stock pursuant to a court order would tend to incriminate in the sense protected by the privilege, namely that such production may create a “real and appreciable risk” of prosecution; or may create a “reasonable ground to apprehend danger of prosecution”: see the discussion of the applicable test in Cross on Evidence.^[12]
39. [39]
    Once it is appreciated that the respondent’s reliance on the privilege against self-incrimination is an insufficient justification to continue the stay of the appellant’s application for interlocutory relief, there is, in our assessment, no other consideration which operates to persuade us to continue the stay of that application.  Indeed, it seems to us to be productive of an injustice to prevent the appellant from seeking to persuade a judge of the trial division that the nature of its case against the respondent is sufficient to warrant the interlocutory orders it seeks.  Particularly is that so when one appreciates that the appellant’s undertaking as to damages operates to protect the respondent’s financial interests.
40. [40]
    Of course, that is not to say that the question of stay might not be re-agitated once the interlocutory application has been dealt with.  Any re-exercising of the stay discretion on such a re-agitation would also require careful re-consideration of the risk of prejudice to the parties, in the context of the then applicable changed factual scenario.

Orders

41. [41]
    The Court orders:

1. The appeal be allowed.
2. The orders below be set aside.
3. The application for a stay be dismissed.
4. The respondent pay the appellant’s costs of the application below and of this appeal, to be assessed on the standard basis.