Split trial for Dale v Clayton Utz … Former partner suing firm for breach of contract … Yarraside Appeals says Chris Dale has privilege against self-incrimination … Kate Lilly on the case
Dale is claiming a breach of contract after the Clutz board dropped him in 2005.
Last week (Thursday, July 23) the CA, with Justice Pamela Tate doing the heavy lifting, upheld an interlocutory order from Clyde Croft for a Protean Holdings split so that Dale will not be required to answer questions relating to unproven (and potentially unlawful) conduct during the proceedings.
Her Honour also held that the privilege against self-incrimination at the trial would be available to Dale at trial.
Things started to go awry for Dale in the years following the Rolah McCabe personal injuries suit against British American Tobacco.
In April 2002, the Victorian Supreme Court held Clutz had facilitated the destruction of pertinent documents on behalf of British American Tobacco and awarded McCabe almost $700,000 in damages. That was set aside later that year by the Vic CA.
Almost four years later, Dale revealed an internal committee at Clutz had also determined that documents relevant to the McCabe litigation were improperly destroyed. Memos relating to the internal investigation turned up in The Age and elsewhere.
The Clutz board expelled Dale from the partnership in 2005, amid allegations he was guilty of criminal and unlawful conduct and had breached his fiduciary duty to the firm.
Dale’s expulsion came after a police search warrant was executed at the firm’s Melbourne offices. The warrant concerned the matter of Cheuna Schmidt, for which Dale was the partner responsible.
Dale took Clutz to court in 2011, claiming the circumstances of his dismissal lacked procedural fairness and constituted a repudiation of the partnership agreement.
In July 2014, the Justice Croft of the Victorian Supreme Court granted an interlocutory application to split Dale’s trial, in order to avoid what he claimed was “a roving commission” into his conduct.
Furthermore, although it was Dale who commenced proceedings, the court found he was entitled to invoke the privilege against self-incrimination.
Clutz sought leave to appeal the orders, in particular the split, on the grounds that Croft erred in finding there was no “intertwining” between Dale’s claim and the allegations made by the firm.
In his pleading, Dale claimed he was a patient in a psychiatric hospital at the time the allegations of misconduct arose. As such, he was unable to instruct his legal advisors and was denied the opportunity to explain his behaviour to the board.
In the Supreme Court, Croft found Dale’s case could be confined to the question of procedural fairness. The judge considered the firm’s allegations against Dale to be a separate matter. As such, the issues could be split.
On appeal, Tate found that Croft was incorrect to characterise Dale’s case so narrowly.
“An application of the ‘but for’ test to the circumstance of the case here indicates that Dale would need to prove that but for the breach of procedural fairness he would not have been expelled from the firm …
[The firm] alleges that, even had Dale been given a proper opportunity to be heard, the expulsion decision would still have been made due to the gravity of the allegations contained in the Fagan memorandum … In my view, the contest of the issue of causal connection renders Dale’s case and the firm’s case intertwined. It focuses upon Dale’s conduct as a central part of the proceedings and entangles the case to be presented by Dale with that of the firm.”
Despite appearing to agree with Clutz on this point, Justice Tate found the split order could be supported on a different basis. HH observed that the decision to split a trial was ultimately a question of ensuring fairness and finding an effective means to resolve issues at hand. She held:
“Without such an order Dale would unfairly be required to answer a negative of overwhelming proportions and confront evidence of which he has little or no knowledge. Dale has had no opportunity to be appraised of the evidence put against him. This would require Dale, if he chooses to give evidence, to do so largely in a factual vacuum …
My conclusion is reinforced by the fact that the judge’s order was one directed to practice and procedure that should not be overturned in the absence of exceptional circumstances.”
Clutz had also argued that the timing of the split order was premature and inappropriate, considering the parties had not formally opened their cases. HH found there was “no merit in this submission” considering the need for efficiency and the fact that Croft would also hear the trial.
In his judgment, Justice Croft found “the plaintiff is with respect to the defendant’s case – in substance – a defendant”.
The firm went on to suggest that there have been no cases in which a defendant in equity has successfully claimed the privilege against self-incrimination.
After a lengthy exploration of the privilege’s common law history, Tate disagreed. She found:
“It is clear that, historically, the privilege against self-incrimination has been recognised as available to the plaintiff even if the firm is correct in submitting that it has not been relied upon successfully by a plaintiff.”
On this matter, Clutz had a few extra cards up its sleeve.
The firm contended that Dale impliedly waived privilege by commencing proceedings and/or by giving a voluntary interview to police on the matter of his alleged misconduct.
Furthermore, it was argued that Dale suffers no real risk of incrimination or penalties because his alleged misconduct is “stale”.
Once again, Justice Tate was not convinced. HH firstly reiterated her finding that the privilege against self-discrimination is open to plaintiff.
Concerning the police interview, she held:
“Dale’s responses were exculpatory, not incriminating. Dale denied wrongdoing … The fact that Dale voluntarily submitted to the police interview does not provide a proper basis for inferring that he has thereby waived the privilege on the ‘issues’ canvassed in that interview.”
Finally, referring to Croft’s original reasoning, HH agreed that there was nothing “tenuous or illusory” about the risk of prosecution, given the allegations of serious misconduct and the fact Clutz would seek to tender police evidence at trial.
As a result, it was appropriate to uphold Justice Croft’s order concerning the application of privilege against self-incrimination. HH explained:
“I see no error in the orders made by the judge excusing Dale from compliance with the Rules of Court on the grounds that they may have a tendency to expose Dale directly or indirectly to a civil penalty or a criminal proceeding.”
Justice David Ashley agreed with Tate’s reasoning.
With respect both the main issues Justice Anne Ferguson added:
“No substantial injustice flows from leaving the orders unreversed … They go to the order in which evidence will be given at trial. Each party will have the opportunity to present the evidence and its case. No-one will be shut out from doing so. If the orders remain as they are until the conclusion of the trial, no harm will be done.
In any event, the case is being managed by a commercial court judge. He will likely be the trial judge. As the matter progresses towards the trial and during the trial itself, he will have the opportunity to revisit the orders that he has made (they being interlocutory). He may vary and adapt them to suit the circumstances of the case as they unfold.
Orders of this type are quintessentially matters best left to the managing judge. Modern litigation is dynamic. It is not static. Commercial Court judges are proactive in the management of cases. They are well placed to make decisions as to the order of evidence to be given at trial.”