Kerry Fb Packer and Consolidated Custodians Pty Limited v United States of America [1988] ACTSC 18 (6 April 1988)

SUPREME COURT OF THE ACT

KERRY F.B. PACKER and CONSOLIDATED CUSTODIANS PTY LIMITED v. UNITED STATES OF
AMERICA
S.C. No. 1320 of 1987
Stay of Proceedings

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Stay of Proceedings - Order for examination of Australian Commissioner of Taxation or his designee - order made pursuant to Letters Rogatory issued out of United States District Court, Ohio - Letters issued pursuant to ex parte application - attempts made to have letters set aside - no definite ruling on those attempts as yet - application for stay of examination by Commissioner - considerations applicable.

Rockware Glass Ltd. v. MacShannon (1978) AC 795

Jennings Constructions Ltd. v. Burgundy Royale Investments Pty. Ltd (No. 1) [1986] HCA 84; (1986) 161 CLR 681

Marconi's Wireless Telegraph Co. Ltd. v. The Commonwealth (No. 3) [1913] HCA 23; (1913) 16 CLR 384

HEARING

CANBERRA
6:4:1988

ORDER

The Order made herein dated 6 November 1987 for the examination of the Australian Commissioner of Taxation or his designee named in the said order be stayed until further order upon the said Commissioner's undertaking to do all he can to cause to be prosecuted with all reasonable expedition in the appropriate Court or Courts in the United States of America the proceedings touching upon the validity of the Letters Rogatory issued out of the United States District Court, Southern District of Ohio, Eastern Division on 26 October 1987 and also his undertaking to pay to the petitioners such damages or loss, whether legally claimable or not, as this Court or a Judge thereof may think just and fair as compensation to the petitioners for any disadvantages they may sustain by reason of this order in respect of their preparation for the examination before the Honourable the Chief Justice now scheduled to begin on 12 April 1988, such disadvantage to be limited to costs and expenses thrown away or occasioned by any delay by the Commissioner of Taxation in making this application.

DECISION

On 6 November 1987 on the application of the petitioners made ex parte I ordered that the Australian Commissioner of Taxation or his designee named in the order should attend before the Honourable the Chief Justice on 11 April 1988 or on such further date or time as his Honour might appoint to be examined upon oath or affirmation touching the testimony referred to in certain Letters Rogatory (the "Letters") issued out of the United States District Court, Southern District of Ohio, Eastern Division (the "District Court"). The order appointed his Honour the Chief Justice examiner. The general effect of the order was that of an order for discovery against the Commissioner in respect of certain proceedings instituted by the respondent at the behest of the Australian Government whereby the respondent sought by summons addressed to Bank One of Columbus, Ohio production of certain records described in the summons as relative to accounts held by or on behalf of the petitioners and another company for the period from July 1 1979 to 31 December 1985 inclusive.

2. There was evidence before me when I made the order to show that on 22 October 1987 the petitioners caused to be issued out of the District Court a petition to quash the summons referred to above. The petition was accompanied by a motion for the issue of the Letters. The Letters were issued on 26 October 1987.

3. On 10 November 1987 the respondent moved to have the order under which the Letters had been issued vacated and for their withdrawal and sought also an order that discovery be stayed pending a ruling on the motion to vacate. On 18 November 1987 Magistrate Kemp refused the application for a stay on the ground that it was set down for a date almost five months ahead at which time it might be expected that a decision on the motion to vacate would have been made. Of course this order was made without prejudice to the right of the respondent to renew its application.

4. On 21 December 1987 the respondent moved for interlocutory judgment against the firstnamed petitioner at least.

5. On 10 March 1988 the respondent renewed its application to have the Letters vacated. On 23 March 1988 Magistrate Kemp made recommendations and a report pursuant to Order 85-4, I.C.1. of the General Rules of the District Court enacted under authority of Title 28 U.S.C. 636B, a United States statute which authorises Magistrates of the United States District Court to deal with matters such as that in issue. Magistrate Kemp recommended that each pending application by the respondent including its motion to vacate the order for the issue of the Letters, its renewed motion for their suspension by their withdrawal "on an interim basis" and its motion that the proceedings be certified as appealable be denied. The withdrawal of the Letters "on an interim basis" would effectively stay the examination listed for hearing before his Honour the Chief Justice.

6. A notice of 17 March 1988 convened a conference of counsel to be held on 28 March 1988 in the chambers of the Honourable George C. Smith, Judge of the United States District Court. At that conference an attorney appearing on behalf of the respondent United States Government orally requested his Honour Judge Smith to issue immediately an order withdrawing the Letters "on an interim basis" in accordance with draft documents which were submitted to the Judge at the conference. His Honour did not do so. The only direction he gave on the matter was, "If you (meaning the United States Government) have any objections to the recommendations and report, your objections should be filed within the time limited by the rules" or words to that effect. The attorney for the respondent replied, "We propose to file objections next week on Wednesday (6 April 1988)", the last day on which objections could be filed pursuant to the relevant rules of the United States District Court.

7. On 31 March 1988 this Court was moved on the behalf of the Australian Commissioner of Taxation for an order that the order made on 6 November 1987 be stayed until further order. It should be noted that the hearing pursuant to that order is now scheduled to begin on 12 April 1988. No objection was taken to short service of the Notice of Motion nor was any objection taken to the fact that the Court was moved on behalf of the Australian Commissioner of Taxation, not on behalf of the respondent, the United States of America. The reality of the situation, of course, is that the Australian Commissioner of Taxation is the petitioners' opponent, the United States Government acting on his behalf. In any event, the Commissioner's position may be likened to that of a witness seeking to set aside a subpoena under which he has been called to give evidence.

8. Counsel for the Commissioner submitted that so that a stay might be granted two conditions should operate. First the respondent or, in this case, the Australian Commissioner of Taxation should satisfy the Court that the examination of the Commissioner or his designee on the allocated date would work injustice or be an abuse of the process of the Court; secondly, a stay must not cause injustice to the petitioners. He relied on Rockware Glass Ltd. v. MacShannon (1978) AC 795. He submitted that the proceedings taken by the respondent in the District Court and its challenge to the petition would be rendered useless insofar as they affected the validity of the Letters if the examination were to proceed as scheduled. Injustice, he said, would therefore be worked. A stay would cause no injustice to the petitioners because they could not be deprived of any right which was legitimately theirs. If it were found that the Letters had been invalidly issued a stay of the examination would deprive them of nothing which was rightfully theirs. If on the other hand, it were found that the Letters had been validly issued the only detriments which they would suffer would be those of delay and the incurring of costs which might be thrown away. Delay of itself would not be injustice and any detriment in costs could be cured. There was no suggestion of abuse of process.

9. Counsel for the petitioners referred to the history of the unsuccessful attempts to have the examination under the Letters stayed. He pointed to Magistrate Kemp's decision of 18 November 1987, to his report and recommendations and Report of 23 March 1988 and to his Honour Judge Smith's refusal to withdraw the letters on an interim basis. He also submitted that there had been a leisurely approach to the matter by the respondent's legal representatives.

10. As I understand the material placed before me, it seems that Magistrate Kemp's report and recommendation of 23 March 1988 have no definitive effect. No doubt they constitute significant matters which will in due course be taken into account by the Judge or Judges dealing with the matter in Ohio. But the essence of the matter seems to be that there has been no decision upon the merits as to the validity of the issue of the Letters after debate at a contested hearing.

11. Counsel also pointed out that prejudice would enure to the petitioners in that they would lose the dates allotted for the hearing and be unlikely to have dates for hearing set down again before November of this year. He stated without objection that Counsel, expert in the relevant United States law, had been retained, that time had been set aside by them for the hearing and that it was important to the petitioners, at least as a matter of economics, that the same counsel should continue to act on their behalf. He referred to the wish of Mr Kerry Packer, particularly, to have brought to an end quickly what he conceived to be an attack upon his personal integrity. Counsel said that to refuse the stay would not operate to the prejudice of the respondent or to that of the witness, the designee of the Australian Commissioner of Taxation.

12. When a litigant obtains a judgment regularly in a Court he is entitled to the fruits of that judgment and in the normal course of events a stay of execution will not be granted. There are, of course, exceptions to that rule. By parity of reasoning a litigant is entitled to the benefit of an interlocutory order in his favour, regularly obtained. On principle, therefore, unless the circumstances warrant the application of a legitimate exception, the application for a stay of proceedings ought to be refused. But if it be not refused in this case a substantial part of the subject matter of the respondent's continuing proceedings in Ohio will be lost to it so that its recourse to the court or courts there will be rendered nugatory as to that substantial part. If the stay is granted without more, the petitioners will have been put to considerable expense much of which will not be recoverable on any ordinary order for costs which I might make and will suffer the delays attendant upon a stay, delays with which one may sympathise.

13. Although the application made by the Notice of Motion of 29 March 1988 is a simple request for a stay of the order of 6 November 1987 in a procedural matter, it seems to me that if such a stay were refused, the refusal would destroy in large part the subject matter of the litigation presently being conducted by the respondent in Ohio.

14. I do not doubt that this Court has jurisdiction to grant a stay. I am dealing, after all, with what amounts to an application for an adjournment.

15. I think guidance is to be obtained from the decision of Brennan J. in Jennings Constructions Ltd v. Burgundy Royale Investments Pty. Ltd. (No.1) [1986] HCA 84; (1986) 161 CLR 681 in the High Court of Australia when he granted a stay of proceedings in respect of an appeal to that court from the Supreme Court of the Northern Territory so that the subject matter of the litigation might be preserved.

16. At p 684 he referred to an earlier decision of the High Court, Marconi's Wireless Telegraph Co. Ltd v. The Commonwealth (No.3) [1913] HCA 23; (1913) 16 CLR 384, where the court said at p 386,

"The Court will not ordinarily grant an application of this

kind unless very strong and special grounds are shown. This
is a very peculiar case. The conditions are such that, on
the one hand, if the stay is granted without more, the whole
benefit of the action may be lost to the plaintiffs, while,
on the other hand, unless the stay is granted on some fair
terms, the defendants' appeal will be nugatory. It really
is a question of the preservation of the rights of the
parties without disregard of the balance of convenience."

17. There is, as it seems to me, a risk of detriment to the petitioners if the stay is granted but the detriment is, I think, principally an economic one, that relating to the expense to which the petitioners have been put in preparing for the hearing before his Honour the Chief Justice. It seems to me that this detriment may be properly overcome by the use of an order adapted from that made by the High Court in Marconi's Wireless Telegraph Co. Ltd v. The Commonwealth (supra).

18. Accordingly, I am prepared to order that the order made herein on 6 November 1987 be stayed until further order upon the Australian Commissioner of Taxation undertaking to cause to be prosecuted with all reasonable expedition the proceeding in the District Court touching upon the validity of the Letters Rogatory and also undertaking to pay to the petitioners such damages or loss, whether legally claimable or not, as this Court or a Judge thereof may think just and fair as compensation to the petitioners for any disadvantage they may sustain by reason of this order in respect of their preparation for the examination before his Honour the Chief Justice now scheduled for 12 April next. Without such undertakings the examination will proceed.

19. I will hear argument on the question of the costs of the motion.