The short answer
If you are a criminal defence lawyer and your client is sued for fraud, you and the civil defence lawyer should work collaboratively from day one. Very often a civil proceeding leads to a criminal prosecution, and vice versa. A pleading can become a roadmap for a prosecution. An affidavit challenging a freezing order can become an admissions document. Discovery can reveal the architecture of a defence before any brief is served. There is no automatic right to stop the civil case, but the court can stay or control it where the interests of justice require: Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 at [36]. Discipline and relevant expertise are critical along with confined pleadings, careful evidence, properly claimed privileges and a single coordinated strategy.
Executive Summary
- The first mistake is treating the civil claim as merely commercial. The second is treating criminal risk as too remote because no charge has been laid. The right question is whether anything done in the civil case may prejudice the client if an investigation or prosecution follows.
- A stay is available but never automatic. The burden sits on the defendant, the risk of prejudice must be real, and a staged stay targeting the most prejudicial steps may be the better move.
- Sections 128 and 128A of the uniform Evidence Acts are protections, not plans. They must be raised before the evidence is given, and they do not assist corporations.
- Every civil step, from the defence to the settlement deed, should be reviewed through two lenses: civil advantage and criminal exposure.
Why the crossover is dangerous territory
Civil fraud litigation is often fought on two fronts. On the surface it is a private dispute about misrepresentation, dishonest assistance, breach of fiduciary duty, conspiracy, asset recovery, tracing, freezing orders or damages. Beneath that, the same facts may interest police, the AFP, ASIC, AUSTRAC, the ATO, ICAC or the Commonwealth Director of Public Prosecutions (along with other prosecutorial authorities).
Civil fraud plaintiffs move fast. They seek freezing orders, search orders, asset disclosure, subpoenas, preliminary discovery and tight evidence timetables. Those steps can be legitimate. They also press a defendant to explain transactions, identify accounts, disclose documents and answer allegations of dishonesty long before the criminal position is clear.
That creates the central tension. In the criminal jurisdiction, the prosecution must prove its case and the accused is generally entitled to silence. In civil proceedings, a defendant who says nothing may suffer default judgment, adverse inferences, loss of assets under restraint and costs orders. The so-called right of silence does not, as of right, give a defendant the same protection in contemporaneous civil proceedings: McMahon v Gould (1982) 7 ACLR 202. Good defence strategy is about escaping that false choice where possible.
Start with a criminal risk audit
Before any defence, affidavit, witness statement or discovery list is filed, conduct a criminal risk audit. Identify the alleged conduct, the possible offences, the likely investigating agency, the individuals exposed, the documents likely to be sought, and the overlap between the civil allegations and criminal elements such as dishonesty, deception, intention, knowledge, obtaining a financial advantage, false accounting and dealing with proceeds of crime.
Keep it practical. Which paragraphs of the statement of claim allege dishonesty? Which transactions are said to be fraudulent? Which individuals will be interviewed? Are there existing regulator notices, compulsory examinations, insolvency examinations or police contact? Has the plaintiff threatened referral to authorities, or is it using the civil process to assemble a complaint? Where the overlap is real, the criminal and civil teams need one integrated strategy from the start: one chronology, one document map, one privilege protocol, and a coordinated approach for sensitive forensic calls.
Stays and staged stays
There is no automatic right to stop a civil proceeding because criminal proceedings are pending, contemplated or possible. A plaintiff is ordinarily entitled to pursue its rights, and the burden falls on the defendant to show that interference is justified: McMahon v Gould (1982) 7 ACLR 202. The court will stay a civil proceeding where the interests of justice require it, and the risk of prejudice to the criminal defence is real, weighed against the prejudice a stay would cause the plaintiff: Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 at [36], [47]; Construction, Forestry, Mining and Energy Union v Australian Competition and Consumer Commission (2016) 242 FCR 153 at [22]. The McMahon guidelines are guidelines only: the Full Federal Court described some of them as outdated in Australian Securities and Investments Commission v Taylor [2023] FCAFC 189 at [91], and the governing statement of principle remains Zhao.
The argument is strongest where the civil and criminal issues substantially overlap, the client would need to reveal the criminal defence to fight the civil claim, the same witnesses are involved, and charges are imminent or realistically on the cards. It is strengthened where protective orders would not cure the prejudice; the High Court in Zhao held, at [46], that protective orders were plainly insufficient to remove the risk once the defence would be exposed. Usefully for applicants, Zhao also confirms, at [35] and [43], that a defendant need not spell out the specific prejudice in detail, because doing so would itself reveal the defence.
A stay need not be all or nothing. Courts can and do order temporary or staged stays: allow pleadings but defer evidence, allow non-contentious discovery but defer affidavits, preserve assets but postpone cross-examination, or stay the matter only until a charge decision or criminal trial step occurs: Its Eco Pty Ltd v BPS Financial Ltd (No 2) [2023] FCA 110; and see the recent NSW treatment in Telstra Ltd v Sulaiman [2024] NSWSC 971. Courts generally find it easier to grant a targeted and calibrated application which recognises the plaintiff’s legitimate interests while protecting the client from the most prejudicial steps. General assertions of a possible investigation will rarely be enough. It will be necessary to put on evidence identifying the overlap, the forensic prejudice and why any measures short of a stay or staged stay will fail to protect the client from prejudice.
Pleadings and affidavits: say no more than necessary
The defence pleading is a forensic document. It can record the client’s explanation for the impugned transactions, admissions about knowledge, denials that imply a positive case, and propositions that resurface in cross-examination. Draft it with criminal exposure in mind. While it is necessary to respond properly to the claim, unnecessary narrative and evidence should be avoided. Distinguish facts admitted, facts not admitted, allegations denied and legal characterisations denied. Take particular care with dishonesty, intention, knowledge and state of mind. Think hard before pleading an affirmative explanation early; sometimes it is necessary, and sometimes it simply gives the prosecution a preview of the defence.
Affidavits are more dangerous still. They are sworn or affirmed, detailed and usually drafted under time pressure. Before any exposed person swears or affirms one, ask whether the evidence is truly necessary, whether the point can be made through submissions or documents, whether another witness can give it, whether it can be confined, and whether the privilege against self-incrimination or penalty privilege should be claimed. Do not assume civil evidence is quarantined from criminal use. Material can be summarised in correspondence, referred to in open court, reported, provided to regulators or used to shape an investigation. The question is not only later admissibility. It is whether the material helps investigators build the case.
Section 128 certificates: a protection, not a plan
Where a witness objects that evidence may tend to prove they have committed an offence or are liable to a civil penalty, the certificate procedure under section 128 of the Evidence Act 1995 (Cth), and its NSW counterpart, is engaged. If the court finds reasonable grounds for the objection and the evidence is given, the court must cause a certificate to be given: s 128(5). The effect is that the evidence, and evidence obtained as a direct or indirect consequence of it, cannot be used against the person in an Australian court, except in proceedings about the falsity of the evidence: s 128(7).
Three limits matter in practice. First, bodies corporate cannot claim the privilege at all: s 187. Secondly, in a criminal proceeding the section does not apply to a defendant’s evidence that they did an act, or had a state of mind, that is a fact in issue: s 128(10). Thirdly, a certificate does not stop the prosecution learning the defence theory through other pathways, and it does not stop investigative momentum. Nevertheless, raise the objection before the evidence is given, identify the topic precisely, ensure the certificate is properly issued and attached to the transcript, and keep copies. Do not let it be dealt with informally. Further, do not treat it as a complete answer; combine it with stays, confidentiality orders, careful evidence design and strict control of who receives the material.
Asset disclosure under freezing and search orders: section 128A
Freezing and search orders commonly require a respondent to disclose assets, accounts and dealings at very short notice. For an individual with criminal exposure, the disclosure may itself be incriminating. Section 128A of the uniform Evidence Acts governs objections to disclosure orders made in connection with freezing or search orders. In broad terms, the person discloses the non-objectionable information, places the objectionable information in a privilege affidavit delivered to the court in a sealed envelope, and files a separate affidavit setting out the basis of the objection. The court then decides whether there are reasonable grounds and whether the interests of justice require disclosure: s 128A(4) to (6); and see Deputy Commissioner of Taxation v Shi [2021] HCA 22, where the High Court ordered a privilege affidavit disclosed because the interests of justice required it.
These orders are often made without notice, and clients rarely appreciate the criminal significance of complying too broadly or too quickly. Manage the response with precision. Separate what is not objectionable, what may incriminate, and whether pre-existing documents stand on a different footing from information created in response to the order. Speed is the plaintiff’s advantage. Discipline is the defendant’s answer.
Discovery, settlement and the communications discipline
Discovery can be as dangerous as oral evidence. Documents can reveal intention, knowledge, money flows and attempts to conceal, and may supply the prosecution with elements it could not otherwise prove. Map discovery categories against criminal risk. The privilege analysis differs between oral evidence, documents created for the proceeding, pre-existing documents, corporate documents and third-party documents. A corporation cannot claim the privilege, but an exposed officer or employee may, and courts are cautious about orders against a corporation that would in substance force an individual to hand over material the individual could resist: Its Eco Pty Ltd v BPS Financial Ltd (No 2) [2023] FCA 110. The aim is not to obstruct lawful disclosure. It is to disclose only what is required, under the right protections.
Settlement carries its own traps. Be very careful with admissions of dishonesty, agreed statements of fact, apologies, consent judgments and recitals that can be used later. Even confidential material can reach regulators or prosecutors through compulsory powers. A well-drafted settlement resolves the commercial dispute while minimising criminal prejudice: no admissions, neutral payment language, controlled confidentiality and no agreed findings of fraud. A term requiring cooperation with a complaint to authorities should not be accepted without specialist criminal advice. On the other hand, a term seeking to prevent a party from cooperating with a regulatory or criminal investigation or prosecution could itself be unlawful. Thoughtful strategy may be able to achieve the same outcome.
Finally, assume that significant civil filings will eventually be read by investigators, and let that assumption shape correspondence, submissions and any public statement. Public statements are usually high risk: for example, a detailed explanation may reveal the defence. The safest public position is narrow, neutral and process-focused. Suppression and non-publication orders have a place, but they are not a complete answer to criminal prejudice; open justice constrains what the civil court will suppress.
THE GUIDING PRINCIPLE Do not create the prosecution’s case for it. That does not mean refusing to engage with the civil court. It means engaging carefully, strategically and with full appreciation of the criminal consequences. Sometimes the right course is a stay. Sometimes a confined defence. Sometimes evidence under a certificate. Sometimes resisting disclosure. Sometimes settling without admissions. Every step in the civil case is reviewed through two lenses: does it help the civil defence, and does it harm the criminal position? |
A practical framework: the first conference
The first conference should not simply ask whether the client has been charged. It should map everything that can compel information, everything already on the record and everyone else who is exposed.
Ask about | Why it matters |
Contact and compulsion | Any regulator notice, police contact, compulsory examination notice, search warrant, production notice, freezing order, asset disclosure order, subpoena, insolvency examination summons, tax audit letter or disciplinary notice. |
What is already on the record | Every document filed in the civil proceeding, every affidavit sworn, every examination transcript, every letter to the plaintiff, every settlement offer, every insurance notification and every communication with a regulator. |
Who else is exposed | Directors, employees, spouses, accountants, bookkeepers, business partners and companies. Their evidence and their exposure shape what your client can safely say. |
Deadlines already in play | Return dates, asset disclosure deadlines, defence due dates, discovery timetables. Civil deadlines are short and breach carries contempt or default consequences. |
The plaintiff’s posture | Has referral to authorities been threatened? Has a complaint been made? Is the civil process being used to assemble a criminal brief? |
Versions already given | An important question: what has already been said? Once a version is on the record, the task becomes controlling future damage and preventing inconsistent or expanded statements. |
How Ironbridge handles the referral
Ironbridge Legal is a disputes-only firm. We do not practise criminal law and we do not compete for your client. When a criminal client is sued for fraud, we run the civil side: the freezing order response, the stay application, the confined defence, the privilege architecture, the discovery strategy and the settlement, all in lockstep with your criminal strategy and with you remaining lead on the criminal matter. The reporting lines are agreed at the outset, and the client hears one strategy, not two. Our fraud, asset tracing and recovery lawyers have significant experience in criminal and civil fraud crossover matters – successfully protecting clients from adverse civil and criminal consequences. Ironbridge Legal acts for plaintiffs and defendants in these cases, so we know how the other side builds its case, providing us with the ultimate strategic advantage – insight and intelligence.
Further Information
For further information about civil fraud claims involving criminal exposure, stays and staged stays in civil proceedings, and privilege and disclosure issues arising from freezing and search orders, please contact the author of this article:
