Re Amev-Udc Finance Limited v David Gregory Charles Walker; Christopher Neil Campbell Walker; Sandra Louella Walker and Bushman'S Run Pty Limited [1986] FCA 4 (21 January 1986)

FEDERAL COURT OF AUSTRALIA

Re: AMEV-UDC FINANCE LIMITED
And: DAVID GREGORY CHARLES WALKER; CHRISTOPHER NEIL CAMPBELL WALKER; SANDRA
LOUELLA WALKER and BUSHMAN'S RUN PTY LIMITED
No. NSWP1545 of 1985
Contempt of Court

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Wilcox J.

CATCHWORDS

Contempt of court - Breach of undertakings given to Court in relation to bankruptcy proceedings - Undertaking to remove sheep from grazing property when quarantine order lifted - Quarantine order lifted at a time when some sheep still lice-infested - Failure to move sheep in accordance with undertaking - Unnecessary delay in movement - Varying opportunities of respondents to implement undertaking - Undertaking to forward accounting information to creditor - Some information forwarded out of time, some not at all - Respective culpability of respondents - Appropriate penalties - Fines imposed on two respondents.

Flamingo Park Pty Limited v Dolly Dolly Creations Pty Limited (1985) 59 ALR 247, Australasian Meat Industry Employees Union v Mudginberri Station Pty Limited (1985) 61 ALR 635 applied.

HEARING

SYDNEY
21:1:1986

ORDER

THE COURT ORDERS THAT:

That each of the respondents, David Gregory Charles Walker, Christopher Neil Campbell Walker, Sandra Louella Walker and Bushman's Run Pty Limited, be adjudged guilty of contempt in having failed to comply with undertakings nos.1 and 5 in the undertakings given by them to the Court on 15 November 1985.

In relation to these contempts, the respondent David Gregory Charles Walker pay to the District Registrar of the Court within twenty-one (21) days of this order a fine in the sum of three thousand dollars ($3,000).

In relation to these contempts, the respondent Christopher Neil Campbell Walker pay to the District Registrar of the Court within twenty-one (21) days of this order a fine in the sum of one thousand dollars ($1,000).

The respondents pay to the applicant AMEV-UDC Finance Limited its costs of the motion for contempt, such costs to be taxed on a solicitor and own client basis.

NOTE: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

DECISION

This is an Application charging contempt of court, in respect of three separate matters, by virtue of failures to comply with undertakings given to the Court. On 10 October 1985, there was presented to the Court a creditor's petition by AMEV-UDC Finance Limited seeking sequestration orders against the estates of David Gregory Charles Walker of "Bushman's Run", Nevertire, New South Wales and Christopher Neil Campbell Walker whose address was given as "Little River", Geurie, New South Wales. The petitioning creditor alleged that the two debtors were indebted to it in the sum of $3,147,924.19.

2. The petition came before Beaumont J. who, on 25 October 1985, heard argument upon two grounds of opposition advanced by the debtors, namely, that the judgment upon which the bankruptcy notice was based was not a final judgment or order for the purposes of s.40(1)(g) of the Bankruptcy Act 1966, and that the bankruptcy notice was in any event bad because it required payment of less than the amount due under the judgment. On 28 October 1985, his Honour gave reasons for rejecting both of these grounds of opposition and indicated an intention to make sequestration orders. The matter was adjourned to the bankruptcy list upon the following day for that purpose. However, the petition was not able to proceed on that day and in the event was adjourned until 12 November 1985.

3. On 12 November 1985 the matter came before me. I rejected an application by the debtors for leave to appeal against the decision of Beaumont J. but I did not proceed to make sequestration orders. The reason for this was that it appeared that there was a substantial prospect that the petitioning creditor would be able to sell three grazing properties, each owned by companies controlled by one or both of the debtors, and thereby raise sufficient funds to satisfy the judgment debt. The petitioning creditor was a mortgagee of each of these three properties. I indicated that the debtors should be afforded the opportunity of these sales but that any adjournment of the petition should be upon the basis that the debtors would fully co-operate with the petitioning creditor in effecting the sales. At the request of the parties I stood the matter over to allow them to discuss the steps necessary for this purpose.

4. On Friday, 15 November 1985, I was informed that agreement had been reached between the parties in relation to interim steps. The parties had reduced to writing certain undertakings to the Court which undertakings were given not only by the two debtors but also by the wife of Mr David Walker, Mrs Sandra Louella Walker, and a company controlled by Mr David Walker and Mrs Sandra Walker named Bushman's Run Pty Limited. These undertakings, which were given on behalf of all four undertaking parties by their solicitor, Mr Kelso, included the following:

"1. To remove, under the supervision of
AMEV-UDC Finance Limited (hereinafter called
'the Petitioner@), to a location approved in
writing by the Petitioner or its solicitors,
and to keep at the aforesaid location all
livestock currently situate on the properties
known as 'Darrah@ and 'Willawar@ within four
days of the debtors' solicitors being notified
by the Petitioner's solicitors of the lifting
of an existing quarantine order over the
livestock; and otherwise give vacant
possession of the said properties within the
abovementioned period.

...

5. To deliver to the solicitors for the
Petitioner during the first week in each month
a statement recording all transactions
involving the assets of Bushmans Run Pty
Limited, the partnership of D.G.C. and S.L.
Walker and the debtors' personal assets for
the preceeding months, together with copies of
all bank statements, receipts, cheque butts
and invoices evidencing such transactions;
and to procure the preparation of the books of
account of Bushmans Run Pty Limited and the
partnership of D.G.C. and S.L. Walker for the
year ending 30 June 1985, and make all
financial books records and vouchers
pertaining thereto available for inspection by
the Petitioner or its nominees at all
reasonable times."

5. It appears that "Darrah" and "Willawar" are adjoining grazing properties situate near the town of Carinda in the Walgett district. They were worked as a single property by Mr David Walker. He did not reside on either of these properties but at "Bushman's Run" near Nevertire some 200 to 300 kilometres away. There were no resident employees at "Darrah" or "Willawar" but Mr David Walker used the services from time to time of two casual employees resident in the Carinda district. As at 15 November 1985, "Darrah" and "Willawar" were subject to a quarantine order under the Stock Diseases Act 1923 (NSW) forbidding the movement of sheep from the property. This order had been imposed because it had been discovered that some of the sheep on the properties were infested with lice. Prior to 15 November, according to Mr David Walker, he had made arrangements with a contractor to shear and dip the sheep on the properties -- apparently numbering about 3000 head -- but he had been informed by Mr Roger Alden, the representative of the petitioning creditor as mortgagee, that he would not be permitted to do this and that the mortgagee would attend to shearing and dipping.

6. Mr David Walker expected -- and in my opinion reasonably -- that the lice would be destroyed by dipping and that the quarantine order would not be lifted until the sheep on the properties were lice-free. When he entered into the undertakings of 15 November 1985 -- and it was Mr David Walker who took the major role in negotiating the terms of those undertakings -- he expected that it would be a little time before the quarantine order would be lifted. Mr David Walker was aware that there were upon the properties lambs which needed to be crutched and marked. He intended that this should be done before they were removed from the two properties and I think that it is probable that he indicated this intention to the representatives of the petitioning creditor with whom he negotiated the terms of the undertakings. Apparently no objection was raised to this being done.

7. In his evidence before me Mr David Walker sought to suggest that these representatives had agreed that his right to crutch and mark the lambs should qualify, by extending the otherwise available time, the terms of undertaking no.1 as to the period within which the sheep should be removed from the two properties. I am satisfied that there was no such agreement. Mr Walker, and his co-undertakers, were represented in these negotiations by a competent solicitor, Mr Peter Kelso, who has represented them throughout. I am confident that any such qualification would have found its way into the written terms of the undertakings. Moreover, it is significant that the affidavit sworn by Mr Walker in connection with this Application -- which affidavit was filed by Mr Kelso -- contains no reference to any such terms. Whilst, as I have said, I accept that Mr Walker did refer to crutching and marking the lambs, the suggestion that this was accepted as providing an extension of time is, in my opinion, simply an attempt to justify Mr Walker's failure to carry out his obligations under that undertaking.

8. In the event the quarantine order was lifted upon the Monday following the giving of the undertakings -- on 18 November 1985. Apparently Mr Alden arranged for the muster of the sheep on the properties. They were yarded into three large pens on "Willawar" and there inspected by Mr Peer von Gavel, an inspector of stock and ranger employed by the Walgett Pastures Protection Board. Mr von Gavel looked at what he described as a "good cross-section" of the sheep in each of the three pens. He found no lice and he issued to Mr Alden a notice releasing the properties from quarantine. Upon the same day the solicitors for the petitioner notified Mr Kelso of the release. This notification started running the period of four days referred to in undertaking no.1 within which the undertaking parties were required to remove all livestock from the two properties. Mr Kelso telephoned Mr David Walker on that same day, informed him of the release from quarantine and advised him: "You had better get on with moving the sheep".

9. Regrettably, Mr Walker did not get on with moving the sheep. He held the view that it would be desirable to crutch and mark the lambs before they were moved, a course which, as a matter of good sheep husbandry, was desirable. Mr Walker telephoned a shearing contractor but found that he would not be available until the following week. He arranged for his two part-time employees to remuster the sheep -- they had apparently been released after the inspection of 18 November -- on Monday, 25 November. On 26 November Mr David Walker went to "Willawar" himself. He found that some of the lambs were fly-struck and/or lice-infested. He thought that the ewes were in poor condition through not having been drenched for stomach worm. There was one ewe in the yard which had missed the shearing altogether. Mr Walker was angry at the condtion of the sheep. He separated into a small pen a number of sheep, mostly lambs, which were fly-struck and lice-infested. Mr Walker's estimate was that there were 150 head in this pen.

10. Mr Walker telephoned Mr von Gavel, who came out to the property the next day, and inspected the sheep in the small pen; the number of which he estimated at 40 to 50. He agreed that they were in poor condition. He maintained at the time, in a report to Mr David Hall, the veterinary inspector for the district, that these sheep had not been amongst those inspected on 18 November, but that they had missed the earlier muster and the shearing and dipping. In evidence before me Mr von Gavel agreed that if he had seen the sheep on 18 November he would not have lifted the quarantine order. It is clear on his evidence that he found lice on the sheep in the small pen.

11. Mr Walker urged Mr von Gavel on 27 November to reimpose a quarantine order. Mr von Gavel refused to do so. He took the view that all the sheep on the properties were healthy except for those in the small pen. In relation to the latter he issued an order for movement requiring the sheep to be removed to "Bushman's Run".

12. It is clear that Mr Walker entertains a feeling of grievance about the decisions made by Mr von Gavel on 27 November but the reasonableness of those decisions is not an issue in this case. The fact is that Mr von Gavel saw no need to reimpose the quarantine restriction so that there was no legal impediment to Mr Walker's discharging the obligation he had accepted in undertaking no.1. The movement order facilitated rather than hindered the discharge of that obligation.

13. Notwithstanding the movement order Mr Walker proceeded with his original plan to crutch and mark before moving the sheep. The fly-struck sheep were treated immediately. On about 12 December 1985 crutching took place, marking on 14 December 1985. Mr Walker took the view that it was better not to move the lambs until about seven to ten days after marking. On 20 December he contacted a drover, intending to arrange that the sheep be driven on foot to "Bushman's Run". Various further delays occurred so that, in the result, the sheep did not finally leave the property until the first couple of days in January: some six weeks after the date upon which they were supposed to be removed.

14. The respondents concede that they are in breach of undertaking no.1. Various matters have been put in mitigation. In relation to Mrs Sandra Walker and Bushman's Run Pty Limited, it is submitted that for relevant purposes they should be regarded merely as alter egos of Mr David Walker. There is substance in that contention. Those two parties were brought into the matter only because it was claimed that the sheep, although not the fee simple of "Darrah" or "Willawar", were owned by Bushman's Run Pty Limited. Bushmans Run is a company whose directors are Mr David Walker and Mrs Sandra Walker. Mrs Sandra Walker is engaged in full-time domestic activities, including the care of a five-months old baby. She leaves all business matters to her husband. I think that it is clear that she had little opportunity to take any effective action to ensure implementation of undertaking number 1.

15. The situation in regard to Mr Christopher Walker is a little different. He is an experienced farmer and grazier used to handling sheep. During recent months he has been resident in Sydney. He is not employed but he has been engaged in attempting to obtain an irrigation licence from the Water Conservation Commission. Mr Christopher Walker was informed by his brother on or about 27 November 1985 of the facts both that the quarantine order had been lifted on 18 November and that the sheep were then still on the property. He did nothing to implement the undertaking either by himself going to "Willawar" and removing the sheep or by urging his brother to take prompt and decisive action. It may be that Mr Christopher Walker was unclear about the precise form of the undertaking but he could easily have checked this with Mr Kelso. Whilst I am satisfied there was no element of deliberate defiance in the attitude of Mr Christopher Walker, his conduct falls well short of what was required of a person who has given an undertaking to the Court which, to his knowledge, has not been honoured.

16. It is clear that Mr David Walker bears the main responsibility for what occurred. He was, I think, surprised by the suddenness of the release from quarantine, but when he learned of this release on 18 November his clear obligation was to move the sheep from the property within four days. He chose not to do so, preferring to adopt the course of first crutching and marking. However desirable this course might be from a husbandry point of view, it was in clear conflict with his undertaking to the Court. He might have sought release from the undertaking with a substituted timetable for removal of the sheep but he did not do so. He simply ignored the undertaking in favour of his previously determined course.

17. It is clear that Mr Walker was annoyed at the condition of the sheep on 26 November and at the fact that the quarantine order had been lifted at a time when some sheep were still lice-infested. It is not necessary to express any view as to whether this annoyance was justified; it was irrelevant to his obligation to move the sheep. But once again Mr Walker continued on his pre-determined way, unfortunately not even at great speed. It took almost a further three weeks to complete crutching and marking, and he then waited a further six days before even engaging a drover. I appreciate that Mr Walker experienced difficulties in getting a shearing contractor on to the property but I do not understand why he did not earlier approach a drover. The sheep were fit to set out, even in the dilatory events which happened, about 21 to 24 December.

18. Mr Walker gave evidence that first on 17 November and later between 12 and 17 December he was occupied by his wheat harvest at "Bushman's Run". I do not, I hope, under-estimate the magnitude of that activity but this does not furnish an excuse for failure to comply with an undertaking given to the Court.

19. The situation in relation to undertaking no.5 is that there has been a failure to comply -- each in two separate respects -- with the undertaking in respect of the accounts for the months of November and December 1985. The November information was sent to Mr Kelso just before Christmas. It reached the solicitors for the petitioning creditor early in January but it was incomplete. Bank statements and summaries of transactions were supplied: copies of invoices and cheque butts were not. This information has not yet been supplied. Similarly, the December information, again limited to bank statements and summaries, was supplied late, namely on 20 January 1986. The excuse offered is that it is simply impractical, given the demands on their time, for Mr David Walker and Mrs Sandra Walker, the two parties who must in practice provide this information, to get the documents to the petitioning creditor within one week of the end of the month. It is also said to be impractical, given their lack of photocopying facilities, to provide the necessary copy documents. I think there is substance in these excuses but it is a pity that this was not appreciated at an earlier point of time.

20. The petitioning creditor submits that, in relation to all respondents and all three charges, that is, the breach of undertaking no.1 and the two breaches of undertaking no.5, contempt is proved. I accept this submission. As I have indicated, it is not disputed that there has been a failure in respect of each matter to comply with the relevant undertakings.

21. There is, in my view, no question of deliberate defiance by any of the respondents of the authority of the Court. I doubt whether the nature of the obligation to the Court was at the forefront of the minds of any of them, even Mr David Walker who was most concerned with the matter. I think that Mr David Walker did not really consider that obligation. Although he does not suggest that he was unaware of his obligation to comply with his undertakings or of the serious consequences of non-compliance, he does not seem to have realized that the undertaking was different in kind from any contractual obligation he had with the petitioning creditor. He seems to have allowed himself to have been influenced in the performance of his undertaking to the Court by grievances harboured against both AMEV-UDC and Mr von Gavel. That he was wrong in so doing goes without saying, but I do not think that it represents any position of defiance.

22. However, the power of the Court to punish contempt does not depend upon a finding of contumacy -- see Flamingo Park Pty Limited v Dolly Dolly Creations Pty Limited (1985) 59 ALR 247, which decision was endorsed by a Full Court of this Court in Australasian Meat Industry Employees Union v Mudginberri Station Pty Limited (1985) 61 ALR 635. The defaults of the respondents must be regarded as wilful non-compliance with undertakings, thus attracting the possibility of punishment by way of imprisonment, fine or, in the case of a company, sequestration.

23. I have reached the conclusion that the circumstances of the breaches of undertakings in this case are such that it would not be appropriate to allow the matter to pass without penalty, insofar as Mr David Walker and Mr Christopher Walker are concerned. The respondents were warned on 18 November that the petitioning creditor would insist upon full compliance with the relevant undertakings. The application in respect of contempt was filed on 13 December and was before the Court for mention on 17 December. Notwithstanding these matters, Mr David Walker adopted an attitude to the discharge of his obligations which may only be described as cavalier.

24. The acceptance from parties of undertakings to the Court is an extremely useful method of resolving forensic problems, often enabling the Court, as here, to give relief which it might otherwise be unwilling to grant. It is of considerable importance that in accepting undertakings the Court may be assured that that which is promised will, in fact, be performed subject only to unavoidable circumstances. It is important that parties who give undertakings to the Court realize that this is their obligation and that they may expect to be punished in respect of any default in the performance of their undertakings without good cause.

25. It is appropriate to consider the three matters together and to impose upon each of the respondents David Walker and Christopher Walker a fine in the sums of $3,000 and $1,000 respectively. Having regard to their dependence upon David Walker in respect of the implementation of the undertakings, I do not propose to impose any penalty on Sandra Walker or Bushman's Run Pty Limited.