Re Australian Securities Commission v Robert James Macleod; Trainex Pty Ltd; Starlight Film Studios Ltd; Starlight Pictures Pty Ltd and Star Partners Pty Ltd [1993] FCA 52 (24 February 1993)

FEDERAL COURT OF AUSTRALIA

Re: AUSTRALIAN SECURITIES COMMISSION
And: ROBERT JAMES MACLEOD; TRAINEX PTY. LTD.; STARLIGHT FILM STUDIOS LTD.;
STARLIGHT PICTURES PTY. LTD. and STAR PARTNERS PTY. LTD.
No. Q G3011 of 1992
FED No. 129
Number of pages - 19
Contempt - Practice
(1993) 113 ALR 525
(1993) 40 FCR 155

COURT

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Drummond J.(1)

CATCHWORDS

Contempt - "no case" submission

Practice - O. 37, r. 2(5) of the Federal Court Rules - discretion to order committal for breach of orders where endorsed copies of orders not served as required by O. 37, r. 2(1) and (3)

Practice - O. 37, r. 2(5) of the Federal Court Rules - "notified" - neutral term - awareness or knowledge - action by applicant not necessary

Words and Phrases - "notified" - neutral term - awareness - action not necessary

Federal Court Rules - O. 1, r. 8; O. 37, r. 2

CCOM Pty. Ltd. v Jiejing Pty. Ltd. (unreported, Federal Court, Drummond J, 8 July, 1992)

Doyle v Commonwealth [1985] HCA 46; (1985) 156 CLR 510

Drummoyne Municipal Council v Lewis (1974) 1 NSWLR 655

Fullerton v Gardiner (1978, unreported, New South Wales Supreme Court, Powell J)

Halley v Johnson (1957) St R Qd 500

Hocking v Bell [1945] HCA 16; (1945) 71 CLR 430

Re Intex Consultants Pty. Ltd. (1986) 2 Qd R 99

Lazare v Taito (Australia) Pty. Ltd. [1985] FCA 35; (1985) 5 FCR 395

Madeira v Roggette Pty. Ltd. (No. 2) (1992) 1 Qd R 394

Sun Newspaper Pty. Ltd. v Brisbane TV Ltd. (1989) 92 ALR 535

Trade Practices Commission v Allied Mills Industries Pty. Ltd. (No. 3) (1981) 37 ALR 225

Windsurfing International Inc. v Sailboards Australia Pty. Ltd. [1986] FCA 384; (1986) 19 FCR 110

HEARING

BRISBANE, 15, 16, and 24 February 1993
24:2:1993

Counsel for the applicant: Ms E.M. O'Reilly

Solicitors for the applicant: Australian Securities Commission

Counsel for the respondents: Mr R.I.M. Lilley

Solicitors for the respondents: John M. O'Connor and Co.

ORDER

THE COURT ORDERS THAT:
1. The first respondent has no case to answer in relation to

the charge of contempt for the breach of the orders set out
in paragraph (a) of the Notice of Motion, insofar as that
charge relates to the order of Spender J of 3 July, 1992.
2. Except as stated in order 1, the first respondent's "no
case" submissions are dismissed.

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

DECISION

DRUMMOND J. By notice of motion the Australian Securities Commission ("ASC") seeks orders that the first respondent, Mr. MacLeod, be committed to prison or otherwise punished for failure to comply:

(a) with the order of Heerey J of 29 June, 1992, that Mr.
MacLeod deliver to the receivers of the property of
all the respondents forthwith upon service of a copy
of the order a detailed list of all the property of
the respondents, and the further order of Heerey J of
that same date that Mr. MacLeod, as well as each of
the other respondents, be restrained from disposing
of, encumbering, taking any steps to dispose of or
encumber or dealing in any manner whatsoever with any
and all property of the respondents;
(b) with the orders of Spender J of 3 July, 1992 in
identical terms to the two orders of Heerey J to which
I have referred; and
(c) with the order of Cooper J of 21 July, 1992 which
amended the order of Spender J of 3 July requiring
delivery to the receivers of a list of the property of
the respondents forthwith upon service of Spender J's
order, to require instead delivery of that list by
9.30 a.m. on 23 July, 1992.

2. The statement of charge alleges that Mr. MacLeod breached the order of Heerey J and also the order of Spender J in that he failed to deliver any list of the respondents' property prior to 21 July, 1992 when Cooper J made his order, and that he breached the order of Cooper J amending the order of Spender J by delivering, shortly prior to 9.30 a.m. on 23 July, 1992, a list of property of the respondents which list, insofar as it related to his property, did not include his interest in certain real estate in South Australia.

3. The statement of charge also alleged that Mr. MacLeod breached the order of Heerey J and the order of Spender J restraining him from disposing of or dealing with any of the property of the respondents by transferring to Mrs. Wilkie by memorandum of transfer executed on 10 July, 1992 the South Australian property which he owned and by on or about 21 September, 1992 dealing with a cheque which was the property of the third respondent by requesting the drawer of that cheque to endorse it over to Mr. MacLeod personally and then by returning that cheque to the drawer upon the latter's refusal to comply with Mr. MacLeod's request.

4. The two orders of Heerey J with which I am concerned were two of a number of orders made on 29 June, 1992 on the ex parte application of the ASC. It operated until 3 July, 1992 when Spender J, by consent, vacated those two orders and made orders of his own in identical terms. Spender J's orders of 3 July, with respect to delivery of the list, operated until 21 July when Cooper J varied it by substituting the obligation on Mr. MacLeod to deliver the list by 9.30 a.m. on 23 July in place of the obligation imposed by Spender J to deliver that list forthwith upon the making of the order.

5. The order of Spender J restraining the respondents from dealing with their property operated from 3 July, 1992 and continues to operate. Counsel for Mr. MacLeod has submitted that he has no case to answer in respect of any of the contempt charges. In dealing with this submission, insofar as it involves an evaluation of the evidence led by the ASC, I must assume that the ASC's evidence is accepted in its entirety, I must draw all inferences favourable to the ASC that are open on that evidence and I must make my determination on the basis of such evidence and inferences, ignoring all evidence and inferences that can be drawn from the evidence favourable to Mr. MacLeod: see Trade Practices Commission v Allied Mills Industries Pty. Ltd. (No. 3) (1981) 37 ALR 225 at 240; Hocking v Bell [1945] HCA 16; (1945) 71 CLR 430 at 442-3; and the article by Glass J, "The Insufficiency of Evidence to Raise a Case to Answer" (1981) 55 A.L.J. 842 at 843.

6. It is common ground that the standard of proof the ASC must meet throughout is proof beyond reasonable doubt. The submission of no case was made in respect of Heerey J's order only in respect of the order requiring delivery of a list of all the property of the respondents forthwith upon service of a copy of his order. The requirement for delivery of the list forthwith upon service of a copy of the order properly construed was said to be a requirement for delivery of that list within what was a reasonable time in all the circumstances after service of a copy of the order. That was not disputed by the ASC.

7. It was further submitted, however, that given that a copy of the order was only served on Mr. MacLeod at 6.30 p.m. on 30 June, 1992 a reasonable time for compliance by him with the requirement to deliver the list of property had not expired when Spender J vacated that particular order on 3 July, 1992. It was also submitted that, given the draconic intrusion into the affairs of the respondents, including those of Mr. MacLeod, that the numerous orders of Heerey J authorised, which involved the exclusion by the receivers of Mr. MacLeod from his residence on 30 June, 1992 and prior to service later that day of the order on him, Mr. MacLeod was entitled to a greater period of time than that which passed between service of the order and 3 July, 1992, when the order was vacated, to comply with it insofar as it obliged him to deliver a list of the respondents' property.

8. Heerey J's order properly construed required delivery of the list within a time which was reasonable in all the circumstances. I think that the determination of what that period was involved the question of fact that is governed by all the circumstances of the case, but particularly by what steps would need to be taken by the respondents in order to comply with their obligation to deliver the lists.

9. I must, of course, make this evaluation of the evidence applying the approach I have already referred to as that which is to be taken in dealing with a "no case" submission. Counsel for the ASC submits that in performing this exercise I should have regard to the list that was ultimately furnished of all the respondents' property on the morning of 23 July, 1992 as evidence of what had to be done when Mr. MacLeod got notice of the order of Heerey J on the afternoon of 30 June.

10. It was submitted that the list is not a particularly extensive document and could not have necessitated any great degree of research or checking before it could be prepared. I accept this submission. I also note that Mr. MacLeod controlled each of the respondents. I hold that it is open to me to find that a reasonable time for delivery of the list was a shorter period than the period between 6.30 p.m. on 30 June, 1992, when the order was delivered to Mr. MacLeod and 3 July, 1992, when Spender J vacated that order.

11. I reject the submission that Mr. MacLeod has no case to answer that he committed the contempt of Heerey J's order.

12. I should say that counsel for Mr. MacLeod did not at the hearing last week seek to argue that the vacation by Spender J on 3 July, 1992 of Heerey J's order, which had the effect of extending the time for delivery by the respondents of the list of property for a reasonable time after the making of Spender J's order, absolve Mr. MacLeod from any breach of Heerey J's order that he may have committed prior to 3 July. Counsel sought to put such an argument to me this morning as I was about to deliver judgment. I declined to allow him to proceed with that. Nor should I say was any argument advanced that it was not open to find that a reasonable time had expired by 3 July, 1992 for compliance with Heerey J's order given that the order of Spender J vacating the order was made following an agreement with the ASC to consent to the vacation order and to the associated extension of time given to the respondents to deliver the list of property in the way I have mentioned by Spender J's order.

13. As to the charge of contempt that Mr. MacLeod was in breach of Spender J's order of 3 July, 1992 by failing to deliver the list prior to 21 July, 1992 when Cooper J varied Spender J's order when it was pointed out that there was no evidence that Spender J's order had ever been served on any of the respondents, the ASC correctly conceded that it must fail in relation to this particular charge. So far as Spender J's orders are concerned there remains only the submission that there is no case to answer in respect of the charge that Mr. MacLeod breached the order restraining him from dealing with any of the property of the respondents in the two respects set out in the statement of charge, to which I have already referred.

14. The "no case" submission in relation to this order was based on the ASC's failure to serve on Mr. MacLeod personally a copy of the order endorsed with what is called the penal endorsement as is required by O. 37, r. 2(1)(a) and r. 2(3)(b) respectively of the Federal Court Rules.

15. It is not disputed that the ASC did not comply with these provisions. Assuming that O. 37, r. 2 applies to contempt proceedings, a matter contested by the ASC, O. 37, r. 2(5), would authorise the Court to make a finding of contempt notwithstanding non-compliance with rr. 2(1) and (3) if the requirements of r. 2(5) are satisfied. This sub-rule provides:

"Where a person liable to committal or sequestration of his
property by way of enforcement of a judgment or order has
notice of the judgment or order -
(a) by being present when the judgment is pronounced, or
when the order is made; or
(b) by being notified of the terms of the judgment or
order, whether by telephone, telegram, or otherwise,
the judgment or order may be enforced by committal of that
person or by sequestration of his property, notwithstanding
that service has not been effected in accordance with this
rule."

16. Rule 2(5), in its terms, authorises the making of an order for committal by way of enforcement of a judgment or order despite the absence of personal service of that judgment or order, provided the respondent has adequate notice of it. An absence of personal service of the order will necessarily mean an absence of personal service of the penal consequences notice referred to in r. 2(3), but r. 2(5) does not require proof that the respondent has any notice of the penal consequences of non-compliance with the judgment or order sought to be enforced before it can be relied on to justify the making of a committal order.

17. However, the absence of notice on the part of the respondent of those consequences, while not depriving the Court of jurisdiction under r. 2(5) to make an order for committal, would be a discretionary consideration that the court could take into account in deciding whether to order committal where there has not been personal service of an appropriately endorsed judgment or order on the respondent.

18. There is no doubt that non-compliance with r. 2(3) could also be excused in a proper case under O. 1, r. 8: see Lazare v Taito (Australia) Pty. Ltd. [1985] FCA 35; (1985) 5 FCR 395. In that case the absence of personal service of the statement of charge and supporting affidavits in a contempt case, which were required by O. 40, r. 8 to be served personally, was excused pursuant to O. 1, r. 8: see pages 403-4 and 414. But I do not think, in view of the terms of r. 2(5), that non-compliance with r. 2(3) would first have to be excused under O. 1, r. 8 before any order for committal could be made in reliance on r. 2(5). It would be sufficient if the Court took into account in deciding whether to exercise the discretion conferred on it by r. 2(5), in the circumstances of a particular case, the fact that the respondent had not received a warning that compliance with r. 2(3) would have ensured he had.

19. Counsel for Mr. MacLeod submits that the ASC cannot rely on r. 2(5) to overcome its failure to serve Mr. MacLeod personally with a suitably endorsed order, because it is said there is no evidence that Mr. MacLeod, who was not present in court when Spender J made his order of 3 July, was nevertheless "notified" within the meaning of that word in the rule of the terms of his Honour's order. Reference is made to Drummoyne Municipal Council v Lewis (1974) 1 NSWLR 655, and Fullerton v Gardiner, a decision of Powell J in the New South Wales Supreme Court reported only at paragraph 11,015 of the Supreme Court Procedure in New South Wales. Both cases involved rules identical, for all practical purposes, with O. 37, r. 2.

20. In the Drummoyne case, Holland J said, at page 657:

"I am completely satisfied that the conduct of the
defendants has amounted to disobedience of the orders of the
court. However, it is another question whether the
plaintiff is entitled to have those orders enforced."

21. There had not been personal service of an endorsed order in that case, a requirement of the New South Wales rules similar to O. 37, r. 2(1) and (3). His Honour said of this omission at page 658:

"In my opinion the power provided in r. 8(6) (the equivalent
of O. 37, r. 2(5) of the Federal Court Rules) ought to be
exercised sparingly. To commit a person to prison for
disobedience of an order of a court is a most serious matter
and when the rules expressly require in mandatory terms
personal service of the order in an official form showing on
its face that it emanates from and is authenticated by the
seal of the court with an express statement endorsed
thereon, the disobedience is liable to lead to
'imprisonment', it seems to me that, unless there are
special circumstances justifying non-compliance with the
requirements of the rules, they ought not to be disregarded
by the Court."

22. His Honour then referred to the fact of the case before him and then continued at page 658:

"It seems to me that these rules are so framed and the power
of the Court so far-reaching that the Court itself has a
duty to see that the rules are obeyed, unless there are good
grounds for disregarding them in a particular case. If they
had been obeyed in the present case, I would have had no
hesitation in making an order committing the defendants for
disobedience of a judgment, but I do not see any sufficient
reason in the present case for permitting the rules to be
disregarded."

23. This case does not, however, require me to hold that O. 37, r. 2(5) can only be relied on if special circumstances exist to excuse the applicant's non-compliance with r. 2(1) and (3). Rather does the wording of r. 2(1) and (5) suggest that proof that the case is within r. 2(5) is equivalent to compliance with r. 2(1) at least insofar as such proof is without more sufficient to enliven the discretion conferred by r. 2(5) and sufficient without more in an appropriate case to justify the making of a committal order despite the absence of personal service of the judgment or order sought to be enforced.

24. I do not think the Queensland Full Court decision of Halley v Johnson (1957) St R Qd 500 requires any different approach. That was a decision within a regulatory regime that did not contain any provision equivalent to O. 37, r. 2(5). Fullerton v Gardiner, to which I have already referred, is to the contrary effect to Halley v Johnston. There Powell J, speaking of the New South Wales rules similar to O. 37, r. 2 said:

"It is true that some of the cases dealing with attachment
of parties for a contempt in procedure have described the
procedure or attachment as one said strictissima juris.
Further, it has been stated that upon such applications the
Rules must be strictly complied with. However,it seems to
me as, indeed it seemed to Else-Mitchell J in Spindler v
Balog (1959) 76 WN (N.S.W.) 391 at (393) that such
expressions mean no more than that the court must not
proceed on less than proper proof of the non-compliance or
contempt in procedure nor on a course of procedure other
than that prescribed by the Supreme Court Act or the Rules.
While it is true that, as a general rule, where it is sought
to enforce by attachment an order of the court that there
must first have been served upon the party sought to be
attached a duly endorsed Minute of the Order, r. 8(6) of
Part 42 of the Rules which merely reflects what, in my
experience, over a quarter of a century, always has been the
practice of the court provides as follows:- ..."

25. His Honour then proceeded to quote that rule which is similar to O. 37, r. 2(5) of the Federal Court Rules.

26. Fullerton v Gardiner is not, in my view, authority for the proposition for which it is cited in the Supreme Court procedure, namely, that deliberate defiance of the judgment will be enough to justify the invoking of a provision such as r. 2(5). There, although an endorsed order was not served on the plaintiff in the action, there was evidence that established that the plaintiff knew of and consented to the terms of the injunction and, according to Powell J, had some awareness of a liability to punishment if he breached the order.

27. However, assuming that O. 37, r. 2 applies to contempt proceedings, Spender J's order was a consent order. Where an order is made by consent in the presence of the legal representative of a party, then even though that party is not personally present, that is, in my view, enough to permit the drawing of an inference that the party was aware of the terms in which the order was made and that he authorised his legal representative to consent, on his behalf, to all those terms, prior to the order being made.

28. In my view, on a "no case" submission, there would have to be something in the evidence that clearly showed that the consent given on behalf of the party to the making of the order went in a particular respect or respects beyond the party's authority to his legal representative before it would be proper to accept a submission that the fact that the order sought to be enforced by committal was made by consent was not of itself sufficient to make out a case that the party was aware of both the making of the order and all its terms.

29. There is no such evidence, understandably, as will generally be the case, before me at the moment since I am considering only the evidence relied on by the ASC. There is also evidence from Mr. Burton that on 3 July, 1992, that is, shortly after Spender J made his order, which is fairly open to the inference that Mr. MacLeod was then aware that Spender J had made the order in the terms in which it was framed. The expression "notified" in r. 2(5) is in my view neutral in the sense that it does not require proof that the party seeking to enforce the judgment or order has taken action to inform the respondent of the making of that order.

30. The rule is satisfied by evidence showing that the respondent became aware from any source that the judgment or order had been made. But the order of Spender J was a consent order and that Mr. Burton gives evidence suggesting that by the afternoon of 3 July, 1992, Mr. MacLeod knew the order had been made is evidence well capable of giving rise to an inference that Mr. MacLeod had by then been notified, in the sense of being informed or being made aware by someone - probably his own solicitor - that the order had been made earlier that day.

31. Although for the reasons given, absence of evidence that a respondent was aware of the penal consequences of a breach of an order - an awareness that r. 2(3) is designed to ensure he has - will not deprive the court of jurisdiction to make an adjudication of contempt in reliance on O. 37, r. 2(5), the absence of such evidence, as I have said, is a relevant discretionary consideration against the making of such an adjudication.

32. But in this regard, there is evidence that a copy of the order of Heerey J was handed by Mr. Burton to Mr. MacLeod on 30 June, 1992; that Mr. MacLeod then spent about 15 minutes going through the order on the telephone with his solicitor; there is also evidence that a sealed copy of the order, with the penal endorsement on it, was personally served on Mr. MacLeod at 3.30 p.m. on 2 July, 1992; and evidence that, immediately after that, Mr. Burton told Mr. MacLeod that, because of the order:

"... he was not able to deal with any property of the
respondents, and that if he did, he would be in contempt of
court."

33. The order of Heerey J, penally endorsed, is in identical terms to the relevant parts of Spender J's order. This evidence is, in my view, capable of justifying an inference that Mr. MacLeod was aware that he was potentially liable to some form of punishment if he breached Spender J's orders and, in particular, that judge's restraining order. I therefore reject the submission that Mr. MacLeod has no case to answer on the charge that he committed a contempt in respect of Spender J's restraining order of 3 July, 1992.

34. Counsel for the ASC made a submission which she advanced somewhat tentatively that, with respect to an order incorporating a negative obligation on a party - as did Spender J's restraining order here in question - there is no requirement for compliance with O. 37, r. 2 before a contempt order, based on a breach of the restraint, can be made. All that is necessary, so it was said, is proof that the respondent was aware of the restraining order. In relation to this last submission, reliance was placed on Madeira v Roggette Pty. Ltd. (No. 2) (1992) 1 Qd R 394.

35. I do not get any assistance, however, from that case because the question there in issue was whether Jones, a person who was not bound by the restraining order sought to be enforced against him in contempt proceedings, could nevertheless be adjudged in contempt on the ground that, with knowledge of the restraining order made against the company of which he was a director, he had taken action that necessarily defeated the effect of the order binding only the company.

36. Sun Newspaper Pty. Ltd. v Brisbane TV Ltd. (1989) 92 ALR 535 involved a similar situation - see page 535 line 40; as did Re Intex Consultants Pty. Ltd. (1986) 2 Qd R 99. The principle upon which a person not bound by an order may nevertheless be held in contempt by engaging in conduct that defeats the operation of the order is quite different from that which governs the liability of persons bound by an order later said to be breached.

37. I dealt with those differences in an unreported decision, CCOM Pty. Ltd. v Jiejing Pty. Ltd. and Ors., QG 124 of 1991, which I gave on 8 July, 1992. There is no requirement to serve a stranger to an order as a precondition to his liability to contempt proceedings. The reason for this is clear. It may often be quite impossible beforehand for the beneficiary of an order to know of the existence of, let alone to serve with a copy of the order in accordance with O. 37, r. 2, a person not bound by the order but who later is said to be in contempt of court in respect of that order.

38. Counsel for the ASC also referred to a decision of Burchett J in Windsurfing International Inc. v Sailboards Australia Pty. Ltd. [1986] FCA 384; (1986) 19 FCR 110 in support of the proposition that O. 37, r. 2 had no application to contempt proceedings in respect of an order imposing a negative obligation. That was a case involving breaches of an undertaking given by a company in which the managing director, who was not in terms bound by the undertaking, was also said to be involved. Burchett J held that a failure to serve a copy of the order incorporating the undertaking, whether it was positive or negative, in form, did not bar contempt proceedings against either: see pages 115-116.

39. I do not find anything in what his Honour said as lending support to the proposition that O. 37, r. 2 is not applicable to proceedings under O. 40 in respect of a breach of any order that is said to amount to a contempt. English authorities that support the ASC's proposition are collected in Miller's Contempt of Court, 2nd Ed., at page 423, but they must be read, as Burchett J warned in the Windsurfing case, against the background of the English rules, which, so far as English O. 45, r. 7(6) is concerned, is significantly different from O. 37, r. 2(5) of the Federal Court Rules in that the English rule permits the enforcement only of an order negative in effect where the order has not been served but where the respondent had appropriate notice of the order.

40. If, as I think is the case, O. 37, r. 2 does apply to proceedings under O. 40, an order binding upon a person can only be enforced where O. 37, r. 2(1) and (3) have not been complied with if the case comes within r. 2(5): see Doyle v Commonwealth [1985] HCA 46; (1985) 156 CLR 510 at 518.

41. The "no case" submission made with respect to the charge that Mr. MacLeod was in contempt of the order of Spender J, as varied by Cooper J, requiring the respondents to deliver to the receivers a list of all the property of the respondents by 9.30 a.m. on 23 July, 1992 in lieu of forthwith upon service of the order is, in my view, unsustainable. The evidence is that Mr. MacLeod was aware of the orders of Heerey J and Spender J requiring delivery of that particular list forthwith upon service of a copy of each of those orders on him.

42. Mr. Burton gave evidence that, after Mr. MacLeod was made aware of Heerey J's order, he discussed the latter's obligations with respect to the delivery of this list with Mr. MacLeod on 30 June, 1992 and again on 2 July, 1992, including, in the course of a discussion, Mr. MacLeod's liability to contempt proceedings if he failed to provide the list forthwith. Mr. Burton says that Mr. MacLeod's response was to say he would contact Mr. Burton after he had spoken to his solicitor. Mr. Clout gave evidence that he received a list of the respondent's property - that does not include the South Australian property - shortly before the deadline fixed by Cooper J's variation to Spender J's order expired.

43. There is thus ample evidence to entitle, although not to compel me, to draw the inference that Mr. MacLeod was aware of this particular order. I have already referred to the evidence relating to his awareness of the consequences of non-compliance with the orders of Spender J, which included the order varied by Cooper J but varied only as to the required time for compliance as to the delivery of the list.

44. I therefore reject the "no case" submission in respect to this particular charge.