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ASIC v Sigalla (No. 4) [2011] NSWSC 62 (18 February 2011)
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ASIC v Sigalla (No. 4) [2011] NSWSC 62 (18 February 2011)
Last Updated: 27 May 2011
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Case Title:
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Medium Neutral Citation:
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Hearing Date(s):
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Decision Date:
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Jurisdiction:
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Before:
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Decision:
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Refer to paras [194] - [197] of judgment. |
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Catchwords:
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CONTEMPT - whether application to punish for
contempt for disobedience of court's orders were civil proceedings to which the
Civil Procedure Act 2005 and Uniform Civil Procedure Rules apply - whether
application is a proceeding for an offence and therefore a criminal proceeding
and not a civil proceeding - whether proceedings were civil or criminal
proceedings for purposes of the Evidence Act 1995 - held character of principal
proceeding in which alleged contempt committed does not determine character of
contempt proceeding
- held proceedings for criminal contempt are proceedings for
an offence but proceedings for civil contempt are not - distinction
between
civil and criminal contempt - held proceeding included charges of criminal
contempt - held Uniform Civil Procedure Rules
r 29.10 did not apply where no
case to answer submission made
CONTEMPT - orders restrained defendants from dealing with 'their assets' -
whether orders restrained dealing with moneys not beneficially
owned by the
defendant - trust asset is property of trustee - beneficial interest not carved
out of trust property leaving the trustee
with a 'bare legal title' - 'their
assets' includes assets held as trustee - Federal Bank of the Middle East v
Hadkinson [2000] 1 WLR 1695; [2000] 2 All ER 395 disapproved
CONTEMPT - ambiguity - orders restraining dealing with 'their assets'
ambiguous - defendant not liable for contempt if breach not
established on a
reasonable view of what the orders prohibit - not proved beyond reasonable doubt
that defendant beneficially entitled
to moneys transferred - orders breached but
contempt not established
CONTEMPT - proof of breach of court orders in relation to swearing
affidavit of assets - genuine effort to comply - not proved beyond
reasonable
doubt that breach deliberate
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Legislation Cited:
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Cases Cited:
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Texts Cited:
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William Hawkins, The Pleas of the Crown, 8th ed (1824)
Ch 6Cross on Evidence, LexisNexis looseleaf edition |
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Category:
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Parties:
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Australian Securities and Investments Commission -
Plaintiff Andrew Sigalla - Defendant |
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Representation
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Counsel: D R Stack (Plaintiff) S Robb QC
with C Botsman (Defendant) |
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- Solicitors:
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Solicitors: Conrad Gray Solicitor
(Plaintiff) n/a (Defendant) |
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File number(s):
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Publication Restriction:
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Judgment
- HIS
HONOUR : On 8 September 2010 I upheld the submission of counsel for Mr
Sigalla that he had no case to answer in respect of many of the charges
of the
further amended interlocutory process. I found that he had a case to answer in
respect of the charges in paras 1, 31, and
33-40 ( ASIC v Sigalla (No 3)
[2010] NSWSC 1076). Mr Sigalla did not make a no case to answer submission
in respect of the charges in paras 41 and 42 of the further amended
interlocutory
process. This judgment concerns the remaining charges.
Preliminary issue: civil or criminal proceedings
- There
is a preliminary matter to be dealt with. Prior to counsel for Mr Sigalla making
his submission that there was no case to answer,
I heard argument on the
question as to whether, if such a submission were made but was not successful,
or was not wholly successful,
Mr Sigalla would then be entitled to adduce
evidence otherwise than with the leave of the court. Mr Stack who appears for
ASIC submitted
that the position was governed by r 29.10 of the Uniform Civil
Procedure Rules 2005 and if Mr Sigalla failed to establish that there was no
case to answer in respect of any of the charges then he could not adduce
evidence in the proceedings except by leave of the court by reason of r
29.10(4). He indicated that ASIC would oppose leave being
granted. Rule 29.10 of
the Uniform Civil Procedure Rules provides:
" 29.10 Judgment for want of evidence
(cf SCR Part 34, rule 8; DCR Part 26, rule 8; LCR Part 21, rule 6)
(1) An opposite party may apply to the court to give judgment for the
opposite party, either generally or on any claim for relief
in the proceedings,
on the ground that, on the evidence given, a judgment for the beginning party
could not be supported.
(2) Such an application may be made at any time after the conclusion of
the evidence for the beginning party in his or her case in
chief.
(3) The court may not give judgment under this rule unless the opposite
party satisfies the court that, on the evidence given, a judgment
for the
beginning party could not be supported.
(4) If the opposite party fails to satisfy the court that, on the evidence
given, a judgment for the beginning party could not be
supported, the opposite
party may not adduce evidence or further evidence in the proceedings generally
or on the claim for relief
concerned, as the case may be, except by leave of the
court.
(5) If not all opposite parties apply to the court under subrule (1), the
court must not deal with any such application before the
conclusion of the
evidence given for all parties. "
- Mr
Botsman of counsel who appeared for Mr Sigalla submitted that the Uniform Civil
Procedure Rules did not apply as the present application was not a " civil
proceeding " within the meaning of the Civil Procedure Act 2005. He
submitted that the present application is a criminal proceeding and he was
entitled to make a no case to answer submission at
the conclusion of ASIC's
case, without being put in jeopardy that if the submission were unsuccessful he
would not be entitled as
of right to adduce evidence in Mr Sigalla's case.
- Mr
Sigalla was entitled to know what would be the consequence of his making a no
case to answer submission. I heard argument on that
question in advance of the
submission being made. I am indebted to both counsel for the thoroughness of
their arguments.
- Mr
Botsman provided a brief outline of the nature of the no case submission to be
advanced. At the close of argument I had not reached
a concluded view as to
whether r 29.10 applied. However, I was satisfied that if r 29.10 applied I
would give leave to Mr Sigalla
to adduce evidence if his no case to answer
submission were wholly or partly unsuccessful. I said:
" 1 The question whether r 29.10 applies is a difficult one. But
rather than delay matters, I consider that I should indicate how, in
any event,
I think the proceedings should move forward.
2 If r 29.10 does not apply, then the defendant is entitled to make a no
case to answer submission at the close of the plaintiff's
case without being put
to an election whether or not to call evidence, that is, without needing leave
to call evidence if the application
fails. The test for determining whether or
not there is a case to answer will be the test in May v O'Sullivan [1995]
HCA 38; (1955) 92 CLR 654, as explained in Amalgamated Television v Marsden
[2001] NSWCA 32.
3 If this is a civil proceeding to which r 29.10 applies, then the same
approach to determining whether there is a case to answer
should be adopted,
because the proceedings are essentially criminal in nature. Safeguards similar
to those appropriate in criminal
proceedings ought to apply.
4 Accordingly, I can indicate now that if I find that r 29.10 applies,
then I will give leave to the defendant to adduce evidence
generally, including
in respect of any charges in respect of which a no case to answer submission
might be made and might be unsuccessful.
5 In due course, I will give a full statement of my reasons for that
conclusion, but I don't think I ought to delay the further progress
of the case
while they are prepared. "
- Similar
issues are raised in relation to the rules of evidence. Mr Stack accepted that
the charges must be established beyond reasonable
doubt, but submitted that
inferences could be drawn on the principles in Jones v Dunkel [1959] HCA
8; (1959) 101 CLR 298 that apply to civil proceedings, for what he said was Mr
Sigalla's failure to call evidence.
- The
submissions raise the distinction between civil and criminal contempts.
Disobedience of a court's order by a party against whom
the order is made is
usually classified as a civil contempt. If contempt proceedings are brought,
their object is usually to coerce
the recalcitrant defendant into compliance or
into remedying the breach. If the defendant refuses to do what he is ordered he
may
be imprisoned or fined, or, if the defendant is a company, its assets may be
sequestrated. Fines may be coercive, particularly where
they accrue until the
breach is remedied. If the defendant is imprisoned for refusing to obey an
order, on purging his contempt,
he is entitled to be released.
- Criminal
contempts involve interference with the administration of justice. They are not
easily categorised. They include contempt
in the face of the court, such as
speaking insulting words to a judge in the discharge of his or her office,
making affray or other
disturbance that disrupts the business of the court,
refusing to be sworn to give evidence or refusing to answer questions,
interfering
with witnesses, seeking to coerce or improperly influence a judge,
publishing material that may interfere with a fair trial, and
assisting a party
to breach a court's order. A contumacious disobedience to the court's order that
exhibits defiance of the court
is also a criminal contempt.
- Proceedings
whose essential purpose is to punish the contemnor for past breaches, rather
than to coerce the contemnor into complying
with the orders or to remedy past
breaches, are classified as criminal contempts.
- In
Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525 Brennan, Deane, Toohey
and Gaudron JJ held (at 534) that the differences upon which the distinction
between civil contempts and criminal
contempts is drawn are illusory. Punishment
is punishment. The High Court held that all proceedings for contempt must
realistically
be seen as criminal in nature and accordingly must be proved
beyond reasonable doubt. Their Honours went on to say that:
" However, to say that proceedings for contempt are essentially
criminal in nature is not to equate them with the trial of a criminal
charge.
There are clear procedural differences, the most obvious being that criminal
charges ordinarily involve trial by jury, whereas
charges of contempt do not.
"
- Nonetheless,
the distinction between civil and criminal contempts has not been abolished. It
remains enshrined in legislation ( Supreme Court Act 1970, s 101(5) and
(6), s 101A; Hearne v Street [2008] HCA 36; (2008) 235 CLR 125). The
distinction is important in determining whether the present application to
commit Mr Sigalla for contempt is a civil proceeding
within the meaning of s 4
of the Civil Procedure Act, and to the application of the Evidence Act
1995.
- Mr
Stack submitted that although charges for contempt are essentially criminal in
nature, it is well established that proceedings
for contempt, whether
characterised as civil contempt or criminal contempt, were brought in the
court's civil jurisdiction and were
governed by the rules of civil procedure.
- So
far as I am aware, since Witham v Holloway was decided, in all
proceedings for contempt brought in this court or in the Federal Court, it has
been held or assumed that the charges
must be proved beyond reasonable doubt,
whether classified as civil or criminal contempts. However, Witham v Holloway
was decided on the basis of the law as it stood before the introduction of
the Evidence Act. The Evidence Act contains different provisions
for criminal and civil proceedings, including provisions dealing with onus of
proof. " Civil proceedings " and " criminal proceedings " are
defined expressions. Likewise the Civil Procedure Act and the Uniform
Civil Procedure Rules apply to civil proceedings. It is also a defined
expression. The question whether the Civil Procedure Act and Uniform
Civil Procedure Rules apply (which affects not only the making of a no case to
answer submission, but also the power to order costs), and the question
of what
rules of evidence apply, depend on the construction of those definitions.
Civil Procedure Act 2005
- Parts
3-9 of the Civil Procedure Act and the Uniform Civil Procedure Rules
apply to all civil proceedings in the Supreme Court (s 4 and sch 1; and r 1.5
and sch 1, respectively). The expression " civil proceedings " is defined
in s 3 of the Civil Procedure Act . That section provides relevantly:
" 3 Definitions
(1) In this Act:
civil proceedings means any proceedings other than criminal
proceedings.
...
criminal proceedings means proceedings against a person for an
offence (whether summary or indictable), and includes the following:
(a) committal proceedings,
(b) proceedings relating to bail,
(c) proceedings relating to sentence,
(d) proceedings on an appeal against conviction or sentence. "
- "
Offence " is not defined. Nor is " proceedings ".
- "
Civil proceedings " has the same meaning in the Uniform Civil Procedure
Rules as it does in the Civil Procedure Act ( Interpretation Act
1987, s 11).
- Mr
Botsman, for Mr Sigalla, submitted that the present application for punishment
of Mr Sigalla for alleged contempt is a " criminal proceeding " within
this definition as it is a proceeding against him for an offence.
The Evidence Act 1995
- The
operative provisions of the Evidence Act commenced on 1 September 1995.
That Act specifies a civil standard of proof on the balance of probabilities,
but having regard to
the nature of the subject matter of the proceedings and the
gravity of the matters alleged, in a " civil proceeding " (s 140). It
specifies the criminal standard of proof beyond reasonable doubt in a "
criminal proceeding " (s 141). The Dictionary to the Evidence Act
defines " civil proceeding " as " a proceeding other than a
criminal proceeding ". A " criminal proceeding " is defined as
follows:
" criminal proceeding means a prosecution for an offence
and includes:
(a) a proceeding for the committal of a person for trial or sentence for
an offence, and
(b) a proceeding relating to bail,
but does not include a prosecution for an offence that is a prescribed
taxation offence within the meaning of Part III of the Taxation
Administration Act 1953 of the Commonwealth."
" Offence " is defined as " an offence against or arising under an
Australian law ", and " Australian law " means " a law of the
Commonwealth, a State or Territory " (Dictionary, Part 1). This is clarified
by clause 9 of Part 2 of the Dictionary, which provides:
" 9 References to laws
(1) A reference in this Act to a law of the Commonwealth, a State, a
Territory or a foreign country is a reference to a law (whether
written or
unwritten) of or in force in that place.
(2) A reference in this Act to an Australian law is a reference to an
Australian law (whether written or unwritten) of or in force
in Australia."
The Current Proceedings
- The
present application is brought by interlocutory process in proceedings commenced
by ASIC by way of originating process on 26 August
2009. In its originating
process ASIC sought orders pursuant to s 1323 of the Corporations Act
2001 (Cth), s 66 of the Supreme Court Act 1970, and in the inherent
jurisdiction of the court, for the appointment of a receiver to the assets of
five named defendants, or alternatively
orders to prevent the removal and
disposal of the defendants' assets. Those proceedings are unquestionably civil
proceedings.
- Part
55, r 6(1) of the Supreme Court Rules provides:
" 6 Procedure generally
(1) Where contempt is committed in connection with proceedings in the
Court, an application for punishment for the contempt must be
made by motion on
notice in the proceedings, but, if separate proceedings for punishment of the
contempt are commenced, the proceedings
so commenced may be continued unless the
Court otherwise orders."
- The
application was brought by interlocutory process, presumably because it was
thought that r 2.2 of the Supreme Court (Corporations) Rules 1999 applies. It is
unnecessary to consider whether the application was properly brought by way of
interlocutory process under that rule
or whether it should have been brought by
way of notice of motion. In either case, the application is made in the
proceedings already
commenced for relief under s 1323 of the Corporations Act
.
- Mr
Stack for ASIC submitted that because the application for punishment of Mr
Sigalla for alleged contempt is made in the existing
proceedings and those
proceedings are civil proceedings, the rules of civil procedure apply, whether
or not the application, if considered
as a separate proceeding, would be so
characterised. Mr Botsman submitted that the application was a discrete and
separate matter
and a separate proceeding, as evidenced by the fact that had
separate proceedings been commenced they could have been continued unless
the
court otherwise ordered. Moreover, as a matter of substance, the present
application is discrete and separate from the application
under s 1323 of the
Corporations Act that led to the making of the orders with the alleged
breach of which Mr Sigalla has been charged.
- I
have concluded that the application to punish Mr Sigalla for contempt is a
separate proceeding from the proceeding in which the
orders allegedly breached
were made, and its character is not determined by the character of the principal
proceedings. I have concluded
that proceedings to punish for a civil contempt
are civil proceedings, but proceedings to punish for criminal contempt are not.
I
have concluded that these are criminal proceedings within the meaning of the
Civil Procedure Act , the Uniform Civil Procedure Rules and the
Evidence Act because some of the alleged contempts are criminal
contempts. It follows that I have concluded that r 29.10 of the Uniform Civil
Procedure Rules did not apply. My reasons follow.
Character of principal proceedings does not determine character
of contempt proceedings
- The
word "proceeding" is capable of a variety of meanings. Its meaning depends upon
the statutory context and the objects of the legislation
in question. It may
mean the whole of the processes that come before the court under the umbrella of
one court file number (e.g.
Owners of Strata Plan 62930 v Kell & Rigby
Holdings Pty Ltd [2010] NSWSC 612 at [397]). It may mean the whole of a
cause of action (e.g. Blake v Norris (1990) 20 NSWLR 300). It may mean a
step in an action ( Blake v Norris at 306; Quick v Stoland Pty Ltd
[1998] FCA 1200; (1998) 87 FCR 371 at 388).
- The
effect and purpose of s 4 of the Civil Procedure Act is that criminal
proceedings not be governed by that Act or the Uniform Civil Procedure Rules.
For reasons which follow, prosecution of a criminal contempt is prosecution of a
common law offence. Where the substance of the
"proceeding" is a prosecution for
a common law offence, that purpose would be frustrated by treating the motion
that an alleged contemnor
be punished for criminal contempt as the same
proceeding as the proceeding in connection with which the contempt was
committed.
- It
would defeat the purpose of the Evidence Act in establishing stricter
evidentiary rules for criminal proceedings and be inconsistent with the
reasoning in Witham v Holloway to say that even where criminal contempt
is alleged, the character of the proceeding for the purposes of the Evidence
Act is to be taken from the character of the principal proceeding from which
the contempt arose.
- In
Amalgamated Television Services Pty Ltd v Marsden [2001] NSWCA 32,
discussed in more detail at [68]-[72] below, the Court of Appeal treated the
notice of motion charging the respondent with contempt
as a criminal proceeding
to which the principles of criminal law and procedure applied, notwithstanding
that it arose in the course
of a civil proceeding.
- In
Aztec Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2008] NSWSC
908 the question was whether the court had power to refer contempt proceedings
to mediation pursuant to s 26 of the Civil Procedure Act . Hamilton J
held that there was power to do so if the contempt proceedings were civil
proceedings, but not if they were criminal
proceedings because s 26 applied only
to civil proceedings (at [26]-[27]). The proceedings were held to be civil
proceedings because the contempt charged
was a civil and not criminal contempt.
The contempt alleged was a wilful contempt, but not a contumacious contempt and
the purpose
of the proceedings was to obtain compliance rather than inflict
punishment (at [31]-[33]). His Honour did not consider that the question
whether
the application was a " civil proceeding " was to be determined by the
character of the principal proceeding in which the notice of motion alleging the
contempt was filed.
- Consistently
with those cases, a motion that an alleged contemnor be punished for contempt
should be characterised as a separate proceeding
even though it is required to
be brought in the principal proceeding. In substance the present application is
a separate proceeding.
The principal proceeding provides only the background
against which the charges are to be considered. The allegations in the
application
and the evidence adduced in support of them are separate and
distinct from the claims and the evidence in support of the claims in
the
principal proceedings.
- The
fact that the present application would be validly commenced even if brought
separately, demonstrates that it is substantively
a separate proceeding.
- For
these reasons, I consider that the present application should not be
characterised as a civil proceeding merely because it is
brought in a civil
proceeding.
- I
do not consider that the decision of the Full Court of the Supreme Court of
Victoria in La Trobe University v Robinson and Pola [1973] VicRp 67; [1973] VR 682
indicates a contrary conclusion. Mr Stack did not submit otherwise. One issue in
that case was whether an appeal lay to the Full
Court against an order by the
primary judge dismissing an application to set aside an order of another judge
giving leave to issue
a writ of attachment. The appellants were student
demonstrators at La Trobe University who had defied orders prohibiting them from
trespassing. They were attached for contempt. The University argued that no
appeal lay to the Full Court because the contempts committed
in the civil action
were criminal in nature and there was no statutory ground of appeal in a
criminal matter (at 688). In rejecting
that submission Smith ACJ, with whom Adam
and Newton JJ agreed, held (at 688) that because the action in which the
injunctions were
ordered was a civil action, the appeal was not in a
criminal matter but a civil matter. The Full Court held that the question
whether the appeal was in a criminal matter was determined
not by the nature of
the contempt alleged, but by the nature of the action in which the order was
made. That was a different question
from whether the application to charge the
appellants with contempt was a criminal matter. The issue concerned the
construction of
the relevant provisions of the Supreme Court Act 1958
(Vic) that had no similarity to the statutory provisions relevant to the present
case.
Criminal contempt but not civil contempt is a common law offence
- Proceedings
for contempt, whether civil or criminal, have sometimes been described as
proceedings for an offence. Wellesley v Duke of Beaufort (1831) 2 Rus
& My 639; [1831] EngR 809; (1831) 39 ER 538 concerned contempt by a member of the House of
Commons by removing his daughter, who was a ward of the court. He claimed that
he
could not be attached for the contempt because of parliamentary privilege.
Lord Brougham LC held that if the contempt showed criminality
and the sentence
was penal, the privilege was ousted (at 667, 548). It was contended that
parliamentary privilege was a protection
against arrest and confinement in all
cases except felony, treason and breach of the peace. In rejecting this argument
Lord Brougham
LC said (at 663, 547):
" There are, however, many offences - and this is the other
ground of my denying that to be the right distinction - offences for which
no
man can doubt the right of the Courts of Common Pleas, of Exchequer, and of
Chancery to commit; offences for which till now their
right to commit has never
been disputed; offences involving no breach of the peace, and for which by every
day practice, parties
are committed by those Courts, and by the Court of Kings
Bench, not sitting as a criminal Court. "
- In
Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd
[1986] HCA 46; (1986) 161 CLR 98, a case concerning civil contempt, Gibbs
CJ, Mason, Wilson and Deane JJ said (at 115):
" Contempt of court is a distinctive offence attracting remedies
which are sui generis ... "
- In
Re Colina; ex parte Torney [1999] HCA 57; (1999) 200 CLR 386 at [109] and
[111] (428 and 429) Hayne J also referred to contempts as constituting offences,
without distinction as to whether the contempts
were civil or criminal.
- However,
in the context of legislation dealing with "offences" or a "criminal cause or
matter" it has been held that a civil contempt
is not an offence ( Pooley v
Whetham (1880) 15 Ch D 435 at 440, 443 and 445; Scott v Scott [1913]
AC 417 at 440, 443, 444, 455-462, 486). In John Fairfax & Sons Pty Ltd v
McRae [1955] HCA 12; (1955) 93 CLR 351 the plurality of the High Court
(Dixon CJ, Fullagar, Kitto and Taylor JJ) said (at 364) that contempt through
disobedience of a court's
order was not criminal. In Australian Consolidated
Press Ltd v Morgan [1965] HCA 21; (1965) 112 CLR 483 at 497-498, Windeyer J
said that civil contempts do not involve an offence.
- On
the other hand, criminal contempts of court have long been treated as common law
offences, although sometimes described as " an offence sui generis and ...
not part of the ordinary criminal law " ( Ahnee v Director of Public
Prosecutions [1999] 2 AC 294 at 306). Criminal contempts of court were
characterised as common law offences in William Hawkins, The Pleas of the
Crown, 8 th ed (1824) Ch 6, where they are classified as one of a number of
offences against the King, including contempts against the King's palace, his
prerogative,
person or government, and title. Thus it is and always was a common
law offence to speak contemptuous words to the judge in execution
of his or her
office or to make an affray in the courts (this is not of course an all
inclusive description of criminal contempts).
- In
Re Colina; ex parte Torney the respondent was charged with contempt of
scandalising the court. This was described by the majority of the High Court as
a common
law offence triable summarily (at 393, 399, 428-429, 433). Kirby J also
held that the contempt was an offence (at 411-412).
- In
Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309, a
case of criminal contempt, Kirby P, with whom Hope AJA agreed, said (at 314):
" A conviction of contempt of court is a conviction of an
offence, criminal in nature. "
- This
was repeated by the Court of Appeal in Attorney General (NSW) v Whiley
(1993) 31 NSWLR 314 at 320. That was another case of criminal contempt. The
Court said (at 320):
" A conviction for contempt of court is a conviction for an
offence which is criminal in nature. Punishment of the convicted contemnor
must
therefore take into account considerations normally applicable to the punishment
of crime in general and this crime in particular.
...
Being a common law offence there is no statutory maximum penalty. "
- It
has been held that the Crimes (Sentencing Procedure) Act 1999 is
applicable where punishment for contempt involves a custodial sentence (
Principal Registrar of the Supreme Court of New South Wales v Jando
[2001] NSWSC 969; (2001) 53 NSWLR 527; Ryan v Wright (No 2) [2004]
NSWSC 1019 at [21]; Australian Securities and Investments Commission v
Michalik [2004] NSWSC 1259; (2004) 52 ACSR 115 at [26]; Circuit Finance
Australia Limited v Sobbi [2010] NSWSC 912 at [6]). That is so at least for
a criminal contempt. The Act applies to the sentencing of an "offender", meaning
a person whom a court
has found guilty of an "offence". "Offence" is not
otherwise defined.
- Mr
Stack submitted that the definition of "criminal proceedings" in s 3 of the
Civil Procedure Act referred only to those offences as were truly
criminal in character. I agree. The dichotomy between civil and criminal
proceedings
in the Civil Procedure Act indicates that this is so. The
Uniform Civil Procedure Rules assume that the Rules apply to at least some cases
of contempt.
- Rule
1.7 of the Uniform Civil Procedure Rules provides that the rules of court
specified in Schedule 2 prevail over the Uniform Civil Procedure Rules. One of
such rules is r 7 of Pt 55 of the Supreme Court Rules. It requires that a
statement of charge specifying the contempt of
which the contemnor is alleged to
be guilty be subscribed to, or filed with, the notice of motion or summons. The
necessary implication
of r 1.7 is that the Uniform Rules Committee considered
that the Rules would apply to at least some charges of contempt. Were it
otherwise there would be no question of Pt 55 r 7 of the Supreme Court Rules
prevailing over the Uniform Civil Procedure Rules.
- However,
it is not legitimate to construe the definition of " civil proceedings "
in s 3 of the Civil Procedure Act by amendments to the Rules initially
contained in Schedule 7 to the Civil Procedure Act made by the Uniform
Rules Committee. Section 9 of the Civil Procedure Act only empowered the
Committee to amend the Rules in conformity with the Act. Schedule 7 of the
Civil Procedure Act (which originally contained the Uniform Civil
Procedure Rules, albeit that the Schedule was repealed by Schedule 5 of the same
Act) did not include the reference to Pt 55 r 7 of the Supreme Court Rules in
Schedule 2. That reference was included by an amendment to the Rules made by the
Uniform Rules
Committee prior to the commencement of the Act (Schedule 2 was
amended by the insertion of the reference to Pt 55 of the Supreme
Court Rules by
Uniform Civil Procedure Rules (Amendment No. 1) No. 395 of 2005, made by the
Rule Committee on 1 August 2005. It commenced on the commencement of s 9 of the
Civil Procedure Act ).
- Nonetheless,
it is unlikely that the definition of " civil proceedings " in the
Civil Procedure Act was intended to exclude all cases of contempt, as
this would mean that there would be no statutory power to order costs in
contempt
proceedings. An order for costs, usually on the indemnity basis, is
often the only sanction against a proved civil contempt.
- In
Director of Public Prosecutions (Commonwealth) v Sexton [2008] NSWSC 352,
Howie J held that the Criminal Procedure Act 1986 (NSW) did not apply to
proceedings for contempt, and that the Supreme Court Act and the Supreme
Court Rules applied to the making of an order for costs. His Honour's reasons
for concluding that the Criminal Procedure Act did not apply even to a
case of criminal contempt are compelling. However, his Honour did not identify
any specific power to order
costs under the Supreme Court Act or the
Supreme Court Rules. His Honour did not refer to the Civil Procedure Act,
or to the Uniform Civil Procedure Rules. It is not clear what provision of
the Supreme Court Act or the Supreme Court Rules his Honour had in mind
as conferring a power to order costs. Section 76 of the Supreme Court Act
formerly conferred power to order costs in respect of proceedings governed
by that Act, including any proceedings for contempt brought
in accordance with
Pt 55, whether the contempt was civil or criminal. That section was repealed by
clause 5.47 [3] of Schedule 5 of the Civil Procedure Act . Part 55 of the
Supreme Court Rules does not deal with costs.
- Howie
J did not find that the proceedings were civil proceedings governed by the
Civil Procedure Act to which s 98 of that Act (which deals with costs)
applied. His Honour did not say so and did not address the issues which would
then arise.
- It
seems to me, with respect, that as the courts of common law had no inherent
jurisdiction to order costs ( Garnett v Bradley (1878) 3 App Cas 944 at
962; Queensland Fish Board v Bunney [1979] Qd R 301 at 303), and as the
Court of Chancery would have had no jurisdiction to deal with a criminal
contempt such as that alleged in Director of Public Prosecutions
(Commonwealth) v Sexton , the court had no jurisdiction to order costs in
that case if, as I consider to be the case, it was a proceeding for an offence
within
the definition of "criminal proceeding" in the Civil Procedure Act
.
- The
problem did not arise prior to the introduction of the Civil Procedure Act
because the Supreme Court had power to order costs under s 76 of the
Supreme Court Act in all cases of contempt, civil or criminal. In my view
it retains that power in respect of civil contempts which should not be
characterised
as proceedings for an offence ( Scott v Scott ; John
Fairfax & Sons Pty Ltd v McRae at 364; Australian Consolidated Press
Limited v Morgan at 497-498). In cases of civil contempt, the award of
costs, often on the indemnity basis, is an important sanction, and not
infrequently
a sufficient sanction, to mark the court's condemnation of the
breach of its orders.
- If
the current application is to deal with Mr Sigalla for alleged civil contempts,
I am of the view that the proceedings are civil
proceedings to which r 29.10
applies. But that is not the case if Mr Sigalla is charged with one or more
criminal contempts. If the
application charging Mr Sigalla with contempt is
properly characterised as a proceeding for criminal contempt, then unless there
be authority to the contrary, I consider that the proceedings are proceedings
for an offence and not civil proceedings to which the
Uniform Civil Procedure
Rules apply. Although tried summarily and assigned by Pt 55 r 6 to the Division
in which the proceedings to which the contempt relates were instituted, in this
case the Equity Division, the
proceedings are truly criminal, and not
"quasi-criminal". The question is whether Witham v Holloway , or other
binding authorities, are authority to the contrary.
- Mr
Stack submitted that cases of contempt are sui generis and whether
characterised as civil contempts or criminal contempts (itself an illusory
distinction ( Witham v Holloway at 534)), such contempts were not
"offences" within the definition of " criminal proceedings " in s 3 of
the Civil Procedure Act . He referred to numerous cases, in particular
Witham v Holloway , which have held that although all proceedings for
contempt are in their nature criminal, rules of civil procedure apply. The
problem
with these authorities is that they either involved different statutory
provisions, or did not address the applicable statutory provision.
- The
background to Witham v Holloway is Jendell Australia Pty Ltd v Kesby
[1983] 1 NSWLR 127. McLelland J (as his Honour then was) was concerned with
a breach of an undertaking where the breach had been established on the balance
of probabilities, but not beyond reasonable doubt. His Honour concluded that in
the case of a wholly civil contempt the civil standard
of proof applied,
although the degree of satisfaction for which that standard called varied
according to the gravity of the facts
to be proved and the consequences flowing
from the finding. In the case of a criminal contempt proof was required beyond
reasonable
doubt (at 136-137). His Honour characterised the charge before him as
a civil contempt and upheld the charge applying the civil onus
of proof.
- This
decision was followed at first instance in Witham v Holloway , but was
overruled by the High Court in that case. Brennan, Deane, Toohey and Gaudron JJ
described the distinction between civil
and criminal contempts as follows (at
530):
" In general terms, the distinction between civil and criminal
contempt is that a civil contempt involves disobedience to a court order
or
breach of an undertaking in civil proceedings, whereas a criminal contempt is
committed either when there is a contempt in the
face of the court or there is
an interference with the course of justice. However, disobedience or breach of
an undertaking amounts
to a criminal contempt if it involves deliberate defiance
or, as it is sometimes said, if it is contumacious.14 As well, in the case
of
some orders, described in Australasian Meat Industry Employees' Union v
Mudginberri Station Pty Ltd as involving 'arbitrary classification',
disobedience constitutes criminal contempt. They are orders forbidding
interference with
a ward of court, orders for the delivery up of a child and
non-molestation orders. And it has been held that breach of a court order
by a
solicitor or by a liquidator is also a criminal contempt. "
- Their
Honours also said (at 531):
"The basis of the distinction between civil and criminal
contempt is said to lie in the difference between proceedings which are remedial
or coercive in the interest of the private individual and proceedings in the
public interest to vindicate judicial authority or maintain
the integrity of the
judicial process. "
- Their
Honours went on to reject as illusory the differences between civil and criminal
contempts on which the distinction is based.
In the course of doing so, their
Honours rejected the suggested distinction between proceedings in the public
interest and those
that are coercive or remedial in the interests of the private
individual as being a satisfactory basis for the distinction between
civil and
criminal contempt (at 532). Their Honours concluded (at 534):
" Moreover and, perhaps, of more importance, nothing is achieved
by describing some proceedings as 'punitive' and others as 'remedial
or
coercive'. Punishment is punishment, whether it is imposed in vindication or for
remedial or coercive purposes. And there can
be no doubt that imprisonment and
the imposition of fines, the usual sanctions for contempt, constitute
punishment. And the same
is true of a sequestration made in consequence of a
company's failure to comply with an order or undertaking.
The differences upon which the distinction between civil and criminal
contempt is based are, in significant respects, illusory. They
certainly do not
justify the allocation of different standards of proof for civil and criminal
contempt. Rather, the illusory nature
of those differences and the fact that the
usual outcome of successful proceedings is punishment, no matter whether
primarily for
the vindication of judicial authority or primarily for the purpose
of coercing obedience in the interest of the individual, make
it clear as Deane
J said in Hinch , that all proceedings for contempt 'must realistically
be seen as criminal in nature'. The consequence is that all charges of contempt
must be proved beyond reasonable doubt. "
- There
was no question in Witham v Holloway of construing a statutory definition
that prescribed different rules of procedure, or different rules of evidence,
according to whether
or not the proceedings were for an offence.
- A
further question arose in Witham v Holloway as to whether there was power
to order a retrial. Counsel submitted that the only power to order a retrial of
a criminal matter was
to be found in s 8 of the Criminal Appeal Act 1912
and as the appeal was not under that Act there could be no order for retrial (at
534). It was in this context that Brennan, Deane,
Toohey and Gaudron JJ said
(partly quoted at [10] above):
" However, to say that proceedings for contempt are essentially
criminal in nature is not to equate them with the trial of a criminal
charge.
There are clear procedural differences, the most obvious being that criminal
charges ordinarily involve trial by jury, whereas
charges of contempt do not.
There is no basis, in our view, for importing into the law of contempt the
nineteenth century rules which
allowed a verdict of guilty, given in a jury
trial, to be quashed on appeal, but did not permit of an order for retrial.
"
- Mr
Stack submitted that this showed that even though the application is essentially
criminal in nature, the proceeding is nonetheless
a civil proceeding to which
rules of civil procedure, other than the onus of proof, apply. He submitted that
this is confirmed by
subsequent authority.
- At
the time Witham v Holloway was decided, s 48(2)(j) of the Supreme
Court Act assigned to the Court of Appeal proceedings in the Court for the
punishment of contempt of the Court or of any other court. Subsection
48(4)
provided:
" 48
...
(4) This section does not affect -
(a) the powers of the Court in a Division in relation to punishment for -
(i) contempt in the face of the Court in that Division or in the hearing
of the Court in that Division;
(ii) disobedience to a judgment or order of the Court in that Division; or
(iii) breach of an undertaking given to the Court in that Division; or
... "
- Hence,
all contempts, whether characterised as criminal or civil, arising from
disobedience to a judgment or order of the court in
a Division were assigned to
the Division. Under s 101(1)(a) an appeal from the judgment of the Division lay
to the Court of Appeal.
Under s 75A(10) the Court of Appeal could make any order
which the nature of the case required. This included the power to order
a
re-hearing (per McHugh J at 549-550). The Criminal Appeal Act 1912
provided, amongst other things, for an appeal to the Court of Criminal Appeal by
a person convicted of an offence by the Supreme
Court in its summary
jurisdiction (s 5AA). That section did not apply to contempt proceedings whether
civil or criminal in character, as these were specifically dealt with
by s 48 of
the Supreme Court Act . Section 17 of the Supreme Court Act
provided that that Act did not apply to proceedings specified in the Third
Schedule, which listed various types of criminal proceedings,
but not
proceedings for contempt. As Howie J held in Director of Public Prosecutions
(Commonwealth) v Sexton , proceedings for contempt are governed by the
Supreme Court Act and the Supreme Court Rules (at [8]-[12]).
- In
deciding whether there was power to order a re-hearing, no question of statutory
construction arose in Witham v Holloway such as arises now under the
Civil Procedure Act and the Evidence Act . The High Court was not
required to consider, and did not consider, whether the proceedings were
properly characterised as proceedings
for an offence. It may be inferred from
the court's insistence that all charges of contempt are criminal nature that had
the question
arisen, it is unlikely to have been held that no proceedings for
contempt are proceedings for an offence.
- On
the other hand, it cannot be assumed that because the High Court said all
contempts were criminal "in nature", that it would have
held that all charges of
contempt were charges of an offence. That would have required departure from
previous decisions of the highest
authority, including the High Court itself
(see para [36] above). Subsequently, in Hearne v Street , when construing
a statutory reference to "criminal contempt", the High Court applied the
traditional distinction. It did not say
that all contempts are criminal in
nature and therefore are all criminal contempts.
- In
Hinch v Attorney-General (Vic) [1987] HCA 56; (1987) 164 CLR 15, the
contempt alleged was a criminal contempt for publishing material intending to
influence court proceedings. The offenders were
convicted and fined and the
individual defendant was also imprisoned. Appeals against the conviction were
dismissed by the High Court.
On the question of costs the High Court said as
follows (at 89-90):
"The appellants submit that in the exercise of its discretion
the Court should not make any order for costs. An analogy is sought
to be drawn
between the present case and an application for special leave to appeal
following a trial on indictment for a criminal
offence. In the later kind of
case, the established practice of the Court is not to make any order for costs,
save where the Crown
is an unsuccessful applicant: Reg. v. Martin [1984] HCA 23; (1984)
58 ALJR 217 at 218; 53 ALR 84 at 84.
However, is our view [sic] , the analogy which the appellants seek
to draw is not apt for present purposes. Notwithstanding that a contempt may be
described
as a criminal offence, the proceedings do not attract the criminal
jurisdiction of the court to which the application is made. On
the contrary,
they proceed in the civil jurisdiction and attract the rule that ordinarily
applies in that jurisdiction, namely, that
costs follow the event. There are
many instances of the application of this rule to cases of contempt of court in
this Court, including
Consolidated Press Ltd. v. McRae [1955] HCA 11; (1955) 93 CLR 325,
John Fairfax & Sons Pty Ltd v McRae [1955] HCA 12; (1955) 93 CLR 351, James v
Robinson [1963] HCA 32; (1963) 109 CLR 593 and Doyle v The Commonwealth [1985] HCA 46; (1985) 156
CLR 510: see also R v Taylor; Ex parte Roach [1951] HCA 22; (1951) 82 CLR 587."
The application involved no question of statutory construction.
- In
Re Colina; Ex Parte Torney , Hayne J said (at 428 [109]):
" [109] Although I accept that it is right to speak of an
'offence' of contempt, the use of that term should not be permitted to obscure
the significant differences between the powers that are invoked against an
alleged contemnor and those that are set in train under
the criminal law. As was
said in Hinch v Attorney-General (Vic) [No 2]:
'Notwithstanding that a contempt may be described as a criminal offence, the
proceedings do not attract the criminal jurisdiction
of the court to which the
application is made. On the contrary, they proceed in the civil jurisdiction and
attract the rule that
ordinarily applies in that jurisdiction, namely, that
costs follow the event.'
The power to punish for contempt is an inherent power of courts charged
with 'the function of superintending the administration of
justice'. It is a
power that is invoked sparingly but in a very wide variety of circumstances.
There are, in that sense, many forms
of contempt; there is no single 'offence'
of the kind that the criminal law knows. "
- I
do not understand Hayne J to be saying that no offences of the kind that have
been traditionally classified as criminal contempts
are offences against the
criminal law. Rather, his Honour was emphasising that there are many forms of
contempt and not a single
offence (see at [110]).
- Mr
Stack placed particular reliance on the decision of the Court of Appeal in
Athens v Randwick City Council [2005] NSWCA 317 (reported in part but not
on this point at [2005] NSWCA 317; (2005) 64 NSWLR 58). Hodgson JA, with whom Santow and Tobias
JJA agreed, noted (at [62]) the definitions of " civil proceeding " and "
criminal proceeding " in the Evidence Act but did not decide
whether the proceedings at hand were a " prosecution for an offence " for
the purposes of the Evidence Act . Nonetheless the Court of Appeal
rejected challenges to the procedure adopted in the Land and Environment Court.
The appellant contended
that he had been denied the opportunity to make a
submission that there was no case to answer, and that the Council had been
permitted
to address in reply. In rejecting the application for the charges to
be dismissed on the ground that there was no case to answer,
the primary judge
said that the proceedings remained civil proceedings and were criminal " only
to the extent that the requisite standard of proof for a criminal proceedings is
to be applied " (at [87]). The Court of Appeal shortly rejected the
challenges to these rulings. Hodgson JA said:
" [89] In my opinion, Witham v Holloway makes it clear
that the procedure in contempt proceedings is not the same as in a criminal
trial.
[90] In my opinion it was within the discretion of the primary judge not
to entertain a submission of no prima facie case; and in
any event, it is plain
that there was a prima facie case.
[91] In my opinion, it was within his discretion to allow an address in
reply. In any event, there was no conceivable prejudice in
circumstances where
the appellants were themselves allowed a further reply.
[92] In my opinion also it was within the primary judge's discretion to
allow the re-opening of the case. No error is shown in his
reasons. No tactical
advantage had been sought by the Council. No prejudice was caused to the
appellants, as compared to the situation
they would have been in if the
Council's affidavits had been read at the appropriate time. "
Presumably in para [89] of the judgment Hodgson JA was referring to the
sentence in Witham v Holloway that " to say that proceedings for
contempt are essentially criminal in nature is not to equate them with the trial
of a criminal charge
".
- The
hearing in the Land and Environment Court was before the introduction of the
Civil Procedure Act . The only consideration given to whether the
proceedings were "proceedings for an offence" was in the context of the
Evidence Act , and that question was not decided. Section 67(1)(d) of the
Land and Environment Court Act 1979 provided that the Land and
Environment Court had and could exercise the functions vested in the Supreme
Court in respect of the apprehension,
detention and punishment of persons guilty
of contempt, or of disobedience to any order made by the Court or of any process
issuing
out of the Court. All that can be said is that the Court of Appeal found
that the proceedings in the Land and Environment Court under
the Land and
Environment Court Act at that time were civil proceedings to which rules of
civil procedure applied. That conclusion does not govern the present question.
Moreover, the proceedings were, or were treated as, proceedings for a civil
contempt ( Nuclear Utility Technology & Environmental Corporation Inc v
Australian Broadcasting Corporation [2009] NSWSC 78 at [97]).
- Athens
v Randwick City Council is not authority that all cases of contempt are to
be treated as civil proceedings to which rules of civil procedure apply. The
Court
of Appeal did not seek to distinguish or explain Amalgamated Television
Services Pty Ltd v Marsden [2001] NSWCA 32. (The decision is reported in
[2001] NSWCA 32; (2001) 122 A Crim R 166, where it is wrongly stated to be a decision of the
Court of Criminal Appeal and the wrong neutral citation is given). That was a
case of alleged contempt of orders of the Court of Appeal in defamation
proceedings prohibiting the publication of the name or other
material likely to
identify a witness proposed to be called in the proceedings. The case was heard
in the Court of Appeal's original
jurisdiction because the application was to
punish an alleged contempt for disobedience of the Court of Appeal's orders.
Those proceedings
were assigned to the Court of Appeal ( Supreme Court Act
, s 48(2)(i)(ii)).
- Ipp
AJA, with whom Powell and Giles JJA agreed, said (at [32]) that it was
undoubtedly correct that the application was " criminal in nature and the
criminal standard of proof applied ". His Honour also recorded that the
parties accepted that " as the proceedings were criminal in nature, Mr
Marsden was entitled to make a no case to answer submission at the close of the
claimant's
case, and the parties accepted that the general principles governing
such submissions were of application " (at [33]). The Court of Appeal did
not suggest that this position was incorrect. Rather, the no case to answer
submission was entertained
and upheld. In so doing, the court held that not only
in respect of jury trials, but in criminal trials by judge alone, the question
to be determined on a no case to answer submission at the close of the
prosecution case was whether the prosecution evidence, taken
at its highest, was
capable of establishing guilt beyond reasonable doubt (at [48]-[50]). There was
no suggestion that the proper
approach on the no case to answer submission was
that applicable in a civil proceeding, where the court may consider whether
evidence
is so unsatisfactory that it should not be accepted ( Cross on
Evidence , LexisNexis looseleaf edition at [11090]).
- The
Court of Appeal held that the evidence was not capable of establishing beyond
reasonable doubt Mr Marsden's knowledge of the orders
or their substance prior
to the publications alleged to constitute the contempts.
- The
Court of Appeal did not characterise the contempts as criminal or civil as it
accepted that they were criminal in nature. Although
the contempts alleged were
disobedience of the orders of the Court of Appeal, they were made to protect the
safety of a third party
rather than the interests of the party to the
litigation. They would properly be classified as alleged criminal contempts
whether
or not the breaches were shown to be contumacious. (If it had been
established that Mr Marsden had knowledge of the orders, there
would have been a
powerful case for saying that the breaches were contumacious.) Whether the
breaches were contumacious or not, the
proceedings would be properly
characterised as punitive rather than remedial or coercive.
- Amalgamated
Television Services Pty Ltd v Marsden and Athens v Randwick City Council
can be reconciled on this ground that in the former, criminal contempt was
alleged, and in the latter, civil contempt was alleged.
- Mr
Stack also referred to Matthews v ASIC [2009] NSWCA 155 where Tobias JA,
with whom Basten and Campbell JJA agreed, said at ([38]-[39]):
" [38] As is pointed out in Arlidge, Eadie & Smith on
Contempt, 3rd Ed (2005) Sweet & Maxwell at para 3-74, with regard to
civil contempt, given that the liberty of the subject is at stake,
although the
courts have in certain respects insisted upon the greater safeguards normally
associated with the criminal trial process,
such as in relation to the standard
of proof required to establish a charge of contempt, they have also been careful
to resist the
full assimilation of civil contempt into the framework of criminal
safeguards: Arlidge op cit at 3-75. Thus, in Witham v Holloway at
534, their Honours (in their joint judgment), whilst reiterating that all
charges of contempt must be proved beyond reasonable
doubt, also observed:
However, to say that proceedings for contempt are essentially criminal in
nature is not to equate them with the trial of a criminal
charge. There are
clear procedural differences, the most obvious being that criminal charges
ordinarily involve trial by jury, whereas
charges of contempt do not.
[39] A similar view was expressed by Wall J in Re B (A Minor)
(Contempt of Court: Affidavit Evidence) [1996] 1 WLR 627 where, at 639A, his
Lordship observed:
'I respectfully agree ... that the analogy with criminal proceedings can be
taken too far and that in civil proceedings for contempt
the Court will
introduce those safeguards which are necessary for the protection of the alleged
contemnors but will not import criminal
procedure wholesale or
indiscriminately.'"
- Mr
Stack submitted that this showed that the Court of Appeal treated the charges of
contempt as being made in civil proceedings. The
issue to which these
observations went was whether for the charges to be established it was necessary
that particulars of the charge
be made out in their entirety, or whether only
those elements of the charges necessary to establish breach of the relevant
orders
needed to be established (at [67]). There was no issue before the court
whether the proceedings were " civil proceedings " or " criminal
proceedings " within the meaning of the Civil Procedure Act . The
same is true of the other authorities relied on by Mr Stack ( Energiser
Australia Pty Ltd v Remington Products Australia Pty Ltd (No 4) [2008] FCA
864 at [13]- [14]; Australian Securities & Investments Commission v Reid
[2006] FCA 699 at [18],[21]; Australian Securities & Investments
Commission v Matthews [2000] NSWSC 201 at [13]).
- For
these reasons I conclude that whether r 29.10 of the Uniform Civil Procedure
Rules applies depends on whether Mr Sigalla is charged with civil contempt or
whether the charges include alleged criminal contempts.
Charges include alleged criminal contempts
- Whilst
in Witham v Holloway the High Court found that the differences that led
to the distinctions between civil and criminal contempt were illusory, that
distinction
remains. It is recognised in the Supreme Court Act: sub-ss
101(5) and (6) confer different rights of appeal in cases of civil and criminal
contempt, and s 101A confers power on the Attorney
General to submit questions
of law to the Court of Appeal in cases of criminal contempt only. In my view the
distinction is also
required by the definitions of " civil proceeding "
and " criminal proceeding " in the Civil Procedure Act and the
Evidence Act .
- Disobedience
to the court's order, or failure to comply with an undertaking to the court, is
a civil contempt, unless the disobedience
is contumacious (that is, demonstrates
a deliberate defiance of the court's authority) or if the purpose of the
proceeding seeking
to punish the contemnor for the breach is punitive and not
remedial or coercive ( Jendell Australia Pty Ltd v Kesby at 132-133;
Witham v Holloway at 530; Microsoft Corporation v Marks (No 1)
(1996) 69 FCR 117 at 136; Street v Hearne [2007] NSWCA 113; (2007) 70
NSWLR 231 at 243-244, [59]; Hearne v Street at [132]-[141], [168]-[172];
Mosman Municipal Council v Kelly (No 3) [2009] NSWLEC 92 at [58]).
- It
can be difficult to determine whether a breach is contumacious before the
hearing of the proceeding commences and thus be able
to characterise the
proceedings as proceedings for criminal or civil contempt on that basis. In
Mosman Municipal Council v Kelly (No 3) , Biscoe J held, with reference
to authority, that contumacy does not have to be alleged as a separate element
of the charge because
the contemnor's state of mind is irrelevant to whether
there was a contempt (at [65]-[71]).
- In
the present case the sanction sought by ASIC in its interlocutory process for
the alleged contempts is imprisonment. From this
it can be implied that ASIC
contends that the breaches were contumacious and involved a deliberate defiance
of the court's authority.
Prima facie a custodial sentence would not be
appropriate if the contempt was not contumacious ( Registrar of the Court of
Appeal v Maniam (No 2) at 314-315), unless the sentence was coercive to
achieve compliance with the court's order. However, Mr Stack submitted that the
fact
that the interlocutory process sought only imprisonment as punishment did
not affect the width of the court's powers to punish a
proved contempt, and the
fact that that was the only sanction sought should not mean that the contempts
alleged should be characterised
as criminal.
- In
my view the more important consideration is the nature of the proceedings.
Subject to a handful of arguable exceptions, all of
the charges are for breaches
which are not capable of remedy. They are not coercive of the plaintiff's future
conduct. The two payments
of $300,000 and $52,500 alleged to have been made in
breach of the court's orders have been completed and the moneys disbursed. Mr
Sigalla remains subject to the restraints from dealing with all of his assets
without limitation as to amount, except for payment
of permitted expenses from a
particular account. This is not a case of a restraint precluding the defendant
from reducing his or
her assets below a particular sum where a breach might not
literally be capable of being remedied if the defendant disposes of assets,
but
where the purpose of the order can be fulfilled if the defendant is able to
restore assets within the jurisdiction to the required
level.
- Similarly,
none of the alleged breaches for use of Mr Sigalla's credit card for the alleged
provision of services would be capable
of being remedied.
- Mr
Stack submitted that the High Court in Witham v Holloway had rejected the
distinction between proceedings brought in the public interest for the
punishment of contempt and proceedings whose
purpose is remedial or coercive (at
532-534). However, where the distinction between criminal and civil contempts
has to be drawn,
the distinction remains relevant. It was applied by the High
Court in Hearne v Street .
- Applying
that distinction I consider that in respect of the majority of the charges, the
proceedings should be characterised as proceedings
for criminal contempt. It is
enough for a proceeding to be a " criminal proceeding " within the
meaning of s 4 of the Civil Procedure Act that any of the charges are for
an offence, even if other charges are properly characterised as being for civil
contempt.
- Some
of the charges allege breach of an order requiring the service of an affidavit
of assets and liabilities by the omission of certain
shares said to be owned by
the fourth defendant and by the omission of a credit card. Other charges allege
breach of orders requiring
the production of statements of accounts used by Mr
Sigalla. One of the orders required the production of such statements on the
15
th of every month. Standing alone, these allegations would properly be
characterised as allegations of civil contempt. However,
that does not mean that
the proceeding as a whole, that is, the proceeding by way of the interlocutory
process, should be so characterised.
- It
follows that in my view these proceedings are not " civil proceedings "
and r 29.10 does not apply. Mr Sigalla was entitled to make a no case to answer
submission without the need to obtain leave from
the court to adduce evidence in
respect of charges for which that submission was not to be made, or in respect
of which the submission
might fail.
- In
any event, before reaching this conclusion I indicated that I would grant leave
to Mr Sigalla to adduce such evidence if leave
were needed. In Doyle v
Commonwealth [1985] HCA 46; (1985) 156 CLR 510 at 516, Gibbs CJ, Mason,
Wilson, Brennan and Dawson JJ said:
" Although disobedience of an injunction is not a criminal
offence ( Australian Consolidated Press Ltd v Morgan [1965] HCA 21; (1965) 112 CLR 483
at 497-8 and a proceeding for the committal of a person who has wilfully
disobeyed an order of the court is not a criminal proceeding
(see La Trobe
University v Robinson and Pola [1973] VicRp 67; [1973] VR 682 at 688) except possibly where
the proceedings are grounded upon a contumacious or defiant contempt of the
court ( Australian Consolidated Press Ltd v Morgan , at pp 489, 501-2) a
proceeding for committal may result in a very serious interference with the
liberty of the subject - indefinite
confinement. Safeguards similar to those
appropriate in criminal proceedings therefore apply. "
- As
the proceedings are essentially criminal in nature, even if, contrary to my
view, they are civil proceedings for the purposes of
the Civil Procedure Act
and Uniform Civil Procedure Rules, the safeguards of criminal procedure
should apply. In a criminal proceeding, if the prosecution does not in its case
adduce evidence
which, taken at its highest, is capable of establishing guilt
beyond reasonable doubt, the accused is entitled to be acquitted in
respect of
those charges for which proof is lacking. He does not and should not face the
jeopardy that if he gives evidence in defence
of one charge, he may be convicted
by admissions obtained in the course of cross-examination on other charges for
which the prosecution
did not have sufficient evidence to establish guilt beyond
reasonable doubt. Such a situation could have arisen in the present case.
As the
result of my rulings on evidence ( ASIC v Sigalla (No 2) [2010] NSWSC
792), Mr Stack had conceded that there was insufficient evidence in ASIC's case
to convict Mr Sigalla on six charges of making payments
to the TAB. Were they
the only charges that would be the end of the matter. But there were other
charges in respect of which Mr Sigalla
might have given evidence. In my view
justice required that he be able to make a no case to answer submission without
being at risk
that by so doing he might forfeit his opportunity to call evidence
to defend the other charges.
- For
this reason I indicated that if leave were required to be given under r 29.10 I
would give that leave.
The Evidence Act
- Within
days of the High Court's decision in Witham v Holloway , the Full Court
of the Family Court of Australia decided a question of law as to what standard
of proof is to be applied in proceedings
taken pursuant to s 112AD of the
Family Law Act 1975 (Cth). That section provides for the imposition of
sanctions where a person, without reasonable excuse, contravenes an order made
under the Family Law Act . It stands in contrast with s 112AP of the
Family Law Act which applies to a contempt of court that either does not
constitute a contravention of an order under the Act, or which constitutes
a
contravention of an order involving a flagrant challenge to the authority of the
court. Broadly speaking s 112AD is a statutory provision dealing with conduct
equivalent to a civil contempt and s 112AP is a statutory provision dealing with
conduct equivalent to a criminal contempt.
- In
In the Marriage of J A and D M Lindsey [1995] FamCA 117; (1995) 19 Fam LR
649, the Full Court of the Family Court held (at 660):
" The relevant provisions of the Evidence Act and the
Evidence Act 1995 (NSW) were not considered by the High Court [in
Witham v Holloway ] , as the hearing of the proceedings clearly began
before the commencement of both Acts. The court therefore did not consider the
distinction
between an 'offence against or arising under Australian Law' and
proceedings concerning the breach of a civil order, including proceedings
under
s 112AD of the Act.
The effect of s 140(1) of the Evidence Act is to make the standard
of proof for all civil proceedings covered by the Act the civil standard on the
balance of probabilities.
Therefore the crux of the issue before this court is
not the distinction, if any, between the burden of proof applicable to civil
and
criminal contempt proceedings at common law, but rather, are proceedings under s
112AD of the Act civil proceedings as defined
in the Evidence Act ? In
our opinion they are and therefore, for the reasons which we have already given
(subject to the provisions of s 4(1) and (5)), the breach of an order of the
court to which s 112AD applies does not constitute 'an offence against or
arising under Australian
Law', and therefore the standard of proof to be applied
is the civil standard. "
- By
contrast, in In the marriage of Tate [2002] FamCA 356; (2002) 169 FLR
190; (2002) 29 Fam LR 195, the majority of the Full Court of the Family Court
(Ellis and Holden JJ) held that in proceedings under s 112AP of the Family
Law Act the required standard of proof was proof beyond reasonable doubt.
Their Honours said (at [75] and [76]):
" [75] Having regard to the language of s 112AP of the Act,
including the possibility of committal to prison and/or the imposition of a fine
if a natural person is found to be in
contempt and to the Rules of Court made
pursuant to s 112AP(3), in our view, properly characterised, the application
before Murray J seeking that the husband be dealt with for contempt of court
was
a proceeding for an offence. While the acts constituting the alleged contempts
in the instant case are not offences against any
law of the Commonwealth, as to
the meaning of which see Jerger v Pearce [1920] HCA 34; (1920) 27 CLR 526 at 531; [1920] HCA 34; 26 ALR
117 at 119 and Western Australia v Commonwealth; Wororra Peoples and Biljabu
v Western Australia [1995] HCA 47; (1995) 183 CLR 373 at 487; [1995] HCA 47; 128 ALR 1 at 64, in our view,
those acts, if established, constitute offences arising under an Australian law.
Accordingly, the proceedings
are criminal proceedings as defined in the
Evidence Act and thus the standard of proof to be applied is as set out
in s 141(1) of that Act, namely proof beyond reasonable doubt.
[76] It follows, in our view, that the standard of proof to be applied in
proceedings in the Family Court seeking that a respondent
be dealt with for
contempt of court is proof beyond reasonable doubt. "
- Notwithstanding
the decision in Lindsey , the uniform practice in this court and the
Federal Court since the introduction of the Evidence Acts in cases of
contempt has been to require proof beyond reasonable doubt. The courts have
implicitly assumed that all such proceedings
are proceedings for prosecution of
an offence against or arising under an Australian law and not " civil
proceedings " within the meaning of the Evidence Act . In the present
case, Mr Stack for ASIC accepted that the required standard of proof is proof
beyond reasonable doubt. But that is
only so if the present application is a "
criminal proceeding " within the meaning of the Evidence Act .
- The
effect of clause 9 of Part 2 of the Dictionary is that proceedings for an
offence against the common law of Australia are proceedings for an offence
against or
arising under an Australian law. Accordingly proceedings for criminal
contempt are criminal proceedings for the purposes of the Evidence Act.
- The
Evidence Act displaces the decision in Witham v Holloway that the
criminal onus applies to all charges of contempt whether classified as civil or
criminal. In my view the approach of McLelland
J in Jendell Australia Pty Ltd
v Kesby is restored by ss 140 and 141 of the Evidence Act. Those
sections direct attention to whether the proceedings are civil or criminal.
There is no logical basis for saying that the rules
of evidence applicable to
civil proceedings apply, but proof must be established beyond reasonable doubt.
- As
the proceedings are criminal proceedings, I have below rejected ASIC's
contentions as to the consequences of Mr Sigalla not having
called certain
evidence (see at [149]-[153]).
First charge: payment of $300,000 to Moon Corporation
- I
will set out again the first charge. It is that:
" 13. Mr Sigalla, is guilty of contempt of this Court [in that]
in breach of :
(a) Order 7 of the Orders made by the Honourable Justice Bergin, Chief
Judge in Equity, on 26 August 2009;
(b) Order 1 of the Orders made by the Honourable Justice Barrett on 31
August 2009; and
(c) Order 2 of the Orders made by the Honourable Justice Barrett on 3
September 2009,
between about 26 August 2009 and 4 September 2009, Mr Sigalla, having made
a request, for the sum of $300,000 to be transferred from
his bank account with
KAS Bank, account number xxxxxxxxx, to a bank account held by Moon Corporation
Pty Ltd, with the National Australia
Bank, account number yyyyyyyyy,
subsequently took no steps to prevent the said transfer occurring on or about 4
September 2009. "
- This
charge was amended on 26 February 2010. As originally framed it was in the
following terms:
" 4. Mr Sigalla, is guilty of contempt of this Court in that
between 26 August 2009 and 4 September 2009 in breach of:
(a) Order 1 of the Orders made by the Honourable Justice Bergin, Chief
Judge in Equity, on 26 August 2009;
(b) Order 2 of the Orders made by the Honourable Justice Barrett on 31
August 2009; and
(c) Order 3 of the Orders made by the Honourable Justice Barrett on 3
September 2009,
between about 26 August 2009 and 4 September 2009, Mr Sigalla caused the
sum of $300,000 to be transferred from his bank account with
KAS Bank, account
number xxxxxxxxx, to a bank account held by Moon Corporation Pty Ltd, with the
National Australia Bank, account
number yyyyyyyyy. "
- The
order made by Bergin CJ in Eq on 26 August 2009 was in the following terms:
" Up to 5pm on 31 st August 2009, each of the Defendants is
restrained (by themselves, their directors, officers, partners, agents,
employees or others acting on their behalf or instructions) from:
(a) removing, or causing or permitting to be removed from the State of New
South Wales and from Australia all or any of their assets;
and
(b) from selling, charging, mortgaging or otherwise dealing with disposing
of or causing or permitting to be sold, charged, mortgaged
or otherwise dealt
with or disposed of, all or any of their assets whether located within Australia
or outside Australia,
PROVIDED that this Order:
(c) shall not prevent each of the Defendants from paying their reasonable
ordinary living and operating expenses;
(d) shall not prevent each of the Defendants from paying legal costs
reasonably incurred in these proceedings; and
(e) shall not prevent any bank, building society or financial institution
from exercising any right of set-off which it may have in
respect of a facility
afforded by it to any of the Defendants prior to the date of this Order. "
- On
31 August 2009 and 3 September 2009 the order was extended with no material
change.
- Mr
Sigalla had an account with a Dutch bank known as the KAS Bank. As at 1
September 2009 it had a credit balance of 1,024,798.76.
On 26 August 2009 Mr
Sigalla was in New York. He had a broker, Mr Mike Willems, in Amsterdam. On 26
August 2009 at what is apparently
3.58pm New York time, Mr Sigalla sent an email
to Mr Willems advising that he would send instructions for the transfer of funds
of
$300,000 to Moon Corporation Pty Ltd ("Moon Corporation") and $170,000 to his
personal account. On 26 August 2009 Mr Sigalla sent
a further email to Mr
Willems. The email has a time of 5.00pm. It says " Thanks Mike. Here are the
instructions. " The email did not set out any instructions in the text and
did not refer to an attachment.
- Mr
Sigalla admitted having received notice of the orders of 26 August 2009 at
around 7.00pm on that day, New York time. In a passage
from an affidavit of Mr
Sigalla's tendered by ASIC, Mr Sigalla asserted that he had given instructions
to KAS Bank to transfer the
sums of $300,000 and $170,000 at about 8.00am New
York time on 26 August 2009. He said that he did not have the email which
attached
those instructions.
- ASIC
tendered a further email from Mr Sigalla to Mr Willems dated 27 August 2009 at
2.00am addressed to Mr Willems that again said,
relevantly, " Thanks Mike.
Here are the instructions ." That email included a reference to an
attachment.
- The
relevant instructions sent either at 8.00am New York time on 26 August 2009, or
at 5.00pm on 26 August 2009, or at 2.00am on 27
August 2009, were addressed to
Mr Willems. They said:
" Dear Mike, please transfer from my accounts held with KAS Bank
the sum of A$470,000 to the following two accounts:
1. Account Name: Andrew Sigalla
Bank: St George Bank Limited
...
Amount: $170,000
...
2. Account name: Moon Corporation
Bank: National Australia Bank
...
Amount: A$300,000
Yours sincerely
Andrew Sigalla "
- Mr
Stack submitted that Mr Sigalla gave the instructions to Mr Willems for the
transfer of $300,000 to Moon Corporation seven hours
after he had received
notice of the orders of 26 August 2009. However, Mr Robb QC, who appeared with
Mr Botsman for Mr Sigalla, submitted
that that was not the charge Mr Sigalla had
to face. As originally framed the charge against Mr Sigalla was that between 26
August
2009 and 4 September 2009 he caused the sum of $300,000 to be transferred
from his bank account with KAS Bank to an account held
by Moon Corporation with
the National Australia Bank. That charge was amended so as to allege that "
between about 26 August 2009 and 4 September 2009, Mr Sigalla, having made a
request, for the sum of $300,000 to be transferred from
his bank account with
KAS Bank, ... to a bank account held by Moon Corporation Pty Ltd, with the
National Australia Bank, ... , subsequently
took no steps to prevent the said
transfer occurring on or about 4 September 2009. " Mr Robb QC submitted that
the charge was not that Mr Sigalla requested the transfer of $300,000 after
having notice of the orders,
but that having made that request subsequently he
breached the orders by taking no steps to prevent the transfer occurring. Had
the
charge been that Mr Sigalla gave instructions for the transfer after notice
of the orders, evidence might have been called in relation
to the significance
or accuracy of the times shown on the emails as to whether, for example, they
might be the times the emails were
received by Mr Willems rather than the times
they were sent by Mr Sigalla. The emails in question were tendered by ASIC from
documents
obtained by ASIC from Mr Willems. There was no such inquiry. Mr
Sigalla did not give evidence.
- I
agree with the submission of Mr Robb QC and Mr Botsman that the charge against
Mr Sigalla is not that he gave instructions for the
transfer after having notice
of the orders, but that, having previously given such instructions, he failed to
prevent the transfer
occurring.
- The
orders restrained Mr Sigalla not only from dealing with his assets, but from
permitting a dealing with, or disposition of, any
of his assets whether located
within Australia or outside Australia. Mr Robb QC and Mr Botsman submitted that
Mr Sigalla did not
permit such a dealing or disposition of the sum of $300,000
in his KAS Bank account because his instruction operated as an immediate
assignment of the sum of $300,000 owed by KAS Bank to Mr Sigalla to Moon
Corporation. Therefore, so it was said, Mr Sigalla did not
permit the dealing or
disposition to take effect after he received notice of the orders. Rather, that
disposition and dealing were
completely effected by the letter of instruction.
- At
the same time as the orders were served by email, ASIC also served a copy of the
originating process and a supporting affidavit
of Mr Marks. ASIC also served a
copy of the originating process and supporting affidavit and the orders of 26
August 2009 on Mr Ward
of HWL Ebsworth, Lawyers, who acted for Mr Sigalla. It
appears that these documents were provided by Mr Ward to Mr Willems on 27
August
2009. On 27 August 2009 at 7.16pm Mr Ward wrote to Mr de la Rambelje of KAS
Bank. He wrote:
" I act for Andrew Sigalla. On 26 August Mr Sigalla received
freezing orders in relation to his assets as made by the Supreme Court
of New
South Wales. A copy of the order is attached.
As you will note in paragraphs 7 (c) and (d) Mr Sigalla ['] s
rights to pay living expenses and legal costs are preserved.
I am instructed that Mr Sigalla had sought the transfer of monies from an
account he holds with KAS bank.
The order is a freeze of Mr Sigalla ['] s assets but expressly
allows for him to pay living expenses and legal costs. This is the purpose for
which he needs the funds the
subject of the transfer request as I am instructed.
The purpose for which he intends to deploy these funds is therefore within
the scope of the orders.
I would be grateful if you could advise me of when at the earliest we may
be able to speak today. "
- No
submission was made for Mr Sigalla at the hearing that the payment of $300,000
was for living expenses or legal costs. To the contrary,
Mr Sigalla's contention
at the hearing was that the sum of $300,000 was money he held on trust for Moon
Corporation and that in transferring
the money he was transferring an asset that
did not belong to him, but that belonged to Moon Corporation.
- On
28 August 2009 at 6.52pm (presumably Netherlands time) Mr de la Rambelje advised
Mr Ward that KAS Bank had received the information
about the freezing order and
had also received instructions for payment. Mr de la Rambelje said that he did
not yet know if KAS Bank
would execute the instructed payments. Later on that
day Mr de la Rambelje advised Mr Ward that KAS Bank would carry out the
instructions
to make payments probably on 31 August 2009. Evidently KAS Bank did
not regard itself as bound to act on the instructions given by
Mr Sigalla to Mr
Willems, which it can be inferred were conveyed by Mr Willems to KAS Bank. As a
matter of practicality, I infer
that Mr Sigalla could have stopped the payment
being made on his instruction by countermanding the instruction.
- On
30 August 2009 Mr Sigalla arrived in Australia. On 31 August 2009 the matter
came before the court. Mr Sigalla was represented
by senior counsel. The orders
of 26 August 2009 were extended to 3 September 2009.
- On
1 September 2009 Mr Ward wrote again to Mr de la Rambelje seeking confirmation
that the payments had been effected.
- On
3 September 2009 the matter came again before the court. Mr Sigalla was
represented by senior counsel. The orders were continued
to 16 September 2009.
On 3 September 2009 Mr Sigalla sent an email to Mr de la Rambelje at KAS Bank
stating " Could you please send confirmations of the transfers that you made
to my account and to Moon ['] s as neither bank has seen the funds. "
Later that day at what I infer is 10.09am Netherlands time, Mr de la Rambelje
sent an email to Mr Sigalla stating that " I can confirm that KAS Bank has
instructed your two payments today the 3th [sic] of September ." On 3
or 4 September 2009 (depending on time differences) KAS Bank transferred
$300,000 to the account of Moon Corporation with
the National Australia Bank.
- It
is quite clear that Mr Sigalla permitted that transfer to occur. Leaving aside
the other arguments addressed below, this was a
breach of the orders. On no view
was the debt that the KAS Bank owed to Mr Sigalla legally assigned to Moon
Corporation. At best
there was an equitable assignment of part of the debt. Even
if Moon Corporation were entitled to call on KAS Bank to transfer $300,000
to
it, Mr Sigalla nonetheless permitted a part of a debt which was legally his to
be paid to Moon Corporation by taking no step to
prevent the transfer. To the
contrary, by himself and through his solicitor he pressed KAS Bank to effect the
transfer in accordance
with his earlier instructions.
- In
any event, the instruction from Mr Sigalla to Mr Willems was not an equitable
assignment of part of the debt. The instruction was
not given to KAS Bank. It
was an instruction to Mr Sigalla's own agent, Mr Willems, authorising Mr Willems
to give an instruction
to KAS Bank for the transfer of the funds. As an
instruction to Mr Sigalla's own agent, it was inherently revocable. Even if the
instruction had been addressed to KAS Bank, it would not have operated as an
equitable assignment. The letter did not express an
intention on the part of Mr
Sigalla to part with his interest in $300,000 in favour of Moon Corporation
immediately on KAS Bank's
receipt of the letter, as distinct from its being a
mandate authorising KAS Bank to transfer funds to Moon Corporation which would
have a dispositive effect when the mandate was acted on ( Comptroller of
Stamps (Vic) v Howard-Smith [1936] HCA 12; (1936) 54 CLR 614 at 623-624).
- On
the evidence tendered by ASIC there was a clear contravention of the orders.
- However,
there is more to it than emerged from ASIC's evidence. Mr Sigalla and Moon
Corporation contended that the moneys paid by
Mr Sigalla to Moon Corporation
were moneys held by Mr Sigalla on trust for Moon Corporation because they
represented the proceeds
of the sale of shares in a company called Photon Group
Limited ("Photon") that were beneficially owned by Moon Corporation. I
understand
that this contention, and documents to support the contention, had
been provided by the solicitors for Moon Corporation to ASIC in
November 2009.
Although ASIC tendered material it obtained from third parties relevant to the
charge, it did not tender those documents.
It ought to have done so. Even if, as
ASIC contended, these were to be considered as civil proceedings, as the High
Court said in
Witham v Holloway they are essentially criminal in nature.
ASIC had the responsibility of a prosecutor in conducting a criminal trial.
- The
sole director and shareholder of Moon Corporation is Mr Siimon Reynolds. He and
Mr Sigalla have been friends since school days.
Mr Reynolds or Moon Corporation
was a founding member of Photon which was listed on the Australian Stock
Exchange in 2004. Mr Reynolds
said that the company provided advertising,
marketing and sales services. At about June 2006 Moon Corporation held 4,484,000
Photon
shares. Mr Reynolds had a margin loan facility with the National
Australia Bank for which the Photon shares were security. In 2007
the shares
traded at prices above six dollars. However by about June 2008 the shares were
trading below three dollars. Mr Reynolds
was under pressure from the National
Australia Bank to improve the security on the margin loan account or face a
margin call. In
early 2008 Mr Sigalla offered to help. He said to Mr Reynolds
words to the following effect:
" I think I can help you with your NAB problem. My margin lender
will lend you 40% against Photon shares. They have interest rates that
are much
more competitive than Australian margin loan facilities. I can take over your
Photon shares and fund them through my margin
loan account. You will need to
make all the payments of principal and interest. They will be in my name but
they will remain your
shares. I'll need to have them in my name because it's my
account. "
- Mr
Reynolds accepted this offer. On 17 July 2008 Mr Reynolds sent an email to his
account manager to the National Australia Bank advising
that " KAS Bank have
confirmed that they will take over my entire loan from NAB. I have asked Mike
Willems to contact you directly so that
you guys can effect the transfer in a
mutually agreeable way. " On 22 July 2008 Mr Willems advised the NAB that "
we can take over the account of Siimon but I am waiting [for] an
answer of Kasbank how to settle. "
- It
took some months for the mechanics of settlement to be implemented. The National
Australia Bank wanted to sell the Photon shares
to KAS Bank. Mr Sigalla said
that the transaction should not be a sale but a transfer of security. Mr
Reynolds owed the National
Australia Bank $6,217,451.50. On 26 September 2008
that loan was discharged by a payment from KAS Bank. Mr Sigalla's account with
KAS Bank was debited with the Euro equivalent. The 4,840,000 shares beneficially
owned by Moon Corporation (but subject to a mortgage
to the National Australia
Bank) were transferred by the National Australia Bank (as a purported sale) to
NAB Custodians to be held
by it on behalf of KAS Bank. KAS Bank's title was as
mortgagee.
- The
result of that transaction was that NAB Custodians was the legal owner of the
shares. It was either agent or trustee for KAS Bank.
KAS Bank held the equitable
interest in the shares as mortgagee. It recognised Mr Sigalla as being entitled
to the equity of redemption
in the shares. Mr Sigalla held that equity of
redemption on trust for Moon Corporation. Moon Corporation and Mr Reynolds were
required
to indemnify Mr Sigalla in respect of his liability to KAS Bank to pay
interest and repay the principal on the loan.
- Mr
Reynolds deposed that from October 2008 Moon Corporation made numerous payments
in reduction of the loan. He deposed:
" 25. Since the transfer of the shares to the KAS Bank account
held by Andrew Sigalla, Moon Corporation has paid approximately AUD
$3,287,400.00
in payments of principal and interest to fund the Photon Shares
loan. These payments were made to Andrew Sigalla (either in his name
or to his
related account entitled 'ZMS Investments') by Moon Corporation at his requests
as follows:
(i) on or about 7 October 2008 the sum of $822,000 was paid direct to the
KAS Bank account from dividends received from the Photon
Shares;
(ii) on or about 20 October 2008 the sum of $30,000 was paid to account
name ZMS Investments by RTGS transfer. ...;
(iii) on or about 23 October 2008 the sum of $500,000 was paid to account
name ZMS Investments by RTGS transfer. ...;
(iv) on or about 7 November 2008 the sum of $500,000 was paid to account
name ZMS Investments by RTGS transfer. ...;
(v) on or about 25 November 2008 the sum of $195,000 was paid to account
name ZMS Investments by RTGS transfer. ...;
(vi) on or about 3 December 2008 the sum of $500,000 was paid to account
name ZMS Investments by RTGS transfer. ...;
(vii) on or about 7 April 2009 the sum of $290,400 was paid direct to the
KAS Bank account from dividends received from the Photon
Shares;
(viii) on or about 9 April 2009 the sum of $20,000 (by two payments of
$10,000) was paid to account name ZMS Investments by internet
transfer. ...; and
(ix) on or about 17 April 2009 the sum of $430,000 was paid to account
name Mr A Sigalla by internet transfer. ... "
- On
8 April 2009 Mr Sigalla sent an email to Mr Reynolds purporting to set out the
state of the account between them. He said that
the initial borrowing was
3,554,444 which equalled A$6,171,226. After setting out various payments Mr
Sigalla concluded the email
by saying that as at that date the amount owed was
1,701,248 without interest.
- Mr
Reynolds deposed that in about August 2009 he directed Mr Sigalla to arrange for
KAS Bank to sell approximately $300,000 worth
of the Photon shares. He said that
apart from that direction and except for some shares having to be sold by KAS
Bank in order to
allow him to take up a rights issue announced by Photon, he was
not aware of any other sales of Photon shares having been made by
KAS Bank.
However, he also gave evidence that Mr Sigalla told him that KAS Bank had had to
sell some shares after the share price
had dropped to keep the margin, i.e. to
reduce the debt.
- Mr
Reynolds gave evidence that he thought that when he made his request for payment
of $300,000 in August 2009 he owed Mr Sigalla
approximately $2.88 million plus
interest. It was his understanding that the price of the Photon shares,
discounted to 40 per cent,
had to exceed the outstanding debt, unless Mr Sigalla
added additional security to the loan facility with KAS Bank.
- If
Mr Sigalla still owed KAS Bank part of the loan debt, then although Mr Sigalla
held the equity of redemption in the shares on trust
for Moon Corporation, he
would have had a preferred beneficial interest in the shares (that is, preferred
to Moon Corporation) in
respect of his right to be indemnified against the
outstanding debt ( Chief Commissioner of Stamp Duties (NSW) v Buckle
[1998] HCA 4; (1998) 192 CLR 226; CPT Custodian Pty Ltd v Commissioner of
State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98 at [51]).
- However,
the position as deposed to by Mr Reynolds that the debt was still outstanding is
apparently contradicted by other evidence
included in the email chains tendered
by ASIC. The email chain included an email from Mr Willems to Mr Sigalla dated
26 August 2009
which stated as follows:
" Hi Andrew,
We sold 156,790 Photon Group at $1.7787 (which completes balance of
600,000 order).
and sold: 325,000 Photon Group at $1.7698 (which completes balance of
1,349,500 order).
Your total balance in cash now is 275.653 credit. We can now pay out the
A$300,000 to Siimon. "
- Mr
Reynolds made no reference in his affidavit to sales of 600,000 and 1,349,500
shares in the Photon Group. Mr Robb QC and Mr Botsman
submitted that it shou ld
be inferred from this email that prior to the transfer of $300,000 to Moon
Corporation, the debt from the
loan that Mr Sigalla took over had been
discharged so that the account was in credit, and had been discharged from the
sale of the
Photon shares, which were ultimately beneficially owned by Moon
Corporation. Accordingly, they submitted that the $300,000 transferred
by Mr
Sigalla to Moon Corporation were moneys beneficially owned by Moon Corporation.
They submitted that properly construed, the
orders only restrained Mr Sigalla
from dealing with assets beneficially owned by him.
- The
issues are:
a) whether the orders restrained Mr Sigalla from permitting a
disposition of the moneys in his account with KAS Bank to Moon Corporation
even
if the moneys were beneficially owned by Moon Corporation;
b) if so, whether the orders were nevertheless ambiguous and it is a
reasonably available construction that the orders only restrained
Mr Sigalla
from permitting a disposition of assets beneficially owned by him, and did not
prohibit him from permitting the disposition
of moneys held in his name but
beneficially owned by Moon Corporation; and
c) if on the proper construction of the orders, or on a reasonably available
construction, the orders only restrained Mr Sigalla from
dealing with, or
disposing of, or permitting a dealing with or disposition of, assets
beneficially owned by him, whether ASIC has
established beyond reasonable doubt
that the sum of $300,000 paid from Mr Sigalla's account with KAS Bank to Moon
Corporation was
beneficially owned by him.
- Were
the matter free from authority I would have thought it was clear that the orders
restrained Mr Sigalla from dealing with his
assets, or from permitting a dealing
with his assets, whether the asset dealt with was beneficially owned by him or
held by him as
trustee. The orders restrained the defendants from dealing with "
their assets ". An asset belongs to a person and is " his asset "
or " her asset " whether or not the person holds the asset on trust for
another, so that equity recognises the other party as being beneficially
entitled to the asset. Where assets are held on trust the interest of the
beneficial owner is imposed on the interest of the legal
owner. The asset
belongs to both the legal owner and the beneficial owner. The beneficial owner's
interest is not carved out of the
legal owner's interest. In DKLR Holding Co
(No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 Hope
JA gave an exposition of the nature of a trustee's and beneficiary's interest in
trust property which has been frequently cited
with approval. His Honour said
(at 519):
" ...
(16) ... an absolute owner in fee simple does not hold two estates, a
legal estate and an equitable estate. He holds only the legal
estate, with all
the rights and incidents that attach to that estate. If he were to execute a
declaration that he held the land in
trust for himself absolutely, the
declaration would be of no effect; it would give him no separate equitable
rights; he would remain
the legal owner with all the rights that a legal owner
has. ... Secondly, although the equitable estate is an interest in property,
its
essential character still bears the stamp which its origin placed upon it. Where
the trustee is the owner of the legal fee simple,
the right of the beneficiary,
although annexed to the land, is a right to compel the legal owner to hold and
use the rights which
the law gives him in accordance with the obligations which
equity has imposed upon him. The trustee, in such a case, has at law all
the
rights of the absolute owner in fee simple, but he is not free to use those
rights for his own benefit in the way he could if
no trust existed. Equitable
obligations require him to use them in some particular way for the benefit of
other persons ... "
- In
Re Transphere Pty Ltd (1986) 5 NSWLR 309 McLelland J (as his Honour then
was) said (at 311):
" It is important to recognise the true nature and incidents of
legal and equitable estates in property subject to a trust. They are
clearly and
succinctly described in the judgment of Hope JA in DKLR Holding Co (No 2)
Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510 at 518-520. (His
Honour's analysis is not affected by the decision of the High Court in that case
- see [1982] HCA 14; 149 CLR 431.) I would not wish to detract from the value of Hope JA's
exposition by trying to summarise it. But what is significant for present
purposes is the imprecision of the notion that absolute ownership of property
can properly be divided up into a legal estate and
an equitable estate. An
absolute owner holds only the legal estate, with all the rights and incidents
that attach to that estate.
Where a legal owner holds property on trust for
another, he has at law all the rights of an absolute owner but the beneficiary
has
the right to compel him to hold and use those rights which the law gives him
in accordance with the obligations which equity has
imposed on him by virtue of
the existence of the trust. Although this right of the beneficiary constitutes
an equitable estate in
the property, it is engrafted onto, not carved out of,
the legal estate. Hope JA (at 519) illustrates the point by the following
quotation from Maitland - Lectures on Equity 2nd ed (1949) at 17:
'... Equity did not say that the cestui que trust was the owner of the
land, it said that the trustee was the owner of the land, but added that he was
bound to hold the land for the
benefit of the cestui que trust . There
was no conflict here.'"
- This
passage has frequently been cited and was approved by the High Court in
Commissioner of Taxation v Linter Textiles Ltd (in liq) [2005] HCA 20;
(2005) 220 CLR 592 at 606, [30].
- Accordingly,
if Mr Sigalla held the debt owed to him by KAS Bank, represented by the credit
balance in his account with KAS Bank,
on trust for Moon Corporation, that debt
nonetheless was his asset, even if Moon Corporation was the beneficial owner of
the debt.
Its equitable interest in the debt would be engrafted onto Mr
Sigalla's legal estate.
- There
is nothing in the surrounding circumstances and legal context in which the
orders were made which detracts from the ordinary
legal meaning of the
expression " their assets " in the orders. In its originating process
ASIC sought orders under s 1323 of the Corporations Act . Where the
conditions prescribed by that section are satisfied, the court is empowered to
appoint a receiver to " property " of a relevant person. It is implied
from the provision giving power to appoint a receiver that the court has power
to make a restraining
order in lieu of appointing a receiver. The " property
" of a relevant person in respect of which orders can be made expressly
includes property held by that person as trustee or nominee
for another (s
1323(2A)).
- In
its originating process ASIC had sought an order in the following terms:
" 12. A notation by the Court that in relation to the orders
sought herein, 'property' has the same meaning as in section 1323 of the
Corporations Act and includes:
(a) any legal or equitable interest (whether present or future and whether
vested or contingent) which any of the Defendants have
in the relevant property;
and
(b) any asset which any of the Defendants has power, either directly or
indirectly, to dispose of or deal with as if it were his or
its own. "
- A
notation to that effect was not included in the orders made.
- It
cannot be inferred from the fact that the notation was not included in the
orders made that the orders should be construed as not
extending to the kinds of
property referred to in para 12. Paragraph 12 would appear to exhaust concepts
of property and to extend
to powers which are not property. If everything that
were encompassed by para 12 were impliedly excluded by the absence of the
notation,
there would be no work for the orders to do. The absence of the
notation in the court's orders is entirely neutral.
- Counsel
for Mr Sigalla relied upon the decision of the Court of Appeal of England and
Wales in Federal Bank of the Middle East Ltd v Hadkinson [2000] 1 WLR
1695; [2000] 2 All ER 395. That decision certainly supports Mr Sigalla's
submission. There a freezing order was obtained prohibiting the defendant and
companies
under his control from disposing of " their assets and all funds
" and discovery was ordered of " all their assets and/or funds ". The
defendant was alleged to be in contempt of the freezing order. The defendant
transferred sums in offshore accounts in his name
into the names of his wife and
children and failed to include such accounts in his affidavit of assets. The
matter was argued on
the assumption that the defendant was not beneficially
entitled to the assets and funds transferred. The Court of Appeal held that
the
expression " his assets and/or funds " when read in context and having
regard to the object of the order referred to assets " belonging to the
defendant " which would be available to satisfy a judgment and did not
extend to assets in the defendant's name which he did not own beneficially.
- The
Court of Appeal's reasoning was based on three propositions. First, that the
expression " his assets " refers to assets belonging to the person and
not to assets belonging to another person (at 1709 per Mummery LJ with whom Pill
LJ
and Nourse LJ agreed; and at 1714 per Nourse LJ). Secondly, property does not
belong to a person who holds it as trustee. This is
implicit but not express in
the reasoning of Mummery LJ. Nourse LJ said that in legal parlance assets "
belong " to a person if they are assets or funds to which he is
beneficially entitled. His Lordship said (at 1714):
" As a matter of ordinary language assets or funds, in reference
to an individual, cannot be said to be 'his' unless they belong to
him or, in legal parlance, are assets or funds to which he is beneficially
entitled. When Iago, affecting to prize only his good
name, says to Othello:
'Who steals my purse, steals trash; 'tis something, nothing;
Twas mine, 'tis his, and has been slave to thousands',
though a modern restitution lawyer might conjecture that the thief becomes
a constructive trustee of the purse, Iago himself will
have none of it. '
Tis his '. So far as he is concerned, the purse now belongs to the
thief. Assets which are held by someone for the benefit of another do not belong
to him and are not his. Arden J said that
bare legal ownership is none the less
a form of ownership. So indeed it is. But that does not make the assets '
his '. "
- Thirdly,
that the purpose of a freezing order is to preserve assets of a defendant
against which a judgment can be executed. Assets
which belong beneficially to
someone else will not be available for that purpose and hence should be outside
the scope of a freezing
order unless express provision is made to the contrary
(at 1709 and 1714.F).
- I
am unable to accept this reasoning. The reasoning assumes that if assets belong
to A, they cannot also belong to B. The Court of
Appeal did not explain why
assets held by a trustee do not " belong " to the trustee, as well as the
beneficiary. Nourse LJ merely asserted that assets only " belong " to the
person who is beneficially entitled. The dictionary meaning of " belong "
relevantly includes that the thing be the property of the person to whom it
belongs. A trust asset is the property of the trustee.
The Court of Appeal's
reasoning is based on the erroneous conception that where property is held on
trust for another, the beneficial
interest is carved out of the property held by
the trustee leaving the trustee with a " bare legal title " which then,
for reasons not explained, is said to be insufficient to characterise the asset
as " belonging " to the trustee.
- If
the reasoning of the Court of Appeal is to be supported, it must be on the third
ground that the object of the freezing order was
to preserve assets against
which judgment could be executed. A similar position was taken by Owen J in R
& I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993)
10 WAR 59 at 78 where his Honour said:
" Both the concise Oxford Dictionary and the Macquarie
Dictionary define ' asset ' as ' property to meet debts '. There
is implicit in this definition, when applied to the context of a Mareva
injunction, that an ' asset ' must be a thing of value and it must be
capable of application to satisfy debts. "
- However,
that is not always, or even often, the only purpose of a freezing order. It is
common for a freezing order to be made on
the application of a plaintiff who
alleges that the defendant has stolen or fraudulently misappropriated his
property. A thief holds
stolen property on a constructive trust for the true
owner ( Black & Black v S Freedman & Co [1910] HCA 58; (1910) 12
CLR 105). It is often the case that a plaintiff wishes to preserve property of
which the defendant has obtained possession, or of which he
has obtained a legal
title, in order to recover the property as beneficially belonging to the
plaintiff. On the reasoning of the
Court of Appeal in Federal Bank of the
Middle East v Hadkinson a defendant who has stolen the plaintiff's property
would not be in contempt of an order which restrains the defendant from
disposing
of " his assets " if he disposed of the assets he held on trust
for the plaintiff and thereby put it out of the plaintiff's reach. Indeed that
consequence
was expressly acknowledged by Nourse LJ in the passage quoted at
[138] above.
- The
construction favoured by the Court of Appeal would lead to great uncertainty as
the facts of this case illustrate. A trustee has
a preferred beneficial interest
in trust assets to the extent that he has a right to be indemnified in respect
of liabilities properly
incurred in execution of the trust. Hence the inquiry
would be not only whether the assets dealt with by the defendant were trust
assets, but whether the defendant has an unsatisfied right of indemnity. If he
has an unsatisfied right of indemnity, on any view
he would have a beneficial
interest in the assets and they would be " his assets " and subject to
the order. Enforcement of freezing orders should not be the occasion for the
taking of trust accounts.
- Mummery
LJ said (at 1710):
" I fully appreciate the force of the point that the meaning of
'his assets' may be coloured by the fact that a freezing order is a
precautionary measure taken urgently to protect the claimant against a risk
of dissipation and disposal of assets pending a fuller investigation by the
claimant and the court to determine who is the beneficial
owner of the assets.
That is not, however, a sufficient reason for giving the expression a meaning
which it cannot reasonably bear.
The order should, when appropriate, be made in
a different form. "
- His
Lordship did not give effect to the policy consideration there enunciated
because he took the view that the expression " his assets " could not
reasonably bear the meaning of extending to trust assets in which the defendant
did not have a beneficial interest. However,
for the reasons above, the
expression " his assets " are entirely apt to refer to assets held by the
defendant as trustee. The policy consideration referred to should be given full
weight.
- For
these reasons I am unable to agree with the reasoning in Federal Bank of the
Middle East Ltd v Hadkinson . In my view, on the proper construction of the
orders, Mr Sigalla was in breach of the orders by permitting the transfer of the
sum
of $300,000 to Moon Corporation whether or not the moneys beneficially
belonged to Moon Corporation.
- However,
that is not the end of the inquiry. In the light of the decision in Federal
Bank of the Middle East Ltd v Hadkinson , I must conclude that the orders
are ambiguous and that the interpretation that the orders only restrain a
dealing, or the permitting
of a dealing, with assets beneficially belonging to
Mr Sigalla is an interpretation that is reasonably open. Moreover, the ambiguity
in this case is in what is denoted by the expression " their assets ".
The ambiguity is not based on uncertainty in the syntactical construction of the
order (compare Australian Consolidated Press Ltd v Morgan per Windeyer J
(at 503) and see Wyszynski v Bill [2005] NSWSC 110 at [33]- [34]). It
follows that Mr Sigalla cannot be found liable for contempt for his breach of
the orders unless he would also have breached
the orders on the construction of
the orders for which he contends ( Kirkpatrick v Kotis [2004] NSWSC 1265;
(2004) 62 NSWLR 567 at [55]). To absolve an alleged contempt on the ground that
the orders are ambiguous, the ambiguity must be such that on one reasonable view
of the orders the defendant was not in breach ( Redwing Ltd v Redwing Forest
Products Ltd (1947) 177 LT 387 at 390; Australian Consolidated Press Ltd
v Morgan at 516; Wyszynski v Bill at [36]). Counsel for Mr Sigalla
did not dispute this.
- I
therefore turn to the third issue, namely whether ASIC has established beyond
reasonable doubt that Mr Sigalla had a beneficial
interest in the moneys. The
question is not whether Mr Sigalla has established that he did not have a
beneficial interest in the
moneys. The question is whether ASIC has discharged
its onus of establishing beyond reasonable doubt that he did have such an
interest.
- ASIC
relied in part upon the fact that neither Mr Sigalla nor Mr Ward gave evidence.
Mr Stack submitted that the court is therefore
entitled to draw an inference in
accordance with Jones v Dunkel that the uncalled evidence would not have
assisted Mr Sigalla's case. Mr Stack submitted that while such an inference
could not fill
gaps in the evidence or convert conjecture and suspicion into
inference, it more readily allowed the court to accept the inferences
contended
for by ASIC arising from the evidence it adduced ( Adler v ASIC [2003]
NSWCA 131; (2003) 46 ASCR 504 at [649]).
- However,
these are criminal proceedings. In RPS v R [2000] HCA 3; (2000) 199 CLR
620 at 632-633, Gaudron ACJ, Gummow, Kirby and Hayne JJ said (at [26]-[28]):
" [26] In a civil trial there will very often be a reasonable
expectation that a party would give or call relevant evidence. It will,
therefore, be open in such a case to conclude that the failure of a party (or
someone in that party's camp) to give evidence leads
rationally to an inference
that the evidence of that party or witness would not help the party's case and
that:
'where an inference is open from facts proved by direct evidence and the
question is whether it should be drawn, the circumstance
that the defendant
disputing it might have proved the contrary had he chosen to give evidence is
properly to be taken into account
as a circumstance in favour of drawing the
inference.'
[27] By contrast, however, it will seldom, if ever, be reasonable to
conclude that an accused in a criminal trial would be expected
to give evidence.
The most that can be said in criminal matters is that there are some cases in
which evidence (or an explanation)
contradicting an apparently damning inference
to be drawn from proven facts could come only from the accused. In the absence
of such
evidence or explanation, the jury may more readily draw the conclusion
which the prosecution seeks. As was said in Weissensteiner v The Queen:
' [I] n a criminal trial, hypotheses consistent with innocence may
cease to be rational or reasonable in the absence of evidence to support
them
when that evidence, if it exists at all, must be within the knowledge of the
accused. ' (Emphasis added)
[28] In a criminal trial, not only is an accused person not bound to give
evidence, it is for the prosecution to prove its case beyond
reasonable doubt.
The observations by the Court in Jones v Dunkel must not be applied in
criminal cases without taking account of those considerations. "
- In
Azzopardi v R [2001] HCA 25; (2001) 205 CLR 50, Gaudron, Gummow, Kirby
and Hayne JJ said (at [34], 64):
" [34] The fundamental proposition from which consideration of
the present matters must begin is that a criminal trial is an accusatorial
process, in which the prosecution bears the onus of proving the guilt of the
accused beyond reasonable doubt. It is, therefore, clear
beyond doubt that the
fact that an accused does not give evidence at trial is not of itself evidence
against the accused. It is not
an admission of guilt by conduct; it cannot fill
in any gaps in the prosecution case; it cannot be used as a make-weight in
considering
whether the prosecution has proved the accusation beyond reasonable
doubt. Further, because the process is accusatorial and it is
the prosecution
that always bears the burden of proving the accusation made, as a general rule
an accused cannot be expected to give
evidence at trial. In this respect, a
criminal trial differs radically from a civil proceeding. "
- It
would only be if there were facts which were solely in the knowledge of the
defendant, and thus could not be the subject of evidence
from any other person
or source, which, if true, contradicted ASIC's case that it would be legitimate
to reason that an inference
otherwise available from proven facts should be more
safely drawn from the defendant's failure to give evidence ( Azzopardi v R
at [61]-[73]).
- I
can draw no inference adverse to Mr Sigalla's case from the fact that Mr Ward
was not called to give evidence. At one point counsel
for Mr Sigalla
foreshadowed reading an affidavit from Mr Ward. I was told that an affidavit was
served. It was not read. However,
it was open to ASIC to call Mr Ward. If his
evidence was material to the guilt or innocence of Mr Sigalla and could have
been adduced
either because it was not privileged, or because privilege was
waived by the service of the affidavit, or could be expected to be
waived, then,
ASIC might be expected to have done so. However, neither the court nor the
defendant could control the decision of
counsel for ASIC as to which witnesses
should be called.
- ASIC
relied upon additional facts to which I have not yet referred. On 11 June 2009
Moon Corporation and Mr Reynolds entered into
a facility agreement with Sabre
Synergy (Australia) Pty Ltd ("Sabre Synergy"). Sabre Synergy agreed to lend Moon
Corporation $1,300,000
for the purpose of financing an acquisition by Moon
Corporation of shares and options in TZ Limited. This included prepayment of
interest of $180,000. The loan was due to be repaid after six months. The loan
was at very high rates of interest of six per cent
per month reducing to three
per cent per month if there was no event of default. On 11 June 2009 Mr Sigalla
entered into a share
mortgage deed with Sabre Synergy. By clause 5.1 of that
agreement he undertook to satisfy, or procure the satisfaction of the "
secured obligations ", which included the obligations of Moon Corporation
to Sabre Synergy under the facility agreement. The share mortgage deed recited
that Mr Sigalla was the beneficial owner of the " Mortgaged Property ",
which was held on trust for Mr Sigalla by National Nominees Limited, the legal
owner of the Mortgaged Property.
- "
Mortgaged Property " was defined as follows:
" Mortgaged Property - all of the Mortgagor's [Mr Sigalla's]
present and future right, title and interest in and to:
a) all of the Shares; and
b) the Additional Rights. "
- The
" Shares " were the 4,840,000 shares in Photon Group Ltd and 1,800,000
shares in TZ Limited.
- "
Additional Rights " included any dividends or bonus Shares or the
proceeds from disposal of any Shares. Sabre Synergy's loan to Moon Corporation
had
not been repaid on 3 and 4 September 2009 when $300,000 was transferred to
Moon Corporation from the proceeds of sale of Photon shares.
- Clause
2.1 of the Share Mortgage Deed provided:
" The Mortgagor [Mr Sigalla] as beneficial owner
mortgages and assigns all of his interest in the Mortgaged Property to the
Mortgagee [Sabre Synergy] as security for the due and punctual
performance of the Secured obligations. "
- Mr
Stack submitted that the Share Mortgage deed contained an admission by Mr
Sigalla that he was the beneficial owner of the 4,840,000
Photon shares.
- At
the time the Share Mortgage deed was entered into, Mr Sigalla undoubtedly had a
beneficial interest in the Photon shares because
he was entitled to be
indemnified in respect of his liability to KAS Bank in respect of the loan he
had taken over. The " Mortgaged Property " was not defined as the Shares,
but Mr Sigalla's interest in the Shares. He mortgaged his interest in the
Shares. The Share Mortgage
deed is not inconsistent with Mr Sigalla's case that
he held the equity of redemption in the Photon shares on trust for Moon
Corporation
and that by 4 September 2009 the loan had been discharged so that
Moon Corporation was the full beneficial owner of the Photon shares
and of the
proceeds of sale.
- In
any event, even had Mr Sigalla represented to Sabre Synergy that he was the
beneficial owner of the shares, such a representation
would not displace the
position which is otherwise clearly established that Mr Sigalla held the equity
of redemption in the shares
for Moon Corporation.
- Mr
Ward sought to persuade KAS Bank that the transfer of $300,000 was not
prohibited by the orders because of the exception to the
orders allowing payment
of reasonable ordinary living and operating expenses. There was no basis for
that contention. Subject to
one qualification, the payment to Moon Corporation
was not made for the purpose of paying Mr Sigalla's ordinary living and
operating
expenses. The qualification is that after receiving the payment of
$300,000 to Moon Corporation Mr Reynolds caused three payments
to be made
totalling $50,000 to Mr Sigalla's American Express credit card. Those payments
were made on 9, 10 and 11 September 2009.
However, Mr Sigalla does not seek to
justify the payment of $300,000 to Moon Corporation on the basis of the
exception to the orders
allowing payment for reasonable living and operating
expenses. The fact that Mr Ward sought to rely on that exception to justify
the
payment and did not assert to KAS Bank that the moneys should be transferred
because Moon Corporation was beneficially entitled
to the money raises a doubt
as to whether Moon Corporation was entitled to the money.
- The
fact that $170,000 was transferred at the same time to Mr Sigalla's own account
also raises a question as to whether Moon Corporation
was beneficially entitled
to the moneys, but is not necessarily inconsistent with Moon Corporation being
beneficially entitled to
at least t he $300,000 transferred to it.
- There
was no evidence about the prior state of Mr Sigalla's account with KAS Bank.
Although there was evidence that Mr Sigalla's account
with KAS Bank was in
credit in the sum of 1,024,798.76 as at 1 September 2009, it was unclear how
that credit balance was arrived
at. It may have been the result of the sale of
Photon shares to which Mr Willems referred in his email of 26 August 2009, or it
may
have been the result of other transactions conducted by Mr Sigalla. Accordi
ng to Mr Willems, Mr Sigalla's account was in credit
as at 26 August 2009 in an
amount of 275,653 as a result of the sale of the Photon shares. Such a credit
balance resulting from the
sale of the Photon shares would be trust moneys
payable to Moon Corporation. It can be inferred that Mr Sigalla mixed those
moneys
with his own moneys in the KAS Bank account giving a credit as at 1
September 2009 of 1,024,798.76. It can also be inferred that
in remitting
A$300,000 to Moon Corporation, Mr Sigalla was remitting the moneys to which Moon
Corporation was beneficially entitled.
- However
the question is not whether Moon Corporation was beneficially entitled to the
moneys it received, but whether ASIC has proved
beyond reasonable doubt that it
was not so entit led. That onus has not been discharged. Accordingly, the first
charge should be
dismissed.
Charge in para 31 of the Further Amended Interlocutory Process:
transfer of $52,500 to Mr Sigalla's New York bank account
- ASIC
brings the following charge:
" Mr Sigalla is guilty of contempt of this Court in that, in
breach of Order 2 of the Orders made by the Honourable Justice Barrett
on 3
September 2009, Mr Sigalla on 9 September 2009, caused the sum of $52,500 to be
paid from his bank account with St George Bank,
Australia, account number
[xxxxxxxxx] , to his bank account with JPMorgan Chase Bank, in the United
States of America, account number [yyyyyyyyy] , for the sole purpose of
paying $52,500 ('the Fees') to the Convent of the Sacred Heart, New York, for
his children's school education
in circumstances where the Fees had been paid
before 9 September 2009. "
- As
I observed in my judgment concerning the admissibility of evidence ( ASIC v
Sigalla (No. 2) at [8]), the allegation is not intended to be that Mr
Sigalla transferred $52,500 from his account with St. George to his account
with
JPMorgan Chase Bank in the United States for the purpose of paying his
children's school fees, but rather that this was the
stated, but not the true,
purpose of the transfer. This was always clear. Properly, counsel for Mr Sigalla
did not contend that the
purpose of the payment as charged by ASIC was within
the permitted exception of paying ordinary living and operating expenses.
- The
question is whether the payment of $52,500 from Mr Sigalla's account with the St
George Bank to his account with JPMorgan Chase
Bank was a contravention of the
orders of 3 September 2009. The question is not whether the payment was made for
the stated purpose
of paying school fees. Rather, it is whether the payment was
for ordinary living and operating expenses. The onus lies on Mr Sigalla
of
establishing that the payment was within the permitted exception. That onus can
be discharged on the balance of probabilities
(see ASIC v Sigalla (No. 3)
at [46]-[48]).
- There
is no dispute that the payment was made. The circumstances were as follows. On 8
September 2009 Mr Ward on behalf of Mr Sigalla
approached Barrett J to request
that the matter be re-listed in order to vary the existing freezing order. The
parties were referred
to the Duty Judge. Mr Ward provided ASIC with a draft
interlocutory process which, amongst other things, sought to particularise
various payments totalling $193,930 which would be classified as reasonable
ordinary living and operating expenses. This included
a once-off item of
$52,500, said to be the equivalent of US$42,000, for school fees. Mr Sigalla
swore an affidavit on 8 September
2009, parts of which were tendered by ASIC. He
exhibited a bundle of documents including a document that he said had been
provided
to officers of ASIC on 3 September 2009. He deposed that that document
accurately set out his current living expenses. He also deposed
that his
children were due to recommence school on 8 September 2009 in New York and that
it was necessary for him to pay school fees,
set out at pages 46-47 of the
exhibit, immediately, so as to allow them to attend school. The schedule of
expenses included the item
for school fees of $52,500. Pages 46-47 of the
exhibit included facsimile copies of invoices for US$20,866.79 and US$20,966.79
for
each of his daughters. A note on the invoices stated that those amounts were
due by 10 June 2009.
- As
a result of negotiations on 8 September 2009 ASIC consented to payments
totalling $177,000 being made from Mr Sigalla's St George
account. These
included expenses totalling $52,500 for school fees. ASIC asked for receipts for
the payments which were received
on 28 September 2009 showing transfers of two
sums from the St George Bank account to his bank account with JPMorgan Chase
Bank of
$22,500 and $30,000 on 9 September 2009. The telegraphic transfers both
stated that the payments were for school fees.
- The
statements of Mr Sigalla's JPMorgan Chase Bank account show that the moneys were
not used for that purpose. One statement for
Mr Sigalla's account with JPMorgan
Chase Bank was for the period from 21 August to 21 September 2009. As at 21
August 2009 the account
was in credit in the sum of US$33,373.71. Cheques were
drawn up to 26 August 2009 totalling US$32,633.58. These would have reduced
the
credit balance to US$740.13. The payments included a payment of US$31,833.58 by
Mr Sigalla for his children's school fees. That
cheque was drawn by Mr Sigalla
on 13 August 2009 and paid on 26 August 2009. On 2 September 2009 there was a
transfer of US$700 to
a credit card in the name of Mr Sigalla with JPMorgan
Chase Bank for which Mrs Sigalla held a second card. This payment would have
reduced the credit balance of the account to approximately US$40.
- Mr
Sigalla's father-in-law, Mr Terence Caplice, had paid $52,500 to Mr Sigalla's
company, ZMF Investments Pty Ltd, on 20 August 2009.
Mr Caplice described this
as a payment for school fees.
- The
payment of US$31,833.58 on 26 August 2009 did not discharge Mr and Mrs Sigalla's
liability for school fees. There still remained
substantial moneys owing. The
school fees were US$33,985 per annum for each child. Sixty per cent of this sum,
or a total of US$40,782
was payable on 1 June 2009 and the balance was payable
by 1 December 2009. Because Mr Sigalla's employment in the United States ceased,
the children were withdrawn from the school in the United States at the end of
2009. There were consequential financial adjustments
involving an insurance plan
to which it is unnecessary to refer. It is not necessary to make any finding as
to whether Mr Sigalla
genuinely believed that the whole of the sum of A$52,500
was to be used either to pay further school fees that were then or would
become
owing, or to reimburse his father-in-law for moneys which his father-in-law had
provided. The moneys transferred on 9 September
2009 were not used to reimburse
Mr Caplice. They were spent on ordinary living expenses for Mr Sigalla's
dependants.
- The
payments credited to Mr Sigalla's account with JPMorgan Chase Bank on 9
September 2009 totalled US$44,537.91. Between 10 September
and 21 September 2009
Mrs Sigalla made four ATM withdrawals from the account each totalling US$500.
She deposed that while she did
not specifically recall those withdrawals, she
did recall making cash withdrawals from time to time. She said that she used the
money
for every day expenses such as medicines, subway fares, cabs, food, and
for expenses of her daughters. I accept that evidence.
- On
10 September 2009 US$10,000 was transferred from the account to Mr Sigalla's
credit card with JPMorgan Chase Bank. The account
was then in debit. Mrs Sigalla
deposed that the payments made from the credit card account were for ordinary
living expenses which
she itemised. I accept her evidence. It is unnecessary to
go through the individual payments made through the credit card. The payments
were for the living expenses of Mrs Sigalla and Mr and Mrs Sigalla's daughters.
- As
at 21 September 2009 the bank account with JPMorgan Chase Bank was in credit in
the sum of US$32,548.04. In the following month
that credit balance was reduced
to US$181.09. US$2,892.92 was withdrawn by Mrs Sigalla in New York through ATM
withdrawals. I accept
her evidence that those withdrawals were all for the
purposes of payment of ordinary living expenses. Cheques totalling US$24,149.06
were also drawn. These included a cheque paid on 24 September 2009 for
US$23,000. This was for payment in advance of rent on Mr and
Mrs Sigalla's
apartment in New York. The rent for that apartment was US$23,000 per month. Mrs
Sigalla drew four other cheques totalling
US$1,149.06 which were all applied for
ordinary living expenses of herself and her daughters in New York. In addition
there were
two transfers of US$4,000 on 25 September 2009 and US$1,500 on 13
October 2009 to Mr Sigalla's JPMorgan credit card. The credit card
was used for
ordinary living expenses. By the end of October 2009 the only funds left in the
JPMorgan Chase Bank account totalled
US$181. There were no further withdrawals.
- Although
the $52,500 transferred by Mr Sigalla from his St George account to his JPMorgan
Chase Bank account was not used for the
purpose of paying school fees, the
moneys were used for the purpose of paying ordinary living expenses of his wife
and daughters,
and, to a small extent, expenses for which he and his wife were
both responsible. Some of the payments sourced through the payment
of A$52,500
were for expenses, which Mr Sigalla had proposed be paid directly from his St
George Bank account. ASIC had given its
consent to the payment of A$124,500 from
the St George Bank account for living expenses which included an allowance for
those amounts.
- Mr
Stack submitted that Mr Sigalla could not justify the payment of A$52,500 on 9
September 2009 on the basis that the moneys were
used to pay living expenses
after 16 September 2009 because on 16 September 2009 the freezing orders were
reformulated. From 16 September
2009 the freezing orders provided that Mr
Sigalla could pay an amount up to $500,000 in the aggregate for reasonable
ordinary living
expenses, legal expenses and business expenses properly
incurred, and to discharge obligations properly incurred under a contract
before
the freezing order was made, from moneys standing to the credit of the St George
Bank account. There was no general exception
to the freezing orders allowing
payment of reasonable ordinary living expenses from any other account.
- However,
Mr Sigalla is not charged with having made payments after 16 September 2009 in
breach of the freezing orders. The only question
is whether the two payments
totalling $52,500 made on 9 September 2009 are within the proviso that the
restraining order did not
prevent the defendants from paying their reasonable
ordinary living and operating expenses. The defendants were, relevantly, Mr
Sigalla
and BZI Pty Ltd ("BZI"). ASIC did not submit that a payment of living
expenses for Mr Sigalla's wife or daughters was outside the
scope of the
proviso. It was correct not to do so. Plainly, the proviso encompassed not only
Mr Sigalla's personal living expenses,
but those of his dependants. I can infer
from the fact that the moneys transferred to the JPMorgan Chase Bank account
were used to
pay the living expenses of Mr Sigalla's dependants, that that was
the purpose of the payments. I am satisfied that the payments totalling
$52,500
on 9 September 2009 were within the proviso. This fact is not negated because Mr
Sigalla stated that the purpose of the payment
was to pay school fees, whereas I
would infer that that was not its purpose. The true purpose was still within the
proviso.
- For
these reasons the claim in para 31 of the further amended interlocutory process
should be dismissed.
Charges the subject of paras 33-41 of the Further Amended
Interlocutory Process
- I
described the charges the subject of paras 33-40 of the further amended
interlocutory process in my reasons in ASIC v Sigalla (No. 3) . I there
found that there was a case to answer in respect of those charges. In final
submissions, counsel for Mr Sigalla stated that
Mr Sigalla accepted that those
charges had been proved (T507-508). In final submissions counsel for Mr Sigalla
also stated that Mr
Sigalla accepted that the charge the subject of para 41 of
the further amended interlocutory process had been proved (T559). That
charge
was that Mr Sigalla was guilty of contempt of court in that in breach of order
5(a) of orders made by Austin J on 30 November
2009 he failed to disclose in his
affidavit sworn 4 December 2009 the Sigalla JPMorgan credit card.
Charge the subject of para 42 of the Further Amended
Interlocutory Process
- The
charge the subject of para 42 of the further amended interlocutory process is
that Mr Sigalla is guilty of contempt of court in
that he is in breach of order
5(c) of the orders made by Austin J on 30 November 2009 by failing to disclose
in his affidavit sworn
4 December 2009 that the fourth defendant, BZI, had an
interest in securities in Biosceptre Limited.
- On
30 November 2009 Austin J made the following orders:
" 5 Orders that by 4pm on Friday 4 December 2009, the Sigalla
Defendants are to file and serve on ASIC, an affidavit setting out:
...
(c) an itemised inventory of the relevant Defendants' assets and
liabilities;
... "
- The
" Sigalla Defendants " was defined to mean the " First and Fourth
Defendants ", that is, Mr Sigalla and BZI Pty Limited.
- Mr
Sigalla swore an affidavit on 4 December 2009 in purported compliance with the
obligations of himself and BZI under the orders
of 30 November 2009. Counsel for
Mr Sigalla did not submit that only BZI could be liable for contempt for breach
of the order binding
it.
- In
his affidavit of 4 December 2009 Mr Sigalla described the assets and liabilities
of BZI. He said:
" 3. I refer to order 5 in the orders made in these proceedings
on 30 November 2009. Pursuant to order 5(a) I set out the name of any
bank,
building society or other financial institutions at which there is an account in
the name of or under the control of BZI Pty
Limited ('BZI') ...
...
(k) BZI has had no bank account since the closure of its NAB account in
August 2009.
...
3 .[sic] BZI is owed a sum of money by ZMS. As at the date of
swearing this affidavit I am unable to ascertain the precise amount of this
indebtedness.
4. As at the date of swearing this affidavit the financial accounts for
BZI and ZMS respectively have not been prepared for the period
ending 30 June
2008 and 30 June 2009 respectively. In the absence of these accounts being
prepared, I am unable to precisely identify
the extent of this indebtedness. My
prior accountants, William Buck, hold all of my documents and those of BZI and
ZMS. I am in dispute
with that firm as a consequence of the winding-up
proceedings in relation to ZMS and the ATO. They have not provided documents to
me as at the date of this affidavit. I will need to retain new accountants.
...
11. The only asset that BZI has is the loan to ZMS which is indeterminate.
...
13. BZI has no property which is secured over any debt. "
- On
22 January 2010 an officer of ASIC telephoned the finance manager of Biosceptre
International Limited, Mr Lowe, inquiring whether
BZI held shares in that
company. Mr Lowe's initial response was to say " I think BZI has sold all
their shares, but I can find out for you. " In due course Mr Lowe produced
the share register of Biosceptre International Limited. It shows that as at 28
January 2010 BZI held
15,000 shares pursuant to certificate 175. The share
register did not disclose when the shares were acquired. There was no evidence
to show when the shares were acquired.
- On
15 December 2009 Mr Chambers of ASIC wrote to Mr Ward in relation to Mr
Sigalla's affidavit of 4 December 2009. Amongst other things,
he said:
" 2. In November 2008 when seeking a loan from BankWest, which
loan was ultimately approved in 2009, Mr Sigalla claimed as an asset
620,000
shares in Biosceptre International Limited valued at $2,480,000. Does Mr Sigalla
retain such assets? If so, does Mr Sigalla
possess documentary material
evidencing such interest? If Mr Sigalla has disposed of such asset, can he
please explain when and how
such asset was disposed including details of the
proceeds. "
- Mr
Ward replied on the following day as follows:
" Mr Sigalla, ZMS Investments or BZI Pty Limited do not own any
shares in this company. I note that this company is a public company
and assume
that all records of shareholding are available to ASIC to discern. "
- On
5 February 2010 Mr Ward wrote further to ASIC on this matter. He said:
" During the course of preparation of his evidence in these
proceedings and in particular as a result of the receipt of documents from
William Buck, his accountants, Mr Sigalla has identified that BZI Pty Limited
owns 15,000 shares in an unlisted public company called
Biosceptre Limited. We
are instructed that the shares have no market or commercial value. In due course
should it be necessary for
Mr Sigalla to provide any further affidavit evidence
as to his assets and liabilities he will include these shares in such affidavit.
"
- Although
there is no evidence as to when BZI acquired the 15,000 shares it still held in
Biosceptre International Limited, it can
be inferred beyond reasonable doubt
that the shares were not acquired after 4 December 2009. Counsel for Mr Sigalla
did not submit
that the charge should be dismissed because ASIC had not proved
that BZI held the shares at the date Mr Sigalla swore his affidavit.
Rather,
counsel submitted that ASIC had not proved beyond reasonable doubt that when he
swore his affidavit Mr Sigalla knew that
BZI held those shares and therefore had
not established that the omission to refer to the shares was anything other than
casual,
accidental or inadvertent. I agree with that submission.
- ASIC
called no evidence to rebut Mr Sigalla's sworn assertion that he did not have
access to the relevant records when he swore his
affidavit of 4 December 2009.
If Mr Chambers accurately recorded the statement in the loan application to
which he referred, and
if the statement in that loan application were correct,
(and there was no contrary evidence in respect of either proposition), BZI
sold
in excess of 97.5 per cent of its shareholding in Biosceptre International
Limited after November 2008. It substantially divested
itself of its
shareholding. There is no evidence to contradict the assertion in Mr Ward's
letter of 5 February 2010 that the shares
had no commercial value. It appears
from the face of Mr Sigalla's affidavit of 4 December 2009 that he was making a
genuine effort
to comply with the orders of 30 November 2009 in relation to the
disclosure of the assets of BZI. No motive is suggested as to why
Mr Sigalla
would omit the reference to the shares in Biosceptre International Limited. I
infer that without records he was then unaware
that BZI still held such shares.
That is consistent with the first letter written by Mr Ward when the matter was
raised by ASIC.
After further inquiries and after apparently having obtained
access to documents, Mr Sigalla, through his solicitor, corrected the
matter. I
infer that the breach of the order was inadvertent. ASIC has not established the
contrary. In Markisic v Commonwealth of Australia [2007] NSWCA 92; (2007)
69 NSWLR 737, Campbell JA held (at [64] 749):
" ... proof that a contempt has been committed by breaching a
court order involves proving enough to conclude that the action or inaction
said
to constitute the breach was deliberate, and not casual, accidental or
unintentional. "
In so concluding, his Honour applied Australasian Meat Industry Employees
Union v Mudginberri Station Pty Ltd at 111-112.
- That
has not been established in the present case.
Conclusion and orders
- For
these reasons I order that the claims in paras 1, 31 and 42 of the further
amended interlocutory process be dismissed.
- I
find that the first defendant, Mr Andrew Sigalla, is guilty of contempt of court
in respect of each of the charges the subject of
paras 33-41 of the further
amended interlocutory process.
- These
findings dispose of all of the substantive claims (save as to punishment and
costs) in the further amended interlocutory process.
- I
will stand the proceedings over to a convenient time to hear any evidence and to
hear submissions on the questions of punishment
and costs.
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