Australian Securities and Investments Commission v Liban Net Pty Limited

[2005] FCA 1317

FEDERAL COURT OF AUSTRALIA

Australian Securities & Investments Commission v Liban Net Pty Limited [2005] FCA 1317

Australian Securities & Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION v LIBAN NET PTY LIMITED & ANOR
NSD 1075 OF 2005

HELY J
16 SEPTEMBER 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1075 OF 2005

BETWEEN:

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
PLAINTIFF

AND:

LIBAN NET PTY LIMITED
(ACN 106 063 558)
FIRST DEFENDANT

GABY HADDAD
SECOND DEFENDANT

JUDGE:

HELY J

DATE OF ORDER:

16 SEPTEMBER 2005

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The second defendant be fined the sum of $5,000.00 for his contempt of Court in failing to comply with the orders made on 18 July 2005 and 16 August 2005 within the times specified in those orders.

2.The fine be paid to the NSW Registry of the Court on or before 31 October 2005.

3.The second defendant pay the plaintiff’s costs of the motion filed on 26 August 2005 on an indemnity basis, such costs to include any costs payable by the plaintiff to Mr Jaramillo of Marsdens Law Group in consequence of the order made on 12 September 2005.

4.        Those costs may be taxed forthwith.

THE COURT DIRECTS THAT:

1.If the second defendant fails to pay the fine of $5,000.00 by 31 October 2005 the District Registrar is to bring that failure to the attention of a judge of the Court for further direction, and to notify the parties of the date and time fixed for that purpose.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1075 OF 2005

BETWEEN:

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
PLAINTIFF

AND:

LIBAN NET PTY LIMITED
(ACN 106 063 558)
FIRST DEFENDANT

GABY HADDAD
SECOND DEFENDANT

JUDGE:

HELY J

DATE:

16 SEPTEMBER 2005

PLACE:

SYDNEY

REASONS FOR JUDGMENT

1. I have before me a Notice of Motion filed on 26 August 2005 seeking orders that the second defendant (‘Mr Haddad’) be found guilty of contempt of Court for failing to comply with orders which I made on 18 July 2005 and 16 August 2005 within the times specified in those orders or at all.

2. The Statement of Charge is as follows:

   ‘The Second Defendant is guilty of contempt of Court in that knowingly, and in wilful and contumacious disregard of them, and each of them, he disobeyed and failed to comply with Order 2 made in these proceedings in his presence by Justice Hely on 18 July 2005 whereby he was ordered to provide to the Plaintiff by the close of business 22 July 2005 a list of the names and addresses all persons having been issued with policies of insurance by the First Defendant, in its name or in the name of API Insurance or Australian Private Insurance including as to the nature of the insurance, the amount paid, and as to the sum insured; together with copies of the said policies and any documents relating to how any claims under such policies were to be paid and from what source; and/or that he failed to comply with the subsequent order made in his presence by Justice Hely on 16 August 2005 where time for compliance with the order made on 18 July 2005 was extended to 12.00 pm on Friday 19 August 2005.’

   Mr Haddad pleaded not guilty to that charge.

3. These proceedings were commenced on 29 June 2005.  The Australian Securities & Investments Commission (‘ASIC’) alleges that the defendants issued policies of motor insurance to members of the public in contravention of provisions of the Corporations Act 2001 (Cth) and of the Australian Securities & Investments Commission Act 2001 (Cth).

4. The matter came before me on 18 July 2005 when I made the first order set out in the Statement of Charge.  Mr Haddad was present in Court when the order was made; he consented to the order being made; and he indicated a willingness and an ability to comply with the terms of the order.  However, the order was not served upon Mr Haddad.

5. The matter was adjourned until 27 July 2005 but Mr Haddad failed to appear.  The matter was next before the Court on 16 August 2005 when Mr Haddad appeared in person even though he had previously indicated that Mr Jaramillo of Marsdens Law Group, was to be engaged to represent him in the proceedings.  The order of 18 July 2005 had not been complied with.  Mr Haddad sought a further three days within which to comply with the terms of the order.  I extended the time for compliance with the order until noon on Friday 19 August 2005.  I cautioned Mr Haddad that he was at risk of going to jail if he did not comply with the order, and I told him that I did not want him to be under any illusion as to the seriousness of the position in which he found himself.  This order was served on Mr Haddad by being left in an envelope addressed to him at Unit 8, 560-562 Hume Highway, Yagoona, NSW, that being the address which he had previously nominated for service of documents upon him pending the filing of a notice of appearance by his solicitor.  This order did not bear the notice required by Order 37 rule 2(3) of the Federal Court Rules.

6. A motion for contempt was served personally on Mr Haddad on 31 August 2005.  The motion was returnable on 1 September 2005.  Mr Haddad did not appear on the return of the motion or proffer any explanation for his absence.  On 1 September I ordered that the time for service of the plaintiff’s Notice of Motion dated 26 August 2005 seeking the committal of Mr Haddad for contempt of Court be abridged to 5 pm on 31 August 2005, subject to Mr Haddad’s right to apply to the Court to vary or reverse such order.  I adjourned the hearing of the motion until 8 September 2005.  No application to reverse or vary the order of 1 September 2005 has been made.

7. When the contempt motion came on for hearing on 8 September 2005 I adjourned it at the request of counsel for Mr Haddad until 12 September 2005.  Mr Khoury, of George Khoury & Co Solicitors, had been retained by Mr Haddad to act on his behalf a day or so beforehand and on 7 September 2005 Mr Khoury wrote to ASIC foreshadowing an adjournment application of the contempt motion and enclosing what was described as a list of policy holders as provided to him by Mr Haddad.  The provision of this list was a partial compliance with the terms of my order.

8. On 9 September 2005 Mr Haddad filed and served an affidavit.  Annexed to that affidavit were schedules of information.  ASIC now accepts that the information provided in that affidavit substantially complies with the information which I ordered Mr Haddad to provide.  Mr Haddad was able to compile that information in about half a day.

9. Mr Haddad’s defence to the contempt charge is that he took all reasonable steps to comply with the terms of the orders which I made by engaging Marsdens Law Group to represent him and by instructing them to comply with the order.  For the reasons which follow, I do not accept Mr Haddad’s case that his non-compliance with the order was due to default on the part of Marsdens Law Group, or that he took all reasonable steps to comply with the terms of the order.  Before turning to those reasons, I should record that counsel for Mr Haddad did not rely upon any non-compliance with the Rules on the part of ASIC, and I am satisfied that Mr Haddad was aware of the terms of my orders.

10. Mr Jaramillo of Marsdens Law Group was first asked to act on behalf of Mr Haddad on or about 21 July 2005.  Mr Jaramillo told Mr Haddad that he was not going to do anything for Mr Haddad until $5,000 was paid to him on account of fees.  On 15 August 2005 Mr Jaramillo made it plain to Mr Haddad that arrangements which had earlier been made for the payment of that sum by means of a BBX voucher had not been ‘fixed up’, and ‘the money had to be in’ before he would be prepared to act in the matter.  On 16 August 2005, after the conclusion of the proceedings in this Court, there was a conversation between Mr Haddad and Mr Jaramillo in which Mr Jaramillo said that the voucher had been cleared and arrangements were made for them to meet.  Mr Jaramillo told Mr Haddad to compile the information which had to be given to the ASIC, as he would need to see that.

11. Mr Jaramillo and Mr Haddad met on 18 August 2005.  Mr Haddad did not bring the records and a list of insured to that meeting because he said that it was difficult to extract from the computer.

12. The second order was due to be complied with on 19 August 2005.  No information had been given by Mr Haddad to Mr Jaramillo prior to that time which could have enabled compliance with the terms of my orders.

13. On 24 August 2005 Mr Haddad attempted to email the information to Mr Jaramillo, but Mr Jaramillo was unable to access that information.  At some time between 24 August and 1 September Mr Haddad delivered a disk containing the relevant information to Mr Jaramillo’s office in Campbelltown.  It is clear that on 1 September 2005 Mr Jaramillo became aware that he had the disk, although the precise date upon which it was delivered to him is unclear.

14. On or about 1 September 2005 Mr Jaramillo had a conversation with Ms Do of ASIC in which Ms Do told Mr Jaramillo that the matter was listed for a final hearing on 8 September 2005, and that contempt proceedings had been instituted against Mr Haddad.  According to Mr Jaramillo, whose evidence I accept, he had not previously been given this information by Mr Haddad.  Mr Jaramillo then consulted a partner in his firm, after which he told Mr Haddad that Marsdens Law Group was not prepared to act for him unless there was an immediate payment of $15,000 on account of fees.

15. On 2 September 2005 Mr Haddad indicated to Mr Jaramillo that he proposed to instruct other solicitors, and on 3 September 2005 Mr Jaramillo returned the disk to him.  As earlier indicated, Mr Khoury was thereafter retained to act on behalf of Mr Haddad.

16. It is clear from this chronology of events that Mr Haddad’s failure to comply with my orders was not in any way referable to default on the part of Marsdens Law Group, and that Mr Haddad has not taken anything like reasonable steps to comply with those orders.  Mr Haddad did give some evidence that he instructed Jennifer Lim, an employee in an associated business, to endeavour to compile the list manually.  Jennifer Lim was not called, nor were the results of her work produced.  I am prepared to assume that Mr Haddad did give such an instruction to Ms Lim, but I am not satisfied upon the basis of the evidence called that any diligent attempt was made to compile manually a list which would be responsive to my orders.

17. I therefore find that the Statement of Charge has been made out and I find that the defendant is in contempt of Court in not complying with the orders referred to in the Statement of Charge.

18. The cases establish that, generally speaking, imprisonment for contempt of Court is a remedy of last resort, and that the primary purpose of imprisonment is to secure obedience to the Court’s orders.  I regard the failure to comply with these orders as a serious matter, particularly because the primary purpose of the orders was to enable ASIC to notify persons who had taken out insurance policies marketed by Mr Haddad that, for all practical purposes, they may be uninsured.  Nonetheless, as ASIC accepts that Mr Haddad has now substantially complied with the terms of those orders, I do not think it appropriate to order that he should be sentenced to a term of imprisonment.

19. But neither is it appropriate that his conduct should go unpunished.  Very little information has been put before me as to Mr Haddad’s financial position or personal circumstances.  I do accept that about the time the first order was made Mr Haddad and his wife and children had been evicted from their home, and that there were financial and other pressures operating on Mr Haddad.  In the written submissions lodged on behalf of Mr Haddad he apologised unreservedly for the delays in responding to my orders.  Although this apology is tendered very late in the piece, it should be taken into account.  In the circumstances, I think it is appropriate to order that Mr Haddad should pay a fine of $5,000, which sum is to be paid to the NSW Registry of the Court on or before Monday 31 October 2005.  In fixing that sum, I have taken into account the costs order which I propose to make.  I also order that Mr Haddad should pay ASIC’s costs of the motion on an indemnity basis, such costs to include any costs payable by ASIC to Mr Jaramillo of Marsdens Law Group pursuant to the order which I made on 12 September 2005.  Whilst there is no general principle or rule of law in contempt cases that the successful applicant is routinely awarded costs on an indemnity basis, such orders are commonly made.  It is an appropriate order to make in the present case given the circumstances of the default, the absence of any real defence to the contempt charge and the public interest in securing obedience to the orders which I made.

I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Associate:

Dated:             16 September 2005

Counsel for the Plaintiff:	Mr L V Gyles, Mr K Oliver
Solicitor for the Plaintiff:	Australian Securities & Investments Commission
Counsel for the Second Defendant:	Ms F Sinclair
Solicitor for the Second Defendant:	George Khoury & Co
Date of Hearing:	12 September 2005
Date of Judgment:	16 September 2005