Australian Securities and Investments Commission v One Tech Media Limited (No 3)

[2018] FCA 1071

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v One Tech Media Limited (No 3) [2018] FCA 1071

File number:

VID 848 of 2016

Judge:

MOSHINSKY J

Date of judgment:

19 July 2018

Catchwords:

CONTEMPT OF COURT – civil contempt – where ‘freezing orders’ had been made pursuant to the Corporations Act 2001 (Cth) – where the plaintiff (ASIC) brought an interlocutory application alleging contempt of court against five of the defendants for breaches of the court orders – where three of the defendants admitted liability for contempt – where ASIC and the five defendants prepared statements of agreed facts and jointly proposed orders – whether agreed proposed orders should be made – declarations and orders made substantially in the terms proposed by ASIC and the five defendants

CONTEMPT OF COURT – civil contempt – where ‘freezing orders’ had been made pursuant to the Corporations Act 2001 (Cth) – where the orders included ‘carve outs’ that permitted the relevant defendant to pay legal expenses up to specified amounts – where the firm of solicitors acting for the defendant made payments from its trust account on behalf of the defendant that exceeded the cumulative total of the carve outs – principles applicable where contempt of court is alleged against a person who is not a party to a proceeding and is not bound by the court orders – whether such a person is subject to the strict liability in contempt that rests upon a person bound by a court order – whether requisite intention established on the facts

Legislation:

Australian Securities and Investments Commission Act 2001 (Cth), s 19

Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law

Corporations Act 2001 (Cth), s 1323

Federal Court of Australia Act 1976 (Cth), s 31

Judiciary Act 1903 (Cth), s 24

Federal Court Rules 2011, rr 42.11, 42.12

Cases cited:

Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201

Attorney General v Punch Ltd [2003] 1 AC 1046

Attorney General v Times Newspapers Ltd [1992] 1 AC 191

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 351 ALR 190

Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 1441

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405

Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98

Baker v Paul [2013] NSWCA 426

Cardile v LED Builders Pty Ltd (1999) 198 CLR 380

CCOM Pty Ltd v Jiejing Pty Ltd (1992) 36 FCR 524

Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375

Hurd v Zomojo Pty Ltd [2015] FCAFC 148

Lane v Registrar of the Supreme Court (NSW) (Equity Division) (1981) 148 CLR 245

Legal Services Board v Forster (No 3) [2012] VSC 640

R v Witt (No 2) [2016] VSC 142

Reid v Howard (1993) 31 NSWLR 298

Seaward v Paterson [1897] 1 Ch 545

Sigalla v TZ Limited [2011] NSWCA 334

Witham v Holloway (1995) 183 CLR 525

Z Ltd v A-Z and AA-LL [1982] QB 558

Zhu v Treasurer (NSW) (2004) 218 CLR 530

Date of hearing:

26, 27 March, 18 May, 27 June 2018

Registry:

Victoria

Division:

General Division

National Practice Area:

Commercial and Corporations

Sub-area:

Regulator and Consumer Protection

Category:

Catchwords

Number of paragraphs:

123

Counsel for the Plaintiff:

Mr MR Pearce SC with Ms N Moncrief

Solicitor for the Plaintiff:

Australian Securities and Investments Commission

Counsel for the Third, Fourth, Sixth, Eighth and Ninth Defendants:

Mr R Peters

Solicitor for the Third, Fourth, Sixth, Eighth and Ninth Defendants:

HWL Ebsworth Lawyers

Counsel for Kalus Kenny Intelex Lawyers:

Mr I Waller QC with Mr A Herskope

Solicitor for Kalus Kenny Intelex Lawyers:

Kalus Kenny Intelex Lawyers

Counsel for the First, Second, Fifth, Seventh, and Tenth to Sixteenth Defendants:

The First, Second, Fifth, Seventh, and Tenth to Sixteenth Defendants did not appear

ORDERS

VID 848 of 2016

BETWEEN:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

AND:

ONE TECH MEDIA LIMITED

First Defendant

ULTRA SOLUTIONS MG (UK) LIMITED

Second Defendant

ALLIANZ METRO PTY LTD (ACN 610 042 843) (and others named in the Schedule)

Third Defendant

JUDGE:	MOSHINSKY J
DATE OF ORDER:	19 JULY 2018

THE COURT DECLARES THAT:

1.The fourth defendant (Eustace Senese) is guilty of contempt as alleged in charges A6, A15, A24, A33, A42, A51, A72, A78, A80, A82, A84, A86, A88, A90, A92, A94, A96, A98, A100, A102, A104, A106 and A108 as set out in the plaintiff’s amended statement of charge dated 18 December 2017 (the amended statement of charge).

2.The sixth defendant (Transcomm) is guilty of contempt as alleged in charges F2, F5, F8, F11, and F14 as set out in the amended statement of charge.

3.The ninth defendant (Cameron Senese) is guilty of contempt as alleged in the following charges set out in the amended statement of charge:

(a)charges A9, A18, A27, A36, A45 and A54;

(b)charges B109 to B162, B509 to B600;

(c)charges C11 to C15;

(d)charges D251 to D375, D720 to D891; and

(e)charge F1.

THE COURT ORDERS BY CONSENT THAT:

4.All other charges against Eustace Senese, Transcomm and Cameron Senese be dismissed.

5.The plaintiff’s amended interlocutory application dated 18 December 2017 (the contempt application) as against the third defendant (Allianz) and all charges against Allianz be dismissed.

6.The contempt application as against the eighth defendant (Bianco) and all charges against Bianco be dismissed.

7.The costs as between the plaintiff and Allianz, Eustace Senese, Transcomm, Bianco and Cameron Senese be reserved.

8.The matter be listed for a hearing on penalties and costs on a date to be fixed.

THE COURT ORDERS THAT:

9.The contempt application as against Kalus Kenny Intelex and all charges against Kalus Kenny Intelex be dismissed.

10.Within seven days, the plaintiff and Kalus Kenny Intelex file any agreed order in relation to costs.

11.If the parties are unable to agree, within 14 days of these orders, each party file a written submission (of no more than three pages) on costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1. On 1 May 2017, the plaintiff (ASIC) filed an interlocutory application alleging contempt of court against five of the defendants to the proceeding and the firm of solicitors that had acted for them, Kalus Kenny Intelex (Kalus Kenny or KKI).  The five defendants named in the contempt application are:

   (a)the third defendant, Allianz Metro Pty Ltd (Allianz);

   (b)the fourth defendant, Eustace Anthony Senese (Eustace or Tony);

   (c)the sixth defendant, Transcomm Global Pty Ltd (Transcomm);

   (d)the eighth defendant, Bianco Pty Ltd (Bianco); and

   (e)the ninth defendant, Camera David Senese (Cameron).

2. ASIC subsequently filed, with leave, an amended interlocutory application dated 18 December 2017 (the contempt application) and an amended statement of charge dated 18 December 2017 (the amended statement of charge).

3. ASIC alleged in the contempt application that the five defendants breached various orders made by this Court during the period August 2016 to February 2017.  The orders, made pursuant to provisions of the Corporations Act 2001 (Cth), restrained the defendants referred to above from dealing with certain assets and property. It is convenient to refer to these orders as “freezing orders”. It was alleged that the defendants breached those orders in various ways. The amended statement of charge is a lengthy document, divided into a number of sections and containing a large number of charges.

4. In March 2018, ASIC and the five defendants referred to above reached an agreed position in relation to the contempt application.  In summary, Eustace, Transcomm and Cameron admitted that they were guilty of contempt of court as set out in a number of the charges in the amended statement of charge.  In relation to Allianz and Bianco, ASIC agreed, in effect, to withdraw the charges against them.  Two statements of agreed facts, admissions and proposed penalties (each referred to as a statement of agreed facts) were prepared.  The first related to the position of Allianz, Eustace and Transcomm.  It is annexed as Annexure “A” to these reasons.  The second related to the position of Bianco and Cameron.  It is annexed as Annexure “B” to these reasons.  It was arranged that there would be a hearing on the issue of liability, with the issues of penalties and costs deferred, to be dealt with on a later occasion.

5. The main question to be considered in relation to the agreed proposed orders is whether I am satisfied that there is a proper basis to make the orders proposed by the parties.  For the reasons set out below, I consider there to be a proper basis to make orders substantially in the terms proposed by ASIC and the five defendants.  In summary, I will make declarations that Eustace, Transcomm and Cameron are guilty of contempt of court as set out in certain charges in the amended statement of charge, and I will make orders dismissing the remaining charges against those defendants and all of the charges against Allianz and Bianco.

6. In relation to Kalus Kenny, ASIC alleges that the firm breached certain court orders by causing or procuring Transcomm to deal with its assets or property in contravention of the court orders.

7. In order to explain the allegations against Kalus Kenny, it is necessary to refer to the relevant breaches alleged against (and admitted by) Transcomm.  On 3 August 2016 and 15 November 2016, freezing orders were made against Transcomm.  Each of these orders included what it is convenient to refer to as a “general freezing order”, namely an order restraining Transcomm from selling, transferring, encumbering, disposing of or otherwise dealing with any of its assets or property.  These freezing orders were subject to exceptions, which it is convenient to refer to as “carve outs”.  The relevant exceptions were contained in orders made on 22 August 2016 and 14 December 2016.  The effect of these carve outs was to permit Transcomm to pay legal expenses for the proceeding up to a cumulative total of $53,037.69.

8. It is alleged that, in the period between 20 December 2016 and 6 February 2017, Kalus Kenny made five payments from its trust account on behalf of Transcomm that were not permitted by the carve outs.  In respect of four of the payments, it is alleged that the payments caused the total amount applied by Transcomm to legal expenses for the proceeding to exceed the cumulative total permitted by the carve outs, and hence the payments were in breach of the orders.  In respect of one payment, it is alleged that the payment related to another legal matter, and hence was not permitted by the carve outs, and breached the orders.  The total of the five payments is $11,351.08.

9. There is no real issue that at least three, if not all five, of the five payments were not permitted by the carve outs, and therefore involved breaches by Transcomm of the court orders.  The real question is whether Kalus Kenny, as the firm of solicitors acting for Transcomm, is liable for contempt of court.

10. ASIC’s charges against Kalus Kenny are formulated on two alternative bases.  As explained in ASIC’s written submissions: the primary charges assume that Kalus Kenny’s liability for contempt of court is essentially strict; and the alternative charges assume that some mental intent must be proved.  Each of the alternative charges alleges that Kalus Kenny breached the court orders by causing or procuring Transcomm to deal with its assets or property in contravention of the court orders “knowing that to be in contravention of the Court Order”.

11. In my view, for the reasons set out below, the primary basis upon which ASIC puts its case against Kalus Kenny is inconsistent with the judgment of Drummond J in CCOM Pty Ltd v Jiejing Pty Ltd (1992) 36 FCR 524 (CCOM).  CCOM and the authorities to which it refers establish that a person who is not a party to the proceeding and not bound by a court order is not subject to the strict liability for contempt that applies to a person bound by a court order that is breached; an additional element of intention needs to be established.  Further, I consider CCOM to be authority for the proposition that these principles apply to a solicitor in circumstances where the solicitor is acting for a party to a proceeding who is bound by a court order, but the solicitor is not himself or herself bound by the court order.  It follows that I reject the primary charges brought by ASIC against Kalus Kenny.  In relation to the alternative charges against the firm, it is not established that the partner responsible for the matter (or anyone else at the firm) effected the relevant payments knowing this to be in contravention of the court orders.  Accordingly, the alternative charges are not established.

12. It follows that the contempt of court charges against Kalus Kenny are to be dismissed.

13. These reasons are structured under the following headings:

    (a)The hearing of the contempt application.

    (b)Applicable principles – contempt of court.

    (c)Applicable principles – declarations and orders by consent.

    (d)The proceeding and the relevant orders.

    (e)The agreed declarations and orders.

    (f)The contempt charges against Kalus Kenny.

    The hearing of the contempt application

14. The hearing of the contempt application commenced on 26 March 2018.  The first matter dealt with was the agreed proposed orders.  After submissions had been made on his aspect, Mr R Peters, counsel for the five relevant defendants, sought to be, and was, excused from the hearing.  The hearing of ASIC’s charges against Kalus Kenny then proceeded, occupying the balance of that day and the next day.  Judgment was then reserved.  On 15 May 2018, my chambers sent an email to the parties raising a factual question for the parties, and indicating that the matter would be listed for mention.  In short compass, the question was whether the four relevant payments from Kalus Kenny’s trust account on 25 January 2017 and 6 February 2017 had been made on behalf of Transcomm or Eustace.  The parties had proceeded on the basis that the payments had been made on behalf of Transcomm, but the evidence indicated that the source of funds for the payments was Eustace.  On 18 May 2018, a mention took place.  Each of the parties to the contempt application was represented (with Kalus Kenny represented by its junior counsel, Mr A Herskope).  The matter was left on the basis that ASIC and the five relevant defendants would consider whether any amendments were needed to the statements of agreed facts, and ASIC would either: (a) by consent, amend the amended statement of charge; or (b) make an application for leave to amend the amended statement of charge.  Subsequently, ASIC filed an interlocutory application seeking leave to amend the amended statement of charge.  ASIC maintained, as its primary position, that the four payments had been made on behalf of Transcomm, but now proposed, as an alternative, that the payments had been made on behalf of Eustace.  The hearing of the interlocutory application took place on 27 June 2018.  ASIC and Kalus Kenny appeared at that hearing; the defendants did not appear.  Kalus Kenny opposed the amendments.  In the course of doing so, Kalus Kenny made clear that it accepted that the four payments had been made on behalf of Transcomm.  In circumstances where this matter was now clearly common ground between the parties, ASIC did not press its interlocutory application for leave to amend, and that application was dismissed.  In light of these matters, I am prepared to proceed on the basis that it is common ground, as between ASIC and Kalus Kenny, that the four payments were made on behalf of Transcomm.

15. Included in the materials filed for the hearing on 27 June 2018 were proposed amendments to the statements of agreed facts.  The effect of the proposed amendments was to include an alternative characterisation of the four payments, namely that they had been made on behalf of Eustace.  The primary position remained that the payments had been made on behalf of Transcomm.  I am prepared to proceed on the basis of the primary position, making it unnecessary to have regard to the proposed amendments to the statements of facts.

    Applicable principles - contempt of court

16. In Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 1441, I summarised the applicable principles in relation to contempt of court. For ease of reference, I set out, in the following paragraphs, that summary of the applicable principles.

17. This Court’s power to punish for contempt of its power and authority is contained in s 31(1) of the Federal Court of Australia Act 1976 (Cth). The power is the same as that of the High Court to punish for contempt of that Court. The High Court’s power in this regard is the same as that of the Supreme Court of Judicature in England at the commencement of the Judiciary Act 1903 (Cth): s 24 of that Act.

18. An application by a party who alleges a contempt of court is governed by Div 42.2 of the Federal Court Rules 2011. If a party alleges that a contempt has been committed by a person in connection with a proceeding in this Court, an application for punishment for the alleged contempt is to be made by the party by interlocutory application in the proceeding: r 42.11(1). An application that a contempt has been committed must be accompanied by a statement of charge, specifying the contempt with sufficient particularity to allow the person charged to answer the charge, and the affidavits on which the person making the charge intends to rely to prove the charge: r 42.12.

19. A distinction is drawn between civil and criminal contempt.  An alleged breach of a court order generally falls to be considered under the principles applicable to civil contempt.  Deliberate conduct which is in breach of a court order will constitute wilful disobedience of the order, and therefore a civil contempt, unless the conduct is casual, accidental or unintentional:  see Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 113 per Gibbs CJ, Mason, Wilson and Deane JJ; Hurd v Zomojo Pty Ltd [2015] FCAFC 148 at [90]-[91] and [97]-[101] per Besanko and Gilmour J, at [164] per Beach J. Whether the charge be for civil or criminal contempt, it must be proved beyond reasonable doubt: Witham v Holloway (1995) 183 CLR 525 at 534 per Brennan, Deane, Toohey and Gaudron JJ; Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375 at [42] per French CJ, Kiefel, Bell, Gageler and Keane JJ, at [59] per Nettle J.

20. In Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201, Gillard J set out the elements necessary to establish a civil contempt involving a breach of an order of the court. His Honour said (at [31]):

    In order to prove a civil contempt of court involving a breach of an order of the court, the plaintiff has to prove the following:

    (i)        that an order was made by the court;

    (ii)that the terms of the order are clear, unambiguous and capable of compliance;

    (iii)that the order was served on the alleged contemnor or excused in the circumstances, or service dispensed with pursuant to the Rules of Court;

    (iv)      that the alleged contemnor has knowledge of the terms of the order;

    (v)       that the alleged contemnor has breached the terms of the order.

1. The principles set out above apply to a party to the litigation who is bound by a court order.  The principles that apply to a person who is not a party to the proceeding and is not bound by the court order will be discussed below, in relation to the contempt charges against Kalus Kenny.

   Applicable principles - declarations and orders by consent

2. The principles relating to the making of orders by agreement and as regards declarations were summarised by Gordon J in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [70]-[79], in the context of a proceeding under the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth). Her Honour said:

   2.3.1    Orders sought by agreement

   …

   70The applicable principles are well established.  First, there is a well-recognised public interest in the settlement of cases under the [Competition and Consumer Act]: NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 at 291. Second, the orders proposed by agreement of the parties must be not contrary to the public interest and at least consistent with it: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [18].

   71Third, when deciding whether to make orders that are consented to by the parties, the Court must be satisfied that it has the power to make the orders proposed and that the orders are appropriate: Real Estate Institute at [17] and [20] and Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1]. Parties cannot by consent confer power to make orders that the Court otherwise lacks the power to make: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163.

   72Fourth, once the Court is satisfied that orders are within power and appropriate, it should exercise a degree of restraint when scrutinising the proposed settlement terms, particularly where both parties are legally represented and able to understand and evaluate the desirability of the settlement: Australian Competition & Consumer Commission v Woolworths (South Australia) Pty Ltd (Trading as Mac’s Liquor) [2003] FCA 530 at [21]; Australian Competition & Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [24]; Real Estate Institute at [20]-[21]; Australian Competition & Consumer Commission v Econovite Pty Ltd [2003] FCA 964 at [11] and [22] and Australian Competition & Consumer Commission v The Construction, Forestry, Mining and Energy Union [2007] FCA 1370 at [4].

   73Finally, in deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of Coles as an admission of all facts necessary or appropriate to the granting of the relief sought against it: Thomson Australian Holdings at 164.

   2.3.2Declarations

   74The Court has a wide discretionary power to make declarations under s 21 of the Federal Court Act: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99.

   75Where a declaration is sought with the consent of the parties, the Court’s discretion is not supplanted, but nor will the Court refuse to give effect to terms of settlement by refusing to make orders where they are within the Court’s jurisdiction and are otherwise unobjectionable: see, for example, Econovite at [11].

   76However, before making declarations, three requirements should be satisfied:

   (1)       The question must be a real and not a hypothetical or theoretical one;

   (2)       The applicant must have a real interest in raising it; and

   (3)       There must be a proper contradictor:

   Forster v Jododex at 437-8.

   77In this proceeding, these requirements are satisfied.  The proposed declarations relate to conduct that contravenes the ACL and the matters in issue have been identified and particularised by the parties with precision: Australian Competition & Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [35]. The proposed declarations contain sufficient indication of how and why the relevant conduct is a contravention of the ACL: BMW Australia Ltd v Australian Competition & Consumer Commission [2004] FCAFC 167 at [35].

   78It is in the public interest for the ACCC to seek to have the declarations made and for the declarations to be made (see the factors outlined in ACCC v CFMEU at [6]).  There is a significant legal controversy in this case which is being resolved.  The ACCC, as a public regulator under the ACL, has a genuine interest in seeking the declaratory relief and Coles is a proper contradictor because it has contravened the ACL and is the subject of the declarations.  Coles has an interest in opposing the making of them:  MSY Technology at [30]. No less importantly, the declarations sought are appropriate because they serve to record the Court’s disapproval of the contravening conduct, vindicate the ACCC’s claim that Coles contravened the ACL, assist the ACCC to carry out the duties conferred upon it by the Act (including the ACL) in relation to other similar conduct, inform the public of the harm arising from Coles’ contravening conduct and deter other corporations from contravening the ACL.

   79Finally, the facts and admissions in Annexure 1 provide a sufficient factual foundation for the making of the declarations: s 191 of the Evidence Act; Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at [57]-[59] endorsed by the Full Court in Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [92]; Hadgkiss v Aldin (No 2) [2007] FCA 2069 at [21]-[22]; Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [77]-[79] and Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543.

3. Although the present case involves a contempt application rather than consumer law or other statutory provisions, I consider the principles set out above to be generally applicable.

   The proceeding and the relevant orders

4. On 26 July 2016, in anticipation of the commencement of a proceeding, ASIC made an ex parte application for injunctions to: prohibit certain of the defendants from carrying on a financial services business; and preserve certain bank accounts and other assets pending its investigation into suspected contraventions of the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).  The suspected contraventions related to the operation of a website ( In broad terms, ASIC’s investigation concerned whether customers of the website had been induced to invest money in ‘binary options’, which were said to be essentially bets on the movement in prices of certain assets, such as shares.  ASIC was concerned that a number of Australian customers may have lost substantial amounts of money by these investments.

5. A Judge of this Court made orders on 26 July 2016. Those orders included, in paragraph 3(b), an order pursuant to s 1323(1) of the Corporations Act freezing certain bank accounts and, in paragraph 3(e), a general freezing order as follows:

   3.        Until 4pm on 3 August 2016, or further order:

   …

   e.pursuant to section 1324(4) of the [Corporations Act], the first to eleventh defendants be prohibited from selling, transferring, encumbering, disposing of or otherwise dealing with any of their assets or property.

6. On 3 August 2016, ASIC formally commenced this proceeding and the matter returned to court on an inter partes basis.  Certain of the defendants were represented at this hearing.  Orders were made to similar effect as the earlier orders, with the injunctions now lasting until 4.00 pm on 16 November 2016.  The orders also included, in paragraph 2, a carve out for Bianco and Cameron.  There was no carve out, at this stage, for Transcomm.  The orders relevantly provided:

   1.Until 4pm on 16 November 2016:

   …

   (e)pursuant to section 1324(4) of the [Corporations Act], the first to eleventh defendants be prohibited from selling, transferring, encumbering, disposing of or otherwise dealing with any of their assets or property.

   2.Paragraph 1 of this Order does not prohibit the ninth defendant (Cameron Senese) from withdrawing from the Bianco Account or the CS Account:

   (a)each calendar month commencing in August 2016, funds for living expenses not exceeding a total of $12,000 per calendar month; and

   (b)a total amount of $20,000, to be deposited in the trust account of Kalus Kenny Intelex on account of, and to be applied to pay for, future legal expenses of [Bianco] and [Cameron].

7. On 22 August 2016, further orders were made by this Court, the effect of which was to create further carve outs.  Although the 22 August 2016 orders refer to “paragraph 3(e)” of the previous orders and to the date of the previous orders as being “26 July 2016”, it is common ground that they should refer to “paragraph 1(e)” of the previous orders of “3 August 2016”.  As so corrected, the 22 August 2016 orders were to the following effect:

   1.Order [1(e)] of the Orders … made [3 August 2016] be varied by inserting the following subparagraphs:

   (i)[Transcomm] be permitted to pay $19,000.00 out of account [details omitted] held by [Transcomm] with Westpac Banking Corporation (“the account”) to Messrs Kalus Kenny Intelex (“the firm”) on account of legal costs and disbursements that have been incurred to date;

   (ii)[Transcomm] be permitted to pay the sum of $25,000.00 out of the account to the firm which sum is to be held in the trust account of the firm for the sole purpose of the sum being applied on account of legal costs and disbursements … hereafter [to] be incurred until 16 November 2016 or further order;

   (iii)[Transcomm] be permitted to pay the sum of $15,000 per month out of the account to be applied to the ordinary living expenses of [Eustace] and [Sandra Senese] until 16 November 2016 or further order.

   These orders contained the first and second carve outs for Transcomm in relation to legal expenses (expressed as “legal costs and disbursements”).  It will be observed that the orders permitted expenditure on legal expenses of two amounts – $19,000 and $25,000 – making a total, at this stage, of $44,000.  It is convenient to note at this point that the seventh defendant was Sandra Senese (Sandra), who is married to Eustace.

8. On 15 November 2016, a further hearing in the proceeding took place.  Further freezing orders were made on this occasion.  These orders were expressed to continue until 4.00 pm on 2 February 2017.  Paragraph 1(b) of the orders contained a specific freezing order and paragraph 1(e) contained a general freezing order.  Paragraph 2 contained carve outs for living expenses.  The orders relevantly provided as follows:

   1.        Until 4.00 pm on 2 February 2017:

   …

   (e)pursuant to section 1324(4) of the [Corporations Act], the first to eleventh defendants be prohibited from selling, transferring, encumbering, disposing of or otherwise dealing with any of their assets or property.

   2.        Paragraph 1 of this Order does not prohibit:

   (a)the ninth defendant (Cameron Senese) from withdrawing from the account [details omitted] held by [Bianco] with the Commonwealth Bank of Australia or the account [details omitted] held by the ninth defendant with the Commonwealth Bank of Australia funds for living expenses not exceeding a total of $12,000 per calendar month until the earlier of 2 February 2017 or further order;

   (b)[Transcomm] from paying the sum of $15,000 per month out of the account [details omitted] held by the sixth defendant (Transcomm) with Westpac Banking Corporation to be applied to the ordinary living expenses of the fourth (Eustace Senese) and seventh defendants (Sandra Senese) until the earlier of 2 February 2017 or further order.

   The orders of 15 November 2016 did not contain any carve out for legal expenses (as distinct from living expenses).

9. On 14 December 2016, orders were made providing further carve outs.  Paragraph 2 of the orders provided as follows in relation to Eustace and Sandra’s legal expenses:

   2.Paragraph 1 of the Order made on 15 November 2016 does not prohibit the sixth defendant (Transcomm Global Pty Ltd) from withdrawing from the account [details omitted] held by the sixth defendant with Westpac Banking Corporation a total amount of $9,037.69 to be deposited into the trust account of Kalus Kenny Intelex on account of, and to be applied to pay for, legal expenses incurred and to be incurred by the fourth defendant (Eustace Senese) and seventh defendant (Sandra Senese).

   These orders contained the third carve out for Transcomm in relation to legal expenses.  Taking into account the $44,000 already allowed, the cumulative total of the carve outs for Transcomm to pay legal expenses was $53,037.69.

10. On 2 February 2017, this Court made further freezing orders, extending to 4.00 pm on 5 May 2017.  Paragraph 1(b) of the orders was a specific freezing order.  Paragraph 1(e) was a general freezing order, as follows:

    1.        Until 4.00 pm on 5 May 2017:

    …

    (e)pursuant to section 1324(4) of the Act, the first to eleventh defendants be prohibited from selling, transferring, encumbering, disposing of or otherwise dealing with any of their assets or property.

    A carve out for living expenses and legal expenses of Cameron was included in paragraph 2 of the orders.

11. It is unnecessary for present purposes to refer to the subsequent court orders.

    The agreed declarations and orders

12. The amended statement of charge is arranged in a number of sections as follows:

    (a)Edge Premium Funding Loan Agreement (charges A1 to A108).

    (b)The Ubank Internal Transfers (charges B1 to B876).

    (c)Transfers from the Ubank Savings Account (charges C1 to C15).

    (d)Transfers from the Ubank Transaction Account (charges D1 to D891).

    (e)Cameron Senese CBA Account Transactions (charges E1 to E6).

    (f)Kalus Kenny Trust Account Transactions (charges F1 to F16).

13. Eustace has admitted liability for contempt of court as alleged in charges A6, A15, A24, A33, A42, A51, A72, A78, A80, A82, A84, A86, A88, A90, A92, A94, A96, A98, A100, A102, A104, A106 and A108 in the amended statement of charge.

14. Transcomm has admitted liability for contempt of court as alleged in charges F2, F5, F8, F11 and F14.

15. Cameron has admitted liability for contempt of court as alleged in the following charges:

    (a)charges A9, A18, A27, A36, A45 and A54;

    (b)charges B109 to B162, B509 to B600;

    (c)charges C11 to C15;

    (d)charges D251 to D375, D720 to D891; and

    (e)charge F1.

16. As noted above, two statements of agreed facts have been prepared.  Copies of these statements are annexed to these reasons as Annexures “A” and “B”.   The first statement of agreed facts relates to the position of Allianz, Eustace and Transcomm.  The second relates to the position of Bianco and Cameron.  Although each of the statements of agreed facts annexes proposed orders, the parties provided my chambers with revised forms of proposed orders on 5 April 2018.

17. The effect of the orders proposed by the parties is as follows:

    (a)orders would be made that Eustace, Transcomm and Cameron are guilty of contempt as alleged in the charges referred to above;

    (b)the balance of the charges against Eustace, Transcomm and Cameron would be dismissed;

    (c)all of the charges against Allianz and Bianco would be dismissed;

    (d)costs would be reserved as between ASIC and Allianz, Eustace, Transcomm, Bianco and Cameron;

    (e)the matter would be listed on a date to be fixed to deal with penalties and costs.

18. In relation to (a) above, the parties’ proposed orders express these as “orders”, but I consider it more appropriate for these matters to be dealt with as declarations.

19. The statements of agreed facts set out in detail the relevant facts and matters relating to the contempt charges.  As these statements are annexed to these reasons, I do not consider it necessary to describe or summarise these facts in these reasons.

20. On the basis of the facts set out in the statements of agreed facts, and the admissions made in those documents, I am satisfied that each of Eustace, Transcomm and Cameron is guilty of contempt as set out in the charges identified in [33]-[35] above.  I consider that it is appropriate to make declarations to this effect.  I also consider it to be appropriate to make the consent orders proposed by the parties.

    The contempt charges against Kalus Kenny

    The charges

21. ASIC’s charges against Kalus Kenny are set out in Annexure “C” to these reasons (including an agreed correction to a figure in particular (v) to charge F12).  The charges are grouped in pairs, as follows:

    (a)charges F3 and F4, which relate to a payment of $4,158.06 on 25 January 2017;

    (b)charges F6 and F7, which relate to a payment of $757.02 on 20 December 2016;

    (c)charges F9 and F10, which relate to a payment of $2,266 on 25 January 2017;

    (d)charges F12 and F13, which relate to a payment of $1,750 on 6 February 2017; and

    (e)charges F15 and F16, which relate to a payment of $2,420 on 6 February 2017.

22. Each pair of charges is formulated in a similar way.  In each case, the primary charge assumes that Kalus Kenny’s liability for contempt of court is essentially strict.  And in each case, the alternative charge assumes that some mental intent must be proved.  For example, charges F3 and F4, without the particulars, are as follows:

    Charge F3

    On 25 January 2017, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016.

    …

    Charge F4

    Alternatively to Charge F3, on 25 January 2017, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016, knowing that to be in contravention of the Court Order.

    (Emphasis added.)

23. The following table sets out, for each pair of charges, the amount of the payment upon which the charge is based, the date of payment, and a summary of ASIC’s contentions as to breach of the court orders:

Charges	Payment amount	Date of payment	ASIC contentions
F3/F4	$4,158.06	25/01/2017	The payment brought the total payments for legal expenses to $54,942.57, being $1,904.88 in excess of total permitted
F6/F7	$757.02	20/12/2016	The payment was for legal costs for another matter, and was not permitted by the Court’s orders
F9/F10	$2,266.00	25/01/2017	The payment brought the total payments for legal expenses to $57,208.57, being $4,170.88 in excess of total permitted
F12/F13	$1,750.00	06/02/2017	The payment brought the total payments for legal expenses to $58,958.57, being $5,920.88 in excess of total permitted
F15/F16	$2,420.00	06/02/2017	The payment brought the total payments for legal expenses to $61,378.57, being $8,340.88 in excess of total permitted

The evidence

1. ASIC relied on the following affidavits in support of its contempt application against Kalus Kenny:

   (a)two affidavits of Bruce Standfield, a senior investigator in Financial Services Enforcement at ASIC, dated 1 May 2017 and 7 December 2017; and

   (b)three affidavits of James McAllister-Harris, a lawyer employed by ASIC in the Financial Services Enforcement team, dated 22 August 2016, 13 December 2016, and 31 January 2017.

   Neither Mr Standfield nor Mr McAllister-Harris was required to attend for cross-examination.

1. In addition to the above affidavits, ASIC tendered four affidavits of Michael Jonathan Kenny (Mr Kenny), the partner of Kalus Kenny responsible for the matter.  These were Mr Kenny’s affidavits dated 19 August 2016, 13 December 2016, 4 May 2017 and 2 March 2018.

2. Kalus Kenny relied on Mr Kenny’s affidavits dated 4 May 2017 and 2 March 2018, which had already been tendered by ASIC.  Mr Kenny was cross-examined by ASIC.

3. In final submissions, ASIC challenged Mr Kenny’s credibility.  I found Mr Kenny to be a credible witness.  He generally gave clear and precise answers and indicated when he was unable to recall something.  He was consistent in his position as to whether or not certain acts constituted a breach of the court orders.  I therefore accept his evidence.  That said, Mr Kenny’s own evidence establishes serious deficiencies in the processes adopted by Kalus Kenny to ensure that payments out of its trust account were permitted by the court orders.  I discuss these deficiencies below.

   Factual findings

4. In this section, I set out my factual findings in relation to the charges against Kalus Kenny.

   The period between 26 July and 31 December 2016

5. On 26 July 2016, this Court made freezing orders against the first to eleventh defendants.  These orders have been described in [25] above.

6. Shortly thereafter, Kalus Kenny was retained to act for the third to the eleventh defendants to the proceeding.  The partner of Kalus Kenny responsible for the matter was Mr Kenny.

7. On 3 August 2016, an affidavit of Cameron was filed in the proceeding.  In this affidavit, Cameron deposed at paragraphs 9-12:

   9.I currently have no income other than consultancy fees of $20,000.00 inclusive of GST, payable to Bianco Pty Ltd by Allianz Metro Pty Ltd and Transcomm Global Pty Ltd for my work which is IT operations and help desk support and writing computer programs and the design of the system on which the software will operate.  The software program I am writing is for an online credit card payment gateway which is not operational.  I know from my work, that Transcomm has not operated for the last 7 months.

   10.Given this matter that income will cease.

   11.I refer to paragraph 76 of Ms Miller’s affidavit in which there is a reference to a transfer of $122,475 to Bianco Pty Ltd.  The amount referred to represents payment to Bianco Pty Ltd of consultancy fees.  I was unaware that these payments had been made by Allianz until this investigation commenced.  I have no knowledge of the source of the funds used to pay the Bianco’s consultancy fees.

   12.Other than providing my services to Transcomm and IT help desk assistance to Allianz, Bianco conducts no other business and neither do I.

8. Further, in paragraph 23 of that affidavit, Cameron deposed that Mr Kenny had told him, and he (Cameron) believed, that the costs he had incurred with Kalus Kenny so far, and would incur on 3 August 2016, would be about $15,000.  He stated that he had not paid those fees given paragraph 3(e) of the 26 July 2016 orders.

9. On 3 August 2016, further freezing orders were made by this Court.  These orders have been described in [26] above.

10. On 11 August 2016, Kalus Kenny sent a letter to ASIC.  The letter commenced by stating that, in respect of Eustace and Sandra, Kalus Kenny was instructed as set out in the letter.  The letter relevantly stated:

    3.The only funds Tony and Sandra Senese have other than the funds in the personal account, are minimal funds in a debit card they use for expense [sic] in Italy.  The current balance in the debit card is EUR9,640.

    …

    5.If $15,000 is applied for legal costs as requested above, the balance in [Transcomm’s bank account] will be $113,213.68.

    …

    7.Monthly expenses include rent in Italy of 1,300 Euro per month (about AUD$2,000) and Australian mortgage payments of $7,300 per month.  Other bills and living expenses equal about $6,000 per month for both of them.

    8.Had it not been for this matter, Sandra Senese would have used funds in the Transcomm Account for the living expenses by way of salary or loan account.

    9.Without the funds, she has no other access to funds.

11. On 22 August 2016, further orders were made by this Court, the effect of which was to create further carve outs.  These orders have been described in [27] above.  As noted above, the effect of these carve outs was to permit Transcomm to apply $44,000 towards legal expenses.

12. On 10 November 2016, ASIC sent a letter to Kalus Kenny.  The letter addressed, among other things, the continuation of carve out orders for the defendants’ legal expenses.  It was noted that, in a letter to ASIC of 26 September 2016, Kalus Kenny had sought an extension of time on behalf of the defendants for compliance with an ASIC document production notice on the basis that Eustace had “business travel commitments”.  ASIC stated that, based on this letter, it appeared that the defendants were now conducting business in Italy and had an income there.  The letter requested that, if that was not the case, sworn evidence be provided from the defendants as to their business activities in Italy (or any other place).

13. On 15 November 2016, a further hearing in the proceeding took place and further orders were made, as described in [28] above.  These orders included a general freezing order in relation to Transcomm.  It is this order (as varied by the orders made on 14 December 2016) that is alleged to have been breached by Kalus Kenny.

14. Following the 15 November 2016 order, further correspondence was exchanged between ASIC and Kalus Kenny regarding carve outs.

15. On 14 December 2016, a further hearing in the proceeding took place.  The topic of carve outs was raised in the course of this hearing.  Junior counsel for ASIC indicated to the Judge that further carve outs for legal expenses had been sought by Cameron, Eustace and Sandra, but ASIC wanted substantiation of the costs that they had incurred and evidence about their financial position and access to funds.  Ultimately, orders were made on 14 December 2016 as described in [29] above.  The effect of these orders was to permit Transcomm to apply a further $9,037.69 to the legal expenses of Eustace and Sandra, bringing the cumulative total that Transcomm could apply to legal expenses to $53,037.69.

16. On 20 December 2016, a payment of $757.02 was made from Kalus Kenny’s trust account.  This payment is the subject of charges F6 and F7 against Kalus Kenny.  The most useful record of the relevant trust account transactions is a three-page document on the letterhead of Kalus Kenny, expressed to be a statement of account for the period to 8 September 2017, which forms part of annexure “BCS-4” to Mr Standfield’s 7 December 2017 affidavit (the Statement of Account).  The Statement of Account sets out relevant receipts, payments and transfers in respect of the firm’s trust account during the period from 26 August 2016 to 6 February 2017.  The document states that the client was “Senese”, the matter details were “Dispute with ASIC” and the matter number was 161550 (which Mr Kenny said was the firm’s matter number for Eustace).  The Statement of Account is arranged in six columns, with the following headings: date; receipt/payment/journal; from/to reason; debit amount; credit amount; and balance.  Mr Kenny said during cross-examination, in relation to the Statement of Account, that “I didn’t effect the transactions or create the document, but I believe that it’s accurate”.

17. The payment of $757.02 on 20 December 2016 appears as follows in the Statement of Account (omitting the last two columns):

Date	Receipt/ Payment/ Journal	From/To Reason	Debit Amount
20/12/2016	Journal	Matter 161550 to 160401 Matter 160401 Re: Claim to Vero Client: Mr Senese T/fer from 161550 to 162401 - Payment of Inv 45408 …	757.02

1. It is common ground that this payment was applied, not for legal expenses for this proceeding, but for another legal matter.  In my view, the carve outs for legal expenses in the court orders dated 22 August 2016 and 14 December 2016 (set out at [27] and [29] above) were for legal expenses in relation to the present proceeding.  Although not stated expressly in the orders, I consider that this goes without saying.  This was not seriously challenged by Kalus Kenny.  Accordingly, the payment of $757.02 from Kalus Kenny’s trust account was not permitted by the carve outs for legal expenses, and involved a breach by Transcomm of the general freezing order.  (I note that this is admitted by Transcomm.  Of course, that admission is not evidence in the contempt application against Kalus Kenny.)

2. On 21 December 2016, an examination pursuant to s 19 of the ASIC Act (section 19 examination) of Cameron took place.  At this examination, Cameron informed ASIC, for the first time, that he held bank accounts at a bank named “UBank” and had received regular monthly payments of income into one of these accounts.

   The period between 1 January and 3 March 2017

3. On 25 January 2017, ASIC sent a letter to Kalus Kenny. This letter referred to statements made by Cameron during the section 19 examination. On the basis of these statements (as summarised in the letter), ASIC stated that the defendants did not appear to require any further carve outs from the frozen accounts. It was stated that ASIC would oppose any application for carve outs for Cameron, Eustace or Sandra.

4. On 27 January 2017, Kalus Kenny sent an email to ASIC in response to the 25 January 2017 letter.  The email indicated that carve outs would be sought as follows: $15,000 per month for living expenses for Eustace and Sandra; and $12,000 for living expenses for Cameron.  The email did not respond to the substance of the matters raised in ASIC’s 25 January 2017 letter.

5. On 30 January 2017, ASIC sent a letter to Kalus Kenny.  In relation to the issue of carve outs for Cameron, the letter referred to ASIC’s letter dated 25 January 2017, and stated that Kalus Kenny had not addressed the substantive matters raised in that letter, nor had it sought to justify with supporting sworn evidence why Cameron needed further carve outs from the frozen accounts.  In relation to carve outs for Eustace and Sandra, the letter stated that Kalus Kenny’s email of 27 January 2017 had not addressed the issue raised by ASIC in its earlier letter, which suggested that Eustace did not require access to the frozen accounts for living and legal expenses.

6. On 1 February 2017, an affidavit of Cameron of that date was served, in anticipation of a hearing in the proceeding to take place the next day.  In this affidavit, Cameron provided the following details in relation to his financial position:

   4.On about 25 August, 2016 I opened account number [details omitted] with U Bank (Ubank account 1) which is an interest bearing account and I also opened account number [details omitted] which is a transaction account (Ubank account 2).

   5.The only reason I did so was to overcome difficulties and significant delays in withdrawing funds from the Commonwealth Bank accounts referred to in paragraph 2 of the Orders made on 3 August, 2016, which difficulties and delays were directly attributable to the orders affecting that account.

   6.I opened two UBank accounts to avoid those delays and so that I could regularly withdraw funds for living expenses.

   7.At the time I opened the accounts I did not appreciate that I was required to inform my solicitor or ASIC about the existence of these accounts.

   8.In or about late August, 2016 I commenced providing IT Services to the Comersa Group at an agreed fee of $15,000.00 per month.  I received my first monthly payment of $15,000 from the Comersa Group at the end of August 2016.

   9.I deposited that amount and the monthly income received by me thereafter into UBank account 1.

   10.Since then my spending from the account has been about as follows:

Jan 2017:	$20,000
Dec 2016:	$8,000
Nov 2016:	$25,000
Oct 2016:	14,000
Sep 2016:	$9,000

The reference to the “Comersa Group” is explained in Mr Kenny’s affidavit, referred to in the next paragraph of these reasons.  In oral submissions on the hearing of the contempt application, ASIC submitted that, by the steps described in the above passage, Cameron had effectively circumvented the orders that had been made in the proceeding.

1. An affidavit of Mr Kenny dated 1 February 2017 was also served on 1 February 2017.  In this affidavit, Mr Kenny deposed:

   2.At about 6 pm Melbourne time (8 am Rome time) I had a telephone discussion with Eustace Senese who told me, and I believe as follows.

   3.Comersa Group is a business he is trying to develop.  At this stage its only activity is retaining Cameron Senese to develop software.  It has never traded, it has no funds, and it has never generated any income.

   4.The funds used to pay Cameron Senese’s remuneration have come from loans Eustace Senese has secured from friends.

   5.Eustace Senese has not to date obtained any loans for himself or for Sandra Senese for living expenses.

   6.He has very recently obtained a loan of $15,000 for legal fees which was paid into the trust account of my firm in the last few days.

   7.Prior to and on 14 December, 2016 he did not have access to any funds for legal expenses other than the funds that were in the Transcomm account.

   ASIC submitted at the hearing of the contempt application that the statements in this affidavit were contrary to the statement in the 11 August 2016 letter to the effect that Eustace had no source of funds other than funds in his and Sandra’s personal account and minimal funds in a debit card.

2. On 2 February 2017, a hearing in the proceeding took place.  Senior counsel for ASIC indicated that ASIC opposed any further carve outs in favour of Cameron.  It was submitted that: the earlier carve outs had been permitted because Cameron had sworn that he was in receipt of no income; Cameron had now told ASIC that, in the entire period since August 2016, he had been receiving $15,000 a month; and this had not been disclosed to this Court on 22 August 2016, 15 November 2016 or 14 December 2016.  Counsel for the third to eleventh defendants sought a carve out for living expenses for Cameron.  Counsel submitted that, given the general freezing order in paragraph 1(e) of the 15 November 2016 orders, absent a carve out, Cameron could not withdraw money from his bank accounts.

3. In the course of submissions on 2 February 2017, senior counsel for ASIC submitted that this Court had been misled over a long period of time.  Her Honour observed that, “[i]f there has been the withholding of information about moneys that [Cameron] received which was not disclosed [it] is a very serious matter”.  Her Honour also said that, if the freezing order was being extended, it was still necessary, nonetheless, for Cameron to have access to certain funds for living expenses.  Ultimately, the Judge made further freezing orders on 2 February 2017, as described in [30] above.

4. On 17 February 2017, Cameron filed and served an affidavit setting out further details of his financial position.

5. On or about Tuesday, 28 February 2017, Mr Kenny became aware that payments had been made from Kalus Kenny’s trust account that may have exceeded the carve outs for legal expenses in the court orders.  He raised this issue in a letter to ASIC on Wednesday, 1 March 2017.  The letter sought agreement from ASIC on three issues: an increase in the amount of the carve outs for legal expenses; an extension of time to serve certain affidavits; and in relation to a confidentiality issue.  The letter stated in part:

   Amount of carve out for legal costs

   In the course of preparing for Friday’s hearing [ie on 3 March 2017] I have prepared a detailed analysis.  That process has [led] me [to] the conclusion that $20,000 is not sufficient.

   Attached is a summary of funds my firm has received, paid out, and billed.

   Carve out orders for legal fees for Eustace and [Sandra] Senese have to date been :

Order made on 22.8.16	$44,000.00
Order made on 14.12.16	$9,037.69
$53,037.69

You will see from the analysis that bills rendered so far total $76,439.72 which includes $6,949.06 for gst.

The shortfall is $23,402.03 although the amount owing to us is $18,223.63.

That means we have inadvertently received $5,178.40 more than allowed in the carve outs.

I note that we have received $5,292.37 so far for gst, and not for legal costs.

I did not appreciate that until I had undertaken the [analysis] in the past day.

I will inform the Court at the next opportunity.

We currently have $8,548.12 in trust for our fees, which I have not applied due to the carve out limit to date.

Fees rendered so far do not allow for the costs of obtaining instructions and preparing the 2 affidavits.

There should also be a buffer so I do not need to seek consent every time, or seek a court order every time.

I suggest an appropriate carve out should now be $38,000 to allow for the following:

1.	Payment of fees now due	$18,223.63
2.	Work on the 2 affidavits including obtaining instructions and counsel’s fee to settle affidavits if so instructed	$6,600.00
3.	Work to prepare for and appear at the next hearing currently scheduled for 5 May, 2017 - solicitors fees and counsel’s fees	$15,400.00
$40,223.63
The above figures include gst.

The above is designed to avoid this type of issue arising again before the next hearing on 5 May.

Please advise if ASIC agrees to the amount of the carve out being $40,000.

This request does not involve or include accessing the frozen assets.

(Emphasis added.)

1. The figure of $53,037.69 referred to in the letter reflects the cumulative total of the carve-outs for Transcomm for legal expenses.  In relation to the statement that Kalus Kenny had “inadvertently received $5,178.40 more than allowed in the carve outs”, I note that this figure does not include GST.  There is also a difference between Mr Kenny’s calculations in the 1 March 2017 letter, and his later calculations, in his evidence in response to the contempt application.

2. Attached to the 1 March 2017 letter was a document headed “Trust Account Statement – Tony Senese”.  This was a typed extract from the firm’s trust account for Eustace.  However the information in that extract does not appear to be correct in some respects.  The Statement of Account (referred to in [60] above) provides a more reliable record of the movements in Kalus Kenny’s trust account.

3. The Statement of Account shows that, on 25 January 2017, $8,000 was paid into the trust account by Eustace and that, on 31 January 2017, a further $7,000 was paid into the trust account by Eustace.  Mr Kenny was cross-examined about these payments into the trust account.  The general line of questioning was as to whether someone in the firm had realised that there was not enough money in the trust account to pay the outstanding invoices and had requested further funds to be paid into the account.  Mr Kenny said that he did not know.  He said that he thought that Eustace had borrowed the $15,000 and paid it into the trust account in two tranches, and that he had done so because there was significant further work to do.

4. On 25 January 2017, payments in the amounts of $4,158.06 and $2,266 were made out of Kalus Kenny’s trust account.  On 6 February 2017, payments in the amounts of $1,750 and $2,420 were made out of the trust account.  These four payments are the subject of charges F3, F4, F9, F10, F12, F13, F15 and F16 against Kalus Kenny.  The payments appear as follows in the Statement of Account (omitting the last two columns):

Date	Receipt/ Payment/ Journal	From/To Reason	Debit Amount
25/01/2017	Transfer	Matter 161550 to 161550 Trust to office transfer to pay Tax Invoice 48183 …	4,158.06
25/01/2017	Transfer	Matter 161550 to 161550 Trust to office transfer to pay Tax Invoice 48531 …	2,266.00
…
06/02/2017	Payment	Creditor/Pay to: MELDRUM & HYLAND Payee: Meldrum & Hyland Barrister … – Slip Number …	1,750.00
06/02/2017	Transfer	Matter 161550 to 161550 Trust to office transfer to pay Tax Invoice 48711 …	2,420.00

1. Three of the four payments were transfers from Kalus Kenny’s trust account to its office account by way of payment of Kalus Kenny’s invoices.  One of the payments was a payment of counsel’s fees.  It is common ground that the payments were made on behalf of Transcomm: see [14] above.

2. There is an issue as to whether one takes GST into account in calculating the amount permitted to be paid for legal expenses under the carve outs. In other words, were the carve out amounts GST-inclusive or GST-exclusive figures? If the carve out amounts were inclusive of GST, then all four payments exceeded the cumulative total (by the amounts contended for by ASIC and set out at [43] above) and were in breach of the court orders. If the carve out amounts were exclusive of GST, then the last two payments exceeded the cumulative total and were in breach of the court orders. I discuss the GST issue later in these reasons.

3. I note that Transcomm admits that the four payments involved a breach of the court orders.  Of course, this is not evidence in the contempt application against Kalus Kenny.

4. On 3 March 2017, a further hearing of the proceeding took place.  Mr Kenny appeared for Eustace and Sandra at this hearing.  At this hearing, Mr Kenny informed the Judge that payments out of the firm’s trust account may have exceeded the carve outs.  He also sought a further carve out for legal expenses.  Referring to the letter dated 1 March 2017, which had been annexed to an affidavit he had sworn, Mr Kenny explained the position to the Judge as follows:

   So your Honour, exhibit … [M]JK4 is the letter dated 1 March.  So under the first heading, Carve-Out for Legal Costs[,] [w]hat I’ve done there, your Honour, is I’ve explained that the carve outs for legal costs so far for Mr and Mrs Senese have been a total of $53,000.  See that at the bottom of page 1 of the letter.

   …

   And I then say that I’ve now done an analysis where the bills rendered for Mr and Mrs Senese so far total about $76,000.

   …

   About $7000 of that is GST.  So if one then turns over the page, your Honour, what I’ve explained is the shortfall of the carve outs as compared to the bills rendered is $23,000, but there’s currently $18,000 owing to my firm, which means my firm has received $5000 more than the carve outs.  What I’ve explained is that I did not appreciate that until I had undertaken the analysis the day before I wrote this letter and that I would bring that to the court’s attention, which I’m now doing, your Honour.  Interestingly, though, the $5000 extra, your Honour, is actually also the amount of the GST we’ve paid so far.

   So if you like when your Honour has made orders allowing certain amounts for legal fees, we’ve actually received pretty much a couple hundred dollars less than the orders – the carve outs [that] have been allowed.  The $5000 extra that we’ve received actually would have been for GST, not for legal fees.  In any event, your Honour, I then explain that based on the trust account statement, which is the next document, we’ve got $8500 left in trust at the moment.  That’s not from the frozen accounts, your Honour.  That was from – if you will – that was from $15,000 that was received from Mr Senese in late January and that was the subject of an affidavit on the last occasion.

5. Her Honour ruled that there should be a further carve out with respect to legal costs.  Her Honour said:

   On the question of the carve out, I have before me the affidavit of Michael [Jonathan] Kenny setting out, in some detail, the basis upon which a further carve out in the amount of $40,000 is sought and as to why it is that the amount sought by way of carve out has effectively doubled since earlier this week when Mr Kenny put to ASIC that a carve out of $20,000 was required.

   I am satisfied on the basis of the material furnished to me by Mr Kenny that … there is justification for a carve out up to amount of $40,000 and, so finding, I note that $15,400 relates to anticipated work to prepare for and appear at the next hearing which is scheduled for 5 May 2017.  One of the aspects of this case which seems to impede the progress of this case on a timely basis … has been the need for carve outs to be determined for the purposes of [preparing] for the next directions hearing and the further steps that are being undertaken in this matter.  I consider it reasonable to allow a buffer so that work can continue to be undertaken pending the next directions hearing and not held up because of the need to come to court to obtain further order in relation to carve outs.

   The period after 3 March 2017

6. On 10 March 2017, an affidavit of Mr Kenny was filed and served.  This related to an order that had been made on 21 February 2017 requiring Eustace and Sandra to file and serve affidavits setting out their financial position.  The affidavit of 10 March 2017 set out a number of practical difficulties relating to the swearing of affidavits by Eustace and Sandra, who were living in Italy (apparently to support an application that they be excused from the requirement to provide affidavits).  The letter annexed an unsworn affidavit that Mr Kenny had prepared for Eustace on his instructions.  Mr Kenny deposed that Eustace had informed him that the contents were true and correct.  In the unsworn affidavit, Eustace referred to a loan agreement between a lender and him dated 1 August 2016 (the Edge Premium Funding Loan Agreement).  Eustace stated that he made arrangements for the loan about two months prior to 1 August 2016 for the purpose of funding a new venture that was discussed in the unsworn affidavit.  Eustace stated that the lender had paid certain amounts to Cameron and other recipients (as set out in the unsworn affidavit).  These amounts included two payments for legal fees: $8,000 on 24 January 2017; and $7,000 on 31 January 2017.  Eustace stated that Mr Kenny had explained to him that the above spending had exceeded the carve outs ordered by this Court.  He stated: “That was inadvertent on my part.  I did not appreciate that payments by the lender to Cameron Senese, was spending by me.  If I had appreciated that I would have informed Mr Kenny and instructed him to seek that carve out.”

7. A copy of the Edge Premium Funding Loan Agreement was annexed to Mr Kenny’s affidavit of 10 March 2017.  Mr Kenny deposed in paragraph 8 of his affidavit:

   I became aware of the matters contained in Mr Senese’s unsworn affidavit relating [to] the loan funds and how those funds have been applied earlier this week.  I first sighted the loan agreement on 21 February 2017.

8. The Judge was not prepared to dispense with compliance by Eustace and Sandra with the requirement that they swear affidavits setting out their financial position.  An affidavit was sworn by Eustace on 27 April 2017 and an affidavit was sworn by Sandra on the same date.

   Kalus Kenny’s practices and state of mind

9. I now discuss the evidence in relation to, and make findings about, Kalus Kenny’s practices and its state of mind in relation to the payments that are the subject of the contempt charges against the firm.  Both parties proceeded on the basis that, insofar as ASIC alleges in its alternative charges that the firm had a particular knowledge or intent, this was to be determined by reference to Mr Kenny.  It was not suggested by ASIC that anyone else at the firm had the knowledge or intent alleged in the alternative charges.

10. In his affidavit dated 4 May 2017, Mr Kenny gave the following evidence.  There were some corrections made in his later affidavit of 2 March 2018, which have been incorporated in the following summary.

    (a)Mr Kenny stated that all of the charges against his firm were denied and that, save for “an error on my part” in relation to the sum of $2,761.02, the matters alleged by ASIC as constituting the alleged contempts by the firm were incorrect.

    (b)Mr Kenny expressed the view that “legal costs” (referred to in the 22 August 2016 orders) meant fees payable to his firm, and “disbursements” (referred to in the same orders) meant amounts payable by the firm for counsel’s fees, search fees, courier fees, travel costs, and the like.  He said that disbursements did not include GST, which was a separate charge that was required to be imposed by the firm each time it rendered a bill of costs.

    (c)Mr Kenny said that, when the orders were made, he did not turn his mind to the effect of GST.

    (d)He said that when Kalus Kenny renders a bill for legal costs and disbursements, it adds to the amount of legal costs and disbursements 10 per cent GST, which Kalus Kenny remits to the Australian Taxation Office on a quarterly basis.

    (e)Mr Kenny stated that he had examined his firm’s trust account ledger for Eustace and Sandra.  He set out amounts received by Kalus Kenny up to 1 March 2017 for legal costs and disbursements and GST.  The total was $61,378.57 (as corrected in the 2 March 2018 affidavit).

    (f)In relation to the payment of $757.02 on 20 December 2016, Mr Kenny said that this was a payment for an unrelated matter, not for the present proceeding, and “so it should not have been included in that statement”.  Annexed to the affidavit was an email exchange between Eustace and Mr Kenny in relation to the payment of $757.02.

    (g)Mr Kenny accepted that, in relation to the payments of $1,750 and $2,420 on 6 February 2017, there was a payment in excess of the amount allowed for legal costs and disbursements.  Mr Kenny stated that this “was an unintentional error on my part”.

11. Mr Kenny also stated in his 4 May 2017 affidavit:

    17.I did not realise that the amount transferred on 6.2.17 was in excess of the amounts allowed until about 1 March, 2017.  I immediately informed ASIC by letter dated 1 March, 2017, which is exhibit “MJK-4” to my affidavit sworn on 2 March 2017.  I also informed the Court about this at the hearing at the hearing on 3 March, 2017.  I refer to the transcript of that day, … and in particular to the matters commencing at line 35 on page 3 through to line 30 in page 4 of the transcript.  I now appreciate that my calculation was incorrect at that time as I had incorrectly assessed the effect of GST and the amounts received.

    18.I did not appreciate that the receipt by my firm of the amounts on 6.2.17 would exceed the amounts allowed for legal expenses.  I mistakenly believed that the amounts being paid to my firm were within the amounts allowed.

12. Mr Kenny gave the following evidence during cross-examination:

    (a)The firm’s invoices for the present proceeding were prepared by a secretary.  The invoices were then settled by Mr Kenny.  Under the retainer arrangement with the defendants to the proceeding, the firm had permission at the outset to transfer funds from the firm’s trust account to pay the invoices.

    (b)The general practice of the firm (for other files) is that, once an invoice has been rendered and processed through the firm’s accounts department, if there are funds in trust, funds are transferred from the trust account to the office account to pay the invoice.

    (c)The Eustace and Cameron files were “the only ones where there were orders in place of this kind”.  Mr Kenny said that “ordinarily, the process should have been that no funds should be transferred without my authority”.

13. Mr Kenny was asked during cross-examination whether he formally approved the four transfers on 25 January and 6 February 2017.  He said: “I don’t recall … I don’t have a record of approving them.”   He said that “I’ve gone back to look at my records and I can’t find any record of what happened”.

14. Later during the cross-examination, Mr Kenny was asked further questions relating to approval of transactions shown in the Statement of Account.  This evidence makes reference to two debit entries that appear in the Statement of Account before the four payments set out in [76] above.  The two debit entries were $4,391.69 (on 17 January 2017) and $4,500 (on the same date).  The following exchange took place.

    [T]he total carve outs that had been allowed were $53,037.69. Now, on the – so if we go over to 17 January 2017, when that amount of $4391.69 was transferred out of the office account, did you verify that that – that the transfer of that amount did not result in any excess of the carve outs?---I don’t believe so.

    No. Do you know to your knowledge whether anyone in your firm did that?---I don’t believe anyone else did that.

    Right. And the same about the next item – $4500 – is it the same answer?---Is that on 17 of – of January?

    It’s on 17 January?---Yes.

    And does that apply to the following four payments on – there are two payments on 25 January 2017: one of $4158 and another of $2266. You didn’t turn your mind to whether the making of those payments exceeded the carve out limits?---No.

    To your knowledge, you don’t know that anyone else in your firm did that?---No.

    And the same goes for the two payments on 6 February: 1750 and 2420?---That’s correct, and, Mr Pearce, if I would have known that any – any of those payments put us over the carve out, there’s – there’s no way I would have allowed these payments or – to occur, because there’s no way that I would deliberately breach an order of the court.

    (Emphasis added.)

    In the above passage, Mr Kenny accepted that neither he nor anyone else at Kalus Kenny checked whether the relevant payments out of the trust account would exceed the carve outs and thus breach the court orders.  I note that Mr Kenny answered “No” to the fifth and sixth questions set out above.  It is clear from the context that he was accepting the proposition that was being put to him, namely that he did not turn his mind to whether the making of the payments exceeded the carve outs, and he did not know whether anyone else at the firm turned their mind to this question.

15. Mr Kenny was then asked questions regarding whether Kalus Kenny had procedures in place to ensure that the court orders were not breached.  The following exchange took place:

    Your firm had no procedures in place to ensure that the order was not breached, did it?---No, that’s not correct.

    What were the procedures that you put in place to ensure that the orders were complied with?---I had told the – the accounts department staff in August that they were not to transfer any monies in the Tony Senese file or the Cameron Senese file without checking with me.

    So it’s their fault, is it? They made these transfers without checking with you?---I – I’m not saying it’s their fault. I’m – you asked me what the process was, and I – I told – instructed them not to make any payments without checking with me.

    Well, this was back in August, you told them that?---Yes.

    And numerous payments were made from August through to January. You must have been aware that those payments were being made, weren’t you?---Most of the time I was aware, yes.

    Yes. And they were being made without checking with you?---No.

    Which payments in this statement of account document were made after checking with you?---I can’t say, really, but – I can’t say, but I – I do recall – from time to time the accounts staff asking me for authority to pay accounts.

    …

    But in respect of these payments, the two payments on 25 January and the two payments on 6 February, you’re confident that your authorisation or approval was not sought in respect of those payments?---Mr Pearce, I can’t recall. I can explain this. I – I’ve had a look at what I was doing on those days. On 24 January, I wasn’t in the office. I was – I had a matter commencing at 9.30 in this court before Registrar Allaway, and I was appearing as counsel, and I spent most of the day doing that. … I then had a conference with a barrister, where I went immediately after court. And I believe I then went home. On 25 January, I was at a wedding … and I didn’t come to the office that day, either. So I don’t recall – I don’t have any recollection of my authority being sought for these transfers, and I don’t recall – well, I certainly know that – I certainly know that I made no check of the account at the time.

    …

    So the state of evidence before his Honour as to how these moneys came to be paid on that day was that you, sitting there in the witness box, can’t give an explanation for why those payments were made without your authorisation?---No.

    And the same goes for the two payments on 6 February; no explanation?--- That’s correct.

    I note that Mr Kenny answered “No” to the second last question in the above passage.  Read in context, Mr Kenny was accepting the proposition that he could not provide an explanation for why the two payments on 25 January 2017 were made without his authorisation.  The same answer applied for the two payments on 6 February 2017.

16. Mr Kenny made clear in his evidence during cross-examination that it was only after he realised that the payments may have exceeded the carve outs that he considered the question whether GST was to be taken into account in calculating the total amount permitted by the carve outs.  This was not an issue he had considered earlier, for example, at the time the payments were made.

17. On the basis of the evidence set out above, I make the following findings:

    (a)Mr Kenny’s own evidence establishes that neither he nor anyone else at Kalus Kenny turned their mind to whether the four payments that were made on 25 January 2017 and 6 February 2017 exceeded the carve outs.

    (b)Mr Kenny was unable to provide an explanation for how the payments came to be made in breach of the court orders.  (Even if the cumulative total of the carve outs was a GST-exclusive figure, two of the four payments made on 25 January 2017 and 6 February 2017 were in breach of the court orders.)

    (c)In response to the proposition that the firm had no procedures to ensure the orders were not breached, the only procedure Mr Kenny identified was that he had instructed the accounts department not to transfer moneys in the Tony Senese file or the Cameron Senese file “without checking with me”.  Mr Kenny did not provide any documentation in relation to this instruction and I infer that it was oral.  The procedure he referred to (if it can be called that) did not require his authorisation to be obtained in writing.  Nor did the procedure incorporate a process for calculating, before a payment for legal expenses was made, the total amount that had already been paid towards legal expenses and a comparison against the cumulative total permitted by the carve outs.  In light of these matters, Mr Kenny’s own evidence establishes serious deficiencies in the processes adopted by Kalus Kenny to ensure that payments out of its trust account were permitted by the court orders.

    (d)Mr Kenny made clear in his evidence that it was only after he realised that payments may have exceeded the carve outs that he considered the question whether GST was to be taken into account in calculating the total amount permitted by the carve outs.  He made clear that he had not considered this position earlier.  He did not suggest, for example, that he had authorised the payments to be made on the basis of this interpretation of the orders.  To the contrary, Mr Kenny did not turn his mind to whether the payments exceeded the carve outs.

    (e)In relation to the payment of $757.02 on 20 December 2016, I infer that the position as regards this payment was substantially the same as with the four payments made on 25 January 2017 and 6 February 2017.

    (f)I accept Mr Kenny’s evidence that, if he had known that any of the four payments exceeded the carve outs, he would not have allowed the payments to occur.  Mr Kenny was not directly challenged on this evidence.  If and to the extent that he was indirectly challenged, he did not waver from this position.  I consider it most unlikely that Mr Kenny, as an experienced legal practitioner, would have permitted the payments to be made if he had realised or considered there was a possibility that they exceeded the carve outs.

    Consideration

40.After the 15 November 2016 Order was made and before 2 February 2017, Cameron transferred money from the Ubank Savings Account to the Ubank Transaction Account and from the latter account Cameron made numerous payments for living expenses.  The transfers are the subject of Charges B509 to B600 (transfers totalling $55,745.54) and the payments are the subject of Charges D720 to D891 (transfers totalling $55,887.82).

41.Cameron first disclosed to the Court his $15,000 per month remuneration in his Affidavit sworn 1 February 2017.  At that time, Cameron thought he had breached the Orders made by the Court by spending on living expenses more than the $12,000 per month permitted by the 15 November Orders.  Cameron deposed that:

10.Since then [opening the UBank Accounts] my spending from the account has been about as follows:

Jan 2017:       $20,000
Dec 2016:       $8,000
Nov 2016:       $25,000
Oct 2016:       $14,000

Sep 2016:       $9,000

14.I acknowledge that I have drawn from the UBank transaction account amounts that exceed $12,000 per month.  I did so foolishly and without properly appreciating the effect of the order of the Court limiting my spending.  I now realise that I should have informed Mr Kenny immediately after I opened the UBank Accounts and that I was also foolish and naïve in not doing so.

42.On 2 March 2017, Eustace paid $30,000, being two payments of his $15,000 per month remuneration, into KKI’s trust account for Cameron.

43.On 2 March 2017, KKI paid $12,000 from the KKI trust account to the Ubank Savings Account (the deposit was received on 9 March 2017 with the notation “Transfer Living Expenses Kalus Kenny”.  On 10 March 2017 Cameron transferred $10,662.92 to Jacqueline. Cameron adopted this process to ensure that he did not breach the $12,000 limit for living expenses.

44.On 1 May 2017 ASIC served its Interlocutory Application and Statement of Charges bearing that date.

ADMISSION OF GUILT AND APOLOGY TO THE COURT

45.Cameron admits that he intended to receive the payments of remuneration referred to in paragraphs 27, 28, 29, 30, 33, 38 and 42 above and that therefore he is guilty of each of the contempts referred to in Charges A9, 18, 27, 36, 45 and 54 and Charge F1.

46.Cameron admits that he intended to make the payments of living expenses referred to in paragraphs 32, 39 and 40 above and that therefore he is guilty of each of the contempts referred to in Charges B109 to 162, B509 to 600, C11 to 115, D251 to 375 and Charges D720 to 891.

47.In respect of each charge of contempt of which he is guilty, Cameron did not intend to breach the relevant Order made by the Court.

48.Cameron apologises to the Court for each breach of the Orders referred to in the three preceding paragraphs.

MATTERS GOING TO MITIGATION AND CAMERON’S PERSONAL

CIRCUMSTANCES

No Prior Contempts

49.Cameron has not been charged with contempt of court before and hence has not been found guilty of contempt before.

Co-operation with ASIC

50.In December 2017, Cameron initiated the discussions which have led to this Statement.

Cameron Admits his Guilt and Consents to the proposed Penalty and Costs Order

51.      Cameron has admitted his guilt above.

52.Cameron agrees to make submissions to the Court about the appropriate penalty and ASIC’s costs in accordance with paragraphs 65 to 70 below. Cameron will pay any fine the Court determines, and any legal costs, from his own resources.

Cameron’s Personal Circumstances

53.      Cameron was born in 1974.

54.Cameron graduated from Charles Sturt University with a Master’s Degree in Networking and Systems Administration in 2013.

55.Cameron has lived with Jacqueline since 2000.  They have one son who is 16 years old.  They reside at, and are the joint registered proprietors of, [details omitted] Massey Street, Box Hill (Massey Street).

Cameron’s Employment

56.Since June 2017, Cameron has worked for Oracle Corporation Australia Pty Ltd.  His remuneration is salary and commission based.  He receives a salary of $15,000 per month (gross) and is entitled to a variable commission based on the performance of up to $77,143.00 per annum (gross) payable quarterly. To date, Cameron has been paid commissions of $9,677.00 (net).

Jacqueline’s Employment

57.Jacqueline is a qualified nurse.  Jacqueline is casually employed by Royal Freemasons Aged Care and given her casual employment does not have set hours of work.  She earns approximately $2,400.00 a month (gross).

Cameron’s Assets and Liabilities

58.Cameron set out his financial position in his affidavit sworn 17 February 2017.  His financial position remains similar, the differences being set out in the following paragraphs.

59.The change in Cameron’s employment since his 17 February 2017 affidavit is set out in paragraph 56 above.

60.As Cameron disclosed in his 17 February 2017 affidavit, he has a large tax debt.  The debt was agreed with the Australian Taxation Office (ATO) at $194,000.

61.As Cameron disclosed in his 17 February 2017 affidavit, he and Jacqueline had two home loans which then totalled approximately $612,000.  Those loans were recently refinanced.  Massey Street was valued at $1.3 million. The new loan was for $800,000.  The balance was paid by the financier directly to the ATO.

62.Cameron does not know whether he can borrow further from the financier to pay any fine or costs which the Court may order him to pay.  If he cannot, he intends to obtain the money from family and friends.

63.At present, Eustace is paying Cameron’s legal costs of the proceeding.

Bianco’s Assets and Liabilities

64.      Bianco has no assets and is not trading.

AGREED PENALTY AND COSTS

65.ASIC, Bianco and Cameron accept that it is ultimately for the Court to determine whether a penalty is to be imposed on Cameron, and if so its quantum, and what orders as to the costs of the Contempt Application should be made.

66.Subject to the preceding paragraph, ASIC, Bianco and Cameron have agreed to the terms of the disposition of the Contempt Application.

67.They agree that the following charges cover single courses of conduct for which the following penalties are appropriate, and should be imposed:

67.1.Charges A9, 18, 27, 36, 45 and 54 and Charge F1 (being receipts of remuneration into the Ubank account) - $5,000

67.2.Charges B109 to 162, B509 to 600, C11 to 115, D251 to 375 and D720 to 891 (being payments made by Cameron) - $5,000,

68.They agree that Cameron should have 90 days after they are imposed or until 30 June 2018, whichever is the earlier, within which to pay them.

69.They agree that Cameron should pay ASIC’s costs fixed at $10,000 and that Cameron should have 90 days after the costs are imposed or until 30 June 2018, whichever is the earlier, within which to pay it.

70.They agree that as against Bianco, the Contempt Application should be dismissed with no order as to costs.

PROPOSED ORDERS

71.By the Order of the Court made on 16 March 2018 the hearing of the Contempt Application was divided into the “Liability Question” and the “Penalty Question”.

72.The Proposed Orders in Annexure A [not reproduced] are intended only to deal with the Liability Question.

73.As anticipated by paragraph 6 of the Order of the Court made on 16 March 2018, joint submissions will be filed concerning matters relevant to penalty and costs which will focus upon the appropriateness of the proposed penalty and costs referred to above.

Date:    23 March 2018

ANNEXURE C

THE CHARGES AGAINST KKI IN THE AMENDED
STATEMENT OF CHARGE

F.        KALUS KENNY TRUST ACCOUNT TRANSACTIONS

…

Charge F3

On 25 January 2017, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016.

Particulars:

Payment of Invoice for Legal Expenses in Excess of Carve-outs

(i)Since 1 August 2016, Kalus Kenny have acted for the Third to Eleventh Defendants in this proceeding.

(ii)By paragraph 1(e) of the Court Orders made on 3 August 2016, the Court prohibited [Transcomm] from dealing with its assets or property.  That order was continued by paragraph 1(e) of the Court Orders made on 15 November 2016.

(iii)On 22 August 2016, the Court made orders permitting [Transcomm] to deposit into the Kalus Kenny trust account $19,000 on account of legal costs and expenses already incurred and $25,000 to be applied on account of legal costs and expenses incurred until 16 November 2016.

(iv)By paragraph 2 of the Court Orders made on 14 December 2016, the Court permitted [Transcomm] to deposit the sum of $9,037.69 into the trust account of Kalus Kenny to be applied for legal expenses incurred, and to be incurred, by [Eustace] and [Sandra].

(v)As at 14 December 2016, the Court had permitted [Transcomm] to pay a total of $53,037.69 to Kalus Kenny for legal costs and expenses.

(vi)On 17 January 2017, [Transcomm] paid $8,926.69 into the Kalus Kenny trust account for legal costs and expenses, so that it had paid a total of $52,926.69 into the trust account in accordance with the Court Orders.

(vii)As at 24 January 2017, Kalus Kenny had applied a total of $50,784.51 in final payment of its invoices numbered 46530, 46918, 47323, 47711, 47931 and part payment of invoice numbered 48183.

(viii)On 25 January 2017, Kalus Kenny applied $4,158.06 in final payment of its invoice numbered 48183, bringing the total applied towards legal costs and expenses to $54,942.57, being $1,904.88 in excess of the total amount permitted by the Court as at that date.

Payment of Legal Expenses out of Living Expenses

(ix)On 22 August 2016, the Court made orders permitting [Transcomm] to pay the sum of $15,000 per month to be applied to the ordinary living expenses of [Eustace] and [Sandra] until 16 November 2016 or further order.

(x)On 15 November 2016, the Court made orders permitting [Transcomm] to pay the sum of $15,000 per month to be applied to the ordinary living expenses of [Eustace] and [Sandra] until the earlier of 2 February 2017 or further order.

(xi)On 13 December 2016, [Transcomm] paid the amount of $15,000 into the trust account of Kalus Kenny.

(xii)On 16 December 2016, Kalus Kenny received the amount of $15,000 into its trust account with the description “Transcomm Global Pty Living expenses as per court order”.

(xiii)On 16 December 2016, Kalus Kenny debited $5,000 from its trust account with the description “Payee: Eustace A Senese Living Expenses – Creditcard [sic] payment”.

(xiv)On 20 December 2016, Kalus Kenny debited $7,242.98 from its trust account with the description “Payee: NAB Teletransfer To: Eustace Anthony Senese”.

(xv)On 10 January 2017, $15,000 was credited to the trust account for living expenses of [Eustace].

(xvi)On 13 January 2017, Kalus Kenny debited $10,000 from its trust account to [Eustace].

(xvii)On 13 January 2017, Kalus Kenny debited $5,000 from its trust account to [Eustace].

(xviii)As at 24 January 2017, the Court had permitted $53,037.69 for legal expenses and $15,000 for living expenses per month, being a total of $75,000 for living expenses.

(xix)As at 24 January 2017, [Transcomm] had paid into the trust account of Kalus Kenny the sum of $75,000 for living expenses.

(xx)As at 24 January 2017, the following amounts had been paid from the trust account:-

a.        $50,784.51 for legal expenses; and

b.        $72,242.98 for living expenses.

(xxi)On 25 January 2017, $4,158.06 was debited from the trust account in final payment of invoice 48183 in circumstances where $2,253.18 only was available for legal expenses.  Therefore, the balance of funds debited by Kalus Kenny came out of funds for living expenses contrary to the Court Orders.

Charge F4

Alternatively to Charge F3, on 25 January 2017, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016, knowing that to be in contravention of the Court Order.

Particulars:

The particulars to Charge F3 above are repeated.

Particulars of Kalus Kenny’s knowledge of the contravention of the Court Orders are:

Payment of Invoice for Legal Expenses in Excess of Carve-outs

(i)Kalus Kenny at all material times had knowledge of the Court Orders made 15 November 2016 and 14 December 2016.

(ii)Kalus Kenny had obligations as solicitors for the Third to Eleventh Defendants and as officers of the Court to ensure compliance with court orders.

(iii)Kalus Kenny at all material times had knowledge of the transactions recorded in the trust account statements which are Exhibit BCS-31 to the Affidavit of Bruce Craig Standfield sworn on 1 May 2017 and the documents set out in Exhibit BCS-4 to the Affidavit of Bruce Craig Standfield sworn on 7 December 2017.

(iv)Kalus Kenny therefore knew that, by debiting the amount of $4,158.06 from the trust account on 25 January 2017, it would be causing [Transcomm] to pay more in legal costs and expenses than was permitted by the Court Order.

Payment of Legal Expenses out of Living Expenses

(v)Kalus Kenny at all material times had knowledge of the Court Orders made 15 November 2016 and 14 December 2016.

(vi)Kalus Kenny had obligations as solicitors for the Third to Eleventh Defendants and as officers of the Court to ensure compliance with court orders.

(vii)Kalus Kenny at all material times had knowledge of the transactions recorded in the trust account statements which are Exhibit BCS-31 to the Affidavit of Bruce Craig Standfield sworn on 1 May 2017 and the documents set out in Exhibit BCS-4 to the Affidavit of Bruce Craig Standfield sworn on 7 December 2017.

(viii)Kalus Kenny therefore knew that subsequent to debiting from the trust account the amounts of $5,000 and $7,242.98 on 16 and 20 December 2016, respectively (as referred to in the particulars to Charge F3), the balance in the trust account included $2,757.02 reserved for living expenses.

(ix)Kalus Kenny therefore knew that by debiting the amount of $4,158.06 in final payment of invoice 48183, it caused [Transcomm] to pay legal costs out of funds reserved for living expenses, contrary to the Court Orders.

…

Charge F6

On 20 December 2016, Kalus Kenny, breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016.

Particulars:

(i)By paragraph 1(e) of the Court Orders made on 3 August 2016, the Court prohibited [Transcomm] from dealing with its assets or property.  That order was continued by paragraph 1(e) of the Court Orders made on 15 November 2016.

(ii)As at 31 May 2016, Kalus Kenny had acted for [Eustace] in a matter titled “Claim to Vero”.

(iii)On 31 May 2016, Kalus Kenny rendered invoice number 45408, in the ‘Claim to Vero Matter’ in the amount of $757.02.

(iv)On 19 December 2016, the Fourth Defendant sent an email to Kalus Kenny instructing them to “pay from the Westpac funds $757.02 for Vero matter.”

(v)On 20 December 2016, Kalus Kenny applied a further $757.02 in payment of its invoice 45408.

(vi)The payment of invoice 45408 was not for legal costs relating to this proceeding or living expenses, but rather the legal costs owing in another matter contrary to the Court Orders.

Charge F7

Alternatively to Charge F6, on 20 December 2016, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016, knowing that to be in contravention of the Court Order.

Particulars:

The particulars to Charge F6 above are repeated.

Particulars of Kalus Kenny’s knowledge of the contravention of the Court Orders are:

(i)Kalus Kenny at all material times had knowledge of the Court Orders made 15 November 2016 and 14 December 2016.

(ii)Kalus Kenny had obligations as solicitors for the Third to Eleventh defendants and as officers of the Court to ensure compliance with court orders.

(iii)Kalus Kenny at all material times had knowledge of the transactions recorded in the trust account statements which are Exhibit BCS-31 to the Affidavit of Bruce Craig Standfield sworn on 1 May 2017 and the documents set out in Exhibit BCS-4 to the Affidavit of Bruce Craig Standfield sworn on 7 December 2017.

(iv)Kalus Kenny therefore knew that, the debiting of $757.02 in payment of its invoice 45408 was not for legal costs relating to this proceeding or living expenses, but rather the legal costs owing in another matter contrary to the Court Orders.

…

Charge F9

On 25 January 2017, Kalus Kenny, breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016.

Particulars

(i)By paragraph 1(e) of the Court Orders made on 3 August 2016, the Court prohibited [Transcomm] from dealing with its assets or property.  That order was continued by paragraph 1(e) of the Court Orders made on 15 November 2016.

(ii)On 22 August 2016, the Court made orders permitting [Transcomm] to deposit into the Kalus Kenny trust account $19,000 on account of legal costs and expenses already incurred and $25,000 to be applied on account of legal costs and expenses incurred until 16 November 2016.

(iii)By paragraph 2 of the Court Orders made on 14 December 2016, the Court permitted [Transcomm] to deposit the sum of $9,037.69 into the trust account of Kalus Kenny to be applied for legal expenses incurred, and to be incurred, by [Eustace] and [Sandra].

(iv)As at 24 January 2017, the Court had permitted [Transcomm] to pay a total of $53,037.69 to Kalus Kenny for legal costs and expenses.

(v)As at 25 January 2017, Kalus Kenny had applied a total of $54,942.57 in payment of its invoices numbered 46530, 46918, 47323, 47711, 47931 and 48183.

(vi)On 25 January 2017, Kalus Kenny applied $2,266 in payment of its invoice numbered 48531, bringing the total applied towards legal costs and expenses to $57,208.57, being $4,170.88 in excess of the total amount permitted by the Court as at that date.

Charge F10

Alternatively to Charge F9, on 25 January 2017, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016, knowing that to be in contravention of the Court Order.

Particulars:

The particulars to Charge F9 above are repeated.

Particulars of Kalus Kenny’s knowledge of the contravention of the Court Orders are:

(i)Kalus Kenny at all material times had knowledge of the Court Orders made 15 November 2016 and 14 December 2016.

(ii)Kalus Kenny had obligations as solicitors for the Third to Eleventh Defendants and as officers of the Court to ensure compliance with court orders.

(iii)Kalus Kenny at all material times had knowledge of the transactions recorded in the trust account statements which are Exhibit BCS-31 to the Affidavit of Bruce Craig Standfield sworn on 1 May 2017 and the documents set out in Exhibit BCS-4 to the Affidavit of Bruce Craig Standfield sworn on 7 December 2017.

(iv)Kalus Kenny therefore knew that, by debiting the amount of $2,266 from the trust account on 25 January 2017, it would be causing [Transcomm] to pay more in legal costs and expenses than was permitted by the Court Order.

…

Charge F12

On 6 February 2017, Kalus Kenny, breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016.

Particulars:

(i)By paragraph 1(e) of the Court Orders made on 3 August 2016, the Court prohibited [Transcomm] from dealing with its assets or property. That order was continued by paragraph 1(e) of the Court Orders made on 15 November 2016.

(ii)On 22 August 2016, the Court made orders permitting [Transcomm] to deposit into the Kalus Kenny trust account $19,000 on account of legal costs and expenses already incurred and $25,000 to be applied on account of legal costs and expenses incurred until 16 November 2016.

(iii)By paragraph 2 of the Court Orders made on 14 December 2016, the Court permitted [Transcomm] to deposit the sum of $9,037.69 into the trust account of Kalus Kenny to be applied for legal expenses incurred, and to be incurred, by [Eustace] and [Sandra].

(iv)As at 5 February 2017, the Court had permitted [Transcomm] to pay a total of $53,037.69 to Kalus Kenny for legal costs and expenses.

(v)As at 6 February 2017, Kalus Kenny had applied a total of [$57,208.57] [agreed correction] in payment of its invoices numbered 46530, 46918, 47323, 47711, 47931, 48183 and 48531.

(vi)On 6 February 2017, Kalus Kenny applied $1,750.00 in part payment of its invoice 48711, bringing the total applied towards legal costs and expenses to $58,958.57, being $5,920.88 in excess of the total amount permitted by the Court as at that date.

Charge F13

Alternatively to Charge F12, on 6 February 2017, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016, knowing that to be in contravention of the Court Order.

Particulars:

The particulars to Charge F12 above are repeated.

Particulars of Kalus Kenny’s knowledge of the contravention of the Court Orders are:

(i)Kalus Kenny at all material times had knowledge of the Court Orders made 15 November 2016 and 14 December 2016.

(ii)Kalus Kenny had obligations as solicitors for the Third to Eleventh Defendants and as officers of the Court to ensure compliance with court orders.

(iii)Kalus Kenny at all material times had knowledge of the transactions recorded in the trust account statements which are Exhibit BCS-31 to the Affidavit of Bruce Craig Standfield sworn on 1 May 2017 and the documents set out in Exhibit BCS-4 of the Affidavit of Bruce Craig Standfield sworn on 7 December 2017.

(iv)Kalus Kenny therefore knew that, by debiting the amount of $1,750.00 from the trust account on 6 February 2017, it would be causing [Transcomm] to pay more in legal costs and expenses than was permitted by the Court Order.

…

Charge F15

On 6 February 2017, Kalus Kenny, breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016.

Particulars:

(i)By paragraph 1(e) of the Court Orders made on 3 August 2016, the Court prohibited [Transcomm] from dealing with its assets or property. That order was continued by paragraph 1(e) of the Court Orders made on 15 November 2016.

(ii)On 22 August 2016, the Court made orders permitting [Transcomm] to deposit into the trust account $19,000 on account of legal costs and expenses already incurred and $25,000 to be applied on account of legal costs and expenses incurred until 16 November 2016.

(iii)By paragraph 2 of the Court Orders made on 14 December 2016, the Court permitted [Transcomm] to deposit the sum of $9,037.69 into the trust account of Kalus Kenny to be applied for legal expenses incurred, and to be incurred, by the Fourth and Seventh Defendants.

(iv)As at 5 February 2017, the Court had permitted [Transcomm] to pay a total of $53,037.69 to Kalus Kenny for legal costs and expenses.

(v)As at 6 February 2017, Kalus Kenny had applied a total of $58,958.57 in payment of its invoices numbered 46530, 46918, 47323, 47711, 47931, 48183, 48531 and part payment of invoice numbered 48711.

(vi)On 6 February 2017, Kalus Kenny applied $2,420.00 in final payment of its invoice numbered 48711, bringing the total applied towards legal costs and expenses to $61,378.57, being $8,340.88 in excess of the total amount permitted by the Court as at that date.

Charge F16

Alternatively to Charge F15, on 6 February 2017, Kalus Kenny breached paragraph 1(e) of the Court Orders made on 15 November 2016 (as varied by the Orders made on 14 December 2016), by causing or procuring [Transcomm] to deal with its assets or property in contravention of the Court Orders made on 15 November 2016, knowing that to be in contravention of the Court Order.

Particulars:

The particulars to Charge F15 above are repeated.

Particulars of Kalus Kenny’s knowledge of the contravention of the Court Orders are:

(i)Kalus Kenny at all material times had knowledge of the Court Orders made 15 November 2016 and 14 December 2016.

(ii)Kalus Kenny had obligations as solicitors for the Third to Eleventh Defendants and as officers of the Court to ensure compliance with court orders.

(iii)Kalus Kenny at all material times had knowledge of the transactions recorded in the trust account statements which are Exhibit BCS-31 to the Affidavit of Bruce Craig Standfield sworn on 1 May 2017 and the documents set out in Exhibit BCS-4 to the Affidavit of Bruce Craig Standfield sworn on 7 December 2017.

(iv)Kalus Kenny therefore knew that, by debiting the amount of $2,420.00 from the trust account on 6 February 2017, it would be causing [Transcomm] to pay more in legal costs and expenses than was permitted by the Court Order.

SCHEDULE OF PARTIES

VID 848 of 2016
Defendants
Fourth Defendant:	EUSTACE SENESE
Fifth Defendant:	SANSEN PTY LTD (ACN 111 816 178)
Sixth Defendant:	TRANSCOMM GLOBAL PTY LTD (ACN 169 503 762)
Seventh Defendant:	SANDRA SENESE
Eighth Defendant:	BIANCO PTY LTD (ACN 604 778 305)
Ninth Defendant:	CAMERON DAVID SENESE
Tenth Defendant:	IMC HOLDINGS PTY LTD (ACN 138 145 291)
Eleventh Defendant:	YOAV IDA
Twelfth Defendant:	WESTPAC BANKING CORPORATION (ABN 33 007 457 141)
Thirteenth Defendant:	NATIONAL AUSTRALIA BANK LIMITED (ABN 12 004 044 937)
Fourteenth Defendant:	BENDIGO AND ADELAIDE BANK LIMITED (ABN 11 068 049 178)
Fifteenth Defendant:	COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124)
Sixteenth Defendant:	CITIGROUP PTY LIMITED (ABN 88 004 325 080)