Australian Securities Commission v MacLeod (No 3)

Re: AUSTRALIAN SECURITIES COMMISSION
And: ROBERT JAMES MACLEOD; TRAINEX PTY. LTD.; STARLIGHT FILM STUDIOS LTD.;
STARLIGHT PICTURES PTY. LTD. and STAR PARTNERS PTY. LTD.
No. Q G3011 of 1992
FED No. 172
Number of pages - 16
Contempt
(1993) 113 ALR 374

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Drummond J.(1)

CATCHWORDS

Contempt - Multiple deliberate breaches of order - one breach different in character and substantially later in time than other two breaches - concurrent sentences for associated breaches - cumulative sentences for discrete breaches

Federal Court Rules - O. 37, r. 10; O. 52, r. 35(3)

AMIEU v Mudginberri Station Pty. Ltd. (1986) 161 CLR 98

Lee v Walker (1985) 1 ALL ER 781

Patton v Minister of Defence (1987) 71 ALR 637

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

HEARING

BRISBANE, 15, 16, 24 February and 11 March 1993

#DATE 11:3:1993

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

Solicitors for the applicant: Australian Securities Commission

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

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

ORDER

THE COURT ORDERS THAT: 1. The first respondent be imprisoned for two months in respect

of his contempt, constituted by his breach of the order of Spender J of 3 July, 1992, that restrained the first respondent from disposing of, encumbering, taking any steps to dispose of, encumber, or dealing in any manner whatsoever with, any property of any of the respondents in this action, in that the first respondent, by transfer executed on 10 July, 1992 and dated 27 June, 1992, transferred his estate in real property situated in South Australia to Mrs. Margaret Rae Wilkie.

2. The first respondent be imprisoned for two months in respect

of his contempt constituted by his breach of the order of Spender J of 3 July, 1992, as varied by Cooper J on 21 July, 1992, that he furnish to the receivers appointed in this action a list of all property in which the respondents have had an interest, wherever the property is situated in Australia or overseas, and whether the interest is presently existing or has at any time since 1 January, 1989 so existed, and whether owned by the respondents individually or jointly or held upon trust for other persons, in that the first respondent failed to disclose his interest in this South Australian property in the list furnished to the receivers on 23 July, 1992.

3. The sentences of imprisonment imposed by orders 1 and 2 are

to be served concurrently.

4. The first respondent be imprisoned for a period of four

months in respect of his contempts constituted by breach of the order of Spender J of 3 July, 1992 as varied by the order of Cooper J on 21 July, 1992 restraining him from disposing of, encumbering, taking any steps to dispose of or encumber, or dealing in any manner whatsoever with, any property of any of the respondents, in that the first respondent obtained possession of a cheque for the sum of $7,200.00 drawn by Mrs. Carroll in favour of the third respondent, Starlight Film Studios Ltd., the property of Starlight Film Studios Ltd., and attempted to persuade Mr. Carroll to endorse the cheque over to him personally, and in that the first respondent returned the cheque to Mr. Carroll after Mr. Carroll refused to so endorse the cheque.

5. The sentence of four months' imprisonment imposed by order 4

is to commence upon completion of service of the terms of two months' imprisonment imposed by orders 1 and 2.

6. The first respondent pay the applicant's costs of and

incidental to the motion for committal to be taxed on a solicitor and client basis.

7. A warrant issue for the arrest of the first respondent and

for his committal to prison to serve the sentences of imprisonment which have been imposed upon him.

8. The warrant for the arrest and committal of the first

respondent to prison is to lie in the Registry unexecuted until 4 p.m. on Wednesday, 17 March, 1993.

THE COURT DIRECTS THAT:
1. If the first respondent attends upon the District Registrar

or a Deputy District Registrar and furnishes a written undertaking to the Court to prosecute an appeal against these orders with all expedition, then the warrant is to remain in the Registry, unexecuted, until the determination of the appeal or earlier order of the Court.

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

JUDGE1

DRUMMOND J. On 4 March, 1993, I published my reasons for finding that Mr. MacLeod had committed a number of wilful breaches of orders made in the proceedings. I then stated that I would give Mr. MacLeod an opportunity to make submissions in mitigation of punishment and today was set, after discussions with counsel for Mr. MacLeod and the Australian Securities Commission (the "ASC"), as the date on which I would dispose of the matter.

Mr. Lilley, who again appeared for Mr. MacLeod today, did not put any evidence or other material before me, save for exhibit "MCL1", which has just been tendered. However, in the course of today's hearing, Mr. Lilley asked for an adjournment of proceedings to obtain evidence relating to the transfer of the South Australian house to Mr. MacLeod's grandmother. The circumstances in which that application came to be made are these: Mr. Lilley made a submission that it was possible that Mr. MacLeod had intended to make a gift of the property to Mrs. Wilkie. I told Mr. Lilley that I would not be prepared to act on assertions from the bar table in relation to matters which should readily be able to be the subject of proof by or on behalf of Mr. MacLeod. Mr. Lilley thereupon sought an adjournment in order to place such evidence before the court. I went on to indicate that I would not regard as admissible any evidence said to go to questions of mitigation which really went to issues which I had determined in the proceedings culminating in my giving the reasons which I published on 4 March. A major purpose in adjourning the hearing from 4 March to today was to give Mr. MacLeod the very opportunity to assemble the evidence or other material that he might wish to rely on in mitigation that Mr. Lilley sought a further adjournment to attend to. As I say, I declined to grant the adjournment on the ground that Mr. MacLeod had not taken the opportunity expressly afforded to him on 4 March to gather material in mitigation. I also made it clear that I would not in any event receive evidence with respect to the house transfer that went to issues that were determined in the proceedings that culminated in my publishing my findings on 4 March that Mr. MacLeod had wilfully disobeyed the orders and which might go to cast doubt on any of those findings.
As to the breach with respect to delivery of the list which was incomplete because it did not mention Mr. MacLeod's South Australian property, Mr. Lilley initially submitted that the contempt was purged because the ASC and the receivers were now aware of this property. When I pointed out that a person can only be said to purge his contempt where he has done something to remedy the contempt and that the ASC only learned of this property due to its own efforts, without any assistance whatsoever from Mr. MacLeod, it was submitted that this contempt could readily be remedied by Mr. MacLeod delivering an amended list that included reference to the South Australian property. Mr. Lilley did not, however, produce to the court any such amended list or even offer on behalf of Mr. MacLeod, who was not present in court today, to do so until, in response to a query from me, an undertaking was offered by counsel on behalf of Mr. MacLeod to deliver an amended list to the receivers within seven days. I do not regard this offer, having regard to the circumstances in which it was made to me and having regard to the very limited significance delivery of an amended list even now, let alone in seven days, would have as going to evidence any contrition or even concern by Mr. MacLeod as to his conduct which is the subject of my adverse findings against him in the reasons I have already published, or as having any basis upon which I should treat it as amounting to mitigation of any significance.
As to the contempt constituted by Mr. MacLeod's dealing with the cheque, it was submitted that the purpose of the order breached, namely, to freeze property of the respondents said to represent funds obtained by them from investors in the respondents' film investment projects that are said to have been marketed and conducted in contravention of the Corporations Law, has not been frustrated and that the Carrolls have not suffered since they got back the cheque for $7,200.00 when, but for that, they may have had to sue one or other of the respondents for that sum.
All this is true enough, but only because, despite Mr. MacLeod's persistent efforts in breach of the order, he failed to persuade Mr. Carroll to join in his proposal to deprive the third respondent of its property and in effect to give the moneys represented by the cheque to Mr. MacLeod for his own personal use. In criminal sentencing, a person who, through no want of effort on his part, fails to commit an offence, and is dealt with only for attempting to commit the offence, is generally treated more leniently than he would have been if his efforts were successful. But the analogy sought to be made here between Mr. MacLeod's actions in relation to the cheque and a criminal attempt is, I think, a false one. His actions amounted to a completed contempt of court. I do not consider that there is any significant mitigatory effect that flows from Mr. MacLeod's failure to bring about a situation that would have involved him in an even more aggravated contempt than the serious contempt which I have found against him here.
It was also submitted that Mr. MacLeod's action with respect to the cheque were those of a desperate man: that is, one who has had all his assets frozen and was in desperate need of funds to fight the case the ASC had brought against him and to live on in the meantime. It is true, as I recorded in my reasons at page 26, that Mr. Carroll says that Mr. MacLeod told him in late September last:

"I asked you to make the cheque out to me personally and not to the company, because I need to maintain a fighting fund for legal services and for living expenses."

But under Spender J's order of 3 July, increased provision for Mr. MacLeod was made beyond the allowance of $250 per week for his living expenses, which was all that was allowed by the earlier order of 29 June. Spender J ordered that Mr. MacLeod have unfettered and uninterrupted use of his residence, of a BMW motor vehicle and of his personal effects and clothing in addition to having the $250.00 per week. His Honour further ordered that the respondents should, in effect, be entitled to $20,000.00 of the funds held by the receivers for the purpose of defending the proceedings.
Later, Mr. MacLeod did apply to the court for access to additional funds to defend the case, but only on the basis of affidavits by his solicitor, Mr. Skinner, filed on 3 August, 7 September and 11 September, 1992 and then read before me. In these affidavits Mr. Skinner relied on information from Mr. MacLeod as to what was said to be Mr. MacLeod's lack of means. Mr. MacLeod's failure to go on oath himself to confirm his lack of means is dealt with by Mr. Skinner in his affidavit of 11 September. He says:

"I am informed and instructed by the first respondent (that is, Mr. MacLeod) and verily believe that as a result of advices given to him by his senior counsel and his junior counsel in these proceedings and the nature of these proceedings, and the allegations which have been made against him in these proceedings and the refusal by the applicant ASC to categorically confirm that it does not propose to initiate criminal sanctions against him, that he is not prepared to swear and file an affidavit on his own behalf relating to the matters in issue and about the notice of motion filed on behalf of the respondents on 5 September 1992."

That was an application, as I say, for access to further funds. I ruled that I would not grant further access to the frozen funds and assets unless Mr. MacLeod went on oath himself to depose to his lack of means and consequent need for those funds. Mr. MacLeod has, however, filed no such affidavit and has not renewed his application to the court for further provision out of the frozen funds and assets for himself or for funds to meet the cost of defending the action. I am not prepared to accept, in the light of Mr. MacLeod's apparent decision not to pursue an application to the court for further funds when that would involve him having to go on oath as to his means, that his approach through Mr. Carroll was the act of a man in desperate personal straits.
As to the contempt constituted by his transfer of the South Australian house, Mr. Lilley returned to his submission that Mr. MacLeod may have gifted the home to his grandmother. He went on to submit that the transfer may well have been to give effect to a gift to the grandmother to whom Mr. MacLeod felt obliged because of her care for him in the past. It was submitted that when the ASC moved, Mr. MacLeod may have panicked and carried the transfer through to completion in the clandestine way I have referred to in my reasons to ensure his desire to gift the home to his grandmother would not be interrupted by the orders that were made at the behest of the ASC and to ensure that his aged grandmother would not be upset by becoming involved in a possible dispute with the ASC. Reliance was placed on the fact that it was Mrs. Wilkie who initiated the approach to the land broker, which ended in his arranging for the registration of the transfer of the South Australian property from Mr. MacLeod to Mrs. Wilkie, about two weeks before the ASC obtained the first orders. Reliance was also placed upon the fact that Mr. MacLeod was unaware of any action being imminent by the ASC against him, as going to show that the transfer was or may have been to effect a gift.
However, at pages 18-21, I gave my reasons for concluding that Mrs. Wilkie had, on the evidence before me, which remains unchanged, no beneficial interest in the house. At page 21 I said, referring to the two pieces of evidence now relied on by Mr. MacLeod in support of the gift submission:

"However, I do not think this is sufficient when considered with all the other evidence to which I have referred concerning the circumstances surrounding the transfer to raise any real doubt that when Mr. MacLeod signed the transfer, he was quite deliberately acting in an attempt to divest himself of the indicia of ownership of his property in defiance of the restraining order of Spender J of which he was then well aware."

I reject these submissions concerning the possibility that there was a gift and that Mr. MacLeod panicked in an attempt to perfect his gift as being inconsistent with my findings. I would only mention that in Mr. Skinner's affidavit, filed on 3 August, 1992, to which I have earlier referred, he says in paragraph 3 that he first received instructions in this matter to act on behalf of the first and third respondents and other directors of the third respondent in or about September 1991, at the commencement of the investigation by the ASC. He goes on to say:

"I have, at all times, to the knowledge of the relevant officers of the applicant, acted and continue to act in this matter on behalf of the first and third respondents. That representation has been reflected in voluminous correspondence and numerous other communications between myself and the applicant and its officers and in court representation and on examination of company offices by the applicant."

Mr. Skinner concludes:

"Notwithstanding such representation, neither the applicant nor anybody on its behalf gave me notice of the ex parte application made to this court on 29 June, 1992 and had such notice been given I would certainly have received instructions to resist that application."

The submission by counsel for Mr. MacLeod, that when Mrs. Wilkie approached the land broker in mid-June 1992, Mr. MacLeod was unaware that the ASC had in mind moving against him did not and could not, in view of what Mr. Skinner says, go so far as to suggest that Mr. MacLeod, in mid-June 1992, was wholly unaware of the ASC being closely interested in both him and his companies.
It was also submitted on behalf of Mr. MacLeod that the purpose of the order in freezing the respondent's assets was not impaired by Mr. MacLeod's actions with respect to the transfer. It was said that if Mrs. Wilkie has no interest in the house, the ASC may proceed against her and will recover the property, presumably quickly, if Mrs. Wilkie does not resist, or slowly, if she does, after litigating the matter and then only if the court that deals with it correctly decides against Mrs. Wilkie. Alternatively, it was put that, if Mrs. Wilkie had an interest in the house, it could never have been properly caught by the orders made in the action by the ASC against the respondents. Again, I do not think these considerations work very much at all in Mr. MacLeod's favour. It is wholly fortuitous and will owe nothing to any action on Mr. MacLeod's part that could qualify as mitigating his breach of the order that the purpose for which the order was made may not ultimately turn out to have been frustrated by Mr. MacLeod's breach.
I have already mentioned the document which was tendered just before I commenced to deliver my sentencing remarks this afternoon and which has been marked as exhibit "MCL1". This document records an arrangement between Mrs. Wilkie and the ASC ensuring, in effect, that until the question of the ASC's entitlement to control, through the receivers, of the South Australian property has been resolved, there will be no risk of that property being dealt with in any way which might impede the order. That is of interest so far as it goes, but again, there is no suggestion that it is anything other than an arrangement made between Mrs. Wilkie and the ASC. In particular, there is no evidence to suggest that Mr. MacLeod has in any way had a hand in producing a situation where, it would appear, there is pretty complete protection until the matter is resolved against the order, so far as it touches the South Australian property, being impeded. I do not see that that has any bearing upon the appropriate sentence to be imposed on Mr. MacLeod.
So far as penalty is concerned, Mr. Lilley submitted first that as a solicitor and client costs order will be made against Mr. MacLeod and having regard to the unreasonably extensive material the ASC chose to rely on, the costs order will inflict on Mr. MacLeod a very heavy pecuniary penalty which would be a sufficient punishment, in itself, without anything further. Counsel relied upon a decision of Pincus J in Sun Newspapers Pty. Ltd. v Brisbane TV Ltd. (1989) 92 ALR 535. That was, however, a vastly different case from this. There, a television journalist published material, which publication amounted to a contempt of court, hastily as it were on the spur of the moment without reflecting on the nature of what he was really doing. It was, moreover, a case, as appears from page 543, in which Pincus J regarded not only those factors as mitigating circumstances, but was also minded to impose a fine as opposed to imprisonment. His Honour went on to conclude that because of the mitigating circumstances and the general nature of the case, the burden that would fall on the respondent there, by having to pay the costs which would be ordered against him, was a sufficient vindication of matters so as to make it unnecessary to impose a fine. This case is vastly different, given the deliberate and repeated nature of the contempts committed by Mr. MacLeod. Moreover, there is no evidence Mr. MacLeod will, in fact, meet any costs order as may be made against him. The only evidence as to his assets is that they are all frozen by the order of 3 July, 1992 as amended by the order of 23 July, 1992. The case by the ASC in the main proceeding is being pursued on the basis that all those assets, in effect, belong to the various investors.

An alternative submission was put that the impact of the costs order should go to justify a shorter sentence of imprisonment than would otherwise be appropriate. In the absence of some reason to think that an order for costs will in fact cause Mr. MacLeod actual hardship - in the absence of some reason to think that he will pay, or that the order will be satisfied out of his own property - I do not regard these submissions as justifying mitigation. In any event, I think it would be odd if a person who wilfully committed serious breaches of orders of the court, who resisted the contempt proceedings and who showed at no time any sign of contrition or concern at the improper nature of his conduct, could avoid imprisonment either wholly or to a limited extent because the party interested in enforcing the order has decided to incur the inevitable costs which have to be incurred to obtain the committal order, because those costs turn out to be recoverable by the party from the person in contempt.
I say that, even recognising that in some cases, and this is said to be one, that some of the costs incurred by the ASC as the party interested in enforcing the order, may have been unreasonably incurred. I make no judgment on that. I simply note the argument that has been put to me. However, I do say that I am not at all satisfied that if solicitor and client costs are ordered against Mr. MacLeod, the ASC will recover all the costs of gathering the evidence that was, in the course of the hearing, supplanted by other evidence. I have already ordered that the ASC pay Mr. MacLeod's costs of one half day of the hearing to reflect the disrupted way the ASC's case was presented.
The conclusions I have reached are these. This is a case involving deliberate and serious breaches separated by a period of about two months. It is a case in which there is no sign of contrition or concern about the nature of this conduct shown by Mr. MacLeod at any stage up until now. No mitigating circumstances have been demonstrated. The only appropriate punishment is a period of imprisonment.
I have had regard to the cases to which I have been referred by counsel for the ASC dealing with sentences in contempt cases. They range from a period of two months to six months where the contempt, as here, is constituted by breaches of court orders or undertakings given to the court. All those cases, however, involve a single breach, although it is obvious that each involves a serious breach of a court order.
I regard the contempt in respect of the transfer of the South Australian property as being associated with the contempt constituted by the failure to deliver to the receivers a complete list of the respondents' property. It is appropriate to impose concurrent sentences in relation to these two breaches in my opinion. I take into account that on the evidence, albeit in deliberate defiance of the order, what Mr. MacLeod tried to do here was to conceal from the receivers property acquired by him with funds to which he may have been entitled; that is, funds to which no investor would have a claim on the basis that those funds were obtained by Mr. MacLeod, or any of the respondents, in contravention of the Corporations Law. But the order still in part operates in the same way as a Mareva injunction operates. To deliberately seek to conceal, in the way Mr. MacLeod has gone about it, property caught by such an order calls, as I say, for a period of imprisonment.
The order of the court will be that on each of those two charges of contempt Mr. MacLeod be sentenced to imprisonment for two months. Those sentences to be served concurrently.
So far as the contempt in relation to the cheque is concerned, this was a wholly separate contempt from the other two contempts. It occurred significantly later in time and was quite different in kind. It involves, moreover, an attempt to dishonestly take property of another respondent for Mr. MacLeod himself. I also have regard to the persistence that Mr. MacLeod showed in attempting to achieve this object.
I propose to order that Mr. MacLeod serve a period of four months imprisonment in respect of this particular contempt. I propose, for the reasons I think I have sufficiently indicated, to order that this sentence be served cumulatively upon the other sentences.
I refer, as to the court's power to make a cumulative order of imprisonment in a contempt case, to the decision of the Court of Appeal in Lee v Walker (1985) 1 All ER 781, particularly 785, wherein it is made clear that the High Court in the United Kingdom has always had jurisdiction to impose what are called consecutive sentences of imprisonment in any appropriate contempt case. This court, in my view, has no less power than that. I also refer to AMIEU v Mudginberri Station Pty. Ltd. (1986) 161 CLR 98, particularly at 114, for the proposition that a superior court has a wide range of remedies available to it in dealing with contempts.
I mention that, for the reasons I outlined in the course of argument today, I have decided to impose fixed terms of imprisonment. I do not think it proper to impose an indeterminate period of imprisonment which, in my view, is only appropriate if there is room for the exercise of the court's powers in contempt to coerce a respondent into complying with an order not yet complied with, or to remedy a past breach which remains capable of remedy. In view of the fact that the ASC has an application on foot against Mrs. Wilkie and that it appears from what I have been told by counsel for the ASC, without objection by counsel for Mr. MacLeod, and from exhibit "MCL1", that the claim by the ASC against Mrs Wilkie in respect of the South Australian property has not been resolved, although discussions have taken place, and the undertaking given by Mrs Wilkie, I am not prepared to assume, notwithstanding my finding at page 20 and for the reasons I there indicated, that it remains open to coerce Mr. MacLeod into complying with the order with respect to the house transfer, or rather that it remains open to coerce him into remedying his breach in relation to that transfer.
I should also say that, although I have imposed fixed terms, Mr. MacLeod is entitled, under O. 40, r. 12 of the Federal Court Rules, to apply for early discharge if he has grounds for doing so.
Mr. MacLeod, by notice of motion, has sought a stay of what I have described as the orders I made on 4 March and 11 March. That would be apt to include the sentences of imprisonment which I have just today ordered that Mr. MacLeod serve. As an alternative application, Mr. MacLeod sought to be admitted for bail pending determination of his motion for leave to appeal those orders, which has already been filed.
I have been referred to O. 52, r. 35(3) as empowering the grant of bail. The rule, as I read it, applies only to criminal cases and I am not at all sure whether it is apt to cover a matter of the kind that I have before me. I have also been referred to O. 37, r. 10 which empowers the court to stay execution of a judgment or order. The complication to my, as a single judge, using that procedure is discussed by Pincus J in the case of Patton v Minister of Defence (1987) 71 ALR 637.
It seems clear that an appeal having been instituted and going on what I have been informed that the appeal will focus on, among other things, the absence of service of various of the orders made in the proceedings in respect of which adjudications of contempt have been made, it can by no means be said to be a frivolous appeal. Having regard also to the fact that a relatively short period of imprisonment in total has been imposed on Mr. MacLeod which might be over, wholly or in large part, before judgment can be given in the appeal, it is appropriate that he should not be imprisoned until the appeal is determined.
I am satisfied that I have power in the exercise of the jurisdiction in contempt that this court has to direct that the warrant for the arrest and committal to prison of Mr. MacLeod that I have ordered to be issued is to lie for a time in the Registry.

[1993] FCA 172

11 MARCH 1993