Environment Protection Authority v Ramsey Food Processing Pty Ltd (No 4)

Case •

[2011] NSWLEC 246

•

09 December 2011

Land and Environment Court


New South Wales

Medium Neutral Citation: Environment Protection Authority v Ramsey Food Processing Pty Ltd (No 4) [2011] NSWLEC 246
Hearing dates:7 December 2011
Decision date: 09 December 2011
Jurisdiction:Class 5
Before: Sheahan J
Decision:

The court notes that:

1. The prosecutor notified the defendant of the court's findings and orders on the prosecutor's motion on contempt, made 13 October 2011, including the order fixing the further hearing on conviction and sentence for 7 and 8 December 2011; and

2. The defendant did not appear when its name was called at the commencement of the penalty hearing on 7 December 2011.

And the court orders that:

3. The defendant is convicted of contempt.

4. The defendant is fined the sum of three hundred thousand dollars ($300,000).

5. The defendant is to pay the prosecutor's costs, from and including 14 October 2011, on an indemnity basis, as agreed or assessed.

6. All exhibits, except Exhibit P6 , be returned.

Catchwords: CONTEMPT: Sentencing, "contumacious" contempt, claims of impecuniosity or insolvency not supported by evidence, indemnity costs
Legislation Cited: Corporations Act 2001 (Cth)
Crimes (Sentencing Procedure) Act 1999
Land and Environment Court Act 1979
Protection Environment Operations Act 1997
Supreme Court Rules 1970
Cases Cited: ASIC v Edwards [2005] NSWSC 831; (2005) 54 ACSR 583
ASIC v Sigalla (No.4) [2011] NSWSC 62
Environment Protection Authority v Ramey Food Processing Pty Ltd [2010] NSWLEC 23
Environment Protection Authority v Ramsey Food Processing Pty Ltd [2010] NSWLEC 150
EPA v Ramsey Food Processing Pty Ltd (No 2) [2010] NSWLEC 175
Environment Protection Authority v Ramsey Food Processing Pty Ltd ACN 082 062 468 (No.3) [2011] NSWLEC 180
Environment Protection Authority v Pannowitz (No.2) [2006] NSWLEC 797; (2006) 153 LGERA 126
Fair Work Ombudsman v Ramsey Food Processing Pty Ltd [2011] FCA 1176
Gerondal v Eurobodalla Shire Council (No 5) [2011] NSWLEC 104
Gerondal v Eurobodalla Shire Council (No 6) [2011] NSWLEC 132
Jeray v Blue Mountains City Council [2011] NSWLEC 28
Lewis v Doran [2004] NSWSC 608; (2004) 208 ALR 385
Lewis v Doran (2005) 219 ALR 555
Markarian v R [2005] HCA 25; (2005) 228 CLR 357
McIlwain v Ramsey Food Packaging Pty Ltd [2006] FCA 828
McIlwain v Ramsey Food Packaging Pty Ltd (No.4) [2006] FCA 1302
Mosman Council v Kelly (No 6) [2010] NSWLEC 20
Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69
Pelechowski v Registrar, Court of Appeal (NSW) [1999] HCA 19; (1999) 198 CLR 43
Registrar of the Court of Appeal v Maniam (No. 2) (1992) 26 NSWLR 309
Sandell v Porter (1966) 115 CLR 666
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449
Council of the City of Sydney v Owners Corporation - Strata Plan 18945 [2011] NSWLEC 79
Williams (as liquidator of Scholtz Motor Group Pty Ltd) (in liq) v Scholz [2008] QCA 94
Wily v Terra Cresta Business Solutions Pty Ltd [2006] NSWSC 1042
Wood v Staunton (No 5) (1996) 86 A Crim R 183
Wormall Pty Ltd v Marchese Investments Pty Ltd [2009] WADC 102; (2009) 66 SR (WA) 56
Category:Sentence
Parties: Environment Protection Agency (Prosecutor)
Ramsey Food Processing Pty Ltd (Defendant)
Representation: Mr A Hill, Solicitor (Prosecutor)
No Appearance (Defendant)
Office of Environment and Heritage (Prosecutor)
No Appearance (Defendant)
File Number(s):50069 of 2009

Judgment

Introduction

  1. In this my fourth judgment in this matter, the court will sentence the defendant company, Ramsey Food Processing Pty Ltd, for contempt, on account of its failure to obey orders I made on 17 September 2010.

  1. Contempt is a common law offence for which there is no maximum penalty. This court's power to punish for contempt, or disobedience of any order, is regulated by s 67 of the Land and Environment Court Act 1979, and Part 55 of the Supreme Court Rules 1970 ('SCR'). SCR 15(2) provides that the court may punish a corporate contemnor by sequestration or fine or both.

  1. The prosecutor wants the court to enter a conviction on the contempt charge, impose a substantial fine, and order the defendant to pay the prosecutor's costs on an indemnity basis.

  1. The defendant company was convicted on 10 August 2010 of a pollution offence committed in December 2008 at its South Grafton Abattoir (see [2010] NSWLEC 150), and sentenced on 17 September 2010 (see judgment No 2, [2010] NSWLEC 175).

  1. In view of the company's bad environmental record, I determined that a fine of about $100,000 was warranted, but, instead of imposing a fine, I made orders requiring a mandatory environmental audit of the abattoir, and the publication of advertisements acknowledging the conviction. (The consolidated orders of the court are set out in full detail in [15] of judgment No 3, [2011] NSWLEC 180, and are not repeated in this judgment).

  1. The defendant had been placed on notice prior to the hearing on 17 September 2010 that such orders may well be sought, and had been invited to co-operate in an audit, to no response. The likely total cost of compliance with the orders made was approximately $93,000, once the audit process was completed.

  1. The company was required to act on those orders within 14 days, and, when they were not complied with, the company was charged with five counts of contempt. (The particulars are set out in [17] of judgment No 3, and are not repeated in this judgment). It was convicted on all five on 13 October 2011.

  1. In none of the four hearings over which I have presided in this case, did the company appear, lodge any substantive submissions, or have legal representation.

  1. I am satisfied that the company is aware of the matter coming on for this sentencing hearing ( Exhibit P6 ), and I granted leave to the prosecutor to proceed in its absence when there was no appearance.

  1. Throughout these class 5 proceedings the defendant company has repeatedly asserted, in various letters and other documents, as an explanation for its non-appearance, non-compliance, and non-representation, that it was or is " insolvent ".

  1. Insolvency can be a significant issue in deciding the level of seriousness of the contempt the court must punish. The defendant having placed no evidence before the court on this (or any other) point, the court must address the question on the basis of other sources before setting the penalty.

The Prosecutor's Case

  1. The prosecutor set out to establish, beyond reasonable doubt, that the defendant company was solvent at the time of its contempt, by proving:

(1) an admission of solvency by conduct;

(2) that sufficient funds were available to the defendant during the period within which it was required to comply with my earlier orders;

(3) the payment of legal fees by or on behalf of the defendant in respect of class 1 proceedings in this court, and unrelated proceedings in the Federal Court; and

(4) the payment of the defendant's environment protection licence ('EPL') fees, including by a related party;

and by expert evidence.

  1. The prosecutor relied upon the following documentary evidence:

  • Affidavits dated 13 July 2011 and 13 October 2011 by its senior solicitor in this matter, Anthony Alexander Hill;
  • Affidavits dated 9 and 11 November 2011 by Mr Hill's assistant/instructing solicitor, Gail Nash;
  • Affidavits dated 13 July and 30 November 2011, by the prosecutor's Regional Operations Officer, Scott Christopher Ensbey;
  • Affidavit dated 11 October by the EPA Compliance Coordinator, Sandra Gail Pupo;
  • Affidavit dated 18 July 2011 by Judith Leah Lewis, General Manager of the Grafton Daily Examiner;
  • Affidavit dated 13 July 2011 by Peter Kerr, Executive Editor of the Sydney Morning Herald;
  • Affidavit dated 22 July 2011 by Larissa Andelman, senior lawyer in the litigation group of the Fair Work Ombudsman ('the FWO');
  • Affidavit dated 29 June 2011 by Steven Molino, a founding principal of Molino Stewart, consultants in Environmental and Natural Hazards;
  • Affidavit dated 14 November 2011 by expert forensic accountant Chris Katehos.

  1. To these affidavits there were extensive documentary exhibits, tendered in eight volumes, as Exhibit P4 .

  1. Also tendered in evidence were copies of affidavits sworn by solicitor Monique Hannigan on 28 October 2010 ( Exhibit P3 ), and by Mr Katehos on 25 November 2010 ( Exhibit P7 ), in the class 1 proceedings involving the defendant and the prosecutor (10466/2010). Exhibit P5 was a schematic diagram of the structure of companies in the Ramsey group, essentially owned and controlled by Stuart Bruce Ramsey and perhaps his wife Patricia Ann Ramsey. As an aide memoire for the court, a more extensive flow chart of that structure was also provided in order to assist in my understanding the expert accounting evidence.

The Contemnor's Environmental Record

  1. It is appropriate at this early point in these reasons to note again some of the company's environmental record.

  1. In my judgment No 2, dealing with a penalty for the incident at the heart of the substantive proceedings in this case, I recorded the following (at [14] - [16]):

14. Cowdroy J sentenced the defendant company in April 2003 - [2003] NSWLEC 82, 125 LGERA 369 - for a s 120 offence committed in 2001. His Honour observed that the defendant company had failed to improve its environmental management procedures appropriately following an incident in April 2000. In addition to imposing a substantial financial penalty ($33,750 plus costs), His Honour made an order requiring the defendant to submit to the EPA a specification for the operation of its waste disposal system ' in view of the two failures which have occurred at the abattoir '.
15. Biscoe J dealt with the defendant company in a judgment earlier this year ([2010] NSWLEC 23 - ' Ramsey 2010' ) over a further s 120 pollution incident in the creek and a tributary in October 2007. There was evidence of a potential threat to human health, but the major offence was a failure to notify, as the actual pollution event was accepted to have resulted from an intruder tampering with equipment. Apart from Cowdroy J's 2003 case, Biscoe J referred (in [146]) to a January 2006 pollution incident. His Honour imposed on the defendant company fines totalling $130,000 ($80,000 for the ' notify ' offence, $40,000 for pollution of the creek, and $10,000 for pollution of the tributary), prosecutor's legal costs of $200,000, and investigation costs of $13,477.
16. It is clear, therefore, that the defendant company, with recorded incidents and/or court appearances in 2000, 2001, 2003, 2006, 2007, 2008, 2009 and 2010, has a poor record in environmental matters. The court's earlier decisions and the evidence in the present matter indicate a reactive and incident-driven approach to environmental management of this abattoir.

  1. In Ramsey 2010 Biscoe J noted (in [146]) that, following the 2006 incident to which he referred, the EPA varied the defendant's EPL to require a pollution reduction programme.

  1. In my first judgment in these proceedings (at [53]), and in my second (at [21]), I noted that the offence charged:

.... resulted from a range of failures on the part of the defendant company in the conduct of its abattoir business, principally a failure to anticipate that old infrastructure, such as redundant pipe systems and old, cracked pavements, could constitute a serious risk of precisely the incident which occurred in this instance. Similar events had occurred in the past ([49]). While it is clear that many improvements had been effected during the Ramsey company's conduct of the abattoir, (1) the premises are neither supervised nor secured overnight, despite the intrusion in October 2007, (2) the water drainage arrangements were clearly inadequate, (3) no precautions were taken to ensure that leaf litter etc did not foul or block the drainage system, and (4) regular cleaning of the premises is inadequate. There is evidence also of (5) inadequate training in environmental management matters (see generally pars [42]-[52]).

  1. As I turned to the question of possibly ordering an audit, rather than imposing a fine, I made the following comments (at [28]-[29] - emphasis mine):

28 The defendant company has made no submissions at all regarding the audit, and cannot avoid its being ordered simply by ignoring the proposal and the provisions of the Act, and failing to attend the hearing. Co-operation in this desirable public objective would have been evidence of genuine contrition on its part, and the court believes that the audit will prove advantageous to the defendant over time.
29 The company has chosen , despite order 5 made on 10 August 2010 - and not for the first time (Biscoe J in Ramsey 2010 at [186]-[189]) - not to support its claims of impecuniosity by evidence (see EPA v Pal at [114]-[122], so the court has nothing to address in this regard.

  1. In Ramsey 2010 , Biscoe J (at [186]-[189]) dealt with the defendant's submission that any fines should be reduced because of the anticipated costs burden ($200,000 plus). His Honour said (at [189]):

189 In the present case, there is no suggestion that the obligation to pay costs will affect the ability of the defendant to pay a fine nor that payment of a fine and costs would cause hardship to the defendant. There are no circumstances, in my view, which should lead to any reduction in the fine that would otherwise be imposed because of the obligation to pay costs.

  1. Earlier in his judgment, His Honour examined how the defendant company operated. Stuart Ramsey was identified as Chief Executive Officer, and his " eyes and ears on the ground " ([23]) were Michael Considine and Paul Allen. Mr Considine reported directly to Mr Ramsey, and Mr Allen to both Considine and Ramsey, " but mostly to Mr Considine " ([22]). By the time of that hearing, the defendant had no contact with Considine, and Mr Ramsey accepted that Allen was best placed to explain what had happened in respect of the event(s) underpinning the charges. His Honour said (at [147(e)]):

... Mr Allen was responsible for daily maintenance checks and reported to Mr Considine. I conclude that by the Tuesday Mr Allen, at least, knew that the creek was black and odorous. Certainly they both knew by the Thursday when they inspected the creek with Mr Ensbey. Once they knew, it would have been blindingly obvious that the pollution incident on the Monday was a likely cause. It follows that they misled or deceived Mr Ensbey by not disclosing this to him until the Friday despite earlier direct opportunities to do so, and by the statement to him on the Thursday that the pool in the rye paddock was merely rainwater.

  1. Biscoe J accepted (at [173]) a prosecution submission that the deceit of Allen and Considine was an aggravating factor to be counted against the defendant, and criticised Mr Ramsey (at [178]) in these terms:

It reflects poorly on Mr Ramsey that in cross-examination he claimed to have no recollection of a court case over effluent leaking into the creek. If he was taking the defendant's environmental responsibilities seriously, he should have been completely familiar with the case.

Insolvency Asserted Selectively

  1. As noted above ([10]) the defendant in these present proceedings has asserted that at material times, it was " insolvent ". The court must now review relevant events and correspondence, in chronological order.

  1. The legal firm Hannigans has acted for the Ramsey group, including the defendant company, since 1998 .

  1. Ramsey 2010 concerned an incident in October 2007 ; those proceedings were commenced 3 October 2008 ; and the incident in this present matter occurred in December 2008.

  1. The hearing in Ramsey 2010 occupied eleven days in September-December 2009 .

  1. The summons in the present matter was issued on 11 November 2009, and Hannigans filed an appearance on the defendant company's behalf on 20 November 2009.

  1. Biscoe J gave his judgment in Ramsey 2010 on 24 February 2010 . It is worthy to note that the defendant company was represented throughout that case by Hannigans and counsel.

  1. It is also relevant to note that no question of insolvency was raised in those proceedings, only the costs/penalty issue recorded above ([21]).

  1. On 11 June 2010, while still represented by Hannigans, a plea of Not Guilty was entered in the present matter.

  1. On 18 June 2010, Hannigans launched two sets of class 1 proceedings ( 10466 and 10467 of 2010) on the defendant company's behalf against the prosecutor regarding the abattoir and its EPL (see Exhibit P4 , Vol 1, tabs 12 and 13).

  1. On 28 June 2010, Stuart Ramsey, as director of the defendant company, signed a Notice of Removal of Solicitor in the present matter. Hannigans filed that on the defendant's behalf on 7 July 2010. They continued to act in the class 1 matters.

  1. Despite pleading Not Guilty in these proceedings, the defendant filed no evidence or submissions, and responded to no directions. The hearing was fixed for 9-10 August 2010.

  1. On 6 August 2010, the FWO commenced proceedings in the Federal Court (NSD 1005/2010) against the defendant company and Mr Ramsey himself, in respect of allegations that Ramsey Food Processing failed to pay proper entitlements to eleven terminated employees from the abattoir, and that Mr Ramsey was knowingly concerned in that conduct by the company.

  1. Also on 6 August 2010, Mr Ramsey wrote to this court in the following terms:

Your Honour
Ramsey Food Processing Pty Ltd is in a pecunious (sic) financial position and unable to afford the services of legal practitioners. An application was made to the Department of Environment Climate Change and Water to transfer the licence and dispute giving all particulars to the Department, they failed to advise their position within the period referred to in the Act.
An appeal has been lodged with the Land and Environment Court (being matter number 10/10466) and a timetable set for this matter and it is my respectful submissions the Department do not appear before you on a bonafide basis. The Department has failed to fully inform the Court of its motives.
If financial circumstances were different the Company would be represented.
It is my respectful submission that his matter should be adjourned until after the hearing of the appeal.

  1. I declined the adjournment request, and proceeded to hear the matter. I gave my judgment on liability on 10 August 2010.

  1. On 10 September 2010, the two class 1 matters were fixed for s 34 conferences on 6 October 2010.

  1. On 17 September 2010, the day on which the consequent penalty hearing was to be conducted, the defendant company wrote again, in these terms:

Your Honour
The Director of the Defendant wrote to this Honourable Court on the 6 th of August 2010 advising of the pecunious (sic) financial position the Defendant Company was in at the time.
The financial position of the Defendant Company has not changed.
The solicitor for the Environment Protection Authority wrote to the Defendant Company advising of the Orders sought in this matter, specifically Order 4 - the advertisement Order.
The cost to advertise in the Sydney Morning Herald with the wording and dimensions sought by the Prosecutor is extreme. The cost to advertise the Defendant's previous conviction was $6,715.37. Please see attached Tax Statement paid for the said advertisement.
Whilst the Defendant Company understands the public interest in this matter, the Defendant Company respectfully requests that the Advertisement be published in accordance with Order 4(b) sought by the Prosecutor, that is in the local newspaper where the Abattoir carries on its livestock slaughtering and rendering activities. The Defendant Company respectfully requests that Order 4(a) not be ordered against the Company.
Yours faithfully,
RAMSEY FOOD PROCESSING PTY LTD.

  1. I again proceeded with the hearing, and gave my penalty judgment (judgment No 2), including the orders the subject of these present contempt proceedings, on that same day. The only material before the court that day from the defendant were the two letters I have just quoted.

  1. After being notified of the court's orders, including the 14 day time stipulation, Mr Ramsey wrote on 27 September 2010 to both the prosecutor and the nominated environmental auditor, Molino Stewart.

  1. The defendant company wrote to the prosecutor in the following terms:

To Whom It May Concern,
Re: EPA v Ramsey Food Processing Pty Ltd
Land and Environment Court No. 50069 of 2010
I have a copy of the judgement in the above matter which was given on the 17th September 2010.
In the judgement a number of Orders were made including that the offender is to publish the offence within 14 days in the Sydney Morning Herald and the Grafton Daily Examiner.
As you are aware, the offender is insolvent and is unable to pay the cost of the publications. If Ramsey Food Processing did so it would be trading insolvently and in doing so would be breaking the law.
We note Section 250(3) of the Protection of the Environmental Operations Act 1997 allows the prosecutor to take action to carry out the order as far as is practicable.
Yours faithfully,
Ramsey Food Processing Pty Ltd

  1. The defendant's letter to Molino Stewart was in the following terms:

Dear Mr Molino
Re: EPA v Ramsey Food Processing Pty Ltd
Land and Environment Court No. 50069 of 2010.
I have a copy of the judgement in the above matter which was given on the 17th September 2010.
In the judgement a number of Orders were made including that Molino Stewart Pty Ltd is appointed to carry out a mandatory audit of the Armidale Road Site (Order 3a). Order 3b requires Ramsey Food Processing Pty Ltd to do all things reasonably necessary to cause the auditor to perform the mandatory audit which is the reason for this letter.
Your staff can access the Armidale Road Site on 24 hours notice and we will do our best to answer any questions you may have as well as providing you with access to documents etc. Naturally any of your staff visiting the site will need to comply with occupational health and safety requirements as well as any applicable AQIS requirements including Q-Fever injections.
You will see from the judgement that Ramsey Food Processing advised the Court that it was in a poor financial position and was unable to continue paying for legal representation for the hearing. Ramsey Food Processing is insolvent and put simply is unable to pay your firms fee of $84,450.30, or any part of it, to conduct the mandatory audit. If Ramsey Food Processing did so then it would be trading insolvently and in doing so would be breaking the law.
Ramsey Food Processing will do everything reasonable to allow your company to undertake the mandatory audit but it cannot pay for it.
Yours faithfully
Ramsey Food Processing Pty Ltd

  1. On 30 September 2010, Hannigans filed an appearance on the defendant company's behalf in the Federal Court proceedings ([35] above), and wrote a letter (Annexure 'A' to Andelman's affidavit), indicating its active representation of the company and of Mr Ramsey in those proceedings, on and from that date.

  1. On 6 October 2010, the two class 1 proceedings went to a s 34 conference. Hannigans continued to represent the defendant company (as the applicant in both). No agreement was reached.

  1. On 15 October 2010, the two class 1 proceedings were fixed for hearing on 9 December 2010, preferably before a Judge or legally qualified Commissioner.

  1. In 10466, on 28 October 2010, Monique Hannigan verified on affidavit a Statement of Financial Position of the defendant company received from the company's accountant, as at 30 June 2010. It showed a deficit (liabilities > assets) of $367,632.

  1. On 26 November 2010, Craig J vacated the hearing on 9 December 2010 in 10466, and granted leave to the company to discontinue 10467 .

  1. On 29 November 2010, the defendant company discontinued matter 10467, and agreed to pay the respondent prosecutor's costs, as agreed or assessed. Hannigans were still acting in that matter.

  1. On 8 February 2011 , matter 10466 was listed for hearing before a Judge and a Commissioner on 28 March 2011.

  1. On 17 February 2011, the present contempt charge was filed.

  1. On 28 March 2011, Preston ChJ granted leave to the defendant company to discontinue 10466 , by consent, on the basis that it paid the respondent prosecutor $25,000 for its costs. Hannigans were also still acting in that matter. The notice of discontinuance was filed by Hannigans on 30 March 2011.

  1. On 20 July 2011, Hannigans wrote to the Registrar of this court in respect of these proceedings. The letter was marked " Amicus Curiae " and said:

The Director of the above company, being the Defendant in the above proceedings, has requested our Firm, to act as Amicus Curiae and to advise the Court of the following:-
1. The Company is insolvent;
2. The Company cannot attend Court as it would be an indication of trading whilst insolvent;
3. The Company has no funds to instruct legal practitioners; and
4. It is likely the Company shall be wound up in the future.

  1. On 21 July 2011, Andelman from the FWO wrote to Hannigans in the following terms (Annexure 'B' to her affidavit):

I have been contacted by the Office of Environment and Heritage regarding the proceedings that it has commenced against your client in the Land and Environment Court, namely the matter of Environmental Protection Authority v Ramsey Food Proceedings Pty Ltd, (50069 of 2009) ( EPA Proceedings ).
I understand that in the EPA Proceedings, the Office of Environment and Heritage alleges that your client is in contempt because it has failed to comply with the Orders of the Court. In response to this application, I understand that your client has informed the Court that it is unable to comply with the Orders because it is insolvent.
The Office of Environment and Heritage has requested the FWO to provide it with an affidavit to be filed in the EPA Proceedings. Specifically, the proposed affidavit would relate to the FWO Proceedings against your client, being Fair Work Ombudsman v Ramsey Food Processing Pty Ltd & Stuart Ramsey (NSD 1005 of 2010) ( FWO Proceedings ) and it would state that at all relevant times during the FWO Proceedings, your client has been legally represented. In addition, it is proposed that Court documents from the FWO Proceedings would be annexed to the affidavit.
The FWO intends to assist with this request because we have formed the view that disclosing this information would be consistent with section 718 of the Fair Work Act 2009 . Section 718 of the Fair Work Act 2009 provides that information acquired by an employee of the FWO in the course of performing work may be disclosed if the disclosure is likely to assist in the administration or enforcement of a law of the Commonwealth, a State or a Territory.
As a matter of courtesy we put you on notice that the FWO intends to provide the affidavit to the Office of Environment and Heritage by Tuesday 26 July 2011. We will provide you with a copy of the document.

  1. Hannigans replied on 22 July 2011, on an " open letter " basis (Annexure 'C' to Andelman's affidavit):

Thank you for your letter dated the 21 st instant. We appreciate your advising us of your intentions.
As an officer of the Court we respectfully suggest you inform the Court of the following:-
1. It is not unusual for third parties to pay accounts for solicitors' clients; and
2. The relationship between client and solicitor and the methods of payment, if any, are between the parties.

  1. Between 5 and 13 September 2011, the FWO matter in the Federal Court was heard by Buchanan J. The defendant company was represented by counsel, instructed by Hannigans, throughout, and its financial arrangements within the Ramsey group were at the heart of the matter.

  1. On 13 October 2011, I heard the contempt charge in this court, convicted the defendant, and published judgment No 3.

  1. On 19 October 2011, Buchanan J delivered his judgment in the FWO proceedings ( Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (' FWO ') [2011] FCA 1176).

  1. It came to the prosecutor's notice shortly before 1 November 2011 that the company intended to close the abattoir, effective 14 November 2011. To ensure compliance with the EPL, and with environmental standards regarding the decommissioning of plant and equipment, the prosecutor exercised its statutory right of entry on 22 November 2011.

Insolvency principles

  1. Section 95A of the Corporations Act 2001 (Cth) (' Corporations Act' ) provides that a company is " solvent if, and only if, able to pay all its debts as and when they become due and payable. If not solvent the company is held to be insolvent ". Section 588G creates an offence for director to allow a company to incur a debt when insolvent: see, generally , Sandell v Porter (1986) 115 CLR 666.

  1. The authorities establish that insolvency is a question of fact to be ascertained from a consideration of the company's financial position taken as a whole, including its ability to obtain financial assistance externally or internally. The key concept is ability to pay debts as and when they fall due. Monies need not be held in cash. See Lewis v Doran [2004] NSWSC 608; (2004) 208 ALR 385 (relevantly upheld in the Court of Appeal in (2005) 219 ALR 555), and Williams (as liquidator of Scholz Motor Group Pty Ltd) (in liq) v Scholz [2008] QCA 94. In Lewis v Doran, Palmer J held that the court may determine insolvency, whether retrospective or prospective, as a question of commercial reality, having regard to the particular facts of the case.

  1. A company in a group must have more than a mere expectation that another member of the group will meet the debt. There must be reasonable grounds for believing such support will be provided on the relevant occasion. The capacity to raise funds must be judged in a practical business like way by reference to the commercial realities of the case. Mere possibilities are not enough. ASIC v Edwards [2005] NSWSC 831; (2005) 54 ACSR 583. The court must find a degree of commitment to continue the financial support. Wormall Pty Ltd v Marchese Investments Pty Ltd [2009] WADC 102; (2009) 66 SR (WA) 56. See also Wily v Terra Cresta Business Solutions Pty Ltd [2006] NSWSC 1042.

  1. Insolvency can be either Balance Sheet Insolvency (i.e. negative nett assets, therefore unable to meet future obligations) or Cashflow Insolvency (i.e. inability to pay debts as and when they fall due). If a company appears insolvent and is not in voluntary administration, the directors may still have, again as a " matter of commercial reality ", reasonable grounds to expect that it can pay its debts as and when they fall due.

  1. If directors of a company assert that it is unable to meet its debts, they have a duty to act on that assertion, notify ASIC, and place the company into voluntary administration.

The Prosecutor's Evidence on Insolvency

  1. The prosecutor has now investigated the defendant company's financial position at various relevant times, and has produced extensive evidence, prepared by a well-credentialed expert forensic accountant, Chris Katehos.

  1. As noted earlier, Katehos swore an affidavit in the class 1 proceedings on 25 November 2010 ( Exhibit P7 before me), and a further affidavit in these proceedings on 14 November 2011. To both affidavits were attached detailed reports and supporting materials ( Exhibit P7 contains the 2010 material, and Volume 7 of Exhibit P4 is the 2011 material), covering periods commencing with the financial year ended 30 June 2006.

  1. He had concluded in his 2010 material that the defendant and Ramsey Wholesale Meats (the only asset of which was all the shares in the defendant) were both insolvent, in both balance sheet and cashflow senses, as at 30 June 2010, if there were no support from the directors. However, Katehos saw no evidence to indicate the company was, in fact, insolvent, despite assertions to that effect between 27 September 2010 and 20 July 2011. ASIC had not been notified to that effect, and various company documents asserted capacity to pay.

  1. The 2011 report revisited the 2010 report on the basis of added information. Katehos concluded in his 2011 material that the obligations imposed by the court on 17 September 2010 could have been met, by the defendant company. He amended his 2010 conclusion, specifically addressing the key question for the court, namely the defendant's capacity to make the payments to the environmental auditor and the two nominated newspapers within 14 days after the relevant orders, namely between 17 September 2010 and 1 October 2010.

  1. Katehos and the judgment in FWO identified a number of companies related to the defendant, and various relationships it has with other commercial entities, such as:

  • Ramsey Meats Pty Ltd;
  • Ramsey Wholesale Meats Pty Ltd;
  • Ramsey Food Services Pty Ltd;
  • Ramsey Food Packaging Pty Ltd;
  • Ramsey Food Packaging No 2 Pty Ltd;
  • Mortimer Administration Services Pty Ltd;
  • Paul Allen Contracting Services Pty Ltd (formerly Abattoir Contracting Service Pty Limited);
  • Tempus Holdings Pty Ltd;
  • Ramsey Family Trust;
  • Ramsey Property Trust;
  • Ramsey Developments Pty Ltd;
  • Ramsey Pastoral Company Pty Ltd;
  • Ramsey Holdings Pty Ltd; and
  • Ramsey Butchering Services.

  1. Many of the companies were either " labour hire " or administrative services companies, established by Stuart Ramsey to run the abattoir operated by the defendant company, after he purchased it in 1998.

  1. Among the material Katehos relied upon was Stuart Ramsey's evidence in the FWO's proceedings in the Federal Court on 7 September 2011 (Transcript of that evidence is in Exhibit P4 , Vol 5).

  1. What clearly emerged from that evidence, and from Buchanan J's judgment, was that Stuart Ramsey has been the person in effective control of the management and operation of the South Grafton Abattoir since 1998, when his group acquired it and some associated assets from RJ Gilbertson Pty Ltd. Several employees who had been on the payroll since 1987 were retained (see my first judgment at [49]). Stuart Ramsey resigned as a director of the defendant company on 29 October 2010, leaving his wife Patricia Ann Ramsey as the only continuing director.

  1. Although the Ramsey Group operated the abattoir through labour hire and service companies, His Honour concluded (at [1] - [2]) that, although the 11 claimants and many others were employed by Tempus Holdings Pty Limited ('Tempus'), " a company inter-positioned between Ramsey Food Processing and the employees ", their true employer was Ramsey Food Processing and that " the purported inter-positioning of Tempus was a sham intended to disguise the true position". His Honour continued (in par [3]):

The creation of those arrangements (so far as they involved Tempus) was conceived as part of arrangements made to avoid payment of penalties ordered by this Court, in other proceedings, to be paid by companies associated with Mr Ramsey and under his direct control. The arrangements were also intended, I am satisfied, for the purpose of avoiding direct legal responsibility by Ramsey Food Processing for the wages and entitlements of employees at the abattoir. A purpose of that kind does not mean, necessarily, that arrangements are ineffective, much less illegal. The arrangements appear to have been put in place on the basis of legal advice and certainly with legal assistance. However, in my view, on the facts of the present case, for the reasons I will explain, the arrangements made by the respondents were wholly ineffective to deflect responsibility from Ramsey Food Processing with respect to payments due to the complainant employees. Mr Ramsey was not only an active participant in those events, but was a key decision-maker. Responsibility for them, and their consequences, is to be attributed to him equally with Ramsey Food Processing.

  1. The " other proceedings " to which His Honour referred were some 2006 proceedings brought in the name of one McIlwain, and dealt with by Greenwood J. See McIlwain v Ramsey Food Packaging Pty Ltd [2006] FCA 828, and (No.4) [2006] FCA 1302. They resulted in penalties and orders for compensation, and Ramsey Group immediately sent several of its " employing companies " into liquidation, rendering the orders ineffective. Mr Ramsey told Buchanan J that those orders caused the companies to be insolvent and unable to retain their employees. Mr Ramsey told Buchanan J that the Greenwood J orders would stretch the financial resources " to the point where the abattoir would need to be closed ", but Buchanan J commented (at [14]): " [t]he evidence in the present proceedings is insufficient to permit an evaluation of the accuracy or honesty of that explanation" .

  1. Mr Ramsey appears to have had control and ultimate oversight of every aspect of the business. Through another corporate relationship Ramsey had recruited Michael Considine as his second in charge (see [22] above). Buchanan J preferred Considine's evidence to Ramsey's whenever there was a conflict. Considine's company (" Drama ") became the sole shareholder of Tempus, and Considine its sole director and secretary, effective 17 October 2006. Tempus went into voluntary administration apparently at the end of March 2009. His Honour noted (at [42]): " [t]his, like the apparent cessation of trading of Ramsey Food Processing, occurred in the early stages of the investigation by the applicant which led to the present proceedings ." Mr Hannigan identified himself as a director of Tempus from the 13 February 2009. A liquidator was later appointed to Tempus on 10 March 2010.

  1. Buchanan J proceeded to examine the legal principles at some length, and then apply them to the facts of the case, as proven before him. He said (at [98]ff):

98. Tempus bore none of the characteristics of an employer. It had no business of its own. It earned no money. It had no interest in the engagement of any employee except as a favour to the respondents. Ramsey Food Processing, on the other hand, had every right and privilege normally associated with an employer in its dealings with the workforce at the abattoir. It had the right to recruit employees and to dismiss them. It had the right to decide what work was to be performed and by whom. With those rights came corresponding obligations. Those obligations were not displaced by the inter-positioning of Tempus, the Tempus bank account or the Tempus letterhead.
99. The attempted inter-positioning of Tempus between Ramsey Food Processing and the employees who performed their work in Ramsey Food Processing's business was ineffective to produce the factual and legal consequence that Tempus was their employer. Whether the matter is approached by asking whether Tempus was the actual employer (or whether Ramsey Food Processing was the direct employer notwithstanding the attempted inter-positioning of Tempus from mid-October 2006), or by asking whether Tempus acted as the agent for Ramsey Food Processing (rather than in its own right), the answers are the same. On either of those approaches, the respondents' defence to the present proceedings must be rejected. Tempus was not an employer in its own right. Ramsey Food Processing was, at all relevant times between 17 October 2006 and 28 November 2008 the employer of each of the 11 complainant employees.
100. A less charitable view, but one which is available on the material before me, is that Tempus was inter-positioned between Ramsey Food Processing and Ramsey Food Processing's employees at the abattoir in a way which was designed to hide the true position and to avoid Ramsey Food Processing's liabilities to those employees should that ever become necessary. On that view the arrangement was a sham.

  1. The word " sham " had not been used in the pleadings in the FWO matter. The contraventions alleged against Ramsey Food Processing and Ramsey himself did not depend on the proof of fraud or deceit, but on the non-satisfaction of statutory entitlements. Nonetheless His Honour concluded that the word " sham " was a good description of the arrangements in place, apparently concluded to protect Ramsey Food Processing from any liability from employee entitlements: Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449, at 454 per Lockhart J.

  1. Later His Honour added (at [121]):

121. ... The establishment of Tempus had its origins in deceit. Later, despite the assurances given to Mr Considine, the written indemnity, the fact that accrued entitlements were shown in the books kept for Tempus and that money was received into the Tempus bank account sufficient to cover all the obligations identified in the present proceedings, persons acting on behalf of Ramsey Food Processing acted to frustrate, deny or defeat the entitlements of employees identified in the present proceedings. The matters relied on to justify this conduct were based, from beginning to end, on deceit and on a 'sham' arrangement. ...

  1. I conclude that Mr Ramsey, at all relevant times, owned and controlled the subject abattoir. All the shares in Ramsey Food Processing are owned by Ramsey Wholesale Meats; all the shares in Wholesale are owned by Ramsey Holdings; all the shares in Holdings are owned by Ramsey Pastoral; and all the shares in Pastoral are owned by Stuart Ramsey. Ramsey himself accepted, before Buchanan J, the substance of that analysis, and that he had the ultimate personal controlling interest in the defendant company.

Is the Defendant Insolvent?

  1. Mr Ramsey told Buchanan J that the defendant company had not traded beyond February 2009, and that Ramsey Meats had taken over as the abattoir's operating company. There was, in 2008-09, a significant deficiency in Ramsey Food Processing's assets relative to its liabilities, and its 2008-09 financial documents disclosed not only an operating loss, but also the payment during that year of almost $2M in dividends to Ramsey Wholesale Meats, c.f. $450,000 in 2005.

  1. A National Australia Bank overdraft facility of $500,000 remained in place at the relevant time, drawn down to no less than $200,000 (see Exhibit 4 , Volume 2, p204). Katehos assumes that the bank has had the comfort of some form of guarantee from directors or related companies. He discovered evidence that the directors in office at the contemnor company at the time provided support during the 2005 financial year (see p30, par 8.7, and p110).

  1. The fines due in Ramsey 2010 by 24 March 2010 (namely, $130,000), the assessed legal costs of that case ($202,510), and the investigation costs in that matter, all remain unpaid, as do the prosecutor's costs of the present proceedings, whereas the bank statements (p206) show that, when the interest was paid on the overdraft, it was reimbursed by an unnamed third party in the sum $2,500 on 2 September 2010, $24 on 16 September 2010 (p204), $2,500 on 7 October 2010 (p201), and $5,000 on each 6 July 2010 (p204), and 10 August 2010 (p209).

  1. During the relevant period in which the court has been considering the entire matter, the prosecutor's annual administration fee for the defendant's EPL was paid on two occasions by the defendant company itself and on one occasion (2010) by Ramsey Meats Pty Limited (see the evidence of Pupo). Those payments were approximately $1,600 per annum.

  1. Mr Katehos expressed serious concerns about the reliability, completeness and accuracy of the contemnor's financial records in respect of substantial payment of dividends to the directors, and the failure to record, as company liabilities in its financial statements, fines and other obligations arising from judgments in this Court, and the contemnor's legal expenses.

  1. Hannigans acted in various court matters from June 2010 until at least 9 May 2011, and payments were made to them from within the group up to 29 June 2011. There is evidence of the defendant's legal fees being paid by two different companies in the group, both of which have directors in common with the contemnor, and one of which is related to the contemnor in terms of membership. However, the financial statements do not record all the defendant's legal expenses, and Katehos is also critical of that accounting treatment.

  1. The contemnor's sole shareholder, Ramsey Wholesale Meats, paid fees of $22,230.50 for legal fees incurred by the contemnor between 25 October 2010 and 1 February 2011 (matter 10466). This liability was incurred within a few weeks after the expiry of the time in which the court's orders were to be complied with. On or about 29 June 2011, Ramsey Meats paid $25,653.10, being legal fees incurred in the class 1 proceedings.

  1. On 7 September 2011, Ramsey testified in the Federal Court that Hannigans were still acting for him and his group, including the defendant. That evidence was given almost two months after Hannigans wrote to this court on 20 July 2011, saying that the defendant was insolvent, could not find " funds to instruct legal practitioners ", and would likely be " wound up in the future " (see [53] above). He also testified (T 7.9.11, p210) that " there was nothing ever paid out until there was money put in ", including wages: " [i]f 'processing' had to pay the money to those [employing] companies to pay the fines, everyone would have been out of work, it would have been closed and in receivership ".

  1. After that evidence, there was this exchange between Mr Ramsey, and FWO's counsel (Ms C Howell):

Ms Howell: ... you made a decision, on advice you say, that you would continue operating the abattoir without paying the fines by setting up new corporate structures?-We had to or the business wasn't going to run, we were gone.

  1. On the basis of additional material available, Katehos concluded that the company was solvent, rather than trading while insolvent, at all material times, especially as at 17 September 2010. It had access to funds to meet any fees rendered. It could have paid the auditor the upfront payments due within the 14 days ($35,898), and, later, a further $26,536, by drawing on the overdraft or looking for assistance within the group. It could also have paid for advertisements which presumably would have been approximately the same price as those following Biscoe J's orders (March/April 2010), namely Sydney Morning Herald $6,715.37, and the Grafton Daily Examiner $841.43.

  1. The only evidence in respect of any winding up is the mention of the prospect of it in the letter of 20 July 2011 ([53] above).

  1. I am satisfied, beyond reasonable doubt, that, at all material times, the defendant was solvent, believed it was solvent, and simply sought to escape its responsibilities by claiming it was not.

Consideration

  1. A long line of cases in this court establishes that enforcement of the process and orders of the court, and punishment for their breach, as a vindication of the court's authority, are important functions of contempt sentencing. See, for example, Lloyd J in Environment Protection Authority v Pannowitz (No.2) [2006] NSWLEC 797; (2006)153 LGERA 126; Biscoe J in Mosman Council v Kelly (No 6) [2010] NSWLEC 20; Craig J in Jeray v Blue Mountains City Council [2011] NSWLEC 28; Pepper J in Council of the City of Sydney v Owners Corporation - Strata Plan 18945 [2011] NSWLEC 79; and Pain J in Gerondal v Eurobodalla Shire Council (No 5) [2011] NSWLEC 104, and (No 6) [2011] NSWLEC 132. See also Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69 and ASIC v Sigalla (No.4) [2011] NSWSC 62.

  1. As contempt proceedings are realistically seen as criminal in nature, the prosecutor must prove its case against the defendant beyond reasonable doubt.

  1. Normal sentencing principles and considerations apply, so that the usual " instinctive synthesis " of objective seriousness of the offence and subjective factors of the offender. See Markarian v R [2005] HCA 25; (2005) 228 CLR 357, and Crimes (Sentencing Procedure) Act 1999 (' the CSP Act' ) ss 3A and 21A.

  1. There should be elements of both general and specific deterrence in the sentence imposed, but the court must first establish the relevant level of culpability, and punishment should be " emphatic ": Pelechowski v Registrar, Court of Appeal (NSW) [1999] HCA 19; (1999) 198 CLR 435, per Kirby J (at [149]).

  1. Some of the provisions in the CSP Act mirror the landmark listing of relevant considerations by Dunford J in Wood v Staunton (No 5) (1996) 86 A Crim R 183, at 185, namely:

a. The seriousness of the contempt proved;
b. Whether the contemnor was aware of the consequences to himself of what he did;
c. The actual consequences of the contempt on the relevant trial or inquiry;
d. Whether the contempt was committed in the context of serious crime;
e. The reason for the contempt;
f. Whether the contemnor has received any benefit by indicating an intention to give evidence;
g. Whether there has been any apology or public expression of contrition;
h. The character and antecedents of the contemnor;
i. General and personal deterrence; and
j. Denunciation of the contempt.

  1. In the present case the prosecutor submits that none of the mitigating factors in s 21A of the CSP Act are relevant, but that several of the aggravating factors, namely a, e, h, i, and j from Dunford J's list are relevant.

  1. The defendant, without participating in the proceedings in the court, has sought to contend, as an excuse for non-appearance at hearings and, more relevantly, for its non-compliance with the orders of the court within the two weeks specified in those orders, that it was insolvent. It repeatedly said that it would not contravene the Corporations Act by trading insolvently if it made the payments, but, if it intended to avoid contravening the Corporations Act , and was indeed insolvent, it should have notified ASIC and taken steps towards being wound up. It has done neither.

  1. On 17 September 2010, the defendant told the court that it could pay for an advertisement in the local paper, despite being " pecunious " (sic). Its claims rose to " poor financial position " and " insolvent " by September 2011. Its sole shareholder (Wholesale Meats) paid Hannigans, on or about 29 June 2011, yet three weeks later Hannigans told the court ([53]) of the contemnor's purported insolvency.

  1. The prosecutor has established that the defendant could have paid, but chose not to pay, the various amounts required by those orders. The prosecutor submits that decision is the deliberate defiance which elevates the defendant's conduct from " wilful " to " contumacious " contempt. If, on the other hand, the court had been satisfied that the defendant company was insolvent during the relevant period, the contempt should be regarded as non-deliberate or " technical ".

  1. I accept the prosecutor's submission that the contempt in this case is " contumacious ", rather than " wilful ", let alone merely " technical ", and that it should be regarded as very serious, indeed at the upper end of the range of seriousness. As the evidence confirms that the contemnor's conduct was deliberately defiant, it meets the definition of " contumacious ", in the sense of the meaning given to that term in Registrar of the Court of Appeal v Maniam (No. 2) (1992) 26 NSWLR 309. Kirby P (at 314f) made clear that intentional disobedience does not always involve " a conscious defiance of the authority of the court ". It is that which is " the essence " of a contumacious contempt, because it is " aimed at the integrity of the courts and designed to degrade the administration of justice", as distinct from disobedience which simply interferes with property rights manifested by a court order.

  1. By disobeying the orders of the court the contemnor has effectively avoided paying any penalty at all for the pollution offence of which it was convicted in these proceedings. It continued to operate the offending abattoir until (the evidence suggests) approximately 22 November 2011. For a period of 14 months to now, the activities at the abattoir should have been moderated, as a consequence of the implementation of the findings of the audit the court ordered.

  1. The court, therefore, infers that the penalties were avoided for the financial gain of either the defendant itself, one of its related companies, or the beneficial owner(s).

  1. As was noted in judgment No 2 (see [17] above) this was the third occasion on which the defendant was convicted and punished in relation to the offending operations of the abattoir, having first come under adverse notice in 2000, less than two years after taking it over. As also noted ([74]ff above), Buchanan J recently made substantial findings adverse to the character of the company's guiding mind. I find the defendant and its guiding mind set out intentionally to evade statutory responsibilities and orders of this court and to mislead regulators and officers of the court.

  1. The situation requires the court to strongly denounce the contemnor's conduct, in the interests of both specific and general deterrence. The punitive deterrent and rehabilitative characteristics, as well as the positive environment effects, of orders under the Protection Environment Operations Act 1997, such as those made and defied in this matter, depend upon the compliance with such orders.

Conclusion and Orders

  1. I have decided to impose a fine three times the size of the fine I found was appropriate at the time of sentencing the defendant/contemnor for the original offence.

  1. The contemnor should also pay, on an indemnity basis, the costs of the prosecutor since the contempt conviction.

  1. The orders of the court will, therefore, be:

The court notes that:

1. The prosecutor notified the defendant of the court's findings and orders on the prosecutor's motion on contempt, made 13 October 2011, including the order fixing the further hearing on conviction and sentence for 7 and 8 December 2011; and

2. The defendant did not appear when its name was called at the commencement of the penalty hearing on 7 December 2011.

And the court orders that:

3. The defendant is convicted of contempt.

4. The defendant is fined the sum of three hundred thousand dollars ($300,000).

5. The defendant is to pay the prosecutor's costs, from and including 14 October 2011, on an indemnity basis, as agreed or assessed.

6. All exhibits, except Exhibit P6 , be returned.

Decision last updated: 13 December 2011

Most Recent Citation
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