GND Developments Pty Ltd (in Liq), Moloney & Geroff v DA Luttrell Nominees Pty Ltd

[1998] QSC 159

IN THE SUPREME COURT

OF QUEENSLAND
  No. 5385 of 1998

[GND Developments Pty Ltd (in liq), Moloney & Geroff v D.A. Luttrell Nominees Pty Ltd & Ors]

BETWEEN:
  GND DEVELOPMENTS PTY LTD (IN LIQUIDATION)
  (ACN 064 233 138)
  First Plaintiff

AND:
                 GREGORY MICHAEL MOLONEY and PETER IVAN FELIX GEROFF
  Second Plaintiff

AND:
  D.A. LUTTRELL NOMINEES PTY LTD
  (ACN 056 990 302)
  First Defendant

AND:
  KARADAY PTY LTD
  (ACN 010 677 362)
  Second Defendant

AND:
  DONALD ALLAN LUTTRELL
  Third Defendant

AND:
  GLYN FRANCIS PEARCE
  Fourth Defendant

JUDGMENT - HELMAN J.

Judgment delivered 20 August 1998

This is an application by the plaintiffs by way of motion under Order 84 Rule 2 of the Rules of the Supreme Court for orders that each of the first and second defendants be fined for contempt of court in failing to comply with an undertaking given to the Court by all defendants on 30 June 1998, and for orders that the third and fourth defendants be committed to prison or fined for contempt of court in failing to comply with the undertaking. 

Before Derrington J. on 30 June 1998 the plaintiffs sought orders restraining the defendants until the trial of the action from disposing of their interests in certain land, from encumbering it, or from borrowing further funds using it as security.  The defendants were represented by senior counsel, and their solicitor and the third defendant were present in court.  The fourth defendant was not at the hearing. 

On 21 November 1997 an order was made in this Court that the first plaintiff be wound up in insolvency, and Messrs Maloney and Geroff were appointed liquidators.  The action, begun on 16 June 1998, arises from the transfer of the land I have mentioned to the first and second defendants by the first plaintiff, of which the third and fourth defendants were the only directors.  (The third and fourth defendants are directors of the first and second defendants respectively.)  The transfer took place shortly after an order was made against the first plaintiff by the Queensland Building Tribunal on 30 May 1997.  The plaintiffs allege that the result of that transaction was that the first plaintiff was left without any assets and with a number of liabilities including the judgment debt.  The first plaintiff claims against the first and second defendants a declaration that it is beneficially entitled to the land and other relief.  There are further claims by the plaintiffs against the third and fourth defendants.

All parties gave undertakings to the Court which were recorded in an order made by Derrington J. and dated 30 June 1998.  The defendants’ principal undertaking was to develop the land forthwith by subdivision and by the construction of residential dwellings for sale on the parcels of land created by that subdivision.  There were other undertakings by the defendants the effect of which was to protect the alleged rights of the first plaintiff.  Among those other undertakings was one numbered 3 which has given rise to this application.  It was, so far as it is relevant, as follows:

“3.The Defendants shall provide a written report to the Plaintiffs in respect of all aspects of the development of the Land as at the end of each month by the seventh day of each following month, commencing on 7 July 1998 ... each such report to include:-

(a)Marketing Report;

(b)Construction Report (including copies of any development consultants’ reports, variations or directions in respect of construction obtained in the month);

(c)Payments Report listing each payment made during the month by date, payee, amount and purpose;

(d)Receipts Report stating each receipt received during the month by reference to date, amount, payer and purpose;

(e)a Bank Account Report providing monthly reconciliation of all bank accounts of the First and Second Defendants including any loan facility held at the Bank of Queensland, and copies of a bank statement in respect of each account maintained;

(f)a Debtors and Creditors Report listing all debtors and creditors as at the end of the month, stating in respect of each creditor, the amount payable, the name of the creditor and the nature of the goods or services supplied to which the debt relates;

(g)a Cash Flow Budget in respect of the development from the end of the first reporting month to the forecast completion of the development of the land.”

The plaintiffs allege that the defendants were guilty of contempt of court in failing to provide a report for the month of June 1998 on 7 July pursuant to that undertaking.

The notice of motion was filed on 13 July 1998.  It was served on the defendants’ solicitor at 10.30 a.m. on 14 July 1998, and personally on the defendants later that day, at 9.30 p.m., for hearing the following day.  When the matter came before me on 15 July 1998 no application for adjournment was made on behalf of the defendants, although I expressly gave Mrs Hunter, for the defendants, the opportunity to apply for an adjournment if further time were required to prepare the defendants’ case.  It was not in dispute that no report had been provided on 7 July 1998 or at any other time before the hearing before me, but since then I have received a memorandum, signed by counsel for all parties and which I have had marked Exhibit 2, informing me that a report for the month of June was provided to the plaintiffs on 21 June 1998. 

The order dated 30 June 1998 was, as I have related, served personally on the defendants, but it was not endorsed in accordance with Order 44 Rule 4 which is as follows:

“Every judgment or order made in any cause or matter requiring any person to do an act thereby ordered to be done shall state the time, or the time after service of the judgment or order, within which the act is to be done, and there shall be endorsed upon the copy of the judgment or order served upon the person required to obey the same a memorandum in the words or to the effect following, viz -

‘If you, the within-named A.B., neglect to obey this judgment [or order] by the time therein limited, you will be liable to process of execution for the purpose of compelling you to obey the judgment [or order].’ ”

Mrs Hunter argued that since contempt proceedings are penal in nature the Court should insist on strict compliance with the rules: Hally v. Johnston [1957] St. R. Qd. 500, and Re Brown [1969] Q.W.N. 12. In Re Intex Consultants Pty Ltd [1986] 2 Qd.R. 99, however, Thomas J. held that personal service of an order recording an undertaking and, it follows from that, compliance with Order 44 Rule 4 were not necessary in contempt proceedings for breach of the undertaking, there being a distinction between the enforcement of an undertaking and the enforcement of an order (pp. 106-109). The giver of an undertaking is presumed to have known that he has given the undertaking: Callow v. Young (1886) 55 L.T. 543, at p. 544; and see also D v. A & Co. [1900] 1 Ch. 484, Hussain v. Hussain [1986] Fam. 134, and Windsurfing International Inc v. Sailboards Australia Pty Ltd (1986) 19 F.C.R. 110. Mrs Hunter argued that Re Intex Consultants Pty Ltd could no longer be regarded as correct on this point since the decision of the High Court in Witham v. Holloway (1995) 183 C.L.R. 525, in which it was held that all charges of contempt, whether criminal or civil, must be proved beyond a reasonable doubt. It does not follow, however, because the standard of proof is beyond a reasonable doubt that approved practices, which are not incompatible with the standard of proof, should be regarded as abrogated.

Another procedural irregularity pointed to on behalf of the defendants was non-compliance with Order 62 Rule 10:

“Unless the Court or a Judge gives special leave to the contrary, which leave may be obtained ex parte, there must be at least 2 clear days between the service of a notice of motion and the day named in the notice for making the motion.”

Since the notice of motion was not served on the defendants until the day before the day named for making the motion that rule was plainly not complied with.  But failure to comply with the requirements of the rules is an irregularity (Order 93 Rule 17(1)), and since an adjournment was not sought on behalf of the defendants it could not be said that they suffered any prejudice arising from non-compliance with Order 62 Rule 10.  I see nothing in the circumstances of the case that would call for me to do other than ignore that irregularity.

For those reasons I do not think that the submission that the plaintiffs’ motion should be dismissed for procedural irregularity is well founded.

On the merits of the application, Mrs Hunter argued that on a proper construction of the undertaking, the defendants had not failed to comply with it, or alternatively that the undertaking was not clear and unambiguous.  The terms of an undertaking must be shown to be clear and unambiguous:  Microsoft Corporation v. Marks (1996) 139 A.L.R. 99, at pp. 118-119 per Beaumont J., with whom Lindgren and Lehane JJ. agreed. It does not follow, however, that contempt will not be found wherever an alleged contemner did not understand the terms of an order or injunction according to their true meaning: ibid, at p. 121 per Lindgren J.  Mrs Hunter submitted that the words “commencing on 7 July 1998” should or could be interpreted as meaning that the undertaking to provide the reports applied from 7 July 1998 in such a way as to require the first report in August.  The report for July would then have covered only 7 to 31 July.  Mrs Hunter submitted that had it been intended that the first report should be provided on 7 July the words “the first report shall be due”, or words to that effect, should have been inserted before the words “on 7 July 1998”.  She said weight was added to that submission because the interpretation of the undertaking relied on by the plaintiffs meant that it was to have retrospective operation, in that a report for the month prior to the order’s being made was required.  Another possible interpretation of the undertaking suggested by Mrs Hunter in the course of argument was that the months in relation to which the reports were required were to begin on the seventh day of each calendar month, and so the first report would be in respect of a full month beginning on 7 July 1998 and would be due seven days after the end of that month, and so on.

Plainly, in my view, the words of the undertaking do not support either of the possible interpretations suggested on behalf of the defendants.  Giving the words their natural meanings, I conclude they require a report for each calendar month to be provided on the seventh day of the following calendar month.  Again, from the natural meaning of the words of the undertaking it is clear that the first month in respect of which a report was required was June 1998 and the first report was due on 7 July 1998.  I do not think there is any doubt about the meaning of the words, nor do I think it is correct to say that the undertaking had retrospective operation in any relevant sense; the first report was to be provided after the order was made. 

The evidence shows that the third defendant and the defendants’ solicitor simply misunderstood the effect of the undertaking.  In an affidavit filed by leave at the hearing before me, the defendants’ solicitor, Mr Charles Chan, swore that at the hearing on 30 June 1998 Derrington J. stood the matter down so that the terms of the undertakings could be agreed on.  The undertaking in question was discussed and at no time was there a dispute that monthly reports were to be provided on the seventh day after the end of the preceding month.  Mr Chan said that he understood the first month to be reported on was to be July 1998 with the first report due on 7 August 1998.  The “issues in principle” having been agreed on, it was left to counsel for the parties to draft the appropriate undertaking.  Mr Chan was informed by the defendants’ counsel that Derrington J. required amendments to the draft order.  Those amendments were made, and a final version was produced.  The draft was approved by the defendants, Mr Chan said, and the defendants’ counsel was authorized to sign it.  Counsel for both parties then signed the final draft of the order, and Mr Chan received his copy of it on 6 July 1998.  The following day, Mr Chan said, he caused copies of the final draft of the order to be sent to the defendants.  In an affidavit the third defendant has sworn that he too understood the undertaking to mean that the first month to be reported on was July 1998 and that the first report was due on 7 August 1998. 

The fourth defendant gave oral evidence before me that he was in Hong Kong at the time of the proceedings before Derrington J.  He had left everything in the hands of the third defendant and the defendants’ solicitor.  Although while the fourth defendant was in Hong Kong he had a brief telephone conversation with the third defendant after the proceedings before Derrington J., he did not become aware of the precise terms of the undertaking until the night of 7 July when he first saw a copy of the order which had come from the defendants’ solicitor.  The fourth defendant then read it as requiring the first report on 7 July, but thought there must have been a mistake because he thought not enough time had been allowed for preparation of the first report.

On the evidence before me I am satisfied beyond a reasonable doubt that the undertaking was given with the authority of all defendants, and that it was not complied with.  I am not, however, satisfied beyond a reasonable doubt that the defendants’ failure to comply with the undertaking was wilfully disobedient or deliberately defiant.  It was unintentional, and proceeded from a mistaken interpretation of it by the third defendant and, more importantly, by Mr Chan. There is, as Mr Perkins for the plaintiffs pointed out, some evidence that may cast doubt on the bona fides of the fourth defendant, in particular in answers he gave at a public examination before Mr Halliday S.M. on 3 April this year.  But there is nothing before me to cast doubt on Mr Chan’s bona fides.  His mistake was not without any foundation: it probably proceeded from an assumption that the first report could not be ready by 7 July.  It is reasonable to conclude that Mr Chan’s mistake was instrumental in causing the failure of the defendants to comply with the undertaking, even though the fourth defendant on his first reading of it understood it correctly.  It is also reasonable to conclude that had Mr Chan not misunderstood it he would have ensured that the defendants were aware of their obligation.  In the result, since the undertaking was clear and unambiguous and was given with the authority of the defendants, they were guilty of contempt of court in failing to comply with it.  Their contempt was, in the circumstances however, venial.  It does not call for either committals or fines.  The motion will therefore be dismissed, and I shall invite further submissions on costs.