In the matter of Mempoll Pty Ltd, Anankin Pty Ltd and Gold Kings Pty Ltd

[2013] NSWSC 301

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Mempoll Pty Ltd, Anankin Pty Ltd and Gold Kings Pty Ltd [2013] NSWSC 301

Hearing dates:

8 February 2013

Decision date:

08 February 2013

Jurisdiction:

Equity Division - Corporations List

Before:

Brereton J

Decision:

Adjournment refused

Leave to discontinue refused

Application dismissed

Catchwords:

CONTEMPT - adjournment of contempt proceedings - whether adjournment to permit applicants to remedy evidentiary difficulties justified

CONTEMPT - leave to discontinue contempt proceedings - whether leave to discontinue contempt proceedings should be granted

Legislation Cited:

UCPR r 12.1

Cases Cited:

Covell Matthews v French Woolstone [1977] 2 All ER 591; affirmed [1978] 2 All ER 800
Practises Commission 1984 2 FCR 113
Re Alpha Company Limited [1903] 1 Ch 203
Rydges Hotel Limited v Charles of the Ritz Limited [No 8] (1987) 12 IPR 75
SCI Operations Pty Limited v Trade
Stahlschmidt v Walford [1879] 4 QB 217
Stevens v Theatres Limited [1903] 1 Ch 860
Young Austin & Young Limited v British Medical Association [1977] 2 All ER 884

Category:

Interlocutory applications

Parties:

R Ho (First Applicant)
Rhodium NSW Pty Ltd (Second Applicant)
The Trading House Pty Ltd (Third Applicant)
P Chau (Respondent)

Representation:

Counsel:
D Grieve QC, S Ahmed (Applicants)
J Whittle SC, A O'Brien (Respondents)
Solicitors:
PMF Legal (Applicants)
Haylen McKenzie Solicitors (Respondents)

File Number(s):

2012/ 202690

Judgment (ex tempore)

1. HIS HONOUR: Before the court is a motion filed by the plaintiffs on 31 October 2012 seeking that the fourth, fifth, sixth defendants and first respondent be found guilty of contempt of Court for failing to comply with orders of Black J made on 31 August 2012 in connection with the production of documents referred to, in a notice to produce in the case of the fourth, fifth and sixth defendants, and in a subpoena in the case of the first respondent. The motion was returnable on 1 November 2012 before the Registrar, on which occasion it was adjourned to be listed before the Corporations Judge on 5 November 2012 for directions and allocation of a hearing date. The matter came before me in the Corporations List on 5 November 2012, when it was fixed for hearing with a one-day estimate today, and I noted that the applicant's evidence was complete and made the usual order for hearing.

1. When the motion came on for hearing today, the plaintiffs/applicants read two affidavits, one of Georgina Wu of 26 October 2012 and one of Richard Arnold sworn 31 October 2012 which annexed a report. Mr Arnold is an accountant and his report addressed, in substance, the question whether the documents referred to in the notice to produce and subpoena, which allegedly had not been produced, were documents "required to be maintained" by the respondents in order to prepare the financial statements and taxation returns they produced and to comply with applicable laws as to the records which a company is required to maintain.

1. In answering that question, which was question A in his report, Mr Arnold did not refer to whether those documents were necessary in order to prepare the financial statements and taxation returns, on which question his evidence might conceivably have been admissible, but limited his answer to whether such documents were required to be maintained by various laws. I rejected his evidence in that respect, which underlay most of the remainder of his evidence, on the basis that that was a question of law and not a question calling for accountancy expertise.

Application for adjournment

1. Mr Arnold's evidence having been rejected, the applicants seek an adjournment of the hearing of the motion, in order to enable the deficiencies in the evidence to be remediated. In substance, that what is envisaged is that Mr Arnold would opine, that it would be difficult for a business such as the restaurant conducted by the respondents to be maintained if the documents allegedly not produced were not maintained.

1. It remains as open now as it did before Mr Arnold's report was read for the applicants to submit that the respondents were obliged to keep such documents as a matter of law. Whether that would support an inference that they in fact kept such documents and had them in their possession, custody or power at the time production was required is another matter, but I do not see how the rejection of Mr Arnold's opinion on a matter of law prejudices the applicants in any relevant way.

1. Although there are some respects in which his report might have approached matters properly the subject of accountancy opinion, where it did - and those aspects were few - it was inadequately expressed to be a matter of expert opinion. For example, Mr Arnold gave evidence of what he would "expect", rather than what was standard or invariable practice. And even evidence of standard practice would be of dubious utility in a case in which the applicants bear the onus of proof beyond reasonable doubt.

1. To my mind, it is dubious that evidence of the kind proposed to be adduced - to the effect that it would be difficult as opposed to practically impossible - to maintain such a business, would suffice to permit an inference to be drawn that such documents at one time existed, in a case in which the standard of proof is beyond reasonable doubt, as it is in a contempt application. And if there were an available inference that such documents existed at some time in the relevant period from 2006 to 2009 covered in the notice to produce and subpoenas, it would be a long bow to conclude from that, without more, beyond reasonable doubt, that such documents still existed in 2012.

1. Accordingly, it seems to me that insofar as I have rejected those parts of Mr Arnold's opinion that amount to a conclusion of law, there is no prejudice to the applicants because they can still contend that that is the legal position without reliance on an accountant's opinion to that effect today. Insofar as I have rejected other aspects of his report which depend on accountancy practice, they seem to me to be a minor part of his report and it is dubious in the extreme that remediation of those defects would advance the applicant's case. Moreover, these are contempt proceedings; they involve serious allegations and serious consequences. They are interlocutory proceedings that interrupt and delay the progress of the substantive matter. They have been set down for months on the basis that the applicants' evidence is complete and they ought not remain hanging over the respondents' heads. In those circumstances I am not prepared to accede to the adjournment application.

Application for leave to discontinue

1. The applicants now seek to discontinue the motion. Discontinuance is governed by UCPR r 12.1, the effect of which is that discontinuance of proceedings as a whole, or of any claim for relief in the proceedings, may be effected either with the consent of each other active party in the proceeding - which plainly is not the case here - or with the leave of the court. Accordingly, this is an application for leave to discontinue.

1. It is a general principle that, although there may be exceptions, rarely will it be appropriate to grant leave to discontinue once the proceedings have proceeded to a contested hearing: see Stahlschmidt v Walford [1879] 4 QB 217; Re Alpha Company Limited [1903] 1 Ch 203; Stevens v Theatres Limited [1903] 1 Ch 860. This is because once the parties have defined their positions, prepared their cases and proceeded to a hearing it is ordinarily regarded as unfair to deprive a party who has obtained a forensic advantage of that advantage. For example, even where leave to discontinue is granted, where a defendant has gained some advantage leave to discontinue is usually granted on terms that preserve the advantage: see Covell Matthews v French Woolstone [1977] 2 All ER 591, 594 affirmed [1978] 2 All ER 800; Young Austin & Young Limited v British Medical Association [1977] 2 All ER 884; SCI Operations Pty Limited v Trade Practises Commission (1984) 2 FCR 113; Rydges Hotel Limited v Charles of the Ritz Ltd [No 8] (1987) 12 IPR 75.

1. In my view, particularly having regard to the quasi-criminal nature of these proceedings, and the state they have reached, this is a case in which it would not be appropriate at this stage to grant leave to discontinue.

1. That conclusion is fortified by the circumstance that there are other apparent obstacles to the applicants' claim, which would not apparently be overcome by an adjournment.

1. In particular, it appears (1) that the order relied on as founding the contempt was not endorsed with a notice to party bound; (2) that it was not served personally on the fourth, fifth and sixth defendants; and (3) that the motion for contempt was not served personally on those defendants. All of those matters would require, at least, that the court be persuaded to dispense with compliance with the Rules, and while it might be persuaded to do so in the case of one non-compliance, bearing in mind the strict character of contempt proceedings, it might be thought unlikely that the court would be prepared to dispense with three defects in such compliance.

1. Moreover, there is a very live question as to whether the order in respect of which contempt is alleged imposed any obligation on the respondents at all. As Black J explained in his Honour's judgment, the obligation to produce was imposed by the notice to produce and by the subpoena, and the effect of his Honour's order was to extend time for compliance, rather than to impose an obligation to produce. I have not reached any final view on that matter but, as presently advised, there is at least a very considerable difficulty for the applicants in that respect.

1. Finally, the remedies sought are sequestration or fine, rather than attachment and committal of the directors of the defendants, and it might be thought unlikely that those remedies would advance the production of the documents in question in order to assist the plaintiffs prosecute the substantive case.

1. None of that is to overlook that, while I am not in any position to express a view one way or the other as to whether it is the case, there may have been a failure to produce documents, and that failure may be important to the applicant's substantive case. However, it seems to me that there may be other remedies under the Rules, in connection with the enforcement of subpoenas and notices to produce, that may afford a far more useful means of securing the production of documents than this present application.

1. As it seems to me, both by reason of the evidentiary deficiencies that have already emerged, and on account of the other apparent difficulties to which I have referred, it is far better that this matter be brought to a head now once and for all, rather than be protracted, while many of those difficulties will persist.

1. I decline to grant leave to discontinue.

Disposal

1. Leave to discontinue having been refused, the applicants offer no further evidence. In those circumstances, there is no case to answer, and the motion must be dismissed with costs.

Application for costs to be payable forthwith

1. Although in a sense the contempt application is a discrete matter, it is, in reality an element in the plaintiffs' endeavours to obtain discovery to prosecute the substantive proceedings. While the submission that the costs should be payable forthwith is not without force, on balance, I do not consider as a matter of discretion, that a "forthwith" costs order is warranted.

1. I decline to order that the costs be assessed forthwith.

Further directions

1. I note that the plaintiffs' lay evidence in the substantive proceedings is complete.

1. I direct that the defendants not be entitled to rely at the hearing without the leave of the Court on any lay evidence that has not been served by 8 March 2013. In this respect, if it is not practicable to obtain an affidavit from a proposed witness, service of a written outline of the evidence that the witness is expected to give, together with any documents that it is expected that that witness would prove, will suffice in lieu of an affidavit.

1. I adjourn the proceedings to 15 March 2013 at 9.45 before me for further directions.

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Decision last updated: 08 April 2013