Mane Market Pty Ltd v Temple No. Scgrg-96-2017 Judgment No. S6986
[1998] SASC 6986
•27 November 1998
MANE MARKET PTY LTD & ORS v TEMPLE
[1998] SASC S6986
Civil
Debelle J
The plaintiffs allege that the defendant has acted in breach of a Mareva injunction ordered by this court. They have made three applications each of which seeks, among other orders, the issue of a Registrar’s summons for contempt. To put the applications in context, I set out the factual background.
In this action, which was commenced on 4 October 1996, the plaintiffs claim damages from the defendant for alleged breaches of his duties both as a director and an employee of the plaintiff companies. The Statement of Claim includes allegations that the defendant misappropriated an amount in excess of $700,000.
On 30 January 1997 the plaintiffs obtained an ex parte interim order for a Mareva injunction restraining the defendant from dealing in any way with his assets. After argument on 20 February 1997 a fresh interlocutory order with a Mareva injunction was made until further order. The injunction restrains the defendant and his wife and any company, trust or other entity owned or controlled by them from disposing of and dealing in or removing out of South Australia any property or interest in property. The order is couched in very wide terms. The order lists several named assets and operated in respect of any beneficial interest of the defendant and his wife in any trust. The order was served on the defendant on 7 March 1997.
The First Application
The defendant had an interest in a trust called “The Temple Weeks Trust”. On 20 April 1998 the defendant by deed assigned his interest in the trust in consideration of the payment of $50,000. The sum of $50,000 has been paid to the defendant. He has used the money to pay for various household and other expenses and to repay a loan made by his parents. The plaintiffs’ first application, which is dated 1 June 1995, is for an order that the defendant’s action in assigning his interest in the trust is in breach of the Mareva injunction ordered on 20 February 1997 and for an order that a Registrar’s summons for contempt should issue. The defendant admits the breach of the order but denies that he has acted in contempt of the order. The contempt is denied on the ground that the breach was not contumacious.
When determining whether a Registrar’s summons should issue, the court is exercising a screening function somewhat similar to that exercised by a magistrate in committal proceedings in respect of a criminal offence. To make an order that a Registrar’s summons should issue, the court must be satisfied that there is sufficient evidence which, if accepted, would prove the contempt. When determining whether there is sufficient evidence, it must be remembered that there is no longer any distinction between civil and criminal contempts. All contempts should be punished as if they are quasi-criminal in character: Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 109, and the burden of proof in civil proceedings is proof beyond reasonable doubt: Witham v Holloway (1995) 131 ALR 401. The defendant refers to his definition of contempt in Rule 93.01(9) which includes as a contempt “any contumacious refusal to obey or comply with a judgment or order of the court”. He says that a Registrar’s summons should not issue because his breach of the order was not contumacious. He also says that the breach was inadvertent. However, as the defendant himself has admitted in paragraph 6 of his affidavit sworn on 26 August 1997, he was aware that the Mareva injunction prevented him from disposing of his assets. The defendant has not offered to purge his contempt. Neither has he made any apology or expressed regret, though it is doubtful whether an apology is sufficient: see Hadkinson v Hadkinson [1952] P 285 per Romer LJ at 291.
It is not appropriate at this stage to determine whether the breach is contumacious. There are two reasons for that conclusion. The first is that it is necessary for the court to determine no more than whether there is sufficient evidence which, if accepted, would prove the contempt. Secondly, the plaintiffs have given notice that they seek to cross-examine the defendant. There is a real dispute whether the defendant’s breach was inadvertent. The plaintiffs assert that the sale of the defendant’s interest in the trust was a deliberate act made with full knowledge and despite the terms of the injunction. It is not possible, therefore, to determine the issue until the relevant evidence has been led and tested. Finally, wilful disobedience of an order may constitute contumacious conduct and thus constitute a contempt: see the discussion in Mudginberri (supra) at 109 to 113. Evidence will be necessary to determine whether this was a wilful breach.
Given the admitted breach of the order, it is proper to grant the plaintiffs’ application that the defendant has, by assigning in the deed made on 20 April 1998 his interest in The Temple Weeks Trust, acted in breach of the injunction ordered on 20 February 1997 and to order the issue of a Registrar’s summons for contempt.
The Second Application
The ex parte order with the Mareva injunction made on 31 January 1997 was personally served on the defendant at Marion at 10am on 1 February 1997. That injunction, like the injunction later made on 20 February 1997, prevented the defendant from dealing in or in any way disposing of any of his property or interests in property. The injunction was expressed in very wide terms. It also prevented the defendant from removing any of his property from its then location.
At 10.31am on 1 February 1997 the sum of $7,000 was withdrawn by the defendant, or at his direction, from a telephone betting account which the defendant had with the Totalizator Agency Board (“TAB”). The withdrawal was made at the TAB agency at the Grosvenor Hotel at Victor Harbor. The Grosvenor Hotel is owned and operated by Southern Hotels Pty Ltd. At that time the defendant was general manager of hotels owned by Southern Hotels Pty Ltd. As the defendant himself has said in an affidavit sworn on 18 February 1997, he is a professional punter, commission agent and betting agent in the horse racing industry. In that same affidavit he says that he has made a livelihood through his gambling activities.
On 8 July 1998 the plaintiffs applied for an order that the withdrawal of $7,000 from the TAB agency was in breach of the injunction ordered on 31 January 1997 and for an order that the Registrar issue a summons for contempt. This is the second of the plaintiffs’ applications. As will be seen, the defendant admits the withdrawal but denies he acted in breach of the injunction.
According to an affidavit sworn by an internal auditor of the TAB, in order to make a withdrawal from a TAB account it is necessary to present an identification card which shows the account number in relation to the particular account, verbally advise the check number which is associated with the account number, and sign a withdrawal slip with a signature that matches that on the back of the identification card.
On 27 February 1997 a master of this court made an order pursuant to s49 of the Evidence Act 1929 that the plaintiff be at liberty to inspect and take copies of certain records including a detailed betting statement of the TAB relating to the defendant for 1996 and 1997. On 3 October 1997 that order was varied by a judge of this court. Pursuant to the order made on 27 February 1997 the plaintiffs obtained evidence of the cash withdrawal on 1 February 1997. They then sought an explanation of the transaction from the defendant. The defendant, through his solicitors, denied withdrawing any sum from the TAB after the order had been served on him. The defendant did not give any account of the transaction until 15 July 1998, when he swore an affidavit which has been filed in this action. It will be noticed that the affidavit was filed after the plaintiffs had issued this second application for a Registrar’s summons for contempt.
In the affidavit sworn on 15 July 1998, the defendant admits the withdrawal but says that he had arranged for the money to be withdrawn on the evening of 31 January 1997. He says that he completed a telephone betting withdrawal slip that evening at the Grosvenor Hotel and he left the signed slip with the staff of the Grosvenor Hotel to process. He says that he asked the staff to fill in $7,000 on the slip as the amount of the withdrawal. He adds that he has withdrawn money in this way on many other occasions, the practice being for him to leave the withdrawal slip with an employee of the hotel who, after completing any part of the slip which the defendant had not completed, would then take the amount stated on the slip from the funds of the TAB agency and place those moneys in the hotel safe for the defendant to collect at a later time.
The plaintiffs contend that the defendant’s account is implausible for the simple reason that, if the defendant had wanted cash, he could have obtained it himself on 31 January 1997 when he was at the Grosvenor Hotel at Victor Harbor. They submit that the only rational inference is that the defendant had left one or more signed but otherwise incomplete withdrawal slips with hotel staff and had telephoned the instruction to withdraw $7,000 after the order with the Mareva injunction had been served on 1 February. The plaintiffs do not have direct evidence that the defendant made the withdrawal or arranged it after he had been served with the injunction. The case against the defendant is circumstantial.
The defendant submitted that the case against him is very weak and that no breach has been proved. He submits that the plaintiffs must prove that he has disposed of an asset and there is simply no evidence that he has done so. He, therefore, submits that it is not open for the court to order that he has acted in breach of the injunction and that a Registrar’s summons should not issue.
The defendant’s submission that the plaintiff must prove that the defendant has disposed of an asset overlooks, if not ignores, that part of the injunction made on 31 January 1997 which restrained the defendant from “removing from their present location or otherwise dealing with” any of his assets or property. The submission, therefore, fails. The defendant also sought to avoid the operation of the injunction ordered on 31 January 1997 on the ground that the injunction ordered on 20 February 1997 was not so wide in its terms. However, the later injunction also prevents the defendant from removing his property from its present location. This submission too must fail. Finally, the defendant submitted that the plaintiff’s delay in applying for the summons should tell against the application. I do not agree. While it was desirable that the plaintiffs should have acted more promptly, their delay is not relevant on the question whether a Registrar’s summons should issue.
As the plaintiffs have not yet proved that the withdrawal was made in breach of the injunction, they are not entitled to the first of the orders they seek. However, there is prima facie evidence of such a breach. In reaching that conclusion I have had regard to the fact that the plaintiffs’ case against the defendant is circumstantial. In a case based on circumstantial evidence it is, I think, appropriate to apply the test when considering whether there is sufficient circumstantial evidence to constitute a case to answer by an accused person. Some force for that conclusion lies in the fact that the criminal onus applies on a charge of contempt. Thus, when considering whether there is a prima facie case to warrant the issue of a Registrar’s summons, it is not the role of the judge hearing the application to choose between the inferences which may be fairly open to the judge who hears the summons. Instead, the judge must decide the question on the basis that the judge hearing the summons will draw such of the inferences which are reasonably open as are most favourable to the party seeking the issue of the Registrar’s summons: cf R v Bilick (1984) 36 SASR 321; Questions of Law Reserved on Acquittal (No 2 of 1993) (1993) 61 SASR 1, 5. In addition, for the reasons I have expressed in relation to the first application, proof that the breach was wilful will constitute a contempt. There will, therefore, be an order that a Registrar’s summons shall issue in relation to this alleged contempt.
The Third Application
In an attempt to obtain further evidence to prove its allegation that the defendant had acted in breach of the Mareva injunction when withdrawing the sum of $7,000 the plaintiffs applied for an order for production of the telephone betting withdrawal slip used in that transaction on 1 February 1997. On 28 July 1997 a master of this court made an order that a subpoena issue to the secretary of Southern Hotels Pty Ltd (“Southern Hotels”) to produce to the court on 31 July 1997 the original of the telephone betting withdrawal slip. The subpoena was served and conduct money was tendered. The solicitors for the plaintiff are Messrs Hynd & Co. The solicitors for the defendant are Phillips Fox and Mr Purcell of that firm has the conduct of the matter.
On 30 July 1997 Southern Hotels sent by facsimile transmission to Mr Purcell a copy of the withdrawal slip. It is reasonable to infer, as I do, that the original withdrawal slip was then in existence. Then, by application dated 31 July 1997 Southern Hotels applied to set aside the order for the subpoena. The application was heard on 2 October 1997 and dismissed. Southern Hotels did not answer the subpoena. For reasons which are not entirely clear, Hynd & Co did not seek to inspect documents produced in answer to this and another subpoena until June 1998. It appears that they erroneously held the view that the subpoena had been complied with and that the withdrawal slip had been produced in a sealed package adduced to the Registrar of this court. On 5 June 1998 a judge of this court granted the plaintiffs liberty to inspect documents produced in the sealed package in answer to the subpoenas.
It was not until they inspected the sealed package that Hynd & Co discovered that Southern Hotels had not complied with the subpoena which had been served on it. On 17 June 1998 they wrote to Mr Purcell, asking if Southern Hotels had produced the document. Mr Purcell did not reply. On 25 June Hynd & Co repeated the request. Mr Purcell still did not reply. On 8 July 1997 Hynd & Co then issued an application for an order that the failure of Southern Hotels to comply with the subpoena was an act in breach of the subpoena. They also sought the issue of a Registrar’s summons for contempt addressed to Southern Hotels Pty Ltd in respect of the alleged contempt. This is the plaintiffs’ third application.
After the application had been served, Mr Purcell wrote a letter dated 15 July 1998 to Hynd & Co. He stated that Phillips Fox acted for Southern Hotels Pty Ltd in relation to this matter. The letter went on to explain why the withdrawal slip had not been produced. The effect of his letter was that the slip may have been inadvertently destroyed. I set out the material parts of the letter.
“I confirm that Phillips Fox acts for Southern Hotels Pty Ltd in this matter.
The history of the subpoena in relation to this document is a complicated and confused one. The subpoena was issued at the request of your firm on 28 July 1997. We objected to the production of the document contained in the said subpoena and the matter was set down for argument before Master Kelly on 2 October 1997 where he ordered that the subpoena was validly issued. At this time our Fiona Errington was informed that a document had been produced to the court in accordance with the initial subpoena. She recalls that she was informed of this by Peter Sheppard of your firm.
No subsequent service of the Order made by Master Kelly or correspondence was received by my client from your firm indicating that the subpoena had not been complied with. It appears that the non-production of this document has occurred due to an oversight in this matter.
My client has instructed me that they are currently trying to locate the original document. They have informed me that a staff member may have inadvertently destroyed the document relating to the withdrawal of $7,000.00 on 1 February 1997 from the Totalisator Agency Board (“TAB”) along with other TAB documents. This is a normal procedure conducted by hotel staff on a six-monthly basis as the volume of those documents becomes significant.
However, a copy of that document was forwarded to me by my client on 30 July 1997. I enclose a copy of that document for your information.”
In addition, Mr M C Gray, the secretary of Southern Hotels, has sworn an affidavit confirming that the withdrawal slip had been inadvertently destroyed. In that affidavit he acknowledges that the subpoena was served and that it required production of the withdrawal slip. His affidavit continues:
“6..... At the time of service of the said subpoena, an objection was made by our solicitors to the production of the document contained in the said subpoena and the matter was set down for argument before Master Kelly on 2 October 1997.
7.I or Southern Hotels have received no further correspondence in relation to that subpoena since service was executed on 30 July 1997.
8...... I believed that the document had been produced in accordance with the order. It was an oversight that the document was not produced to the Registry in accordance of with [sic] order and the failure to produce the said document was entirely accidental and unintentional.
9.Despite making extensive enquiries the original of the document has not been located since a copy was provided to Phillips Fox in July 1997. I believe that the original document has been destroyed in the ordinary course of destruction of TAB documents.”
That is the evidence concerning the plaintiffs’ third application.
Mr Ross-Smith, who appeared for the defendant on these applications, also appeared on behalf of Southern Hotels. He submitted that there was little point in issuing a Registrar’s summons as the subpoena had been inadvertently destroyed and, in any event, a copy had been produced to the plaintiffs. The affidavit filed on behalf of Southern Hotels did not establish how the withdrawal slip was destroyed.
The destruction of a document which is the subject of a subpoena constitutes a contempt: Registrar of Supreme Court v McPherson [1980] 1 NSWLR 688. A belief that the subpoena was not valid did not relieve Southern Hotels from the obligation to produce the withdrawal slip pending the resolution of the application to set aside the subpoena: Little v Lewis [1987] VR 798. The destruction of the withdrawal slip is admitted. The only issue is whether that destruction constituted a contempt. Southern Hotels says it was inadvertent. The affidavits filed on behalf of Southern Hotels do not establish how the slip was destroyed. The case against Southern Hotels is circumstantial. One relevant fact is that the defendant was at all material times the manager of Southern Hotels. The question whether the destruction of the slip was inadvertent is an issue which can only be resolved after hearing the evidence.
For the same reasons as led me to conclude that there is a prima facie case in respect of the plaintiffs’ second application, I find that there is a prima facie case which justifies the issue of a Registrar’s summons for contempt in respect of the destruction of the withdrawal slip. Although there is sufficient evidence to decide that the failure of Southern Hotels to comply with the subpoena constitutes a breach of the subpoena, I do not make an order to that effect. Such an order can be made when the summons for contempt has been heard.
Orders
For these reasons, there will be orders as follows:
That the defendant has, by assigning in the deed made on 20 April 1998 his interest in The Temple Weeks Trust, acted in breach of the injunction ordered on 20 February 1997.
That a Registrar’s summons for contempt issue in respect of the breach identified in paragraph 1 of this order.
That a Registrar’s summons for contempt issue in respect of the withdrawal by the defendant of the sum of $7,000 from the Totalizator Agency Board at its agency in the Grosvenor Hotel, Victor Harbor.
That a Registrar’s summons for contempt issue in respect of the destruction by Southern Hotels Pty Ltd of the telephone betting withdrawal slip fro the withdrawal of the sum of $7,000, the subject of the subpoena issued out of this court on 28 July 1997.
I will hear the parties on the orders to be made as to costs.
This action was commenced on 4 October 1996. It is still a long way from being ready for trial. While I do not for one moment intend to condone the conduct which has led to these three applications, I question whether it is desirable for the plaintiffs to be distracted from the prosecution of the action by the prosecution of each summons for contempt. The allegations in the Statement of Claim are serious. They are factual allegations which should be capable of being brought to trial with reasonable expedition. There are questions whether the capacity of the plaintiffs to prove their case will in any respect be enhanced by pursuing, at this stage, the prosecution of each summons which could be heard and determined after judgment of the action. As against that view, these allegations might be capable of fairly ready proof. In addition, the outcome may affect the issues arising from the defendant’s application to vary the terms of the injunction with which I will deal in a moment. These are, of course, matters which the plaintiffs are in a better position to determine.
The Defendant’s Application
On 16 June 1998, the defendant applied to vary the terms of the Mareva injunction to enable him to pay his legal fees and ordinary living expenses. The application has not been prosecuted until this hearing.
It is well settled that, generally speaking, a party in contempt cannot make an application in the same court until he has purged his contempt: Hadkinson v Hadkinson (supra); Short v Short (1973) 7 SASR 1, 11; X Limited v Morgan-Grampian (Publishers) Ltd [1990] 2 All ER 1. The rule applies even in those cases where it appears that a breach of an order of a court has been committed but the court has not yet made an order that a party is in contempt: see the discussion by Young J in Young v Yackman (1986) 7 NSWLR 97 at 99 to 101. The rule is subject to certain exceptions: see Halsbury’s Laws of England (4th ed) vol 9 para 106. In addition, the court has a discretion to hear the application notwithstanding that it does not fall within any of the exceptions: Hadkinson v Hadkinson, Short v Short, and X Limited v Morgan-Grampian (Publishers) Ltd at 10-12.
The defendant urges that the court should, in the exercise of its discretion, hear his application. He advances several reasons in support. The first is that it has not been proved that he is in contempt. He has, however, admitted a breach of an order of this court, namely, the assignment by the defendant of his interest in The Temple Weeks Trust. That was a serious breach. It was made with the full knowledge of the order and advice as to its terms. The defendant says that the breach was inadvertent. This is not a case where it was obvious that it was inadvertent and that a Registrar’s summons should not issue. I say no more lest I prejudice the later hearing of the Registrar’s summons for contempt. As already mentioned, the rule that a party in contempt will not be heard applies also where a breach of an order has been established but the court has not yet determined whether a party is in contempt. The fact that the defendant has not yet been adjudged to be in contempt is not, therefore, a ground which justifies the exercise of the discretion in the defendant’s favour.
Another ground on which the defendant relies is that he is no longer in contempt in the sense that all of the breaches of the Mareva injunction are alleged to have occurred in the past. There is no force at all in that contention. The defendant has admitted one breach and, in the case of the other two contempts, there are facts which justify the issue of a Registrar’s summons. The submission is tantamount to a submission that the breaches in the past should be ignored. There is nothing to justify that course which would be akin to condoning the breaches.
The defendant then points to the principle that the court will hear a party who has purged his contempt and submits that the application is tantamount to purging the contempt. I do not agree. Although part of the sum of $50,000 was applied towards living expenses, $25,000 was used to repay a loan said to be a loan from the defendant’s parents to pay living expenses. That has not been established. Even if the loan was to assist in payment of living expenses, the repayment of the loan was not, strictly speaking, a payment of living expenses. The defendant will not have purged his contempt unless and until he repays at least the sum of $25,000.
There are other factors which point to the discretion to permit the defendant’s application to be heard. The justification for the making of a Mareva injunction is, not to improve the position of a plaintiff claiming to have a right against the defendant by giving him security for any possible judgment, but to prevent the abuse which might be caused to such a plaintiff if a defendant, who was so disposed, were free to dissipate his assets, or to spirit them out of the country, with a view to defeating any judgment which might be obtained: Iraqi Ministry of Defence v Arcepey Shipping Co (SA) [1980] 2 WLR 488; Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 at 569. Generally speaking, at the time of the grant of the Mareva injunction or by later variation, the order permits the defendant to have access to his assets in order to provide for his living expenses: Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (supra); and to provide for his legal expenses: A v C (No 2) [1981] QB 961 and Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (supra). On one view, consideration should have been given to the living expenses of the defendant at the time when the Mareva injunction was ordered. I think, therefore, it is a proper exercise of the court’s discretion to permit the defendant to be heard on this application.
Other factors point to the same conclusion. Notwithstanding that the defendant is guilty of contempt, he is entitled to prosecute a defence of the action: Wilson v Bates (1838) 3 My & Cr 197 at 201, 40 ER 901; Marchant v Dunlop (1927) 44 WN (NSW) 108, 110; Hadkinson v Hadkinson at 289 to 290. In addition, a party in contempt may appeal with a view to setting aside the order on which the contempt is founded: Gordon v Gordon (1904) P 163; Hadkinson v Hadkinson (supra) at 290 to 291. Thus, although there is a natural disinclination to permit a party who has failed to comply with an order of the court to come to the court and ask for something, regard must be had to the principles of procedural fairness. Notwithstanding the alleged contempt, the defendant is entitled to conduct his defence. If the defendant is denied funds with which to do so, the court is effectively requiring his solicitors to fund the defence.
There are, however, other factors which must be addressed. The defendant is, on his own admission, a person who gambles heavily on horse races, asserting that the proceeds of his betting are part of his livelihood. There is no order restraining the defendant from gambling. It is obviously appropriate that such an order be made to prevent dissipation of his assets in this way. Next, the defendant’s gambling activities require that there be an enquiry as to what he ought to be permitted to draw as his living expenses. Such an enquiry is unusual - but the defendant’s gambling activities mean that this is not the usual kind of case. Thirdly, given the defendant’s admitted gambling activities, consideration might have to be given to how the withdrawal of moneys for living expenses should be monitored. The applications for funds for legal expenses raises other issues. This is a case where it is appropriate to require the defendant to satisfy the court that he has no other assets with which he can pay his legal costs: A v C (No 2) (supra) at 963.
For these reasons, notwithstanding the admitted breach of the Mareva injunction and the prima facie case that the defendant is guilty of at least one other breach, I am satisfied that he should be permitted to be heard on his application to vary the Mareva injunction. I will remit the matter for enquiry by a master as to how much should be allowed for living expenses and legal expenses. I have considered whether the application should not be heard until the defendant has purged his contempt by payment into court of the sum of $25,000 which he paid to his parents. For the reasons already expressed, I have, with a great deal of hesitation, come to the conclusion that it is not appropriate to make such an order.
2
8
0