Registrar of Supreme Court v Southern Hotels P/L No. Scgrg-99-137

REGISTRAR OF THE SUPREME COURT v SOUTHERN HOTELS PTY LTD
[2001] SASC 7

1................ WILLIAMS J. The defendant, Southern Hotels has been charged with contempt of court. It is alleged that:

“...in breach of a subpoena issued on 28 July 1997 pursuant to the Order of Judge Burley Master of the Supreme Court made on the same day by which subpoena Southern Hotels Pty Ltd was required to produce to the Registrar of this Court a telephone betting withdrawal slip for a withdrawal in the sum of $7,000 made from the Totalizator Agency Board telephone betting account in the name of Russell James Temple, being a withdrawal made at the Grosvenor Hotel agency of the Totalizator Agency Board at or about 10.31 am on Saturday 1 February 1997, it has destroyed the said telephone betting withdrawal slip.”

A hearing before me of the charge has been conducted in accordance with the procedure set out in Supreme Court Rules (SA) (“SCR”) r 93.06.
On 27 September 2000 the defendant by counsel pleaded guilty before me and I have received evidence and heard submissions as to penalty. Pursuant to a judge’s order made on 27 November 1998 the proceedings are prosecuted in the name of the Registrar of the Supreme Court by Mane Market Pty Ltd, Mane Lion Pty Ltd, Potanc Pty Ltd, Brighton Management Pty Ltd and Flinders Management Pty Ltd.
The history of this matter is comprehensively recited in the reasons given by Debelle J in support of the abovementioned order of 27 November 1998 (see Mane Market Pty Ltd v Temple [1998] SCSA S6986). It is sufficient now to note that in Action 2017 of 1996 the present prosecutors as plaintiffs were pursuing a monetary claim against Mr RJ Temple for breach of duty as a former director and employee. An injunction containing a Mareva order was served on Temple at 10 am on 1 February 1997 prevented him from dealing with his assets. At 10.31 am on that day he withdrew $7000 from his account at the TAB agency at Grosvenor Hotel, Victor Harbour.
Service of the order was effected personally on Mr Temple at Marion (a suburb of Adelaide) so that it was most unlikely that Mr Temple made the withdrawal in person some 100 kilometres distant at Victor Harbor thirty one minutes later.
Southern Hotels operates the Grosvenor Hotel and the Crown Hotel at Victor Harbor where the group Manager of the hotels at the relevant time was Mr Temple. He was a professional punter who maintained an account with the TAB agency at the Grosvenor Hotel (under the clerical control of Ms Yvonne Mills). Mr Temple’s employment by Southern Hotels ceased in about March 1998.
On 28 July 1997 a subpoena duces tecum against Southern Hotels was issued in the proceedings 2017 of 1996 in this court on a Master’s order. The subpoena required the present defendant Southern Hotels Pty Ltd (a stranger to those proceedings) on 31 July 1997 at 10 am to produce to the Registrar of the Supreme Court:
“...A Telephone Betting Withdrawal slip for a withdrawal in the sum of $7,000 made from the South Australian Totalisator Agency Board telephone betting account in the name of Russell James Temple, being a withdrawal made at the Grosvenor Hotel agency of the Totalisator Agency Board at or about 10.31 am on Saturday 1 February 1997.”
As required by SCR r 81.01(2) the subpoena was generally in the form prescribed by Form 23 to the Rules.
The order was served on Southern Hotels by leaving it at the registered office of the company at Adelaide on 30 July 1997 where it came to the personal notice of the company secretary on that date; that officer was also a director of the defendant. In fact, on the previous day the process server also delivered the subpoena to the Grosvenor Hotel Victor Harbor where it was left with the duty manager. (This may explain action which was taken on 29 July 1997 to instruct solicitors as undermentioned).
A charge of contempt of court against Mr Temple arising out of his withdrawal of funds on 1 February 1997 was dismissed by Perry J on 12 April 2000 as it had not been established what action Mr Temple may have taken disobediently during the half hour after service of the court order. (See Registrar of the Supreme Court v Temple (No 2) Judgment [2000] SASC 96). Mr Temple pleaded guilty to another charge which is not directly relevant to the matter with which I am now concerned.
Mr Temple was represented by a solicitor in action 2017 of 1996 at all relevant times and certainly on 29 July 1997 when the subpoena came to his notice. On that date (but after business hours) Mr Temple “faxed” a copy of the betting withdrawal slip from Victor Harbor to his Adelaide solicitor; the copy forms part of a composite document described below. Concurrently he instructed his solicitor to challenge the subpoena. Whether he personally sent the fax and handled the original withdrawal slip is not in evidence. Treating the fax as a business record, I conclude that Mr Temple made handwritten notations on a composite copy document (which I regard as his document) which was then faxed to the solicitor. The composite document comprised (a) a copy extract from the TAB operating manual showing the routine office procedure for maintenance of various classes of documents and (b) a copy of the original withdrawal slip and (c) Mr Temple’s endorsements by way of explanation and emphasis.
The withdrawal slip (as it appears from the composite document) carries Mr Temple’s signature and is countersigned by Ms Yvonne Mills. The amount of the withdrawal is shown in handwriting. Being (apparently) a “fax of a photostat” it is not possible to discern whether Mr Temple’s signature might be written in the same colour pen (or pencil) as the amount of the withdrawal. To anyone interested in pursuing by forensic document examination the circumstances surrounding the withdrawal of money from the betting account, the faxed photostat is obviously inadequate.
Mr Temple gave instructions to his solicitor on 29 July 1997 to contest the issue of the subpoena. On 30 July 1997 Mr Gray (a director and the secretary of Southern Hotels) also gave corresponding instructions on behalf of Southern Hotels to the same solicitor. Eventually the challenge to the subpoena was abandoned. The common representation of Temple and Southern Hotels by the same solicitor ceased on about 20 August 1999 - apparently when counsel identified the conflict of interest.
The subpoena was never answered although the present prosecutors believed after a routine enquiry from the Court Registry that a document had been delivered to the Registry in answer to the subpoena. The prosecutors (as plaintiffs in action 2017 of 1996) obtained the leave of a judge on 5 June 1998 to inspect and sought to exercise that right on 16 June 1998. The prosecutors then realised that the material in the Registry was in fact something (not now relevant) produced by someone else in answer to another subpoena. Steps were then taken to cause Southern Hotels’ default to be dealt with by way of contempt.
The attention of the solicitor for Southern Hotels was drawn to the apparent default by letters dated 17 June and 25 June 1998. In the absence of any response to those two letters the prosecutors on 8 July 1998 applied in action 2017 of 1996 (inter alia) for the issue of a Registrar’s summons for contempt. Under cover of a letter dated 15 July 1998 the defendant’s solicitor forwarded a copy of the composite document to the plaintiffs’ solicitor in action 2017 of 1996. The letter discloses for the first time that Hotel staff may have routinely destroyed the subpoenaed document. In fact this occurred after service of the subpoena and the management of Southern Hotels took no step to prevent it.
The original telephone betting withdrawal slip formed part of business records maintained at Victor Harbor by the Grosvenor Hotel in respect of its TAB agency. It is common ground between the parties for the purposes of this application, that in the circumstances of this case, it was the duty of Southern Hotels upon service of the subpoena to take steps properly to secure the document so that the company could discharge its obligation to produce the betting withdrawal slip to the court.
For the purposes of the law of contempt, a distinction may be drawn between conduct which is “casual accidental or unintentional” and that which constitutes “wilful disobedience” (see Australasian Meat Industry Employees Union v Mudginberri Station “Mudginberri” (1986) 161 CLR 98 at 113). In my opinion the company’s failure to take any reasonable steps after service of the subpoena to protect the document from routine destruction has the result that the company’s default with respect to production cannot be classified as “casual” (as that term is used in Mudginberri). The inability of the company to comply with its obligations should not be treated as fortuitous in view of the company’s failure to take any step to ensure the preservation of the withdrawal slip. If the document was kept for only six months in accordance with an established office practice (as appears to be the case) and if Southern Hotels omitted to do anything to preserve the slip, then I do not consider that its loss should be described as “accidental”.
I consider that the inaction of Southern Hotels is inexcusable neglect of a duty which ought to have been apparent to Southern Hotels upon service of the subpoena. The importance of the subpoena - which only dealt with one piece of paper - should have been enough to place Southern Hotels upon notice of a need for some care. The company seems to have been indifferent to any responsibility with respect to the document - which in the office routine only had an assured life of six months. In this instance I identify a degree of wilfulness in the company’s omission. I use that expression (in the case of a corporation) in the sense explained in Stancomb v Trowbridge Urban District Council (1910) 2 Ch 190 at 194 and as approved in Mudginberri (supra) see below.
The company secretary approached its legal adviser who also had instructions from Mr Temple personally (who had ceased to be a director of Southern Hotels on 8 May 1997). With the benefit of hindsight it can be seen that these common instructions to a solicitor presented at least potential difficulties. I do not wish to be critical of any individual because I may have imperfect material upon which to make a judgment. Mr Temple was apparently aligned with his parents (who as now relevant still financially stand behind the Trading Trust operated by Southern Hotels as trustee). It is possible that the need for Southern Hotels to stand at arm’s length from its Victor Harbor manager Mr RJ Temple in relation to his own personal problems may not have been sufficiently appreciated. It is understandable how Mr Temple and Southern Hotels initially chose the same solicitor. It is also understandable that the solicitor may not have clearly distinguished between the instructions and information received from his two separate clients.
At all events Southern Hotels joined in efforts to overturn the subpoena - as of course was its right. I am prepared to proceed upon the basis that the company’s default was not intentional and that the destruction of the records probably occurred in the ordinary course by an employee acting in accordance with the established office routine. However, that routine (as to retention of documents for six months) was specifically mentioned in the composite document which Mr Temple sent to the solicitor on 29 July 1997. He quoted a statement from an operations manual as to the TAB agency accounting and administration requirements with respect to the “filing and retention of records”. Under this heading, handwritten emphasis (presumably by Mr Temple) has been added to the following quotation:
“Telephone Betting Withdrawal Slips 6 months in week ending order”
It seems to me that the solicitor was on notice (if he understood - as do I -the import of Mr Temple’s annotation) that telephone betting withdrawal slips were maintained within the system for only a limited period. It is apparent that the betting withdrawal slip was only required to be retained until early August 1997 - a few days after service of the subpoena. (It was suggested in argument that the handwritten emphasis might have been added to the original operations manual by someone other than Mr Temple in the ordinary course of study of the manual. If that were so, Mr Temple adopted it in his composite document).
I should observe at this stage that the composite document only showed the face of the telephone betting withdrawal slip (TAB Form 11B); whether there was anything endorsed on the reverse side of the document is unknown. The composite document is endorsed with Mr Temple’s handwritten confirmation that the photostat is a “copy of actual slip”. Three handwritten asterisks link this comment with a notation that the actual slip was “signed by Evonne Mills” and a further reference as abovementioned to the routine written TAB instructions requiring retention of filed telephone betting slips for six months.
In his reasons dated 27 November 1998 for ordering the issue of the Registrar’s summons Debelle J said:
“[Counsel for Southern Hotels] 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.”
With the benefit of the material filed in support of the defendant’s plea in mitigation of penalty I proceed upon the basis that the failure to secure the betting slip was not deliberate although the omission was culpable. The information before the company’s officers was such that it is difficult not to reach the conclusion that the company may have at least turned a blind eye to its obligations. However, bearing in mind the seriousness of the charge (and the criminal standard of proof) I have eventually decided that I should not make such a finding. Although the inference was open on the prosecutors’ case that Southern Hotels deliberately allowed the document to be destroyed, I reject that conclusion in light of the sworn evidence put before me by Southern Hotels. Mr Russell Temple gave instructions to his solicitor on his own behalf on 29 July 1997. His knowledge as Manager is not to be attributed to Southern Hotels - at least for the purpose of now fixing penalty. It is an unfortunate complication that the company secretary and Mr Temple gave their respective instructions to the same solicitor. The company should have been astute to its obligation properly to care for the document. A letter dated 15 July 1998 (mentioned above) from Southern Hotels’ solicitor to the plaintiffs’ solicitors confirms that the writer is acting for Southern Hotels. He says:
“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.”
(My emphasis added).

The enclosed document was a copy of the composite document to which I have referred.

Despite the apparently clear terms of this letter, I am not satisfied that the document was forwarded to the solicitor by Southern Hotels. It appears that the document was forwarded to the solicitor by Mr Temple acting on his own behalf for the purpose of his own case. This is extremely important. If the composite document had been forwarded by Southern Hotels to its solicitors, that fact would have caused me to take a different view with respect to the “blind eye” which I have just mentioned. The letter of 15 July 1998 upon its face is a damaging admission on behalf of Southern Hotels. Nevertheless in light of the affidavit evidence, in my view it is likely that the author of the letter was then not clearly distinguishing in his own mind between the instructions and actions of his two clients, Mr RJ Temple and Southern Hotels In a follow up letter between solicitors dated 21 July 1998 the solicitor for Southern Hotels wrote:
“I refer to my letter of 14 July 1998.
My instructions are that the TAB withdrawal slip was destroyed by an employee of Southern Hotels Pty Ltd in the normal course of business between September 1997 and December 1997. I am instructed that my client identifies the employee responsible for that destruction as Ms Evonne Mills.”

I find:

1...... That telephone betting withdrawal slips were ordinarily retained by Southern Hotels for a period of 6 months and then destroyed
2.That the subpoenaed document was probably destroyed by the Grosvenor’s TAB clerk Ms Mills in the ordinary course of office routine and without knowledge of the requirements of the subpoena soon after 1 August 1997 and in any event within two months thereafter.
3...... That the director and secretary of Southern Hotels (who for present purposes accepts responsibility for compliance with the subpoena), became aware of the non-compliance with the subpoena in June or July 1998. He then travelled from Adelaide to Victor Harbor for the purpose of endeavouring to find the original withdrawal slip, and conducted extensive but unsuccessful searches.
4.Mr Chigwidden who was a manager under Mr Russell Temple and who reported to him, located the withdrawal slip amongst the records at the Grosvenor and photocopied it in July 1997 for Mr Temple at the Crown Hotel Victor Harbor (which was part of the Hotel group being locally managed by Mr Russell Temple). Mr Chigwidden then returned the original document to its place in the Grosvenor’s TAB system so as to keep it intact for audit purposes but not otherwise protected against routine destruction.

As now relevant, the defendant’s obligation arose upon service of the subpoena. It was entitled to take steps (as it did) seeking to discharge the Master’s order and the subpoena which issued thereon. Pending the Court’s determination of the application, the defendant was not entitled to go about its business in disregard of the subpoena. If the subpoena were not set aside then it stood in jeopardy as regards the obligations arising thereunder.
In Hadkinson v Hadkinson [1952] P.285, at p 288, Romer LJ said: (VR 1987 bottom of page 804)
“It is the plain and unqualified obligation of every person against, or in respect of whom, an order is made by a court of competent jurisdiction, to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void. ‘A party who knows of an order, whether null and void, regular or irregular, cannot be permitted to disobey it...It would be most dangerous to hold that the suitors, or their solicitors, could themselves judge whether an order was null and void - whether it was regular or irregular. That they should come to the court and not take upon themselves to determine such a question: that the course of a party knowing of an order which was null and irregular and who might be affected by it was plain. He should apply to the court that it might be discharged. As long as it existed it must not be disobeyed.’ (Per Lord Cottenham LC in Chuck v Cremer.)”

In the present case as I have already observed, the challenge to the subpoena was abandoned.
It is appropriate that an order for the payment for the prosecutors’ costs on a solicitor and own client basis be made in favour of the prosecutors against the defendant arising out of the issue of the summons for contempt. At my suggestion the amount of these costs up to 17 November 2000 has been agreed at $15,971.95. Southern Hotels has already made payments to the prosecutors of $4,200.24 on 8 September 1999 and a further $18,241.60 on 2 February 2000 arising out of earlier proceedings (including those before Debelle J). Its own costs are estimated at about $33,500. In all the direct costs which Southern Hotels will have incurred up to 17 November 2000 and associated with the charge of contempt is approximately $71,913.79 and the liability for costs will continue to run since 17 November 2000.
I have been provided with a copy of the financial statement relating to the Trading Trust of which Southern Hotels is the Trustee. Southern Hotels has no assets of its own. The trust business involves the running of a number of hotels. Upon my reading of the Trust instrument the Trustee will be entitled to an indemnity against the Trust Fund in respect of these costs for which it is liable. Undoubtedly the costs which I have identified will constitute a serious burden to Southern Hotels and to the Trust which it administers. I am informed that the ability of the Southern Hotels as Trustee to continue to carry on business has become dependent upon the injection of funds by the late Mr Roy Temple (the father of Russell Temple) and his wife. In reaching my decision as to appropriate penalty I have regard to the ability of Southern Hotels to meet the proposed orders and the effect thereof upon the Trust and the Trustee.
The present proceedings were commenced on 17 February 1999 and the defendant entered a guilty plea as soon as the matter was called on before me. There has been a great deal of work necessary upon both sides to assemble the facts in affidavit form. The burden of this will fall on Southern Hotels and this is reflected in the costs abovementioned.
In my opinion (contrary to the submission of the defendant’s counsel) this is not a case where a reprimand coupled with an order for payment of costs will suffice. An apology has been put before the Court and that together with the guilty plea should be brought to account. The inherent power of the court is wide. It is regulated to some extent by SCR r 93. Bearing in mind the shadow of substantial punishment which on my assessment hangs over the proceedings, I have proceeded as upon a disputed facts hearing in the Criminal Court. I have taken the most favourable view of the facts (from the defendant’s point of view) which is open on the evidence. The defendant has put forward a convincing and consistent body of sworn evidence.
The present case is not one where the conduct of the contemnor should be treated as “contumacious” in the wider sense identified in Mudginberri (supra) at 111-112 distinguishing the narrow use of the word by Stamp J which equates it with “wilful”).
It is also not appropriate to regard the conduct as casual, accidental or unintentional. It is to be treated as wilful in the sense used in Mudginberri.
It is clear from the passage to which I have referred in Mudginberri that the court in appropriate cases will impose a penalty for conduct which is not characterised as contumacious (in the wider meaning of that word). In Mudginberri (supra) at 112-113 Gibbs CJ, Mason, Wilson and Deane JJ said:
“In Mileage Conference itself, substantial fines were imposed on companies for contempt by breach of undertaking which was not merely non-contumacious but was committed reasonably on legal advice.
The correctness of the approach outlined in the preceding paragraph was indorsed by the House of Lords in Heatons Transport; their Lordships explicitly citing Steiner and Mileage Conference as precedents for the imposition of a fine in a case of disobedience to an order which is more than casual, accidental or unintentional. This indorsement was evidently based on the reasoning in the decisions to which we have referred, including an appreciation of the unsatisfactory consequences which would flow from the adoption of the view that there is no power to fine in such cases. To those reasons we would add the comment that lying behind punishment for a contempt which involves wilful disobedience to a court order, is the very substantial purpose of disciplining the defendant and vindicating the authority of the Court....”
Inre Mileage Conference Group of the Tyre Manufacturer’s Conference Ltd’s Agreement [1966] 1 WLR 1137 at 1162-1163 the Restrictive Practices Court said:
“We accept the view of the law expressed by Warrington J in Stancomb v Trowbridge Urban Council [1910] 2 Ch 190, 194:
......... “...if a person or a corporation is restrained by injunction from doing a particular act, that person or corporation commits a breach of the injunction, and is liable for process for contempt, if he or it in fact does the act, and it is no answer to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order.”
We conclude, therefore, that the breaches of undertaking here were contempts of court, even though it were to be shown that they were things done, reasonably and despite all due care and attention, in the belief, based on legal advice, that they were not breaches.
We are also of opinion that, just as the court can require, at least, payment of damages, where there has been a breach of an injunction by a party to litigation between two individual citizens, so also where the injunction or undertaking is given in litigation between the registrar, as representing the public interest, and an individual or a company, the court, in imposing a financial penalty, may take into account, in addition to other factors, the injury to the public which must be deemed to be involved in the breach.
Questions as to the bona fides of the persons who are in contempt, and their reasons, motives and understandings in doing the acts which constitute the contempt of court, may be highly relevant in mitigation of the contempt. Bona fide reliance on legal advice, even though the advice turns out to have been wrong, may be relevant, and sometimes very important, as mitigation. The extent of such mitigation must, however, depend upon the circumstances of the particular case, and the evidence adduced.”
In Stancomb v Trowbridge Urban District Council (1910) 2 Ch 190 at 194 Warrington J said:
“In my judgment, if a person or a corporation is restrained by injunction from doing a particular act, that person or corporation commits a breach of the injunction, and is liable for process for contempt, if he or it in fact does the act, and it is no answer to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order. I think the expression “wilfully” in Order XLII, r 31, is intended to exclude only such casual or accidental and unintentional acts as are referred to in Fairclough v Manchester Ship Canal Co. I think this view, though not of course expressed in the same words, is to all intents and purposes the view expressed in Attorney-General v Walthamstow Urban Council. In my opinion, further, the act need not be done by the person himself. In the case of a corporation it cannot be done by the corporation itself, at any rate in the case of such a corporation as an urban district council. Such a body can only act by its agents or servants; and I think, if the act is in fact done, it is no answer to say that, done, as it must be, by an officer or servant of the council, the council is not liable for it, even though it may have been done by the servant through carelessness, neglect, or even in dereliction of his duty...”
It seems to me that Southern Hotels is now to be dealt with upon the basis that it was in dereliction of its duty which arose upon service of the subpoena. Its fault lies in its inaction which could not be remedied after the destruction of the document.
In Witham v Holloway (1995) 183 CLR 525 at 532-533 Brennan, Deane, Toohey and Gaudron JJ said:
“One problem is that there is not a true dichotomy between proceedings in the public interest and proceedings in the interest of the individual. Even when proceedings are taken by the individual to secure the benefit of an order or undertaking that has not been complied with, there is also a public interest aspect in the sense that the proceedings also vindicate the court’s authority. Moreover, the public interest in the administration of justice requires compliance with all orders and undertakings, whether or not compliance also serves individual or private interests.
Nor can the dichotomy between proceedings in the public interest and proceedings in the interest of the individual be maintained on the basis that some cases involve an interference with the administration of justice and others merely involve an interference with individual rights. All orders, whether they be Mareva injunctions, injunctions relating to the subject matter of the suit, or, simply, procedural orders, are made in the interests of justice. Non-compliance necessarily constitutes an interference with the administration of justice even if the position can be remedied as between the parties.”
In my opinion a punitive order is now required. I will impose a fine of $4,000 and order the payment of costs. If the defendant had not pleaded guilty and properly acknowledged the extent of its default and apologised, the fine would have been $5500.
I order:
1...... That in respect of the admitted contempt of court, the defendant Southern Hotels be fined $4000.
2.That the defendant pay to the plaintiff its costs as between solicitor and own client; those costs are fixed at $15971.95 up to 17 November 2000; the costs arising thereafter are to be taxed (if not agreed).

[2001] SASC 7

8 February 2001