Shearer & Others No. Scgrg-97-1498 Judgment No. S6445

[1997] SASC 6445

RE SHEARER & OTHERS

Civil

Debelle J  (ex tempore)

This summons for contempt stems from proceedings between a mortgagor and mortgagees.  The mortgagor was a Dr Papps.  He had borrowed money from a group of individuals.  The loan was secured by a mortgage. On 21 February 1997 Dr Papps instituted proceedings in this court. It is action No. 311 of 1997. Those proceedings initially sought relief against the mortgagees' agent.  Later the mortgagees themselves were added as defendants and Dr Papps sought orders restraining the mortgagees from enforcing their rights under the mortgage.

On 24 April 1997 Judge Bowen Pain made a series of orders the effect of which was to restrain the mortgagees from enforcing their rights under the mortgage.  It is necessary to have regard to the precise terms of the order.  The relevant paragraphs are paras.2, 3 and 4.  They are in these terms:

1. That the second defendants by their servants and/or agents be restrained, until 4.00pm on 12 May 1997, from exercising their rights and powers pursuant to Memorandum of Mortgage No.8141000 and registered over the plaintiff’s land contained in Certificate of Title Register Book Volume 5230 Folio 927 and situate at 262 Cross Road Kings Park in the State of South Australia ("the Mortgaged Property").

1. That the second defendants by their servants and/or agents be restrained until 4.00pm on 12 May 1997 from demanding, from the Plaintiff, any sum which is or is alleged to be due to the second defendants and secured by the said Mortgage.

1. That the second defendants by their servants and/or agents be restrained until 4.00pm on 12 May 1997 from exercising all or any of their rights pursuant to the said Mortgage and in particular -

4.1     to enter upon and take possession of the Mortgaged Property;

4.2    to sell all or any of the Mortgaged Property."

The order was an interim order. Judge Bowen Pain adjourned the matter for further consideration on 9 May 1997. On 9 May the judge made orders extending the injunction until further order.  He also granted liberty to apply.

The mortgagees were anxious to enforce the mortgage. They wished to avoid any unnecessary delay.  On 12 June 1997 Clelands, the solicitors for the mortgagees, sent a letter to Mr Brook, the solicitor for Dr Papps, stating their clients' intention to commence proceedings and suggesting that the issue and service of the proceedings would not constitute a breach of the injunction.  I set out the terms of the letter.

"We refer to the injunctions obtained by you in the above proceedings on 9th April 1997 and 23rd May 1997.  We note that those injunctions remain in force until further order and until 18th July 1997 respectively.

As you are aware the mortgagees are required to issue separate proceedings by way of summons in Form 3 in order to obtain an order for sale and possession of the relevant property.  In the issue of such proceedings there are various requirements as to service and the filing of notices of acting or appearances.   Each of these requirements involve delays before any order may be made or executed.  In the event that our application to dissolve the injunctions is successful (and given the real risk that any further delay may "erode" the equity in the property to a point that there is insufficient equity to meet the monies due to the mortgagees) we do not wish our clients to be caused any further unnecessary delay.  Accordingly we shall issue separate proceedings for possession and sale on Monday 16th June 1997.  Once these proceedings are issued we shall arrange for them to be heard concurrently with the above proceedings.  In the event that our application to dissolve the injunctions is not successful then these proceedings may be adjourned pending further determination in the above proceedings.  Accordingly we do not see that the above course of action will cause your client any prejudice.

We advise you of the above matters as a matter of courtesy. We do not consider that the issue of such proceedings will be in breach of the existing injunctions. Such proceedings do not, of themselves, seek to "exercise their rights and powers" "demand... from the Plaintiff" or exercise "all or any of their rights". Rather the proceedings seek to determine what if any rights the mortgagees have. Any relief granted to the mortgagees shall be granted pursuant to the Law of Property Act and, or the Real Property Act and not pursuant to the mortgages. Should you be of the view that such proceedings will breach the terms of the injunction we invite you to obtain orders or directions from the above Court clarifying the terms of the injunctions. In the absence of such orders or directions we shall proceed in the manner foreshadowed."

Although the letter states an intention to issue proceedings, it is apparent that it was also intended to serve them. That is clearly implied in the suggestion that the mortgagees' proceedings should be heard concurrently with the proceedings in action No. 311 of 1997.  Mr Brook did not reply to the letter from Clelands.  On 16 July 1997 Clelands issued the proceedings which is action No. 844 of 1997.  The summons was served on 24 June 1997.

On 3 July 1997 Mr Brook wrote to Clelands stating that the action No. 844 of 1997 was in breach of the terms of the injunction. He invited Clelands to discontinue the action in these terms:

"In the circumstances I require that you file a Notice of Discontinuance in relation to proceedings No. 844 of 1997 forthwith by 4.00pm Monday 7 July 1997.  In the event that this Notice of Discontinuance is not filed and served prior to 4.00pm 7 July 1997 I reserve my right to draw the Court’s attention to this letter and to the breach, by your clients, of the Orders made in proceedings No. 311 of 1997 and to make submissions in relation to the consequences flowing therefrom."

Clelands did not discontinue the action.

The mortgagees applied to discharge the injunctions.  On 1 August 1997 Judge Bowen Pain discharged the injunctions. Dr Papps appealed from that order.  On 15 August 1997 King AJ dissolved the injunction and ordered a fresh injunction pending the hearing of the appeal.  King AJ also heard the appeal and on 29 August 1997 he dismissed the appeal.

On 9 September 1997 Dr Papps applied for a Registrar’s summons for contempt.  The grounds of the application were that the issue of the action No. 844 of 1997 was in breach of the injunctions ordered in action No. 311 of 1997.  On 10 September Prior J ordered that a Registrar’s summons should issue.

While these actions were being prosecuted in this court in respect of the mortgage, Dr Papps was opposing sequestration orders made in the Federal Court.  On 10 February 1997 his estate had been sequestrated by order of the Federal Court.  On 2 April 1997 Dr Papps obtained an order annulling the sequestration order.  However, on 14 October 1997 the Federal Court rescinded the order annulling the sequestration order. Thus, Dr Papps was declared bankrupt.

When the Registrar’s summons for contempt came on for hearing on 24 October 1997, counsel for the Official Trustee in Bankruptcy informed the court that the Official Trustee did not wish to prosecute the summons. Although the summons was issued by the Registrar pursuant to R93.03, the summons must be prosecuted by the party who applied for it. The Registrar issues the summons but does not prosecute it. Where an alleged contempt is not committed in the face of the court, the offender can only be punished upon an application made for that purpose and it is for the person who makes the application to establish the case by admissible evidence: In Re Cook; ex parte Twigg (1980) 147 CLR 15 and in particular the reasons of Gibbs J at pp.24 to 25 with whom other members of the court agreed. As the Official Trustee does not wish to prosecute the summons, the summons must be dismissed for want of prosecution.

I do not wish to leave this matter without commenting on the procedure adopted by Clelands.  It is not possible to express a final conclusion on whether or not there had been a contempt since the defendants have pleaded not guilty and no evidence has been led. But on the face of the matter there is a strong case that a contempt had been committed. The order of Judge Bowen Pain was clear.  The action No. 844 of 1997 sought orders that Dr Papps give possession of the mortgaged land.  It was, therefore,  a step taken by the mortgagees to exercise their rights under the mortgage.  Clelands were aware of the terms of the injunction.  That is apparent from their letter of 11 June 1997.  Clelands failed to adopt the proper means of determining whether the issue and service of the intended action No. 844 of 1997 was in breach of the injunction. Having asked Mr Brook if he considered it was a breach of the injunction and having obtained no reply, the proper course for Clelands, as the solicitors for the mortgagees, was either to apply pursuant to the liberty to apply granted by Judge Bowen Pain and seek the court's determination of the issue whether the issue of fresh proceedings was in breach of this regulation, or, alternatively, Clelands could apply to have the injunction discharged.

There is another matter which should also be mentioned. In the written submissions filed on behalf of the mortgagees, it is contended that Dr Papps had failed to make full disclosure of all material facts so that the injunction had been improperly obtained. Even if that were so, it would not be a defence to a charge of contempt. An order of the court should be obeyed unless and until it is set aside and, as a general rule, the fact that the order might have been irregularly obtained is no answer to a contempt. Where it is believed that the order was wrongly obtained, the proper course is to apply to have it set aside and discharged: Hadkinson v Hadkinson [1952] P. 285 at 288, Isaacs v Robertson [1985] AC 97; Little v Lewis [1987] VR 798; and Re Zagoridis (1990) 98 ALR 718. It is convenient to note the observations of Lord Diplock in Isaacs v Robertson at 103 where his Lordship said:

"The contrasting legal concepts of voidness and voidability form part of the English law of contract. They are inapplicable to orders made by a court of unlimited jurisdiction in the course of contentious litigation. Such an order is either irregular or regular. If it is irregular it can be set aside by the court that made it upon application to that court; if it is regular it can only be set aside by an appellate court on appeal if there is one to which an appeal lies."

These principles were not observed by Clelands and, had the summons for contempt been prosecuted, there was a real risk of a finding of contempt. Fortunately for the defendants it is unnecessary to examine these issues further as the summons must be dismissed for want of prosecution.

There will, therefore, be an order dismissing the summons. I do not consider there should be an order for costs.