Testel Australia Pty Ltd v KRG Electrics Pty Ltd
[2014] SASC 119
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Civil)
TESTEL AUSTRALIA PTY LTD v KRG ELECTRICS PTY LTD & ANOR
[2014] SASC 119
Reasons for Sentence of The Honourable Justice Stanley
28 August 2014
PROCEDURE - CONTEMPT, ATTACHMENT AND SEQUESTRATION - POWER OF COURT TO PUNISH FOR CONTEMPT - IN GENERAL
PROCEDURE - CONTEMPT, ATTACHMENT AND SEQUESTRATION - POWER OF COURT TO PUNISH FOR CONTEMPT - SUPREME COURT
PROCEDURE - CONTEMPT, ATTACHMENT AND SEQUESTRATION - CONTEMPT - WHAT CONSTITUTES - DISOBEDIENCE OF ORDERS OF COURT - INJUNCTIONS
The defendants are charged by the plaintiff on summons with contempt.
The summons charges a contempt of Court by the defendants in carrying out electrical safety inspection, testing and tagging services in breach of an injunction made against the defendants on 8 December 2011. The injunction was discharged on 27 April 2012. The summons charges 12 occasions on which the injunction was breached constituting the contempt. On 20 June 2014 the defendants pleaded guilty to the contempt charge.
The injunction was obtained by the plaintiff to enforce a restraint of trade clause contained in a franchise agreement between the plaintiff and the first defendant. The second defendant guaranteed the first defendant’s performance of the franchise agreement. The second defendant is the director of the first defendant and was the person who carried out the electrical testing and tagging work on behalf of the first defendant.
The plaintiff seeks orders for the payment of a fine by the first defendant and for the imposition of a term of imprisonment on the second defendant, and orders for the joint and several payment of the plaintiff’s costs of the action on an indemnity basis.
Held:
1. While the contempt in this matter is serious, it does not fall within the most serious category of contempt that would warrant the imposition of a term of imprisonment (at [19] - [23]).
2. It is permissible and appropriate to recognise the defendants’ serial disregard for Court orders in determining the consequence of the failure of the second defendant to pay the fine the Court intends to impose in punishment of his contempt (at [25]).
3. The first defendant is sentenced to a fine of $5,000 payable to the Registrar within three months (at [27]).
4. The second defendant is sentenced to a fine of $5,000 payable to the Registrar within three months (at [27]).
5. The defendants are to pay the plaintiff the costs of the action on an indemnity basis fixed in the sum of $12,000 (at [27]).
6. Pursuant to 6SCR 306(2)(b), a term of imprisonment of one month is fixed in default of payment of the fine by the second defendant (at [28]).
Supreme Court Civil Rules 2006 (SA) r 306; Criminal Law (Sentencing Ac) 1988 (SA) s 5, referred to.
Registrar of the Supreme Court of SA v Temple (No 3) (2000) 77 SASR 8; Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98; Hinch v Attorney-General (Vic) (1987) 164 CLR 15; Witham v Holloway (1995) 183 CLR 525; Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435; Louis Vuitton Malletier SA v Design Elegance Pty Ltd (2006) 149 FCR 494; Zappia v The Registrar of the Supreme Court (2004) 90 SASR 193; Dental Board of Australia v Traianou [2011] WASC 293; Vaysman v Decker’s Outdoor Corporation Inc (2011) 276 ALR 596; Testel Australia Pty Ltd v KRG Electrics Pty Ltd [2013] SASC 91, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
"Contempt of Court"
TESTEL AUSTRALIA PTY LTD v KRG ELECTRICS PTY LTD & ANOR
[2014] SASC 119Sentencing Remarks
STANLEY J:
Introduction
In this matter the defendants were charged by the plaintiff on summons with contempt.
The summons charges a contempt of Court by the defendants in carrying out electrical safety inspection, testing and tagging services in breach of an injunction made against the defendants on 8 December 2011 and extended on 17 January 2012, 3 February 2012, 3 March 2012 and 14 March 2012. The injunction was discharged on 27 April 2012. The summons charges 12 occasions on which the injunction was breached constituting the contempt. On 20 June 2014 the defendants pleaded guilty to the contempt charge.
The injunction was obtained by the plaintiff to enforce a restraint of trade clause contained in a franchise agreement between the plaintiff and the first defendant. The second defendant guaranteed the first defendant’s performance of the franchise agreement. The second defendant, Kawana George, is the director of the first defendant and was the person who carried out the electrical testing and tagging work on behalf of the first defendant.
Principles relevant to punishment for contempt
6SCR 306 expressly provides punishment for contempt. It provides that the Court may punish a contempt by a fine or imprisonment or both. If the Court imposes a fine the Court may fix a term of imprisonment in default of payment of the fine. It can also order that a person found guilty of contempt pay the costs of the proceedings for contempt.
In addition the Court has an inherent power to punish for contempt. Pursuant to its inherent power the Court can impose a broader range of penalties from those expressly conferred by 6SCR 306.[1]
[1] Registrar of the Supreme Court of SA v Temple (No 3) [2000] SASC 199 at [19], (2000) 77 SASR 8 at 10.
Historically the authorities recognised a distinction between civil and criminal contempt. A civil contempt involved disobedience to a Court order or breach of an undertaking in civil proceedings, whereas a criminal contempt is committed either when there is a contempt in the face of the Court or there is an interference with the course of justice. The deliberate, wilful disobedience or breach of an undertaking amounts to a criminal contempt. However, since the High Court’s judgment in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd,[2] the distinction between civil and criminal contempt has been regarded as illusory.[3] It seems all contempts are to be characterised as quasi-criminal.[4]
[2] [1986] HCA 46, (1986) 161 CLR 98.
[3] Hinch v Attorney-General (Vic) (1987) 164 CLR 15; Witham v Holloway [1995] HCA 3, (1995) 183 CLR 525 at 534.
[4] Registrar of the Supreme Court of SA v Temple (No 3) [2000] SASC 199 at [49], (2000) 77 SASR 8 at 13.
Punishment for contempt serves to protect both the interests of the applicant and the administration of justice. In their joint judgment in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd,[5] Gibbs CJ, Mason, Wilson and Deane JJ said:[6]
Although the primary purpose in committing a defendant who disobeys an injunction is to enforce the injunction for the benefit of the plaintiff, another purpose is to protect the effective administration of justice by demonstrating that the court's orders will be enforced. As the authors of Borrie and Lowe’s Law of Contempt, 2nd ed (1983) say, at page 3:
“If a court lacked the means to enforce its orders, if its orders could be disobeyed with impunity, not only would individual litigants suffer, the whole administration of justice would be brought into disrepute.”
[5] [1986] HCA 46, (1986) 161 CLR 98.
[6] [1986] HCA 46, (1986) 161 CLR 98 at 107.
In Pelechowski v Registrar, Court of Appeal (NSW),[7] Kirby J[8] said:[9]
The underlying purpose of the law on this form of contempt is to vindicate the due administration of justice. Contempts … may be technical, wilful but without a specific intent to defy the authority of the Court and contumacious. In the last category a serious act of deliberate defiance of judicial authority is evidenced.
Conceding that such categories of contempt may sometimes overlap, in a case of a technical contempt, where the contemnor has offered an apology which the Court accepts, it will sometimes be sufficient to make a finding of contempt coupled with an order for the payment of costs. Where a wilful contempt is shown, in the sense of deliberate conduct but without specific intent to defy judicial authority, a finding of contempt and an order for the payment of costs may not be sufficient. In such a case, a fine (and sometimes more) may be needed to vindicate the authority of the court. But in a case of contumacious defiance of a court’s orders and authority, it will frequently be appropriate for a custodial sentence to be imposed as a response to an apparent challenge to the authority of the law.
Unless courts are seen to respond firmly to deliberate defiance of their orders, their effectiveness in the authoritative determination of disputes of law would be undermined. And if they were not effective, “serious and lasting damage to the fabric of the law may result.” Obviously, the culpability of the contemnor is relevant to the order which must be made. The contemnor must then be punished in an emphatic way. He or she must be deterred effectively from any temptation to re-offend. However, the focus of attention is not solely on the contemnor. It is also addressed to the community at large and to any others who might consider acting in a similar manner.
(Citations omitted).
[7] [1999] HCA 19, (1999) 198 CLR 435.
[8] Kirby J was in dissent, however the majority of Gaudron, Gummow and Callinan JJ did not need to address the principles relevant to punishment for contempt. The statement of principles by Kirby J has been adopted by this Court in Registrar, Supreme Court v Temple (No 3) [2000] SASC 199 at [51], (2000) 77 SASR 8 at 13 - 14.
[9] [1999] HCA 19 at [147] – [149], (1999) 198 CLR 435 at 484 – 485.
In Louis Vuitton Malletier SA v Design Elegance Pty Ltd,[10] Merkel J identified the following considerations as being relevant to the determination of an appropriate penalty for contempt of court:[11]
[10] [2006] FCA 83, (2006) 149 FCR 494.
[11] [2006] FCA 83 at [25], (2006) 149 FCR 494 at 501 – 502.
·the contemnor’s personal circumstances;
·the nature and circumstances of the contempt:
·the effect of the contempt on the administration of justice;
·the contemnor’s culpability;
·the need to deter the contemnor and others from repeating contempt;
·the absence or presence of a prior conviction for contempt;
·the contemnor’s financial means;
·whether the contemnor has demonstrated genuine contrition and made a full and ample apology;
·whether the conduct falls within the most serious category of criminal contempt cases such as to warrant the imposition of a term of imprisonment; and
·whether or not imprisonment is a “last resort” penalty in the circumstances of the case.
The Criminal Law (Sentencing) Act 1988 (SA) does not apply to punishment for contempt.[12]
[12] See s 5 and Zappia v The Registrar of the Supreme Court [2004] SASC 375 at [83] – [84], (2004) 90 SASR 193 at 215.
In determining punishment for contempt, the amount of any fine or length of imprisonment is entirely a matter for the exercise of the Court’s discretion.[13] However, the Court should have regard to the kinds of penalties imposed in comparable cases in an effort to achieve consistency.[14]
[13] Dental Board of Australia v Traianou [2011] WASC 293 at [39].
[14] Vaysman v Decker’s Outdoor Corporation Inc [2011] FCAFC 17 at [51], (2011) 276 ALR 596 at 618.
Submissions
The plaintiff seeks orders for the payment of a fine by the first defendant in the range of $3,000 to $5,000 and for the imposition of a term of imprisonment on the second defendant in the range of two to four months, and orders for the joint and several payment of the plaintiff’s costs of the action on an indemnity basis fixed in the amount of $12,000. The plaintiff submits that while the fine sought is relatively modest, the imposition of any heavier financial penalty would adversely affect its interest in recovering the award of damages made against the first defendant.
The second defendant apologised to the Court for the breaches constituting the contempt. He explained that he breached the Court’s order because of the need to earn money to support his family.
The second defendant opposes any order for his imprisonment. Initially, he submitted imprisonment would operate harshly on his partner and his youngest children, all of whom are wholly dependent on him for financial support, however, it transpires that it is no longer the case that his partner and youngest child are dependent on him.
Circumstances of the defendants
The first defendant continues to trade. The plaintiff obtained an award of damages against the defendants for breach of the franchise deed including breach of the restraint of trade clause in an amount of $146,818 in June 2013. The plaintiff has been attempting to enforce the judgment but to date has only recovered $2,500.
The breaches constituting the contempt occurred over a period from 10 January 2012 to 7 March 2012. The first defendant rendered invoices for this work which totalled $1,685.20.
The second defendant is 47 years of age. He was born in New Zealand and has lived in South Australia since 1999. He has three adult children living in New Zealand. He has a 10-year old son. Custody is shared with his former spouse who lives in Adelaide. He has a nine-year old daughter with his former partner. He is responsible for the financial support of his 10-year old son, but is no longer supporting his nine-year old daughter or his former partner. He has worked in the electrical industry for approximately 26 years as an electrical trades assistant and later in testing and tagging. He is currently employed by the first defendant. In the 2013 financial year his taxable income was $64,435. In addition to expenses relating to the running of the first defendant’s business and his personal living expenses, the second defendant has a child support debt of approximately $27,000.
The Court received evidence of the second defendant’s criminal record. It discloses relatively minor offending all of which is more than five years old. I do not consider it relevant to the sentence the Court must impose for his contempt.
Consideration
This is a serious contempt. It was deliberate and wilful. The breaches of injunction were not isolated but repeated and sustained over a two-month period. The first breach occurred just over a month following the making of the injunction. The contempt represents a flagrant disregard of the Court’s orders.
I accept that the second defendant, who performed the work which constituted each breach, did so out of a sense of financial necessity. I accept that this pressure was real. Nonetheless, I consider this matter carries little weight in mitigating the seriousness of the defendants’ conduct. The defendants should have sought to earn income other than in breach of the Court’s orders.
I sentence on the basis that the contempt should be dealt with as a single course of conduct. There is no suggestion of any prior conviction for contempt.
I also accept that the defendants have apologised for their conduct. The defendants are entitled to credit for their pleas of guilty.
In my view, the Court must impose a sentence that reflects the needs for personal and general deterrence. While the contempt is serious, I do not consider it falls within the most serious category of contempt that would warrant the imposition of a term of imprisonment.
I propose to impose fines on both defendants. The fines should reflect the serious nature of the contemptuous conduct and its deliberate and sustained character. The penalty must send an unequivocal message to the defendants and to the general public that the Court will not countenance its orders being flouted. However, the penalty must reflect the relatively small amount of money earned by the defendants through the breach of the Court’s orders, the limited capacity of the defendants to pay, and the prejudice the plaintiff will suffer if the fines are of a magnitude that will significantly diminish the capacity of the defendants to satisfy the award of damages made by the Court in its favour.
While I do not consider that the contempt falls within the most serious category warranting the imposition of a term of imprisonment, I am conscious of the failure of the defendants in the past to comply with the Court’s orders, as set out in Testel Australia Pty Ltd v KRG Electrics Pty Ltd [2013] SASC 91 at [18] – [26]. While these instances of non-compliance with the Court’s orders occurred subsequent to the commission of the contempt for which the defendants are being sentenced, I consider it permissible and appropriate to recognise the defendants’ serial disregard for Court orders, not for the purpose of fixing penalty, but for the purpose of determining the consequence of the failure of the second defendant to pay the fine the Court intends to impose in punishment of his contempt pursuant to 6SCR 306(2).[15]
[15] Vaysman v Decker’s Outdoor Corporation Inc [2011] FCAFC 17 at [64], (2011) 276 ALR 596 at 622.
In addition I consider that the plaintiff is entitled to the award of costs it seeks.
Conclusion
I would impose a fine in the sum of $5,000 on the first defendant. I would impose a fine of $5,000 on the second defendant. The defendants are to pay the plaintiff the costs of the action on an indemnity basis fixed in the sum of $12,000. Payment of the fines is to be made to the Registrar. I would allow three months to pay the fines.
I consider it appropriate to make an order pursuant to 6SCR 306(2)(b) in the circumstances of this matter. I would fix a term of imprisonment of one month in default of payment of the fine by the second defendant. I consider that it is inappropriate to make an order that the second defendant be liable to a term of imprisonment in default of payment of the fine imposed on the first defendant.
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