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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] SASC 119
Decision Date

CaseChat Overview and Summary

The matter before the court involved Testel Australia Pty Ltd as the plaintiff and KRG Electrics Pty Ltd and its directors as the defendants. The primary dispute centred around the defendants’ repeated breaches of an injunction, which were considered to be deliberate and wilful. The court was tasked with determining an appropriate penalty for the defendants' contemptuous conduct. The plaintiff also sought costs associated with the action.

The court had to decide on the appropriate penalty for the defendants' contempt, considering the seriousness of the breaches, the defendants' financial situation, and the need for deterrence. Additionally, the court had to consider the defendants' pleas of guilty and their apologies, which could potentially mitigate the penalty. The court also had to decide whether the penalty should include imprisonment in default of payment of the fines.

The court concluded that the contempt was serious and deliberate, but it did not fall within the most serious category warranting imprisonment. Instead, the court imposed fines on both defendants to reflect the seriousness of the contemptuous conduct. The fines were intended to serve as a deterrent and to communicate that the court would not tolerate its orders being disregarded. The court also recognised the defendants' limited capacity to pay and the potential prejudice to the plaintiff if the fines were too high. Given the defendants' past failures to comply with court orders, the court decided that a term of imprisonment would be imposed on the second defendant in default of payment of the fine. The court allowed three months for payment of the fines and the costs of the action.

The court ordered that the first and second defendants pay a fine of $5,000 each, with the second defendant also facing a one-month term of imprisonment in default of payment. The defendants were to pay the plaintiff's costs of the action on an indemnity basis, fixed at $12,000. The payment of the fines was to be made to the Registrar, with a deadline of three months. The court also made an order pursuant to 6SCR 306(2)(b), fixing the term of imprisonment in default of payment of the fine by the second defendant.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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.