The State of Western Australia v Galati [No 4]
[2017] WASC 162
•16 JUNE 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: THE STATE OF WESTERN AUSTRALIA -v- GALATI [No 4] [2017] WASC 162
CORAM: TOTTLE J
HEARD: 8 JUNE 2017
DELIVERED : 16 JUNE 2017
FILE NO/S: CIV 2545 of 2015
BETWEEN: THE STATE OF WESTERN AUSTRALIA
Plaintiff
AND
ANTONIO GALATI
First DefendantGALATI NOMINEES PTY LTD
Second Defendant
Catchwords:
Contempt - Civil contempt - Penalty - Where contempt admitted - Seriousness of the breach considered - Where defendants making substantial contribution to plaintiff's costs - Where defendants have made public apology in newspaper
Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 97, s 98
Marketing of Potatoes Act 1946 (WA), s 28
Marketing of Potatoes Amendment and Repeal Act 2016 (WA), s 46, s 49(1)
Sentencing Act 1995 (WA), s 6
Result:
The first defendant be fined $7,500
The second defendant be fined $32,500
Category: B
Representation:
Counsel:
Plaintiff: Mr P D Quinlan SC & Ms B M Allen
First Defendant : Mr J C Giles SC & Mr P van der Zanden
Second Defendant : Mr J C Giles SC & Mr P van der Zanden
Solicitors:
Plaintiff: State Solicitor for Western Australia
First Defendant : Hotchkin Hanly Lawyers
Second Defendant : Hotchkin Hanly Lawyers
Case(s) referred to in judgment(s):
Allbeury v Corruption and Crime Commission [2012] WASCA 84
Attorney-General (NSW) v MacQuarie Publications Pty Ltd (1988) 40 A Crim R 405
Attorney-General v Times Newspapers Ltd [1974] AC 273
Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98
Caratti v Boban Pty Ltd (Administrators Appointed) [No 2] [2015] WASC 139
Chief Executive Officer, Department of Environment and Conservation v Szulc [No 2] [2011] WASC 315
Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13; 196 ALR 350
Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [2015] HCA 21; (2015) 256 CLR 375
Kennedy v Lovell [2002] WASCA 226
Potato Marketing Corporation of Western Australia v Galati [2015] WASC 430
R v Giscombe (1984) 79 Cr App R 79
R v Pearce (1992) 7 WAR 395
Re Colina; Ex parte Torney [1999] HCA 57; (1999) 200 CLR 386
Thunder Studios Inc (California) v Kazal (No 2) [2017] FCA 202
Witham v Holloway (1995) 183 CLR 525
Wood v Staunton [No 5] (1996) 86 A Crim R 183
TOTTLE J:
Summary
Galati Nominees disobeyed an order made by the court on 11 November 2015.[1] It admits this disobedience means that it is guilty of a contempt of court for which it should be punished. By disobeying the order Galati Nominees obtained a commercial benefit in the form of revenue of approximately $148,000.
[1] In these reasons I will refer to the first and second defendants as the defendants unless it is necessary to refer to them individually, in which case I will refer to them as Mr Galati and Galati Nominees, respectively.
Mr Galati was a director of Galati Nominees when it disobeyed the order and he admits that he is guilty of a contempt of court for which he should be punished.
The law of contempt of court protects the public interest in the due administration of justice, that is, the resolution of disputes by adjudication in the courts. Orders made by the courts give effect to decisions made by applying the law that governs all members of society to disputes brought before the courts. The authority of the courts and ultimately the rule of law are undermined if court orders are not obeyed. Those bound by court orders must understand that they cannot be disobeyed with impunity.[2]
[2] Attorney-General v Times Newspapers Ltd [1974] AC 273 [315] (Lord Simon of Glaisdale); Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98, 107; Thunder Studios Inc (California) v Kazal (No 2) [2017] FCA 202 [4] (Rares J).
Acknowledging these important principles, the defendants have apologised unreservedly to the court and, on 9 June 2017, published a statement in The West Australian newspaper recording their apology and their acceptance that the court's orders must be obeyed without exception. I have decided that Galati Nominees should be punished for its contempt by the imposition of a fine of $32,500 and that Mr Galati should be punished for his contempt by the imposition of a fine of $7,500.
The defendants have agreed to pay $200,000 towards the plaintiff's costs of the contempt proceedings.
Agreed facts
The parties agreed a statement of the facts which should be taken into account by me in determining the penalties to be imposed on the defendants. The facts are as follows.
In November 2015 Mr Galati was a commercial producer of ware potatoes and Galati Nominees was a merchant, appointed by the Potato Marketing Corporation of Western Australia (the Corporation), to receive delivery of ware potatoes on behalf of the Corporation from persons, such as Mr Galati, who were authorised by it to carry on business as commercial producers. Galati Nominees sold the ware potatoes delivered to it by Mr Galati.
The Domestic Marketing Pool 2 of the 2015/2016 season established under the Marketing of Potatoes Act 1946 (WA) comprised the period 4 October 2015 to 2 January 2016 (Pool 2).
The Corporation issued Mr Galati a certificate of domestic market entitlement for Pool 2 which entitled him to deliver a total of 1,049 tonnes of potatoes during Pool 2.
On 11 November 2015 I made the following order:
Until further order [Galati Nominees] is restrained from, either directly or indirectly, selling ware potatoes in excess of the domestic market entitlement of a total of 1,049 tonnes allocated by [the Corporation] to [Mr Galati] pursuant to section 28 of the Marketing of Potatoes Act 1946 (WA) for the period from 4 October 2015 to 2 January 2016.
The order was served personally on Mr Galati on 24 November 2015. This constituted service on Galati Nominees.
Mr Galati was also present in court when the order was made and both he and Galati Nominees had knowledge of the terms and substance of the order that was clear, unambiguous and capable of compliance.
In breach of the order, Galati Nominees sold 150 tonnes of ware potatoes in excess of the domestic market entitlement of 1,049 tonnes allocated by the Corporation to Mr Galati for Pool 2.
The breach was deliberate, that is, not accidental, and it was voluntary.
Both defendants knew of the sale of 150 tonnes of ware potatoes in excess of the domestic market entitlement of 1,049 tonnes allocated by the Corporation to Mr Galati for Pool 2.
Galati Nominees received an average sale price of $990 per tonne for the ware potatoes it sold in breach of the order. This figure did not represent the net financial benefit per tonne received by Galati Nominees resulting from the breach as it had to meet certain overheads and variable costs, such as casual labour, transport, packaging and distribution costs.
The pleas of guilty and the agreement as to facts have resulted in savings in court time and trial costs.
In addition to their contribution of $200,000 to the plaintiff's costs the defendants have paid their own costs of the proceedings.
The defendants have no prior convictions for contempt.
Procedural matters
The application comes before the court by way of a notice of motion filed on 1 June 2016 and amended on 24 August 2016. In the amended notice of motion, the Corporation alleged that Galati Nominees should be found guilty of contempt by reason of its disobedience of the order and that Mr Galati, as a director of Galati Nominees, be found guilty of contempt pursuant to s 98(3) of the Civil Judgments Enforcement Act 2004 (WA).
The Corporation was abolished on 31 December 2016 and its assets and rights were vested in the State of Western Australia.[3] On 16 January 2017, I ordered that the State of Western Australia be substituted as the plaintiff in place of the Corporation.
[3] Marketing of Potatoes Amendment and Repeal Act 2016 (WA) s 46 and s 49(1).
Contempt - the legal principles
Division 2 of the Civil Judgments Enforcement Act applies if a judgment requires or has the effect of requiring a person to not do an act, to cease doing an act, or to do an act other than to pay money or to give possession of any real or personal property to another person.[4]
[4] Civil Judgments Enforcement Act 2004 (WA) s 97.
'Judgment' is defined in s 3 of the Civil Judgments Enforcement Act to include an order of a court that requires or has the effect of requiring a person to do an act, or not do an act, or cease doing an act. Accordingly, the order is a judgment for the purposes of div 2 of the Civil Judgments Enforcement Act.
Section 98(3) of the Civil Judgments Enforcement Act provides:
If a corporation disobeys a judgment to which this Division applies, the corporation is guilty of a contempt of court, and each officer of the corporation is also guilty of a contempt of court unless he or she satisfies the court -
(a)that the corporation's disobedience occurred without the officer's consent or connivance; and
(b)that the officer took all the measures to ensure the corporation obeyed the judgment that he or she could reasonably be expected to have taken having regard to the officer's functions and to all the circumstances.
The requirements for proof of a punishable contempt of court are as follows:
(i)an order was made by the court;
(ii)the terms of the order were clear, unambiguous and capable of compliance;
(iii)the order was served on the contemnor or service was dispensed with;
(iv)the contemnor has knowledge of the terms of the order;
(v)the contemnor has breached the terms of the order; and
(vi)the act or omission which constituted the breach of the order was deliberate and voluntary.[5]
[5] Caratti v Boban Pty Ltd (Administrators Appointed) [No 2] [2015] WASC 139 [19] - [21], [86] - [88] (Mitchell J, as his Honour then was).
Deliberate disobedience of an order does not require a specific intention to break the law or even knowledge on the part of the contemnor that the relevant conduct constituted a breach. It is sufficient that the contemnor was aware of the facts that make their conduct a breach of the order. In the context of contempt, 'deliberate' means wilful in the sense that the actions of the contemnor were not casual, accidental or unintentional.[6]
[6] Chief Executive Officer, Department of Environment and Conservation v Szulc [No 2] [2011] WASC 315 [8] (Martin CJ); cf Caratti [82] - [84].
Disobedience of a court order constitutes a civil contempt although where the disobedience involves deliberate defiance, that is, where the disobedience can be described as contumacious, it may constitute a criminal contempt. The distinction between criminal and civil contempt is, however, blurred and has been described as illusory.[7]
[7] Witham v Holloway (1995) 183 CLR 525, 534 (Brennan, Deane, Toohey and Gaudron JJ), cited with approval in Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [2015] HCA 21; (2015) 256 CLR 375 [42] (French CJ, Kiefel, Bell, Gageler and Keane JJ), [66] (Nettle J). The distinction was described as being of an 'unsatisfactory nature' in Mudginberri (107) (Gibbs CJ, Mason, Wilson and Deane JJ).
Defendants are guilty of contempt
On the basis of the admissions made by them, each defendant is guilty of contempt of court.
As a director of Galati Nominees, Mr Galati's guilt flows from Galati Nominees' disobedience of the order and his inability to satisfy the court that:
(i)such disobedience occurred without his consent or connivance; and
(ii)he took all the measures that he could reasonably be expected to have taken having regard to his functions and circumstances to ensure that Galati Nominees obeyed the order.
Principles applicable to determination of penalty
The question of punishment for contempt is a matter that is within the discretion of the court.[8]
[8] R v Pearce (1992) 7 WAR 395, 431 (Malcolm CJ, with Pidgeon and Rowland JJ agreeing).
The Sentencing Act 1995 (WA) does not apply as a matter of law to punishment for contempt of court but it is appropriate to have regard to the principles of sentencing set out in s 6 of the Sentencing Act.[9]
[9] Kennedy v Lovell [2002] WASCA 226 [6] (Malcolm CJ, with Murray and Steytler JJ agreeing).
The cardinal feature of the power to punish for contempt is that it is an exercise of judicial power by the courts to protect the due administration of justice.[10]
[10] Re Colina; Ex parte Torney [1999] HCA 57; (1999) 200 CLR 386, 429 [112] (Hayne J), cited with approval in Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [41] (French CJ, Kiefel, Bell, Gageler and Keane JJ).
In Mudginberri, the majority emphasised that the underlying rationale of the exercise of the power to punish for contempt was that it was necessary to uphold and protect the efficient administration of justice by demonstrating that the court's orders will be enforced. The majority cited the following passage from Borrie and Lowe's Law of Contempt:[11]
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.
[11] Mudginberri (107), citing Borrie and Lowe's Law of Contempt (2nd ed, 1983) 3. This passage also appears in the more recent version of the text: I Cram (ed), Borrie and Lowe: The Law of Contempt (4th ed, 2010) 6.
In Wood v Staunton [No 5],[12] Dunford J set out a number of matters relevant to the assessment of the proper punishment for a contempt constituted by a refusal by a witness at a Royal Commission to answer questions put to him. Expressed in more general terms than those used by Dunford J the relevant matters are as follows:
[12] Wood v Staunton [No 5] (1996) 86 A Crim R 183, 185.
(i)the nature and seriousness of the contempt proved;
(ii)the consequences of the contempt;
(iii)the context in which the contempt was committed;
(iv)the reason for the contempt including whether the contemnor intended subjectively to commit the contempt;
(v)any benefit received by the contemnor;
(vi)whether there has been any apology or public expression of contrition;
(vii)the circumstances, character and antecedents of the contemnor;
(viii)general and personal deterrence; and
(ix)denunciation of the contempt.
The absence or presence of a prior conviction for contempt,[13] but not other criminal history,[14] is relevant.
[13] Attorney-General (NSW) v MacQuarie Publications Pty Ltd (1988) 40 A Crim R 405, 410 (Kirby ACJ, with Hope AP and Mahoney JA agreeing).
[14] R v Giscombe (1984) 79 Cr App R 79, 84.
The great variation in the facts and circumstances of offences of contempt and contemnors precludes the establishment of a tariff or a sentencing range.[15]
[15] Allbeury v Corruption and Crime Commission [2012] WASCA 84 [251] (Buss JA, as his Honour than was, with McLure P and Mazza JA agreeing).
The burden imposed on a contemnor by an adverse costs order may be taken into account when determining the penalty for contempt. In some instances an adverse order for costs may be considered by a court as a sufficient sanction for contempt.[16]
[16] Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13; 196 ALR 350 [7] - [13] (Moore J, with Tamberlin and Goldberg JJ agreeing).
I will now set out how the principles to which I have referred apply to the contempt committed by the defendants.
Seriousness of the contempt, its context, the reason for it and benefit received
The context in which the order disobeyed by Galati Nominees was made is relevant to my assessment of the seriousness of the contempt.
The order was made to restrain breaches of the regulatory scheme for the production and marketing of potatoes established by the Marketing of Potatoes Act 1946. As recorded in the reasons for making the order, Mr Galati had stated that unless restrained Galati Nominees would sell potatoes in excess of his Pool 2 Domestic Market Entitlement.[17] One of the factors taken into account in assessing where the balance of convenience lay was the public interest, about which I stated:[18]
I am satisfied that there is a real danger that if Galati Nominees is not restrained from selling potatoes grown by Mr Galati in excess of his relevant DMEs, the Corporation will not be able to regulate the market for potatoes effectively and in accordance with the Act. There is a real risk that other growers and merchants who have operated in compliance with the Act will follow Mr Galati's lead and operate without regard to the provisions of the Act. This carries with it the risk of disorderly de facto deregulation. If there is to be deregulation, this must be achieved in accordance with a timetable and in a manner specified by the State Government and Parliament. In my view, these factors highlight that damages would not be an adequate remedy and that the balance of convenience favours the grant of relief.
I should add that the public interest (in the widest sense) suffers if a scheme established by law is contravened by persons who decide unilaterally that the scheme should not apply to them. In essence, this is the position taken by Mr Galati and Galati Nominees. The aspect of the public interest to which I have just adverted is thus a factor that favours the grant of an injunction.
[17] Potato Marketing Corporation of Western Australia v Galati [2015] WASC 430 [109].
[18] Potato Marketing Corporation of Western Australia v Galati [124] - [125].
By referring to these passages in the reasons for making the order I am not to be taken as determining the seriousness of the breach on the basis that the defendants acted in defiance of the order, that is, that the contempt was contumacious. The facts that have been agreed do not permit such a finding to be made. The contravening sale of potatoes was deliberate in the sense to which I have referred earlier: it was not casual, accidental or unintentional.
The defendants accepted the breach of the order was serious and that it was not a 'technical' breach. In my view, this was a proper concession to make. The breach of the order was serious for the following reasons.
First, the object of the order was not confined to the preservation of private rights but was made to uphold those aspects of the public interest identified in the passages of the reasons for making the order cited above. Mr Galati, and thus Galati Nominees, knew that the order was made in part to protect the public interest and this should have reinforced the importance of ensuring that the order was obeyed.
Second, as the defendants acknowledge, the breach was not a trivial breach. A significant tonnage of potatoes was sold in breach of the order. Galati Nominees derived substantial revenue from the infringing sales.
Third, directors of a company which is subject to a court order enjoining it either to perform an act or to refrain from doing a particular act bear a heavy responsibility to ensure that the company complies with the order. In this case, Mr Galati has accepted, in effect, that he did not take all the measures that he could reasonably have been expected to take, having regard to his position within Galati Nominees, to ensure Galati Nominees obeyed the order. No explanation has been offered as to how the breach of the order was allowed to occur. In circumstances in which it must have been obvious to Mr Galati that it was important that the order be obeyed, his failure to ensure that it was obeyed is an omission deserving of punishment.
The defendants accept that it is proper to view the acts constituting the breach of the order as done for the purposes of obtaining commercial benefit. The significant revenue received by Galati Nominees does not represent the net financial benefit derived by it from the breach of the order, but Galati Nominees has not provided any information from which an estimate of the net financial benefit might be made. Indeed, no information about the defendants' financial circumstances has been provided.
The agreed facts do not permit me to make specific findings as to any consequences that flowed from the breach other than as to the revenue derived from the breach by Galati Nominees.
Deterrence and denunciation
The need to deter others from disobeying court orders and the need to denounce disobedience of court orders feature prominently in exercising the sentencing discretion for this form of contempt of court. As I have already emphasised, litigants and others to whom court orders are addressed must understand that orders of the court cannot be disobeyed with impunity.
It is accepted by the plaintiff that the imposition of a sentence of imprisonment on Mr Galati is not warranted.
In cases in which disobedience to a court order has generated a financial gain to the contemnor, the interests of general deterrence require the imposition of a financial penalty that ensures the contemnor does not profit from the contempt. Mr Giles SC accepted this general proposition on the defendants' behalf, but argued that in this case the benefit received by Galati Nominees has been stripped from it by its agreement to pay $200,000 to the plaintiff in respect of the costs of the contempt proceeding. It was also submitted that the payment by the defendants of $200,000 towards the plaintiff's costs would be regarded by the public as part of the sanction for contempt and would have a significant deterrent effect. I deal with the significance to be attached to the payment of $200,000 towards costs later in these reasons.
I accept that the apology published in The West Australian newspaper serves the interests of general deterrence.
Personal deterrence is not a relevant factor in the determination of the penalty in this case. Neither defendant has any prior convictions for contempt of court. The dispute that generated the application for the order and the making of the order has been resolved. It is unlikely that there will be any repetition of the circumstances that led to the order and thus there is no need to deter the defendants personally from committing contempts of court in the future.
Guilty pleas and the apologies
The hearing of the contempt motion was listed for seven days. The plaintiff's case rested upon circumstantial evidence and 19 affidavits had been filed and served by the plaintiff. The plaintiff had also filed and served comprehensive written submissions.
The defendants' admissions and guilty pleas came after the plaintiff had incurred the expense of preparing its case and this is reflected, in part at least, by the defendants' agreement to pay $200,000 to the plaintiff in respect of costs.[19] It is a substantial payment.
[19] This payment does not reflect an agreement to pay costs on an indemnity basis.
The utilitarian benefit of the defendants' admissions and guilty pleas is, however, a mitigating factor. The further costs of a seven‑day hearing have been avoided and the court has been able to utilise the time that the hearing would otherwise have occupied. I will reduce the fines that I would otherwise have imposed in recognition of the utilitarian benefit of the admissions.
I accept that the apology made to the court by Mr Giles SC on behalf of the defendants in the presence of Mr Galati, and the apology published in The West Australian newspaper, taken with the admissions and guilty pleas, is evidence of remorse on Mr Galati's part. As noted earlier, the publication of an apology in a newspaper assists in conveying the message to the public that court orders must be obeyed.
The significance of the payment of $200,000 towards the plaintiff's costs
Mr Giles submits that the publication of the apology and the liability to pay the plaintiff's costs constitute sufficient punishment for Mr Galati. For the same reasons he submits that any fine imposed on Galati Nominees should be modest.
I accept that the payment of $200,000 towards the plaintiff's costs ensures that Galati Nominees has not profited from its breach of the order. I also accept that the payment of this sum contributes to general deterrence. I have taken those matters into account in determining the fines.
In my view, however, the mitigation to be derived from the contribution to costs is not to be accorded the weight for which the defendants contend for three reasons.
First, by making the payment of $200,000 towards costs the defendants are bearing a burden they created. The same observation may be made about the costs incurred by the defendants with their own lawyers. If the defendants had made their admissions at the commencement of the contempt proceeding (as implicitly they acknowledge they should have done), the significant costs burden they incurred would have been avoided.
Second, although a costs order in favour of the successful party in a contempt motion may be regarded as part of the sanction for contempt, the primary object of a costs order is to enable a successful party to recoup some or all of its expenditure on legal costs from the unsuccessful party, whereas in punishing a party who has disobeyed a court order which no longer has operative effect,[20] the court is concerned to protect the effective administration of justice by imposing a penalty which discourages others from disobeying orders in the future. The purpose of the imposition of a penalty is not limited to ensuring that a contemnor does not benefit from the contempt.
[20] In contrast to those cases in which the court is exercising its contempt powers to secure obedience to an order.
Third, for the reasons given above the disobedience of the court order was serious, if the court was not to impose a fine on Mr Galati and only impose a modest fine on Galati Nominees, this may be perceived as diminishing the seriousness of the contempt thereby undermining the object of imposing a penalty.[21]
[21] See Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [53] (Tamberlin and Goldberg JJ).
Determination of the fines
In determining the fines I have taken into account the matters to which I have referred in these reasons. I wish to emphasise that whilst the remorse evidenced by the guilty pleas and apologies, and the disgorging of the benefit obtained by Galati Nominees by the payment of the plaintiff's costs, are factors that favour leniency, substantial fines are required to ensure that the due administration of justice is protected and that is why I have determined that the appropriate fines to impose are a fine of $32,500 on Galati Nominees and a fine of $7,500 on Mr Galati.
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