Global Kiwi NZ Limited v Fannin

[2016] NZHC 1767

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2014-488-180 [2016] NZHC 1767

IN THE MATTER

of an application for contempt against Jake

Bernard Fannin

BETWEEN

GLOBAL KIWI NZ LIMITED Plaintiff

AND

JAKE BERNARD FANNIN Defendant

Hearing:

22 April 2015 and, on the papers,

to 25 January 2016

Appearances:

J Browne for the Plaintiff
D Grindle for the Defendant

Judgment:

1 August 2016

JUDGMENT OF WOODHOUSE J

This judgment was delivered by me on 1 August 2016 at 3.30 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

Solicitors:

Mr J Browne, Henderson Reeves Connell Rishworth, Solicitors, Whangarei

Mr D Grindle, WRMK Lawyers, Solicitors, Whangarei

GLOBAL KIWI NZ LTD v FANNIN [2016] NZHC 1767 [1 August 2016]

[1]      The plaintiff (Global Kiwi) seeks an order that the defendant, Mr Fannin, be held in contempt of Court.  It seeks three further orders in respect of that contempt: (1) a fine and a sentence of community work: (2) a portion of the fine to be paid to Global Kiwi; (3) costs on an indemnity basis.

[2]      Mr Fannin admits the contempt and accepts that there should be a formal finding of contempt.   He accepts that there should be an order to pay costs, but opposes a fine or other penalty.

Background facts

[3]      In 2012 Global Kiwi issued proceedings against Mr Fannin.  Mr Fannin had been  a  director  of  Global  Kiwi  and  manager  of  a  retail  store  from  which Global Kiwi’s business was operated.  Global Kiwi alleged breaches by Mr Fannin of duties as a director of Global Kiwi, breach of s 9 of the Fair Trading Act 1996, intentionally causing loss by unlawful means, and passing off. The background is set out in more detail in a judgment of Katz J, given in those proceedings on 1 February

2013, recording reasons for an order that Mr Fannin deliver up items of property claimed by Global Kiwi.1     This is the order in respect of which Mr Fannin has admitted breach and contempt.

[4]      Global Kiwi sought the order in late January 2013.  This was without notice to Mr Fannin.  The order was that he deliver six specified items of property to the process server on service of the order or, if items were not in his immediate possession, to deliver those items to the offices of Global Kiwi’s solicitors within one working day of service of the order. There were the following additional orders:

(b)       The defendant [Mr Fannin] is not to alter or delete any data from the computer equipment pending its delivery up.

(c)       The computer equipment is to be kept in the safe custody of [Global Kiwi’s solicitor] for ten working days following service of these Court orders on the defendant.  If an application to vary or discharge these orders is made within that period the computer equipment is to remain in the safe keeping of [Global Kiwi’s solicitors] (and not be accessed or reviewed) pending further order of the Court.   If the defendant does not apply to vary or discharge these orders during the

1      Global Kiwi NZ Ltd v Fannin [2013] NZHC 39.

ten working day period, the computer equipment may be returned to the plaintiff [Global Kiwi].

[5]      Global Kiwi, on its present application, initially contended that there had been knowing breach by Mr Fannin of the order in relation to a laptop computer and a tablet computer.  The plaintiff withdrew its application for contempt and related orders in respect of the tablet computer.

[6]      A chronology of  events  following  issue  of  the  orders,  taken,  with  some amendments, from an agreed statement of facts, is as follows:

(a)       On 4 February 2013 Mr Fannin was personally served with the order.

(b)Mr Fannin handed to the process server one item of property referred to in the order (a docking station).

(c)      Mr Fannin told the process server (a retired police sergeant, who provided an affidavit in support of the present application) that he had disposed of the laptop computer and signed handwritten notes stating that he “got rid of the laptop quite a while ago.  Disposed of it on the Whangarei rubbish dump.”

(d)On 5 February Mr Fannin delivered to the process server another item of property referred to in the order (a monitor).

(e)      On 5 February Mr Fannin gave the process server typed notes, signed and dated 4 February, recording that “this laptop has unfortunately to my cost been disposed of.” He said that the tablet computer “has been disposed of for the same reasons as the laptop.”   He also signed interview notes, prepared by the process server, again stating that the laptop and tablet computer had been disposed of in the rubbish dump.

(f)      On 8 February, after the process server agreed that Mr Fannin could retain the SIM card, Mr Fannin gave him a mobile phone, another item referred to in the order.

[7]      On 6 August 2014, police executed a search warrant at Mr Fannin’s home and work addresses. At Mr Fannin’s home police found the laptop computer in his living room in a prominent position.

Further evidence and findings

[8]      Mr Fannin said in his affidavit that he accepts that the way he responded when the order was served was wrong.   But he says, in essence, that he was overwhelmed by the circumstances in which he found himself and the arrival of the process server at 7.20 am on Monday morning was a shock.  I accept the evidence for Global Kiwi that Mr Fannin knew in advance that Global Kiwi was going to seek injunctions requiring him, amongst other things, to return the laptop.  Mr Fannin had obtained access to the private email account of Mr Trass, the responsible director of Global Kiwi, and his father-in-law.   Documents from Global Kiwi’s solicitors to Mr Trass were automatically forwarded on to Mr Fannin.  Mr Fannin in fact referred to the contents of an affidavit of Mr Trass, at that point a privileged document and still to be sworn, in a Skype communication with another employee.  This affidavit refers expressly to  the fact  that  Global  Kiwi was seeking an  injunction  against Mr Fannin and then refers to a number of matters in respect of which orders were being sought, including the laptop.   Mr Fannin quoted part of this affidavit in a Skype communication found by chance by a Global Kiwi staff member.  Mr Fannin subsequently admitted that he had arranged for emails to Mr and Mrs Trass to be auto-forwarded to him.

[9]      Mr Fannin said that, if he had been served during business hours, he would have called a lawyer and got advice.  There was nothing to prevent Mr Fannin from doing that a few hours later, but he did nothing.  He did not get any legal advice at any relevant time until after police recovered the computer around 18 months later and this contempt proceeding was served.

[10]     Mr Fannin says, in essence, that he was confused as to the effect of the order and  he  “initially  thought”  that  the  order  was  to  do  with  disputed  ownership. Mr Fannin claimed that at the time it was accepted that the computer was his.  That particular point is disputed by Global Kiwi, but does not need to be resolved because

it is irrelevant.   The order to deliver up possession is quite clear.   There are the further provisions in paras b and c of the order, quoted above.  The order in para c was there for Mr Fannin’s benefit.  He did nothing other than knowingly defy the order.

[11]     Mr Fannin, referring to events after the process server had left, said:

Given I had now sent the process server off and committed contempt of court, I was uncomfortable continuing this lie in written statements further signed, but again I must say I thought this situation would blow over.

[12]     This is an effective acknowledgment by Mr Fannin that he knew at the outset that he had committed contempt of court.   But he later took active steps which increased to a significant extent the gravity of the contempt.   On 8 March 2013

Mr Fannin filed a statement of defence.  In response to Global Kiwi’s pleading that it had demanded return of the laptop computer, Mr Fannin stated that the laptop computer had “gone”.  Mr Fannin then lied directly to the Court.  In a memorandum to an Associate Judge for a case management conference Mr Fannin said:

I have filed a statement of defence, and based it as factually as I could …

The  plaintiff  applied  for  interim  relief  from  the  Courts  which  I  fully complied with where able.   Unfortunately due to the ruthless tact [sic] of Barry Trass and his complete lack of privacy in regards to an individual’s private information, I had disposed of my laptop owned by myself well in advance of any Court injunction.

Principles

[13]     The purpose of the orders is not to assist in enforcing the injunction.  This is because it is now spent.   The purpose is to hold Mr Fannin accountable for his breach, to deter him from further breach of court orders, and to deter others.  The rationale    was    explained    by    McGrath    J    in    the    Supreme    Court    in

Siemer v Solicitor-General, as follows:2

[26]     The  objective  of  the  summary  process  in  contempt  of  court proceedings is to protect the ability of the courts to exercise their constitutional role of upholding the rule of law. Effective administration of justice  under  our  constitution  requires  that  the  orders  of  the  courts  are obeyed unless properly challenged or set aside. Public confidence in the

2      Siemer v Solicitor-General [2010] NZSC 54, [2010] 3 NZLR 767.

administration of the law, also necessary for its effective administration, requires that there is a strong expectation that those who ignore court orders are quickly brought to account. Achieving these aims is part of the objective of the law of contempt. …

[27]      The law of contempt does not, of course, exist to protect the dignity of judges but to protect the public interest in the due administration of justice by an impartial court.3 As the effective functioning of the rule of law is itself essential in a democratic society, the protective purpose of the summary process is of sufficient importance as an objective to override the right to trial by jury. This reflects what the Court of Appeal said in Radio Avon:4

No one can question the extreme public importance of preserving an efficient and impartial system of justice in today’s society which appears to be subject to growing dangers of direct action in its various forms. It is to that end, and that end alone, that the law of contempt exists.

[14]     Principles relevant to breach of an injunction are summarised in the Laws of

New Zealand as follows:5

67. Breach of injunction. The terms of an injunction, whether final or interim, must be strictly observed.6  Where an injunction is mandatory in its terms, it is the duty of the party bound by the injunction to discover the proper means of obeying the order.7 …

The Court will punish a breach of injunction as a contempt only if satisfied that  the  terms  of  the  injunction  are  clear  and  unambiguous,8   that  the defendant has proper notice of the terms,9  and that breach of the injunction has been proved beyond reasonable doubt.10

[15]     If a fine is imposed, the Court may order that some of the fine be paid to the plaintiff.11     Orders for payment of indemnity costs to the plaintiff are not uncommon.12     Sentences for criminal offences, prescribed by the Sentencing Act

2002,  can  be  imposed  for  disobedience  of  a  court  order  or  contempt  of  court,

(subject  to  some  limits  which  are  not  relevant  in  this  case).    This  is  because

3      Gisborne Herald Co Ltd v Solicitor-General [1995] 3 NZLR 563 (CA); Solicitor-General v

Radio Avon Ltd [1978] 1 NZLR 225 (CA) at 229.

4      Solicitor General v Radio Avon, at 229

5 Laws of New Zealand Contempt of Court at [67].

6      Taylor Bros Ltd v Taylors Textile Services (Auckland) Ltd (1987) 1 PRNZ 483, Taylor Bros Ltd v

Taylors Textile Services (Auckland) Ltd [1991] 1 NZLR 91 (CA).

7      Cook v Doyle [1946] NZLR 398, Parker v Dodson (1914) 33 NZLR 1313 (CA).

8      Iberian Trust Ltd v Founders Trust and Investment Co Ltd [1932] 2 KB 87.

9      Above n 5, at [63], [66] and [75].

10 Above n 5, at [67]. Citations are omitted.

11     Taylor Bros Ltd v Taylors Textile Services (Auckland) Ltd, above n 6.

12     Ibid.

“offender” in the Sentencing Act 2002 is defined in s 4 to include “a person who is dealt with or is liable to be dealt with for … disobedience of a court order, or contempt of court.”13

[16]     Mr Grindle, for Mr Fannin, referred to s 365 of the Criminal Procedure Act

2011.   This provides that a person in contempt of court may be imprisoned for a period not exceeding three months or fined up to a maximum of $1000.  Section 365 is directed to contempt in the face of the Court in the course of criminal proceedings. As provided in s 365(3), the section does not apply to “any power or authority of the court to punish any person for contempt of court in any case to which this section does not apply.”

Evaluation

[17]     The principal issue was whether there should be a fine, or a sentence of community work, or both, in addition to a formal finding of contempt.  Mr Browne submitted for Global Kiwi that there should be a fine, with a portion paid to Global Kiwi and community work.   Mr Grindle submitted for Mr Fannin that in all the circumstances, and including Mr Fannin’s acknowledgment of his contempt and an apology recorded in an affidavit, a formal finding of contempt would be sufficient.

[18]     As  recorded  in  the  introduction,  Global  Kiwi  also  seeks  costs  on  an indemnity basis.  There was no material opposition to that application by Mr Fannin. The only submission was that, given Mr Fannin’s financial circumstances (to which I will come) payment of any costs order would have to be by instalments.  Although orders for indemnity costs have been made on applications for contempt, an order to pay indemnity costs should not be treated as part of the penalty imposed by the Court for defiance of the court order.

[19]     I am in no doubt that there should be a penalty, or penalties, in addition to a formal finding of contempt.  This is because this was a bad case of contempt.  There is  evidence,  to  which  I will  come, that  Mr  Fannin  may not  have the  financial

capacity to pay a particularly substantial fine, but that can be addressed by imposing

13     See Queen Elizabeth the Second National Trust v Netherland Holdings Ltd [2014] NZHC 1094 at [47] – [48].

a sentence of community work. A sentence of community work is also one which, in substantial measure, reflects the primary purpose of penalties imposed for contempt of court of the sort now being dealt with, and as explained by the Supreme Court in Seimer v Solicitor General.14

[20]     This case is not one of the most serious cases of contempt that have come before the courts.  There is no need to cite cases to draw comparisons.  Nevertheless, and  as  my  findings  on  disputed  evidence  should  have  made  clear,  there  was calculated defiance by Mr Fannin of a court order.  I reject Mr Fannin’s contentions, in effect, that he was taken by surprise and that he was confused as to the terms and purpose of the order.  He knew an order was being sought for, amongst other things, return of the computer.   The terms of the order were quite clear.   Mr Fannin, in a calculated way, thought he could get away with it.  This was deliberate defiance at the outset.   This was made decidedly worse by what was a deliberate lie in the memorandum to the Associate Judge.

[21]     To  some  extent,  Mr Fannin  has  further  compounded  his  mendacity  by effectively presenting excuses, or pleas in mitigation, in his affidavit, which are not consistent with established facts.  This diminishes the weight that might otherwise be given, in Mr Fannin’s favour, to his acknowledgment, once he had obtained advice from Mr Grindle, that he was in contempt of court.  There is also an apology from Mr Fannin in his affidavit.  The weight of that is also diminished for the reasons I have mentioned.   In addition, the way in which the apology is expressed further diminishes its force and indicates that Mr Fannin still does not regard what he did as being  of  much  consequence.     The  apology  is  made  for  having  “technically committed contempt of court.”  As my conclusion to this point make clear, this was much more than a technical breach of a court order and, therefore, much more than a “technical” contempt of court.

[22]     Mr Grindle submitted that  Mr  Fannin’s  actions  did  not  have  an  adverse impact on the civil proceeding.   To the extent that the computer was eventually recovered, that proposition is correct.  However, Global Kiwi’s legitimate interests,

as beneficiary of a court order, were adversely affected for an extended period.  In

14     Siemer v Solicitor General, above n 2.

addition, there is evidence from Mr Trass that, although Mr Fannin had removed from the laptop data belonging to Global Kiwi, this was not provided in discovery with the result that company information was lost.  An inference can be drawn that, had Mr Fannin complied with the order when it was served on him, this information would not have been lost.  There was also a measure of loss to Global Kiwi in being deprived of possession of the laptop for over 18 months.   Assessed in pecuniary terms it may be modest (and the value of the computer itself is modest).   It is nevertheless a loss.

Mr Fannin’s financial capacity

[23]     Mr Fannin said that in December 2012, shortly after the issues relating to his involvement in Global Kiwi arose, he had to engage a lawyer to recover holiday pay, that he and his wife had defaulted on a mortgage payment, and they had only $12 in their account.  Mr Trass, in response, noted that in December 2012 Mr Fannin had incorporated another company, called Global Diamonds Limited, and asserted that Mr Fannin “had made thousands of dollars worth of trades” at that time.  That was not challenged.

[24]     In submissions, Mr Grindle said that Mr Fannin was in a poor financial position.   He said that Mr Fannin was having to sell his car and “downgrade” in order to pay for legal representation on this contempt proceeding and that, in all likelihood, he would again have to be self-represented if the civil proceeding was revived.  Mr Grindle further said that Mr Fannin would only be in a position to pay a fine over time and “that would come at significant hardship to his children and wife, because it would divert income from them to other purposes”.

[25]     There was no evidence to support this.  I granted Mr Fannin leave to file “a full and sworn statement of means (assets and liabilities, income and outgoings)”. Mr Fannin subsequently filed an affidavit.   The affidavit itself records assets and liabilities only, and without any supporting documentation for these items.  In respect of income and outgoings, Mr Fannin simply annexed a copy of a statement of means which he had provided to the District Court at Manukau.  This appears to have been on a Registrar’s inquiry for enforcement of a judgment debt of Mr and Mrs Fannin to

Mr and Mrs Trass (Mrs Fannin’s parents) arising out of an unrelated transaction around seven years ago.  Production of this statement to the District Court Registrar in March 2014, in a statement which does not have any supporting documentation, was not a provision of financial information of the sort for which Mr Fannin was granted leave.  I will note below relevant information from this statement, but it is not an encouraging response from a person protesting that he is now seeking fully to purge his contempt and that he does understand the seriousness of what he has done.

[26]     Mr Fannin records assets totalling $843,000 in value.  Of that, $746,000 is recorded as the price paid by Mr and Mrs Fannin in August 2013 for their family home.   The value at the date of the affidavit is recorded as “unknown”.   This is another example of a decidedly cavalier approach.   Global Kiwi’s solicitors asked Mr Fannin’s solicitors to in turn ask Mr Fannin to provide a registered valuation of the current market value.  There was no response.  There is a memorandum filed for Global Kiwi in January 2016 which has attached to it an estimate of value from QV of $936,000, and an estimated selling range of, in round figures, between $842,000 and $1,029,000.   I am prepared to admit this evidence.  Based on that estimate of value, and a mortgage liability recorded by Mr Fannin, the equity in the property is around $455,000.  Mr Fannin records other liabilities of approximately $85,300.  Of this “$40,000 plus” is recorded as owing to Colleen Fannin, who I assume is a relative of Mr Fannin, but there are no particulars as to the terms of the debt.  There is another estimate of $44,000 as the total of judgment debts owed  directly, or indirectly through companies, to Mr and Mrs Fannin. Against this liability to Mr and Mrs Fannin there is a recorded asset of $70,000 owed to Mr Fannin on a current account with Global Kiwi.  Mr Fannin says it is worthless because Mr Trass, as the current company director, is refusing to pay it.  That does not make it worthless.  The only debt of a current nature is a sum of $1,300 on a credit card.  Assessed overall, I am satisfied that Mr Fannin’s net asset position is reasonably substantial.  In saying that I have taken account of his wife’s interest in the family home and the fact that she is a joint debtor for much of the debt.

[27]     The only evidence of Mr Fannin’s income is an annual sum of $120,000 recorded  in  the  statement  to  the  Manukau  District  Court.    This  is  income  in March 2014.   What appears to be the net income is recorded as $1,692 per week.

There is a list of expenses totalling $3,398 per week, but no evidence supporting these figures.   What is more, as indicated from the information in the previous paragraph of this judgment, in spite of the seemingly major excess of expenses over income, there is no accrued debt other than $1,300 on a credit card.  Mr Fannin was seeking to persuade me that he is in no position to pay a fine.  I am not persuaded to that effect.

[28]   Mr Fannin’s conduct, assessed overall, and leaving aside the financial information just dealt with, would justify a reasonably substantial fine.   By that I mean a fine of at least $20,000.  This might be compared, for example, with a fine of

$10,000 imposed for an unintentional breach in one case.15   That was a fine imposed

on a company.   In another case, where the Court referred to “a blatant and wilful disregard of the injunction,” a fine of $25,000 was imposed on an individual.16   I will not impose a fine of that amount because this will simply add in a material way to existing debt arising from court judgments, none of which seems to have been paid. In addition, there will be an order for payment of indemnity costs.  The appropriate way of dealing with these circumstances is to impose a more modest fine, together

with an order that Mr Fannin undertake 120 hours of community work in accordance with the relevant provisions of ss 55 and following of the Sentencing Act 2002.  The fine is $5000, of which $3000 is to be paid to Global Kiwi.

Costs

[29]     The evidence from Mr Trass is that Global Kiwi’s actual costs up to the date of the affidavit (29 May 2015), were $17,054.70 inclusive of disbursements and GST.  There was no challenge to that figure and no submissions for Mr Fannin that indemnity costs should not be paid.  Some additional cost will have been incurred since May 2015, for which I increase the total to a round sum of $17,500 (again

inclusive of any disbursements and GST).

15     Norbrook     Laboratories    Ltd     v     Bomac     Laboratories    Ltd     (No     7)     HC     Auckland

CIV-2002-404-1732, 18 December 2003.

16     Director  of  the  Land  Transport  Safety  Authority  v  McNeil  HC  Auckland  M509-IM/99,

20 December 2000.

Result

[30]     There is an order holding the defendant in contempt of court for intentional and continuing breach of the order served on him on 4 February 2013 and for lying to this Court in a memorandum dated 9 April 2013.

[31]     Mr Fannin is fined a sum of $5000, with that fine to be recovered as a fine imposed under the Sentencing Act 2002.   $3000 of the fine is to be paid to the plaintiff.

[32]     The defendant is to undertake 120 hours of community work in accordance with the relevant provisions of the Sentencing Act 2002.

[33]     The defendant is to pay costs to the plaintiff in respect of this proceeding, down to the date of this judgment in a sum of $17,500.

Woodhouse J