Ark Hire Pty Ltd v Barwick Event Hire Pty Ltd & 5 Ors [2007] NSWSC 488 | Case summary

(c) return to the plaintiff all of the equipment referred to in the list of equipment referred to in (a) on or before 30 April 2007. Initial Explanations of Attempts to Comply with the Undertakings 13 Mr Noel Mason is a director of the first defendant. He swore an affidavit on 30 March 2007. He deposed that he swore the affidavit in order to verify the equipment in the first defendant's possession in relation to the action. He deposed that searches had been made for the equipment to that point. He provided an incomplete description of equipment in the first defendant's possession. He identified a practical problem in identifying the equipment. The equipment received from the plaintiff had been mixed with large quantities of goods of a similar kind. 14 He deposed that the goods had been so mixed because it was believed at the time that the plaintiff's business had been purchased by the first defendant and that therefore proper stock control methods were not required. One invoice (also called a hire agreement) was purportedly for the hire of 25 chafing dishes. He deposed that the chafing dishes had been taken from the plaintiff's warehouse for stock to be used in the first defendant's business in Sydney. He deposed that they were not taken under any agreement to hire the equipment, but were taken because he believed that the first defendant had purchased the business. He gave an undertaking to return the equipment. 15 The first and seventh defendants have not pressed any claim that they had entered into a binding agreement to purchase the plaintiff's business, including its stock. However, the directors of the first and seventh defendants deposed to believing that such an agreement had been made. A letter from their Adelaide solicitors dated 27 February 2007 sets out in detail negotiations which the first and seventh defendants assert had taken place. The letter is lengthy, but in substance, the solicitors contended that following a series of meetings, an offer was made on 15 February 2007 for the first defendant to purchase for $667,000, excluding GST, the assets of the plaintiff which were subject to a charge to the National Australia Bank; that the deed administrator advised that the offer was acceptable to the bank; that the offer was accepted by the deed administrator; that nonetheless, the question of apportionment of the purchase price as between plant and equipment and trading stock to take account of stamp duty concessions had not been finally settled; that it was agreed that the contract would be based on the standard terms applying to a usual commercial sale and purchase of business in New South Wales; that the deed administrator authorised the first defendant to commence operating the business immediately so as to stem losses; and that the parties shook hands on a deal, albeit one that was not documented. The solicitor's letter went on to contend, in substance, that as the parties attempted to document the transaction over the following days, points of difference arose and that on 21 February 2007, the plaintiff's solicitors, for the first time, contended that no contract would arise until there was a formal exchange of contracts. 16 The relevant hiring agreements, which also take the form of invoices, are dated between 2 February 2007 and 23 February 2007. 17 I was told that the directors of the defendants who swore affidavits in relation to the application were unavailable to attend for cross-examination because they were both ill. This was not disputed. The plaintiff had given notice for the deponents to attend for cross-examination on their affidavits, but it did not object to the affidavits being read or seek an adjournment so that the deponents could be cross-examined on their affidavits. Some parts of the deponents' affidavits were not read. I was led to understand that this was a result of an agreement reached between the parties as to how the application should progress. 18 There was no evidence that the detailed letter from the defendants' solicitors, describing the course of negotiations, had been answered by the deed administrator or his solicitors. There was no evidence that the assertions made in that letter were disputed. I can readily understand why the legal representatives of the defendants concede that the matters asserted in the letter did not give rise to a binding agreement for the purchase of the relevant equipment. However, it is not inconsistent with that concession that the directors of the first and seventh defendants should have believed that such an agreement had been made. A great deal of business must be done under arrangements which, if closely examined, would not involve binding contractual arrangements. 19 Accordingly, whilst Mr Mason's affidavit of 30 March 2007 did not constitute compliance with the undertaking given on 23 March 2007 to provide a list of equipment in the first defendant's possession, I accept his evidence that he was not able to identify the quantities of equipment of which the first defendant had taken possession because it had been mixed with large quantities of similar equipment, and that that situation had come about because proper stock control methods had not been adopted owing to his belief that an agreement had been entered into to purchase the plaintiff's business, including the equipment. 20 No list of equipment was provided by either the first or seventh defendants by 5 April 2007 as required by their undertakings. 21 On 11 April 2007, the plaintiff's solicitors wrote to the solicitors for the first and seventh defendants in relation to the breach of the undertakings. They offered to extend the deadline for compliance with the undertakings to 9.00am on 12 April 2007, failing which they foreshadowed making application to the Court. Following a further letter on 12 April 2007, the first and seventh defendants' Adelaide solicitors wrote to the plaintiff's solicitors acknowledging their default and advising that an affidavit would be sworn and served on 13 April 2007. 22 On 16 April 2007, the first and seventh defendants' solicitors served a further affidavit of Mr Mason and an affidavit of Mr Boros. Mr Boros is a director of the seventh defendant. Mr Mason deposed that his affidavit was sworn in order to verify the equipment that was in the first defendant's possession in relation to the action. However, his affidavit dealt only with one of the seven invoices the subject of the summons. 23 Mr Boros referred to two of the invoices only. He confirmed that the seventh defendant had in its possession some of the equipment referred to in the invoices, but said that they had been mixed into all of the other stock of the seventh defendant and he was unable at that time to identify what equipment falling within those invoices were in the seventh defendant's possession. He said the reason for this was because he had relied on the deed administrator's assertions that the first defendant had purchased the assets of the plaintiff. 24 After further correspondence from the plaintiff's solicitors warning that contempt proceedings would be instituted, the plaintiff filed its notice of motion on 20 April 2007. Further Explanations for the Failure to Comply with the Undertakings 25 After admitting the charge of contempt on 24 April 2007, the first and seventh defendants filed further affidavits of Mr Mason and Mr Boros on 26 April 2007. The affidavits explained why the first and seventh defendants had not provided the lists of equipment as required by their undertakings. Messrs Mason & Boros deposed to the steps taken to try to locate and identify the relevant equipment and to the difficulties in doing so. Mr Mason deposed to having searched the first defendant's warehouse to identify the equipment subject to the invoices. He attempted to determine what equipment was on site from the first defendant's list of invoices of equipment on hire. He asked Mr Boros to instruct Mr Boros' staff to identify whether the equipment was in the seventh defendant's warehouse, or was on site. A major part of the problem was that some parts of the equipment were in use at an event or events. Some had been hired out to other persons. Mr Mason instructed his staff to review the equipment returning to the warehouse on a daily basis and to isolate and separate that equipment from the first defendant's stock as and when it was located. Mr Mason deposed that he was still unable to say with certainty which equipment was owned by the first defendant and which equipment was owned by the plaintiff. He made the assumption that the newer product belonged to the plaintiff and identified that as the equipment which was to be returned on 30 April 2007. 26 He provided a list of equipment which he considered that the first defendant had in its possession in relation to invoice 753 (that is, the invoice to which I referred earlier in these reasons). He listed 2,628 white alfresco chairs, 48 round tables, 189 rectangular tables of one dimension and 41 rectangular tables of another dimension, and 180 metres of "pro floor". He confirmed that the first defendant had chafing dishes under invoice 783. He said that it did not have equipment referred to in two other invoices. He provided a list of equipment which the first defendant had in relation to invoice 695. 27 He also deposed that two semi-trailer loads of equipment in both the first and seventh defendants' possession had already been returned to the plaintiff. He said that the balance of the equipment would be returned on or before 30 April 2007. 28 Mr Boros also swore an affidavit on 26 April 2007 to seek to purge the contempt of the seventh defendant. He also described difficulties in locating and obtaining the relevant equipment. He said that the equipment received from the plaintiff measured approximately 240m², but that the seventh defendant owned approx 70,000m² of stock which was identical or like product. He said that the equipment hired from the plaintiff was made up of components used in erecting structures or tents. All of the structures the subject of the plaintiff's invoices had the same legs, base plates, ridge inserts and purlins. He said that the seventh defendant owned and was in possession of a large quantity of the same kind of equipment. Many of the items were interchangeable. The problem was that the equipment hired from the plaintiff had been mixed with equipment of the same kind owned by the seventh defendant. He provided several of his staff with a copy of the invoices from the plaintiff and asked that they identify all of the equipment the subject of the invoices. He asked them to identify whether the equipment was in the seventh defendant's warehouse, or whether it was on site. Employees of the seventh defendant spoke to staff at a number of work sites and throughout the warehouse to try to identify the equipment. He gave instructions for the entire warehouse staff to continually review the equipment returning to the warehouse on a daily basis in order to locate any of the equipment that might have belonged to the plaintiff which was hired out on other jobs. Once the equipment was identified it was to be isolated. He also said that he was unable to say with absolute certainty which equipment was owned by the seventh defendant and which equipment was owned by the plaintiff. He also assumed that newer product belonged to the plaintiff. He provided a list of equipment the seventh defendant had in its possession. The equipment in the seventh defendant's possession had been included in the two semi-trailer loads of equipment returned to the plaintiff. The balance was to be returned on or before 30 April 2007. 29 Mr Mason and Mr Boros acknowledged that the first and seventh defendants had not complied with their undertakings to the Court in that they did not serve the plaintiff with a list of equipment they had in their possession and provide an affidavit verifying the list. They both proffered unreserved apologies for the first and seventh defendants' failure to comply with their undertakings. I accept those apologies. The first and seventh defendants pleaded guilty to the contempt charges on the first opportunity. Construction of the Plea of Guilty 30 Both Mr Mason and Mr Boros deposed that the first and seventh defendants did not wilfully breach their undertakings. They deposed that whilst their affidavits of 16 April 2007 did not contain the details required in the undertakings, it was the best they could do at the time. 31 However, there is a difficulty with this evidence in that the first and seventh defendants pleaded guilty to the charges of contempt. The statement of charge alleges a wilful failure to serve the required lists on or before 5 April 2007 and a wilful failure to serve affidavits verifying such lists. 32 When this question was raised, senior counsel for the plaintiff said that the plaintiff would contend only that the plea of guilty should be read as an admission that the first and seventh defendants through their relevant officers were conscious that a list and verifying affidavit were required to be provided by 5 April 2007, that they were conscious that the affidavits of 16 April 2007 did not amount to strict compliance with the undertakings, and they deliberately did not provide a list and verifying affidavit by that date. 33 The first and seventh defendants did not seek leave to withdraw the plea. Nature of the Contempt 34 In Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435, Kirby J said (at 484-485, [147]-[149]): " [147] ... In determining the order which is appropriate to the contempt found, the Court must take into account those general principles which govern the sentencing of persons convicted of criminal offences which are apt to the peculiar character of contempt. The underlying purpose of the law on this form of contempt is to vindicate the due administration of justice. Contempts of the kind illustrated in this case may be technical (for example, Ainsworth v Hanrahan (1991) 25 NSWLR 155. These cases are sometimes called "casual, accidental or unintentional" contempts: Steiner Products Ltd v Willy Steiner Ltd [1966] 1 WLR 986 at 992; [1966] 2 All ER 387 at 390), wilful but without a specific intent to defy the authority of the Court (for example, Attorney-General for NSW v Dean (1990) 20 NSWLR 650) and contumacious (cf Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 at 500). In the last category a serious act of deliberate defiance of judicial authority is evidenced ( Registrar, Court of Appeal v Maniam [No 2] (1992) 26 NSWLR 309 at 315).

[148] 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 ( Director of Public Prosecutions v John Fairfax & Sons Ltd (1987) 8 NSWLR 732 at 742) 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 ( European Asian Bank AG v Wentworth (1986) 5 NSWLR 445 at 461-463; AMIEU v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 112). 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 ( Registrar, Court of Appeal v Maniam [No 2] (1992) 26 NSWLR 309 at 318; R v Sergiou (1983) 5 Cr App R (S) 227). [149] 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" ( AMIEU v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 115). Obviously, the culpability of the contemnor is relevant to the order which must be made ( Director of Public Prosecutions v John Fairfax & Sons Ltd (1987) 8 NSWLR 732 at 741). 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. " 35 The plaintiff did not submit that the contempt was contumacious. It submitted that the contempt was wilful, in the sense of being deliberate, although without any specific intent to defy judicial authority. It did not press a claim for a sequestration order. It submitted that a fine could be appropriate, and that its costs should be paid on an indemnity basis. It also submitted that those costs should be paid forthwith, and should include the costs of correspondence preceding the filing of the notice of motion for orders that the first and seventh defendants be punished for contempt. In that correspondence, the plaintiff sought to give the defendant the opportunity to purge its contempt without the need for the present application. Power to Fine 36 In Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98, Gibbs CJ and Mason, Wilson and Deane JJ, in a joint judgment upholding the power of a court to impose a fine for a civil contempt, said (at 112-113): "... In Mileage Conference , the members of the Restrictive Practices Court ([1966] 1 WLR at p 1162; [1966] 2 All ER at p 862;) accepted as correct the view of the law expressed by Warrington J in Stancomb ([1901] 2 Ch at p 194), namely, that it is no answer to proceedings for contempt "to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order". Thus, it would suffice that the relevant act or omission was wilful even if, in a case where the breach was constituted by an act or failure to act by a servant or agent, the act or omission of the servant or agent was "through carelessness, neglect, or even in dereliction of his duty" (per Warrington J in Stancomb , at p 194). In Mileage Conference itself, substantial fines were imposed on companies for contempt by breach of undertaking which was not merely non-contumacious but was committed reasonably on legal advice. The correctness of the approach outlined in the preceding paragraph was endorsed by the House of Lords in Heatons Transport ([1973] AC at p 109); their Lordships explicitly citing Steiner and Mileage Conference as precedents for the imposition of a fine in a case of disobedience to an order which is more than casual, accidental or unintentional . This endorsement was evidently based on the reasoning in the decisions to which we have referred, including an appreciation of the unsatisfactory consequences which would flow from the adoption of the view that there is no power to fine in such cases. To those reasons we would add the comment that lying behind punishment for a contempt which involves wilful disobedience to a court order, is the very substantial purpose of disciplining the defendant and vindicating the authority of the court. In our view the reasons supporting the recent decisions are compelling and they should be accepted by this court. It follows that a deliberate commission or omission which is in breach of an injunctive order or an undertaking will constitute such wilful disobedience unless it be casual, accidental or unintentional. " (My emphasis.) 37 The breaches of the undertakings are admittedly wilful in the sense that the defendants were conscious that the lists and verifying affidavits were required to be served, and were conscious that the affidavits of 16 April 2007 did not constitute compliance with their undertakings and, in that sense, the omission to provide the lists and affidavits was deliberate. Nonetheless, I would not characterise the breaches of the undertakings as intentional. The first and seventh defendants did not intend not to comply with the undertakings. They found themselves unable to do so. Their omission to do so was deliberate only in the sense that they did not think that they had supplied what they were required to supply. 38 Although the breaches were admittedly wilful in the sense described by senior counsel for the plaintiff, I do not consider that the breaches constituted wilful disobedience of the undertakings, in the sense described by the High Court in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd. In my view, whilst the omissions were deliberate in the sense that the defendants knew that they were not supplying what was required, they were unintentional. I do not consider that the contempts were of such a kind as to be punishable by a fine. 39 In any event, even if, having regard to the plea of guilty, the Court does have power to impose a fine, this is not a case in which a fine is called for. The authority of the Court has not been called into question. There was no challenge to the evidence read by the first and seventh defendants. They appear to have done their best in the circumstances in which they found themselves to comply with the orders. The task of locating thousands of chairs and hundreds of tables, and of locating equipment making up roofs and gables for tents, where the goods were not specifically marked so as to be individually recognisable, and which have been mixed in with larger quantities of goods of the same description, moved from site and hired out to others, was daunting. The first and seventh defendants' real failure was in proffering undertakings to do that which they had no real prospect of being able to do in the stipulated time. 40 Senior counsel for the plaintiffs submitted that non-compliance with the undertakings had significantly prejudiced the plaintiff. The plaintiff was pressing for an expedited hearing. The proffering of the undertakings removed the urgency from the proceedings because it provided for the property received by the first and seventh defendants to be identified and that property to be returned by 30 April 2007. The period between 5 April 2007 and 30 April 2007, that is, the period from the time in which the lists of equipment were required to be provided and the time for delivery up of that equipment, was a window in which any dispute as to the accuracy of the lists could be resolved. The failure to provide lists prior to 26 April 2007 (assuming that the affidavits of that date constituted sufficient compliance), meant that there was only an extremely short time for the plaintiff to attempt to verify the lists. I accept that this is so. 41 Nonetheless it is also true, as counsel for the first and seventh defendants submitted, that they cannot be criticised for the approach they took in responding to the plaintiff's claims. Although they asserted a "handshake agreement" to acquire the plaintiff's assets, they did not contend that this amounted to a binding legal agreement. They acknowledged at the first opportunity their responsibility to return the equipment picked up from the plaintiff. 42 The role played by the invoices, which also take the form of hire agreements, issued by the plaintiff, was not made clear on this application. Some of the invoices/agreements were signed. Most were not. Even in respect of those which were signed, there is clearly a dispute as to whether the first and seventh defendants received all of the equipment referred to in the invoices/agreements. Rather than seeking to obtain a very urgent hearing to seek to prove that all of the equipment referred to in the invoices/agreements had been delivered, the plaintiff was prepared to proceed on the basis that the defendants would identify what equipment had been delivered and return that equipment. There is no reason to doubt that that was a realistic approach to take to the litigation. It would have been very difficult to obtain an urgent hearing that could have afforded the plaintiff better relief. Nonetheless, the first and seventh defendants co-operated in providing the urgent relief which the plaintiff obtained. The plaintiff would not have been better off if, instead of accepting the proffered undertakings to provide the lists on 5 April 2007, it had obtained an urgent hearing. The equipment would still have had to have been identified. The plaintiff would not have been worse off if the first and seventh defendants had only offered undertakings to provide the relevant lists by 26 April 2007. Whatever undertakings had been offered, or whatever orders the Court might have made for the identification of the equipment, there were practical problems in making the identification. I accept that the first and seventh defendants did make genuine efforts to seek to identify the equipment they received. 43 The plaintiff submitted that the affidavits of 26 April 2007 did not demonstrate that the undertakings had now been complied with. The plaintiff submitted that the defendants had asserted without any, or any adequate, explanation that various items of property referred to in some of the invoices had not been provided to them. This was so even though, in the case of the first defendant, a number of the invoices had been signed by one of its employees. 44 The first and seventh defendants are not charged with having provided false lists of equipment. They are not charged with having failed to return the equipment received from the plaintiff by 30 April 2007. The questions whether the lists now provided are complete, and whether all of the plaintiff's equipment has been returned, must await a final hearing. 45 For these reasons, I do not order a fine. Costs 46 In bringing the contempt application, the plaintiff was both seeking to enforce what it should already have obtained, and properly asserting the public interest in ensuring that orders of a Court, or undertakings to a Court, are obeyed. Whilst the appropriate order for costs is within the Court's discretion, these are powerful factors for making orders which indemnify the plaintiff from the costs incurred by it on its successful application to charge the first and seventh defendants with contempt (McIntyre v Perkes (1988) 15 NSWLR 417). 47 It is appropriate that the plaintiff's costs of and incidental to its notice of motion of 20 April 2007 be paid on the indemnity basis. An order that the defendant pay costs "incidental to" the notice of motion extends the ambit of the order for costs to include costs incurred as part of the preparation for the application (McIntyre v Perkes at 426). It will include the costs of correspondence with the defendants which preceded the bringing of the application in relation to their non-compliance with their undertakings. It was entirely proper for the plaintiff to correspond with the first and seventh defendants in an effort to avoid the need for the application. 48 It is also appropriate that the costs be payable forthwith. The contempt application is a discrete matter. The plaintiff is subject to a deed of company arrangement. I can infer that it is insolvent. The proceedings have not been concluded. Their conclusion might be delayed. There may well be questions as to whether the plaintiff delivered more equipment to the first and seventh defendants than the first and seventh defendants have admitted receiving. The claim for damages may be pursued. I cannot make a reliable estimate as to when the proceedings are likely to be concluded. It is not just that the plaintiff remain out of pocket for the costs it has incurred in bringing the contempt application until the substantive proceedings are finally determined (Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 at 4-5). 49 Accordingly, the appropriate costs orders will be that the first and seventh defendants pay the plaintiff's costs of and incidental to its notice of motion filed on 20 April 2007 on the indemnity basis, and that such costs may be assessed forthwith, and will be payable forthwith after agreement or assessment. Orders 50 For these reasons, I make the following declarations and orders:

Ark Hire Pty Ltd v Barwick Event Hire Pty Ltd & 5 Ors

At a glance

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Decision date

Before

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Judgment (21 paragraphs)

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Cases Cited (10)

Cited By (1)