ASIC v Matthews [2000] NSWSC 392 | Case summary

1 HIS HONOUR: On 23 March 2000 I gave judgment in which I determined that the defendant, Mr Matthews, was in contempt of court by failing to comply with orders made by O'Connor J in the Federal Court of Australia on 19 February 1999, which orders were confirmed as orders of this court by Austin J by a decision of 26 July 1999, the contempt being that he allowed to be published certain securities reports on a particular Internet site. 2 In the statement of charge and amended notice of motion the plaintiff, Australian Securities & Investments Commission, charged that a series of reports or if you like publications on the Internet site www.chimes.co.nz were reports on securities and that in breach of the orders of O'Connor J, particularly Order 4, the defendant Mr Matthews, had allowed these reports to be published. 3 I found that nine of what I will call postings on the site were reports on securities and I found that Mr Matthews had allowed them to be published and therefore was in contempt of court for breach of the orders originally made by O'Connor J. I should say that five of those postings are now accepted by Mr Matthews as having been posted by him, he being "the publisher", the other four being postings by other persons. 4 I have set out the history of this matter in my judgment of 23 March 2000 and I do not intend to go through the matters set out there again. The question before the court is the question of the penalty which should be imposed as a result of the contempt. 5 It is of some relevance to re-state that there were earlier proceedings for contempt for breach of the same orders heard by Sackville J in the Federal Court in June 1999 and that as a result of the contempt there admitted and in fact proved, he imposed a penalty of committal to gaol for a period of two months but ordered that the warrant for committal be issued and lie in the office for a period of 12 months. It was assumed that if there were no further breach within that time then the term of the imprisonment would not have to be served. 6 The contempts, the subject of the charges before Sackville J, were different from the contempts which I have found. After the judgment and orders of Sackville J on 16 June as I have stated in the earlier judgment, Mr Matthews closed down his Australian site and in July opened a similar site in New Zealand on which it was clearly intended material of the same sort as was posted on the Australian site, when it was open, would be posted and in fact that is what took place. 7 The matters which are the subject of the plaintiff's charge in the proceedings before me related to postings taking place at the end of July and beginning of August 1999. Some of those matters charged I determined were not reports on securities but some of them were and thus having found that Mr Matthews allowed them to be published and in fact he did publish, having stated in evidence today that he in fact was the publisher of five of them, there was a clear breach of the orders which are now treated as orders of this court making the defendant liable to be dealt with for contempt of those orders. 8 It is clear from the transcript of proceedings before Sackville J that Mr Matthews was well aware of the risk he took in keeping a website open as that would enable other persons to post reports on securities to that website. It is also clear that in so far as he has published reports to that website he was well aware of what he was doing. It is equally clear that while he may not have had the technical expertise to remove from that site reports on securities, he is in a position to have that take place. 9 It is, I think, perfectly clear, that what he did in moving the site from Australia to New Zealand was a pre-determined course of conduct to enable what had been happening in Australia to continue to happen on the New Zealand site. In other words, having been sufficiently warned, one would have thought, by what was said by Sackville J in his judgment on 16 June he went ahead and engaged in precisely the same sort of conduct as had been the subject of the proceedings for contempt heard before Sackville J in the Federal Court. 10 The only thing which might be put in mitigation against this, was the view which Mr Matthews maintains that what was being published by him were not reports about securities. I do not accept that he considered that was a view the court would agree with and it is relevant to point out that he does accept that material which he publishes may have an effect on the share price of the securities about which reports are published on that site. That is of course the conduct which the plaintiff is at pains to prevent. 11 Mr Matthews in oral evidence and again in submissions put forward some matters as to what was an appropriate penalty and as to whether any penalty should be imposed. Those matters were: first, that he had been punished enough as he had already received a gaol sentence; second, that any gaol sentence would have a serious effect on his family and that he has suffered substantial humiliation which is apparent when he makes any application for employment; thirdly, that he has already suffered serious financial penalty as a result of the orders for costs which have been made against him to date; and fourthly, he says that there is a wider public interest in this matter in that numerous other persons in the community are conducting themselves in the same manner as he has conducted himself and yet they are not being punished; and fifthly, he says that there is no evidence that anybody has suffered from the conduct in respect of which he is subject to the charges of contempt. 12 I do not think it is necessary to go through these matters in detail other than to set them out, so that it can be shown that I understand them. These matters all arose from conduct of Mr Matthews and have little to do with mitigation. Mr Matthews insisted on saying that he had been to gaol or received a gaol sentence well knowing of course that it has been suspended. So far as the other matters are concerned, while he is subject to the orders for costs he has not paid them; to some extent his financial position is brought about by the fact that he is not a licensed investment adviser and finally the fact that other persons are involved, if they are involved, in relation to securities reports, is no excuse for the conduct of the defendant in breaching the orders. 13 Mr Matthews did say, and this I did not regard as being disrespectful in any way, that there was a disagreement between him and myself as to whether or not the postings I found were a contempt were reports on securities. Whether that is so or not it is proper to say that no evidence was given by Mr Matthews, except on a voir dire matter, on the original hearing, and I do not think that it would be possible to suggest that he was in any way surprised at my decision on the question of whether or not these matters complained of were reports on securities. 14 The defendant is in a different position from that of persons charged with contempt for the first time because as a result of the first hearing before Sackville J he was made perfectly aware of his responsibilities and perfectly aware of the requirements necessary for him to obey the orders of the court. Thus it is perfectly clear in my view that he has purposely breached those orders and there has been a deliberate continuation of the conduct which was the subject of the original orders. 15 The question then is what ought to be the penalty. For the reasons which I have already set out, Mr Matthews submits that there should be no penalty at all and that the plaintiff Commission should pay the costs of these proceedings. The plaintiff Commission argues that there should be a term of imprisonment imposed. 16 It is necessary I think to say when the earlier proceedings for contempt were before Sackville J he said that there were some mitigating factors in that Mr Matthews had pleaded guilty, that he did not publish his own reports but put reports from other people on the site, and that those were reports prepared by licensed investment advisers. None of those mitigating factors is present in respect of the proceedings before me, there having been no plea of guilty and the proceedings actually having taken a considerable time, there having been publishing by Mr Matthews of some of the reports and the others which were allowed to be published I think can be safely assumed were not reports of licensed investment advisers. 17 I have come to the clear view in this matter that there are no mitigating circumstances. Mr Matthews said that he was not sorry about breaching the orders; he said that he was aware that he was a person who had an influence on the market through the site, and he said five of the reports were published by him. He was clearly well aware of what he was doing; he was clearly well aware that his continuing conduct was a breach of the orders originally made by O'Connor J. 18 I do not consider a fine would be appropriate and it is unlikely Mr Matthews could pay any substantial fine. In my view it is necessary to impose a term of imprisonment. The system of justice depends upon persons, the subject of court orders, obeying those orders and it depends upon the court making it perfectly clear that it will enforce in a proper way its own orders so as to make the system of justice, upon which the community relies, effective and recognised as being effective by members of the community. 19 Deliberate renewed breach of a court order in respect of which there has been no apology and no contrition shown, make it necessary for a term of imprisonment to be imposed, regrettable though that may be. In the circumstances I consider that an appropriate term of imprisonment in respect of the contempts, the subject of the proved charges before me, is a period of three months and I propose to make an order for the issue of a warrant forthwith. 20 I make the following orders: 1. The defendant, Stephen Lewis Matthews , is guilty of contempt of court by his conduct in disobeying an order made by O'Connor J on 19 February 1999 in proceedings in the Federal Court and treated as proceedings of this court pursuant to the Federal Courts (State Jurisdiction) Act 1999 (NSW) by order of Austin J on 26 July 1999, in that he: (a) Between about 26 July 1999 and 29 July 1999 allowed publication of a securities report, entitled "Re: My physicals list", on the website known as the Chimes and situated at http://www.chimes.co.nz ; (b) Between about 27 July 1999 and 1 August 1999 allowed publication of a securities report, entitled "News Report#215: "Spike Radio is the bleeding edge of an ambitious transformation of Spike", on the website known as the Chimes and situated at http://www.chimes.co.nz ; (c) Between about 27 July 1999 and 1 August 1999 allowed publication of a securities report, entitled "SECRET TELSTRA ANALYSIS!!! THIS IS HOT!!!", on the website known as the Chimes and situated at http://www.chimes.co.nz ; (d) Between about 27 July 1999 and 29 July 1999 allowed publication of a securities report, entitled "Wait a minute ....", on the website known as the Chimes and situated at http://www.chimes.co.nz ; (e) Between about 27 July 1999 and 29 July 1999 allowed publication of a securities report, entitled "Telstra can hit $20 if ......", on the website known as the Chimes and situated at http://www.chimes.co.nz ; (f) On or about 29 July 1999 allowed publication of a securities report, entitled "News Report #216: Chimes Index buys Macquarie Bank and One.Tel at their all-time highs", on the website known as the Chimes and situated at http://www.chimes.co.nz ; (g) Between about 30 July 1999 and 1 August 1999 allowed publication of a securities report, entitled "News report#217: Murdoch factor to influence One.tel's global ambitions", on the website known as the Chimes and situated at http://www.chimes.co.nz ; (h) Between about 5 August 1999 and 6 August 1999 allowed publication of a securities report, entitled "Tensions in Lucent contract oblige early exit from One.Tel", on the website known as the Chimes and situated at http://www.chimes.co.nz ; and (i) On or about 10 August 1999 allow publication of a securities report, entitled "News Report#220: Emperor's credentials can't be denied", on the website known as the Chimes and situated at http://www.chimes.co.nz . 2. (a) The defendant be imprisoned for a fixed term of three months to commence on 4 May 2000 and conclude on 3 August 2000. (b) A warrant for the defendant's committal to prison for a fixed term of three months issue. (c) The warrant for the defendant's committal to prison be executed forthwith. 3. I order the defendant pay the plaintiff's costs of and incidental to the motion for contempt.

ASIC v Matthews

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Judgment (7 paragraphs)

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