ASIC v Sigalla

Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288 CASES CITED : Southern Equities Corporation Ltd v Bond [2000] SASC 450; (2000) 78 SASR 339 TZ Ltd v ZMS Investments Pty Ltd [2009] NSWSC 1465 TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196

Australian Securities and Investments Commission - Plaintiff Andrew Sigalla - First Defendant PARTIES : John Falconer - Second Defendant Michael Otten - Third Defendant BZI Pty Ltd - Fourth Defendant Dunbar Associates Ltd - Fifth Defendant

COUNSEL : Mr D R Stack - Plaintiff Mr R J Bromwich SC/Mr C A Botsman - First Defendant/Applicant

SOLICITORS : Mr Conrad Gray - Plaintiff Bridges Lawyers - First Defendant/Applicant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

2009/290316 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v ANDREW SIGALLA & 4 ORS JUDGMENT 1 These are the reasons for my decision of this morning to accede to the application of Andrew Sigalla that I disqualify myself from hearing the further amended interlocutory process and further amended statement of charge filed by Australian Securities and Investments Commission on 24 May 2010 alleging contempt of court by him. The alleged contempt consists of disobedience to freezing orders made in these proceedings. 2 My decision was made on the basis, first, that a fair-minded observer might entertain a reasonable apprehension of bias by reason of prejudgment and, second, that no overriding consideration of necessity or special circumstances applied: see Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288 at 299-300 per Mason J, Murphy J, Brennan J, Deane J and Dawson J. 3 For reasons published on 19 March 2010 in other proceedings (the "TZL proceedings"), I ordered, over the opposition of ZMS Investments Pty Ltd, that freezing orders made against that company be extended: see TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196. ZMS Investments Pty Ltd is Sigalla's family company. The TZL proceedings and the present ASIC proceedings are related in the sense that they have, at least to a large extent, a common factual basis. 4 In the course of the judgment of 19 March 2010 in the TZL proceedings, I referred to a 23 December 2009 decision of Austin J (TZ Ltd v ZMS Investments Pty Ltd [2009] NSWSC 1465) that ZMS Investments and Sigalla were in contempt of court because of disobedience in November 2009 to freezing orders made in the TZL proceedings. I then said (at [32] and [33]): "[32] ZMS, speaking through counsel no doubt instructed by Sigalla, submitted upon the present application that the contempt constituted by the exchange of contracts on 10 November 2009 was motivated by a desire to preserve the net assets of ZMS. A picture was painted of circumstances in which a mortgage debt was due but unpaid, ZMS was prevented by the freezing orders from refinancing and the mortgagee was waiting in the wings for an opportunity to enter the arena and effect a fire sale, only to be held at bay by ZMS which, for the benefit of its own constituency, triumphed by selling the particular unit at a better price (reference was made to a finding by Austin J that Sigalla believed he had "no practical alternative" but to proceed with the exchange of contacts, even though he knew that the orders would thereby be breached).

[33] It does neither ZMS nor its controller, Sigalla, credit to seek to invest with some form of nobility of purpose an intentional and knowing contravention of an order of the court. The true position is as submitted by counsel for TZL, that is, that the conduct of ZMS through Sigalla demonstrated disdain for the orders of the court and a serious lack of probity on the part of Sigalla and ZMS. They could have come back to court seeking variation of the orders to allow the sale. They obviously preferred deliberate defiance of the orders." 5 Later, at [39] and [40], I said: "[39] Returning to the finding of contempt by Austin J and my observation that ZMS and Sigalla demonstrated a serious lack of probity, I note the submission made by counsel for TZL that that of itself is sufficient to demonstrate a risk of dissipation of assets. Counsel referred to part of the judgment in the Ninemia Maritime case (above) in which Mustill J said (at 406), in relation to proof of risk of dissipation: 'It is not enough for the plaintiff to assert a risk that the assets will be dissipated. He must demonstrate this by solid evidence. This evidence may take a number of different forms. It may consist of direct evidence that the defendant has previously acted in a way that shows that his probity is not to be relied on.'

[40] TZL has, on this application, led direct evidence that ZMS, at the instigation of Sigalla, has previously acted in a way that shows that the probity of ZMS and Sigalla is not to be relied on. That, to my mind, is alone sufficient to warrant the continuation of the freezing order." 6 In the light of the findings thus made and recorded by me, there is room for the operation, in relation to the contempt motion in these ASIC proceedings listed for hearing today, of the principle enunciated in Livesey (above) as follows (at 293-294): "[The] principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that [the judge] might not bring an impartial and unprejudiced mind to the resolution of the question involved in it." (emphasis added) 7 As Gleeson CJ, McHugh J, Gummow J and Hayne J observed in Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 at 345, the question is one of possibility (real and not remote), not probability. 8 Having regard to the passages in my judgment of 19 March 2010 quoted above, there is, in the present context, a real (not remote) possibility that the parties or the public might perceive that I have prejudged Sigalla's credit. 9 ASIC, in arguing against the disqualification application made by Sigalla, pointed to the desirability of continuing case management by one judge within a list such as the Corporations List. While there is practical merit in that approach, it is one that, of its nature, carries with it possibilities of the kind that have arisen in this case. An illustration is provided by Southern Equities Corporation Ltd v Bond [2000] SASC 450; (2000) 78 SASR 339. That, like this, was a case in which a judge with a continuing case management role had, at an earlier stage, heard and determined an application for a freezing order. It is pertinent to quote the following passage in the judgment of Olsson J (with whom Bleby J effectively agreed) at [46] to [50]: "[46] It is stating the obvious to say that there are inherent dangers in a judicial officer assigned as trial judge entertaining and ruling on a pre-trial application for a Mareva injunction. [47] As Debelle J correctly identified, he was called upon to consider whether the applicants had established the following four matters, namely:- (1) whether the plaintiffs had a substantial cause of action against the defendants; (2) whether the plaintiffs had demonstrated a sufficiently arguable case to justify the relief claimed; (3) whether it had been made to appear that a danger existed that, if successful in the action, the plaintiffs will not be able to have the judgment satisfied; and (4) whether it is just and convenient to make the order. [48] Little difficulty is ever likely to arise from a consideration of facets (1), (2) and (4) - given that discretionary issues and balance of convenience aspects will arise as to (4). [49] However, an inherent problem which arises as to (3) is that, in most instances, its consideration will lead to a need to investigate and arrive at positive conclusions concerning the past and likely future conduct of the party against whom relief is sought. An assessment will need to be made whether, by virtue of that conduct, there is a danger that relevant assets will be dissipated in a manner which is likely to deprive another party of the fruits of the litigation. [50] Such an exercise may well involve issues of credibility. It almost inevitably requires the making of specific findings of fact on the evidence available. It follows that, even if those findings are expressed to be only provisional, they may, quite reasonably and naturally, engender an apprehension of pre-judgment as to other issues at trial, if the findings are made by the trial judge. Much, of course, will depend upon the precise nature of the findings and the manner in which they are expressed." 10 It is the "inherent problem" referred to by Olssen J at [49] and [50] that brought about the situation in which I considered myself precluded from hearing the contempt motion listed for hearing today. **********

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