Australian Competition and Consumer Commission v Jutsen

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 529 of 2010

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

JUDGE: JAGOT J DATE: 3 august 2012 PLACE: SYDNEY

BACKGROUND 1 On 5 June 2012 I delivered reasons for the making of a declaration that the first respondent, Ms Lualhati Jutsen, had been in contempt of court by withdrawing $35,000 from her bank account on 28 May 2010 in circumstances where: - (i) the Court had ordered on 20 May 2010 that Ms Jutsen be restrained from operating that account by making withdrawals or transfers from that account other than amounts reasonably necessary for her ordinary living expenses, (ii) Ms Jutsen was aware of the terms of that order from the time it was made, and (iii) the withdrawal was not reasonably necessary for Ms Jutsen's ordinary living expenses (Australian Competition and Consumer Commission v Jutsen (No 5) [2012] FCA 597). 2 The Australian Competition and Consumer Commission (the ACCC) commenced the contempt proceeding against Ms Jutsen by a notice of motion filed on 6 July 2010 in the principal proceeding before Nicholas J. Paragraphs 3 and 4 of the notice of motion remain outstanding. In those paragraphs, the ACCC sought: 3. An order that the first respondent be punished for the contempts, or in the alternative each of the contempts, specified in the attached Statement of Charge by a fine of an amount to be determined by the Court to be paid within 14 days of the order and in default committal to prison for such term as the Court determines. 4. An order that the first respondent pay the applicant's costs of this motion on an indemnity basis. 3 These reasons for judgment concern the determination of an appropriate penalty for the contempt committed by Ms Jutsen. On 5 June 2012 I directed Ms Jutsen to notify the ACCC within 14 days if she proposed to adduce evidence on penalty. In the absence of such notification, the applicant was to file written submissions on penalty within 21 days of my order of 5 June 2012 and Ms Jutsen within a further 14 days, with penalty to be determined on the basis of the written submissions. Ms Jutsen notified the applicant by email on 18 June 2012 that she did not intend to adduce any evidence on penalty. The ACCC filed its written submissions on penalty on 26 June 2012. Written submissions in reply from Ms Jutsen were received on 10 July 2012. 4 In the principal proceeding Nicholas J found that Ms Jutsen had participated in a pyramid selling scheme in contravention of the prohibition contained in s 65AAC of the Trade Practices Act 1974 (Cth) and engaged in misleading and deceptive conduct and made false representations in breach of ss 52 and 53 of the Trade Practices Act (Australian Competition and Consumer Commission v Jutsen (No 3) [2011] FCA 1352). Nicholas J made declarations to this effect (Australian Competition and Consumer Commission v Jutsen (No 4) [2012] FCA 503). His Honour also made orders pursuant to s 232 of the Australian Consumer Law restraining Ms Jutsen from participating in a pyramid selling scheme and from making certain misleading representations. Nicholas J further ordered that Ms Jutsen pay a civil penalty of $90,000.

RELEVANT PRINCIPLES 5 As Ms Jutsen notified the Court that she did not intend to adduce evidence on penalty, the only evidence before me is the material adduced by the ACCC on liability along with other material on the file relating to the conduct of the contempt proceeding. Under s 4(2) of the Evidence Act 1995 (Cth) the Court may have regard to that material, notwithstanding that it has not been admitted into evidence. 6 Section 31(1) of the Federal Court of Australia Act 1976 (Cth) provides that "[s]ubject to any other Act, the Court has the same power to punish contempts of its power and authority as is possessed by the High Court in respect of contempts of the High Court". By s 24 of the Judiciary Act 1903 (Cth) the High Court has "the same power to punish contempts of its power and authority as is possessed at the commencement of this Act by the Supreme Court of Judicature in England". The power of the English Courts to punish for contempt of court at the date of commencement of the Judiciary Act was limited to the power to fine or to imprison (Pattison (Trustee), in the matter of Bell (Bankrupt) v Bell [2007] FCA 137 at [45]). 7 In Australian Competition & Consumer Commission v INFO4PC.com Pty Ltd (2002) 121 FCR 24; [2002] FCA 949 Nicholson J set out the range of penalties available to the court to punish for contempt. The Court has power to (at [138]): (a) commit a contemnor to prison for an indefinite period of time; (b) impose a fine for a wilful breach of an order or undertaking; (c) impose a daily fine; (d) order the sequestration of the assets of a contemnor; and (e) suspend on condition any sentence of imprisonment that it might impose in respect to contempt. The Full Court of the Federal Court referred to this passage with approval in Hughes v Australian Competition & Consumer Commission [2004] FCAFC 319 at [55]. The Court cannot impose a community service order (Pattison v Bell at [46]-[48]). 8 In Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 Gibbs CJ, Mason, Wilson and Deane JJ stated that the underlying rationale for every exercise of the contempt power is the necessity to uphold and protect the effective administration of justice. Their Honours went on (at 107) to state that: Although the primary purpose in committing a defendant who disobeys an injunction is to enforce the injunction for the benefit of the plaintiff, another purpose is to protect the effective administration of justice by demonstrating that the court's orders will be enforced. 9 Considerations which are relevant to determination of an appropriate penalty include (Australian Competition & Consumer Commission v World Netsafe Pty Ltd (2003) 133 FCR 279; [2003] FCA 1501 at [16]-[17] and Louis Vuitton Malletier SA v Design Elegance Pty Ltd (2006) 149 FCR 494; [2006] FCA 83 at [25]-[27]): (1) the relative seriousness of the contempt, which is determined by the extent to which the contemnor appreciated that a contempt was being committed; (2) whether the contemnor subjectively intended to disobey the order; (3) the importance of bringing home to the contemnor the seriousness of the contempt; (4) whether the contemnor has offered any explanation or apology for his or her conduct; (5) an acknowledgement by the contemnor that a contempt was committed may be a mitigating factor; (6) the contemnor's personal circumstances; (7) the need to deter the contemnor and others from repeating contempt; and (8) the absence or presence of a prior conviction for contempt. 10 As Gray J noted in Vaysman v Deckers Outdoor Corporation Inc (2011) 276 ALR 596; [2011] FCAFC 17 (Vaysman) at [43], "[t]he starting point for the process of reasoning in sentencing is the gravity of the offence or offences concerned. In the case of contempt of court involving contravention of, or failure to comply with, court orders, that means assessing the seriousness of the defiance of the court's authority". In assessing the seriousness of a contempt, the practical consequence of the contemnor's failure to comply and its effect on the administration of justice is a relevant factor (ACCC v World Net Safe at [17]). As to the degree of seriousness, Bromberg J observed in Vaysman at [177] that: The vindication of judicial authority must necessarily reflect the nature of the challenge to that authority inflicted by the conduct in contempt in question. Not all contempts involve an intention to disobey the order of the court let alone contumacy and public defiance. In terms of degree of gravity there is a broad spectrum. A civil contempt does not require an intention to breach the court's order and may result from casual, accidental or unintentional disobedience. If, however, the act or omission is wilful, a court will have the capacity to fine or imprison the contemnor. A wilful breach is to be distinguished from the more serious contumacious breach required as a necessary element of establishing a criminal contempt. As McHugh J pointed out in Witham [Witham v Holloway (1995) 183 CLR 525] (at 542)…wilful breach is not the same as "contumacious or insulting behaviour or interference with the administration of justice". The seriousness of contumacious conduct will also depend upon whether the disobedience was constituted by private resistance or public defiance. 11 In relation to the standard of proof required for aggravating or mitigating factors for the purposes of determining penalty for contempt of court, Campbell J found in Ncr Australia v Credit Connection [2005] NSWSC 1118 at [27] that: When a Judge is finding facts for the purpose of a sentence concerning crime, a fact which will be used in a way which is detrimental to the offender must be proved beyond reasonable doubt, while a fact which will be used in a way which will be advantageous to the offender can be proved on the balance of probabilities: R v Olbrich (1999) 199 CLR 270 at 281…. In Witham v Holloway (1995) 183 CLR 525 the High Court held that a contempt could be found proved only if it was established beyond reasonable doubt. The reason was that the punitive nature of the proceedings brought with it the criminal standard of proof. Consistently with that principle, the standard of proof used in deciding factual matters for the purpose of imposing a sentence for contempt of court should be the same as is used in imposing a sentence in criminal matters. Any aggravating factor must therefore be proved beyond reasonable doubt and any mitigating factor must be proved on the balance of probabilities.

Considerations in relation to penalty 12 In relation to the seriousness of the contempt, the ACCC submitted that: (1) The fact that Ms Jutsen withdrew $35,000 from her bank account in separate transactions allows an inference to be drawn that Ms Jutsen was either seeking to avoid detection of the withdrawals or to avoid an apprehended constraint which might have been placed upon the operation of the account. (2) The withdrawals took place on Friday, 28 May 2010. Ms Jutsen's solicitor at that time, Mr Cockburn, swore an affidavit on 1 June 2010 based on instructions given to him on 31 May 2010 by Ms Jutsen to the effect that she did not have significant savings or sources of income and that her cash resources were tied up in the pyramid selling scheme, which had then been restrained (ACCC v Jutsen (No 5) at [17]-[18]) and did not represent an available or alternate source of funds for living purposes. Ms Jutsen's cash resources on 31 May 2010 necessarily included any of the balance then remaining of the $35,000 withdrawal on 28 May 2010. The inference is open that if her instructions to Mr Cockburn were accurate, then Ms Jutsen had used the entirety of the $35,000 in one business day for the conduct of the pyramid selling scheme. This would be in contumacious violation of the Court's order of 20 May 2010. (3) Without criticising Mr Cockburn, Ms Jutsen's instructions to him were likely to have been false. Having withdrawn $35,000 in cash on Friday 28 May 2010, Ms Jutsen instructed her solicitor on Monday 31 May 2010 that she did not have access to any savings and that all of her cash resources were tied up within a business which had been restrained. Ms Jutsen can only have caused her solicitor to swear a false affidavit in those terms because she knew that the withdrawals she made on 28 May 2010 constituted contempt. (4) Whether the instructions to Mr Cockburn were true or false their timing demonstrates that Ms Jutsen's contempt was a serious and deliberate interference with the administration of justice. (5) The practical consequence of the contravention was the dissipation of $35,000, being a small part of the illegal proceeds of the pyramid selling scheme then being conducted by Ms Jutsen. The evidence shows that from February to May 2010 Ms Jutsen received into her bank account $315,480 for purchase of vouchers for the pyramid selling scheme and had transferred $296,985 to Hong Kong through V2 Group Limited for the purchase of vouchers. Of that amount $175,000 was recycled back to Baker & McKenzie and McLachlan Thorpe at the times that those firms acted for Ms Jutsen. 13 The ACCC accordingly submitted that the Court should find that Ms Jutsen subjectively intended to disobey the Court's order. 14 The ACCC further submitted that Ms Jutsen's conduct in responding to the charge of contempt invites an inference that at no point has she accepted the seriousness of her conduct. In support of this proposition, the ACCC submitted that: (1) The charges were served in July 2010, approximately 5 weeks after the withdrawal of $35,000. There has never been any return of any of the funds to the frozen account. Her failure to return any of the remainder of the funds at any time is wholly inconsistent with any acceptance of the seriousness of her conduct. (2) Ms Jutsen did not merely put the ACCC to proof, as she was entitled to do. She filed and served a substantial affidavit and extensive submissions denying the charges. (3) Ms Jutsen sought and obtained extensive adjournments of the charges on the basis that if she were to go into evidence on the contempt charge then she could be at risk of exposing herself to penalty in the principal proceeding. (4) Once Ms Jutsen obtained the adjournments she departed Australia without notice to the ACCC or the Court. Ms Jutsen then sought further adjournments initially on the basis that it would enable her to obtain advice from new solicitors, and then on the ground that she required time to place her personal affairs in order so that she could return to Australia and deal with the charges. (5) It was not until the ACCC served extensive submissions in reply to Ms Jutsen's submissions that she notified the ACCC two business days before the hearing of the charges that she no longer proposed to adduce evidence on the charges. (6) Ms Jutsen did not appear at the hearing and apparently remains overseas outside the jurisdiction. (7) There is nothing in Ms Jutsen's response to the charges which indicates any acceptance of the seriousness of the contempt, and much in that response which indicates a continuing disregard for the authority of the Court. 15 In addition, the ACCC also submitted that no explanation or apology has been provided by Ms Jutsen, and that any explanation or apology submitted by Ms Jutsen in her submissions in reply should be accorded little weight, given the absence of any explanation or apology to date and the failure to return any of the funds to the restrained account. The ACCC submitted that Ms Jutsen has at no point acknowledged that she has committed a contempt. 16 As Ms Jutsen has elected to adduce no material on penalty, the ACCC submitted that the Court can come to no clear findings as to her personal circumstances. The evidence in the principal proceeding, relied upon in respect of the notice of motion, shows that between February and May 2010 Ms Jutsen received at least $296,985 from the operation of the pyramid selling scheme. Ms Jutsen has provided no explanation as to her disposition of any of those substantial funds (ACCC v Jutsen (No 3) [2011] FCA 1352 at [106]). This fund is sufficient to meet a substantial fine. There is no evidence before the Court which would enable the Court to conclude that Ms Jutsen would not have the capacity to meet a substantial fine. The ACCC also submitted that Ms Jutsen's dealings with the Court and the fact that she remains overseas suggest that whatever her family circumstances, there is unlikely to be significant dislocation caused to any other person in Australia should Ms Jutsen be imprisoned upon her return to Australia. 17 In relation to deterrence, the ACCC submitted that Ms Jutsen is the subject of orders restraining her from participating in a pyramid selling scheme and from making certain misleading representations. The fines and other orders made in relation to the current contempt should be sufficient to specifically deter Ms Jutsen from breaching the Court's orders in the future. The Court should also place significant weight on general deterrence. 18 The ACCC noted that there is no evidence that Ms Jutsen has previously been convicted of a contempt and it knows of no such prior conviction.

Appropriate orders 19 The ACCC called for a substantial fine in the range of $20,000 to $35,000. The lower end of that range aligns to the funds likely to have been available for return to the restrained account at the time Ms Jutsen was served with the charges of contempt. The higher end is the amount of funds withdrawn in contempt of the court order. A fine lower than that range would fail to bring home to the contemnor the seriousness of her conduct, by leaving her to have profited from it even after she had notice of the charges. It would also give little weight to general deterrence. 20 The ACCC submitted that the terms of and imposition of the fine should provide for any application by Ms Jutsen to pay by instalments to be considered by the Court on an application by Ms Jutsen. The orders should not permit any continuation of conduct which effectively disregards the authority of the Court. As such, the orders should make provision for imprisonment in the event of non-payment of the fine in accordance with the time directed for its payment. 21 The ACCC submitted that indemnity costs should be ordered, on the grounds that: (1) It was always open to Ms Jutsen merely to put the ACCC to proof. Had she done so the hearing of the charges could have proceeded two years ago with minimal expense. Instead, Ms Jutsen filed and served two extensive affidavits and submissions defending the charge. (2) As a result, the ACCC was required to issue an extensive notice to produce and there was a contested hearing in respect of compliance with that notice, which was ultimately resolved by adjournment of the whole of the contempt proceeding until the principal proceeding was finalised. (3) Ms Jutsen unreasonably put the ACCC to significant expense. Ms Jutsen did not notify the ACCC that she did not propose to rely on her affidavits and submissions until after submissions in reply were served the week prior to the hearing of the contempt charges. There is no explanation for why that change of position was not communicated at an earlier point in time.

MS JUTSEN'S SUBMISSIONS 22 Many of Ms Jutsen's submissions constitute statements about her state of mind at various times, which is a matter for evidence rather than assertion in submissions. Accordingly, it is difficult to give weight to the untested assertions of fact in Ms Jutsen's submissions. Nevertheless, I have considered her submissions and am mindful of the requirement that the ACCC prove any aggravating factor beyond reasonable doubt. 23 Ms Jutsen submitted that she did not subjectively intend to disobey the order as at the time of making the withdrawals she was not aware this would constitute contempt of court. Her sole motivation in withdrawing the $35,000 was to have cash available to ensure the welfare of her children. 24 Ms Jutsen further submitted that she was in fact opposed to the filing and serving of an affidavit in opposition to the charges, but had relied on the advice of her then solicitor and counsel. She was not aware until she received an email from the ACCC on 23 May 2012 (by which time she was no longer legally represented) asking her whether she would be relying on her affidavit that she knew she had the option to not rely on her affidavit. Similarly, Ms Jutsen relied on the advice of her solicitors in obtaining the extensive adjournments referred to by the ACCC. 25 In relation to her personal circumstances and departure from Australia, Ms Jutsen submitted that she had to leave Australia in order to care for her father in May 2011. She then remained overseas after her father passed away in December 2011 to care for her mother, and as a result lacked the capacity to represent herself effectively in relation to the contempt charge. These circumstances contributed to her delay in advising the ACCC that she did not intend to rely on the submissions prepared by her counsel and did not intend to adduce evidence on the charges. Ms Jutsen also submitted that she has suffered financial hardship since the end of 2010 due to payment of the fine ordered in the principal proceeding and because she has been unemployed since May 2010. 26 Ms Jutsen rejected the ACCC's submission that she does not accept the seriousness of the charge. She submitted that she respects the authority of the Court and she was not aware that an apology was an option or that it would make a difference. If she had been aware of this fact she would have immediately offered an apology. Ms Jutsen did in fact offer an apology in her written submissions. 27 Ms Jutsen contended that the ACCC had not provided clear evidence that the Hong Kong bank account in fact belonged to her or that she had control of the bank account, and it is therefore irrelevant that the funds in the Hong Kong bank account are sufficient to meet any substantial fine ordered against her. Ms Jutsen submitted that she is already unable to pay the fine ordered in the principal proceeding and any further fine in the circumstances would be unreasonable. Should a fine be imposed, Ms Jutsen seeks an order allowing for payment of the fine by instalments. In relation to the ACCC's application for indemnity costs, Ms Jutsen submitted that at the time she did not believe that she had any other option but to defend the matter and the conduct of the contempt matter was beyond her control as she relied on the advice of her solicitor at the time. In addition, Ms Jutsen submitted that the ACCC's request for an order of imprisonment is extremely severe under the circumstances. Ms Jutsen stated that she has three children who remain in Australia and any order of imprisonment would be unfair and unjust to them as well as to herself.

DISCUSSION 28 In terms of the objective seriousness of the contempt, I found in ACCC v Jutsen (No 5) (at [20]) that Ms Jutsen knew of the existence and content of the orders of 20 May 2010 restraining her from operating her bank account by making withdrawals other than amounts reasonably necessary for her ordinary living expenses. The withdrawal of $35,000 in amounts of $5,000 from different branches constituted wilful conduct, in the sense that it did not result from casual, accidental or unintentional actions. It was not a trivial or technical breach of the orders. However, I am not satisfied that by withdrawing the $35,000 in separate amounts Ms Jutsen was seeking to avoid detection of the withdrawals or any constraint placed on the operation of the account. Further, I am not satisfied that Ms Jutsen knowingly intended to breach of the Court's orders. Ms Jutsen's behaviour is more likely to have been driven by short-term financial motives rather than an intention to deliberately defy the Court's authority. Accordingly, I do not accept the ACCC's submission that Ms Jutsen acted in contumacious violation of the Court's order. She acted wrongly, in haste and without due care in circumstances where she might have believed that she would have insufficient resources to provide for herself in the short term. 29 I also do not accept the ACCC's submission that Ms Jutsen's instructions to Mr Cockburn regarding her financial position were likely to have been false and that the only reason Ms Jutsen would have instructed Mr Cockburn in those terms was because she knew the withdrawals she made on 28 May 2010 constituted contempt of court. There is an inference open that Ms Jutsen may have in fact disposed of the sum of $35,000 over the weekend and for purposes other than conducting the pyramid selling scheme prior to instructing Mr Cockburn on 31 May 2010. Accordingly, I am not satisfied that Ms Jutsen had funds remaining in her account on 31 May 2010 such that Ms Jutsen falsely instructed Mr Cockburn. 30 I accept that the practical consequence of Ms Jutsen's contravention has been the dissipation of $35,000, part of the illegal proceeds of the pyramid selling scheme she conducted. I accept that she has not given evidence (subject to testing by cross-examination) explaining her actions, what she did with the $35,000 or her present circumstances. I accept also that she has not repaid the $35,000 which she withdrew. While Ms Jutsen has proffered an apology in her submissions in reply, the apology has been given at the last moment and by way of submissions which cannot be tested. I accept the ACCC's submission that such an apology should be accorded little weight. Specific deterrence of Ms Jutsen is thus an important factor. General deterrence is also an important factor, but cannot be applied so as to result in any penalty disproportionate to the objective seriousness of the contempt found. 31 As noted, Ms Jutsen makes several assertions in her written submissions as to her current personal and family circumstances, and seeks to rely on those circumstances to explain her conduct in committing the contempt and throughout this proceeding. However, those assertions are unsupported by evidence. I accept the ACCC's submission that in the absence of any evidence from Ms Jutsen I cannot make any findings as to her current situation other than that it is common ground she has been overseas. I also accept that there is no evidence before me allowing me to conclude that Ms Jutsen does not currently have the financial capacity to meet a fine. However, I do not agree that it is open to me to find on the basis of the mere fact that Ms Jutsen apparently remains overseas that there is unlikely to be significant dislocation caused to any other person in Australia should she be imprisoned on her return to Australia on failure to pay any fine imposed. 32 One important factor to which the ACCC's submissions give little weight is the fact that Ms Jutsen has no prior convictions for contempt of court, or indeed for any previous breaches of consumer legislation. Accordingly, it should not be inferred that she has exhibited a course of conduct in conscious defiance of the law. 33 The ACCC's suggested fine in the range of $20,000 to $35,000 is excessive in all the circumstances. Nicholas J awarded a substantial fine of $90,000 against Ms Jutsen in the principal proceeding. Ms Jutsen was also ordered to pay the ACCC's costs of the principal proceeding and will be ordered to pay the costs of the present proceeding on an indemnity basis (see below). Given that the principal proceeding represented her first contact with the courts in respect of consumer protection legislation, and this proceeding is the first suggestion of breach of a court's order by her, the ACCC's submissions seek a disproportionately heavy penalty. 34 In Vaysman, Gray J noted at [54] that "[i]n any sentencing process, imprisonment is to be regarded as the penalty of last resort. Any period of deprivation of liberty is a drastic imposition on anyone. The value the law places on liberty is very high. It is incumbent on a sentencing judge to determine first whether any alternative to imprisonment would be appropriate". It is not appropriate to make any order imposing a term of imprisonment (even if contingent on failure to pay the fine) in circumstances where it is Ms Jutsen's first contempt, no evidence has been adduced concerning her personal circumstances and the breach giving rise to the contempt charge cannot be described as contumelious. There is thus no reason to give the ACCC liberty to apply in respect of an order for imprisonment. In the event of default on the part of Ms Jutsen, the ACCC can take such steps as it sees fit. 35 I accept the submissions of the ACCC that costs should be ordered on an indemnity basis. Whatever the reason, the ACCC has been put to substantial and unwarranted expense by Ms Jutsen's conduct of her defence of the contempt charge found against her. It can be anticipated that the ACCC's indemnity costs in this matter will not be trivial. I have taken this consideration into account in determining the amount of the fine to impose on Ms Jutsen. 36 In all of the circumstances I consider that a fine is warranted. Ms Jutsen knew of the orders and pursued a course of conduct which resulted in breach, even though I am not satisfied she intended breach to be the result or intended to act in defiance of the law. The effect of the breach has not been rectified by repayment of the money or otherwise making it available. However, Ms Jutsen is a first-time contemnor, who did not act contumeliously, and who has already been the subject of a substantial fine and costs order, and will be subject to a further costs order. Accordingly, I consider that a fine of $10,000 is proportionate and appropriate in all of the circumstances. 37 Orders will be made accordingly. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.