Defence case for the second respondent
96 In respect of the submissions for the second respondent, the Court disregards the matters asserted in those submissions which were not the subject of evidence and which are particularised in par 6 of the submission for the applicant in reply.
Procedural fairness
97 Presence at bank: In his submissions the second respondent states he believed he was defending himself against an allegation arising from the statement of charge that he went to the bank, made cash withdrawals and kept some funds for himself. The case he faced is that previously set out under the heading "Cash withdrawals", namely that he drew cheques for employees of the first respondent on the first respondent's account and recovered from each such employee a proportion of such cheques after they had been cashed. The difference between the charges pressed and the charges said to be believed by the second respondent is that no case was brought against him that he "made, arranged and received" the cash withdrawals.
98 The submissions for the applicant in reply challenge the sustenance of the belief in the face of what the second respondent knew of the case against him and also assert that the second respondent was not prejudiced in the presentation of his defence.
99 In relation to the foundations of the second respondent's belief, it is clear from examination of the opening that it was stated by counsel for the applicant that the allegation which it made was that a number of payments were made to employees of the first respondent by cheque and the employees were instructed to take the cheque to the Commonwealth Bank, cash it and then a part of the proceeds were handed to the second respondent. It was that allegation which was pressed in opening as the alleged contempt in breach of the orders referred to in the statement of charge.
100 The next question is whether the statement of charge specified the contempt of which the second respondent was alleged to be guilty in the requisite manner previously set out. That requires the application of a test as to "whether the gist or substance of [the alleged contumelious] conduct has been sufficiently conveyed in the Statement of Charge to enable the alleged contemnor to meet the charge": CFMEU at par 119 per Merkel J. This requires examination of whether the charge has been made "sufficiently explicit" (Coward at 579 - 580), even though it is not always necessary to formulate the charge in a series of specific allegations: Chang Hang Kiu v Piggott [1909] AC 312 at 315, considered in Coward at 579 - 580 and discussed in CFMEU.
101 It is necessary to turn to pars 9, 10 and 11 of the statement of charge. It is clear that par 10 in its context can be read and understood as follows:
"10. The second respondent made, arranged and received a number of cash withdrawals from the first respondent' s account numbered 6153 1024 3033 at the Commonwealth Bank of Australia by taking a proportion of wages paid to staff of the first respondent in cash."
The case that was brought was not one that the second respondent himself had "made" such withdrawals by going to the bank. The case brought was one that the second respondent had written appropriate cheques and (on the case as stated in opening) instructed the payee to take the cheque to the Commonwealth Bank and cash it. In my opinion such facts, if established to the requisite standard, are within the meaning of both "make" and/or "arrange". The word "made" takes its meaning from "make". The latter includes meanings of "to produce by any action or causative agency"; "cause to be or become"; and "to give rise to; occasion": The Macquarie Dictionary 2nd ed. 1991 p 1074; cf The New Shorter Oxford English Dictionary (Clarendon Press, Oxford, 1993) at p 1671 - 2. The case that was brought against the second respondent was also that he had "received" part of such withdrawals from the payees. The allegation of partial receipt falls within the scope of the receipt referred to in par 10 of the statement of charge.
102 Therefore, notwithstanding that no allegation was pressed that the second respondent had himself made cash withdrawals, I am of the opinion that the gist or substance of the conduct alleged to be in contempt was sufficiently conveyed in the statement of charge to enable the alleged contemnor to meet the charge. Given the statement in the opening of the applicant there was no basis for continuation of the second respondent's belief to the contrary after that point in time. I reach this view without reliance upon the affidavit evidence in which the case for the applicant is said to have been outlined.
103 De facto directorship: The contentions by the second respondent then continue by focussing upon par 11 of the statement of charge. His submissions maintain that the statement did not refer to what he describes as "a de facto director arrangement" as described in the applicant's submission. The second respondent contends that because of that, he was not aware he would be expected to "defend his actions" and explain to the Court what his actual functions were after his formal resignation as a director of the first respondent. He submits that unless or until an application is allowed to alter a particularised statement of charge, the accused is entitled to insist that he or she if only required to meet the charges made: CFMEU at par [32].
104 The statement of charge bringing the second alleged contempt was not a particularised statement of charge. Nevertheless it was, in accordance with authorities previously cited, required to distinctly state the charge so that it could be met. In my view there is no question that it did so. It alleged the second respondent "was at all material times a director of the first respondent". The word "director" must take its colour from the law. If the applicant is right that the actions of the second respondent were such as to constitute him a director of the first respondent at law, then that lies within the charge. It was not for the second respondent to come to the Court with his own preconception of what the word "director" conveyed. It was intended to convey and did convey all that can be encompassed within the word according to law.
105 Choice of competing inferences: It was also contended by the second respondent that the statement of charge and its use of the words "further or alternatively" in par 11 gives the Court a choice as to the charge against him and so cannot satisfy the standard proof beyond reasonable doubt because it presents the Court with a choice between competing inferences: Re Bramblevale Ltd [1970] 1 Ch 128 at 137. This is not the case; the Court is not presented with competing factual inferences. Rather, the Court is offered a number of ways, as a matter of construction, as to how the contempt may have been committed. The line of proof to the requisite standard is capable of being proved through any alternative provided that standard is not considered to be satisfied within any such alternative by reference to a choice between competing inferences (the criminal standard of proof always requiring that the person charged be given the benefit of the most favourable inference of the competing inferences).
106 Payment of wages in cash: The second respondent also contended for a construction of par 9 of the statement of charge whereby it is to be understood as charging that the wages were paid to staff of the first respondent in cash. However, par 9 was pressed as a charge of the taking of a proportion of wages (being the wages paid the staff of the first respondent) in cash. That is, as pressed the description "in cash" relates to the "taking" rather than to the "wages". It was this which was relied upon implicitly in the terms of the opening for the applicant. In my view that construction was clearly open so that the statement of charge as pressed sufficiently specified the contempt in the terms in which the charge was pressed.
"Cash back" purposive argument
107 The submissions for the second respondent next contend that he received "cash back" not to circumvent the order but to comply with it. He contends that knowing there was a prohibition in the orders on the making of cheques payable to cash, he arranged the payment of cheques, as the evidence disclosed, to staff with cash coming back to him to fund the first respondent.
108 One issue here is whether it is established beyond reasonable doubt that the second respondent made, arranged and received the cash withdrawals as described in par 9 of the orders and whether what occurred is properly considered to be a "cash withdrawal". His purpose, if established by the evidence, is irrelevant to that judgment. Purpose, if established, may be a matter for consideration in respect of sentencing if the second contempt is made out to the requisite standard.
109 The other issue is whether he received cash back as a "payment to a director". His purpose in so doing could be relevant to that argument and it is considered below.
Ambiguity in the orders
110 Next, it is submitted by the second respondent that the orders had two possible constructions so that breach of them cannot lead to conviction for contempt because they fail to specify with certainty the result to be achieved: Concrete Constructions Pty Ltd v Plumbers at 72 - 73; ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 259; Australian Competition and Consumer Commission v Hughes at par [18]; CFMEU v BHP at p 35, par [100]. The first construction which it is said the orders lent themselves to is that no cash could be withdrawn from the bank account of the first respondent. The second construction which it is said the orders lent themselves to was that cash could be withdrawn from the bank account of the first respondent provided it was used in the ordinary course of business and was not taken by either a cheque made payable to cash or a cash withdrawal (understanding the latter to mean a cash withdrawal from a bank). The second respondent claims to have understood the orders in this second sense (leaving aside whether the evidence establishes that). He further submits that the orders did not state that all expenses were to be paid by cheque, nor that the first respondent could not use cash for expenses.
111 In my opinion the ambiguity relied upon by the second respondent is not present in the terms of the orders. A plain reading of the first three orders shows that they restrained the making of:
(a) any withdrawals from any account held within any financial institution other than for expenses incurred by it in the ordinary course of its business to a limit of $5000; and
(b) any cash withdrawals or cheques payable to cash; or
(c) any payments to its directors or to any associated entities of the first respondent.
The restraint in (b) operated both in its own behalf and necessarily in respect of the restraints in (a) and (c). A cash withdrawal or cheque payable to cash made to satisfy matters within categories (a) or (c) would fall within the prohibition in (b). Consequently, none of the expenses incurred by it in the ordinary course of business were capable of being met by "cheques payable to cash". The resulting effect was that the orders required the first respondent to meet its expenses incurred in the ordinary course of business within the permitted limit by cheques payable to a specific debtor. (The evidence on the nature of the expenses does not support any inference that the orders so understood were impossible to comply with).
112 The second respondent's contention in this respect is therefore untenable. It is not what he claims he understood the orders to mean but what they in fact meant which forms the basis of the consideration of the charge relating to the second contempt.
Cash withdrawal
113 It is submitted for the second respondent that the fact that he did not personally go to the bank precludes the evidence satisfying to the requisite standard the description of "cash withdrawal". The second respondent submits (correctly) that there was evidence that a payee could cash a cheque bearing his or her name on the provision of acceptable identification so that they were not cashed by the second respondent. For reasons previously given in relation to the meaning of the words "made, arranged and received", I do not consider that this precludes the application of par 10 of the statement of charge.
114 It was also submitted for the applicant that the fact that more than one person and more than one step was involved in the transaction leading to the receipt by the second respondent of cash does not mean that there was not a "cash withdrawal". It follows also from the prior examination of the meaning of the words "made, arranged and received" that this submission is correct.
115 Next the second respondent contends that with the exception of Mr Mascall's evidence, the applicant has provided no evidence to show that any of the wages cheques were cashed or whether they were banked into the account of the payee with a portion being subsequently returned in cash to the second respondent. There is evidence that M/s Kingdon and M/s Rowcroft banked the cheques into each of their accounts. However, the charge is brought in terms of breach of the orders which requires application in particular of pars 9 and 10 of the orders in this respect. Although in the applicant's written submissions it was stated that the cash had been recovered by the second respondent from a proportion of the proceeds of such cheques "after they had been cashed at the first respondent's bank", it is no part of the statement of charge that the cheques had to have been cashed at that bank or that they had to have been cashed. What is in issue is whether the second respondent, contrary to the orders, "made, arranged and received" a proportion of wages paid to staff of the first respondent in cash. Whether that occurred as a consequence of the cheques being cashed or being first banked and then funding a cash withdrawal is not to the point provided there is the necessary nexus in the application of pars 9 and 10. Paragraph 10 refers to the making, arranging and receiving by the second respondent in relation to "the said withdrawals". That relates to the "cash withdrawals" referred to in par 9.
116 M/s Barr from the Commonwealth Bank gave the following evidence for the second respondent:
(i) A cheque made payable to a person is NOT a cheque made payable to cash;
(ii) A cheque made payable to a person does not ever become a cheque payable to cash;
(iii) A cheque made payable to a person does not ever become a cash withdrawal;
(iv) A cheque made payable to a person is neither a cash withdrawal nor a cheque made payable to cash;
(v) Even though it is possible to cash a cheque bearing a person's name, with the production of the appropriate identification, it is still not a cash withdrawal;
(vi) A cheque that has been cashed will still appear on a bank statement as a cheque with the appropriate cheque number;
(vii) Inspection of a bank statement will not indicate whether a cheque has been cashed, or processed through the normal banking system;
(viii) A cheque that has been cashed does not appear as a cash withdrawal.
M/s Barr also confirmed that the definition of a cash withdrawal was one that was made either by ATM or an over the counter withdrawal using a withdrawal slip, and not by cheque. However, it is submitted for the applicant that whether or not the arrangement is a "cash withdrawal" in bank parlance is irrelevant. I agree with this submission. The reason is that par 9 of the orders uses the description "cash withdrawals" to refer to the taking by the second respondent of a proportion of wages paid to staff of the first respondent in cash. Paragraph 9 gives its own meaning to the description "cash withdrawals" by relating it to the receipt of the proportion of staff wages in cash.
117 The second respondent also contends there was evidence that cash was spent on expenses of the first respondent after the making of the first of the orders and so was utilised to fund the day to day running expenses of the first respondent's business. However, the case for the applicant is correct when it submits that whether or not a cash withdrawal was made by the first and second respondents and so whether the orders were breached is a matter which falls for judgment regardless of the use to which the cash received by the second respondent (approximately $14,000) was put.
118 The second respondent also raised the explanation that cash given to him by employees of the first respondent was for the purpose of the normal business expenses of the first respondent. That submission is irrelevant if such cash was in any event paid to him in breach of the orders. For the applicant it is submitted the evidence does not support the claim that such cash was utilised in the ordinary course of the business of the first respondent. There is evidence that the second respondent advised M/s Kingdon and Mr Mascall that the cash back arrangement was to enable him to survive (although I accept the submission by the second respondent there is a surprising identicality in this evidence). He only partly challenged M/s Kingdon's evidence on this point and did not challenge Mr Mascall's evidence. M/s Corteen gave evidence that she gave money to the second respondent but had no idea what he did with it. In cross-examination it was only put to the second respondent that he used some of the money from staff to put into his own pocket, which he denied. No evidence was adduced concerning actual application of money received by him from staff. In these circumstances I do not consider the second respondent's explanation is negated. However, that does not appear to me to assist him on the issue of liability although it is a factor to take into account in sentencing. Nor does it mean there was no breach of the orders because the orders permitted use of certain funds in the ordinary course of business of the first respondent. That is because the orders did not permit case withdrawals for any purpose and limited such funds to $5,000.
119 Likewise, the second respondent's evidence that some of the cash received was given by the staff of the first respondent to the second respondent as a loan to the first respondent was negated by the evidence and by later contradiction of the second respondent himself.
Making or arranging by second respondent
120 The second respondent denies there is evidence which establishes he specifically directed staff to cash their wages at a particular branch.
121 I do not consider it is established beyond a reasonable doubt that the second respondent "specifically directed" staff of the first respondent to cash their wages cheques at a particular branch. M/s Kingdon's evidence was she had been told by the second respondent that his signature was on file at the Commonwealth Bank (St George's Terrace) and it would be easy to get the cheque cashed there because of that. Mr Mascall's evidence was that he had been told to go to that Bank and branch and get the cheque cashed. M/s Rowcroft's evidence accorded with that of M/s Kingdon.
122 It was also submitted for the applicant that the second respondent did not cross the wages cheques "not negotiable" as he intended the staff to cash the cheques. In my view the evidence establishes beyond a reasonable doubt that the usual practice of the second respondent was generally not to cross cheques "not negotiable". However, the evidence does not go so far as to establish the intention contended for. Nor do I think it is open to inference from the evidence, given the generality of his practice.
123 However, neither of the two preceding points is in my view material to the question whether the second respondent played a causative role in "making" or "arranging" the cash withdrawals by taking a proportion of wages paid to staff in cash. The reason is that the same evidence establishes that the second respondent told the staff members to repay him a certain amount in cash. It is established beyond reasonable doubt that the only reason the staff members paid to the second respondent in cash a proportion of wages received by them was because of his direction to do so.
Whether second respondent acted as servant, agent or otherwise for first respondent
124 In a letter to the Commonwealth Bank Belmont signed by Mr Williamson and Mr Tim Rae on behalf of the first respondent notice was given that the second respondent would no longer be employed by the first respondent from 31 December 2000. (The same letter confirmed the second respondent's removal as an authorised signatory for the first respondent).
125 The second respondent claims he was not employed by the first respondent from 28 December 2000. He claims after that date to have been acting in a caretaker role only, acting under instructions from the first respondent and receiving no remuneration. The case for the second respondent asserts that he was at the material time acting as a caretaker carrying out the wishes of Messrs Williamson and Kendrick. He maintains that was the position after 27 December 2000 when advice was received by the Commonwealth Bank that the second respondent was no longer employed by the first respondent.
126 In cross-examination the second respondent's evidence was that in January and February he was in contact with the first respondent's financial managers in connection with a package to rescue the company. This occurred on a daily basis. It put him in contact with Mr Kendrick of Barclay International Ltd.
127 In my opinion the applicant's case does not negate this explanation beyond reasonable doubt. Rather that case relies on the contention that the second respondent acted as a director of the first respondent (a matter considered below). I do not consider it is established the second respondent was at the material time a servant as an employee of the applicant.
128 On his own evidence, however, the second respondent acted on the instructions of directors of the first respondent. He was therefore an agent for it or otherwise acting on its behalf.
Whether second respondent received payments as a director or acting director of first respondent
129 The word "director" for the purposes of the Corporations Law is defined in s 9 as follows:
"director of a company or other body means:
(a) a person who:
(i) is appointed to the position of a director; or
(ii) is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position; and
(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body."
The relevant paragraph for the present charge is that contained in (b)(i).
130 In Natcomp Technology Australia Pty Ltd v Graiche (2001) 19 ACLC 1117 at 1119. Stein JA relied upon the decision of Madgwick J in Deputy Commissioner of Taxation v Austin (1998) 16 ACLC 1555; (1998) 28 ACSR 565 where he discussed the conduct and circumstances which may be considered when determining whether a person's actions fall within the definition of director which then appeared in s 60(1)(a) or (b) of the Corporations Law. That included a provision that a "director" included a reference to "a person occupying or acting in the position of a director of the body, by whatever name called and whether or not validly appointed to occupy, or duly authorised to act in, the position". Those words do not seem to me to raise issues materially different to those in the above cited present definitions. The reasons of Stein JA was the subject of agreement from Spigelman CJ and Heydon JJA.
131 In Austin's case as cited in Natcomp, Madgwick J said:
"Thus it seems to be a necessary condition of acting as a director, whether properly appointed or not, that one exercises what might be called the actual (and statutorily extended) top level of management functions. However, that is not necessarily a sufficient condition for such a conclusion, nor is it the same as saying that one must do things which only a director can do.
If, in the case of a small company, a person has, with full discretion, "acted as the company" in relation to matters of great importance to the company, and other than as an arms' length expert engaged for a limited purpose, the conclusion that that person has acted in the capacity of a director may well be justified. The extent to which and the circumstances in which the person has so acted will nevertheless be of importance.
The variety of commercial and corporate life is such that it seems to me unprofitable to attempt a general statement as to what is meant by "acting as a director". Whether a person does so act will often be a question of degree, and requires a consideration of the duties performed by that person in the context of the operations and circumstances of the particular company concerned. I have, for example, referred to the circumstance of the size of the company. In a large and diversified company, great discretion to deal with very important matters must be reposed in employees. In the case of a supermarket chain... it would hardly occur to anyone to suggest that a managerial employee held to have `acted as the company' in breaking a consumer protection law at a particular store was acting as a director of the vast company concerned. As suggested above, in the case of a single person making decisions for a company the business of which was confined to the operation of a corner store, a different view might be taken...
Another relevant factor may be how the person who is claimed to have acted as a director was reasonably perceived by outsiders who deal with the company. This may aid a conclusion that the supposed director has held himself or herself out as such. Express holding-out was treated as a relevant factor in the Re Valleys case [Re Valleys Rugby League Football Club Ltd [1997] 2 Qd R 645] and, with respect, this appears obviously correct. However, an express claim to be a director may, in some cases, be carefully not made. That would not prevent a conclusion, nevertheless, that a person's dealings with third parties point to his or her having acted as a director. [at ACLC 1,559; ACSR 570]"
132 Turning to the applicant's case on the factors said to have made the second respondent a de facto director (as previously set out in par [88]), the following matters arise.
Re (a)(i): Examination of the evidence establishes beyond a reasonable doubt only that the second respondent was in contact with Mr Kendrick with a view to being informed concerning development of a financial package being investigated through Mr Williamson and Mr Timothy Rae.
Re (a)(ii) It is established beyond a reasonable doubt that the second respondent conveyed instructions on and before 29 December 2000 to the solicitors on behalf of the first respondent. It was found in reasons delivered on 14 August 2001 by White J in Patrick Walker that an affidavit sworn by the second respondent, apparently on 18 February 2001 and filed in the Federal Court, disclosed that he was then acting for the first respondent in giving instructions to the first respondent's solicitors in connection with the proceedings in the Federal Court. The second respondent maintained that the instructions given to the solicitors by him were at the express request and under the authority of Mr Williamson and Mr Kendrick. He did not bring evidence to support that contention. It is negated by the evidence relied on for the applicant.
Re (a)(iii): The second respondent accepts that he had discussions with the solicitor for the first respondent concerning the financial viability of the first respondent. However he contends that occurred in early December 2000 when he was still a director of the first respondent and that, consistently with his evidence elsewhere, occurred under the instructions of Mr Williamson and Mr Kendrick.
Re (b): M/s Kingdon and Mr Mascall's evidence was that the second respondent appeared to them to be responsible for the day to day operation of the business of the first respondent. The second respondent raises the issue of what it was these witnesses comprehended by the description "the day to day running of the business". That is not explained by the applicant's case. Likewise the second respondent raises in defence the issue that even if he was involved in the day to day running of the business, he was not involved in top level management functions. That is un-negated but is not necessarily decisive. The second respondent's case is that from January onwards he basically had the role of de facto office manager and the question is whether that is negated.
Re (c)(i) and (ii): The evidence establishes and the second respondent accepts that he was responsible for change in the content of the first respondent's website and has maintained it since the first respondent's closure of business.
Re (c)(iii): The evidence establishes that the second respondent paid the monthly fee on the first respondent's website.
Re (c)(iv): The evidence establishes that the second respondent paid the monthly bill for storage of the first respondent's office contents.
Re (c)(v): The evidence establishes that the second respondent paid for company expenses on his personal credit card from August 2000 to early January 2001.
Re (c)(vi): It is established that the second respondent paid some of the first respondent's business expenses out of his own personal funds but not at the material dates.
Re (c)(vii): The evidence establishes that the second respondent maintained records of wages paid to employees of the first respondent.
133 I do not consider that the facts as found in relation to the above paragraphs establish beyond a reasonable doubt that the second respondent was acting as a director of the first respondent. The actions are as consistent with the second respondent's explanation given in defence as they are with the applicant's case that he was a director. There remains par (d).
Re (d): Here reliance is placed on the second respondent representing himself as a "non-shareholding director". He did so in his affidavit sworn 1 June 2001 where he deposed:
"2. On December 28th 2000, I effectively resigned from the first respondent, via an email to shareholding Director Mr. Johnson Williamson. This resignation was at Mr. Williamson's request. …
3. This resignation was confirmed by the standard form sent by Mr. Williamson to ASIC dated 16th January 2001. …
4. On 22nd February, I received notification from ASIC that I could not be removed as Director due to the corporation's law stating that a company must have at least one director who resides in Australia. …"
Copies of the documents described were annexed.
134 In Patrick Walker, Commissioner of Fair Trading v Info4pc.com Pty Ltd [2001] WASC 212 White J found as follows:
"On or about 16 January 2001, Williamson sent a notice to the Australian Securities & Investments Commission ("ASIC") recording that the second respondent ceased to hold office as a director of the first respondent as from 13 January 2001, a copy of which notice was sent to the second respondent and is annexed to one of his affidavits date 4 May 2001. Subsequently, on 22 February 2001, ASIC wrote to first respondent returning the form on the grounds that it had not been properly completed and pointing out that a proprietary company must have at least one director who resides in Australia.
The second respondent may well have believed that he was no longer a director of the first respondent during the period between 16 January and 22 February 2001. The fact is that he was a director during the relevant period."
The finding of White J on the issue of the second respondent being a director cannot have binding effect here as issue estoppel is not applicable in criminal proceedings: Rogers v R (1994) 181 CLR 251 at 254 per Mason CJ.
135 However, in par 3 of his affidavit immediately above the second respondent sets out he could not be removed as a director in January 2001. This is the foundation of the reasoning of White J. There is therefore no reason why that reasoning should not be equally applicable in this proceeding - not because it has any binding effect but rather because, being evidence in this proceeding, it states the correct legal effect of the circumstances relied upon by the second respondent.
136 I therefore find that at the relevant dates the second respondent was a director of the first respondent.
Finding
137 I therefore consider the case brought on behalf of the applicant in respect of the second alleged contempt negates the explanations raised by the second respondent and is established against the first respondent beyond a reasonable doubt. The charge is made out both in respect of the first respondent acting through the second respondent as agent or otherwise in making cash withdrawals and additionally in making payments to a director, namely the second respondent as a director. The second respondent in these circumstances is also a contemnor in respect of the second contempt on the basis of his accessorial or independent breach of the orders in accordance with the authorities previously referred to.