Australian Investments & Securities Commission v Eagle Inter-Link Pty Ltd

REASONS FOR JUDGMENT 1 There is before the Court an amended notice of motion by the Australian Securities and Investments Commission (ASIC) seeking orders that the fifth respondent, Jakob Hans Jost, be punished for contempt of court for breaching an order of Finkelstein J made on 13 May 1999, as amended by orders of his Honour made on 17 December 1999. By those orders Mr Jost, by his servants, agents or otherwise, was restrained from inviting or receiving any investment in certain land on Flinders Island. 2 The statement of charge provides the following particulars: "Between 29 February 2003 and March 2000 Mr Jost - (1) invited Mr Norman Connor ("Connor"), through telephone conversations, to invest money in the land; and (2) further, Jost faxed Connor a document entitled "Flow Chart of Proposed Purchase & Settlement" which set out a proposal, on behalf of the Lady Barron Co-operative Society Ltd, to put a written offer of $195,000 by Friday 3 March 2000 to Sims Lockwood, the liquidator who was selling the land." 3 Mr Jost has pleaded guilty to this charge. ASIC and Mr Jost have submitted an agreed statement of facts to the Court. The original order of 6 May 1999 was made ex parte. It was served personally on Mr Jost on the following day together with associated documents and also a letter which included the following: "These orders are in relation to serious matters and any breach of these orders could lead to a contempt of the Federal Court of Australia. These orders have been sought by the ASIC because they are serious allegations that all the named respondents have breached the sections of the Corporations Law and the ASC Law referred to in the Application." 4 At a further hearing on 13 May 1999 Mr Jost appeared on his own behalf. After explaining the proceedings to him and hearing from him, Finkelstein J continued the restraining order until further order. Again on 6 August 1999 Mr Jost appeared on his own behalf and Finkelstein J ordered that Federal Court proceedings against him be set down for trial on 25 October 1999. However, that trial date was subsequently vacated pending the outcome of related criminal proceedings. 5 Mr Jost was charged on 28 April 1999 with 56 counts of obtaining property by deception contrary to s 81(1) of the Crimes Act 1958 (Vic), two counts of obtaining financial advantage by deception contrary to s 81(1), one count of fraudulently inducing investment contrary to s 191(1) and one count of carrying on banking business contrary to s 7 of the Banking Act 1959 (Cth). 6 After a two-month trial in the County Court of Victoria, Mr Jost was on 26 March 2001 convicted of 47 counts of obtaining property by deception and the banking charge. He was sentenced to a total of four and a half years' imprisonment with a minimum of three years. An appeal to the Court of Appeal was recently dismissed. The criminal proceedings have delayed the resolution of the present contempt proceedings. 7 In the meantime, on 10 December 1999 a winding-up order was made in respect of the first to fourth respondents which were companies controlled by Mr Jost. Those companies held title to the Flinders Island land. 8 In February 2000 Mr Jost made an approach to the liquidator of the companies and said that he had investors willing to pay $195,000 for the land and that there were also other potential investors from overseas. On 3 March 2000 Mr Jost delivered to the liquidator a written offer for $195,000 for the land on behalf of Lady Barron Co-operative Society Ltd. The letter stated they were a group of approximately 10 investors in the previous scheme who were involved in the proposed purchase. The previous scheme had given rise to the convictions of Mr Jost already referred to. 9 The events giving rise to the present contempt charge were as follows. On 29 February 2000 Mr Norman Connor was telephoned by a Mr Eugen Strasser who introduced himself as a friend of Mr Jost. Mr Strasser told Mr Connor that there was a scheme to purchase some property on Flinders Island and that eight investors were putting in between $1000 and $5000 each to bid for the property. Mr Strasser told Mr Connor that he could ring Mr Jost direct but Mr Jost was not allowed to contact any investors, so that was why he, Mr Strasser, was telephoning instead. Mr Connor telephoned Mr Jost and left a message. 10 Later that evening Mr Jost's wife telephoned back. She said that Mr Jost was not allowed to telephone but he would like to speak to Mr Connor. Mr Jost then came onto the line. Mr Jost said he would be making an offer to the liquidator to purchase the property at Flinders Island. Mr Jost said he would be the caretaker on the property and that he would "work like a bear" to get the investors' money back. 11 Mr Connor, after speaking to officers at the Major Fraud Group, telephoned Mr Jost back again on 1 March 2000. Mr Jost answered some questions. He told Mr Connor that everyone, including his wife, was going to put in $5000 for a deposit but that he, Mr Jost, was not allowed to invest. Mr Jost said that there would be set up a co-operative registered in Tasmania, because it was a Tasmanian project, and that they would obtain a mortgage to purchase the property. The idea was to keep the property for between two and eight years and get the money back for investors. Mr Jost said that he did not intend to get any money out of it; he saw it as "an emotional thing" that he wanted to for investors. He thought that when the buildings were finished the property would be worth $1.5 million. He offered to fax Mr Connor the details on the documents. Mr Connor arranged to receive the fax at a shopping centre. 12 The fax was duly sent. It consisted of 11 pages and a nine-page information memorandum from Sims Lockwood setting out details of the land and a one-page flow chart of proposed purchase and settlement, based on the offer of $195,000. After receiving the fax, Mr Connor telephoned Mr Jost again and asked about his original investment of $140,000. Mr Jost told him that the only way to get his money back was to invest in the new co-operative and that the old investors would not get their money back if they did not invest again. Mr Jost said that the value of the property would be elevated over a period of time. 13 These conversations came to the notice of the authorities and proceedings were taken against Mr Jost for breach of one of the conditions of his bail, which prohibited him from approaching the original investors. He was arrested and spent eight days on remand. 14 Where a litigant fails to comply with an order made by the court in a civil proceeding, he is guilty of contempt of court. Ordinarily it is a civil contempt. However, the circumstances may be such that what was a civil contempt becomes a criminal contempt: see Witham v Holloway (1995) 183 CLR 525 at 530. In National Australia Bank Ltd v Juric [2001] VSC 375, Gillard J of the Victorian Supreme Court was dealing with an application for contempt. His Honour held on the facts of that case at [163] that the defendant "disobeyed the injunction in a deliberately defiant and intentional way, and was acting contumaciously" and that in his Honour's view there had been a criminal contempt. 15 In my opinion, the same can be said of the conduct in the present case. There has been a criminal contempt. There is no doubt, on the agreed statement of facts, that the substance of Finkelstein J's order was clearly conveyed on several occasions to Mr Jost. His conduct displayed a calculated attempt to evade the terms of the order by a subterfuge involving Mr Strasser and Mrs Jost. It was also a cynical attempt to gain financial advantage from people who, it seems, had already suffered. Mr Connor, I might add, is 75 years old. 16 Counsel on behalf of Mr Jost advanced a number of personal factors. He is now aged 65. He was born in Stuttgart, Germany, and came to Australia with his wife and four children in 1971. He now has five children and 10 grandchildren. He carried on business mainly as a restaurateur and was a successful chef. It appears he is now estranged from his wife, although there may be some possibility of reconciliation. It is a sad reality that when he is due for release from jail on his current term in March 2004 he will be a man in his late 60s with no assets and still owing some $7000 fine in relation to the County Court convictions. 17 It was put that the eight days he has spent in remand were in some ways a punishment for the same conduct that has constituted a contempt of this court. 18 While these personal considerations excite some sympathy, and mitigate what would otherwise be a more substantial penalty, nevertheless the serious and deliberate nature of the contempt make a term of imprisonment unavoidable if the authority of this Court is to be maintained. I order that Mr Jost be convicted of contempt of court and sentenced to one month's imprisonment, that term to be served at the completion of his current term. ASIC did not seek costs. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.