Australian Securities and Investments Commission v One Tech Media Limited

Introduction 1 These reasons for judgment deal with the issues of penalties and costs in respect of admitted contempts of court. The issue of liability was dealt with in earlier reasons, published on 19 July 2018: Australian Securities and Investments Commission v One Tech Media Limited (No 3) [2018] FCA 1071 (the Liability Reasons). These reasons should be read together with the Liability Reasons. I adopt the abbreviations used in the Liability Reasons. 2 As set out in the Liability Reasons, on 1 May 2017, ASIC filed an interlocutory application alleging contempt of court against five of the defendants to the proceeding, namely Allianz, Eustace, Transcomm, Bianco and Cameron. 3 ASIC subsequently filed, with leave, an amended interlocutory application dated 18 December 2017 (referred to as the "contempt application") and an amended statement of charge dated 18 December 2017 (referred to as the "amended statement of charge"). 4 In March 2018, ASIC and the five defendants referred to above reached an agreed position in relation to the contempt application. In summary, Eustace, Transcomm and Cameron admitted that they were guilty of contempt of court as set out in a number of the charges in the amended statement of charge. In relation to Allianz and Bianco, ASIC agreed, in effect, to withdraw the charges against them. Two statements of agreed facts were prepared. These were annexed to the Liability Reasons. The first related to the position of Allianz, Eustace and Transcomm. The second related to the position of Bianco and Cameron. 5 In the Liability Reasons, I concluded that there was a proper basis to make declarations and orders substantially in the terms proposed by ASIC and the five defendants as regards liability for contempt. Accordingly, the following declarations were made on 19 July 2018: 1. The Fourth defendant (Eustace Senese) is guilty of contempt as alleged in charges A6, A15, A24, A33, A42, A51, A72, A78, A80, A82, A84, A86, A88, A90, A92, A94, A96, A98, A100, A102, A104, A106 and A108 as set out in the plaintiff's amended statement of charge dated 18 December 2017 (the amended statement of charge). 2. The sixth defendant (Transcomm) is guilty of contempt as alleged in charges F2, F5, F8, F11, and F14 as set out in the amended statement of charge. 3. The ninth defendant (Cameron Senese) is guilty of contempt as alleged in the following charges set out in the amended statement of charge: (a) charges A9, A18, A27, A36, A45 and A54; (b) charges B109 to B162, B509 to B600; (c) charges C11 to C15; (d) charges D251 to D375, D720 to D891; and (e) charge F1. 6 In addition, the following orders were made by consent: 4. All other charges against Eustace Senese, Transcomm and Cameron Senese be dismissed. 5. The plaintiff's amended interlocutory application dated 18 December 2017 (the contempt application) as against the third defendant (Allianz) and all charges against Allianz be dismissed. 6. The contempt application as against the eighth defendant (Bianco) and all charges against Bianco be dismissed. 7. The costs as between the plaintiff and Allianz, Eustace Senese, Transcomm, Bianco and Cameron Senese be reserved. 8. The matter be listed for a hearing on penalties and costs on a date to be fixed. 7 It is now necessary to consider penalties and costs. In relation to penalties, Eustace, Transcomm and Cameron propose that the following penalties be imposed: (a) Eustace - a fine of $40,000 in respect of the contempts of court described in paragraph 1 of the declarations; (b) Transcomm - a fine of $10,000 in respect of the contempts of court described in paragraph 2 of the declarations; and (c) Cameron - the following fines: (i) a fine of $5,000 in respect of the contempts of court described in paragraphs 3(a) and 3(e) of the declarations; and (ii) a fine of $5,000 in respect of the contempts of court described in paragraphs 3(b), 3(c) and 3(d) of the declarations. 8 ASIC does not make submissions as to the amount of the penalties. 9 In relation to costs, it is agreed between the parties that orders should be made to the effect that: (a) Eustace pay ASIC's costs of the contempt application fixed at $17,500; (b) Cameron pay ASIC's costs of the contempt application fixed at $10,000; and (c) there be no order as to costs in respect of the contempt application as between ASIC and Allianz, Transcomm and Bianco. 10 For the reasons that follow, I consider it appropriate to impose the fines proposed by Eustace, Transcomm and Cameron. I will also make the costs orders that have been agreed between the parties.

Consideration 11 The parties have filed a joint submission in relation to the legal principles regarding penalties for contempt. They submit that, while it is settled that contempt proceedings are civil proceedings and not criminal proceedings (Hinch v Attorney-General (Vic) (1987) 164 CLR 15 at 89-90; Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375 (Boral) at [40]), there is no direct authority on whether the principles in Barbaro v The Queen (2014) 253 CLR 58 apply to civil contempt proceedings. (In Barbaro, the High Court held that the practice adopted in the Victorian courts (when sentencing criminal offenders) of asking counsel for the prosecution for a submission on the "available range" of sentences was wrong in principle (see, eg, at [6]-[7], [20]-[23]).) The parties' joint submission refers to the judgment of the Full Court of this Court in Kazal v Thunder Studios Inc (California) (2017) 256 FCR 90 (Kazal) at [159]. It is submitted that Kazal is arguably distinguishable from the present case because it was a case of criminal contempt. 12 The parties submit that, viewed as a matter of principle, it is difficult to discern a clear answer to the question whether the Court should receive submissions on an appropriate penalty amount from the applicant in a case of civil contempt; and that, if it depends on the nature of the proceeding - whether and to what extent it is criminal - there are considerations both ways, referring to Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [51]-[53] and Boral at [65]. The parties also submit that, if the touchstone is the possibility of a criminal conviction, it may be arguable that, if or when that possibility is removed in a contempt application, the Court may proceed to receive submissions from the applicant on an appropriate penalty amount. Although that position has been reached in the present case, the parties consider that the position remains too unclear for them to submit with any certainty that the Court may so proceed in the present case. Accordingly, ASIC does not make submissions on the appropriate amount of the penalties. It is unnecessary, for the purposes of this judgment, to resolve this issue. 13 The applicable principles in determining the appropriate penalty for contempt are set out in (among other cases): Louis Vuitton Malletier SA v Design Elegance Pty Ltd (2006) 149 FCR 494 at [25]; Australian Competition and Consumer Commission v World Netsafe Pty Ltd (2003) 133 FCR 279 at [16]; Australian Securities and Investments Commission v Michalik (2004) 52 ACSR 115 at [29]; and Kazal at [101]-[103]. In Michalik, Palmer J summarised the following relevant factors at [29]: For present purposes the relevant factors to be considered may be summarised thus: (i) the seriousness of the contempt proved; (ii) whether the contemnor was aware of the consequences to himself of what he proposed to do; (iii) the actual or potential consequences of the contempt on the proceedings in which the contempt was committed; (iv) whether the contempt was committed in the context of a proceeding alleging crime or conduct seriously prejudicial to the public interest: see, for example, Von Doussa v Owens (No 3) (1982) 31 SASR 116; (v) the reason or motive for the contempt; (vi) whether the contemnor has received, or sought to receive, a benefit or gain from the contempt; (vii) whether there has been any expression of genuine contrition by the contemnor; (viii) the character and antecedents of the contemnor; (ix) what punishment is required to deter the contemnor and others of like mind from similar disobedience to the orders of the court; (x) what punishment is required to express the court's denunciation of the contempt. 14 The facts and circumstances are summarised in the Liability Reasons and set out in more detail in the statements of agreed facts annexed to those reasons. Applying the considerations set out above to those facts and circumstances, I consider the penalties proposed by Eustace, Transcomm and Cameron to be appropriate. 15 The contempts by Eustace, Cameron and Transcomm occurred in circumstances where bank accounts belonging to, or operated by, them had been frozen. The 3 August 2016 orders (and subsequent orders to the same effect) were made under ss 1323 and 1324 of the Corporations Act 2001 (Cth) to preserve funds paid by persons who had invested in binary options on a website that ASIC alleges was operated by the first and second defendants. ASIC alleges that offering these investments involved various contraventions of the law that might entitle investors to recover money they had invested. Almost all of the funds frozen under the orders have been expended pursuant to carve out orders made in favour of Eustace and Cameron. 16 The contempts by Eustace, Cameron and Transcomm had the effect of depleting the frozen accounts. Had the relevant defendants disclosed to the Court as soon as the Edge Premium Funding Loan Agreement was made that they had access to funds other than from the frozen accounts, the Court may not have allowed carve outs from the frozen accounts in their favour. 17 Eustace drew down on the Edge Premium Funding Loan Agreement in order to pay for living expenses such as his home loan with Pepper Group Limited. He did so in circumstances where he also received monthly carve outs of $15,000 and further carve outs for legal expenses. Eustace expended approximately $128,000 pursuant to carve outs in his favour. 18 The contempts of which Eustace has been found guilty involved substantial drawdowns of money, as set out in [18]-[60] of Annexure A to the Liability Reasons. It is common ground, and I accept, that the contempts constitute one course of conduct. 19 Mitigating factors are Eustace's pleas of guilt and his apology. Also relevant are his personal and financial circumstances, which are set out in [72]-[84] of Annexure A to the Liability Reasons. Eustace has not previously been charged with, or found guilty of, contempt. 20 In relation to Cameron, despite the existence of the freezing orders, Cameron opened two new bank accounts with Ubank (a division of National Australia Bank), continued to receive his monthly salary of $15,000 into the Ubank accounts and paid for living expenses from the Ubank accounts. He did so in circumstances where he was also entitled to receive monthly carve outs of $12,000 and further carve outs for legal expenses. Cameron did not disclose the existence of the Ubank accounts or his continued monthly salary until his section 19 examination held on 21 December 2017. This was despite a request by ASIC on 10 November 2016 for an update as to his financial position. 21 The contempts of which Cameron has been found guilty involved receipt of funds into his Ubank accounts, and payment of expenses from his Ubank accounts, as set out in [16]-[44] of Annexure B to the Liability Reasons. It is common ground, and I accept, that the contempts involved two courses of conduct: see [67] of Annexure B to the Liability Reasons. 22 Cameron's position is different to Eustace's in that Cameron only drew on the frozen accounts for living expenses in the amount of approximately $4,230 (as he was entitled to do pursuant to the carve outs). He also drew approximately $27,211 pursuant to carve outs for legal expenses. Cameron relied on the amounts coming into his Ubank accounts for living expenses. Therefore, although Cameron committed more individual instances of contempt, the effect of the contempts is less serious than those committed by Eustace, because he did not deplete the frozen funds to the extent that Eustace did. 23 The pleas of guilt and the apology on Cameron's part are mitigating factors. It is also relevant to take into account Cameron's personal and financial circumstances, which are dealt with in [53]-[63] of Annexure B to the Liability Reasons. Cameron has not previously been charged with, or found guilty of, contempt. 24 The five instances of contempt committed by Transcomm relate to the payment of legal fees in excess of the amount permitted by the Court's orders. It is common ground, and I accept, that the five contempts form part of a single course of conduct. 25 A mitigating factor in respect of each act of contempt was that it did not result from a direct action by Transcomm. In each case, it was the direct action of the solicitors in withdrawing funds from their trust account that caused Transcomm to commit the contempt, although Transcomm had authorised the solicitors to do this. 26 Taking these facts and circumstances into account, I consider the penalties proposed by Eustace, Transcomm and Cameron, as set out in [7] above, to be appropriate. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

SCHEDULE OF PARTIES VID 848 of 2016 Defendants Fourth Defendant: EUSTACE SENESE Fifth Defendant: SANSEN PTY LTD (ACN 111 816 178) Sixth Defendant: TRANSCOMM GLOBAL PTY LTD (ACN 169 503 762) Seventh Defendant: SANDRA SENESE Eighth Defendant: BIANCO PTY LTD (ACN 604 778 305) Ninth Defendant: CAMERON DAVID SENESE Tenth Defendant: IMC HOLDINGS PTY LTD (ACN 138 145 291) Eleventh Defendant: YOAV IDA Twelfth Defendant: WESTPAC BANKING CORPORATION (ABN 33 007 457 141) Thirteenth Defendant: NATIONAL AUSTRALIA BANK LIMITED (ABN 12 004 044 937) Fourteenth Defendant: BENDIGO AND ADELAIDE BANK LIMITED (ABN 11 068 049 178) Fifteenth Defendant: COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) Sixteenth Defendant: CITIGROUP PTY LIMITED (ABN 88 004 325 080)