Aztech Science Pty Ltd v Atlanta Aerospace [2008] NSWSC 908 | Case summary

2187/03 AZTECH SCIENCE PTY LTD v ATLANTA AEROSPACE (WOY WOY) PTY LTD & ANOR JUDGMENT 1 HIS HONOUR: The matters to be traversed in this judgment demonstrate very unsatisfactory aspects of the law of contempt of court and proceedings consequent upon it as things stand in New South Wales at the present time. 2 The central source of the unsatisfactoriness is the difficulty as to whether contempt proceedings are to be characterised as civil or criminal. This (or aspects of it) has been passed upon by the High Court in various decisions. These include Hinch v The Attorney General of the State of Victoria (1987) 164 CLR 15; Witham v Holloway (1995) 183 CLR 525 and Hearne v Street [2008] HCA 36. 3 The High Court undoubtedly decided in Witham that, because all proceedings for contempt, whether for civil or criminal contempt, must realistically be seen as criminal in nature, all charges of contempt must be proved beyond reasonable doubt. There can be no doubt that at least that incident of criminal proceedings attaches to all proceedings for contempt. 4 However, in the recent decision of Hearne v Street the High Court conceded that, at least in New South Wales, there must remain the possibility of contempt proceedings being characterised for some purposes as criminal and for other purposes as civil. This flows from the wording of s 101(6) of the Supreme Court Act 1970 ("the SCA"), which is as follows: "(6) Subsection (5) does not confer on any person a right to appeal from a judgment or order of the Court in a Division in any proceedings that relate to criminal contempt, being a judgment or order by which the person charged with contempt is found not to have committed contempt." 5 On behalf of the second defendant in these proceedings it is argued that what is said in Hearne v Street applies to proceedings only for the limited purpose of determining their nature for the purposes of instituting an appeal, as to whether the appeal should go in the direction of an appeal in civil proceedings or in the direction of an appeal in criminal proceedings. 6 On the other hand, the plaintiff argued that, if proceedings generally fall within the test of civil proceedings for contempt, then that characterisation will apply to all aspects of the proceedings except for the question of the quantum of proof, which the High Court has held in Witham to be to the criminal standard, whatever way the proceedings may otherwise be characterised. 7 In the New South Wales Court of Appeal, from which the appeal went to the High Court in Hearne v Street, it was accepted that some contempt proceedings may be criminal and some may be civil. The distinction between the two ways in which contempt proceedings may be characterised was laid down as follows by Ipp JA in Street v Hearne [2007] NSWCA 113 at [59]: "In my opinion, the Microsoft test is apt. Nevertheless, I would, with respect, add a qualification. In applying that test in a case where the punishment is for wilful disobedience unaccompanied by defiance, due regard must be had to the fact that (as the majority in Mudginberri observed at 108) classification of the contempt proceedings is a more complex and artificial undertaking. In the latter category of case, when attempting to determine the 'substance' of the proceedings, due account must be taken of the following considerations: (a) Notwithstanding that proceedings are brought by an individual to secure the benefit of an order or undertaking, the contempt that arises may be criminal. (b) A breach of an injunctive order or an undertaking that is contumacious in the broad sense involves deliberate defiance, and a breach that is contumacious in the broad sense will be regarded as criminal. (c) Generally, however (and I understand this to mean prima facie), a breach of an injunctive order or an undertaking that is wilful but not contumacious in the broad sense - and is not merely casual, accidental or unintentional - is regarded as a civil contempt (this being the traditional distinction between civil and criminal contempt which still has significance). (d) The fact that the application for an order that contempt has been committed is made within the main action, and not by a stranger to the suit, would tend to show that the contempt is civil in nature. (e) A finding of contempt that is likely to be coercive in regard to the defendant's future conduct would tend to show that the contempt is civil in nature. (f) A breach of an order in civil proceedings may not be a civil contempt where the circumstances are such that the breach cannot be remedied. (g) The competency of the appeal be decided by classifying the contempt proceedings at the time they were instructed [sic]." 8 The High Court, on the appeal, declined to proceed on the basis that all contempt proceedings are criminal for all purposes or to pass upon whether or not those propositions of Ipp JA were correct: Hearne v Street at [131], [132]. I intend, therefore, to take Ipp JA's propositions as correctly stating the law for the purpose of determining these proceedings. 9 As well as the law being convoluted, these proceedings are themselves somewhat convoluted. 10 On 14 September 2006 Barrett J granted injunctive relief against both defendants in the proceedings in terms including the following: "(3) Orders that each of the defendants or either of them by themselves their servants and agents deliver up to the plaintiff the intellectual property forthwith.

It is to be noted that that notice of motion contains no specific prayer seeking against the second defendant that he be imprisoned, fined, have his property sequestrated or be otherwise punished as a result of the contempt of court alleged. This means that r 40.7 is not invoked. 14 There were rather inconclusive proceedings on 7 December 2007 when the parties' representatives were shuttled between Senior Deputy Registrar Musgrave and White J for the purpose of obtaining a date for the hearing of the motion. In the end, Registrar Musgrave indicated that a hearing date between 7 and 11 April 2008 was likely, but that the date would be notified to counsel for the respective parties. The matter was ultimately fixed for 11 April 2008. It would seem on the evidence that this date was never communicated to counsel. 15 The second defendant's counsel appeared before Gzell J on 11 April 2008, but the plaintiff did not appear. The evidence does not disclose how it is that the second defendant's counsel knew of the listing of the matter on that day. The evidence does show that the plaintiff's counsel and solicitor were unaware of the listing on that day. The result of the non appearance of the plaintiff was that on that day Gzell J dismissed the plaintiff's notice of motion and ordered the plaintiff to pay the second defendant's costs of the motion. 16 The plaintiff now moves under a notice of motion filed 1 May 2008 to set aside Gzell J's orders. The prayer in the motion contained reference to r 36.15 of the UCPR relating to the setting aside of judgments or orders made irregularly, illegally or against good faith. This does not appear apposite to the present application and was not relied on before me. The motion was first moved before me today under r 36.16(2)(b) on the basis that it had been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing. The second defendant responded that, as these proceedings were to be characterised as criminal proceedings, in his submission, that rule in the UCPR did not apply and was not available to the plaintiff. 17 The plaintiff thereupon alternatively based its submission on the common law rules relating to the setting aside of judgments and orders, whether civil or criminal, when given or made in the absence of a party who had no notice of the proceedings referred to authorities to support the Court's power to set aside such judgments ex debito justitiae contained in cases such as Cameron v Cole (1944) 68 CLR 571 and Taylor v Taylor (1979) 143 CLR 1. 18 It seems to me that much the relevant considerations will be much the same whether the proceedings are to be regarded as civil proceedings, so that the UCPR apply, or criminal proceedings, so that the common law applies. 19 It is clear on the evidence that the plaintiff was not present at the hearing. I accept on the evidence that the plaintiff's representatives and the plaintiff were unaware that the matter was before the Court on that day. 20 The second defendant submits that, even so, the dismissal of the plaintiff's application for a declaration of contempt ought not be set aside because the setting aside would be futile, as the motion cannot in any event succeed. He claims that the injunctions are ambiguous and would not be enforced for that reason. He relies upon the fact that the Statement of Charge was not subscribed to or filed with the motion for contempt as required by Part 55 r 7 of the Supreme Court Rules 1970. He says that it is not sufficiently clear that the orders were communicated to the second defendant in the manner prescribed or sufficiently or at all for his non compliance to amount to a contempt of court. He says that, as the proceedings, are criminal proceedings the deficiency in relation to the Statement of Charge could not be remedied, as it may be able to be remedied if the proceedings are civil proceedings. Even if the proceedings are civil proceedings, the second defendant would argue that this lapse should not be forgiven in this case in any event. 21 Mr Lovas, of counsel for the second defendant, has put with a great deal of force the obstacles that lie in the way of the plaintiff succeeding on the motion if it be reinstated. However, it seems to me that all of these matters are arguable and it is not at all clear to me that the motion would be futile if reinstated. Since it is not clear that it would be futile, I am not inclined to proceed to the decision of these various points, which are not necessarily easy, upon the hearing of an application such as the present. 22 It does seem to me that, whichever body of law is to be applied to the setting aside of Gzell J's order for dismissal, the fact is that the application was disposed of in the plaintiff's absence without its fault and without it having the opportunity to contest, in a properly prepared way, any of these contentions. In the circumstances, it seems to me that whether the proceedings be characterised as criminal or civil the appropriate course is for me to set aside Gzell J's orders. 23 Whilst it has not been necessary for me to determine for the purpose of the setting aside of the orders, whether the proceedings are to be characterised as civil or criminal, it is necessary for me to make a determination on that matter for another purpose. 24 I inquired whether there had been a mediation between the parties on what ought occur about the injunctive orders being put into force and about what should occur between the parties in relation to the intellectual property. 25 Mr Doherty, the plaintiff's solicitor, gave evidence that there had been negotiations in recent weeks between the parties and that there did seem to him to be some prospect of agreement being reached. Adding this to my own general inclination to refer contested matters to mediation, I announced that I was minded to do so. 26 Mr Lovas raised the objection, consistently with his submission generally that the proceedings were criminal proceedings, that I could not do so because the power for compulsory reference to mediation is in s 26 of the Civil Procedure Act 2005 ("the CPA"). That section uses the word "proceedings" simply and there is no definition of "proceedings" in the definition section of the CPA. However, it seems clear to me from the preamble of the CPA and its general policy that "proceedings" in s 26 must be taken to mean civil proceedings. 27 At the moment there are no proceedings pending between the plaintiff and the second defendant since Gzell J's dismissal of the notice of motion for a declaration that the second defendant is in contempt. However, once Gzell J's orders are set aside and that notice of motion is again on foot, there will again be proceedings pending between the plaintiff and the second defendant. But, if the proceeding instituted by the notice of motion is entirely a criminal proceeding, I cannot make an order under s 26. 28 I therefore return to where I began, which was a discussion of the difficulties that there at present are in New South Wales as to whether contempt proceedings are to be regarded as criminal or civil. 29 I have already said that I do not think that the High Court has ruled in favour of the proposition that all proceedings for contempt in New South Wales are criminal proceedings, save to the extent that s 101(6) of the SCA says something about the destination and incidents of appellate proceedings. 30 I regard the present situation of the law in New South Wales as to the characterisation of such proceedings as set out in the passage from the judgment of Ipp JA that I have set out in [7] above. 31 The general proposition is that put by Ipp JA in paragraph (c) of his considerations. That is, a breach of an injunctive order that is wilful but not contumacious is regarded as a civil contempt. These proceedings are brought within the main action and not by a stranger to a suit and this tends to show that the contempt is civil in nature. Bearing in mind his Honour's paragraph (e), it seems to me that the purpose and tendency of this application and the finding that is likely to be made, is intended to be coercive in regard to the second defendant's future conduct, rather than punitive. The breach of the order in this case, it would appear on the evidence, can certainly be remedied. Bearing in mind that the competency of the appeal is to be decided by classifying the contempt proceedings at the time that they were instituted, the fact that punishment was not sought in the notice of motion instituting the application in relation to the contempt is significant. 32 The second defendant has submitted that it is the plaintiff's case that the breach is contumacious. The distinction between breaches that are wilful on the one hand and contumacious on the other is not an entirely easy one. However, it is to be noted that the breach is alleged in the draft charge of contempt as wilful rather than it being alleged that it is contumacious or defiant. 33 I reach the conclusion overall that the purpose of this application is to obtain compliance rather than inflict punishment. The contempt alleged should be regarded as a civil contempt and the proceedings that will stand upon Gzell J's order being set aside should be characterised as civil proceedings. 34 In those circumstances I intend to order that the proceedings consequent on the notice of motion be referred for mediation before a Registrar. 35 The plaintiff's conduct of the proceedings against the second defendant since the injunctive orders were obtained has not been very swift or satisfactory and I intend to retain the case management of the proceedings to ensure that they are now carried forward in a proper and efficient manner and disposed of in the spirit of s 56 of the CPA. 36 A suggestion was made in correspondence that is in evidence that there was conduct on the part of the second defendant's counsel before Gzell J (who was not either of the counsel for the second defendant who have appeared before me) that was unsatisfactory and in breach of the rules that should be observed by counsel and that this in some way supported the proposition that Gzell J's dismissal of the proceedings should be set aside. I do not intend to go into this matter in detail. I simply say that I do not find that there is any just cause of complaint about the conduct on that occasion of counsel for the second defendant.

Aztech Science Pty Ltd v Atlanta Aerospace

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