BESANKO J:
1 The plaintiffs in this proceeding are Mr Nicholas David Cooper as receiver and manager of Chopsonion Pty Ltd (receivers and managers appointed) and Jechbo Pty Ltd (receivers and managers appointed) and Mr Jason Walter Bettles as receiver and manager of Chopsonion Pty Ltd (receivers and managers appointed) and Jechbo Pty Ltd (receivers and managers appointed). The defendants named in the Originating process are Chopsonion Pty Ltd (receivers and managers appointed) (Chopsonion), Jechbo Pty Ltd (receivers and managers appointed) (Jechbo) and Mr James Trevor Sharpe. In the Originating process, the plaintiffs sought orders under ss 420, 431 and 1324 of the Corporations Act 2001 (Cth) to the effect that the defendants make the books and records of Chopsonion and Jechbo available to the plaintiffs for inspection.
2 On 19 July 2016, Mr Cooper swore an affidavit in support of the Originating process. In that affidavit, he states that he is a partner of Worrells which is a specialist insolvency and forensic accounting firm, and a registered liquidator. He states that on 29 October 2015, he was jointly and severally appointed together with Mr Bettles as receiver and manager over all of the undertakings, property and assets of Chopsonion and Jechbo. He states that the sole director and shareholder of each company as at the date of the appointment of the receivers and managers was the third defendant, Mr Sharpe. Mr Cooper states that each of Chopsonion and Jechbo entered into general security agreements with Mr John Charlton Rowley and five other parties (comprising individuals and companies) whereby the company agreed to grant a security interest over property to the secured party in return for the security party providing financial accommodation to or at the request of the company. The security interests were registered on the Personal Property Securities Register. The receivers and managers were appointed under these agreements.
3 On 30 October 2015, the receivers and managers wrote to Mr Sharpe requesting certain information. On 30 June 2016, the receivers and managers, through their solicitors, wrote to Mr Sharpe seeking delivery up of the books and records of the companies. Mr Sharpe did not respond to these letters.
4 Mr Cooper deposes to the fact that he believes the following:
12.1 In or around 16 October 2014, Chopsonion contracted to sell certain plant and equipment ("the Chains") to FG Agri Pty Ltd ("the FG Agri Sale"). A true copy of an invoice relating to the FG Agri Sale is found at page 135 of Annexure NDC1 to this my affidavit.
12.2 Messrs Mulherin Schier, chartered accountants, held a deposit of $100,000.00 for FG Agri Pty Ltd on account of the FG Agri Sale ("the Deposit"). A true copy of an email from Messrs Mulherin Schier to Sharpe relating to the FG Agri Sale is found at page 136 of Annexure NDC1 to this my affidavit.
12.3 On or around 13 January 2015, Chopsonion sought funding from The Invoice Market ("the Invoice Funding"). A true copy of a letter from the Invoice Market to Sharpe is found at page 137 of Annexure NDC1 to this my affidavit.
12.4 On or around 12 September 2014, Chopsonion contracted to sell land at Collarenebri to Budmint Pty Ltd ("the Budmint Sale"). A true copy of contract for the sale of land at Collarenebri from Chopsonion to Budmint Pty Ltd is found at pages 138 to 141 of Annexure NDC1 to this my affidavit.
12.5 In or around December 2015, Chopsonion entered into negotiations to sell the land referred to in paragraph 12.4 of this my affidavit to Carbo Dynamics through the agency of Mr Garry Green and Premium Project Services ("the Green Sale"). A true copy of a draft contract of sale and associated communications with Garry Green is found at pages 142 to 177 of Annexure NDC1 to this my affidavit.
5 Mr Cooper states in his affidavit that the receivers and managers seek the delivery up of the books and records of Chopsonion and Jechbo, including certain identified categories of documents.
6 Mr Bruce McNab of AMC Law & Associates filed a Notice of Appearance on behalf of Mr Sharpe on 26 August 2016. The solicitors for the parties had discussions and agreed certain orders. On 26 August 2016, I made the following orders by consent:
THE COURT ORDERS THAT:
1. The following are defined terms for the purpose of this order:
1.1. Budmint means Budmint Pty Ltd.
1.2. Budmint Sale has the defined meaning paragraph 12.3 of the Cooper Affidavit.
1.3. Chains means the plant and equipment defined in paragraph 12.1 of the Cooper Affidavit.
1.4. Chopsonion means the first defendant.
1.5. Cooper Affidavit means the affidavit of Nicholas David Cooper sworn 19 July 2016 and filed in these proceedings.
1.6. Invoice Funding has the defined meaning in paragraph 12.3 of the Cooper Affidavit.
1.7. FG Agri means FG Agri Pty Ltd.
1.8. FG Agri Sale has the defined meaning in paragraph 12.1 of the Cooper Affidavit.
1.9. Green Sale has the defined meaning in paragraph 12.1 of the Cooper Affidavit.
1.10. Jechbo means the second defendant.
1.11. Plaintiffs means the Receivers as defined in paragraph 2 of the Cooper Affidavit
2. In this order any reference to a corporate entity is a reference to that entity and any of its officers, employees or agents and in the case of Chopsonion and Jechbo includes Ms Wendy Sharpe.
3. Pursuant to s420(2)(b) and s1324 of the Corporations Act 2001 (Cth) ("the Act"), within 21 days of service of this order, the defendants will deliver up all of the books and records of Chopsonion and Jechbo to the Receivers, including but not limited to any documentation (including contracts, agreements (whether in draft or in final) letters, email communications, notes and records of conversations whether electronic or otherwise) relating directly or indirectly to:
3.1. The sale or attempted sale of the Chains to any party including but not limited to the sale or attempted sale of the Chains to FG Agri.
3.2. Communications between Chopsonion and/or Jechbo and FG Agri between June 2014 to 1 August 2016.
3.3. Communications between Chopsonion and/or Mr Garry Green between November 2015 and 1 August 2016.
3.4. Communications between Chopsonion and/or Jechbo and Messrs Mulherin Schier relating to the Deposit.
3.5. Communications between Chopsonion and/or Jechbo and Budmint in respect of the Budmint Sale.
3.6. The FG Agri Sale.
3.7. The Deposit.
3.8. The Invoice Funding.
3.9. The Budmint Sale.
3.10. The Green Sale.
7 The plaintiffs contended that the orders were not complied with and they sought to bring charges for contempt. To that end, they brought an interlocutory application dated 11 October 2016.
8 At a directions hearing on 27 October 2016, Mr McNab appeared for Mr Sharpe. I made orders concerning the filing of affidavits.
9 When the interlocutory application came on before the Court on 16 December 2016, counsel for the plaintiffs asked the Court:
(1) to waive the requirement in r 41.06 of the Federal Court Rules 2011 (Cth) (the Rules) for an appropriate endorsement on the order. That order was sought because the order made on 26 August 2016 did not bear the endorsement required by the rule; and
(2) to waive the requirement in r 42.13 for personal service of the interlocutory application and other documents. That order was sought because attempts to serve Mr Sharpe personally had failed.
The plaintiffs made it clear that they were not seeking to pursue contempt proceedings against Chopsonion and Jechbo.
10 At a hearing on 18 January 2017, Mr McNab appeared on behalf of Mr Sharpe and he conceded service of the documents. He also indicated that Mr Sharpe would be pleading guilty to the charge.
11 On 24 January 2017, Mr McNab filed a Notice of Appearance on behalf of Mr Sharpe, I think to make it clear that he was appearing for Mr Sharpe on the contempt charge.
12 On 20 February 2017, Mr McNab appeared for Mr Sharpe and asked me to adjourn the interlocutory application for reasons connected with Mr Sharpe's health. I adjourned the interlocutory application to 8 March 2017.
13 On or about 7 March 2017, Mr Sharpe filed and served an affidavit.
14 On 8 March 2017, I adjourned the interlocutory application to enable the plaintiffs to file evidence in reply.
15 The interlocutory application and the contempt charge were heard on 17 May 2017. Mr McNab appeared on behalf of Mr Sharpe. Mr Sharpe was present in the Court. In the circumstances as I have outlined them, no difficulty arises as a result of non-compliance with r 42.13 because personal service has been waived.
16 Furthermore, Mr Sharpe did not take issue with the service of the order dated 26 August 2016. Mr Sharpe did not oppose an order that the requirement for compliance by the plaintiffs with r 41.07 to the extent that the initial order of 26 August 2016 be served personally on him be dispensed with. Furthermore, he did not take issue with the fact that the order did not contain the endorsement referred to in r 41.06. Mr Sharpe did not oppose an order that the requirement for compliance by the plaintiffs with r 41.06 to the extent that the initial order of 26 August 2016 bear the endorsement as required by r 41.06 be dispensed with.
17 At the hearing, each party relied on affidavits it had filed without requiring the deponents of the affidavits of the other side for cross-examination. I have already referred to Mr Cooper's affidavit sworn on 19 July 2016. I accept the evidence set out in that affidavit.
18 In his first affidavit sworn on 13 October 2016, Mr Luke John Charlton Rowley, solicitor for the plaintiffs, said that he wrote to Mr McNab on 5 October 2016 advising him that his client was in contempt of the order and that he, Mr Rowley, had been instructed to make an application seeking to have his client dealt with for contempt. By a second email to Mr McNab on 5 October 2016, Mr Rowley asked Mr McNab to respond as a matter of urgency "to avoid putting people to further (and on any view unnecessary) costs". Mr Rowley did not receive a response and he wrote a further email to Mr McNab on 7 October 2016 advising that the plaintiffs would make an application for the defendants to be dealt with for contempt. Mr Rowley deposed to the fact that as at the date he swore his first affidavit, the defendants had not complied with the orders in whole or in part and that he had not received any response to the correspondence he sent to Mr McNab in early October 2016. I accept Mr Rowley's evidence.
19 In his second affidavit sworn on 1 December 2016, Mr Rowley said that on 1 December 2016, he received a telephone call from Mr McNab during which Mr McNab advised him that Mr Sharpe was bankrupt and that he, Mr McNab, was unfunded and that his client would not be able to pay him to attend at the hearing of the proceeding listed for 2 December 2016. He also advised Mr Rowley that his client was ill and had ongoing health issues and would not be able to attend the hearing and this was also the reason for his non-compliance with the orders made by the Court on 26 August 2016. Finally, he advised Mr Rowley that he was instructed to consent to the orders sought in the application and thereafter to immediately enter a plea of guilty in respect of the charges, the subject of the application. He asked Mr Rowley to convey these matters to the Court. I accept Mr Rowley's evidence.
20 Ms Emily Christina Hunt is a solicitor employed by the solicitors for the plaintiffs. She swore an affidavit on 17 May 2017. Her affidavit establishes that Mr Sharpe was declared bankrupt on a Debtors Petition on 17 October 2016. The bankruptcy does not affect the contempt proceeding, although it might have a bearing on the appropriate penalty should there be a finding of contempt (see, for example, Ambrose (Trustee), in the matter of Peter Athanasas (Bankrupt) (No 2) [2008] FCA 1016 at [60]-[67] per Lander J). Ms Hunt's affidavit also establishes that the plaintiffs made an offer to Mr Sharpe that he disclose the location of the books and records which are the subject of the order dated 26 August 2016. The plaintiffs offered to make arrangements for the collection, copying and return of the books and records at their own cost. The plaintiffs asked Mr Sharpe to indicate that he would do all things necessary to assist the plaintiffs to undertake the task of collecting, copying and returning the books and records. Ms Hunt states that as at the date she swore her affidavit on 17 May 2017, the defendants had not complied with the order dated 26 August 2016 in whole or in part and she had not received a response to her offer. I accept Ms Hunt's evidence.
21 In his affidavit sworn on 3 March 2017, Mr Sharpe describes himself as unemployed and a former director of the first and second defendants. He states that Chopsonion and Jechbo were placed into receivership on or about 30 October 2015 pursuant to powers granted to a group of lenders under general security agreements. He describes the assets, which were the subject of the general security agreements, and other borrowings undertaken by Chopsonion and Jechbo. He refers to the difficulties associated with the sale of an abattoir business. He states that the parties entered into a Deed of Settlement and Release, but ultimately, that Deed or the performance of the Deed, did not proceed. He makes the following statements about his health:
My health has been declining for a number of years and I suffered a heart attack in July 2015 which I attribute to the stress I was placed under as a result of the failure of the first and second defendant's businesses. The collapse of the arrangements made in connection with the Deed of Settlement and Release have devastated me. I find myself entirely unable to cope with the pressure on me. I am now a bankrupt and have no funds to pay for lawyers or accounts. I now receive a government pension. My health is continuing to decline. I am being monitored by a cardiologist and my general practitioner. I need time to recover but I do not believe that I will ever regain my health to a full extent after the events of the last few years.
Mr Sharpe was not cross-examined on his evidence. I accept his evidence so far as it goes.
22 In addition to his own evidence about his health, Mr Sharpe produces the following medical reports:
(1) Medical report from Dr Izaac Flanagan dated 24 November 2016;
(2) Medical report from Dr Izaac Flanagan dated 2 March 2017;
(3) Report from Dr Paul Klaassen dated 13 January 2017; and
(4) Report from Dr Paul Klaassen dated 17 January 2017.
23 Mr Sharpe has not complied with the order made on 26 August 2016. He seeks to defend the contempt charge on the basis that, having regard to the evidence concerning his health, the plaintiffs have not proved beyond reasonable doubt that his actions were wilful and contumacious.
24 Each element of a charge of contempt must be proved beyond reasonable doubt (Witham v Holloway (1995) 183 CLR 525 at 534 per Brennan, Deane, Toohey and Gaudron JJ). It is necessary for the applicant bringing the charge to prove that the conduct of a respondent was deliberate and not casual, accidental or unintentional (Australasian Meat Industry Employees' Union and Others v Mudginberri Station Proprietary Limited (1986) 161 CLR 98 at 113 per Gibbs CJ, Mason, Wilson and Deane JJ; Hurd v Zomojo Pty Ltd [2015] FCAFC 148 (Hurd v Zomojo) at [90] per Besanko and Gilmour JJ). There appears to be different views about whether it is sufficient for the prosecution to prove that the conduct alleged was deliberate and voluntary or whether it is necessary for the prosecution to prove that the conduct was deliberate and voluntary and, in the course of doing so, negate beyond reasonable doubt that the conduct was casual, accidental or unintentional (Hurd v Zomojo at [97]-[101]). I do not need to consider that issue in this case because, on either view of the facts of this case, Mr Sharpe has committed a contempt.
25 Mr Sharpe had at previous hearings before the Court indicated through his solicitor that he would plead guilty to the charge. However, at the hearing on 17 May 2017, Mr Sharpe through his solicitor indicated that he was pleading not guilty to the charge. His submission is that in light of his failing health, the plaintiffs have not proved beyond reasonable doubt that his failure to comply with the order was deliberate. Leaving aside the evidence concerning Mr Sharpe's health, I am satisfied beyond reasonable doubt that Mr Sharpe was aware of the order and that he failed to comply with it. The failure to comply was deliberate. The evidence concerning Mr Sharpe's health does not throw any doubt on that conclusion. The first point to note about that evidence is that it does not include any evidence from Mr Sharpe or a medical practitioner who has seen him that his health prevents him from complying with the order. In his own affidavit, Mr Sharpe said that his health has been declining for a number of years and that he suffered a heart attack in July 2015. He was devastated by the "collapse" of the Deed of Settlement and Release. He said that he finds himself entirely unable to cope with the pressure on him. He has been made bankrupt and his health is continuing to decline. He is being monitored by a cardiologist and his general practitioner. He states that he needs time to recover and he believes that he will never again regain his health to a full extent after the events of the last few years. The second point to note is that the reports from Mr Sharpe's general practitioner (Dr Flanagan) indicate that Mr Sharpe suffers from an ongoing and significant cardiac condition and chronic back pain and that he had reported impairment of concentration and memory. Mr Sharpe's cardiologist (Dr Klaassen) identifies Mr Sharpe's condition and the medication he is taking. On 13 January 2017, he reported that Mr Sharpe was doing "quite well at the current time".
26 I will make a declaration that Mr James Trevor Sharpe has committed a contempt in failing to comply with the order made by the Court on 26 August 2016. I have already heard some submissions on penalty, but I will give the parties the opportunity to close their cases with respect to that issue.
27 I will order that the requirement for compliance by the plaintiffs with r 41.07 to the extent that the order of 26 August 2016 be served personally on Mr Sharpe be dispensed with and that the requirement for compliance by the plaintiffs with r 41.06 to the extent that the initial order of 26 August 2016 bear the endorsement as required by r 41.06 be dispensed with.
28 I will hear the parties as to the appropriate orders and directions with respect to any further hearing concerning penalty.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.