Cooper, in the matter of Chopsonion Pty Ltd (Receivers and Managers Appointed) v Chopsonion Pty Ltd

JASON WALTER BETTLES AS RECEIVER AND MANAGER OF CHOPSONION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ABN 63 142 890 971 AND JECHBO PTY LTD (RECEIVERS AND MANAGERS APPOINTED ) ABN 69 165 492 428 Second Plaintiff

AND: CHOPSONION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ABN 63 142 890 971 First Defendant

JECHBO PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ABN 69 165 492 428 Second Defendant

JAMES TREVOR SHARPE Third Defendant

JUDGE: BESANKO J DATE OF ORDER: 9 October 2018

1. Mr James Trevor Sharpe has committed a contempt in failing to comply between 17 September 2016 and 19 February 2018 with the order made by the Court on 26 August 2016 as follows: 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. THE COURT oRdErS THAT:
2. Mr Sharpe pay to the Registrar of this Court within 28 days a pecuniary penalty of $15,000 in respect of the contempt referred to in the declaration.
3. Mr Sharpe pay the plaintiffs' costs on an indemnity basis of and incidental to the interlocutory application issued by the plaintiffs and dated 11 October 2016. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 I delivered reasons in this proceeding previously and in those reasons I held that the plaintiffs were entitled to a declaration against the third defendant, Mr James Trevor Sharpe, to the effect that Mr Sharpe had committed a contempt in failing to comply with the order made by the Court on 26 August 2016 (Cooper, in the matter of Chopsonion Pty Ltd (Receivers and Managers Appointed) v Chopsonion Pty Ltd (Receivers and Managers Appointed) [2017] FCA 1207; (2017) ACSR 333 (earlier reasons) at [26]). I have now heard submissions on the issue of the appropriate penalty and costs. 2 I will make a declaration that Mr Sharpe has committed a contempt in failing to comply between 17 September 2016 and 19 February 2018 with the order made by the Court on 26 August 2016. Having regard to the seriousness of the contempt, the options in terms of penalty appear to be a custodial sentence or a pecuniary penalty. Mr Sharpe became bankrupt on a debtor's petition on 17 October 2016. On the authorities, a pecuniary penalty for contempt falls within s 82(3) of the Bankruptcy Act 1966 (Cth) and is not provable in bankruptcy (Environment Protection Authority v Ableway Waste Management Pty Ltd [2005] NSWLEC 469; State of Victoria v Mansfield [2003] FCAFC 154; (2003) 130 FCR 376; Mathers v Commonwealth [2004] FCA 217; (2004) 134 FCR 135). Nevertheless, Mr Sharpe has no present capacity to pay a pecuniary penalty and, in those circumstances, a failure to pay is unlikely to constitute a further contempt by him (Siminton v Australian Prudential Regulation Authority (No 3) [2008] FCAFC 89; (2008) 168 FCR 140; Bob Jane Corporation Pty Ltd v ACN 149 801 141 Pty Ltd [2017] FCA 899). In other cases, circumstances such as these have been sufficient to point away from a pecuniary penalty and towards a custodial sentence (Australian Competition and Consumer Commission v Levi (No 3) [2008] FCA 1586 at [54]-[78] per McKerracher J). However, in this case there are, as I will explain, good reasons not to impose a custodial sentence or, indeed, a custodial sentence which is then suspended. Even so, the circumstances of this contempt are such that a penalty must be imposed and Mr Sharpe may at some stage in the future be able to pay a pecuniary penalty. I have decided to impose a pecuniary penalty of $15,000. 3 With respect to costs, the plaintiffs seek an order that the third defendant pay their costs assessed on an indemnity basis and I think that such an order should be made. I will say nothing further about the issue of costs, other than that such an order is often made in contempt proceedings and nothing has been put in this case to suggest that it is not the appropriate order (see Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; (2017) 350 ALR 216 (Kazal)). Such a costs order will not be affected by the existing bankruptcy (Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 241 ALR 32). 4 My reasons for reaching these conclusions follow.

Events which have occurred since the earlier reasons 5 The course of events up to the date of my earlier reasons is set out in those reasons. The following is a summary of events which have occurred after the earlier reasons. 6 The matter came before me on 16 November 2017 at which time Mr Sharpe appeared in person and sought further time to obtain legal representation. I adjourned the hearing until 20 December 2017. On the same day, Mr Sharpe filed a Notice of address for service indicating that he now acted on his own behalf. 7 On 23 November 2017, the plaintiffs filed an affidavit sworn by the first plaintiff in which he set out the effects in terms of the plaintiffs' administrations of Mr Sharpe's failure to comply with the order that he produce the books and records relevant to the affairs of the first and second defendants. He identified various commercial transactions involving the first and second defendants, and what he considered to be apparent anomalies in those transactions. He identified the circumstances in which Mr Sharpe's failure to produce the books and records had hampered his investigation into the transactions. It is not necessary for me to elaborate further on these matters. The first plaintiff also identifies the costs of the receiverships and the costs of and incidental to this proceeding. 8 On 23 November 2017, the plaintiffs filed their submissions with respect to the penalty hearing. An important point made in those submissions is that, according to the plaintiffs, Mr Sharpe had still not complied with the order. 9 On 5 December 2017, Mr Sharpe appointed Mr Brenton John Grant of Grant Legal to represent him and a Notice of acting was filed. Shortly after that date, Mr Sharpe filed a lengthy affidavit in which he set out his account of the circumstances leading to the appointments of the plaintiffs, certain health problems from which he suffered, his relationship with his previous solicitors, his compliance with the order and the effects on both him and his mother should he be imprisoned. It was apparent from Mr Sharpe's affidavit that, although he swore that he had now complied with the order, the true position was that he was in the process of complying with the order (at [68] and [69]). 10 By 7 December 2017, Mr Sharpe had engaged counsel and counsel filed an outline of submissions on his behalf. In addition, affidavits of Mr Sharpe's mother and of his solicitor were filed. 11 In circumstances where Mr Sharpe was in the process of complying with the order, the hearing on 20 December 2017 was adjourned to give Mr Sharpe the opportunity to complete the process of compliance. 12 Before the resumed hearing, two further affidavits of Mr Grant were filed, sworn on 20 February 2018 and 21 February 2018 respectively, and a further affidavit of Mr Sharpe sworn on 20 February 2018. I am satisfied that the order had been complied with by 20 February 2018.

Analysis 13 In Kazal, the Full Court of this Court (of which I was a member) said (at [101]-[103]): In Matthews at [129], Tobias JA (with whom Basten and Campbell JJA agreed on this point) quoted with evident approval nine considerations the sentencing judge in that case had considered relevant to the question of determining an appropriate punishment for contempt of court as follows: (1) the seriousness of the contempt proved; (2) the contemnor's culpability; (3) the reason or motive for the contempt; (4) whether the contemnor has received, or sought to receive, a benefit or gain from the contempt; (5) whether there has been any expression of genuine contrition by the contemnor; (6) the character and antecedents of the contemnor; (7) the contemnor's personal circumstances; (8) the need for deterrence of the contemnor and others of like mind from similar disobedience; and (9) the need for denunciation of contemptuous conduct. That is a useful list of considerations that may properly be seen to have a part to play in a given case, although not exhaustive. Although (8) is directly concerned with deterrence, all of the other factors are also relevant to differing degrees in ascertaining the need for deterrence. A number of decisions of this Court on the approach to penalties for contempt, helpfully summarised by Tracey J in Australian Competition and Consumer Commission v Halkalia Pty Ltd (No 3) [2017] FCA 522 at [140]-[143], refer to a number of the matters of the kind that appear in the Matthews list in more detail and somewhat more besides. The burden of the additional authority in this Court is to add weight to the factors listed in Matthews, rather than requiring any change by way of addition, subtraction or variation. The focus remains on the core themes of the objective seriousness of the conduct and, in particular, its effect on the administration of justice, subjective factors such as the contemnor's culpability, antecedents and attitude, including in particular any apology or other palpable sign of contrition, the capacity to pay a fine, and imprisonment being a last resort. Deterrence remains a dominant theme, both specific and general. Even denunciation and punishment can be seen as bolstering deterrence. That is especially so when the conduct entails contemplation and the opportunity to reflect and desist. 14 I take into account the fact that the order has now been complied with. Nevertheless, the contempt is a serious one. It is important that a controller, such as a receiver, have prompt access to the books and records of a corporation so that he or she can carry out the important functions of a receiver in an expeditious manner. That is recognised in the Corporations Act 2001 (Cth) and should be recognised by this Court in assessing the penalty for non-compliance with the Court's order. Furthermore, the non-compliance extended over a lengthy period. 15 As I said in my earlier reasons, the non-compliance was deliberate (see at [25]), although the evidence now advanced by Mr Sharpe suggests a mitigating circumstance in the form of poor advice from his solicitor. Mr Sharpe's evidence is somewhat difficult to distil and then assign to assertions he made that he was told the receivers did not really want the documents, and a quite separate assertion that he was never told of the possible serious consequences that may follow from a failure to comply with an order of the Court. Nevertheless, I have formed the view that, although Mr Sharpe probably adopted a somewhat "head in the sand" approach to the Court order, the seriousness associated with non-compliance was not, at least for a time, brought home to him by his previous solicitor. 16 Mr Sharpe's reason or motive for non-compliance was probably lethargy and disinterest. I accept that he received no benefit or gain from his non-compliance with the order of the Court other than avoiding, for a period, the time, cost and inconvenience of locating the records. 17 Mr Sharpe asks me to take into account that he now realises that he should have complied with the order of the Court and he has apologised for not doing so. I accept that there is genuine contrition on his part. 18 Mr Sharpe asks me to take into account the assistance he provided to the receivers. I have read the affidavits and I think that any assistance he provided is well and truly outweighed by his failure to provide the books and records of the first and second defendants. 19 Mr Sharpe has no history of non-compliance with Court orders, or indeed, of being in trouble with the law, other than a relatively minor incident approximately 30 years ago. I take that into account. 20 Mr Sharpe is 70 years old and has health problems. He is bankrupt and he receives an aged pension. He assists in the care of his elderly mother. 21 It is most unlikely, in the circumstances, that Mr Sharpe will reoffend in terms of committing another contempt. 22 In my opinion, there are four reasons, considered together, for not imposing a custodial sentence. They are the fact that the order has now been complied with, the fact that he received poor advice, his health issues and his carer duties with respect to his mother. It is convenient to say something more about the last two. 23 Mr Sharpe has a number of health problems which I referred to in my earlier reasons (see [25]). He referred to them in his affidavit sworn on 5 December 2017. He said in that affidavit that from about mid-2015, he was very stressed and that stress seemed to have been caused by his financial circumstances. He suffered a heart attack in July 2015. He consulted a cardiologist at the Royal Brisbane Hospital (Dr Paul Klaassen). He was told that he did not need to have surgery. He had a leaky valve and there were some blockages in the arteries, but that the appropriate course was observation, not surgery. Mr Sharpe has been placed on a number of prescription medications. He states that since his heart attack, he has been physically much weaker and that he has found it difficult to remember things. He has been advised by Dr Klaassen that some of his medication, together with old age and stress, was contributing to his memory loss. He believes that his cardiologist has now changed his medication to try to address the memory loss from which he had been suffering. A medical report from Dr Klaassen dated 6 December 2017 was put before the Court. There is no need for me to go through those details. I accept that Mr Sharpe, who is 70 years of age, has health problems. 24 If Mr Sharpe was given a custodial sentence, that would have an effect on his mother. The circumstances are as follows. Mr Sharpe's mother turned 94 years of age on 19 December 2017. Her husband died in or about 2003. Mr Sharpe is an only child. Mr Sharpe's mother was diagnosed with cancer approximately 10 years ago. She survived the disease. She now suffers from severe arthritis and finds it very hard to move or sit in one spot for any extended period of time. Mr Sharpe moved into his mother's home to look after her in September 2016. His mother no longer drives so he does all the shopping and runs errands for her. He makes sure that there is fresh food at home and in the fridge for her. If Mr Sharpe needs to travel interstate and stay for more than one night, he will drive his mother to her sister's home in Newcastle. This is about a four hour drive and is very uncomfortable and painful for his mother. Mr Sharpe's account is supported by an affidavit from his mother. I accept Mr Sharpe's account and the evidence in that affidavit. 25 Despite these matters, the gravity of the offending calls for a pecuniary penalty. I will impose a fine or pecuniary penalty payable to the Court of $15,000.

Conclusion 26 I will make orders reflecting the conclusions summarised at the beginning of these reasons. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.