Lane v Registrar of Supreme Court of New South Wales

Lane v Registrar of Supreme Court of New South Wales - [1981] HCA 35 - HCA 1979 case summary — Zoe

[33]

The facts of the case were as follows. Proceedings had been brought by petition in the Surpeme Court by a number of ordinary shareholders in Marra Developments Ltd. seeking relief under s. 186 of the Companies Act 1961 NSW, as amended. The defendants to the petition were the company, and a group of shareholders, described collectively as "the Yunghanns connexion", who owned the bulk of the preference shares and controlled the company and were alleged to be exercising their control in a manner oppressive to the plaintiffs. The proceedings were due to commence before Needham J. on 24 April 1979. The appellant was a corporate finance manager employed by Partnership Pacific, a merchant bank which had lent a considerable sum of money to Yunghanns on the security of his shares in Marra. The shares in Partnership Pacific were held equally by the Bank of New South Wales, the Bank of America and the Bank of Tokyo. Each of those banks appointed persons to be members of the board of directors of Partnership Pacific and of the executive committee of that company. The executive committee had a limited authority to approve applications for borrowings; applications not within the authority required the approval of the board. Mr. Kuzumaki, who was employed by the Bank of Tokyo as its senior representative in its Australian representative office in Sydney, had been appointed by that bank to be a member of the board of directors and of the executive committee of Partnership Pacific. On 11 April 1979 the appellant was told by Mr. Vear, the general manager of Partnership Pacific, that Yunghanns had sold his shares in Marra to another company, Industrial Equity Ltd., and was asked to calculate "a figure for accrued interest which we [Partnership Pacific] would be prepared to forego in clearing up our whole Yunghanns involvement." The account had been a "troublesome" one and Partnership Pacific welcomed the prospect of early payment. On the following day, after various discussions, the officers of Partnership Pacific were prepared to recommend a proposal that the shares owned by Yunghanns should be released from the security on terms which meant the forgiveness of about $1.5m of interest, that the sale of those shares to Industrial Equity would thus be able to proceed and that a loan of about $6m would be made to Industrial Equity on the security of the shares. It was hoped that once the allegedly oppressive shareholders had sold their shares to Industrial Equity, the latter company would be able to settle the proceedings brought by the ordinary shareholders. It was also hoped to complete the transaction by 23 April, on which date Industrial Equity intended to announce to the Stock Exchange that it had acquired the shares. Before this proposal was put to the directors of Partnership Pacific, the appellant consulted a solicitor, Mr. Lehane, a member of the firm of Messrs Allen, Allen & Hemsley, and was advised that the financing of the transaction would not be a contempt of court, and that the transaction could not be set aside by the petitioning shareholders once it had been completed. The appellant then sought the views of the directors of Partnership Pacific on the proposal. Mr. McDonald, who had been appointed by the Bank of New South Wales, indicated his agreement to it. The appellant then arranged that Mr. Kuzumaki and Mr. McCoy (an appointee of the Bank of America) should meet with himself and Messrs Vear and McPherson (who was also an officer of Partnership Pacific) to discuss the matter, and Mr. Kuzumaki requested him to prepare something in writing to enable him to understand the transaction. The appellant accordingly wrote out the document which is referred to in the charges as the handwritten memorandum. It is unnecessary to refer in detail to the contents of that document, which set out the details of the proposal and the recommendations of the officers of Partnership Pacific that it should be accepted. The meeting was held on the same day, 12 April, and copies of the handwritten memorandum were given to Messrs Kuzumaki and McCoy. Because of the amount involved it was necessary that the proposal for the borrowing by Industrial Equity should be approved by the board of directors, and the board did approve. However, it became apparent that Industrial Equity would need to borrow about $6.5m rather than the $6m which the board had approved, and on 18 April Mr. McPherson prepared another document - the typewritten memorandum - for further consideration by the board. This document was headed "Memorandum to the Board (through Executive Committee)" and set out the details of the proposal, as well as some details of the financial position of Industrial Equity. However, in this document no reference was made by name to Marra or Yunghanns; the former was referred to as Alpha and the latter as Beta. Copies of this document were forwarded to Messrs McDonald, McCoy and Kuzumaki.

[38]

On the morning of 23 April Mr. Kuzumaki placed in a folder all the documents which seemed to him to answer the description contained in the schedule to the subpoena. He then telephoned the appellant and asked him to come and help him check whether the documents which he had collected were complete. The appellant came to his office and checked the documents, which included a copy of the handwritten memorandum and a copy of the typewritten memorandum. Then the appellant suggested that he should seek advice on the matter from Messrs Allen, Allen & Hemsley and, with Mr. Kuzumaki's concurrence, he went to see Mr. Lehane. He took with him the subpoena and the documents in the folder, but although he showed Mr. Lehane the subpoena he did not show him the documents. He described to Mr. Lehane the typewritten memorandum and inquired whether the bank was required to produce it. The reason which he gave for his inquiry was that the document did not refer to Marra or Yunghanns by name, but Mr. Lehane advised him that the typewritten memorandum was not required to be produced for quite a different reason. Mr. Lehane said: I don't think so [i.e., that the subpoena requires the bank to produce the typewritten memorandum]. As I read the subpoena, what it requires is documents which are in the Bank's possession and all communications from and to the Bank to and from any of the persons in (a) (b) (c) and (d). This document, if it is as you describe it, is a communication from officers of Partnership Pacific to Mr Kuzumaki as a director of Partnership Pacific, not to the Bank, and it is the directors' document, not the Bank's. The appellant returned to Mr. Kuzumaki's office to communicate to him the result of his visit to Mr. Lehane. At this point there is a conflict of evidence. Mr. Kuzumaki, who swore an affidavit but did not give oral evidence, said that the appellant pointed to the file of documents and said: "I think this is in order, but there are papers between your office and Tokyo on the file and you should get in touch with your solicitors to see if they are covered by the subpoena." Mr. Kuzumaki said that he did not remember whether the appellant then referred to the handwritten memorandum and the typewritten memorandum. While the appellant was still in his office, Mr. Kuzumaki telephoned his solicitors, Messrs Baker & McKenzie, but the partner whom he wished to consult was not available. Later that afternoon, according to Mr. Kuzumaki's evidence, the appellant telephoned him and said: "It is not necessary to produce the documents relating to the new transaction", which Mr. Kuzumaki understood to mean the handwritten memorandum and the typewritten memorandum, which related to the purchase of shares by Industrial Equity. The appellant's version of these events was also given by affidavit, upon which he was cross-examined at some length. His evidence was that on his return to Mr. Kuzumaki's office he said to Mr. Kuzumaki: "Mr. Lehane is of the view that the I.E.L. papers are not covered by the subpoena." Later that day the appellant was requested by the Bank of America to help that bank with a similar subpoena that it had received. He went to the bank and was shown their files which, as he observed, did not contain a copy of the handwritten memorandum or of the typewritten memorandum, and when he inquired he was told that the bank had no paper relating to Industrial Equity. He knew however that there were documents on the file that were addressed to members of the board or the executive committee of Partnership Pacific, and he did not tell the officer of the Bank of America who was showing him the documents of the advice that he had received from Mr. Lehane or that, in accordance with the reason underlying that advice, those documents were not covered by the subpoena. He was told that the Bank of America did not intend to obtain legal advice, and later rang Mr. Kuzumaki and said: "I have learnt that the Bank of America are not choosing to take legal advice in relation to their subpoena. I'm ringing you just in case you wish not to take legal advice also." The learned members of the Court of Appeal formed an adverse view of the credibility of the appellant and found much of his evidence unacceptable. They accepted the version of events put forward by Mr. Kuzumaki.

[43]

There is one aspect of this theory that we find it difficult to accept. With all respect we doubt whether it was right to reject the appellant's version of the conversation he had with Mr. Kuzumaki on his return from Mr. Lehane's office. This is not an ordinary case of a conflict of testimony depending on credibility. The Court of Appeal did not see Mr. Kuzumaki in the witness box, and in any case his evidence did not necessarily contradict that of the appellant, for he did not remember whether the appellant referred to the handwritten memorandum and the typewritten memorandum. Moreover, the appellant's version seems to us to accord with the probabilities. If the appellant had any interest in the question whether the documents should or should not be produced, it was to ensure that they should not be produced. There was of course nothing that reflected adversely on Partnership Pacific in the documents themselves. However the officers of Partnership Pacific obviously wanted the sale of the shares to Industrial Equity to be completed; in that way the company would receive payment of the debt due to it by a debtor who had proved so unsatisfactory that Partnership Pacific was prepared to forego $1.5m in interest to be rid of him. The premature disclosure of the sale might have resulted in its cancellation. The appellant had himself suggested that he consult the solicitor, and the advice he had received, that the typewritten memorandum need not be produced, suited the interests of his employer, Partnership Pacific. He had really nothing to gain by refraining from passing on the advice until he had spoken to the Bank of America; the natural thing to do would have been to tell Mr. Kuzumaki that he was not obliged to produce the memoranda and then to have passed on the same advice to the Bank of America. Moreover, there is no evidence that he tried to discover whether the third shareholder, the Bank of New South Wales, had in its possession copies of the handwritten memorandum and the typewritten memorandum and was intending to produce them. There is no doubt that it was open to the Court of Appeal to find that the motive of the appellant in getting and passing on Mr. Lehane's advice was to ensure, in the interest of Partnership Pacific, that the documents be not produced. It must however be said that there seems to have been no apparent danger to Partnership Pacific in the production of the documents on 24 April, since the sale was in fact announced, as it was intended to be announced, on 23 April. Nevertheless before the announcement was actually made it may have been thought wise to play safe. Further the Court of Appeal was entitled to find that the appellant intentionally refrained from telling Mr. Kuzumaki that the effect of Mr. Lehane's advice was that none of the documents sent by Partnership Pacific to the executive committee need be produced. If it mattered, we would not however be satisfied according to the criminal standard of proof that the appellant had passed on to Mr. Kuzumaki advice with regard to the production of the typewritten memorandum different from that which he had received from Mr. Lehane.

[45]

Even if the charges had been, or were now to be, amended, the evidence would not establish that the appellant committed a contempt of court. The expression "contempt of court" is often popularly misunderstood. In a case such as the present, the offence consists not in affronting the dignity of the court, but in interfering with the due administration of the law: see Attorney-General v Leveller Magazine [3] . As Cussen J. said in In re Dunn; In re Aspinall [4] , the essence of the offence is "action or inaction amounting to an interference with, or obstruction to, or having a tendency to interfere with or obstruct the due administration of justice, using that term in a broad sense". In the present case, the charges against the appellant are that he wilfully procured Mr. Kuzumaki or the Bank of Tokyo not to produce the handwritten memorandum or the typewritten memorandum on the return of the subpoena. On such a charge it seems to us essential to prove that the document should have been produced. It is no interference with the administration of justice that a person, not a party to the action, who has been served with a subpoena should do no more than the subpoena orders him to do. There is no reason why such a person should officiously produce documents which he has not been commanded to produce. Since that is so, it is no contempt to tell a person, correctly, that he is not obliged to produce a particular document, even if the person giving the advice has an interest that it be accepted. Such a situation cannot be compared with cases in which a person keeps a material witness out of the way to avoid service of a subpoena (see Clements v Williams [5] ), or attempts to dissuade someone intending, but not bound, to give evidence in a criminal matter from doing so (see R. v Carroll [6] ), or destroys a document which he knows may be required to be produced. In such cases the act done is likely to interefere with the course of justice. In a case such as the present, where the document is left intact and in its existing custody, the administration of justice is not interfered with; if a subpoena is issued to the person who has the document requiring him to produce it, it can be produced.

[47]

It was submitted on behalf of the respondent that conduct otherwise lawful can amount to a contempt of court if done with a particular intention. That is correct, but the intention must be to do something likely to interfere with the course of justice. Thus it may be lawful for one man to advise another to take a holiday in Brazil, but the giving of the advice may constitute a contempt of court if the advice is given for the purpose of keeping the witness out of the way to avoid service of a subpoena. It may be lawful to dismiss a servant or to deprive a man of his office in a trade union, but if this is done for the purpose of punishing him for having given evidence it is a contempt of court: Rowden v Universities Co-operative Association Ltd. [7] ; Attorney-General v Butterworth [8] . In those cases, the purpose, intention or motive of the act was to do the very thing that would interfere with the course of justice - to keep the witness out of the way or to victimize the witness. The words "purpose", "motive", "object" and "intention" are used interchangeably in the judgments in Attorney-General v Butterworth and it is quite unnecessary for present purposes to distinguish between them; we shall use the word "intention" to cover motive as well. An intention to interfere with the administration of justice is not necessary to constitute a contempt; the critical question is whether the act is likely to have that effect, but the intention with which the act was done is relevant and sometimes important (Attorney-General v Butterworth [9] ; John Fairfax & Sons Pty Ltd v McRae [10] ). A lawful act may constitute a contempt if done with the intention of interfering with the course of justice, but will not become a contempt simply because it was done to achieve some purpose or further some interest of the person doing it. For one person to advise another who has been served with a subpoena to refrain from producing a document which the person giving the advice rightly believes falls outside the description of documents contained in the subpoena and therefore need not be produced does not become a contempt because the person giving the advice wishes to achieve some lawful purpose of his own by ensuring that the documents are not produced.

[52]

The proper conclusion is therefore that the appellant, rightly believing that the documents were not required to be produced, persuaded Mr. Kuzumaki not to produce them. The fact that it suited the appellant that they should not be produced did not convert his conduct into a contempt. Nor did the fact that he did not take steps to prevent the production of other documents which also did not come within the schedule have that result; their production was unnecessary, but the omission of the appellant to take any active steps to prevent their production did not obstruct or interfere with the administration of justice. In the argument on behalf of the respondent, reliance was placed on the submission that the appellant was meddlesome in getting Mr. Lehane's advice, and that he was guilty of misrepresentation in transmitting Mr. Lehane's advice without explaining that, in accordance with the reason on what it was based, it was unnecessary to produce other documents. The fact that the appellant had advised Mr. Kuzumaki that the documents need not be produced when that was not the question on which Mr. Kuzumaki had sought his assistance may support the view that the appellant was anxious that the documents should not be produced but is not otherwise material. If it be considered that the appellant suppressed part of Mr. Lehane's advice, and thereby misrepresented it, the misrepresentation was not made to the court or in the course of performing any duty required of the appellant by the court, and it did not result, and was not intended to result, in any failure fully to comply with the subpoena. What the appellant sought, and temporarily achieved, was to prevent the production of two memoranda that were not required to be produced; if, in addition, he sought to create the impression that those documents did not exist, that did not interfere with the due administration of justice, for the only legitimate purpose of the subpoena was to secure the production of the documents specified in it. The conduct of the appellant may be open to criticism, but it did not amount to a contempt of court.

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