McKinnon v Adams

Supreme Court of Victoria|2003-11-28|Before: BONGIORNO J

Courts and judges - Contempt of court - failure to comply with order - civil proceeding - civil contempt/criminal contempt - contumacy - flagrant breach not merely casual, accidental or unintentional - challenge to Court's authority - relevance of Sentencing Act 1991

On 28 April 2003 this Court appointed Morris Dunlea to be the administrator of Body Corporate Strata Plan No. 17739 which is the body corporate of a subdivision consisting of a small block of older style flats in Alfred Street, Kew. The appointment was made because of the total breakdown of the administration of the body corporate over a very long time caused largely if not solely by the activities of the owner of three of the six units, Halina Wendy Adams.

As well as appointing Mr Dunlea the administrator of the body corporate, the Court made a number of ancillary orders designed to facilitate his administration. In particular it ordered that all members of the body corporate deliver to him any documents which any of them may have had which were the property of the body corporate. The Court also ordered that each unit holder pay the administrator $2,000 in respect of each unit owned by him or her for the purpose of providing the administrator with funds to commence his work.

The order of the Court also reserved liberty to apply to any of the unit holders, the body corporate itself and the administrator for further orders or directions in respect of the administration. Pursuant to that liberty to apply, by a summons issued 30 October 2003 the administrator now seeks a number of orders against Halina Adams for breach of some of the orders of the Court made on 28 April and for other orders compelling Ms Adams to honour her obligations with respect to a levy imposed by him on all unit holders, by a notice dated 10 July 2003 and to perform certain other acts which he alleges she must perform for the body corporate to operate properly.

This summons first came before this Court on 6 November when it was supported by an affidavit of Mr Dunlea to which there were a number of exhibits. In that affidavit, Mr Dunlea deposed to Ms Adams having failed to comply with two orders made by the Court on 28 April, namely that she deliver to him all books, records, papers, cheque books, pay in books, correspondence and all other documents and copy documents, the property of the body corporate and that she pay to him the sum of $2,000 for each unit owned by her.

Mr Dunlea deposed to a conversation between him and Ms Adams on 14 May when she acknowledged that she had the common seal of the body corporate in her possession but would not give it to him unless he bought it from her. She claimed that she had herself bought it or had it made. In his affidavit, Mr Dunlea produced title searches which revealed that Ms Adams is the sole registered proprietor not only of the three units in the subdivision to which the body corporate relates but also of some 80 hectares of unsubdivided land in Yarra Glen. The search documents produced show that all of that land is unencumbered.

Mr Dunlea's affidavit also deposes to the erection by Ms Adams of two metal sheds associated with two of the units owned by her on areas of the common property of the subdivision to which the body corporate relates and to her removal of a number of security lights and associated electrical equipment from parts of the common property of the body corporate.

On 10 July 2003, Mr Dunlea, in his capacity as administrator, served notices on each of the unit holders informing them of a decision he had taken that the body corporate would impose a levy of $5,000 per unit holder to pay for the necessary legal work to institute this application to the Court in respect of Ms Adams' failure to comply with some of the orders of 28 April and in respect of her other activities detrimental to the body corporate.

Not only have all other unit holders paid the original $2,000 per unit ordered by this Court on 28 April but they have also paid the $5,000 per unit levy made by Mr Dunlea in July. Ms Adams had, at the date of Mr Dunlea's affidavit, paid neither.

On the basis of this affidavit, I ruled on 6 November that Mr Dunlea had established a prima facie case of contempt of court by Ms Adams in her failure to hand over documents belonging to the body corporate and in her failure to pay the $2000 per unit ordered on 28 April.

Upon Mr McCormick of counsel for Ms Adams stating that he wished to file material in answer to the charges of contempt and in response to the other orders sought by Mr Dunlea, the matter was adjourned to 19 November. By that date Ms Adams had filed an affidavit in which she deposed that she was unable to pay the $6,000 due in respect of the order of 28 April. She gave a number of reasons for that inability and produced a number of documents purporting to corroborate her position. In particular, she deposed that she owed approximately $1,000,000 to her bank, Ed Credit (now apparently known as MECU) and that she owed $1,000,000 to her mother. Ms Adams acknowledged that she built the sheds referred to in Mr Dunlea's affidavit but said that she had received no objections to them from any other unit holders. She acknowledged that she had had possession of the seal of the body corporate but was, at the time of swearing her affidavit, unable to find it. She did, however, offer to purchase a new one and deliver it to Mr Dunlea.

Nowhere in her affidavit did Ms Adams depose as to her assets, liabilities, income and expenditure in support of the contention that she had never had the means and ability to comply with the Court order as to the payment of the $5,000 per unit levy since it was made.

So far as the books and documents of the body corporate are concerned, Ms Adams deposed that she had no such documents, putting forward the tendentious argument that as the judgment of the Court on 28 April had, in her opinion, rendered each of her actions "null and void", she was entitled to keep any documents which she had as they were created "with my ink and upon my paper". She maintained that they were her private property. She did, however, offer to allow Mr Dunlea to inspect her files and take copies of any documents which he believed related to the affairs of the body corporate.

Ms Adams conceded in her affidavit that she had removed security lighting from the common property of the body corporate in May 2003 but claimed that this lighting belonged to her as she had had it installed in May 1990. Again, she referred to resolutions for a levy for the security lighting having been rendered "null and void" by the judgment of this Court of 28 April. This argument is no more valid with respect to the security lighting than it is with respect to the body corporate's documents.

Both Mr Dunlea and Ms Adams were cross examined. Ms Adams' solicitors were also served with a notice to produce, listing some 14 categories of documents, mostly financial records, from which Ms Adams' financial position might have been able to be assessed.

Ms Adams' response to this notice was sparse. Apart from some documents which related to the tenancy of one of the units at Alfred Street, the documents produced appear to have been recently created solely for the purpose of trying to establish Ms Adams' purported impecuniosity. No financial records were produced and no satisfactory explanation was given for their non-production. A letter from her bank attests to its having lent her $1,000,000 but is silent as to the security which it holds as collateral for that loan or as to any other accounts she might have with it. Another document was an incomplete affidavit of Ms Adams' mother as to a further million dollars which she allegedly owed her. Appointments of an estate agent to sell her three Alfred Street units were dated a day before the hearing. They are self-serving.

Overall Ms Adams' response to the notice was unsatisfactory. Her only explanation for this was that she regarded it as an intrusion on her privacy.

Of greater significance, it would appear, was the fact that Ms Adams did not produce any documents apart from those to which I've referred which would enable a proper assessment to be made as to her means of complying with the order of 28 April. Specifically, she failed to produce any bank statements, financial records, tax returns or other records relating to the precise income she has received or assets she owned.

When asked as to why she had not produced any tax returns in answer to the notice of produce, Ms Adams said that she hadn't filed any income tax returns for the past three years. She said that she didn't know when she'd last filed a tax return but agreed that she didn't pay any income tax.

Throughout the whole of her cross-examination, Ms Adams rarely gave a direct answer to any question. She engaged in sometimes intricate evasion and prevarication. She conceded that she placed her solicitors in funds of possibly $7,000 or $9,000 for the defence of this proceeding, that she owned considerable property, including a large property in Sackville Street, Kew and had rental and superannuation income amounting to several thousand dollars per month.

So far as the question of the body corporate's documents is concerned, Ms Adams adhered to a position that the only documents she had were created by her and didn't belong to the body corporate at all. She maintained this position even with respect to documents disclosed in her affidavit of documents in this proceeding which listed letters and documents as passing to and from the body corporate.

Somewhat remarkably, in the course of re-examination, Ms Adams produced the allegedly missing corporate seal from her handbag. She handed it to my associate although continued to insist that it belonged to her. It will be delivered to the administrator by the Court.

Towards the end of the hearing of this matter on 20 November, Mr McCormick informed the court that he had just then been instructed by Ms Adams that she had arranged that some of her tenants would pay their rent prematurely this month so that the sum of $6,000 could be paid to Mr Dunlea by the evening of that day. In fact, my associate was subsequently informed by fax from Mr McClelland, counsel for the administrator, that at 1.05 p.m. on the following day, 21 November, one Elaine Beech, a representative of Collins Simms, Estate Agents, delivered four cheques to Mr Dunlea totalling $6,000. As the evidence before the Court had disclosed that Ms Beech was the estate agent into whose hands Ms Adams says she had placed the sale of her units on the day before this case was heard, it may be inferred that the money received by Mr Dunlea was in fact paid at Ms Adams' direction and should be credited to her, although the order against her was an order that she pay money, not that the administrator recover such money as a debt. It was thus an order directed to Ms Adams to perform a specific act. In this respect it is to be contrasted with a common law judgment for a monetary amount such as a judgment for a debt or damages.

Her payment of the amount ordered and payable since 28 April pursuant to the order of this Court in this way was, I infer, designed to impress the Court as to her impecuniosity and the difficulty she had in raising the amount required. If this was indeed her intention then her efforts have been in vain.

I turn then to the relief sought by Mr Dunlea in this summons.

The administrator seeks that Ms Adams be found guilty of contempt of court for not complying with Orders numbered 2 and 3 of the orders of this court of 28 April 2003 in this proceeding. Those orders were as follows:

"2. On or before 10 May 2003, the plaintiffs and the first defendant deliver up to the administrator, all books, records, papers, cheque books, pay-in books, correspondence and all other documents and copy documents the property of Body Corporate Strata Plan No.17739 in their possession.

3. On or before 10 May 2003, each unit holder pay to the administrator the sum of $2,000 in respect of each unit owned by him or her, such sum to be used by the administrator for the purposes of the administration."

The contempt of court alleged in this case is what is usually referred to as civil contempt; that is to say a contempt which involves disobedience to a court order or breach of an undertaking in civil proceedings. The term is sometimes used in contra-distinction to a criminal contempt which is committed when there is a contempt in the face of the court, there is interference with the course of justice or where disobedience of a court order involves deliberate defiance or contumacious behaviour[1]. However, the distinction between civil and criminal contempt at least at the trial stage is now of less importance as the High Court in Witham v. Holloway has made it clear that the standard of proof for all contempt of court must be the criminal standard.

The first charge of contempt against Ms Adams refers to her alleged breach of Order No.2.

Ms Adams is in possession of a large number of documents which, on their face, would appear to belong to the body corporate. Her affidavit of documents filed in the proceeding discloses as much. On the trial of the proceeding itself, she advanced competing assertions as to books and records of the body corporate, claiming at one point that they'd been stolen and at another that she'd not brought them to court because she didn't realise she had to. This evidence, however, may not be properly before the Court on this application, which must be determined upon the basis of the evidence particularly adduced by affidavit and cross-examination on the hearing of this summons.

In order to be satisfied that Ms Adams has committed a contempt of court in failing to comply with Order No.2, the Court has to be satisfied beyond reasonable doubt, on the evidence before it, that she was in possession of documents fitting the descriptions set out in Order No.2 at the time the order was made and has failed to deliver them to the administrator.

Whilst Ms Adams' tendentious argument concerning ownership of the written material, which she admits she has, could never be regarded as having any real substance, the Court is unable to conclude beyond reasonable doubt that any of the documents to which I have referred were in fact the property of the body corporate so as to be affected by Order No.2. Such a finding could clearly be made as a matter of probability but not so as to discharge the onus of proof required for a conviction for contempt. Accordingly, the administrator's application that Ms Adams be adjudged in contempt of court for the being in breach of Order No.2 will be refused.

In her affidavit filed 13 November 2003 and in the course of the hearing, Ms Adams agreed that she would permit the administrator access to the records which she has for the purpose of his making copies to assist in his administration. Further, through her counsel, she has waived any implied undertaking as to confidentiality which might have attached to all of those documents disclosed by her in the affidavit of documents filed in the proceeding (if there was any such implied undertaking in this case, having regard to the way in which it arose). This will permit the administrator access to copies of those documents which were taken by the plaintiffs' then solicitors in the course of the discovery process. Thus Mr Dunlea will have access to the materials he requires for the purpose of his administration without the need for any further order.

Order No.3 required Ms Adams to pay to the administrator the sum of $6,000 on or before 10 May 2003. She did not do so. Subsequent demands by Mr Dunlea were met with a stubborn refusal by her to comply with the Court's order.

Having regard to the evidence which the Court has heard on this application and in particular having regard to the evidence of Ms Adams herself in cross-examination and the legitimate inferences which might be drawn from that evidence as to her means and ability to have complied with that order by 10 May as she was required to do, the Court is satisfied that Ms Adams' failure to pay to Mr Dunlea the $6,000 was not only a deliberate act but was also one done in circumstances where at the relevant time, she had ample means and ability to make such payment. The bizarre method by which she finally paid the $6,000 (on the assumption that the cheques handed to Mr Dunlea on 21 November have been honoured) simply reinforces this conclusion.

Whilst it is not necessary to ascribe a motive to Ms Adams to support the Court's finding, it is probable that it was no more complex than a desire to frustrate the administrator to the detriment of her co-unit owners. Her contumacy in refusing to comply with the Court's order was of a high order. It merits condign punishment.

There was much argument during the case as to whether the Imprisonment of Fraudulent Debtors' Act 1958 effectively deprives the Court of the capacity to sentence a person to gaol for failure to comply with a judgment of the court for the payment of money. The argument centred around the provisions of that Act and their inter-relation with the Rules of Court, particularly rr 66.02 and 66.05.

Rules 66.02 and 66.05 contemplate the enforcement of a judgment for the payment of money by committal in the circumstances set out in r 66.02. While such a step would be extreme, but for the fact that Ms Adams has now paid the $6000, this case may well have been sufficiently extreme to warrant such a sanction. Ms Adams has challenged the authority of the Court by refusing to comply with its order in the first place and by continuing in that refusal up to and indeed past the 11th hour and in the face of stern warnings from the Court delivered on 9 November upon the first return of this summons as to the consequences which could befall her should she persist in her contumacy.

In the circumstances, Ms Adams will be adjudged guilty of contempt of court for failure to comply with order No.3 of the orders of this Court of 28 April.

The question thus arises as to the penalty to be imposed. In National Australia Bank Ltd v. Juric No.3[2], Gillard J considered a passage from the judgment of Winneke P in Hugo Rich v. Attorney-General for the State of Victoria[3] in the Court of Appeal where the President gave consideration to the applicability of the provisions of the Sentencing Act 1991 to punishment for contempt of Court, although in the event the Court of Appeal did not need to finally determine the question. However Gillard J in Juric, by reference to Winneke P's judgment in Rich, considered that those parts of the Sentencing Act dealing with suspended sentences, at least, applied to punishment for contempts of Court. See also DPP v Johnson[4] per Osborn J, as to the applicability of those parts of the Sentencing Act 1991 relating to concurrency, cumulation and minimum sentences to contempt of court.

In this case the Court considers that it is appropriate that a fine be imposed on Ms Adams. However, by reason of its terms, the part of the Sentencing Act 1991 relating to fines, Division 4, appears inappropriate when it is sought to be applied to fines for this offence. Each of the provisions enabling a maximum fine to be calculated proceeds upon the basis that there will be a statutory provision which fixes the maximum number of months imprisonment that may be imposed so as to enable the calculation of an appropriate fine to be made. In the case of contempt of court there is no maximum term of imprisonment fixed by law and accordingly s.109 of the Sentencing Act 1991 provides no appropriate basis for calculation of the quantum of the fine. I conclude that where a fine is to be imposed for a contempt of court, the provisions of the Sentencing Act do not apply. This conclusion would appear to be not inconsistent with the Court of Appeal decision in Rich or with Gillard, J's decision in Juric No.3 and Osborn, J's decision in DPP v Johnson.

A fine may be imposed upon a contemnor in the inherent jurisdiction of the Court where disobedience of the Court's order is not casual, accidental or unintentional as I have found is the case here[5]. The amount of that fine should take into account the general principles of sentencing, particularly those of special and general deterrence. Further, having regard to the circumstances of this case and notwithstanding what I assume to be Ms Adams' conviction-free record, it is appropriate that a conviction for contempt be recorded against her.

Accordingly in the due course the Court will order that she be convicted and fined. The amount of that fine will, as counsel conceded it must, reflect the contumacious conduct in which it is found the contemnor has engaged. The fine must, in particular, demonstrate the readiness of the Court to ensure that its orders are obeyed so that those who successfully obtain such orders can do so in the secure knowledge that condign punishment will be inflicted upon those who would challenge the means by which society seeks to ensure that disputes are settled according to law. Ms Adams will be fined an appropriate amount having regard to all these relevant considerations including those to which I have referred.

Ms Adams has erected two structures on land the property of the body corporate. She was not entitled to do so. They must be removed. Indeed her counsel conceded in argument that the question of the removal of the sheds came down finally to a question as to how long she should be given to remove them.

Having regard to the matters put on her behalf by her counsel, namely that the Christmas period is almost here and the acknowledged difficulty of obtaining appropriate building contractors over that time, she will have until 7 February 2004 to remove the sheds. The Court will so order in due course.

Whatever might have been the original source of the security lights on the common property, at the time Ms Adams arranged for their removal in May of this year, they had become fixtures and were part of the property of the body corporate. She had no right to remove them. As I observed in argument, if she has any rights in respect of their installation, then those rights lie elsewhere and are probably statute barred long since in any event. They do not concern this Court at this time.

Ms Adams' counsel submitted that an order requiring Ms Adams to replace the security lights removed would be conducive to further disharmony within the subdivision. This is as may be. Ms Adams is not a law unto herself. As I observed in the judgment delivered in April of this year, she has engaged in what could be described as guerrilla warfare against her fellow unit holders over a very long period. The removal of the security lighting was simply the latest skirmish in that war. She must replace them.

Should she fail to do so, the consequences may be very well severe. The Court will make appropriate orders for the re-installation of the removed security lighting. Should Ms Adams, by reason of having disposed of those lights or for any other reason, be unable to comply with this order in the terms in which it is made, she must apply to the Court for appropriate relief under the liberty to apply reserved by the Court's order of 28 April.

On 10 July 2003, the administrator imposed a levy of $5,000 per unit on each of the unit holders. He did so pursuant to his powers as administrator appointed by the Court under the relevant provisions of the Subdivision Act 1988. The same Act provides that any debt payable to a body corporate is recoverable in a court of competent jurisdiction.

Mr McCormick for Ms Adams did not dispute that a levy so made could be recovered by the administrator pursuant to the liberty to apply reserved to him in this proceeding but he did contend that as the size of the levy would have required a special resolution of the body corporate had the body corporate been governed by its members such a levy was beyond the administrator's powers.

The administrator has all the powers of the body corporate and of the committee of the body corporate under the Subdivision (Body Corporate) Regulations 2001. There is no reason why those powers of the body corporate exercisable only by special resolution should be excluded from the powers conferred upon the administrator by the Act. I reject Mr McCormick's submission. The administrator had ample power to impose the levy. It is recoverable. Judgment will be entered in respect of it in due course.

A number of other matters were canvassed in the course of this application such as the failure of Ms Adams to cooperate with the administrator with respect to insurance and the question of whether there ought to be a variation in the liability of the unit holders for certain costs of the administration pursuant to s.38(7) of the Subdivision Act 1988. Those costs, specifically, were the costs and expenses of the administrator of seeking compliance by Ms Adams with the orders made on 28 April.

The former matter is now of no consequence except as to the possible extra costs of the insurance concerned brought about by Ms Adams' refusal to give the administrator an account of her insurance claims history. The matter may have, by now, been resolved. If not, the administrator can seek an order under s.38(7) of the Act if he considers it worthwhile to do so with respect to the increased insurance premiums.

With respect to the latter, that is to say the costs incurred by the administrator in bringing these proceedings, as I intend, subject to argument at the end of this judgment, to order Ms Adams to pay the administrator's costs of this application on an indemnity basis, there will be no need for any variation of the statutory provision to cover his costs and expenses of this application. However, should he at any time wish to make any other application with respect to the costs of his administration as having been greater by reason of Ms Adams' activities, he would need to make an application pursuant to the liberty to apply reserved in the order of 28 April.

1. That Halina Wendy Adams be adjudged guilty of contempt of court for failing to comply with an order of this court made on 28 April 2003 that on or before 10 May 2003 she pay to the administrator of Body Corporate Strata Plan No.17739 the sum of $2000 in respect of each of the three units owned by her in the subdivision to which the body corporate relates, that she be convicted of such contempt of court and that she be fined $10,000.

2. That on or before 4.00p.m. on 7 February 2004, Halina Wendy Adams, at her own expense, remove the two metal sheds presently located on the common property of Body Corporate Strata Plan No. 17739 at Alfred Street, Kew and make good such common property.

3. That by 4.00p.m. on 7 February 2004, Halina Wendy Adams, at her own expense, effect the reinstatement of all security lighting removed by her or at her request from the common property of Body Corporate Strata Plan No. 17739 on or about the 8 May 2003.

4. That there be judgment for Morris Dunlea as administrator of Body Corporate Strata Plan No. 17739 against Halina Wendy Adams in the sum of $15,000 in respect of the levy imposed by him upon unit holders in the said body corporate on 10 July 2003.

In this application the applicant Mr Dunlea seeks his costs. As Mr McCormick of counsel for Ms Adams has rightfully conceded, the normal order for costs where a finding of contempt has been made is that those costs be paid on an indemnity basis.

Mr McCormick has argued that there should be some reduction in that order for costs having regard to the fact that the administrator has not succeeded in respect of all his claims before the Court. Whilst that is undoubtedly true, in my opinion he has succeeded in substantially effecting the result which he sought, that is to say Ms Adams has been convicted of contempt and she is now subject to judgment in respect of the $15,000 and is required to carry out the remedial works which I have ordered. Having regard to the ordinary rule that costs follow the event, as Mr Dunlea has been successful he is entitled to his costs on the special basis referred to. There will be an order that Halina Wendy Adams pay the administrator's costs to be taxed on an indemnity basis.

[1] Witham v Holloway (1995) 183 CLR 525 at 530; AMIEU v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98.

[5] AMIEU v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 at 106 et seq.

Fraudulent Debtors' Act 1958