Plaintiffs v Defendants

I, Pantelis Charitopoulos of 39 Elderside Avenue, Fitzroy in the State of South Australia, Company Director make oath and say as follows:-

1. I am the third defendant named herein. I am a director of the second named defendant in this proceeding and am authorised to make this affidavit on its behalf.

2. I refer to the Reasons for Decision delivered by Her Honour Justice Dodds-Streeton on the 9th February 2007. I understand that Her Honour found:

(a) that the 5th May 2006 order made by the Court was served on me on the 9th May 2006 and the 2nd August 2006

(b) that I breached the 5th May 2006 order in that no vehicles or other assets were delivered up to the plaintiffs and no affidavit was filed within 72 hours of service of the Orders

(c) that the breach is continuing, the affidavits filed on my behalf falsely indicate that the relevant assets are not in the control of Haritopoulos Pty. Ltd. and that I have continued control of the outstanding vans and assets;

(d) that I had committed a contempt of the 5 May 2006 order.

3. At the time the Findings were made, I was overseas. My solicitors emailed to me a copy of the findings, as a result of which I emailed a letter to Duska Dobric advising of the Findings in relation to the control of the vehicles sold to him and requesting that he arrange to return the trucks and assets the subject of the Findings to Mason Gray and Strange. Now produced and shown to me marked "PC-1." Is a true copy of that letter.

4. On or about the 13th February 2007 Mr Dobric emailed me a response to my letter advising that he was not going to return the trucks and assets as Booze2U had purchased them and they were being used in its business and that he was going instruct solicitors in relation to the matter. Now produced and shown to me marked "PC-2" is a true copy of that email. I believe that the vehicles that are the subject of the proceedings are being used in the business of Booze2U.

5. I have subsequently spoken to Mr Dobric on a number of times subsequent to the correspondence by telephone during which times I have asked that he return the trucks and assets the subject of the Findings to Mason Gray and Strange, and on each occasion he has refused maintaining that Booze2U is entitled to possession of the vehicles and assets.

6. He has advise me that he has instructed lawyers to act for Booze2U and him in relation to the return of the trucks and other asset but to date I have not heard from his lawyers.

7. Since my return to Australia earlier this week I have tried to meet with Mr Dobric to discuss the return of the trucks and assets. I have been unable to meet with him until today. At that meeting he again refused to return the trucks and asset, and that he had instructed a solicitor, Ruth Carter, to act for him in relation to any action that I might take for the return of the trucks and the assets. He stated that neither I and/.or Haritopoulos Pty. Ltd. were entitled to have the trucks or the assets back.

8. Whilst I have, in light of Her Honour's Findings asked Booze2U to return the vehicles and assets I nonetheless believe the sale to Booze2U is legitimate. On the basis of my belief I do not believe that I or Haritopoulos Pty. Ltd. can institute proceedings to try and obtain the return of the trucks and assets.

9 The letter of Mr Charitopoulos to Dusko Dobric dated 10 February 2007, exhibited to the affidavit of Mr Charitopoulos sworn 30 March 2007, states as follows:

As you now I am presently over seas, but am writing to you on a matter that is very urgent and distressing.

I have just been advised by Tim Davies my lawyer in Melbourne that the Court has found me guilty of contempt of court in relation to me taking the trucks and other assets from the Athol Park premises prior to the auction.

For some reason the court does not believe that I sold the trucks and assets to Booze2U, and as a result the contempt is continuing. To over come this I need to return these to Mason Gray & Strange.

I know you are using the trucks and assets in your business, but ask that you return them to Mason Gray &Strange, and then maybe you can negotiate some type of deal with Jamie Codling or Sim Partners to get them back for your use. If this is done, I should be able to satisfy the court that the contempt is not continuing.

Dusko, I could go to gaol if this is not done so I ask that you do it straight away.

Thanks mate.

Pantelis

10 The letter of Mr Dobric to Mr Charitopoulos dated 12 February 2007, exhibited to his affidavit, states:

I have received your email asking me to sending the trucks that Booze2U purchased from you back to Mason Gray and Strange.

You correctly say that I am using the trucks in my business. My company bought them from your company and paid a deposit and is paying a fair price for them.

I am not returning them to Mason Gray and Strange. I have spent time effort and money to get the lunch rounds running and cannot afford to have these disrupted. I cannot risk not being able to get the trucks back from Mason Gray and Strange.

I am going to see a solicitor to protect my interests and that of Booze2U.

Dusko

4 April 2006 order

11 The second and third defendants pleaded guilty to contempt of the 4 April 2005 order. I refer to paragraphs 180-210 of the reasons for judgment. In the reasons for judgment, I considered the factors relevant to sentence, including the circumstances in mitigation advanced on their behalf, which I take into account. I also take into account that I have determined that the contempts should be treated as criminal contempts, that convictions will be recorded (which in itself constitutes an element of punishment) and that (as discussed below), the defendants will be ordered to pay the plaintiffs' costs of the contempt proceeding, estimated, on a solicitor-client basis, at $290,000-300,000. In the reasons for judgment, I concluded that a substantial fine was warranted in relation to the contempts of the 4 April 2006 order, but noted that the evidence on the financial circumstances of Mr Charitopoulos and Haritopoulos Pty Ltd was vague and contained some contradictions. In the reasons for judgment, I indicated that the second and third defendants would receive the opportunity to file and serve further evidence or submissions relevant to the penalty for the breach of the 4 April 2006 order, including the quantum of any fine.

12 No material relevant to the financial position of either the second or third defendant was, however, advanced.

13 Mr Charitopoulos's evidence on his financial position is discussed in detail in the reasons for judgment. While the evidence concerning his personal financial circumstances was contradictory, it indicated that Mr Charitopoulos had interests in family trusts and companies with significant assets and that he possessed three luxury vehicles, which indicated an affluent lifestyle. Mr Charitopoulos did not choose to give further evidence to resolve the ambiguities or to clarify the contradictions in his evidence on those issues. In particular, he gave no specific evidence about his personal assets and liabilities or his financial needs and commitments.

14 There was no evidence relevant to the quantum or the likely impact of any fine which may be imposed on him, or whether it might be necessary to extend time in order to enable him to pay any fine.

15 In the absence of further material, the Court also has no clear evidence on the financial circumstances of Haritopoulos Pty Ltd, including evidence as to the nature and quantum of its assets and liabilities. While I initially had some hesitation in imposing a fine on Haritopoulos Pty Ltd due to considerations of its potential effect on creditors, and I accept that a 'doubling up' of penalty should be avoided, Haritopoulos Pty Ltd advanced no evidence that the imposition of a substantial fine would have an adverse impact on the company or its creditors. Mr Charitopoulos's parents were, together with Mr Charitopoulos, directors of Haritopoulos Pty Ltd until 1 November 2006 and they remain the owners of all the issued shares in the company. Haritopoulos Pty Ltd was apparently wholly controlled by Mr Charitopoulos in relation to the conduct constituting the contempt of the 4 April 2006 order. There is no evidence that the persons who were, at that time, co-directors and beneficially interested in Haritopoulos Pty Ltd, took any steps to prevent the breach of the Court's orders or to cause the company to comply with the orders of the Court. In the circumstances, it is appropriate that a fine be imposed on Haritopoulos Pty Ltd.

16 Mr Garratt, senior counsel for the plaintiffs, referred to AMIEU v Mudginberri Station Pty Ltd.[1] He emphasised that a fine in an amount sufficient to vindicate the Court's authority should be imposed on both the second and third defendants, and that, in circumstances where no further evidence of the financial position of either defendant was advanced, the Court should proceed on the basis that each defendant could pay an appropriately substantial fine. He contended that a fine of any amount less than $100,000 for each defendant would be a "slap on the wrist." Mr Collinson declined to make any submission on the quantum of any fine.

17 In the circumstances (taking into account the costs order I intend to make against them), I consider that a substantial fine of $100,000 should be imposed on each of Mr Charitopoulos and Haritopoulos Pty Ltd for contempt of the 4 April 2006 order.

5 May 2006 order

18 The second and third defendants denied that service of the 5 May 2006 order had been effected on 9 June 2006 and 2 August 2006 and challenged other aspects of the case alleged by the plaintiffs, in what developed as complicated and protracted litigation. Mr Charitopoulos's conduct, both in relation to the contempt of the 5 May 2006 order and thereafter, was, in my opinion, wilful, flagrant and deliberately defiant. He exhibited a determination to retain control of the assets removed on 2 May 2006 from the Athol Street premises (itself a contempt of the 4 April 2006 order), regardless of the Court's 5 May 2006 order and irrespective of the rights and entitlements of other parties.

19 In my opinion, Mr Charitopoulos consistently gave untruthful evidence. He was not frank or candid. Although he gave an apology under oath, its effect was diminished by the matters referred to in paragraphs 190-201 of the reasons for judgment. He did not, in my opinion, demonstrate any genuine remorse.

20 There has at no stage been compliance, albeit belated, with the terms of the 5 May 2006 order. The second and third defendants have failed to deliver up to the plaintiffs any asset removed from the Athol Park premises on 2 May 2006 within 72 hours of service of the 5 May 2006 order, or at all. The purported, although belated, satisfaction of the requirements of paragraph 2 of the 5 May 2006 order (which required each of the second and third defendants to file and serve an affidavit within 72 hours of service, providing specified details of those vehicles listed in the schedule which were not returned in compliance with paragraph 1 of the 5 May 2006 order) was ineffective, as the affidavits of Mr Charitopoulos sworn on behalf of himself and Haritopoulos Pty Ltd on 31 August 2006 deposed to the sale to Booze2U, which I have found to be a collusive device.

21 I proceed on the basis of the findings set out in the reasons for judgment, including the finding that the sale by Haritopoulos Pty Ltd to Booze2U did not constitute a real impediment to the return of the assets removed from the Athol Park premises on 2 May 2006.

22 The validity and enforceability of the sale to Booze2U is, strictly speaking, irrelevant to the finding of contempt of the 5 May 2006 order, as the assets were not returned and no affidavits as to the specified items which were not delivered up were filed and served within 72 hours of the service of the 5 May 2006 order. The validity and enforceability of the sale to Booze2U are, however, potentially relevant to sentence, because the impossibility of returning the assets could in some measure excuse the continuing failure to comply with order 1 of the 5 May 2006 order. Further, if the sale to Booze2U were valid and could not be rescinded, the affidavits of 31 August 2006, although belated (and thus incapable of avoiding the contempt), would be accurate, and would have satisfied the requirements of paragraph 2 of the 5 May 2006 order.

23 If, however, contrary to my finding, the sale to Booze2U is valid and cannot be rescinded, and thus constitutes a genuine impediment to the return of the vehicles and other assets, it is an impediment which was deliberately created by Mr Charitopoulos, who, in flagrant breach of his legal obligations, concluded what was, on any view, an unauthorised sale of unlawfully seized assets, thereby putting it beyond his power to rectify or redress his breach of the 4 April 2006 order.

24 Mr Collinson contended that, if, as I have found, the sale to Booze2U were a collusive device, Mr Dobric's current refusal to restore the assets nevertheless constituted a real obstacle to the defendants' ability to deliver up the assets as required by the 5 May 2006 order.

25 Mr Charitopoulos's affidavit sworn 30 March 2007 and the exhibited correspondence demonstrate no more than a mild request to Mr Dobric to return the assets, which request has been refused. There is no evidence that Mr Charitopoulos has negotiated with Mr Dobric to attempt to repurchase or regain the assets or that he has instructed solicitors to make a demand, or that he has taken any other steps legally to challenge Booze2U's retention of the assets, in circumstances where the evidence does not establish that any deposit was paid as required by the alleged sale agreement and Mr Dobric and the second and third defendants have conceded that the balance of the purchase price has not been paid.

26 The plaintiffs' solicitors, by a letter to the defendants' solicitors dated 5 October 2006, stated that the plaintiffs would accept payment of the sum of $109,076.85 "representing the value of the assets taken from the Receivers on 2 May 2006".

27 In October 2006, the sum of $72,549.60 was tendered on behalf of the defendants as payment for the outstanding vehicles, save for one vehicle which did not sell at auction. The plaintiffs ascribed a value of about $36,000 to that vehicle, which the second and third defendants disputed. The solicitors for the plaintiffs did not bank the cheque for $72,549.60. There is no evidence that the second and third defendants took any additional or effective measures satisfactorily to compensate the plaintiffs for the outstanding items until April 2007.

28 At the hearing on 3 April 2007, the second and third defendants, through their counsel, undertook, "most reluctantly", to pay the additional sum of approximately $36,000 to the plaintiffs. The sum of $109,076.85 was paid on 11 April 2007 (being the amount originally tendered plus $36,527.25). The payment constituted an amount of compensation for the vehicles satisfactory to the plaintiffs. (It is not entirely clear whether the payment covered the other assets removed from the Athol Park premises). The payment was a significant measure in remedying the consequences of the contempt of the 5 May 2006 order, although it did not nullify the contempt. While I take the payment into account in favour of the second and third defendants, it was only made after almost a year, during which time the second and third defendants neither returned, nor offered satisfactory compensation for, the assets removed in contempt of the 4 April 2006 order. Rather, they conducted their affairs as if the 5 May 2006 order was of no effect. The process of the Court was set at nought.

29 I have already considered the evidence which Mr Charitopoulos advanced in relation to his personal circumstances and character in relation to the contempt of the 4 April 2006 order. I again take those matters into account in his favour in relation to the contempt of the 5 May 2006 order, including Mr Charitopoulos's relative youth, his family circumstances and commitments, his previous good character and standing in the Adelaide community, his lack of previous convictions save for a driving offence and the stress to which he testified, resulting from the financial difficulties of his family's business. I take into account that he will be the subject of a conviction for a criminal contempt, which will operate as a punishment. I also take into account that the second and third defendants will be required to pay the plaintiffs' costs of the contempt proceeding on a solicitor-client basis, as discussed below.

30 Nevertheless, the contempt of the 5 May 2006 order is extremely serious. The fundamental purpose of the 5 May 2006 order was to cause the second and third defendants to rectify their breach of the 4 April 2006 order by restoring the assets which they had caused to be removed from the Athol Street premises, in contempt of that order. That purpose has been consistently thwarted by the conduct of Mr Charitopoulos and, even now, has not been achieved.

31 I refer to the conclusions on the contempt of the 5 May 2006 order set out in the reasons for judgment. The observations set out in the reasons for judgment on the nature and gravity of the contempt of the 4 April 2006 order apply equally to the contempt of the 5 May 2006 order. There is a significant need to uphold the authority of the Court and the dignity of the law, a need for specific and general deterrence and a need to impose an appropriate punishment. Mr Charitopoulos's personal culpability is high. The aggravating features include his prolonged, deliberate and continuing defiance of the Court's order and his apparent lack of remorse.

32 Although a sentence of imprisonment is a last resort, Mr Charitopoulos's contempt of the 5 May order warrants a term of imprisonment. Mr Garratt argued, and I accept, that, irrespective of the payment made, the vindication of the rule of law requires that Mr Charitopoulos serve a sentence of at least 30 days imprisonment. Taking into account the payment and other mitigating factors in Mr Charitopoulos's favour, I shall impose a sentence of 30 days' imprisonment.

33 Haritopoulos Pty Ltd is also adjudged guilty of contempt of the 5 May 2006 order. The contempt should be treated as a criminal contempt and a fine of $100,000 should be imposed.

Costs of the contempt proceeding

34 Rule 75.14 of the Supreme Court (General Civil Procedure) Rules 2005 provides:

"The costs of an application for punishment for contempt shall be in the discretion of the Court whether an order for committal is made or not."

35 In a contempt proceeding, costs remain in the discretion of the Court but the usual order is that the contemnor pay costs on a solicitor-client basis.

36 I refer to the analysis of Gillard J in Law Institute of Victoria v Nagle[2] and Pico Holdings Inc v Voss,[3] NAB v Juric (No. 2),[4] and the judgment of Kaye J in Chan v Chen (No. 3).[5]

37 In National Australia Bank Limited v Juric (No 2),[6] Gillard J observed that it is only when special circumstances are shown that costs should be paid on any basis other than that of solicitor-client, as a "litigant who must come to court to enforce an order which has been breached by contempt, or to have a person dealt with [for] contempt, should not be out of pocket." While there is no binding rule, and the Court's discretion is unfettered, it is a common or usual practice to order that the contemnor pay the plaintiff's costs on a solicitor-client basis.[7]

38 In the present case, the plaintiffs' estimated costs of the contempt proceeding are $290,000-$300,000. There are no circumstances which would warrant an exercise of the Court's discretion to order costs other than on the usual solicitor-client basis. The plaintiffs were obliged to approach the Court in relation to the second and third defendants' successive breaches of its orders, in order to vindicate both the plaintiffs' rights and the public interest in maintaining the rule of law. The second and third defendants' contempts have resulted in complex and prolonged litigation. The second and third defendants should therefore pay the plaintiffs' costs of the contempt proceeding, including any reserved costs, on a solicitor-client basis.

[1] [1986] HCA 46; (1986) 161 CLR 98.

[2] [2005] VSC 47 (3 March 2005) at [26].

[3] [2002] VSC 319 (9 August 2002) at [87] - [96].

[4] [2001] VSC 398 (10 October 2001) at [67] - [70].

[5] [2007] VSC 52 (8 March 2007) at [27] - [36].

[6] [2001] VSC 398 10 October 2001 at para 70.

[7] Pico Holdings Inc v Voss [2002] VSC 319 (9 August 2002) at [86]-[93].