Ryan v Wright

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4638/03 MICHAEL RYAN & ANOR v CRAIG WRIGHT & ANOR (NO 2) JUDGMENT 1 Craig Wright and his wife Lynn Wright were charged with contempt of court. They did not call evidence at the hearing. I found Mr Wright guilty of contempt and the charges against Mrs Wright not proved. At the hearing as to penalty, Mr Wright chose to swear an affidavit. Over objection that its contents were basically a challenge to my findings, I allowed the affidavit on the restricted basis that it went to Mr Wright's state of mind. 2 The applicants, Michael Ryan and DeMorgan Information Security Systems Pty Ltd, sought to cross examine Mr Wright. I was loath to allow cross examination. However, Mr Wright consented to being cross examined. I limited the cross examination to matters going to the deponent's state of mind. 3 On 4 September 2003, Mr and Mrs Wright gave an undertaking to the court to refrain from directly or indirectly carrying on a business in competition with DeMorgan either through themselves or any associates as that term was defined in a shareholders' agreement and to refrain from directly or indirectly approaching either through themselves or through any associates any company, business, entity or person who was or had been as at 8 August 2003 a customer of DeMorgan. 4 In Ryan v Wright [2004] NSWSC 749, I found that Mr Wright had between 4 September 2003 and 23 October 2003, when the undertakings were in force, directly or indirectly approached the Australian Stock Exchange, Rail Infrastructure Corporation and News Limited all of whom were DeMorgan customers as at 8 August 2003 and that he directly or indirectly carried on business in competition with DeMorgan by undertaking work for ASX, RIC and News being work that DeMorgan had or could have undertaken for those customers. 5 During that period from 4 September 2003 to 23 October 2003, I found that Mr Wright made or received telephone calls from ASX on 14 occasions and on six occasions visited the offices of ASX signing himself in as a representative of Ridges Estate Pty Ltd of which Mr and Mrs Wright were the sole shareholders, directors and secretaries and which conducted a business similar to that of DeMorgan. With respect to RIC, I found that Mr Wright had made or received telephone calls on 43 occasions and communicated by way of email on 11 occasions during that period. With respect to News, I found that he had made or received 11 telephone calls communicated by email on five occasions and Ridges quoted $10,000 for work done up until 23 October 2003. 6 That pattern of behaviour constituted deliberate defiance of the undertakings, in my view. 7 In his affidavit, Mr Wright swore that he believed he would regain control of DeMorgan and thus its business would continue to be the primary source of wealth generation for him and his wife. He said he had no interest in harming DeMorgan's business by competing with it and, while he was subject to the undertakings, he never contemplated approaching a customer of DeMorgan for the purpose of competing for its business. Nonetheless, he did approach DeMorgan's customers and Ridges was carrying on business in competition with it. 8 In his affidavit and in cross examination Mr Wright swore that he prepared a document for ASX in the name of Ridges because his solicitor advised him not to use the name DeMorgan. No evidence was tendered from the solicitor. I find that explanation implausible and I reject the testimony. 9 Both in his affidavit and in cross examination, Mr Wright spoke of contact with employees of customers of DeMorgan. He said he did not understand the undertakings as restraining him from communicating with employees who were not officers of customers of DeMorgan. There was no basis for Mr Wright to limit his undertakings in that fashion. 10 There was nothing in Mr Wright's affidavit or his cross examination that suggested that the breaches of undertaking were casual, accidental or unintentional. That being so, Mr Wright's wilful disobedience of his undertakings constituted criminal contempt (Australian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 108, 113). 11 In his favour, Mr Wright who is 33 years of age, has never before been charged with a criminal offence. Since he was 15 he has been regularly involved in work for charitable organisations and references from charitable organisations associated with the Uniting Church and with St Vincent's Community Services were before me. 12 I also take into account the limited period in which the undertakings were breached. On 23 October 2003, a notice of motion was filed upon which, on 30 October 2003, orders were made by the court in terms of the undertakings given on 4 September 2003 and a further undertaking given on 17 October 2003. No evidence was led to suggest that there had been any breach of the orders made on 30 October 2003. 13 On the other hand, there was no suggestion of contrition on the part of Mr Wright. Having stated that he disagreed with my findings and had instructed his solicitors to lodge an appeal and he understood a holding appeal had been lodged, he stated: "In spite of that appeal, if the Court ultimately maintains that I have breached my undertakings and/or the orders of the Court then I apologise to the Court. It was never my intention to breach the undertakings that I gave or the orders of the Court." 14 In the course of his solicitor's final submissions, I asked whether Mr Wright freely and willingly apologised to the court. His solicitor took instructions from his client and said he did. I do not accept that belated indication of an apology as a purging of Mr Wright's contempt. The whole tenor of his affidavit and his manner in the witness box under cross examination was one of belligerent adherence to his views. 15 The Supreme Court Rules 1970, Pt 55 r 13(1) provided that where a contemnor was not a corporation, the Court might punish contempt by committal to a correctional centre or fine or both. 16 In Mudginberri at 107 a majority of the High Court explained the purpose of punishment for contempt. Having referred to the distinction between criminal and civil contempt, the majority went on to say: "In the light of these complexities it is not surprising that the distinction between the two classes of contempt has been subjected to increasing scrutiny. The theoretical distinction between the two classes overlooks the underlying rationale of every exercise of the contempt power, namely that it is necessary to uphold and protect the effective administration of justice. Although the primary purpose in committing a defendant who disobeys an injunction is to enforce the injunction for the benefit of the plaintiff, another purpose is to protect the effective administration of justice by demonstrating that the court's orders will be enforced. As the authors of Borrie and Lowe's Law of Contempt , 2nd ed (1983) say, at p 3: "If a court lacked the means to enforce its orders, if its orders could be disobeyed with impunity, not only would individual litigants suffer, the whole administration of justice would be brought into disrepute"." 17 In Director-General of Department of Fair Trading v Yang (2002) 132 A Crim R 438, it was common ground that the sentencing principles in the Crimes (Sentencing Procedure) Act 1999 applied if a contemnor was to be sentenced to imprisonment in criminal contempt proceedings. 18 It A-G for NSW v Whiley (1993) 31 NSWLR 314 at 321 it was held that the provisions of the former Sentencing Act 1989 applied where a person was imprisoned for contempt. At 320 the court said: "A conviction for contempt of court is a conviction for an offence which is criminal in nature. Punishment of the convicted contemnor must therefore take into account considerations normally applicable to the punishment of crime in general and this crime in particular. It was said by Kirby P in Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309 at 314: "…it is appropriate to bear in mind the purposes of punishing the contemnor; deterring the contemnor and others in the future from committing like contempts; and denouncing the conduct concerned in an approximately emphatic way." Being a common law offence there is no statutory maximum penalty. Punishment for contempt is referred to in Supreme Court Rules 1970, Pt 55, r 13(1) but, as was said in Registrar of the Court of Appeal v Maniam (No 2), this rule confirms the court's power of punishment but does not exhaust it." 19 In Maniam (No 2) at 314 the court had said that the Supreme Court Rules 1970, Pt 55, r 13(1) was declaratory of the court's power to punish for contempt of court but did not exhaust it. That proposition was not doubted in Whiley. 20 Whiley was criticised on the basis that it ought not apply to civil contempt by Handley JA in Young v Registrar, Court of Appeal (1993) 32 NSWLR 262 at 288 (See also, Powell JA at 292). It was also criticised by Hunt CJ at CL in Wood v Galea (1996) 84 A Crim R 274 at 276-277. His Honour felt himself bound to conclude that once punishment for a certain term was to be imposed in criminal contempt proceedings, it had to be imposed in accordance with the Sentencing Act 1989. 21 In my view, the authorities establish that the court is not confined to the Crimes (Sentencing Procedure) Act 1999 for its power to punish for contempt of court. The court may rely on its inherent power or its declaration in the Supreme Court Rules 1970, Pt 55, r 13(1). But once it is determined that a prison sentence is appropriate, the sentencing principles in the Crimes (Sentencing Procedure) Act 1999 must be applied. In my view, the concession was made correctly in Yang. 22 The Crimes (Sentencing Procedure) Act 1999, s 21A(1) provided that in determining an appropriate sentence, the court was to take into account specified aggravating factors, specified mitigating factors and any other objective or subjective factor that affected the relative seriousness of the offence. Section 21A(2) prescribed the aggravating factors. They included that the offence was part of a planned or organised criminal activity (par (n)). The mitigating factors were prescribed in s 21A(3). They included that the offender did not have any record of previous convictions (par (e)), the offender was a person of good character (par (f)), the offender was unlikely to re-offend (par (g)), the offender had good prospects of rehabilitation (par (h)). I have taken these matters into account in addition to the matters set forth above. 23 In my view Mr Wright's deliberate flouting of his undertaking makes this a serious offence. His lack of contrition exacerbates its seriousness. There is a need to bring home to a contemnor the seriousness of his contempt. For the purposes of the Crimes (Sentencing Procedure) Act 1999, s 5(2) these are my reasons for my determining that a sentence of imprisonment is required in this case. I propose to sentence Craig Wright to a term of imprisonment of 28 days. Under s 46 I am not required to set a non-parole period. 24 The Crimes (Sentencing Procedure) Act 1999, s 8(1) provided that instead of imposing a sentence of imprisonment on an offender, a court might make a community service order directing the offender to perform community service work for a specified number of hours. The procedures with respect to such orders are set out in Pt 7 of the Act. That provision did not empower the making of a custodial sentence and an order for community service. 25 In Maniam (No 2) at 319, however, the Court of Appeal concluded that while the power to order community service under the then Community Service Orders Act 1979, s 4 did not extend to contempt proceedings, the court was entitled to act under its inherent power. It was not contested that the court might, in effect, impose an obligation of community service as a condition for suspending the operation of a fine that would otherwise have been imposed. 26 The Crimes (Sentencing Procedure) Act 1999, s 12(1) provided for the suspension of a custodial sentence of not more than two years upon entry into a good behaviour bond. It did not provide for suspension upon undertaking community service. 27 The Supreme Court Rules 1970, Pt 55, r 13(3), however, provided that the court might make an order for punishment on terms, including a suspension of punishment. I propose to act under that rule. 28 In Maniam (No 2), the Court of Appeal suspended the fine upon the contemnor undertaking to the court that he would perform voluntary service as a medical practitioner at Liverpool Hospital upon duties reasonably directed by the director of medical services or his delegate, that he would cause to be provided to the Registrar of the Court of Appeal by a specified date a certificate of the director of medical services certifying to his satisfactory performance of the voluntary service and, as required by the court, he would appear before it to be further dealt with if called upon having regard to his compliance with the undertaking. 29 I propose to take a similar course. Mr Wright has worked with Uniting Care Burnside Hastings Family Support Centre in the past. I propose to suspend the prison term if Mr Wright undertakes to provide voluntary service to that organisation. That organisation has indicated that it is prepared to accept Mr Wright for that purpose. 30 An appeal has been lodged from my judgment and I propose to grant a short stay of execution of my orders to enable an application for a further stay to be made to the Court of Appeal. 31 So far as the costs of the proceedings are concerned, in Degman Pty Ltd (in liq) v Wright (No 2) (1983) 2 NSWLR 354 at 358 Holland J said that in his experience it was quite common to find, in cases where an application was made to the court for committal for contempt, an order for costs designed to give a party a complete indemnity by ordering the contemnor to pay the other party's costs on a solicitor and client or solicitor and own client basis. 32 The matter is complicated because the case for contempt against Mrs Wright failed and ought not to have been brought, in my view, on the negligible evidence that was led against her. If the case against her had been heard separately, I would have been minded to order indemnity costs in her favour. 33 The amount of time devoted to the case against Mrs Wright was slight. Balancing the positions of the parties as best I can, it seems to me that there should be no order for costs in favour of Mrs Wright and an order for costs on the ordinary basis against Mr Wright. 34 The orders I make are the following: (1) I dismiss the charges against Lynn Wright. (2) I declare that Criag Wright is guilty of contempt of court in that between 4 September 2003 and 23 October 2003 he, without justification, breached an undertaking given by him and Lynn Wright on 4 September 2003 to the court to refrain from: (a) directly or indirectly carrying on a business in competition with DeMorgan Information Security Systems Pty Ltd either through him and Lyn Wright and/or any "associates" (as that term is defined in clause 1.1 of the shareholders' agreement dated 30 June 2003); (b) directly or indirectly approaching either through him and Lynn Wright and/or through any "associates" (as that term is defined in clause 1.1 of the shareholders' agreement dated 30 June 2003) any company, business, entity or person who is or was, as at 8 August 2003, a customer of DeMorgan Information Security Systems Pty Ltd. (3) I sentence Craig Wright to a term of imprisonment of 28 days to commence 28 days after this order takes effect. (4) I order that the punishment in order (3) be suspended upon condition that Craig Wright undertake in writing to the Registrar in Equity within 14 days of this order taking effect that: (a) He will perform 250 hours of voluntary service with Uniting Care Burnside Hastings Family Support Centre at Port Macquarie at times and upon duties reasonably directed by the coordinator of the centre or her delegate; (b) He will cause to be provided to the Registrar in Equity within 21 days of this order taking effect, a certificate of the coordinator of Uniting Care Burnside Hastings Family Support Centre that she or her delegate is prepared to supervise 250 hours of voluntary service to be performed for the centre by Craig Wright; (c) Within six months of this order taking effect, he will cause to be provided to the Registrar in Equity a certificate of the coordinator of Uniting Care Burnside Hastings Family Support Centre certifying to his satisfactory performance of the 250 hours of the voluntary service; and (d) As required by the court, he will appear before it to be further dealt with if called upon to do so having regard to his compliance or non-compliance with the undertaking.

(5) I order Craig Wright to pay the costs of the proceedings. (6) I direct the Registrar in Equity to hold the passport of Craig Wright delivered up in accordance with my previous order to be returned to him upon receipt of the certificate referred in order 4(c) or upon further order of the court. (7) Orders (3) and (4) will take effect upon the termination of any stay of execution of those orders. (8) I stay the execution of orders (3) and (4) for 14 days.

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