Siminton v Australian Prudential Regulation Authority

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND: AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

REASONS FOR JUDGMENT THE COURT 1 This is an appeal against an order in the nature of a declaration that the appellant was guilty of contempt by reason of his failure to pay a fine imposed upon him by the Full Court in an order dated 19 July 2006 and an order that the appellant be imprisoned for a period of four months. 2 The background facts are contained in the two decisions given today in appeals which were heard after each other earlier this week: Siminton v Australian Prudential Regulation Authority [2008] FCAFC 88; Siminton v Australian Prudential Regulation Authority [2008] FCAFC 90. 3 We have decided that the appeal should be upheld but not for any reasons argued by the appellant. The appellant's arguments were without substance and should be rejected. 4 On 14 December 2005, the Australian Prudential Regulation Authority (the respondent) commenced proceeding VID 1607 of 2005 (the principal proceedings) in this Court seeking interim, interlocutory and final relief against the appellant in relation to claimed contraventions of the Banking Act 1959 (Cth) (Banking Act). On 15 December 2005 Sundberg J, at an ex parte hearing, granted interim relief. 5 On 10 January 2006, after a hearing, Gray J made interlocutory orders in similar terms as those made by Sundberg J. The existence and terms of these orders are also relevant as will later appear. The orders made by Gray J (as formally served by the respondent on 9 May 2006) included: 1. Until the hearing and determination of this proceeding or further order, the Respondent, whether by himself, his servants or agents or otherwise, be restrained from: (a) receiving money from members of the public by way of deposit in the Terra Nova Cache or the Principality of Camside; (b) assuming or using the words "bank", "banker" or "banking":, or any words or phrases of like import, in relation to his, their or its business; (c) advertising, representing or stating that he, they or it will carry on banking business; (d) selling, transferring, dealing with, disposing of or otherwise encumbering or removing from Australia or causing to be removed from Australia any money (including, but not restricted to, cash), property or other assets he has whether held alone, jointly or in conjunction with others (including any accounts or property held in the name of the Principality of Camside or the Terra Nova Cache); (e) dealing with, withdrawing or disposing of, or giving any instructions in relation to the disposition or transfer of, all or any part of the moneys standing to the credit of the Respondent and/or his nominee in any account (whether held alone, jointly or in conjunction with any other person, including any accounts or property in the name of the Principality of Camside or the Terra Nova Cache and any account in relation to which the Respondent is a signatory or which the Respondent otherwise has authority to operate, whether or not the Respondent is named as an account holder and any account which may be operated for the benefit of the Respondent, the Principality of Camside or the Terra Nova Cache) in any bank, building society or other financial institution and, without limiting the generality of the foregoing, account number 3162 1027 8861 in the name of the Principality of Camside with the Commonwealth Bank of Australia; (f) … SAVE THAT with the consent in writing of the Applicant previously given, the Respondent may do any of the things referred to in (d), (e) or (f) in the manner and for the purpose for which the Applicant has so consented. 6 On 30 March 2006 Merkel J found the appellant guilty of contempt for breaching the orders made by Sundberg J and on 10 April 2006 ordered him to be imprisoned for 10 weeks. The appellant appealed to the Full Court and on 19 July 2006 the Full Court allowed the appeal and set aside the orders made by Merkel J, and in lieu of those orders imposed a fine of $50,000 which was to be paid within 60 days of the order. The relevant orders of the Full Court were: 1. The appeal be allowed. 2. Paragraph 2 of the orders of Merkel J made on 10 April 2006 is set aside and in lieu thereof it is ordered: (a) A fine in the sum of $50,000 be imposed on the appellant in respect of the contempt the subject of charges 1.1 and 1.2 of the statement of charge dated 4 January 2006 and charges 1.1, 1.2, 1.3 and 1.4 of the statement of charge dated 19 January 2006. (b) The fine be paid to the District Registrar within 60 days or such further time and by such instalments as the District Registrar may allow. (c) In the event that there is default in payment of the fine or in any instalment, the District Registrar shall apply to a judge of the Court for direction[s] concerning enforcement. 7 It was the appellant's failure to pay the fine imposed by the Full Court which was the foundation for the charge of contempt dealt with by the primary judge in the matter with which this appeal is concerned. It will be necessary to return to a further examination of the imposition of this fine in due course. 8 On 14 September 2006 the appellant filed a notice of motion seeking an order that the payment of the fine imposed by the Full Court on 19 July 2006 be stayed pending the hearing and determination of an application by the appellant to strike out the principal proceedings. 9 On 18 September 2006 that notice of motion was dismissed. 10 On the same day the appellant wrote to the Registrar seeking an extension of three months to pay the fine. On that day the Registrar extended the time within which the fine was to be paid to 2 October 2006. 11 On 27 September 2006 the appellant filed a notice of motion seeking to strike out the principal proceedings on the ground that those proceedings constituted an abuse of process. 12 On 2 October 2006 the appellant sought an extension of time from the Registrar within which to pay the fine. The application was refused. The appellant did not pay that fine then or at any later time, in whole or in part. On 3 October 2006 the District Registrar applied to the Court for directions. The primary judge made directions for the purpose of ascertaining whether the appellant's financial circumstances would permit him to pay the fine. 13 On 6 October 2006 the appellant's notice of motion seeking to dismiss the principal proceedings was dismissed. On 17 October 2006 the appellant filed a further notice of motion seeking to stay the orders made by the primary judge on 6 October 2006 pending the hearing and determination of the trial and/or pending the hearing and determination of an application for leave to appeal to the Full Court. On 19 October 2006 that notice of motion was dismissed. 14 On 6 November 2006 the primary judge directed the District Registrar to commence contempt proceedings for the failure by the appellant to pay the fine. It was those proceedings which led to the orders under appeal. The charge of contempt brought by the District Registrar was heard and determined in the principal proceedings brought by the respondent. However, at the hearing of so much of those proceedings as involved the charge of contempt brought by the District Registrar the respondent took no part. The District Registrar was represented by counsel. 15 The appellant complained on the present appeal that the motion for contempt for the failure to pay the fine ought to have been brought by the District Registrar in a new proceeding before the Full Court rather than in the principal proceedings. He contended that in any proceedings brought by the District Registrar the respondent to the principal proceedings should not have been a named party. The primary judge correctly rejected that submission: Australian Prudential Regulation Authority v Siminton (No 5) [2006] FCA 1340 at [5]. 16 In our opinion, the charge of contempt was appropriately commenced in the principal proceedings. Although the motion for contempt relied upon a failure by the appellant to comply with an order of the Full Court, the appropriate proceeding in which to bring that motion for contempt was in the principal proceedings. The order of the Full Court is no different to any other order of the Court and it must be complied with. If it is not complied with, then, pursuant to O 40 r 5, the proper proceeding in which to bring the complaint of contempt is the principal proceedings. It might be different if the contempt had been in the face of the Full Court. In those circumstances, it might have been appropriate to charge the appellant with contempt in that proceeding, but that is not the case here. 17 In any event, the appellant suffered no prejudice by the District Registrar bringing the charge within the principal proceedings. When the proceedings came to be heard, the respondent did not appear so whether or not the respondent was named as a party to the contempt proceedings did not, in the end result, matter. 18 It was argued that there could be no contempt proved unless the District Registrar established that the appellant had the capacity to pay the whole of the fine. We reject this argument. Although it may not have relieved the appellant from an ongoing obligation to pay any remaining balance it would be sufficient to establish a contempt to prove that the appellant had failed not only to pay the whole fine but even so much as he could in the circumstances. To that extent, at least, the failure to pay would be wilful. 19 A final argument, that the primary judge wrongly acted on an inference arising from the fact that the appellant gave no evidence, must be rejected for reasons we have given in Siminton v Australian Prudential Regulation Authority [2008] FCAFC 90. 20 Other arguments concerning alleged constitutional invalidity and abuse of power have been rejected in that decision and in Siminton v Australian Prudential Regulation Authority [2008] FCAFC 88. As we explained in Siminton v Australian Prudential Regulation Authority [2008] FCAFC 90, in dismissing an appeal against another term of imprisonment for contempt, the appellant was bound to comply with the orders made by the Full Court, notwithstanding any argument he wished to advance, unless or until they were set aside. 21 As earlier remarked, none of the arguments upon which the appellant relied were of any substance or afford a reason to uphold the appeal. However, there is a further matter which requires attention. 22 The Federal Court's power to punish for contempt is given by s 31(1) of the Federal Court of Australia Act 1976 (Cth) which provides: Subject to any other Act, the Court has the same power to punish contempts of its power and authority as is possessed by the High Court in respect of contempts of the High Court. 23 Section 24 of the Judiciary Act 1903 (Cth) identifies the High Court's power: The High Court shall have the same power to punish contempts of its power and authority as is possessed at the commencement of this Act by the Supreme Court of Judicature in England. 24 Where the contempt is based upon a refusal to comply with an order of the Court, the order must be clear and ascertainable: Australian Consolidated Press v Morgan (1965) 112 CLR 483 at 492, 503. There is no doubt that this order was clear. The order was to pay a fine of $50,000 within 60 days or within such extended time as directed by the Registrar. After the Registrar extended time to 2 October 2006, it was clear that the appellant had to pay that fine by 2 October 2006. 25 However, it was necessary for the District Registrar to prove the elements of the charge and to prove the charge beyond reasonable doubt: Witham v Holloway (1995) 183 CLR 525 at 534, 548. The District Registrar had to prove that the contempt was wilful and contumacious, not accidental or unintentional: Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 105-107, 111-113. 26 The District Registrar sought to prove that the appellant's conduct had been wilful by establishing that the appellant had the capacity or ability to pay the fine in whole or in part. The primary judge found this contention made out. The reason why the appellant was found guilty of contempt by not paying the fine was that the primary judge concluded that he had the capacity to pay at least part of it but had wilfully failed to do so. 27 The funds which were identified by the primary judge as the foundation for his conclusion that the appellant had the capacity to pay part of the fine were referred to (in Australian Prudential Regulation Authority v Siminton (No 8) [2007] 1612) as follows: 31 The circumstances in which Mr Siminton came to have access to the Holzheimer's Visa account are explained in detail in Siminton (No 7) at [23] and [36]. In summary, what occurred was that, in April 2006, Mrs Holzheimer obtained an additional card to operate the account by reporting the loss of a card held by her. She provided the replacement card to Mr Siminton who used it regularly from April 2006 until it was cancelled by the bank on [15] September 2006. Between 19 July 2006 and 16 August 2006 he used it on many occasions to purchase goods and services. On 16 August 2006 the account had a debit balance of $2,463.73. At about that time Mr Siminton gave instructions to a bank in Austria to transfer $25,000 (less commission) from an account controlled by him to the Holzheimer's Visa account. Pursuant to those instructions $24,981 was transferred into the Visa account on 16 August 2006. The account then had a credit balance of $22,517.27. On that day he used the card to pay $2,000 to his solicitor. On 18 August 2006 he withdrew $1,000 in cash from the account. He did so again on 30 August 2006. 32 I am, accordingly, satisfied that Mr Siminton had the financial capacity to pay at least $22,517.27 to comply, in part, with the Full Court's order. I am satisfied that his refusal to do so was wilful. He was well aware of his obligation to make the payment and he chose to use the funds at his disposal for other purposes. 28 No other funds were identified as ones available to the appellant from which he might have, but did not, pay the fine imposed by the Full Court. 29 During the proceedings, the appellant's counsel conceded that the appellant could have paid part of the fine. The concession was based upon an assertion that the orders made by Gray J did not extend to funds held overseas and did not extend to moneys falling into the possession and control of the appellant in Australia after the order was made. The primary judge rejected those arguments. He was correct to do so. For the purpose of the present appeal the overseas origin of the particular funds is irrelevant and need not be further discussed. It was the suggested availability of the funds once in Australia upon which the District Registrar and the primary judge relied. 30 Although the appellant conceded that he might, once the funds were in Australia, have applied them to pay part of the fine imposed by the Full Court, the question for determination, was whether, as the appellant asserted, he had the right to do so, or otherwise use them as he pleased, because they were not subject to the orders made by Gray J. The correct view is, as the primary judge held in the judgment here under appeal (at [33]), that the funds upon which the concession was based were subject to the orders of Gray J and that the appellant 'should not, therefore, have dealt with those moneys'. More specifically, to do so was, as the primary judge himself correctly found in Australian Prudential Regulation Authority v Siminton (No 7) [2007] FCA 1609 (Siminton No 7) a contempt of the orders of Gray J. 31 However, the primary judge thought it sufficient that the appellant had asserted an entitlement to the funds and actually used them for his personal purposes, even though contrary to the orders made by Gray J. He said (at [33]): 33 I found, in Siminton (No 7), that the funds transferred from the Austrian bank and other funds credited to the Visa account were subject to the "freezing order" made by Gray J in January 2006. Mr Siminton should not, therefore, have dealt with these moneys. This does not, in my opinion, lead to the conclusion that he lacked the capacity to make part payment. Counsel for Mr Siminton did not so submit. Mr Siminton, in fact, had obtained access to these funds and used them. He asserted an entitlement to some, at least, of the moneys covered by Gray J's order. He had the option of preparing an affidavit as to his means and establishing his entitlement to the funds. He chose not to do so. I accept the submission of counsel for the District Registrar that Mr Siminton could, had he wished to do so, lawfully have obtained the right to use the funds to pay the fine by exercising the liberty to apply granted to him by Gray J or by applying to vary Gray J's orders. He did neither of these things. 32 We do not agree that actual use of the funds, an assertion of a right to use them, or the facility of seeking leave to use them to pay the fine (which is, in any event, most unlikely to have been granted) indicates a lawful capacity to apply those funds to pay the fine. 33 In order to illustrate further why we disagree with the primary judge's ultimate conclusion on this issue it is necessary to return to the circumstances in which the fine was imposed by the Full Court. Merkel J was satisfied that, by dealing with money in bank accounts contrary to the orders made, in the first instance, by Sundberg J the appellant committed contempt which 'involved deliberate defiance of the Sundberg J orders and constituted a criminal contempt'. He said (Australian Prudential Regulation Authority v Siminton (No 3) [2006] FCA 397 at [10]): … because the disposal contempts were disguised steps calculated to defeat, and which in part defeated, the purpose of the Sundberg J orders, they amount to particularly serious contempts. 34 His Honour went on to say (at [12] - [13]): 12 Siminton has provided no evidence about his financial circumstances. However, APRA has adduced some evidence relevant to that matter. He was made bankrupt on 9 August 2001 and has failed to provide a statement of affairs or to deliver up his passport as required by the Bankruptcy Act 1966 (Cth) ('the BA'). As a discharge usually only occurs three years after the filing of a statement of affairs, the bankruptcy is likely to continue for at least three more years. Under s 58 of the BA, the property of Siminton, including 'after-acquired property' as defined in s 58(6), vested in his trustee on his bankruptcy. A fine imposed on a bankrupt is not provable in bankruptcy (see s 82(3) of the BA). There is no evidence that Siminton has any capacity to pay a fine and the interlocutory orders made in the proceeding prevent him from accessing any of the funds upon which he might otherwise lawfully draw upon to pay any fine. 13 In all the circumstances, the imposition of a fine on Siminton is not likely to have a significant effect upon him and, in any event, would be insufficient to vindicate the authority of the Court in respect of the disposal contempts. (Emphasis added) 35 For these contempts he sentenced the appellant to prison for 10 weeks. For other contempts he imposed a fine of $5,000. 36 During the appeal to a Full Court (decided in Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129) counsel for the appellant acknowledged that 'there was evidence before Merkel J that the order was personally served upon the appellant and that he read and understood the order' (at 141). Despite this acknowledgment, a member of the Full Court queried whether the order of Sundberg J served on the appellant had the endorsement required by O 37 r 2 of the Federal Court Rules.(Note: such a notice is not required if the appellant is present in court when the order is pronounced - O 37 r 2(5). The Court may also dispense with service as required by O 37 r 2 - O 37 r 2(6)). 37 In fact, the order of Sundberg J served on the appellant lacked the endorsement required by the Rules. 38 The appellant was permitted to amend his appeal to rely upon this ground. The orders made by Sundberg J were made ex parte so O 37 r 2(5) did not apply. The Full Court declined to dispense, under O 37 r 2(6), with the requirements of O 37 r 2. It concluded that there had been, accordingly, no power in the circumstances to commit the appellant to prison. The Full Court, however, found that there was a power to impose a fine. 39 The appellant argued that a fine should not be imposed as an alternative punishment. The practical effect of this submission, in light of the procedural error identified by the Full Court, was that no punishment would be imposed. The Full Court dealt with this argument as follows (at [79] - [81]): 79 Having set aside the order of Merkel J for committal it is then necessary to consider what penalty this Court should impose in respect of the contempt committed by the appellant. The appellant submitted that it was not appropriate for this Court to vary or alter the penalty as it was the trial judge's province to determine the appropriate penalty. He submitted, in the alternative, that it was undesirable that an undischarged bankrupt be fined although he did not make it clear why this was so other than to say that Merkel J had reached this conclusion. 80 This Court has the power to impose an alternative penalty pursuant to s 28 of the Federal Court of Australia Act 1976 (Cth). The contempts committed by the appellant were most serious contempts. We agree with Merkel J's characterisation of them. Although Merkel J was concerned about the efficacy of the imposition of a fine upon the appellant having regard to the fact that he was a bankrupt, we are satisfied that it is appropriate in all the circumstances that a substantial fine be imposed in recognition of the serious nature of the contempts committed. 81 In these circumstances we consider that an appropriate penalty to be imposed for the disposal contempts is $50,000.00. 40 We are not to be taken as suggesting that any course other than the imposition of a fine was appropriate in the circumstances. However, the difficulties referred to by Merkel J in the passages we set out earlier remained. They have come to pass in the present case. Nothing said by the Full Court casts any doubt upon the conclusions of Merkel J which are earlier set out and, in particular, the statement which we emphasised. 41 Accordingly, we do not think it is open to conclude that failure to pay the fine can be said to be wilful in the requisite sense if use of the only identifiable funds which are said to be available would constitute a contempt of other orders of the Court. To accept the proposition would amount to saying that the appellant was obliged to commit a contempt of court. The fact that the appellant used the funds for his own purposes was dealt with by the primary judge in Siminton No 7. The appellant was convicted of a contempt of Gray J's orders as a result. We have dismissed his appeal against the conviction and the 12 months term of imprisonment to which he was sentenced. It would equally have been a contempt of those orders if he had used the funds to pay a fine. 42 Although the appellant's counsel did not seek to withdraw the concession (that the appellant had capacity to pay at least part of the fine) on the appeal, we think that the appellant should not be held to the concession because the concession was based on a false legal premise and because, in fact, the District Registrar did not prove that the appellant had any monies which he could have applied to the payment of the fine without at the same time breaching the order made by Gray J. 43 In the present case the appeal therefore succeeds, although not for any reason argued by the appellant. However, the fine imposed by the Full Court remains unsatisfied. The appellant remains bound to pay it and liable to be found guilty of contempt if it is established that he wilfully failed, or fails, to do so. 44 This appeal should be allowed and the orders made by Tracey J on 28 November 2007 on the Notice of Motion of the District Registrar dated 15 December 2006 be set aside. 45 In lieu thereof, there ought to be an order dismissing the Deputy Registrar's notice of motion dated 15 December 2006. 46 The point upon which the appellant has been successful was not advanced by the appellant on the appeal or at first instance and, in those circumstances, there should be no order as to costs of the appeal or at first instance. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of this Honourable Court.

Associate: Dated: 30 May 2008 Counsel for the Appellant: Mr D Sharp

Solicitor for the Appellant: Erhardt & Associates

Solicitor for the District Registrar: Australian Government Solicitor