Specialty Fashion Group Limited v Muirhead Nominees Pty Ltd & Ors

Supreme Court of NSW|2009-07-29|Before: Bergin CJ

CITATION : Specialty Fashion Group Limited v Muirhead Nominees Pty Ltd & Ors [2009] NSWSC 754

HEARING DATE(S) : 29 July 2009 JURISDICTION : Equity

DECISION : Plaintiff may proceed in respect of consent orders - Charge against non-consenting party dismissed

LEGISLATION CITED : Civil Procedure Act 2005, s 87 Evidence Act 1995, s 128A

Kirkpatrick v Kotis [2004] 62 NSWLR 567 CASES CITED : Ross v Internet Wines Pty Ltd [2004] 60 NSWLR 436 Vasil v National Australia Bank Ltd (1999) 46 NSWLR 207

Specialty Fashion Group Limited (Plaintiff) Beautree Pty Ltd (Third Defendant) PARTIES : Richard Bamford (Fourth Defendant) A.E.M. Holdings Pty Limited (Eighth Defendant) Patricia Yonon (Ninth Defendant)

COUNSEL : R Beech-Jones SC/MA Friedgut (Plaintiff) RD Marshall/PK Bruckner (Third, Fourth, Eighth and Ninth Defendants)

SOLICITORS : Arnold Bloch Leibler (Plaintiff) Whitehead Cooper Williams (Third, Fourth, Eighth and Ninth Defendants)

1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2765 of 2009 SPECIALTY FASHION GROUP LIMITED v MUIRHEAD NOMINEES PTY LIMITED ACN 062 711 175 & ORS JUDGMENT 1 This is a preliminary application brought by the third, fourth, eighth and ninth defendants in respect of the Notice of Motion brought by the plaintiff for orders that those defendants be found guilty of contempt of this Court in failing to comply with orders made on 15 May 2009. 2 The Statements of Charge in respect of those defendants rely upon ex parte orders made on 12 May 2009 and consent orders (as between the plaintiff and the fourth, eighth and ninth defendants (the defendants)) on 15 May 2009. The orders made on 12 May 2009 included the following:

On the plaintiff through its Senior Counsel giving the undertakings on page 14 of the document entitled annexure A Freezing Order initialled by me and dated today I make the orders in that Freezing Order in paragraphs 1 to 7 and 10 to 17 as amended and initialled by me.

I order that the plaintiff serve a copy of the Associate's Record of Proceedings with the orders taken out.

The matter is returnable at 10.00 am on 15 May 2009.

I grant leave to the plaintiff to bring a Motion for orders in terms contained in paragraphs 8 and 9 of the proposed draft order. Such Motion is returnable at 10.00 am on 15 May 2009. 3 The orders sought in paragraphs 8 and 9 of the Freezing Order were not made. Those paragraphs sought a disclosure affidavit and the following exchange took place (tr 6):

Beech-Jones: …Over the page we have added a further order, that those identified persons tell us what happened with the money.

Her Honour: There is some new procedure about putting an affidavit in an envelope. You will have to have a look at that. Let me explore this with you: isn't the most sensible course, to give you some ex parte relief in the form of a freezing order but with an urgent return date and then provide for the regime for disclosure and information? In other words, you serve all this immediately today and it comes back tomorrow at 2 pm so that in the circumstances there can be either a consensual regime for the provision of information or the other side being aware of the application for information. 4 On 15 May 2009 the defendants' consented to the following orders:

1 Orders that, subject to the First and Second Provisos referred to below: (a) on or before 5.00pm on Wednesday 27 May 2009 to the best of their respective abilities: (i) each of the defendants inform the plaintiff in writing of all of that defendant's assets worldwide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject and the amount owing in respect of any such mortgage, charge or encumbrance) and the extent of that defendant's interest in the assets including but not restricted to specifying the name and address of any bank, building society or other financial institution at which there is or has been at any time since 1 July 2005 an account in that defendant's name or under his/her/its control, whether alone or together with any other person or entity, together with the number of such account, the name of the branch, the name or names of the persons or entities in whose name the account is, and the balance therein at the date of service of notice of this order; and (ii) each of the defendants provide copies of any statements concerning the above bank accounts that are in that defendant's possession; (iii) in the case of each of the first defendant, third defendant, fifth defendant, sixth defendant, seventh defendant, eighth defendant, twelfth defendant, thirteenth defendant, fourteenth defendant, fifteenth defendant, sixteenth defendant, seventeenth defendant and nineteenth defendant, provide copies of their respective financial statements for the periods ended 1 July 2005, 1 July 2006, 1 July 2007 and 1 July 2008; (iv) each of the defendants swear and serve on the plaintiff an affidavit setting out the information in paragraph 1(a)(i) above.

2 Orders that, subject to the First and Second Provisos referred to below, on or before 5.00pm on Wednesday 5 June 2009, each of the first defendant, second defendant, third defendant, fourth defendant, fifth defendant, ninth defendant and eleventh defendant to the best of their respective abilities: (a) inform the plaintiff in writing of: (i) the amounts received and the date of receipt by each of Muirhead Nominees Pty Ltd, Beautree Pty Ltd and Willow Glade Pty Ltd in respect of invoices rendered by them or purportedly by them to the plaintiff from 1 July 2004 to date; (ii) the bank account into which the monies were received; (iii) if the funds were disbursed, to whom, when and why the funds were disbursed; (iv) swear and serve on the plaintiff an affidavit setting out the above information.

3 Orders that, subject to the First and Second Provisos referred to below, on or before 5.00pm on Wednesday 27 May 2009, each of the first defendant, second defendant, third defendant, fourth defendant, fifth defendant, ninth defendant and eleventh defendant to the best of their respective abilities provide the plaintiff with copies of: (a) any trust deed of and concerning the Feldman Family Trust; (b) any trust deed of and concerning the Bamford Family Trust; The above orders are subject to the following provisos: The " First Proviso " means: (a) The First Proviso applies to each defendant that is not a corporation and that wishes to object that compliance with the above orders (or one or more of the above orders) may tend to incriminate that defendant or make him or her liable to a civil penalty; (b) That defendant must, on or before 5.00pm on Wednesday 20 May 2009, file a notice of motion applying to revoke the order/s made above pursuant to section 87 of the Civil Procedure Act 2005. The notice of motion must be supported by an affidavit which identifies the grounds for making the application; (c) If any defendant files any such notice of motion, that defendant need comply with the above orders only to the extent, if any, that it is possible to do so without disclosure of the material which may tend to prove that that defendant has engaged in culpable conduct; and (d) If any defendant files such a notice of motion, the Court may give directions as to the filing and service of affidavits setting out such matters as the defendant wishes to place before the Court in support of his or her application. The " Second Proviso " means: (a) The Second Proviso applies to each defendant that is a corporation and all of the persons who are able to comply with the above orders on that defendant's behalf and with whom that defendant has been able to communicate, wish to object that compliance may tend to incriminate them respectively or make them respectively liable to a civil penalty; (b) That defendant must, on or before 5.00pm on Wednesday 20 May 2009, notify the plaintiff in writing that all of the persons referred to in (a) wish to take such objection and identify the extent of the objection; (c) If any defendant gives such notice, that defendant need comply with the above orders only to the extent, if any, that it is possible to do so without disclosure of the material in respect of which the objection is taken; and (d) If any defendant gives such notice, the Court may give directions as to the filing and service of affidavits setting out such matters as that defendant may wish to place before the Court in support of its application.

4 An order that the defendants pay the plaintiff's costs.

5 Such further or other orders or relief as the circumstances of this case may require.

5 Mr Marshall, leading Mr Bruckner, for the defendants, submitted that the Court should not proceed further with this Motion because on the construction of the orders made on 15 May 2009 the defendants could not be found guilty of contempt. 6 The plaintiff relied upon the affidavit of John Mitchell sworn 9 July 2009. Mr Mitchell is a partner of a firm of solicitors known as Arnold Bloch Leibler. He sets out the background to the making of the orders and in particular refers to correspondence between the parties, an application before Gzell J on 9 June 2009 and the claim that the respondents have not complied with the orders of the Court. A great deal of that evidence is irrelevant because Mr Marshall has confined himself to a construction argument in respect of the Orders that were made on 15 May 2009 and has not dealt with the later events. The defendants have not filed any evidence on this preliminary argument. 7 Section 87 of the Civil Procedure Act 2005 (the CPA) provides:

87 Protection against self-incrimination in relation to interlocutory matters

civil penalty has the same meaning as it has in the Evidence Act 1995 .

culpable conduct means conduct that, under: (a) the laws of New South Wales, or (b) the laws of any other State or Territory, or

(d) the laws of a foreign country, constitutes an offence or renders a person liable to a civil penalty .

order for production means an interlocutory order requiring a person (other than a body corporate) to provide evidence to the court or to a party to a proceeding before the court .

provide evidence means: (a) to provide an answer to a question or to produce a document or thing, or

(d) to permit possession to be taken of a document or thing.

(2) This section applies in circumstances in which: (a) an application is made for, or the court makes, an order for production against a person, and

(b) the person objects to the making of such an order, or applies for the revocation of such an order, on the ground that the evidence required by the order may tend to prove that the person has engaged in culpable conduct .

(2A) This section does not apply in circumstances in which section 128A of the Evidence Act 1995 applies.

(3) If the court finds that there are reasonable grounds for the objection or application referred to in subsection (2) (b), the court is to inform the person, or the person's legal representative: (a) that the person need not provide the evidence, and (b) that, if the person provides the evidence, the court will give a certificate under this section, and

(4) If the person informs the court that he or she will provide the evidence, the court is to cause the person to be given a certificate under this section in respect of the evidence.

(5) The court is also to cause a person to be given a certificate under this section if the court overrules an objection to the making of an order for production , or refuses an application for the revocation of such an order, but, after the evidence is provided, the court finds that there were reasonable grounds for the objection or application.

(6) Despite anything in this section, the court may make an order for production if it is satisfied of the following: (a) that the evidence required by the order may tend to prove that the person has engaged in culpable conduct ,

(b) that the culpable conduct does not comprise conduct that, under: (i) the laws of any State or Territory (other than New South Wales), or (ii) the laws of the Commonwealth, or (iii) the laws of a foreign country, constitutes an offence or renders a person liable to a civil penalty , (c) that the interests of justice require that the person provide the evidence.

(7) If the court makes an order for production under subsection (6), it is to cause the person to be given a certificate under this section in respect of the evidence required by the order.

(8) In any proceedings: (a) evidence provided by a person in respect of which a certificate under this section has been given, and

(b) evidence of any information, document or thing obtained as a direct or indirect consequence of the person having provided such evidence, cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence.

(9) If a question arises under this section relating to a document, the court may order that the document be produced to it and may inspect the document for the purpose of determining the question. 8 Section 128A of the Evidence Act 1995 provides:

128A Privilege in respect of self-incrimination-exception for certain orders etc

disclosure order means an order made by a NSW court in a civil proceeding requiring a person to disclose information as part of, or in connection with, a freezing, search or other order under Part 25 of the Uniform Civil Procedure Rules 2005 but does not include an order made by a court under the Proceeds of Crime Act 2002 of the Commonwealth or the Confiscation of Proceeds of Crime Act 1989 or Criminal Assets Recovery Act 1990 of New South Wales.

relevant person means a person to whom a disclosure order is directed. (2) If a relevant person objects to complying with a disclosure order on the grounds that some or all of the information required to be disclosed may tend to prove that the person: (a) has committed an offence against or arising under an Australian law or a law of a foreign country, or

(c) disclose so much of the information required to be disclosed to which no objection is taken, and (d) prepare an affidavit containing so much of the information required to be disclosed to which objection is taken (the privilege affidavit ) and deliver it to the court in a sealed envelope, and

(e) file and serve on each other party a separate affidavit setting out the basis of the objection.

(3) The sealed envelope containing the privilege affidavit must not be opened except as directed by the court.

(4) The court must determine whether or not there are reasonable grounds for the objection.

(5) Subject to subsection (6), if the court finds that there are reasonable grounds for the objection, the court must not require the information contained in the privilege affidavit to be disclosed and must return it to the relevant person.

(6) If the court is satisfied that: (a) any information disclosed in the privilege affidavit may tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law, and

(b) the information does not tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country, and

the court may make an order requiring the whole or any part of the privilege affidavit containing information of the kind referred to in paragraph (a) to be filed and served on the parties.

(7) If the whole or any part of the privilege affidavit is disclosed (including by order under subsection (6)), the court must cause the relevant person to be given a certificate in respect of the information referred to in subsection (6) (a).

(8) In any proceeding in a NSW court or before any person or body authorised by a law of this State, or by consent of parties, to hear, receive and examine evidence: (a) evidence of information disclosed by a relevant person in respect of which a certificate has been given under this section, and

(b) evidence of any information, document or thing obtained as a direct result or indirect consequence of the relevant person having disclosed that information,

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence concerned.

(9) Subsection (8) does not prevent the use against the relevant person of any information disclosed by a document: (a) that is an annexure or exhibit to a privilege affidavit prepared by the person in response to a disclosure order, and

(b) that was in existence before the order was made.

(10) Subsection (8) has effect despite any challenge, review, quashing or calling into question on any ground of the decision to give, or the validity of, the certificate concerned.

Note: Section 87 of the Civil Procedure Act 2005 makes provision with respect to protection against self-incrimination in relation to certain matters to which this section does not apply. 9 Section 128A commenced on 1 January 2009. It introduces a regime that is different to that which was in place prior to that time in that recipients of a disclosure order who wish to take objection to the provision of the information must include such information in an affidavit and place it in an envelope and file it with the Court. There is a process that if the Court finds that the objection is justified then the affidavit is returned to that person. It does not stay with the Court. 10 This is a regime that has been introduced to complement the provisions of s 128 where people in the witness box are able to be warned that they do not have to answer a question if it tends to incriminate them or tends to prove that they may be guilty of an offence against an Australian or foreign law or may expose them to a civil penalty. In other words it seeks to mirror that regime in an out of court situation. 11 This is not a case in which the respondents were ordered to disclose the information in an ex parte setting, albeit that the evidence discloses and the fact is that the plaintiff made an application for such an ex parte order which was refused. 12 The exchange with Mr Beech-Jones on 12 May 2009 extracted earlier is not necessary to deal with on this application because on 15 May 2009 the defendants decided to consent to a regime pursuant to which they would produce the information. They decided that if they wanted to object to producing the information sought they would file a motion with the Court seeking to revoke the orders to which they consented. The third defendant did not consent to the order so it is in a different category to the defendants. 13 Mr Marshall submitted that the reference to s 87 of the CPA in the First Proviso was a reference that would tend to mislead the recipient of the Order. I can well understand this submission if it had been an ex parte Order, but this was an order crafted by the parties. There is no evidence from the defendants in particular suggesting that they were misled, or that they were not advised, or that they misunderstood that to which they were consenting. 14 Mr Marshall submitted that the Order made on 15 May 2009 ranks with cases in which there was no warning given to a person the subject of a disclosure order. In this regard he relied upon Vasil v National Australia Bank Ltd (1999) 46 NSWLR 207 and in particular to the passages of Stein JA's judgment at par [9] and that of Fitzgerald JA at par [24]. Mr Marshall also referred to Ross v Internet Wines Pty Ltd [2004] 60 NSWLR 436 and in particular to the judgment of Giles JA (with whom Spigelman CJ and McColl JA agreed) at par [104]. 15 There is no doubt that a person who receives an order requiring disclosure of information in a regime such as the present should be made aware of their rights not to incriminate themselves and be provided with a mechanism to take objection. Mr Marshall submitted that the order made on 15 May 2009 did not provide the relevant warning to the defendants in relation to possible incrimination if they produced the material and did not alert them to a regime that is available under s 128A of the Evidence Act. It is true there was no reference in that Order to section 128A of the Evidence Act. 16 Mr Marshall submitted that Campbell J's decision, as his Honour then was, in Kirkpatrick v Kotis [2004] 62 NSWLR 567 is analogous to the present situation. He submitted that the order in this case is sufficiently ambiguous that it should be found to be unenforceable by contempt proceedings because a person trying to understand it, and obey it, could be in real doubt about what it meant in a respect which is relevant to the particular charge of contempt. In this regard Mr Marshall relied upon the following passage of Campbell J's judgment:

In my view, the court approaches the question of whether the order is ambiguous with the caution appropriate to a type of litigation which could result in the defendant being punished - if an order is really not clear, it is unjust for someone to be punished for not obeying it. As well, though, the court approaches the question of whether the order is ambiguous on the basis that the recipient is expected to try to understand it and obey it. If a person taking that approach to the order could be in real doubt about what it meant, in a respect which is relevant to the particular charge of contempt which is brought, the charge will fail. This means that there will sometimes be orders which a grammatical analysis would show to contain a syntactic ambiguity, but which are none the less enforceable if it is the type of ambiguity that has no real risk of misleading. There will sometimes be orders which contain a term which has multiple meanings, but where that semantic ambiguity has no real risk of misleading. If there were to be an order addressed to a promoter of musical groups not in any way to be involved in the advertising or promotion of a band under some particular name, the order would be enforceable notwithstanding that a "band" can sometimes be a rubber band, or a headband.

In deciding whether an order is certain enough to be enforceable by contempt proceedings, the task of construction of an order can go far enough to enable ambiguities which have no real risk of misleading someone who is trying to understand and obey the orders to be discarded. I agree with the following remarks of Lindgren J in Microsoft Corporation v Marks (No 1) (1996) 69 FCR 117 at 143: "The proposition that a contempt will not be found where the terms of an order or undertaking are unclear, ambiguous or apt to mislead (except, perhaps, if the prosecutor proved that the contemnor understood them in accordance with what the court holds to be their true meaning) must be distinguished from certain other propositions. It does not signify that there is no breach wherever there is difficulty in the construction of the terms of an order or injunction which it falls to a court to resolve. Nor does it signify that contempt will not be found wherever an alleged contemnor did not understand the terms of an order or injunction according to their true meaning, much less wherever an alleged contemnor was unaware that his or her conduct constituted a breach of the order or undertaking (cf Watkins v AJ Wright (Electrical) Ltd [1996] 3 All ER 31)." 17 As Campbell J said, the Court must approach the assessment of whether an order is ambiguous on the basis that the recipient is expected to try to understand it and obey it and if a person has a "real doubt" about what it means in a respect which is relevant to the particular charge of contempt "the charge will fail". His Honour said at paragraph 57:

In the case of consent orders, where surrounding circumstances can be used as an aid to construction, those surrounding circumstances can have the effect that an order which is ambiguous, considered in isolation, is found to be not ambiguous when read in light of the surrounding circumstances. As the surrounding circumstances that are taken into account are facts known to all parties to the consent order, they are the very thing that a person trying to understand and obey the order would take into account. Hence it is appropriate that any question of whether the order is ambiguous should be answered only after such facts have been taken into account. 18 Where an order is made ex parte the Court would be very concerned to analyse the order most carefully to ascertain any ambiguity of the kind referred to by his Honour. But this case is quite different. The parties chose the regime pursuant to which to produce documents and crafted their own order. They had the benefit of solicitors and counsel and there is no suggestion made that there was any misunderstanding, or that any of the defendants had any real doubt as to what they had to do to comply with the order. 19 Mr Marshall has described his application as a "technical" application at this stage of the proceedings. He submitted that s 87 of the CPA referred to in the First Proviso could not apply in the context of these proceedings. He submitted that s 128A of the Evidence Act was the appropriate section to apply and therefore the contempt charge must fail. The defendants filed Motions to set aside or revoke the orders that were made. The Motions were filed out of time. No extension of time within which to file the Motions was sought and the orders were not revoked. That aspect of the matter is irrelevant to this application but on the other hand it would appear that the defendants took a step, albeit not within time, to do the things to which the Proviso referred. 20 When a consent order is made, the Court and the opposing parties are entitled to accept that the person consenting to the order, fully understands it and when legally represented has provided an informed consent. The parties decided to apply s 87 of the CPA to the regime of disclosure and production. Section 87 refers to "culpable conduct" but the Proviso itself refers to production tending to incriminate the defendants. The terms of the orders make it clear that the parties considered the prospect of self-incrimination and prima facie the orders make it clear that they decided to approach the regime in this fashion. It would be a different matter if on this preliminary application there was evidence to suggest that the defendants overlooked or were not advised about the s 128A regime and believed that they had no other process by which they could protect themselves. But that did not happen. 21 As a "technical matter" in respect of the fourth, eighth and ninth defendants, I am not satisfied that I should preclude the plaintiff from proceeding with its application in the Notice of Motion. The plaintiff may proceed with its contempt motion against the fourth, eighth and ninth defendants. 22 I now turn to the third defendant. The third defendant was not represented on 15 May 2009 and was entitled to the regime under s 128A of the Evidence Act. The orders against the third defendant were made ex parte notwithstanding that the third defendant had been served. In those circumstances it was necessary for the third defendant to be treated somewhat differently because it was not a consensual party to the orders that were made. It seems to me in the circumstances that the Second Proviso that was included in the orders required the third defendant to notify the plaintiff of "all of the persons" who were able to comply with the orders on the defendant's behalf and with whom the defendant had been able to communicate who "wish to take such objection and identify the extent of the objection". The objection identified was an objection that compliance would tend to incriminate them or make them respectively liable to a civil penalty. There was no mention of s 128A. 23 The protection put in place in s 128A is one in which a party is entitled to keep secret from the other side affidavit material and have it returned in the circumstances outlined in that section. That right was not notified to the third defendant and thus to those agents of the third defendant. It seems to me in the circumstances that the order made against the third defendant for disclosure in the form that it was made should not have been made without a reference to s 128A and the procedures there under. Mr Beech-Jones observed that Mr Bamford, who is the sole director of the third defendant, consented to a regime in the consent order in relation to his own disclosure. That does not seem to me to take the matter much further other than to provide further support for not making the order. 24 The application against the third defendant is dismissed with an order as to costs.

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At a glance

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