Specialty Fashion Group Limited v Muirhead Nominees Pty Ltd & Ors

CATCHWORDS : [CONTEMPT] - Penalty hearing - Special circumstances warranting lenient approach

ASIC v Matthews (2009) 71 ACSR 279 ASIC v Michalik (aka Tomaszewski and Krawczyk) & Ors (2004) 52 ACSR 115 CASES CITED : Beautree Pty Ltd, in the matter of Willow Glade Pty Ltd v Willow Glade Pty Ltd [2009] FCA 738 Specialty Fashion Group Limited v Muirhead Nominees Pty Limited & Ors [2009] NSWSC 515 Specialty Fashion Group Limited v Muirhead Nominees Pty Limited & Ors [2009] NSWSC 754 Specialty Fashion Group v Muirhead Nominees Pty Ltd [2009] NSWSC 823

Specialty Fashion Group Limited (Plaintiff/Applicant) PARTIES : Richard Davies Bamford (Fourth Defendant/Respondent) A.E.M. Holdings Pty Ltd (Eighth Defendant/Respondent) Patricia Yonon (also known as Patricia Bamford) (Ninth Defendant/Respondent)

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

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

• 27 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2765 OF 2009 SPECIALTY FASHION GROUP LIMITED v MUIRHEAD NOMINEES PTY LTD & ORS JUDGMENT 1 On 29 July 2009, the fourth, eighth and ninth defendants, respectively Richard Davies Bamford, A.E.M. Holdings Pty Ltd (AEM) and Patricia Yonon, also known as Patricia Bamford, (collectively the defendants) failed in their application to prevent the plaintiff, Specialty Fashion Group Limited (SFG), from proceeding further with the application against them for findings of contempt (the preliminary application): Specialty Fashion Group Limited v Muirhead Nominees Pty Limited & Ors [2009] NSWSC 754 (the Judgment). 2 Since the hearing of the preliminary application, Tamberlin AJ has given judgment in a summary judgment application: Specialty Fashion Group v Muirhead Nominees Pty Ltd [2009] NSWSC 823. It is helpful to the context of this matter to set out the following passage of his Honour's reasons:

4 The allegations in the points of claim are that SFG is a company which carries on the business of a ladies apparel retailer operating from approximately 840 outlet stores in leased premises throughout Australia and New Zealand. From 1994 until May 2009, Feldman was a senior employee of SFG and from who, from 1999 to May 2009, was the head of property and strategic projects of SFG. This position involved responsibilities for approval of invoices, rendered to SFG by third parties for services and goods supplied by contractors to SFG. Feldman was also a director of Willow Glade from 14 June 2001.

5 Mr Richard Bamford ("Bamford") was from 4 December 1995 a director of Beautree and from 30 May 2001 a director of Willow Glade. At all relevant times, the ninth defendant Patricia Yonon ("Yonon") who is the spouse of Bamford, was a cheque signatory for Muirhead's bank account and she was authorised and operated that bank account and has conducted its financial affairs.

6 It is also alleged that she and her husband were agents of Beautree. It is common ground that at all material times Mr Bamford for all practical purposes had the control and was the governing mind of Beautree.

7 Between 2004 and 12 May 2009 the allegation is that Feldman caused a number of bogus invoices to be generated in the name of Willow Glade to SFG totalling $1,051,527.20 (Willow Glade invoices); a number of bogus invoices to be issued in the name of Muirhead to SFG totalling $9,317,269.50 (Muirhead invoices) and also caused bogus invoices to be issued in the name of Beautree sent to SFG totalling $6,307,950 (Beautree invoices). It is alleged that he authorised and procured SFG to pay the amounts stated in those invoices to those three companies respectively by signing or initialling the invoices and authorising payment by SFG. The moneys were duly paid by SFG to the three companies. In some instances he arranged for the payees to transfer some other funds to him.

8 It is alleged that each of the invoices, on its face falsely represented that goods and services referred to in the respective invoices had in fact been supplied and performed for SFG by the three defendants, whereas in fact no such goods or services were provided by any of the three companies to SFG and the payments were made by SFG in the mistaken belief the goods and services reflected on the invoices had in fact been supplied and performed for SFG by the invoicing companies. It is alleged that none of the three companies gave any consideration whatsoever to SFG for any of the payments made and that none of the payments have been refunded to SFG. Accordingly, it is claimed by SFG that each of the three defendant companies is liable to refund the payments received by them from SFG as money had and received to the use of SFG or, alternatively, on the basis that those three companies have been unjustly enriched.

9 Beautree is the only company to appear on this application for summary judgment and it opposes the summary judgment application.

10 The allegation is that from 4 January 2004 it received payments in respect of the Beautree invoices into its bank accounts and distributed the amounts in consultation with Feldman and that in so acting, Beautree, by its agents Mr and Mrs Bamford, was aware that Feldman was a senior employee of SFG who was arranging for false Beautree invoices in the name of Beautree to be issued to SFG. It is alleged, that it was also aware that Feldman was using his position as an employee of SFG to procure the payment of the Beautree invoices and that Beautree was not providing any goods or services to SFG which would justify the payments made by SFG to Beautree. Alternatively, it is alleged that Bamford and his wife Yonon were aware that Feldman was procuring payments from SFG to Beautree in circumstances where Beautree had no proper entitlement to receive the funds and when they were aware that Feldman had procured the payments by improperly using his position as an employee of SFG. On this basis it is alleged that Beautree was knowingly concerned in or was a party to Feldman's improper use of his position as an employee of SFG and that this contravened s 182(2) of the Corporations Act 2001 (Cth). Similar allegations of bogus invoices and mistaken and fraudulently procured payments are made in relation to Willow Glade and Muirhead. By way of relief, SFG claims it is entitled to summary judgment to recover the amounts referred to earlier which were mistakenly and wrongly paid by SFG to the three companies. 3 Each of the defendants was charged with contempt for non-compliance with Order 2 of Consent Orders made by me on 15 May 2009 (the Consent Orders), in failing by 5.00 pm on Wednesday, 27 May 2009 (the first disclosure) to:

(a) inform the plaintiff in writing of all of the [respective] 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 the [respective] 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 the [respective] defendant's name or under 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 the order;

(b) provide copies of any statements concerning the above bank accounts that are in the [respective] defendant's possession;

(c) provide copies of the [respective] defendant's financial statements for the periods ended 1 July 2005, 1 July 2006, 1 July 2007 and 1 July 2008;

(d) swear and serve on the plaintiff an affidavit setting out the information in subpar (a) above. 4 The individual defendants, Mr Bamford and Ms Yonon, were also charged with contempt for failure to comply with Order 2 of the Consent Orders to provide to the plaintiff on or before 5.00 pm on 5 June 2009 (the second disclosure):

(a) 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 13 May 2009;

(b) the bank account into which the monies were received;

(c) if the funds were disbursed, to whom, when and why the funds were disbursed. 5 Subject to the preliminary application, the defendants admitted the facts and matters in the Statements of Charge, which carried with it an admission of contempt of the Consent Orders. As a consequence of their failure in the preliminary application the defendants, through their counsel, accepted that the charges have been made out (tr 20; 29/07/09).

Penalty Hearing 6 The hearing on penalty took place on 29 July 2009 and 11 August 2009. Mr R Beech-Jones SC, leading Mr M Friedgut, of counsel, appeared for the plaintiff and Mr RD Marshall, leading Mr PK Bruckner, of counsel, appeared for the defendants. 7 Each of the defendants relied upon the affidavit of John Arthur Bush, their solicitor, sworn on 24 July 2009. Mr Bamford swore four affidavits: 9 July 2009; 23 July 2009; 7 August 2009; and 11 August 2009. Ms Yonon swore three affidavits: 9 July 2009; 7 August 2009; and 11 August 2009.

Relevant Background 8 On 28 May 2009, the day after the date for the first disclosure, Mr Bush wrote to the plaintiff's solicitors, Arnold Bloch Leibler (ABL) enclosing a draft Notice of Motion seeking orders revoking or excusing the defendants from compliance with the disclosure orders, on the basis that compliance may tend to incriminate them or expose them to a civil penalty. ABL responded in a lengthy letter, referring to s 128A of the Evidence Act 1995 (NSW) (the Act) and inviting Mr Bush to withdraw the Motion immediately. ABL advised that if Mr Bush did not withdraw the Motion they were instructed to seek orders that it be struck out with costs. ABL noted that the first date for compliance had passed and said:

…unless we receive from your clients the material which was due yesterday by 10.00 am Monday 1 June 2009, we are instructed to have the matter relisted to obtain appropriate orders. 9 On 2 June 2009, ABL wrote to Mr Bush noting that they had not been served with a filed copy of the defendants' proposed Notice of Motion and that they had not received any response to their letter of 29 May 2009. That letter noted:

It has now been two weeks since disclosure orders were made. The first date for compliance with the disclosure orders passed on 27 May 2009. Your clients remain in default of those orders.

Unless your clients comply with the Court's orders by 5pm today, we are instructed to have the matter relisted to obtain appropriate orders. 10 On 2 June 2009 Mr Bush served on ABL a filed copy of the Notice of Motion and affidavit in support. On 3 June 2009 Mr Bush wrote a detailed letter to ABL in which he noted that the mechanism in the Consent Orders was independent of the procedure in s 128A of the Act and that no mention of that section was made in those Orders. Mr Bush also advised that he was instructed to press for the relief claimed in the Notice of Motion. That Motion had been filed on 29 May 2009 and was made returnable on 16 June 2009. 11 On 4 June 2009 ABL responded to Mr Bush's letter of 3 June 2009 advising that the information from the defendants, particularly Mr Bamford, was "critical" to the plaintiff's understanding of the location of assets and the circumstances in which money had been misappropriated from the plaintiff. ABL emphasised the urgency of the matter and indicated that the plaintiff would apply to the Duty Judge, Gzell J, on 9 June 2009 to have the defendants' Notice of Motion heard on an urgent basis. 12 On 9 June 2009 Gzell J concluded that paragraph (b) of the First Proviso in the Consent Orders (extracted in the Judgment) "is to be regarded as struck out as having no effect" and that s 128A of the Act operated of its own motion "and gave to the defendants protection analogous to that which in the past was provided by s 87": Specialty Fashion Group Limited v Muirhead Nominees Pty Ltd & Ors [2009] NSWSC 515 at par [13]. 13 On 12 June 2009 ABL wrote to Mr Bush suggesting that Gzell J had made it "abundantly clear" that the defendants were required to comply with the asset disclosure orders and to do so in accordance with the provisions of s 128A of the Act. ABL noted that no communication had been received from Mr Bush since Gzell J's judgment and wrote:

We require your clients immediately to comply with the Court's orders. In the event that your clients continue to ignore the Court's orders, our client reserves its right to file a motion to have your clients punished for their continued failure to comply with the Court's orders. 14 On 17 June 2009 Mr Bush wrote to ABL advising that the defendants were "considering their position" in respect of Gzell J's judgment and that he assumed that the plaintiff intended to "permit a reasonable time for compliance with" the Consent Orders. Mr Bush also advised that "subject to an appeal", it was intended to bring an application to claim privilege against self-incrimination in the light of the allegations of fraud in the main claim. 15 On 23 June 2009 ABL wrote to Mr Bush in terms that included the following:

10. All your clients appear to have done is write us a letter criticising Justice Gzell's decision, and making vague reference to appealing that decision. As you know, a letter does not (and cannot) excuse your clients from complying with the Court's orders.

11. Moreover, in circumstances where you have yourself acknowledged that " on one view " your clients are in contempt, it is surprising that your clients did not immediately seek leave to appeal Justice Gzell's decision or seek a stay or file an application seeking additional time to comply with the asset disclosure orders.

Your client has, in any event, now had a " reasonable " time to comply with her Honour's orders. It has been 5 weeks since the asset disclosure orders were first made, and two weeks since Justice Gzell's decision.

If your clients have not filed and served their application for leave to appeal the decision of Justice Gzell, or filed and served their asset disclosure material, by 1pm on 24 June 2009, we are instructed to make an application without further notice to you to have your clients held in contempt of Court. 16 On Thursday, 25 June 2009, Mr Bush wrote to ABL advising that the material required by the Consent Orders was being prepared and that he anticipated it would be available towards the end of the following week, being 3 July 2009. Mr Bush also advised that an application under s 128A would be made together with an application for an extension of time for compliance with the Consent Orders. He confirmed that an application under s 128A could not be brought until the material was available and that, subject to any delay in compiling the required material, such application would be filed in Court the following week. Mr Bush then suggested a proposal and timetable pursuant to which there would be an extension of time for compliance with the Consent Orders to 1 July 2009. The proposal also included protection under s 128A. Mr Bush noted that a Motion for contempt was "seemingly unnecessary". 17 On 30 June 2009 ABL wrote to Mr Bush debating the matters raised by him in his letter of 25 June 2009. That letter included the following:

Nevertheless in an effort to progress the matter, and in light of your advice that the material is being prepared and that you anticipate being able to serve the material by the end of the week, we can confirm that our clients will refrain from filing any motion for contempt prior to 2 July 2009. 18 On 3 July 2009 ABL wrote to Mr Bush in terms that included the following:

Your clients have been in contempt of the Court's asset disclosure orders since 26 May 2009 ( sic ). That contempt is wilful and continues to cause grave prejudice to our client in circumstances where our client has been defrauded of approximately $17 million.

We have been instructed to file an application seeking to have your clients held in contempt of Court at 9am on Monday morning unless your clients provide us with a letter by no later than 5pm today:

1. Explaining (in detail) precisely what they have done to comply with the asset disclosure orders;

2. Explaining how they propose to comply with the asset disclosure orders; and

3. Undertaking to comply with the asset disclosure orders (in full) by no later than 4pm on 8 July 2009. 19 On 3 July 2009 Mr Bush responded to ABL in a lengthy letter proposing an extension of time for compliance with the Consent Orders to 10 July 2009. Mr Bush also referred to the application that would be made pursuant to s 128A and the procedure by which the defendants would comply with certain parts of the Consent Orders. 20 On 6 July 2009 ABL wrote a further lengthy letter to Mr Bush in response to his proposal of 3 July 2009. That letter concluded as follows:

17. There is only one way for the matter to move " forward " and that is for your clients to comply with the terms of the Asset Disclosure orders forthwith.

18. In view of the egregious delay to date our client will not consider agreeing to orders extending the time for compliance. Given your clients' conduct to date, there is the real possibility that they would only use the granting of any such extension as the opportunity for further delay.

19. On 3 July 2009 we wrote to you indicating that our client would file a notice of motion charging your clients with contempt unless they undertook to comply with the outstanding orders by 4pm on 8 July 2009.

We confirm that if there is no compliance by that time our client will proceed to file and serve the motion. 21 On 9 July 2009 the plaintiff filed its Notice of Motion seeking orders that the defendants be found guilty of contempt for non-compliance with the Consent Orders. On the same day the defendants advised Mr Bush that they no longer wished to have the protection against self-incrimination. The first disclosure affidavits were sworn on 9 July 2009.

Evidence on Penalty 22 On 29 July 2009 Mr Bush gave evidence-in-chief as follows [22]:

MARSHALL: There is something else Mr Bush would wish to say to your Honour.

WITNESS: Your Honour, I received from the client the majority of the material which was required to be produced within a period of about three or four weeks from the 13 th of May. There was some additional material produced at intervals but by and large the majority of the documents required to be produced were produced to me within that period of, first period of four weeks.

Q. From the 13 th ? A. From the 13 th . Now, there was a skirmish before the Court.

Q. Justice Gzell? A. Yes indeed, and I had been under an enormous pressure, I am within the practice of Whitehead Cooper Williams, I am virtually a sole practitioner. I operate as such. I had the assistance of, secretarial assistance of that office but for all other purposes I operate as a sole practitioner. In this particular matter the pressure from the other side has been relentless and I have had difficulty keeping up. And in those circumstances I had the material, I was intent on reviewing it before I provided it to the other side. That didn't happen for various reasons, namely the constant pressure to meet deadlines on other issues. So that I need to make that statement about the way in which I handled the case, which I am not very comfortable with, having a client found guilty of contempt and I must say, your Honour, during the last forty odd years of practice it has never occurred before. 23 In cross-examination Mr Bush accepted that he had material that could have been provided to the plaintiff well prior to 9 July 2009 in respect of which there was no claim for privilege against self-incrimination. He agreed that at the conclusion of the application before Gzell J on 9 June 2009 there was absolutely no doubt that the order for production of the material had to be complied with, save as to the question of an appeal. In the four weeks following 13 May 2009 Mr Bush received most of the documents from the defendants that were ultimately produced. Apart from dealing with his clients' obligations pursuant to the Consent Orders during the period 9 June 2009 to 9 July 2009, Mr Bush was also appearing in applications for the appointment of provisional liquidators to other companies, defendants in the main proceedings.

Mr Bamford's Evidence 24 On 9 July 2009 Mr Bamford swore an affidavit describing his assets, and in particular, disclosing that Beautree Pty Limited (Beautree) was a trustee of the Bamford Family Trust and held assets on trust for the beneficiaries of that trust. In disclosing the assets of Beautree, Mr Bamford referred to specific artworks in a list which he annexed to his affidavit. He placed a cross next to those items which Beautree had disposed of since the date the list was compiled in 2003. In his affidavit sworn on 23 July 2009 Mr Bamford gave the following evidence:

7. In May 2009, I supplied my lawyer John Bush with copies or originals of bank statements and available financial accounts and draft financial accounts for companies in the group. I also provided John Bush with the trust deed and amending deed for the Bamford Family Trust. In May, I also contacted Sid Sassine, the accountant for group entities, to obtain any other financial accounts for companies and final accounts, where I only had access to drafts. Mr Sassine demanded payment of $40,000 before he would give me anything. I could not pay the $40,000.

8. On about 9 July 2009 I saw a letter from the plaintiff's lawyers to John Bush that advised the basis upon which the plaintiff would seek judgment against Beautree Pty Limited. I saw that there was a claim that Beautree Pty Limited had been unjustly enriched and received money by mistake. At that point I decided to abandon any claim for privilege against self incrimination in these proceedings. Also at that time, I instructed John Bush to deliver to the plaintiff's lawyers the documents he had been given by my wife and I that fell within the categories of documents referred to in the 15 May 2009 orders.

9. I now understand that I may have been in contempt of the 15 May 2009 orders. I do not understand why, as I believed I was entitled to hold back production until the relevant legal procedures had been put in place. I apologise to the Court and to the plaintiff for any trouble I have caused. 25 Mr Bamford was cross-examined about the belief referred to in paragraph 9 of that affidavit. He said that he formed that belief on the basis of his discussions with Mr Bush in late May 2009. He was also asked about his belief after Gzell J's judgment on 9 June 2009 as follows (tr 29-30):

Q. Did you understand, following that decision, whatever was the position material had to be supplied? A. Yes.

Q. And the material was not supplied until 9 July? A. No. I did not understand that, no.

Q. Did you follow up to find out when it would be supplied? A. I do not believe so.

Q. Is this the position? You understood they were required to be provided prior to that time except you had some concern about privilege against self incrimination? A. Yes.

Q. But you understood from 9 June they had to be provided, didn't they? A. Yes. 26 Mr Bamford accepted that he understood that the Consent Orders required him to provide details of his own assets and those of Beautree, and the value and location of those assets (tr 32). His evidence in relation to his address was quite unsatisfactory. His counsel asked him the question, "what do you give as your address?", to which he answered "Level 1, 15 Cross Street, Double Bay" (tr 27). This was the address provided in his affidavits of 9 July 2009 and 23 July 2009. That was an office address and at the time Mr Bamford gave his evidence that office had not been used for approximately four weeks. He was cross-examined as follows (tr 32-33):

Q. On 23 July 09 you gave that as your address? A. Correct.

Q. It was a mistake, was it? A. Yes.

Q. Was there reluctance on your part to give your residential address? A. No.

Q. You gave me that address today in Cross Street, but you don't go there anymore? A. That is my office address - it was.

Q. That is not your address today? A. No.

Q. Do you have a business address? A. No not now. 27 This was peculiar evidence but it was explained, rather than excused, later in Mr Bamford's evidence when an application was made, for good reason, for the suppression of his residential address. This was not the appropriate manner in which to protect his address from publication. Mr Bamford's efforts in this regard were in my view wrong-headed, although it appears that he was acting on advice. 28 Mr Bamford was also cross-examined about the artwork and the items against which he placed crosses to indicate that such paintings and other items had been disposed of since 2003. He agreed that since 2003 artwork had been acquired by Beautree for which Mr Bamford provided the funds (tr 34). He accepted that any items purchased since 2003 were not included in the list. The Balance Sheet for Beautree as at April 2009 included artworks to the value of $527,912. Mr Bamford accepted that the value of the items in the list attached to his affidavit was approximately $130,000 and when asked how he reconciled that amount with the amount in the Balance Sheet, he said that the Balance Sheet was a draft document and not as yet "signed off" (tr 37). It was suggested to Mr Bamford that he had failed to comply with the Consent Orders in that he did not set out the detail of the amounts received and the amounts disbursed from each of the relevant companies. He was cross-examined as follows (tr 41-42):

Q. It was your company. You had Beautree's accounts? A. Yes.

Q. You knew it came from SFG? A. I did not know it came from - I believe, when I was shown it was coming from there. All I knew money was going into bank accounts under some particular arrangement.

Q. You knew the source of those funds was SFG? A. Yes.

Q. You knew what your company did with the money when it got it? A. Yes.

Q. It gave it out to the other companies? A. Yes.

Q. In fact it was your wife who did that? A. And Frank.

Q. Between the three of you I suggest you are capable of describing exactly when, where and why the funds were dispersed from Beautree, and you have chosen not to say so? A. No, that is not correct.

Q. What I suggest you have done is attempt to give the minimalist amount of information you can in response to these orders? A. No.

Q. When it came to the art work you were only prepared to describe them when you became aware the plaintiff had some list of the artwork? A. No.

Q. You knew you had acquired more art work? A. That is not with us.

Q. You deliberately did not tell the plaintiff of the further artwork? A. No.

Q. Even when they wrote to you and told you about the receipts you still did not correct it, did you? A. No.

Q. You did not correct it? A. No I didn't.

Q. You knew a misleading response had been given which said - Mr Bamford does not own them - but did not correct the position so far as Beautree was concerned? A. I did not believe it was a misleading response. I was acting with legal advice.

Q. That response was grossly misleading, I suggest? A. No.

Q. In fact the approach you adopted was you would hold it as long as you could not to comply, and when you wanted to comply with the orders, you adopted a minimalist approach to doing so? A. No.

Q. Is there some reason you have not said in your affidavit where the money went? A. I knew it went to those companies. I did not know the specific business, and the timeframe involved in putting that together would have been considerable. We were not able to give that specific information. They knew the dates it came in and they knew where it had been dispersed to.

Q. But they did not know for what reason? A. No, but they were told by us for what reason - salaries, mortgage payments, lease payments, etc., general running of the businesses. 29 Mr Bamford was shown an email from Simon Feldman to Ms Yonon copied to him and dated 11 March 2008 (Ex A). That email was in the following terms:

Trish - RB will need to populate this invoice as per the last Batchcrete (sic) invoice but with diff equip and serial numbers. Merv needs invoice tmrw arvo so he can execute.

thanks 30 Mr Bamford was cross-examined about this email as follows (tr 42-43):

Q. It is asking one of you to make alterations to the email invoices? A. I do not believe that is what it is saying. It says - Trish - RB will need to populate those invoices as per the last page ( sic ) invoices but with different equipment and serial numbers.

Q. It is a request to ( sic ) Mr Feldman to alter the invoice? A. It was not complied.

Q. It was a request for Mr Feldman to alter the invoice? A. Correct.

Q. You did not go back and say - how dare you suggest that - did you? A. No.

Q. It was evident an invoice was going to be issued from Muirhead to SFG? A. No.

Q. You do not accept that? A. No. 31 In cross-examination Mr Bamford said that he did not believe there was an invoice attached to that email and gave evidence that he did not do anything about it (tr 43). 32 On the second day of the hearing, 11 August 2009, Mr Bamford identified a chart that he claimed was put together by a party working with his legal team, who has an accountancy background. He claimed that the chart had been prepared from management accounts to show the trail of money coming in from the various entities and going out to the various entities (tr 23). Mr Bamford agreed in cross-examination that the management accounts included the accounts of Muirhead Nominees Pty Ltd and gave the following evidence (tr 24):

Q. You see it has Muirhead Nominees, see that? A. Yes, I do.

Q. The material that has been supplied by your solicitor to SFG on your behalf included accounts for Muirhead Nominees, hasn't it? A. Yes.

Q. And that was, a company of which you were not a director? A. Correct.

Q. What is your understanding as to how the accounts of that company came to be prepared? A. I don't have any understanding of it.

Q. Didn't you, weren't you the one that gave instructions to the accountants? A. No.

Q. You see there, for example in the bottom right hand corner we have Muirhead Nominees Pty Ltd, in a box we have assets $7.97 million? A. Yes.

Q. Do you there have any understanding of what assets Muirhead Nominees have that could possibly amount to $7.97 million? A. No.

Q. If I was to tell you that the accounts of Muirhead Nominees refer to inventory, that wouldn't help you in any way? A. The only thing I can think of is it could have crumb rubber, or something like that.

Q. Eight million dollars worth of rubber? A. No, it doesn't make sense.

Q. It doesn't make sense, does it? And this document has been prepared based on the accounts, not on the actual flow of moneys through accounts, has it, that is bank accounts? A. I can't answer that question. 33 Mr Bamford was then cross-examined about a further list of artwork and other items as part of an exhibit to his affidavit of 7 August 2009. This was described as an "up-to-date" list of Beautree's assets. Mr Bamford accepted that his affidavit of 9 July 2009 included items as assets which had already been disposed of (tr 29). He rejected the suggestion that they had apparently "disappeared" and said that he was "not sure what has happened to all of them" (tr 29). His further cross-examination included the following (tr 31):

Q. You see your affidavit of 9 July was I suggest riddled with errors?

Q. Do you agree or disagree with that proposition? A. There are errors, I wouldn't agree with riddled your Honour.

Q. You just adopted a completely reckless approach to the truth of that document, I suggest? A. No.

Q. And do you recall on the last occasion I asked you these questions, do you understand, page 29 at line 30: "Q. Did you understand a decision was made by the Court on 9 June, were you told about that? A. Yes. Q. Did you understand following that decision whatever was the position material had to be supplied? A. Yes."

Q. Do you remember giving those questions and answers? A. Yes.

Q. And that is a correct statement of your state of mind? A. Yes.

Q. You understood that the material had to be supplied pursuant to a Court order? A. Yes.

Q. And it had been explained to you that the consequence of not complying with the Court order could be quite severe? A. Yes. 34 Mr Bamford also gave evidence of the wind down of his businesses after the Consent Orders were made. This involved the termination of staff at various premises and between 13 May 2009 and 9 July 2009 arrangements were made for the termination of the businesses conducted by the various companies in the locations identified by Mr Bamford. 35 Mr Bamford is 62 years old and has never been convicted of any offence. He began his career in the mining industry with engineering qualifications. His evidence was that in the last 8 to 10 years he has dedicated his resources, time and effort to building up recycling businesses which he had hoped to provide funding for his retirement. He is presently looking for employment.

Ms Yonon's Evidence 36 Ms Yonon is 54 years of age and has been married to Mr Bamford for 33 years. Ms Yonon has never been convicted of any offence. After leaving school and completing a secretarial course Ms Yonon worked in a secretarial/administration role. She left that work to help Mr Bamford set up the recycling businesses. Her evidence was that she is now looking for work and it seemed to her that she and her husband would "have to start our lives all over again". Ms Yonon's affidavit of 7 August 2009 included the following:

I understand that I have been informed and believe that various documents were produced to the Plaintiff's solicitors out of time and, for this reason, I understand that I have been found guilty of contempt of Court. I sincerely apologise to the Court and to the plaintiff for the lateness in production of these documents. Claim for privilege against self incrimination

Richard told me the proceedings are serious. I came to realize quickly the enormity of it. I realised that some of the things which were alleged were criminal. I later realized that it is alleged that I knew how Simon Feldman was obtaining the funds fraudulently for the companies. I take that allegation very seriously.

I have been shown transcript of proceedings before Bergin CJ in Eq on 12 May 2009 and I am aware that there is an allegation that I amended invoices and participated in the fraud. However, I claimed privilege against self incrimination because I was originally advised that I should claim the privilege because the allegations included fraud and could be used to disqualify me as a director, and we didn't then know what exactly SFG was alleging.

I was later advised that SFG made a claim which meant that I had to prove something which I could not do whilst claiming the privilege. I then decided not to claim the privilege. That was about 9 July 2009.

I refer to the orders made on 15 May 2009 substantially in accordance with the following paragraphs of the Notice of Motion filed 13 May 2009

Assets . I refer to the orders made on 15 May 2009 substantially in accordance with the sub-paragraphs 1(a)(i) and (iv) of the Notice of Motion filed 13 May 2009. The first occasion I was asked to do an affidavit as to my assets was in the first week. I prepared a draft affidavit and provided it to Mr Bush before the end of May 2009.

19. I know that Muirhead, Beautree and Willow Glade received money from SFG. I know it is alleged that the money was received in response to fake invoices rendered. I do not know whether any other money received was not in response to an invoice. I do not know what invoice relates to what payment, as I did not see these invoices until the boxed documents were delivered to AEM office.

20. I nevertheless provide the following information.

21. I did bookkeeping for companies in the Bamford/Feldman Group until about 2006 or 2007. In about 2006 or 2007 the bookkeeping got too much for me and Frank Turijio was employed to do it and I helped him with banking and wages for a while. I tried to properly account for the transactions of group entities when I did the bookkeeping. I prepared cheques and deposits.

22. All of the money that Mr Feldman put in to Muirhead, Willow Glade or Beautree accounts for company expenses or his personal bank accounts, are, to the best of my knowledge, on the bank statements. They show where the monies came from and to whom they went. Any transfers done on internet banking show it clearly. I don't know or recall any transactions that were done any other way than through the bank accounts.

27. The money that came in from Mr Feldman was to pay for salaries, wages, direct debits, bills, etc, and all the things that were generally needed to run the businesses. Sometimes little things would crop up that had to be paid for say COD, so we had to allow for these. The companies also had the normal operating costs, such as telephone, electricity, which was especially large for Revived Rubber Technologies, because a lot of electricity was used to run the machines. There was also for Willow Glade land tax, council rates, etc. There was always something to pay. 37 Ms Yonon was cross-examined as follows (tr 6-8):

Q. One thing is clear, from early June you understood that the court orders requiring production of information had to be complied with? A. Yes.

Q. And you understood that one of those orders required you to file an affidavit? A. Yes.

Q. And you know you did not do that until 9 July? A. I'm not sure exactly the date but I didn't do it until a week later.

Q. So a week later than what? You say a week later than the orders? A. Yes.

Q. You did not actually swear an affidavit, that is swear on oath on a bible that the affidavit was true and sign it until 9 July, did you? A. No.

Q. And up until that date you knew that no affidavit had been provided to SFG? A. I did an affidavit but, and from where it, from where, I don't know.

Q. When you say you did an affidavit, that is the draft you are talking about, paragraph 9? A. Yes.

Q. But you certainly did not sign it? A. Not that, well yes, I did.

Q. You did sign something, did you? A. Yes.

Q. You signed something in May, you say? A. Yes.

Q. And you gave it to your solicitor? A. Yes.

Q. And then you, do you say, you signed another affidavit on 9 July? A. I don't know whether it was 9 July. The first one. I gave to my solicitor, I signed it and gave it to my solicitor.

Q. You say that you signed an affidavit at some stage prior to 9 July, that is different to that one? A. No, I can't be sure.

Q. And could I suggest up until you swore that you knew that no affidavit had been provided -- A. I'm not sure.

Q. Listen to my question before you answer it, that no affidavit had been provided to SFG in accordance with the Court orders? A. I'm not sure.

Q. Did you take any steps to enquire of Mr Bush what is happening with those court orders that require me to provide an affidavit? A. I relied on Mr Bush to let me know what I had to do. 38 Ms Yonon was cross-examined about the contents of paragraph 22 of her affidavit as follows (tr 16):

Q. Now, it is not true to say that the bank accounts show to whom the money went in all cases, is it? A. Yes.

Q. You say it does show where it went? A. If you have the right - your cheque butts and statements, yes.

Q. But not the bank statements. They don't show that, do they? A. But how can they?

Q. Doesn't it say that? Doesn't this paragraph purport to say - A. Yes, you are right. No, they don't.

Q. And it's incorrect, isn't it? A. Yes.

Q. To your knowledge, no-one has ever provided the cheque butts, for example, to SFG and said "That cheque was for this", have they? A. No. That's me talking.

Q. And you have never tried to tell SFG what all these entries are for? A. No.

Q. And you are the person, you and Mr Turijio are the two people, who know it, aren't you? A. Yes. 39 Ms Yonon was also cross-examined as follows (tr 20):

Q. Mrs Bamford, one thing I suggest is this: From around the end of May, early June, of this year, you were aware that the time had expired for the period in which you were required to provide an affidavit and documents. I suggest you knew that? A. I relied on my husband and my solicitor to tell me.

Q. You were aware, up until 9 July, that there had been no compliance on your part with the Court orders? A. No. I had complied.

Q. When you swore the affidavit of 9 July, you did not go: Goodness me, I thought this was supposed to be done a long time ago. I thought it had been done a long time ago, did you? A. No. I relied on advice, or other people.

Consideration 40 Mr Marshall emphasised the sworn apologies from both Mr Bamford and Ms Yonon and the fact that there was no cross-examination in respect of those apologies. It was submitted that those apologies were given sincerely and in circumstances of great regret. I agree with that submission. Both Mr Bamford and Ms Yonon proposed that a finding be made that the charges have been proven against them but that no penalty should be imposed, save that they should be made to bear the costs of the application. 41 The plaintiff submitted that in respect of AEM, there should be a finding of contempt and an order that it pay the plaintiff's costs on an indemnity basis. As against Mr Bamford and Ms Yonon the plaintiff submitted that an order that they are guilty of contempt should be made and that a suspended sentence or bond be imposed for necessary deterrence. 42 The circumstances of this case are distinguishable from those cases in which contemnors acted with contumelious disregard for the Court's orders: ASIC v Michalik (aka Tomaszewski and Krawczyk) & Ors (2004) 52 ACSR 115; ASIC v Matthews (2009) 71 ACSR 279. Mr Beech-Jones accepted that this case has an "element of fuzziness" (tr 42-43). That description arises from the parties having failed to recognise the regime under s 128A of the Act in their Consent Orders. Once mention was made of that regime the parties became polarised. On the one hand the plaintiff, with its unrelenting pressure of correspondence on the defendants' solicitor, sought compliance with a regime pursuant to s 128A of the Act that was not mentioned in the Consent Orders. On the other hand the defendants sought to comply with the regime that had been included in the Consent Orders by filing a Notice of Motion, albeit that such step was not taken until eight days after the date for filing an application in the Consent Orders. That was followed by a period of consideration as to whether to appeal from Gzell J's orders and ultimately the first disclosure affidavits were produced on 9 July 2009. 43 The period of delay was between 5 and 6 weeks. I am of the view that it could not reasonably be suggested that the defendants were disregarding the Court's orders. Rather they were seeking to pursue the regime under the Consent Orders and engaging with the plaintiff's solicitors to find a way through what Mr Beech-Jones has described as the "fuzziness". 44 I accept Mr Bush's evidence that he was under extreme pressure; that his clients had provided a great deal of information within the required timeframe, but some outside the timeframe; and that he had most of the information within four weeks of 13 May 2009. I also accept Mr Bush's evidence that he needed to give consideration to the appeal process and that he was attempting to ensure that his clients were protected from self-incrimination having regard to the very serious allegations of fraud in the main case. 45 On the first day the matter was before me ex parte, 12 May 2009, I alerted the plaintiff's counsel to the fact that a new regime had come into force, without expressly mentioning s 128A of the Act (tr 6). I have little doubt that had the parties addressed the s 128A regime in their Consent Orders, any confusion in respect of the steps to be taken would have been dispelled. However the defendants, to their credit, made an admission of contempt subject to the preliminary application with which I dealt in the Judgment. A great deal happened between 15 May 2009 and 9 July 2009 in respect of the main case. The defendants made a large amount of material available to Mr Feldman so that it could be produced to the solicitors for the plaintiff. The defendants were also winding down their business, moving out of premises and terminating the employment of approximately 17 employees. There was also the application by Beautree in the Federal Court of Australia for the appointment of provisional liquidators to Willow Glade Pty Ltd and Pazoluca Pty Ltd, the fifth and sixth defendants in the main proceedings. Those applications were heard on 7 and 8 July 2009 and judgment was delivered on 9 July 2009: Beautree Pty Ltd, in the matter of Willow Glade Pty Ltd v Willow Glade Pty Ltd [2009] FCA 738. 46 Any contempt of a Court order has an element of seriousness. In this case I am not persuaded that the defendants were acting wilfully to avoid compliance with the Court order. I am satisfied that they took advice from a competent solicitor and provided material to him within a reasonable timeframe, and took steps to try and deal with the matter sensibly whilst seeking to protect themselves from self-incrimination. 47 A further circumstance to be taken into account in considering the seriousness of the contempt is the position adopted by the plaintiff's solicitors in suggesting various dates for compliance, without returning to Court and seeking an extension of time for compliance with the Consent Orders. The plaintiff's solicitors seem to have taken it upon themselves to purport to grant an extension of time for compliance with a Court order. The plaintiff's solicitors utilised the threat of an application for contempt to try to induce compliance with an order, the time for which had already expired. The far better course would have been to return to Court to obtain from the Court an order for an extension of time. I should also say that the defendants could and should have returned to Court to seek such an extension. Unfortunately the lawyers focused on debating this matter in rather turgid and lengthy correspondence. However the plaintiff had to press the defendants for more detailed disclosure of the various assets, in particular, in respect of Beautree's artwork and other items. This necessity will be reflected in an indemnity costs order. 48 Mr Bamford and Ms Yonon have given sworn apologies to the Court which I accept as genuine and which I accept as appropriate to purge their contempts. I have taken Mr Bush's frank disclosures into account and I accept his genuine shame that his clients are found in the present predicament. There were no separate submissions made in respect of AEM, of which Mr Bamford was a director. The contempt is however very much at the lower end of the scale of seriousness and I am of the view that the circumstances of this case require a lenient approach. 49 I find the offences proven but without recording any formal finding of contempt against the defendants, I order the defendants to pay the plaintiff's costs of the Motion for contempt on an indemnity basis. The Motion is otherwise dismissed. **********

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