FEDERAL COURT OF AUSTRALIA

CONTEMPT by disobeying order - whether defect in order prevents a determination person in default is guilty of contempt.

Australian Securities Commission Act 1989 (Cth), ss 19, 30, 70

Judiciary Act 1903 (Cth), s 78B

Coe v Commonwealth of Australia (1993) 118 ALR 193, followed

Cameron v Cole (1943) 68 CLR 571, followed

Little v Lewis [1987] VR 798, followed

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v ERROL JOHN WHITE

QG 40 OF 1998

DRUMMOND J

BRISBANE

16 JULY 1998

THE COURT ORDERS THAT:

1.         Errol John White be committed to prison for a period of eight weeks for his contempt of court constituted by his deliberate refusal to comply with the orders and directions made by Spender J on 24 June 1998.

2.         Errol John White pay the Australian Securities and Investments Commission’s costs of and incidental to the motion for contempt to be taxed on the basis that the Australian Securities and Investments Commission recover all its costs of and incidental to that proceeding, save only such costs, if any, as may have been unreasonably incurred.

Note:                Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

The Australian Securities and Investments Commission has moved on notice that Mr White be dealt with for contempt of court.  The alleged contempts are identified in the statement of charge which the Commission has served on him.  They are as follows:  firstly, that he wilfully failed or refused to comply with the requirements of a notice given to him under s 19 the Australian Securities Commission Act 1989 (Cth), which notice is dated 14 April 1998, and which was personally served upon him on 15 April 1998, in that he wilfully failed or refused to appear at 9.30 am on Wednesday, 1 July 1998 at Level 22, 240 Queen Street, Brisbane for examination on oath or affirmation and to answer questions put to him.  Secondly, that he wilfully failed or refused to comply with the requirements of a notice given to him under s 30 the Australian Securities Commission Act 1989 (Cth), which notice is dated 21 May 1998, and which was personally served upon him on 23 May 1998, in that he wilfully failed or refused to produce to Niall Coburn at 9.30 am on Wednesday, 1 July 1998 the documents referred to in paragraphs 1, 2, 3, and 4 of that notice.

The notices issued under ss 19 and 30 the Australian Securities Commission Act and served by the Commission on Mr White, in terms, required his attendance on 17 April and 26 May 1998 respectively for examination and to produce certain documents with respect to the investigation the Commission was conducting into certain activities of Coastal Asset Management Corporation.  Mr White was associated with that company.  Following Mr White’s failure to comply with those notices, on application of the ASIC, Spender J, on 24 June 1998, made the following orders under s 70(3) the Australian Securities Commission Act.  Firstly, the Court ordered that MrWhite comply with the requirements of a notice given to him under s 19 the Australian Securities Commission Act which notice was dated 14 April 1998 and which was personally served upon him on 15 April 1998 and directed that he comply with that notice by appearing on 9.30 am on Wednesday, 1 July 1998 at Level 22, 240 Queen Street, Brisbane for examination on oath or affirmation and by answering questions put to him.  Secondly, the Court ordered that he comply with the requirements of a notice given to him under s 30 of that Act, which notice was dated 21 May 1998 and which was personally served upon him on 23 May 1998; the Court directed that he comply with that notice by producing to Niall Coburn at 9.30 am on Wednesday, 1 July 1998, the documents referred to at paragraphs 1, 2, 3 and 4 of that notice.

Mr White refused to comply with either order.  His response to them was to deliver to the relevant ASIC officer a letter on 30 June 1998, which reads as follows:

I wish to inform yourself and the ASC that I will not be attending for an examination or supplying any documents on the 1st July 1998 at 9.00 am.

Please refer to the attached documents

(a)   notice of appeal QG 61 of 1998

(b)   affidavit of Errol John White dated 30 Jun 98.

Mr White had already filed the notice of appeal in this court against Spender J’s orders which he referred to in his letter.  He has not however made any attempt to seek a stay of the orders pending the outcome of his appeal.  Given the grounds on which his appeal is based it is highly improbable that a stay, if sought, would be granted.  It is the matter raised in his notice of appeal that also comprises the only answer that Mr White wishes to make to the charge that he deliberately disobeyed the orders of Spender J made on 24 June 1998.

He says, in effect, that upon Australia signing the League of Nations Charter in 1920, it became a sovereign state and thereafter the legislative power conferred on the Commonwealth Parliament by the Imperial Parliament by the Constitution Act 1900 came to an end.  It follows, so he says, that all laws enacted by the Commonwealth Parliament after 1920, including, of course, s 70 the Australian Securities Commission Act under which Spender J’s orders were made, are invalid.

This proposition is, as I have indicated, the only matter on which Mr White relied to oppose the making of the orders which the ASIC sought and obtained from Spender J.  It is, in my opinion, without any merit.  The question whether a law of the Commonwealth Parliament is within the legislative power conferred on the Parliament by the Constitution is, of course, a matter for the courts to determine.  But the entitlement of a national state, as Mr White accepts that the Commonwealth of Australia undoubtedly is, to act by its Parliament to pass laws having effect within its national territory is an attribute of the sovereignty of that state.  Mr White denies that the Commonwealth of Australia has had that capacity under the Constitution since 1920.  But that is not an issue which is justiciable in any Australian court.  See Coe v Commonwealth of Australia (1993) 118 ALR 193 at 200 and 201.  No court can question the capacity of the Commonwealth, as a sovereign authority, to do that which any sovereign can do, viz, make laws that bind those within its territory.  An Australian court must give effect to all the laws of the Commonwealth, including s 70 the Australian Securities Commission Act.  That is the consequence of the Commonwealth having sovereign status and it does not matter whether that results from Imperial legislation or, as Mr White claims, from international law only.

I am satisfied that Mr White has deliberately refused to comply with Spender J’s orders.  I have referred to his explicit statement in his letter of 30 June 1998 of his refusal to attend as required by those orders.  Further, at the hearing before Spender J, he was repeatedly warned by the judge that if he refused to comply with the orders that his Honour made, he would be at risk of imprisonment.  It is sufficient to refer to what took place on the third of these occasions:

HIS HONOUR:   What I am proposing to do is to attempt to meet your convenience as best I can.  If, for instance, you had a pressing obligation this afternoon which would make it inappropriate for you to have to be examined this afternoon, then I would not order you to be examined this afternoon; I’d make it tomorrow morning.  But if there is no such difficulty, then I would nominate a time and you can make your own decision as to whether you obey it or not.  But if you do not obey it, you will be in contempt of this court and you face the possibility that that contempt might bring.

MR WHITE:   I understand that, your Honour.  Therefore I ask that if it could be some time next week to give me a chance to consult the legal counsel in Victoria, which I’ll have to travel down to do, to find out what to do with the - how to proceed with my defence from this point, without having to comply with the court order in the meantime.  I would like to have that verified.

HIS HONOUR:   Well, what I will do is make the time for production and the time for examination the same, and I will make that 10 o’clock on Monday next.

MR WHITE:  That will be fine, your Honour …

I doubt that Mr White has any genuine belief that the proposition on which he relies to claim that he is free of any obligation to comply with the ASIC requirements and with Spender J’s subsequent orders has any merit.  As a matter of commonsense, it is improbable in the extreme that the Commonwealth Parliament has been unable, as a matter of legal principle, to enact valid legislation since 1920.  Rather do I think Mr White’s position is that he is using a ploy to try and frustrate, for as long as possible, the ASIC investigation.  The threat implicit in para 7 of his affidavit read today about the consequences for any legal officer who exercises his statutory authority reinforces me in reaching that view.  I infer that Mr White has refused to comply with the orders well knowing that this is likely to impede the ASIC investigation and, in particular, that aspect of the investigation into the whereabouts of nearly $900,000 of moneys deposited by members of the public with Coastal Assets Management Corporation and which the ASIC has grounds for believing have been moved offshore.  Spender J accepted, in his reasons for making the orders of 24 June 1998, that the ASIC had grounds for that belief.  Spender J also said on this occasion:

The material [ie, the ASIC material] deposes to a belief reasonably entertained that Mr White can give information relevant to the matter, the subject of the ASC investigation, concerning in particular, the location of the funds which are said to be deficient, and with the identity and protection of those funds.

It is sufficient to refer to the exchange between his Honour and Mr White that appears in the transcript of the proceedings on that occasion as an example of the kind of material to which his Honour was having regard:

HIS HONOUR:   Yes, but there are people who’ve lost money, Mr White, and it’s about time the crooks were brought to justice.

MR WHITE:  They didn’t lose any money, your Honour.  The ASC intervened before the moneys could be invested on behalf of the clients, therefore, it is only hearsay that whether they would have lost the money or not.

HIS HONOUR:   Yes, all right.

MR WHITE:  In fact, the only moneys that they really did lose were the funds, when we return to the different exchange rate coming back to Australia, amounted for some $50,000 difference in investment funds as to funds that were going to be returned to the clients.

HIS HONOUR:   Well, you seem to know a fair bit about the operation of the business, Mr White.  You have just virtually condemned yourself in a sense - in a sense of being a person who might be able to shed some light on the way the scheme operated.

MR WHITE:   We had the ASC interventions on the admissions - self-admission they do not know how the scheme operates, so how can you make a judgment on something that you haven’t even see operate?

HIS HONOUR:   All right, well, they are going to ask you about that.

MR WHITE:   There was no chance for us or anybody to produce proof of performance if at every time we get to the point where we can produce performance, we have intervention from the ASC and the courts.

I infer from the considerations I have already set out that Mr White’s refusal to comply with the orders of 24 June 1998 was made also with the intention of impeding at least this aspect of the ASIC’s investigation.

I am satisfied beyond reasonable doubt that Mr White has deliberately refused to comply with Spender J’s orders.

The ASIC has complied with all the procedural preconditions to the Court having power to make an order for committal.  Subject to one qualification, I am equally satisfied that he has no justification for that refusal sufficient to prevent it constituting a wilful contempt of court.

However, Spender J, prior to making the orders of 24 June, considered and reached the conclusion that Mr White’s grounds for denying that ss 19 and 30 the Australian Securities Commission Act imposed any enforceable obligation on him did not raise a matter arising under the Constitution, so that it was open to his Honour to proceed to make the orders he did without s 78B the Judiciary Act 1903 (Cth) first being complied with.  His Honour’s view may well be correct, given that the point that Mr White raises can hardly be said to arise under the Constitution or involve its interpretation, but rather is a point that he relies on to deny the Constitution any effect as a legal foundation for the valid enactment of laws having effect within Australia, at least after 1920. 

Be that as it may, I took a different view when the matter first came before me on 8 July 1998.  I accordingly adjourned the hearing of the contempt proceedings to enable s 78B notices to be served; this adjournment also served the purpose of meeting Mr White’s objection to the late delivery of the ASIC’s notice of motion which he said on that occasion deprived him of the opportunity to gather and present all the material upon which he proposed to rely.  The s 78B notices have now been served.  I should also say that on 8 July, Mr White indicated that an adjournment until today would be sufficient time to enable him to gather this material.  In other words, he took the same position on 8 July in respect to that topic as it would appear he took in the discussion he had with Spender J on 24 June, which resulted in that judge fixing 1 July, rather than an earlier date, as the date for his attendance for examination by the ASIC.  At the end of argument, after the Court resumed this afternoon for the purpose of dealing with the significance of there being no s 78B notices served in the proceedings before Spender J, Mr White applied for an adjournment, reverting again to his claimed need for yet more time to gather materials, this time, he says, from overseas venues.  Given the history of the prior assertions by him as to the limited times he would need to put himself in the position to present his argument, I do not accept that this belated claimed need for yet more time is bona fide.  I accordingly rejected his application for an adjournment which he made on resumption of the hearing after the adjournment.

However, on the assumption that I was correct, and that Spender J should not have made the orders on 24 June, unless and until notices were given in compliance with s 78B the Judiciary Act, I am nevertheless of the opinion that any consequent defect in Spender J’s orders provides no ground for my now refusing to make a determination against Mr White on the ASIC contempt motion.

This Court is a superior court of record, and if one of its orders is void, as it may be if made in circumstances in which there has been non-compliance with s 78B the Judiciary Act, the order nevertheless remains binding on and enforceable against the person to whom it is directed, unless and until set aside by a competent authority.  See Cameron v Cole (1943) 68 CLR 571 at 590.  Little v Lewis [1987] VR 798, particularly the judgment of Kaye J at 804 and 805, with whom the other members of the Full Court agreed, shows that the fact that an order of a superior court casting an obligation on a person is void is no impediment to that person being imprisoned for contempt constituted by his refusal to comply with it, while the order stands.

I have referred to what I consider to be Mr White’s motives in refusing to comply with Spender J’s orders.  I have also referred to the lack of any substance or merit in the proposition on which alone he relies to show that the ASIC had no lawful authority to issue the notices and that Spender J was impotent to make any enforceable order against him.  Even if Spender J’s orders are liable to be set aside by a competent authority because they were made without s 78B first being complied with, and I would consider that it is the Full Court only that has that authority, I do not consider that provides any reason, in the circumstances of this case for my refraining from finding that Mr White is guilty of contempt of court constituted by his wilful disobedience of those orders.

After hearing submissions on sentence, his Honour said:

Far from offering anything in mitigation of punishment, Mr White has, in my opinion, simply shown that he intends to continue to defy the authority of the Court. 

The order of the Court will be that he be committed to prison for a period of eight weeks for his contempt of court constituted by his deliberate refusal to comply with the orders made by Spender J on 24 June 1998.

Associate:

Dated:              16 July 1998