FEDERAL COURT OF AUSTRALIA

Hudson v Australian Competition & Consumer Commission [1999] FCA 891

CONTEMPT OF COURT – appeal against sentence – where earlier sentence imposed for contempt – where subsequent contempts were numerous and occurred during pendency of proceedings for contempt - whether sentence imposed was “manifestly excessive”

PRIVILEGE – privilege against self-incrimination and privilege against exposure to civil penalty not available to corporation – written disclosure by corporation of its conduct

Trade Practices Act 1974  Part V

Trade Practices Commission v Abbco Iceworks Pty Limited (1994) 52 FCR 96 followed

Lazar v Taito (Australia) Pty Ltd (1985) 5 FCR 395 cited

Madeira v Roggette Pty Ltd (1990) 2 Qd R 357 cited

Macleod v Australian Securities Commission (Lockhart, Lee, Hill JJ, 13 August 1993, unreported) cited

Re Intex Consultants Pty Ltd [1986] 2 Qd R 99 cited

Registrar Court of Appeal v Pelechowski [1998] NSWC 2 cited

Karl Pelechowski v The Registrar, Court of Appeal [1999] HCA 19 cited

AMIEU v Mudginberri Station Pty Ltd (1986) 161 CLR 98 referred to

Kovac v R (1977) 15 ALR 637 referred to

Yager v Musa [1961] 2 QB 214 cited

Vaughan v Vaughan [1973] 3 All ER 449 referred to

Burton v Winters [1993] 3 All ER 847 referred to

GRANT WARREN HUDSON v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Q 128 OF 1999

SPENDER BURCHETT and HELY JJ

2 JULY 1999

BRISBANE

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

The appeal be dismissed with costs.

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

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT:

1                     This is an appeal from a sentence of six months’ imprisonment for contempt of court, imposed on Grant Warren Hudson by Kiefel J on 7 May 1999.

2                     The sole ground of appeal is that the sentence was manifestly excessive.

3                     It is necessary to give a history of the matter.  In July 1998 the Australian Competition and Consumer Commission (‘ACCC’) brought proceedings against Goldstar Corporation Pty Ltd (‘Goldstar’) and Mr Hudson alleging that each of them was involved in conduct in contravention of the Trade Practices Act 1974.  The conduct alleged may be described in a shorthand way as telefraud: Goldstar’s employees telephoned potential advertisers for directories published by it and created the false impression that the persons contacted had already placed an order for a directory entry.  These persons were asked to confirm the order and were later charged for the entry.  In many cases no order had ever been placed.  The advertisers had been selected from advertisements they had placed in other publications.

4                     On 2 July 1998 Spender J accepted detailed undertakings given to the court by Mr Hudson and Goldstar to desist from the conduct particularised in those undertakings.

5                     On 6 November 1998, on the application of ACCC, Drummond J found that both Mr Hudson and Goldstar were guilty of contempt of court by breaching the undertakings given on 2 July 1998.  So far as Mr Hudson was concerned, Drummond J ordered that a warrant for Mr Hudson’s committal to prison for a period of two months issue, but directed that:

“The warrant lie in the registry to the intent that it not be executed provided that the second respondent [Mr Hudson] refrains by himself from contravening any of the provisions of Part V [of] the Trade Practices Act 1974 (Cth) for two years and that he also refrains for two years from being knowingly involved in the contravention by anyone else of any of the provisions of Part V [of] the Trade Practices Act 1974 (Cth).”

6                     Drummond J further ordered Mr Hudson to pay the ACCC’s costs of and incidental to the proceedings for contempt on an indemnity basis, and that the ACCC have liberty to apply for the issue of the warrant.

7                     On 6 November 1998 Drummond J made orders similar to the previous undertakings that had been given by Goldstar and Mr Hudson.  The orders presently relevant were as follows:

“THE COURT ORDERS THAT:

1.    Until trial or earlier order, the first respondent be restrained, whether by itself, its employees, agents or howsoever, in connection with the supply or possible supply or promotion of the supply of print advertising or internet advertising or the making of an entry in a directory, from engaging in any of the following conduct:

(a)     representing to any person (which includes a corporation, business or government department) that an advertisement or directory entry had previously been ordered or agreed to by that person or by a person on behalf of that person, when it had not been so ordered or agreed to;

(b)     sending to any person a document which misleads, or is likely to mislead that person as to the effect of signing or returning that document;

(c)     representing to any person that an advertisement or directory entry is to be included in a new edition of a publication in which, or an update of an internet site at which, that person had previously advertised or displayed an entry, when that person had in fact never previously advertised or displayed an entry in the relevant publication or at the relevant internet site;

(d)     where, in response to a representation as described in (a) and (c) above, or where a person receives a document referred to in (b) above, a person makes an order for a print advertisement or internet advertisement or entry in a directory;

(i)        invoicing a person for the advertisement or directory entry;

(ii)   making a demand, orally or in writing, for payment for the advertisement or directory entry;

(iii)  threatening, orally or in writing, to commence legal proceedings with a view to obtaining payment for the advertisement or directory entry;

(iv)  threatening, orally or in writing, to place the name of the person on a list of defaulters or debtors with a view to obtaining payment for the advertisement or directory entry; or

(v)   threatening, orally or in writing, to invoke any collection procedure with a view to obtaining payment;

(e)     where, after an invoice is issued or a demand or threat is made as described in (d) above, a person makes payment to the first respondent, accepting that payment; and

(f)      representing, relying on or claiming that the signature of any person on any document brought into existence after the date of this order constitutes an authorisation of, or request or order for, either advertising services or a directory entry unless:

(i)        upon each page of the document, at least 3 cm from the top or bottom of the page, there appears in bold type no smaller than 28 point, the words:

“This is an order for advertising/directory services.  If you sign this you enter into a binding contract to pay $ (insert cost of entry or service)”; and

(ii)      the document clearly sets out full details of the service or entry to be provided and the date or dates of publication.

…

3. Until trial or earlier order, the first respondent and the second respondent be restrained, whether by themselves, their respective employees or agents or howsoever, in connection with the supply or possible supply or the promotion of the supply of print advertising or internet advertising or the making of an entry in a directory, from taking any step with a view to obtaining the payment of any charge for advertising services or for the making of an entry in a directory unless:

(a)           the first respondent or the second respondent holds a written order for the services or directory entry that clearly requests the services or entry to be provided, and is signed by a person authorised to do so by the person from whom the payment is claimed (“the original order”);

(b)           the original order predates any facsimile transmission or other correspondence from the first respondent or the second respondent to the person that requests, inter alia, confirmation of the content of the proposed advertising or entry; and

(c)           a copy of the original order is provided to the person prior to or together with any demand or request for payment.

8                     On 11 December 1998 ACCC filed a Statement of Charge, alleging that Mr Hudson and Goldstar had breached the orders made by Drummond J on 6 November 1998 in respect of dealings with a company, Hawthorn International Education Ltd.  The essence of the charge was that Goldstar, on about 19 November 1998 had taken steps to obtain payment from Hawthorn for advertising services or the making of an entry in a directory called The National Federal State and Local Government Advertiser (‘The Advertiser’), a publication of Goldstar, when no written order was held by it, a contravention of Order 3(a).  There were also allegations of contraventions of paragraphs (b) and (c) of Order 3, but they are derivative in that each of the Orders 3(b) and 3(c) require an original order to be in existence and in each of the contraventions found by Kiefel J there was no such written order at all.  In respect of this statement of charge the evidence indicated that on about 19 November 1998, a facsimile transmission was forwarded to Hawthorn, asserting that a judgment had been obtained against Hawthorn in the sum of $986.00 and demanding payment within seven days.  Threats of execution and oral examination were made.

9                     When the matter came before the court on 16 December 1998 Goldstar appeared by a solicitor.  Mr Hudson had notice of the application by the ACCC but had not been served personally with the material, and the solicitor who appeared on behalf of Goldstar did not seek to appear for Mr Hudson when the matter was first mentioned on 16 December.  That afternoon, the solicitor who appeared for Goldstar in the morning of 16 December, announced that he had instructions from Mr Hudson to accept service of the proceedings on his behalf.  The solicitor for Goldstar on 16 December conceded that Goldstar had breached the orders in the respects alleged, but said that the contraventions had resulted despite Mr Hudson’s endeavours to ensure that the staff were informed of the orders.  The matter was adjourned until 19 January 1999 for hearing.

10             A notice to produce was served on Goldstar on Friday, 15 January 1999.  Some documents were produced in compliance with that notice on 19 January 1999, but production was incomplete.  Counsel for ACCC indicated that some of the documents produced disclosed “very serious and continuing breaches” of the orders of Drummond J, and foreshadowed that the ACCC might want to expand its statement of charge.  Kiefel J ordered that the notice to produce be complied with within seven days, and adjourned the hearing.  At a directions hearing on 19 February 1999, an amended statement of charge, and its accompanying schedules, was discussed.  The application by ACCC was finally heard on 25 and 26 February 1999 and 10 March 1999.

11                  It is relevant to note that the further amended statement of charge alleged a large number of breaches of the orders of the court by Goldstar.  The case against Mr Hudson, as formulated in the statement of charge, was:

“The second respondent [Mr Hudson] was at all material times a director of the First Respondent.  The Second Respondent was at all material times aware of the Orders of the Court of 6 November 1998.  The Second Respondent took no steps, or no adequate steps, to cause the First Respondent not to breach the Orders of the Court.”

12                  Kiefel J on 7 May 1999 found the charges proved.  The matter was regarded as a very serious refusal to obey the orders of the court, and Kiefel J noted that:

“…Mr Hudson is not charged with contempt by reason of his direct action in contravention of the Order, although this would appear to have been open at least with respect to one matter.”

13                  In the course of her Honour’s reasons, Kiefel J noted:

“It would not appear…that Goldstar’s employees were either clear as to their duties, or took them seriously,…”

and later:

“It is the lack of supervision, which was clearly practicable, which counts most strongly against the respondents.”

Her Honour noted that the contraventions which had been established continued even after the matter had been mentioned in court on 16 December 1998.  Kiefel found:

‘The liability of both respondents, turns largely upon Mr Hudson’s acts and omissions.”

Kiefel J said:

“It is difficult to understand why Mr Hudson could have done so little, when faced with a clear prospect of serving a term of imprisonment.  I am not able to account for Mr Hudson’s state of mind.  The number of breaches and the period over which they occurred, in the context of a small business, permits of an inference that he turned his face against the requirements of the Orders.  Indeed, that would seem to be the only rational explanation available.  The conduct, including his own efforts in one case, can hardly be explained by even gross negligence.

Penalty

This is the second set of charges brought on account of the respondents breaches of undertakings or Orders.  The term of imprisonment of two months ordered by Drummond J, but stayed, was doubtless intended to give Mr Hudson an opportunity to rectify the operations of Goldstar and himself to comply with the terms of the Orders.  He has failed to take advantage of that opportunity.  The sheer number of breaches and their occurrence during these proceedings reflect his lack of willingness to ensure compliance to such an extent that one infers he could not have taken the Orders seriously.  It needs hardly be said that penalties must reflect the Court’s determination that its Orders be complied with and to deter further such conduct.  In the case of each respondent, substantial penalties are in my view therefore demanded.

The first respondent will be fined $30,000.  Mr Hudson will be committed to prison for a period of six months.  The respondents will be ordered to pay the Australian Competition and Consumer Commission’s costs of these proceedings.”

14                  While it formed no part of the appellant’s written submissions on penalty, the court was invited by counsel for the appellant in the course of argument to note that many of the thirty-three proved instances of contempt by Goldstar came to light as a result of the compliance by Goldstar with the notice to produce served on it on 15 January 1999, the suggestion being that, in a sense, the company and, by derivation, Mr Hudson, had been compelled to provide proof against itself.  The appeal is directed solely at the adequacy of sentence against Mr Hudson but, in any event, the privilege against self-incrimination and the privilege against self-exposure to a civil penalty are not available to a corporation.

15                  In Trade Practices Commission v Abbco Iceworks Pty Limited (1994) 52 FCR 96 it was held by Burchett J (with whom Black CJ and Davies J agreed) and by Gummow J, that the privilege against self-incrimination as well as the privilege against self-exposure to a civil penalty is not available to a corporation.  Burchett J said at 114:

“…[Morgan v Babcock & Wilcox Ltd (1929) 43 CLR 163] shows that a notice to produce is an accepted procedure, in a criminal as in a civil case, in order to lay the foundation for proof of documents by secondary evidence.”

And at 116, of the privilege against self-incrimination, Burchett J said:

“It has been argued that this conclusion [that the privilege against self incrimination is not available to corporations] indirectly diminishes the value of the privilege for individuals.  Where both a corporation and its officers are at risk of prosecution, to require discovery of the corporation is to make available documents which may accuse its officers.  But their privilege has never been, nor should it be, a shield against the use of incriminating evidence - only a right to decline to be themselves the authors of their own destruction by producing the evidence.  If evidence produced by the corporation condemns them, the relevant law is vindicated without any breach of the principle against self-incrimination.”

16                  Further, the notice to produce was served in the context of a claim in an affidavit by Mr Hudson that there had been a merely isolated and accidental breach of the orders of Drummond J, a claim which the material produced in response to the notice to produce demonstrated to be false.

17                  In support of the submission that a sentence of six months’ imprisonment was manifestly excessive, counsel for the appellant referred to a number of decisions said to support that conclusion.  In Lazar v Taito (Australia) Pty Ltd (1985) 5 FCR 395,the Full Court of the Federal Court was constituted by Fox, McGregor and Neaves JJ.  Orders had been made restraining Mr Lazar and others from selling or hiring out or encumbering amusement machines or infringing the applicant’s copyright.  Lazar had been sentenced by Smithers J at first instance to three months for contempt of court, and the Full Court held that that sentence was not manifestly excessive.  In Madeira v Roggette Pty Ltd (1990) 2 Qd R 357, a director of a company which demolished a number of shops, an act said by de Jersey J to be “an unscrupulous and reprehensible act which involved dramatic flouting of the order of the court” was sentenced to imprisonment for two months.  In Macleod v Australian Securities Commission, (Lockhart, Lee & Hill JJ, 13 August 1993, unreported) the Court dismissed an appeal that a total sentence of six months was manifestly excessive.  The contemnor had disobeyed orders of the Court by failing to provide a list of property in which he had an interest, and by disposing of real property in which he had an interest.  In respect of various breaches, he was sentenced to two terms of imprisonment for two months, to be served concurrently, and an additional term of four months.  In Australian Securities Commission v Cook, an unreported judgment of Dowsett J in the Supreme Court of Queensland of 14 February 1992, Cook was sentenced to two months’ imprisonment in respect of “contumacious contempt” constituted by dealings with funds in various bank accounts in breach of undertakings.

18                  On the other hand, there are cases where a sentence of six months for contempt has not been regarded as inappropriate.  Macleod is such a case.  In Re Intex Consultants Pty Ltd [1986] 2 Qd R 99, the contemnor, a director of Intex, breached undertakings not to dispose of funds other than by resolution of the Board, and to direct bankers that all cheques must be countersigned by a specified co-director.  The contemnor was sentenced by Thomas J to imprisonment for an additional period of five months after an initial period of six weeks had been served.  In Registrar Court of Appeal v Pelechowski [1998] NSWSC 2, Mr Pelechowski was sentenced to a fixed term of imprisonment for six months.  On appeal to the High Court (Karl Pelechowski v The Registrar, Court of Appeal [1999] HCA 19), the majority found that the initial restraining order was beyond jurisdiction.  However, McHugh J at paras 88-90 and Kirby J at paras 146-155 each would have upheld the sentence of six months for registering a mortgage against his property in contravention of a restraining District Court order, as within the range that could properly be imposed.

19                  A sentence for contempt is punitive, to vindicate the authority of the court: AMIEU v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 107.  There Gibbs CJ, Mason, Wilson and Deane JJ said that the underlying rationale of every exercise of the contempt power was the necessity to uphold and protect the effective administration of justice.  Their Honours said:

“Although the primary purpose in committing a defendant who disobeys an injunction is to enforce the injunction for the benefit of the plaintiff, another purpose is to protect the effective administration of justice by demonstrating that the court’s orders will be enforced.  As the authors of Borrie and Lowe’s Law of Contempt, 2^nd ed. (1983) say, at p. 3:

  ‘If a court lacked the means to enforce its orders, if its orders could be disobeyed with impunity, not only would individual litigants suffer, the whole administration of justice would be brought into disrepute.’  ”

20                  On an appeal against sentence, the court should not interfere unless it is satisfied that the discretion exercised by the court imposing the sentence miscarried, or was unsound, or unreasonable in its exercise: Kovac v R (1977) 15 ALR 637.

21                  None of the cases relied on by the appellant address the particular circumstance of this appeal that the sentence appealed from was the second occasion on which a term of imprisonment had been imposed for conduct in contempt of undertakings given to the court, or of orders of the court.  That circumstance is a highly material factor, as instanced by the following cases.

22                  In Yager v Musa [1961] 2 QB 214, Devlin LJ, with whom Davies LJ agreed, said at 218-219:

“I see no way of dealing with a man of this sort except in the way in which a criminal court deals with a persistent offender, such as a housebreaker, when, after a preliminary warning or probation, it has to impose a sentence of imprisonment.  If immediately after he comes out of prison, the housebreaker, notwithstanding that he said he was going to turn over a new leaf, immediately goes back to housebreaking, a longer sentence of imprisonment has to be imposed, and so on.  The court has to balance the need for protecting the public from his molestations or depredations against the principle that, subject to that need, no man’s liberty should be taken away unnecessarily.  In my judgment, the period of imprisonment that the defendant should now serve should be one - this being his third period - which is substantially longer than the second one, which evidently was not sufficient.  If when he is released after that he gives any further evidence of disobedience, the inevitable result will be that he will be brought back before this court again and yet a longer period will be imposed upon him, and, if that is not sufficient, then the court will have to impose a longer period still which may amount to something that will keep him in prison for a very long time indeed.”

23                  In Vaughan v Vaughan, [1973] 3 All ER 449, a wife was granted a non-molestation injunction pending suit.  The husband was committed to prison for breach of that injunction but released a month later.  After expressing his regret and undertaking to refrain from further disobedience, he again breached an injunction restraining him from molesting the wife and was sentenced to imprisonment, being released twenty-three days later, after again making an apology and giving an undertaking.  On 1 January 1971 he was again committed for contempt, but released on 6 April.  As a result of further incidents, he was on 18 May committed for two months for contempt.  In respect of yet further conduct, some time later, the husband was committed for contempt for six months.  The Court of Appeal amended the detail of the sentence, but Davies LJ said at 454:

“On the merits as to the propriety of the six months period and the question whether molestation has been established, I entirely agree with the conclusion at which the learned judge arrived.  I think that in all the circumstances, in view of this man’s record of misbehaviour towards his wife, the four committals previously, and the apologies on each occasion followed, immediately in many cases, by a fresh offence, there is nothing out of the way in this order at all.”

Stephenson LJ at 454 expressed the view:

“That past conduct makes it impossible to treat this fresh molestation by a suspended committal order or to regard a committal to prison for six months (less one day) as excessive.”

Sir Seymour Karminski said at 455:

“So far as the sentence of six months is concerned, having regard to the prolonged history in this case of molestation and the breaking of a large number of promises to behave himself by the husband, it cannot be said that six months is too heavy a sentence.”

24                  In Burton v Winters [1993] 3 All ER 847, an appeal against a sentence of two years imprisonment was dismissed.  Mrs Burton appealed against orders imposing a prison sentence of two years suspended on condition she commit no further breach of an injunction restraining her from trespass, disturbance or wrongful interference with the property of the defendants, Mr and Mrs Winters, and against subsequent orders made activating the prison sentence of two years.  Lloyd LJ, with whom Connell J agreed, said at 850:

“The sentence undoubtedly contains a punitive element for the serious and repeated breaches of the injunctions granted on 21 April and 17 July 1992.  It also contains a coercive element, (see Lightfoot v Lightfoot [1989] FCR 305).  The defendants are entitled to the protection of the law and the court must do its best to provide such protection by coercing the plaintiff in the only way it can.  She has been given every chance and afforded every indulgence but all to no avail.”

25                  In the present case, it was submitted by counsel on behalf of Mr Hudson that an appropriate penalty would have been three months imprisonment and that imprisonment for six months is manifestly excessive.

26                  The learned trial judge took into account Mr Hudson’s knowledge and understanding of the orders; the wilful manner in which the orders were disobeyed; the time over which the instances of disobedience took place; the volume of breaches of the orders; and the ease with which a person who had desired to obey the orders could have done so compared with the appellant’s lack of willingness to do so.  In addition, Kiefel J noted:

“The attempt to distance Goldstar, and himself, from demands made [throughout January and early February 1999, while the proceedings were current] is consistent with Mr Hudson’s idiosyncratic view of the truth.”

27                  The contempts were not merely a failure to act, but, as the trial judge found, a failure to take the Court’s orders seriously, or a lack of will to comply with the orders, resulting in a failure to take even basic steps to ensure that the court orders were complied with.  The appellant, as sole director, was the only one who could prevent Goldstar breaching the Court’s orders.  The orders breached by Goldstar and Mr Hudson were made on 6 November 1998.  On 17 November a sealed copy of the orders was transmitted to an associate of Mr Hudson.  The trial judge found that a copy of the orders with attached reasons for them was provided to Mr Hudson.  The breaches the subject of this appeal occurred from about 19 November 1998 to about February 1999.

28                  These factors, and in particular, the circumstance that Mr Hudson had been sentenced to two months imprisonment for contempt of the court’s orders, albeit suspended, immediately prior to the large number of contraventions of which he was found guilty by Kiefel J on 7 May 1999, in our opinion, make it impossible to conclude that the sentence of six months is manifestly excessive.

Associate:

Dated:              2 July 1999