FEDERAL COURT OF AUSTRALIA

LED Builders Pty Ltd v Eagle Homes Pty Ltd [1999] FCA 1213

CONTEMPT OF COURT – order that respondent not dispose of any asset having value exceeding $10,000 without first giving applicant seven days’ notice of its intention to do so – later order restraining respondent from disposing of or dealing with any of its money, property or other assets, other than for certain specified purposes – whether later order inconsistent with, and supersedes, earlier one – respondent disposed of two allotments of land, each having a value exceeding $10,000, without giving notice in conformity with earlier order – not suggested that proceeds disbursed in manner inconsistent with later order – elements of aiding and abetting contempt – costs on contempt motion.

Federal Court Rules  O 37 r 2

Seaward v Paterson [1897] 1 Ch 545 followed

Attorney-General v Newspaper Publishing Plc [1988] Ch 333 followed

Yorke v Lucas (1985) 158 CLR 661 applied

Re Modern Woodcraft Pty Ltd (In liq) (1997) 75 FCR 245 considered

Microsoft Corporation v Marks (No 1)  (1996) 69 FCR 117 cited

Witham v Holloway (1995) 183 CLR 525 applied

Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 cited

Forestview Nominees Pty Ltd v Perron Investments Pty Ltd (1999) 162 ALR 482 followed

McIntyre v Perkes (1988) 15 NSWLR 417 referred to

Giorgianni v The Queen (1985) 156 CLR 473 applied

LED BUILDERS PTY LIMITED v EAGLE HOMES PTY LIMITED

NG 817 of 1993

NG 862 of 1994

LINDGREN J

3 SEPTEMBER 1999

SYDNEY

THE COURT DECLARES THAT:

1.         The respondent committed a contempt of an order of the Court made on 23 December 1996 by transferring Lot 1 DP 852183 at Hinchinbrook to Eagle Management Australia Pty Ltd by Transfer dated 16 September 1998 without first providing seven days’ written notice to the applicant as required by the said order.

2.         The respondent committed a contempt of an order of the Court made on 23 December 1996 by transferring Lot 163 DP 843696 Harrington Park to Galaxy Homes (Aust) Pty Ltd by Transfer dated 30 April 1998 without first providing seven days’ written notice to the applicant as required by the said order.

THE COURT ORDERS THAT:

1.         The motion be dismissed as against Paul Cardile and Eagle Management Australia Pty Ltd.

2.         The respondent pay the applicant’s costs of the motion brought by notice of motion filed on 15 April 1999.

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

REASONS FOR JUDGMENT

(Contempt of Court)

INTRODUCTION

1                     By notice of motion filed on 15 April 1999, the applicant (“LED”) seeks a finding of contempt of court by the respondent (“Eagle”), by Paul Cardile and by Eagle Management Australia Pty Ltd (“Eagle Management”).  The contempt alleged is a failure to comply with Order 1 of orders made by Whitlam J in this proceeding on 23 December 1996.  In substance, the order was to the effect that Eagle was restrained from parting with any of its “real assets” with an ordinary market value in excess of $10,000 without first giving at least seven days’ notice to LED of its intention to do so.  According to the statement of charge, Eagle transferred two allotments of land without first giving seven days’ notice to LED. 

2                     First, by transfer dated 16 September 1998, registered on 10 February 1999, Eagle transferred Lot 1 DP 852183 at Hinchinbrook (“Lot 1 Hinchinbrook”) to Eagle Management.  Second, by transfer dated 30 April 1998, registered on 4 December 1998, Eagle transferred Lot 163 DP 843696 at Harrington Park (“Lot 163 Harrington Park”) to Galaxy Homes (Aust) Pty Limited (“Galaxy Homes”).  Further, according to the statement of charge, by transfer dated 10 March 1999, registered on 18 March 1999, Galaxy Homes transferred Lot 163 Harrington Park to Stephen Frederick Woodward. 

3                     At all material times Paul Cardile was a director of, and shareholder in, Eagle and Eagle Management, and his son, John Cardile was a director of, and shareholder in, Galaxy Homes.

BACKGROUND FACTS

4                     On 23 December 1996, Whitlam J made the following order in proceeding NG 817 of 1993:

“1.       The respondent be restrained from entering into any contract in respect of, or encumbering, any of its real assets with an ordinary market value in excess of $10,000, without first providing 7 days written notice to the applicant, such notice to specify:

(a)       the nature of the asset;

(b)       the estimated ordinary market value of the asset;

(c)        the parties to the proposed dealing;

(d)       how it is proposed to apply the proceeds of the sale of the asset.”

5                     Although it is not directly relevant to the issues before me, his Honour made the following further order on the same day:

“2.       The Respondent provide to the applicant on or before 24 December 1996 copies of the agency agreements between L J Hooker Narellan and the respondent relating to the two blocks of vacant land at 5 and 7 William Campbell Avenue, Harrington Park, in the State of New South Wales (Lots 163 and 164 DP 843696).

6                     The issue of service of copies of the orders has been the subject of submissions.  As at 24 December 1996, the registered office of Eagle, Eagle Management and Galaxy Homes was 42 Harris Street Pyrmont.  On that day Colin Steele, Licensed Commercial Agent, attended at an office at that address and had a conversation with the receptionist there as follows:

Mr Steele:                    “Is this the registered office of Eagle Homes Pty Ltd?”

Receptionist:                 “Yes it is.”

He handed a copy of the orders to the receptionist.  On 30 December 1996 he served a copy of the order upon Mr Cardile at 7 Eildon Court, Wattle Grove.  At the time he had a conversation with Mr Cardile to the following effect:

Mr Steele:                    “Are you Paul Cardile?”

Mr Cardile:                   “Yes I am.”

Mr Steele:                    “This is a Federal Court order.  Are you the Paul Cardile referred to in this order?”

            Mr Cardile:                   “Yes.”

7                     There is no issue as to service upon Eagle or Mr Cardile, but it will be noted that there was no purported service upon Eagle Management or, for that matter, Galaxy Homes.  LED submits that Eagle Management was served by reason of two facts: the address at 42 Harris Street Pyrmont was the registered office of Eagle Management as well as that of Eagle, and Mr Cardile was, at the time of service on him, a director of, and shareholder in, Eagle Management.  In substance, LED submits that the service upon Eagle and Mr Cardile was effective service upon Eagle Management also.

8                     The order bore the following endorsement:

“To:                Eagle Homes Pty Limited

And to:            The Directors of Eagle Homes Pty Limited

                        Paul Cardile

                        Lucy Cardile

If Eagle Homes Pty Limited:

(a)       refuses or neglects to do the acts referred to in order 1 within the specified time; or

(b)       disobeys order 2

Eagle Homes Pty Limited, Paul Cardile and Lucy Cardile will be liable to sequestration of property and Paul Cardile and Lucy Cardile will be liable to imprisonment.”

9                     The case does not concern Lucy Cardile and I need say no more of her.  The terms of the endorsement and the relationship between them and the terms of Whitlam J’s order assumed some importance in the case.

10                  On 17 April 1997, Eagle’s solicitors wrote two letters to LED’s solicitors advising that Eagle proposed to sell certain land.  The terms of the letters evince an attempt to satisfy the terms of the orders of 23 December 1996.

11                  On 25 June 1997, Emmett J made an order in proceeding NG 862 of 1994 as follows:

“1.       Eagle Homes Pty Limited be restrained, until further order, from disposing of or dealing with any of its money, property or other assets, other than for the following purposes:

(a)       to protect the copyright of his housing plans (other than plans relating to these proceedings) by the commencement and prosecution of proceedings against infringement of the same;

(b)       to commence and prosecute any other proceedings which it may be advised to bring;

(c)        to defend any other proceedings which may be brought against it;

(d)        to meet its taxation liabilities;

(e)        to comply with statutory requirements to which it is subject;

(f)        to satisfy any judgment for the payment of money in these proceedings;

(g)        to enable it to pay and to continue to pay its reasonable costs of defending these proceedings; and

(h)        to meet its normal accounting fees and other expenses incurred in relation to the day to day conduct of its business and management of its affairs.”

12                  On 25 February 1998, Mr John Valeri, the General Manager of Eagle, sent a facsimile to Mr John Castrission of Castrission & Co, Eagle’s solicitors, in relation to Lot 1 Hinchinbrook.  The facsimile read as follows:

“I refer to our telephone conversation of today and advise we intend to sell the above property to Eagle Management Australia Pty Ltd for the price of $286,000.00.

Please advise the solicitors for LED of the above as soon as possible as we are going to prepare contract of sale.”

13                  A note made by Mr Valeri on the same day records that he spoke to Mr Castrission on that day and advised him to “let [the] other side know” that Eagle intended to sell Lot 163 Harrington Park to “Johnny Cardile’s company” for $95,000.  The reference to “the other side” was clearly a reference to LED or its solicitors.  As at 25 February 1998, Lot 1 Hinchinbrook had a house on it but Lot 163 Harrington Park was still vacant land.

14                  On 16 March 1998, Mr Valeri faxed Mr Castrission regarding Lot 163 Harrington Park as follows:

“On the 25/2/98 I contacted you to advise LED[’s] solicitors that we intended to sell vacant land at Lot 163 William Campbell Drive Harrington Park.  The block will be sold to Paul & Lucy’s son John Cardile’s company for $95,000.  This sale is now to proceed.  Please ensure LED[’s] solicitors are notified.”

In his affidavit, Mr Valeri said that at the time of sending the facsimiles to Mr Castrission he “thought it was appropriate for [Eagle] to seek advice on the matter”.  However, he agreed in cross-examination that his opinion at the time of sending the facsimiles was that Eagle was required by a previous order of the Court to notify LED of the proposed sales of land, and, further, that his instructions to Mr Castrission contained no request for advice as to whether or not notification was necessary.

15                  In his affidavit, Mr Castrission gave evidence that he was asked by Mr Valeri “to advise [Eagle] in connection with the intended sale of properties in Hinchinbrook and Harrington Park”, and, in particular, to advise “whether [Eagle] should notify [LED] of the intended sales in the light of Orders made by the Court regarding [Eagle’s] assets”.  In cross-examination, he suggested that the two facsimiles referred to above, when combined with telephone conversations he had with Mr Valeri in around February and March 1998, amounted to a request for such advice.  Mr Castrission said that his view was that the orders made by Emmett J on 25 June 1997 had superseded those made by Whitlam J on 23 December 1996, and that notification of the intention to sell was therefore unnecessary.  On 26 March 1998, Mr Castrission sent a facsimile to Mr Valeri regarding Lot 163 Harrington Park as follows:

“We refer to your letter dated 16 March 1998 and enclose copy of Mr Justice Emmett’s Order dated 25 June 1997 so far as affects Eagle Homes Pty Limited.

As you can see from the enclosed Court Order, any sale proceeds can only be used for the purposes set out in the Order.

Therefore, provided that the purpose of disposal is [sic – proceeds of disposal are] to be used for the purposes set out in the Order, there should be no problem in selling the property.”

16                  Mr Valeri agreed in cross-examination that nothing in this facsimile told him that notification to LED of the two proposed sales was unnecessary.  However, he said that after receiving Mr Castrission’s facsimile he in fact believed that notification was not necessary.

17                  By transfer bearing the date of 30 April 1998, Eagle transferred Lot 163, Harrington Park to Galaxy Homes for a stated consideration of $100,000.  That transfer was registered on 4 December 1998 number 5443291.  The transfer bears an imprint of Eagle’s common seal which is stated to have been affixed by the authority of the board of directors and in the presence of “P Cardile” whose signature appears as that of a “director”.  By a subsequent transfer dated 10 March 1999, registered on 18 March 1999, number 5691493, Galaxy Homes transferred Lot 163 Harrington Park to Stephen Frederick Woodward for a stated consideration of $320,000.  The common seal of Galaxy Homes is impressed on that transfer and the witness is John Cardile who is stated to be “sole director/secretary” of Galaxy Homes.

18                  Eagle transferred Lot 1 Hinchinbrook to Eagle Management by transfer bearing the date of 16 September 1998 registered on 10 February 1999 number 5545406 for a stated consideration of $155,000.  The transfer bears the imprint of the common seals of Eagle and Eagle Management.  Each common seal is said to have been affixed by the authority of the board of directors and in the presence of Paul Cardile whose signature appears and who is said to be, in each case, sole director.

ISSUES AND REASONING

19                  Eagle, Eagle Management and Paul Cardile had the same legal representation on the hearing of the contempt motion (for convenience, I will refer to counsel for, and the submissions of, “Eagle” as indicating counsel for and the submissions of all three respondents to the contempt motion).  For convenience, I will deal first with the case against Eagle.  Eagle concedes that it did not comply with the order made by Whitlam J on 23 December 1996 in relation to the transfers of Lot 1 Hinchinbrook and Lot 163 Harrington Park.  However, for various reasons, it contends that it should not be found guilty of contempt.

Order 37 r 2 of the Federal Court Rules

20                  Eagle made several submissions related to this rule, whichprovides, relevantly, as follows:

“2 (1)  Subject to the Rules, an order shall not be enforced by committal or sequestration unless –

(a)       the order or a certified or office copy thereof is served personally on the person bound; and

(b)       if the order requires the person bound to do an act within a specified time, the order or a certified or office copy thereof is so served before that time expires.

    (2)   Subject to the Rules, where the person bound by an order is a corporation or organisation the order shall not be enforced by committal of an officer of the person bound or by sequestration of the property of an officer of the person bound unless, in addition to service under sub-rule (1) on the person bound –

(a)       the order or a certified or office copy thereof is served personally on the officer; and

(b)       if the order requires the person bound to do an act within a specified time, the order or a certified or office copy thereof is so served before that time expires.

    (3)   An order or a certified or office copy thereof served under this rule must bear a notice (naming the persons concerned) that the person served is liable to imprisonment or to sequestration of property if –

(a)       where the order requires the person bound to do an act within a specified time, the person bound refuses or neglects to do the act within that time; or

(b)       where the order requires the person bound to abstain from doing an act, the person bound disobeys the order.”

   (4)    ...

   (5)    ...

   (6)    ... .”

21                  The terms of the endorsement which appeared on the order served were set out earlier.  Eagle submits that the endorsement did not satisfy O 37 r 2(3).  I will deal below with this submission.  However, a threshold question arises: was compliance with this provision required at all in the circumstances of this case?

22                  In Re Modern Woodcraft Pty Ltd (In liq) (1997) 75 FCR 245 at 252-253 (“Modern Woodcraft”), I said:

“I think that r 2(3) is directed only to the situation in which enforcement by imprisonment or sequestration is ultimately sought. Although r 2(3) could be better expressed, it is clear, in my view, that it and r 2(1) are addressed to the point of time at which the Court is asked to enforce an order by committal or sequestration. The expression ‘served under this rule’ in r 2(3) refers to a service which is relied upon for the purpose of the making of such an order. It remains possible, in my view, for a contempt of the Court to be committed even though the order served does not bear the endorsement referred to. This view is supported by Windsurfing International Inc v Sailboards Australia Pty Ltd (1986) 19 FCR 110 at 113 (Burchett J) and Bourke Shire Council v Dwyer (1993) 79 LGERA 185 at 186 (Talbot J) (this case concerned the similar provision in Pt 42 subr 8(3) of the Supreme Court Rules 1970 (NSW)).”

LED does not press for imprisonment or sequestration of property: it asks only for findings of contempt, imposition of fines and an order that Eagle Management transfer Lot 1 Hinchinbrook back to Eagle.  As well, it seeks an order for payment of its costs of the motion on an indemnity basis.

23                  Eagle asks me to reconsider the point I decided in Modern Woodcraft.  In an interesting submission, Mr Ireland QC, counsel for Eagle, suggests that O 37 r 2 speaks only of imprisonment and sequestration of property because, at the time when the provision was first made a rule of court, it was thought that imprisonment and sequestration were the only punishments available for a contempt.  He submits that it was not until Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 (“AMIEU”) that it was recognised that there was also power to fine for civil contempt that was “wilful” as distinct from “casual, accidental or unintentional”.  The submission is that for this reason, founded in history, O 37 r 2 should be construed as signifying that any civil contempt proceeding, irrespective of what order is ultimately sought indeed even if the prosecutor presses only for a finding of contempt, must fail if O 37 rr 2(1) and (3) are not complied with.

24                  I have considered the submission carefully.  It would be possible to discuss it at some length.  It suffices to say, however, that in my view to adopt the construction suggested would be to give the words of O 37 rr 2(1) and (3), which are plainly limiting on their face, a strained meaning that they do not bear.

25                  While I accept that a contempt may not be committed if the terms of the order in question were not appropriately brought to the notice of the alleged contemnor, I do not think that this detracts from the view I expressed in Modern Woodcraft with respect to the necessity of compliance with O 37 r 2(3).  Rule 2(1) purports to relate only to the enforcement of an order by committal or sequestration of property, and r 2(3) seeks to ensure that a person against whom those measures are to be sought is made aware of those particular possible consequences of non-compliance.  There is no suggestion that the order in this case was not validly served on Eagle.  Any failure to inform Eagle that orders or imprisonment or sequestration of property might be made could affect only the Court’s power to make orders of those kinds.

26                  Finally, even if, contrary to my clear view, it were possible to give O 37 rr 2(1) and (3) an expansive meaning generally of the kind suggested by counsel for Eagle, in my opinion, non-compliance would extend no further than to affect a fining of the contemnor and would not affect the mere making of a finding of contempt.  It would not affect the result in this case because, for discretionary reasons given later, I do not intend to impose a fine on Eagle.

The suggested ambiguity in the endorsement

27                  LED submits that even if Eagle’s threshold submission should be accepted, the fact is that the order served did bear the notice required by O 37 r 2(3). 

28                  The endorsement appearing on the order served was set out earlier.  Eagle submits that Whitlam J’s order 1 did not require any act to be done “within a specified time” for the purposes of O 37 r 2(3) and that in this respect order 1 was to be contrasted with order 2 made by his Honour (also set out earlier).  It will be recalled that order 2 required Eagle to provide to LED on or before 24 December 1996 copies of certain documents.  Order 1, on the other hand, merely restrained Eagle from entering into any contract of a certain description, without first providing seven days’ written notice to LED.  It did not unconditionally require Eagle to do anything: rather, it restrained it from doing certain things unless it first did something else.  Eagle submits that the endorsement gave rise to ambiguity and that on this ground the charge against it should be dismissed.  In this respect Eagle refers to what I said in Microsoft Corporation v Marks (No 1) (1996) 69 FCR 117 at 143.  Eagle’s present submission seems to be that the terms of the endorsement rendered the terms of order 1 ambiguous.

29                  LED submits that neither the order nor the endorsement was ambiguous.  The order required Eagle to give seven days’ notice before selling or encumbering certain assets.  The endorsement made it clear that if Eagle failed to give that notice within the required time it would be liable to sequestration and its directors liable to imprisonment. 

30                  While order 1 was expressed in terms of Eagle’s being “restrained from” dealing with property over a certain value, that restraint operated only if seven days’ notice of Eagle’s intention was not given.  On one view, the order required that Eagle give seven days’ notice of its intention before it dealt with certain property.  Read in that way, the endorsement’s meaning is clear:  if Eagle “refuse[d] or neglect[ed] to do the acts referred to in order 1 [giving written notice to LED of a proposed dealing] within the specified time [seven days before the actual dealing]”, the stated consequences would follow.  In my view, a person reading order 1 and the endorsement could reasonably understand the endorsement only in that sense.

31                  I do not accept that the endorsement was ambiguous or that it rendered order 1 ambiguous or equivocal: cf Microsoft Corporation v Marks (No 1) (1996) 69 FCR 117 at 139-140. 

The order made by Emmett J on 25 June 1997

32                  Mr Ireland QC, appearing for Eagle, correctly submits that Whitlam J’s order was made as a result of an urgent application for an asset preservation order in respect of two properties at Harrington Park, Lot 163 (Street number 5) and Lot 164 (Street number 7).  The orders made by Whitlam J had been sought by LED in a notice of motion filed on 20 December 1996.  Whitlam J asked counsel who appeared for LED on 23 December 1996, when the motion was heard, what the motion was about.  Counsel responded:

“It is an application for a very limited form of Mareva injunction by an applicant who already has a finding of liability in its favour in respect of the intended disposition by the respondent of two blocks of land.”

33                  In his Honour’s Reasons for Judgment of 23 December 1996, Whitlam J said this:

“It [is] being proposed that the respondent [Eagle]be restrained from entering into any contract for the sale of real assets, it being accepted on both sides that that really focuses on these two particular properties, without providing 14 days’ notice to the applicant.

.............................................................................................................................

Coming up to the end of the year, there is nothing in the evidence to suggest that any particular sales are imminent and there is nothing peculiar to the real estate market in Harrington Park one way or the other as disclosed in the evidence which suggests that this kind of restriction would impose any burden on the respondent.  In all the circumstances I propose to grant the relief sought.”

34                  Eagle relies on the facts surrounding the making of the orders by Emmett J on 25 June 1997.  This was the result of a further interlocutory application by LED, prompted by notification by Eagle on 17 April 1997 of its intention to sell certain land as mentioned earlier.  When LED’s motion which led to the making of orders by Emmett J came on for hearing on 11 June 1997, Mr I M Jackman of counsel, who appeared for LED, said this:

“His Honour Whitlam J granted a kind of Mareva relief just before Christmas last year, on 23 December 1996, on our application.  We sought to restrain Eagle Homes from disposing of the proceeds of sale of two pieces of real property without giving notification to the applicant of its intention to dispose of the property.  So that the order did not actually freeze the assets but simply instituted a notification procedure which was then activated by Eagle Homes in April of this year when it indicated that it wished to dispose of the two pieces of real property, one of them on an arm’s length basis and another to a related company.

We then filed our motion of 24 April this year seeking not to restrain those transfers of the property but rather seeking to freeze the proceeds of sale pending the ultimate accounting of profits in the case.  Eagle Homes provided an undertaking, which is in place pending the hearing of our motion of 24 April, in effect freezing the proceeds of the sale of those two pieces of real property.”

35                  On 25 June 1997, when Emmett J made the orders in question, he dismissed a motion by LED for orders against Paul Cardile, his wife, Lucy Cardile, and another “Cardile company” called Ultra Modern Developments Pty Limited (“Ultra Modern”).  On 22 August 1997 a Full Court of this Court granted LED leave to appeal against the order of dismissal and allowed the appeal, set aside Emmett J’s order of dismissal, and remitted the matter to his Honour for the making of orders in accordance with the Reasons for Judgment of the Full Court. 

36                  On 22 August 1997, Emmett J granted “Mareva injunctions” against Paul Cardile, Lucy Cardile and Ultra Modern in conformity with the Reasons for Judgment of the Full Court.  Those parties appealed to the High Court which, on 6 May 1999, set aside the orders of the Full Court.

37                  Eagle submits that although Emmett J’s orders of 25 June 1997 did not expressly terminate the operation of Whitlam J’s order of 23 December 1996, and although Whitlam J’s order was not expressed to be made “until further order”, prima facie all interlocutory orders are made until further order, and a proper, or at least a reasonable, construction of Emmett J’s order was that the new régime which it established was intended to be the interlocutory régime in place after 25 June 1997 in lieu of that established by the earlier order of Whitlam J.  Alternatively, Eagle submits that if Whitlam J’s order continued to have effect after 25 June 1997, any non-compliance with it was no more than “casual, accidental or unintentional” and that a finding of contempt should not be made: Mr Ireland QC refers to AMIEU above at 113; Heatons Transport (St Helens) Ltd v Transport & General Workers’ Union [1973] AC 15; and Windsurfing International Inc v Sailboards Australia Pty Ltd  (1986) 19 FCR 110 at 116.

38                  Eagle submits that the order made by Emmett J was intended to express the full extent of the asset preservation régime against Eagle, and therefore impliedly replaced the order of 23 December 1996.

39                  Submitting that there was no such intention, LED notes that Eagle accepted that the orders made by Whitlam J and Emmett J were not inconsistent and were capable of standing together.  In addition, LED refers to the fact that during the hearing on 7 October 1998 of the appeal by Eagle to the High Court, counsel appearing for Mr Cardile, his wife, Lucy Cardile, and Ultra Modern referred to the orders made by Whitlam J on 23 December 1996 as still being on foot.  I attach no weight to this factor.

40                  The present issue is whether the intention of the later order was to set aside the earlier one.  The order of 23 December 1996 was interlocutory and Emmett J therefore had power to set it aside if he thought fit: O 35 r 7(2)(c).  His Honour’s order was more detailed than that made by Whitlam J on 23 December 1996.  Nevertheless, it did not purport to set aside the earlier order.  I do not gain much assistance from the fact that the earlier order was not expressed to be made “until further order”.  That the earlier order, as an interlocutory order, was of that nature was implied, as Mr Ireland QC for Eagle submits.  But the question remains whether the later order was a relevant “further order” for this purpose, that is, one that was intended to supersede the earlier one.

41                  Given the concession that the orders made by Whitlam J and Emmett J are not inconsistent, I find it difficult to accept that Emmett J’s intention was to set aside the earlier order.  That intention is not lightly to be inferred.  When the parties were before Emmett J on 25 June 1997, the existence of the earlier order of Whitlam J was present to their minds, yet they did not ask Emmett J to set it aside.  Moreover, consistently with his Honour’s order of that date, the earlier order of Whitlam J still had a purpose.  That purpose was to give LED the opportunity to object to a particular intended disposition on the ground that it would not yield proceeds of sale commensurate with its market value. 

42                  No doubt, a final injunction necessarily supersedes an interlocutory one directed to the same end, but in this case both orders were interlocutory, and while both were directed to preserving Eagle’s assets for the purpose of ensuring that there were funds available to satisfy a judgment in favour of LED, they sought to achieve that goal in different ways.  In my view, the order of 25 June 1997 is fairly capable of being seen, and is appropriately to be seen, as supplementary to, rather than in substitution for, the order made on 23 December 1996.  I therefore do not think that that later order impliedly terminated the operation of the earlier one.

Mr Castrission’s advice of 26 March 1998

43                  Finally, the respondents rely on facts in relation to the alleged contempt itself.  Mr Ireland QC points out that Mr Valeri, the General Manager of Eagle, said that on 25 February 1998, aware of the terms of Whitlam J’s order, he sent a facsimile to Eagle’s solicitor, Mr Castrission, notifying him of a proposal to sell Lot 1 Hinchinbrook for $286,000.  Mr Valeri attempted to contact Mr Castrission by telephone on 11 March 1998 and had to leave a message for Mr Castrission to call him back.  On 16 March 1998 Mr Valeri sent a further facsimile to Mr Castrission referring to his earlier facsimile and also referring to Eagle’s proposal to sell Lot 163 Harrington Park for $95,000.

44                  Mr Castrission said that he regarded the facsimiles as communications seeking his advice whether Eagle should notify LED of the intended sales.  Mr Ireland QC submits that Mr Castrission gave his evidence honestly, that his belief was reasonable, and that his testimony was not damaged by cross-examination.  He submits that even if I should not accept the submission that Whitlam J’s order of 23 December 1996 was superseded by Emmett J’s order of 25 June 1997, Mr Castrission’s view was reasonable nonetheless.

45                  He submits that Mr Valeri, and through him Eagle, acted honestly and reasonably upon Mr Castrission’s advice in selling without notifying LED.  It could not, according to the submission, be concluded that there was an intention to subvert the effect of the earlier order.  Eagle submits that if that order was not superseded, the situation after 25 June 1997 was at least ambiguous.  If the two orders were cumulative, so that Eagle was required to comply with both, in fact LED was adequately protected by the more detailed orders of Emmett J as to disposition of the proceeds of sale.  It has not been suggested that Eagle has not complied with those orders.

46                  Mr Ireland QC submits, in summary, that the actions of the respondent were not contumacious in that Eagle did not intend, by not notifying LED of its intention to sell, “to subvert the effect of the [o]rders made on 23 December 1996”.

47                  It is not necessary in a case where a fine is sought to be imposed to establish that the respondent intended to breach the relevant order.  In Forestview Nominees Pty Ltd v Perron Investments Pty Ltd (1999) 162 ALR 482, Spender J said (at 485):

“It may be accepted that it is not necessary to show that the defendant is intentionally contumacious nor that he or it intends to interfere with the administration of justice. Sacks LJ said in Knight v Clifton (at 721):

‘… when an injunction prohibits an act, that prohibition is absolute and is not to be related to intent unless otherwise stated on the face of the order …’

In the well known passage in  Stancomb v Trowbridge Urban District Council  [1910] 2 Ch 190 Warrington J said (at 194):

‘… if a person or a corporation is restrained by injunction from doing a particular act, that person or corporation commits a breach of the injunction and is liable for process for contempt, if he or it in fact does the act, and it is no answer to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order.’ ”

48                  It is also clear that incorrect legal advice does not exculpate a respondent who is in breach of an order: see AMIEU above at 112.  Eagle submits, however, that this is not the usual case, since at all times LED was protected by the terms of the later order.  But I have already held that the subsistence of the later order did not relieve Eagle of its obligation to comply with the earlier one.

49                  It is true that a person will not be guilty of contempt if his or her act was “casual, accidental or unintentional”: AMIEU above at 113.  However, in this case Eagle knew that it was not complying with the order of 23 December 1996, even if it believed, on the advice of Mr Castrission, that it was no longer obliged to comply with it.  Therefore, the non-compliance was not “casual, accidental or unintentional”.  Although Mr Valeri agreed that Mr Castrission’s facsimile of 26 March 1998 did not expressly say that notification was unnecessary, I accept, on the basis of his evidence, that as a result of that facsimile his view as to the necessity of notification changed.  That is, Eagle did not understand that it was disobeying a current order of the Court when it sold the land without first notifying LED.  But this finding does not prevent Eagle’s acts from constituting contempts.

Mr Cardile and Eagle Management

50                  Eagle accepts that Mr Cardile was at all material times a director of Eagle.  However, it submits that he was not a party to the proceeding and was not a “person bound by” the order for the purposes of O 37 r 2(2).  It submits that Mr Cardile can be made liable for the suggested contempt only if he “aided or abetted/or did an act intending thereby to subvert the effect of the order”: cf Seaward v Paterson [1897] 1 Ch 545; Attorney-General v Newspaper Publishing Plc [1988] Ch 333.

51                  The order of 23 December 1996 was not directed to Mr Cardile.  Therefore, he was not bound by the order any more than any other member of the public was.  Under general law principles, he can have been guilty of a contempt only if he aided or abetted a disobedience of the order by Eagle or intended “to impede or prejudice the administration of justice”: Attorney-General v Newspaper Publishing Plc at 374 per Sir John Donaldson MR; Arlidge, Eady & Smith on Contempt (2^nd ed, 1999), p 763. 

52                  I note that in England the common law position has been altered somewhat by RSC O 45 r 5(1)(b) which provides as follows:

“(1) Where . . . (b) a person disobeys a judgment or order requiring him to abstain from doing an act, then, subject to the provisions of these rules, the judge’s order may be enforced by one or more of the following means, that is to say . . . (ii) where that person is a body corporate, with the leave of the court, a writ of sequestration against the property of any director or other officer of the body; (iii) subject to the provisions of the Debtors Act 1869 and 1878, an order of committal against that person or, where that person is a body corporate, against any such officer.”

53                  The precise effect of this provision has given rise to some uncertainty: see Borrie and Lowe, The Law of Contempt (3^rd ed, 1996), p 571.  The latest position appears to be that stated by the Court of Appeal in Attorney-General for Tuvalu v Philatelic Distribution Corp Ltd [1990] 1 WLR 927 at 936:

“In our view where a company is ordered not to do certain acts or gives an undertaking to like effect and a director of that company is aware of the order or undertaking he is under a duty to take reasonable steps to ensure that the order or undertaking is obeyed, and if he wilfully fails to take those steps and the order or undertaking is breached he can be punished for contempt. We use the word "wilful" to distinguish the situation where the director can reasonably believe some other director or officer is taking those steps.”

54                  But in my view, in the absence of a comparable rule, Mr Cardile’s liability is to be determined by reference to the general law principles governing aiding and abetting (Mr Cardile did not intend to impede or prejudice the administration of justice by subverting the effect of the order).

55                  Mr Cardile did not give evidence before me.  Mr Valeri testified that the only conversation he had with Mr Cardile about the matter was as follows:

Mr Valeri         “I have obtained advice from John Castrission regarding the proposed sale of the Harrington Park and Hinchinbrook properties.”

Mr Cardile:      “What’s his advice?”

Mr Valeri:        “John says Eagle Homes can proceed with the sales provided we comply with the Court Orders made on 25 June 1997.”

Mr Cardile:      “OK.  Let’s go ahead.”

This evidence was not challenged by LED.

56                  In my view, the evidence does not establish beyond a reasonable doubt (cf Witham v Holloway (1995) 183 CLR 525) that Mr Cardile was in contempt of court.  While the incorrect legal advice may not have prevented a finding that Eagle was guilty of contempt, the situation is different with respect to Mr Cardile, to whom the order was not directed.  It is well established that an intentionality may need to be established in order to fix an alleged aider and abettor with liability that would not need to be proved on the part of the primary offender: cf Giorgianni v The Queen (1985) 156 CLR 473; Yorke v Lucas (1985) 158 CLR 661 at 666-668.  Although I do not think LED need prove that Mr Cardile understood that what Eagle was doing bore the label “contempt of court”, it must, in my view, establish that he appreciated that Eagle was disobeying a currently operative order of the Court.  Clearly, this was not proved.  The motion should therefore be dismissed as against Mr Cardile.

57                  Eagle Management was also not a party to the proceeding in which Whitlam J’s order was made.  Its knowledge was the same as that of its director, Mr Cardile.  For the reasons given above, the motion should also be dismissed as against Eagle Management. 

58                  This conclusion makes it unnecessary for me to deal with Eagle Management’s further submissions that it could not be guilty of a contempt of court because it was not served with a copy of the order of 23 December 1996 and because the endorsement on the copy of that order served on its director, Mr Cardile, was not addressed to it.  I note, however, that I do not accept these submissions.  It is not necessary to show that a person who has aided and abetted a contempt of court was served with the order breached. It is necessary to show only that the person sought to be made liable knew of the order: Seaward v Paterson, above.  With respect to the endorsement, my earlier comments apply a fortiori with respect to Eagle Management, which is not sought to be made primarily liable for a disobedience of the order of 23 December 1996 but for aiding or abetting a disobedience by Eagle.  Any person may be found guilty of aiding and abetting a contempt of court.  The endorsement cannot be required to be addressed to all potential aiders and abettors.

Penalty

59                  LED submits that I should impose a fine on Eagle and order that Eagle Management convey Lot 1 Hinchinbrook back to Eagle within fourteen days, or at least make a finding of contempt and an order that Eagle pay LED’s costs on an indemnity basis.

60                  I find that Eagle committed contempts of court in effecting the two transfers.  Findings to that effect should be recorded.  However, in my view Eagle should not be fined.  There are two matters in particular which I take into account in reaching this conclusion. 

61                  First, I find that Eagle did not intend to disobey the order of 23 December 1996 and in fact intended to comply with that order until its solicitor advised it that compliance was unnecessary by virtue of the later order.  While, as I have said, this does not mean that Eagle was not in contempt, it does to a large degree alleviate its blameworthiness and the need for a fine to be imposed to vindicate the Court’s authority.

62                  Second, LED was in fact largely protected from a dissipation of assets by Eagle (which was the reason for the making of the order of 23 December 1996) by the order of 25 June 1997.  In other words, while the earlier order was disobeyed, its aim was not defeated.  LED has not suggested that if it had been given prior notice of the intended sales, it would have sought an order restraining Eagle from proceeding with them or otherwise sought relief additional to that granted by Emmett J on 25 June 1997.  LED has not suggested that Eagle sold at an undervalue, and, in fact, Eagle obtained valuations of both properties before selling them.

63                  For these reasons also, I do not think it appropriate to order that Eagle Management convey Lot 1 Hinchinbrook back to Eagle.  I do not doubt that I have the power to make such an order, at least if I am satisfied that Eagle Management was aware that the transfer was in breach of the order of 23 December 1996: see Arlidge, Eady and Smith on Contempt (2^nd ed, 1999), p 781.  But in the absence of evidence that a failure to make such an order would result in the purpose of the earlier order being subverted, I do not think that I should make it.  Indeed, to make the order would give LED a “double remedy”: it would have the benefit of Eagle’s ownership of the property and of having Eagle’s proceeds of sale of the property.

Costs

64                  Finally, there is the question of costs.  Clearly, the question is one of discretion.  The view is commonly taken that where a private litigant prosecutes a contempt to vindicate the authority of the court, that litigant should have its costs on an indemnity basis” cf : McIntyre v Perkes (1988) 15 NSWLR 417 at 424-428 (Samuels JA), 434-436 (Rogers A-JA).  If I were to follow that practice here, I would order that Eagle pay LED’s costs of the motion on an indemnity basis and that LED pay Paul Cardile’s and Eagle Management’s costs of the motion on a party and party basis. 

65                  Of course, there is no rule of law that a party successfully bringing a contempt to the attention of the court is entitled to indemnity costs.  While contempt is always a serious matter, Eagle’s contempt was unintended in the limited sense that I have described earlier, and caused no prejudice to LED.  It does not appear that LED at any stage considered that it was necessary for it to bring the present motion in order to protect its position.

66                  The costs of Mr Cardile and of Eagle Management, as distinct from those that would have been incurred by Eagle if they had not been respondents to the motion, would be relatively small.  It would be difficult for the taxing officer to distinguish between the two categories of costs.

67                  Taking all these considerations into account, I think that an appropriate order is that Eagle pay LED’s costs of the motion on a party and party basis and that there be no order as to the costs of Mr Cardile or Eagle Management.

CONCLUSION

68                  There will be declarations that Eagle committed contempts of court by reason of its failure to comply with order 1 made by Whitlam J on 23 December 1996 in respect of the two transfers and an order that Eagle pay LED’s costs of the motion.  The motion as against Mr Cardile and Eagle Management will be dismissed with no order as to costs.

Associate:

Dated:              3 September 1999