FEDERAL COURT OF AUSTRALIA

 

Australian Securities and Investments Commission v Reid [2005] FCA 1274

CONTEMPT – application for respondent to be punished for contempt of Court for contravening an order of a Judge of this Court by taking part in the management of a corporation.

 

PRACTICE AND PROCEDURE – jurisdiction of the Federal Court to punish contempts – procedure to be adopted where a party brings contempt proceedings – standard of proof – burden of proof.

CORPORATIONS LAW – whether respondent managed a corporation.

BIAS – circumstances in which a Judge should disqualify himself or herself for bias – whether reasonable apprehension of bias.

Corporations Act 2001 (Cth), s 206A

Federal Court of Australia Act 1976 (Cth), s 31(1)

Judiciary Act 1903 (Cth), s 24

High Court Rules, r 11.01, r 11.02, r 11.04

Federal Court Rules, O 40 r 5, O 40 r 6, O40 r 7, O10 r 1(2)(a)(xiv), O 33 r 1

Coward v Stapleton (1953) 90 CLR 573 cited

Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 cited

Witham v Holloway (1993) 183 CLR 525 cited

Australian Securities and Investments Commission v Reid [2004] FCA 1506 cited

Briginshaw v Briginshaw (1938) 60 CLR 336 cited

Johnson v Johnson (2000) 201 CLR 488 cited

Ebner v The Official Trustee in Bankruptcy (2000) 205 CLR 337 cited

Livesey v New South Wales Bar Association (1983) 151 CLR 288 cited

Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 cited

Re JRL; Ex parte CJL (1986) 161 CLR 342 cited

Australian National Industries Ltd v Spedley Securities Ltd & Ors (1992) 26 NSWLR 411 cited

Pearce v The Queen (1998) 194 CLR 610 cited

Azzopardi v The Queen (2001) 205 CLR 50 cited

Commission for Corporate Affairs (Vic) v Bracht (1989) VR 821 cited

Hadkinson v Hadkinson [1952] P 285 cited

Australasian Meat Industry Employees’ Union and Others v Mudginberri Station Proprietary Limited (1986) 161 CLR 98 cited

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MAXWELL JOHN REID

VID 3023 of 1992

 

LANDER J

13 SEPTEMBER 2005

ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 3023 OF 1992

 

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION APPLICANT
AND:	MAXWELL JOHN REID RESPONDENT
JUDGE:	LANDER J
DATE OF ORDER:	13 SEPTEMBER 2005
WHERE MADE:	ADELAIDE

 

THE COURT ORDERS THAT:

 

1.         The proceeding be relisted for further hearing.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 3023 OF 1992

 

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION APPLICANT
AND:	MAXWELL JOHN REID RESPONDENT

 

JUDGE:	LANDER J
DATE:	13 SEPTEMBER 2005
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1                     These proceedings were heard at the same time as civil proceedings brought by the applicant against the respondent and other persons.  These reasons, whilst discussing those civil proceedings, relate only to the contempt proceedings.

2                     Separate reasons have been published in those civil proceedings.

3                     On 17 November 2003 the applicant filed a Notice of Motion (the contempt proceedings) seeking the following orders:

‘1.        that the respondent be committed to prison or otherwise punished for contempt of Court for contravening the order of the Honourable Justice Jenkinson made on 10 March 1992 that the respondent be prohibited, pursuant to section 230 of the Corporations Law, until 10 August 2036 from managing a corporation; or in the alternative

2.         that the warrant ordered by the Honourable Justice Kenny on 12 February 2002 to lie on the Court file be executed; or in the alternative

3.         that the respondent be committed to prison or otherwise punished for contempt of Court in respect of his breach of the undertaking provided by him to the Honourable Justice Kenny on 8 October 2001 that he would not be involved in the management of a company in any form at all in the future.’

4                     The Notice of Motion was accompanied by a Statement of Charge under O 40 r 6 of the Federal Court Rules:

‘The applicant alleges that the respondent, Maxwell John Reid is guilty of contempt of Court and further that such contempt is wilful and contumacious in so far as:

1.         in breach of paragraph 1 of the order of the Honourable Justice Jenkinson of this Court, made on 10 March 1992, wherein the respondent was prohibited from managing corporations until 10 August 2003, the respondent has been involved in the management of the following corporations:

1.1       Battstone Australia Pty Ltd between about 3 March 2003 and 3 June 2003; and

1.2       Australian Marble Pty Ltd between about 1 February 2003 and 14 July 2003; and

2.         in breach of an oral undertaking provided to the Honourable Justice Kenny on 8 October 2001 that he would not be involved in the management of a company in any form at all in the future, the respondent has been involved in the management of the following corporations:

2.1       Battstone Australia Pty Ltd between about 3 March 2003 and 3 June 2003; and

2.2       Australian Marble Pty Ltd between about 1 February 2003 and 14 July 2003.’

5                     The Statement of Charge must set out the gist or substance of the allegations of contempt: Coward v Stapleton (1953) 90 CLR 573 at 579-580.  In these proceedings the applicant has in the Statement of Charge limited the charge of contempt to the respondent’s conduct in relation to the two companies over the period alleged.  No other conduct could be relevant in making out the charge.

6                     It can be seen from both the Notice of Motion and the Statement of Charge that this matter has a considerable history and it will be necessary to recount that history to understand the reasons that follow.

7                     Before I do so, it would be convenient to identify the Court’s jurisdiction to deal with the charge.

8                     Section 31(1) of the Federal Court of Australia Act 1976 (Cth) provides:

‘(1)      Subject to any other Act, the Court has the same power to punish contempts of its power and authority as is possessed by the High Court in respect of contempts of the High Court.’

9                     The High Court’s power to punish contempts arise from s 24 of the Judiciary Act 1903 (Cth) which provides:

‘24.      The High Court shall have the same power to punish contempts of its power and authority as is possessed at the commencement of this Act by the Supreme Court of Judicature in England.’

10                  The High Court Rules 2004 provide for contempt in the face of the Court (r 11.01) and other cases (r 11.02) and its power of punishment is provided for in r 11.04.

11                  On 31 January 1992 the Australian Securities Commission (as the applicant was then called) brought proceedings in the Victorian District Registry of this Court seeking declarations that the respondent had engaged in conduct that amounted to a contravention of the Corporations Law (the Law) by managing a company whilst prohibited from doing so within five years of having been convicted for serious fraud, without the leave of the Court (as defined in the Law) in breach of s 229(3)(b) of the Law, and declarations of other contraventions.

12                  In those proceedings the applicant sought injunctions pursuant to s 230 and s 1324 of the Law prohibiting the respondent from managing, or participating in the management of, any body corporate.

13                  On 10 March 1992 Jenkinson J made the following orders:

‘1.        The Respondent Maxwell John Reid be prohibited pursuant to s 230 of the Corporations Law until 10 August 2036 from managing a corporation.

2.         The Applicant’s costs of the proceeding including costs reserved be paid by the Respondent.’

14                  In my opinion, that order is quite unambiguous.  It will be a breach of that order if the respondent manages a corporation.  Whether he has breached that order depends upon whether his conduct in relation to any corporation includes managing that corporation.

15                  On 11 November 1993 the applicant brought proceedings in the Victorian District Registry of this Court for ‘orders that the respondent be committed to prison or otherwise punished for contempt of court for breaching an order of the Honourable Mr Justice Jenkinson made on 10 March 1992 …’.

16                  On 6 May 1994 Jenkinson J made the following declaration and order:

‘THE COURT being of opinion that the Respondent Maxwell John Reid has been guilty of a contempt of the Court by being concerned in the management of a corporation, namely Mistoil Pty Ltd, in breach of the order of the Court made in this proceeding on 10 March 1992 that he be prohibited until 10 August 2036 from managing a corporation AND guilty of a contempt of the Court by being concerned in the management of a corporation, namely Resourceful Mining Pty Ltd, in breach of the said order

THE COURT ORDERS THAT:

1.         The Respondent Maxwell John Reid stand committed to Pentridge Prison or to such other Victorian Prison as may by further order be specified for a term of six months BUT the operation of this order for his committal be suspended for so long as he abstains from contravention of the said order made on 10 March 1992.

2.         The Respondent pay the Applicant’s costs including costs reserved of the motion of which notice was filed on 11 November 1993 for his committal for the said contempt.

3.         Each party be at liberty to apply.’

17                  Paragraph 1 of that order was a sentence of imprisonment which Jenkinson J suspended for so long as the respondent abstained from a contravention of Jenkinson J’s earlier order.  Because of the terms of Jenkinson J’s earlier order, the respondent was liable to serve that sentence if he breached that order of 10 March 1992 at any time before 10 August 2036.  In other words, the sentence remained suspended for 42 years.

18                  On 14 May 1999 the applicant, in a Notice of Motion filed in the same Registry, sought a further order that the respondent be committed to prison or otherwise punished for contempt for a further breach of the order made by Jenkinson J on 10 March 1992.

19                  In the Statement of Charge accompanying that Notice of Motion it was alleged:

‘The Applicant alleges that the Respondent, Maxwell John Reid, is guilty of contempt of Court and further that such contempt is wilful and contumacious in so far as, in breach of paragraph 1 of an order of the Honourable Justice Jenkinson of this Court, made on 10 March 1992, wherein the Respondent was prohibited from managing a corporation until 10 August 2036, pursuant to section 230 of the Corporations Law, the Respondent has been involved in the management, within the meaning of that word as defined in s 91A of the Corporations Law, of the following corporations:

            (i)         5 Star Mining Pty Ltd ACN 083 129 560;

            (ii)        Birkdale Heights Pty Ltd ACN 065 448 866; and

            (iii)       Tri – Star Minerals Pty Ltd ACN 085 558 498 –

at various times in and between June 1998 and January 1999.’

20                  The applicant’s Notice of Motion was heard by Kenny J on 8 October 2001.  In relation to that charge, the respondent pleaded guilty but challenged certain statements of fact.  In doing so, he gave evidence.  The transcript records the following exchange:

‘You realise if I accede to what your counsel is proposing you will be a most fortunate man? --- I understand that, your Honour, and I would be most thankful to you, because I have finally got to where I have always wanted to be with the opal industry and can now carry on.

If you ever were found to be doing something like this again ---? --- No.

--- you couldn’t expect the same leniency? --- No, understand that, your Honour.  Well, there’s no need to ever touch a corporate body.  As I said, we’ll get rid of them straightaway, through Mr Cummins, immediately.

Right.  Mr Borick, is there anything that you want to –

MR BORICK:  Perhaps don’t answer this until her Honour says you should: are you prepared on your oath now to give an undertaking to this court that you will not be involved in the management of a company, in any form at all, in the future? --- Yes, I do.

HER HONOUR:  You realise the seriousness of what you’ve said, Mr Reid: --- Yes, your Honour, I do.  I realise how close this is and that it should never be.

MR BORICK:  To put it bluntly, if you breach the undertaking you have just given you know you’ll go to jail for a significant period of time? --- I understand that.’

21                  That undertaking, which was given by the respondent, on his oath, is also quite unambiguous.  It bears the same meaning as Jenkinson J’s order.  A breach of an undertaking may be a contempt: Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483; Witham v Holloway (1993) 183 CLR 525 at 530.

22                  On 12 February 2002 Kenny J made the following declarations and orders:

‘THE COURT ORDERS AND DECLARES THAT:

 

1.         The respondent, MAXWELL JOHN REID, has been guilty of contempt of the Court by being involved in the management of a corporation, namely, 5 Star Mining Pty Ltd, in breach of the order of the Court made in this proceeding on 10 March 1992 that he be prohibited until 10 August 2036 from managing a corporation (“the 10 March 1992 order”) AND guilty of a contempt f the Court by being involved in the management of a corporation, namely, Birkdale Heights Pty Ltd, in breach of the 10 March 1992 order AND guilty of a contempt of the Court by being involved in the management of a corporation namely, Tri-Star Minerals Pty Ltd, in breach of the 10 March 1992 order.

2.         The respondent, MAXWELL JOHN REID, be committed to prison for a term of twelve (12) months.

3.         Subject to paragraph 4 hereof, a warrant for the respondent’s committal to prison for a period of 12 months issue.

4.         Until further order, the warrant lie in the registry to the intent that it not be executed provided that, for a period of two (2) years from today or until the 10 March 1992 order cease to operate (whichever first occurs):

(a)        the respondent abstain from contravention of the 10 March 1992 order save as may be permitted in par (b) below;

(b)        the respondent have no involvement in directing, administering or managing any corporation save where it is necessary to divest himself, his wife or an associate of any office or shareholding in or control of an existing company, or to secure the deregistration of such a company;

(c)        the sum of $15,000 be paid to the applicant, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, out of the sum of $20,000 lodged by the respondent by way of surety (“the surety sum”) pursuant to order of the Court; and

(d)        the balance of the surety sum, being the sum of $5,000, be paid to the trust account of John Cummins, solicitor, 201 Victoria Square, Adelaide, South Australia 5000.

5.         Each party be at liberty to apply.

6.         Paragraph 1 of the order made by the Honourable Justice Jenkinson in this proceeding on 6 May 1994 be discharged.’

23                  At the same time as Kenny J fixed the penalty in paragraph 3, she discharged, by force of paragraph 6 of her orders, the earlier sentence of imprisonment ordered by Jenkinson J on 6 May 1994.

24                  The effect of paragraph 4 of that order was that if the respondent did not breach Jenkinson J’s order over a period of two years from 12 February 2002 the warrant would lie in the Registry indefinitely.  In those circumstances, the respondent would never serve the sentence of imprisonment in paragraph 3 of the order.  However, any breach of Jenkinson J’s order in that period of two years would mean that the warrant would issue unless the respondent’s management of a corporation was necessary to divest himself, his wife or an associate of any office or shareholding in or control of an existing company, or to secure the deregistration of such a company.  There is no suggestion that paragraph 4(b) is relevant in these proceedings.  Therefore, a finding that the respondent’s conduct breached Jenkinson J’s order would mean that the warrant would issue.

25                  It is in that context that the applicant has brought the contempt proceedings against the respondent.

26                  At the same time as this charge was brought, the applicant brought proceedings (the civil proceedings) against the respondent and four other people; Noel Frederick Smith, Barbara Ann Smith, Craig Clifford Hyland and Joy Aronsen in which the applicant sought the following orders:

‘1.        An order that the first defendant be restrained from engaging in conduct that contravenes a provision of section 206A of the Corporations Act 2001 and in particular that he be restrained from doing any act that forms part of the negotiations with respect to, or the purchase of, any business, company or asset by, for or on behalf of any corporation.

2.         Orders that each of the second, third, fourth and fifth respondents be restrained from engaging in any conduct that amounts to aiding abetting counselling or procuring a contravention of section 206A of the Corporations Act 2001 by the first respondent within the meaning of section 11.2 of the Criminal Code and in particular that they each be restrained from doing any act or engaging in conduct that expressly or implicitly authorises or permits the first respondent to take part in or have any involvement in the negotiations with respect to, or the purchase of, any business, company or asset by, for or on behalf of any corporation of which they are a director.

3.         Such further or other orders as the Court considers appropriate.

4.         Costs.’

27                  On 23 December 2003, on an interlocutory application of the applicant, I made an order restraining the first defendant in those proceedings (the respondent in these proceedings) from engaging in conduct in contravention of s 206A of the Corporations Act 2001 (Cth) (the Act).

28                  I also made interlocutory orders directed to the second, third, fourth and fifth defendants in those proceedings.

29                  On 8 April 2004 I made orders by consent directed to the fourth and fifth defendants restraining them from engaging in conduct of the kind complained of.  On 25 June 2004 I made orders by consent directed to the second and third defendants restraining them from engaging in contravention of the conduct of the kind complained of.  The only party who sought to defend the civil proceedings was the respondent, Mr Reid.

30                  The civil proceedings were heard at the same time as the contempt proceedings.  That was a source of complaint by the respondent which will need to be addressed.

31                  Because of a number of arguments which were put in relation to the matters leading up to trial and the conduct of the trial, it is necessary to trace the conduct of these proceedings after the issue by the applicant of the contempt proceedings on 17 November 2003 and the issue of the civil proceedings on 18 December 2003 until the trial of the action which commenced on 22 November 2004 and until the evidence concluded on 3 December 2004.

32                  These proceedings first came before me on 9 December 2003 when Mr Reid appeared unrepresented.

33                  He indicated to the Court that he would be engaging solicitors but he had not had sufficient time to procure the funds necessary to retain solicitors and would need an adjournment of the matter until January 2004 to enable him to do so.

34                  On that occasion, I made an order that all respondents in the civil proceedings file any affidavits upon which they intended to rely by 30 January 2004 and I adjourned the further directions hearing until 17 February 2004.  The orders were not complied with.

35                  The civil proceedings commenced on 18 December 2003.  I have already mentioned that interlocutory orders were made in those proceedings on 23 December 2003.

36                  On 17 February 2004 Mr Winter, a solicitor ‘appeared’ for Mr Reid in the civil proceedings.  Mr Winter advised that he had not been formally retained because the terms of the retainer had not been finalised.  Mr Winter told the Court that he did not appear in the contempt proceedings, but indicated that his understanding was that Mr Reid intended to file affidavits in response to the ASIC affidavits and defend the charge of contempt.

37                  Mr Reid spoke for himself in relation to his failure to file any affidavit evidence.  In this respect, the following exchange occurred:

‘HIS HONOUR:  I might list it to allow you one further chance to file any affidavits before the hearing.

MR REID:  Thank you your Honour.

HIS HONOUR:  The hearing will go on whether you file your affidavits or not.

MR REID:  I understand that.

…

HIS HONOUR:  The week of 5 April seems to be available.

MR REID:  I’d be more than happy to commit to that …’

38                  Mr Reid then indicated that his involvement in another matter might interfere with his ability to be ready or attend trial and the hearing date was changed to 20 April 2004.

39                  I made the following orders:

‘1.        Extend the time within which the respondent has to file any affidavits upon which he intends to rely for a further period of 28 days.

2.         Direct the parties to advise each other of those deponents to affidavits filed by the opposing parties whom they wish to cross-examine at the hearing of the matter.

3.         Set the matter down for hearing on 22 and 23 April 2004.

4.         Liberty to apply.’

40                  Those orders were again not complied with.

41                  The matter came on before me again on 12 March 2004.  Mr Reid was present in Court, as was Mr Winter.  He said he appeared as amicus curiae.

42                  On that occasion, I made the following orders:

‘1.        Extend the time within which the respondent has to comply with the orders made by me on 9 December 2003 and 17 February 2004 for the filing of affidavits in response to the applicant’s application until 29 March 2004 at 4.00 pm.’

43                  Those orders were again not complied with.

44                  The matter was called on again on 8 April 2004, principally to address the relief sought against the fourth and fifth respondents in the civil proceedings.

45                  Mr Reid did not appear and ASIC sought a further directions hearing for 16 April 2004.

46                  The reason advanced at the directions hearing of 8 April 2004 for a further directions hearing prior to the commencement of the trial was that ASIC had obtained affidavits from the fourth and fifth respondents upon which they intended to rely in respect of the trial of both proceedings.  ASIC advised that it had not been able to serve Mr Reid.

47                  The matter was called on again on 16 April 2004 when Mr Reid appeared in person.  The orders made on 12 March 2004 had not been complied with.  He said that he had spoken with senior counsel in Melbourne who would be free in July and who had agreed to represent him.  Mr Reid also indicated to the Court that he intended to retain Mr Winter.

48                  On that occasion, I made the following orders:

‘1.        Mr Reid file any affidavits upon which he intends to rely to establish:

a.            That he has instructed a solicitor;

b.            That counsel has been retained;

c.            The evidence which he intends to adduce in answer to ASIC’s evidence;

            by 12.00pm on Thursday 22 April 2004.

2.         Adjourn the further directions hearing of the matter until 23 April 2004 at 9.00am.’

49                  Mr Reid did not comply with those orders.

50                  The matter came on again on 23 April 2004 when a solicitor, Mr Christoforou, appeared for Mr Reid.  Mr Christoforou told the Court that he had been instructed by Mr Reid on 22 April 2004.  He had been told by Mr Reid that Mr Reid was expecting to receive funds on 23 April and he would formally retain Mr Christoforou at that time.

51                  I made the following orders:

‘1.        Extend the time within which the respondent Reid has to file any affidavits in answer to the applicant’s affidavits until Monday 7 June 2004.

2.         Set the matter for hearing on 28 and 29 June 2004.

3.         The respondent to advise the applicant prior to 7 June 2004 whether he wishes to cross examine any, and which, deponents to the affidavits relied upon by the applicant.

4.         Liberty to apply.

5.         Costs in the cause.’

52                  On 30 April 2004 a letter was received by the Court from Messrs Christoforou, Klotz & Co in which it was stated:

‘We refer to the above matter and advise that Mr Maxwell [sic] has failed to place our firm in funds.

Accordingly, pursuant to the intimation sought from the writer by His Honour Justice Lander, we advise that we have informed Mr Reid that we no longer act for him, although we did indicate that we would consider acting for him if funds become available.’

53                  A further directions hearing was set for 22 June 2004.  As I have already indicated, on 23 April 2004 I made an order setting this matter down for hearing on 28 and 29 June 2004.

54                  Because of a change of commitments, it was necessary to commence the trial on 25 June unless that was inconvenient to the parties.  Mr Winter appeared on behalf of Mr Reid.  He said he was not retained generally but appeared to explain Mr Reid’s circumstances.  He sought an adjournment of the hearing of the matter for a further two weeks so that he could raise funds to retain counsel  He indicated that if I were not prepared to adjourn the matter a commencement of the trial on 25 June was not inconvenient.

55                  The application was refused.  The trial, therefore, of both matters was due to commence on 25 June 2004.  On 24 June 2004 a letter was received from Mrs Reid in the following terms:

‘I am writing to you tonight on behalf of my husband Maxwell Reid who is supposed to be at a hearing before you at 9:15am tomorrow Friday.

Included with this fax are letters from our family doctor and from DR Jones & Partners (Medical Imaging Report).

On behalf of my husband I am asking for an adjournment until after the 03/09/2004 because of Max’s inability to concentrate on what is being said and happening around him because of his severe back pain and headaches.

Professor Robert Fraser will make a judgment on what can be done with my husband’s spine to relieve the pain and headaches when he sees him; the earliest appointment we could obtain was at 2.40pm on the 3^rd Sept. 2004.

May I suggest that our family doctor make another assessment on my husband’s condition (say in one month’s time) and report to you?

At this stage there is a likelihood that Max could become an invalid at ay time and I am sure I do not want that to happen to him.

I do have the x-rays if you wish to view them?’

56                  With the letter was a medical certificate in the following terms:

‘Re: Mr Maxwell Reid

62 Byron Bay Drive

Paralowie  5108

8250 1494

10^th August 1944

Surgery Record No: NO FILE

 

The a/m is having persistent lower back pain which radiates into the gluteal regions as result of which he is having poor sleep and headaches and is awaiting to see Prof. R. Fraser for treatment.

Past History

Grade 1 anterior spondylolisthesis of L5 on S1 with possible compression of L5 nerve roots

23 June 1987              HIATUS HERNIA

8 August 2003             PSORIASIS

9 March 2004             HYPERTENSION

Allergies

SULPHUR

Current medications

ATACAND Tablet                               8mg                 1 tab mane m.d.u.

DAIVONEX Ointment                                    50mcg/g          apply b.d. to affected

                                                                                    Areas for 2/52

NEXIUM Tablet                                 20mg               1 tab nocte m.d.u.

NOVASONE Cream                           0.1%                1 b.d. p.r.n.

Please feel free to reply via e-mail, our address is pfmc@optusnet.com.au.’

57                  The letter was also accompanied by a report from Dr Jones & Partners Medical Imaging, which provided:

‘NAME:                   REID, Mr Maxwell                                 24^th June 2004

 

REFERRED BY:   Dr R BALENDRAN                             Folio: 774004-1

aralowie@promedicus.net

 

EXAMINATION:   X-RAY & CT LUMBAR SPINE       Your Patient Ref:

                                                                                    Date of Birth: 10/08/44

X-RAY LUMBAR SPINE:  There are six lumbar type vertebrae and for convenience the lower most is designated S1.  There is anterior subluxation of L5 on S1 secondary to probable defects in the partes interarticulares of L5.  The L5-S1 disc is markedly narrowed and contains gas.  The other lumbar dics appear normal.  No vertebral body collapse is noted.  The sacroiliac joints appear normal.

CT LUMBAR SPINE:  Unenhanced axial scans were performed through the lower four lumbar discs and through the transitional S1-2 disc.

At the L2-3 level there is no disc bulge.  The L2 nerve roots exit normally.  The posterior facet joints appear normal.

At the L3-4 level there is no disc bulge or L3 nerve root entrapment.  The posterior facet joints appear normal.

At the L4-5 level there is no significant disc bulge.  The L4 nerve roots exit normally.  The posterior facets appear normal.

At the L5-S1 level there is anterior subluxation of L5 on the disc.  A large amount of gas is seen within the disc but there is no significant disc bulge.  There are obvious partes interarticulares defects of L5 with irregular margins.  The L5 nerve roots are hard to define as they pass around the disc and across the path of osteophytes, especially on the right.  There may well be traction of either L5 nerve root in these regions.  The S1 nerve roots appear normal.  The posterior facet joints show mild degeneration.

No abnormality is seen at the transitional S1-2 disc.

CONCLUSION:  Grade 1 anterior spondylolisthesis of L5 on S1 with possible stretching/compression of the L5 nerve roots as they pass laterally around osteophytes/disc just lateral to each exit foramen.  These changes are more marked on the right.’

58                  The correspondence to the Court had an e-mail address and my Associate wrote to that address in the following terms:

‘I refer to your correspondence of 24 June 2004, received on the Court’s fax machine this morning, 25 June 2004.  The correspondence has been brought to Justice Lander’s attention.

These matters are listed for hearing at 9:15am.  Mr Reid should be present.  If he wishes to apply for an adjournment, he can make that application to Justice Lander at that time.’

59                  When the matter came on on 25 June 2004 Mr Reid did not appear.  In the contempt proceedings the applicant sought the issue of a warrant for Mr Reid’s arrest pursuant to O 40 r 9 upon the basis that Mr Reid was likely to abscond or otherwise withdraw himself from the jurisdiction of the Court.

60                  I made an order for the issue of a warrant in accordance with Form 48 and O 40 r 11 in the following terms:

‘To the Sheriff or to a member of the Australian Federal Police and to all constables of police throughout the Commonwealth and to the General Manager, Adelaide Remand Centre, 208 Currie Street, Adelaide in the State of South Australia, and to the Manager of any of Her Majesty’s Gaols within the Commonwealth –

Arrest MAXWELL JOHN REID and bring him before the Court to answer the charge set out below detaining him in custody in the meantime unless, by paying the sum of $5000 into Court he gives security for his  appearance in person before the Court to answer the charge and to submit to the order of the Court.

MAXWELL JOHN REID is charged with contempt of court in that:

1.         in breach of paragraph 1 of the order of the Honourable Justice Jenkinson of this Court, made on 10 March 1992, the respondent has  been involved in the management of the following corporations:

(i)         Battstone Australia Pty Ltd between about 3 March 2003 and 3 June 2003; and

(ii)        Australian Marble Pty Ltd between about 1 February 2003 and 14 July 2003; and

2.         in breach of an oral undertaking provided to the Honourable Justice Kenny on 8 October 2001 that he would not be involved in the management of a company in any form at all in the future, the respondent has been involved in the management of the following corporations:

(i)         Battstone Australia Pty Ltd between about 3 March 2003 and 3 June 2003; and

(ii)        Australian Marble Pty Ltd between about 1 February 2003 and 14 July 2003.’

61                  Because Mr Reid could not be located, the Australian Federal Police were not able to execute the warrant until 11 August 2004.  On that day, Mr Reid appeared before me in person having been produced from custody.  He asked for an adjournment of the proceedings in order that he might obtain legal aid.  I adjourned the matter until 25 August 2004.

62                  On that occasion, Mr Reid was represented by counsel, Mr Pat Amey who indicated that Mr Reid would be making an application for bail but that further time was required before such an application could be made.  I adjourned the matter until 3 September 2004.  In the meantime, I revoked the condition which allowed Mr Reid to be released on bail on payment of $5000.

63                  On 3 September 2004 Mr Amey appeared again for Mr Reid and sought a further adjournment of proceedings in order that Mr Reid might make a bail application in the District Court of South Australia.  I was advised that Mr Reid was being held in custody on orders made by that Court and that he would need to obtain bail from the District Court before he made an application to be released on bail on the warrant which I had issued on 25 June 2004.

64                  I adjourned the matter until 9 September 2004, at which time I made the following orders:

‘1.        The respondent to file any affidavits in opposition to the applicant’s affidavits within 28 days.

2.         The respondent to notify the applicant of those of the applicant’s deponents that he wishes to cross examine within 42 days.

3.         In the event that no notification is given, the applicant may proceed upon the affidavits.

4.         Adjourn the further directions hearing to 9:30am on 26 October 2004.

5.         Set the matter down for hearing in the week of 22 November 2004.’

65                  On 17 September 2004 Mr Reid, through his counsel Mr Amey, made an application for bail before Selway J.  The application was adjourned until 23 September 2004 and then was adjourned sine die.

66                  On 8 October 2004 solicitors acting for Mr Reid advised ASIC that Mr Reid required all deponents to be presented for cross-examination in both proceedings and that he did not intend to file any affidavit material himself but rather rely upon oral evidence.

67                  On 26 October 2004 the bail application which had been made to Justice Selway and adjourned was renewed before me.  It was adjourned until 27 October 2004 and then again until 2 November 2004.  The reason for the adjournment was to allow Mr Reid to present evidence from a proposed guarantor.  On 2 November 2004 I made an order releasing Mr Reid from custody upon oral undertakings given by him and by a guarantor, Mr Morris.

68                  As the orders of 9 September 2004 show, the matter had been set down for hearing in the week of 22 November 2004.  On 16 November 2004 the Court received a facsimile from Mr George Mancini of Mancini & Co advising that he acted for Mr Reid and requesting that the matter be called on for directions for the purpose of his making an application to vacate the trial date.  The matter was listed on 18 November 2004 for a further directions hearing.  Mr Mancini appeared and sought an adjournment.  I refused the application.  On 22 November I gave reasons for refusing the application: Australian Securities and Investments Commission v Reid [2004] FCA 1506.  I need not repeat those reasons here.

69                  On 22 November 2004 the trial commenced.  Mr Reid was unrepresented at the commencement of the trial.

70                  It had been anticipated that the trial of the two proceedings would take five days.  In the end result, the trial did not conclude in the period allowed because of the unavailability of one of the applicant’s witnesses.  That witness did not become available until 2 December 2004.

71                  During the trial, each of the deponents, upon whom the applicant relied, was called; sworn or affirmed; acknowledged the truth of the contents of their affidavit; and made available for cross-examination.  Each of the affidavits was tendered and received.  All were cross-examined by Mr Reid.  Mr Reid did not give evidence.  He called Mr Winter, who did not provide an affidavit but gave his evidence-in-chief orally.  He called Mr Anthony Broome, the liquidator of Australian Marble and the provisional liquidator of Battstone.  Both were cross-examined by Mr Hoffmann.

72                  During the trial I was advised that Mr Mancini would represent Mr Reid for the purpose of giving Mr Reid’s closing address.  Mr Mancini was advised that I would take closing addresses on 7 December 2004.  I was advised that Mr Mancini was unavailable on 7 December 2004, so I adjourned the matter until 8 December 2004.  I was then advised that Mr Mancini would not be available until some time during the week of 13 December 2004.  The matter was adjourned until 15 December 2004 and further adjourned until 17 December 2004 to suit Mr Mancini’s convenience.  That is no criticism of Mr Mancini who was brought into the matter late on a limited retainer.  He needed time to consider the events leading up to the trial and the evidence adduced at trial.

73                  Mr Hoffmann reduced his closing address to writing to which he expected to speak.  However, on 17 December, Mr Mancini raised a number of issues relating to my hearing the trial, the conduct of the trial and the conduct of ASIC.  Neither Mr Mancini nor Mr Reid had given ASIC or its counsel any notice of the matters which Mr Mancini raised on this occasion.  That also is no criticism of either person but explains why the matter did not complete at that time.

74                  At the conclusion of Mr Mancini’s argument and on the application of ASIC’s counsel Mr Hoffmann, I adjourned the further hearing of the matter so that ASIC might reply to Mr Mancini’s arguments.  I heard Mr Hoffmann in reply on 10 February 2005.

MR MANCINI’S ARGUMENTS

75                  Mr Mancini’s first contention was that the contempt proceedings should have been brought in separate proceedings from those in which they were brought.  The Notice of Motion seeking a declaration that the respondent was in contempt was filed in these proceedings, Action No. VID 3023 of 1992 on 17 November 2003.  It was argued that by bringing the contempt proceedings in the same proceedings in which Jenkinson J and Kenny J made the earlier orders I was exposed to factual material to which I should not have had access.  That factual material was not identified, except that it was said to be the evidence upon which Mr Reid had either been found guilty or pleaded guilty.  I reject that submission.

76                  It was appropriate for the applicant to bring its Notice of Motion for contempt in the proceedings in which Jenkinson J, and later Kenny J, had made the orders above referred to.  The contempt which is alleged is for breach of Jenkinson J’s order made on 10 March 2002 and for breach of the undertaking given to Kenny J in his evidence on 8 October 2001.  Moreover, the order made by Kenny J for the respondent’s imprisonment was made in these proceedings.

77                  The procedure which is to be adopted where a party brings contempt proceedings against another party for contempt is regulated by O 40 of the Federal Court Rules.

78                  Order 40 r 5 provides for the procedure generally.  In particular, O 40 r 5(1) provides:

‘Where it is alleged that a contempt has been committed in connection with a proceeding in the Court, an application for punishment for the alleged contempt must be made by motion on notice in the proceeding, but if a separate proceeding for punishment of the alleged contempt is commenced, the proceeding so commenced may be continued unless the Court otherwise orders.’

79                  The Notice of Motion does allege a contempt has been committed in connection with a proceeding in the Court.  In those circumstances, it was appropriate to bring that Notice of Motion in these proceedings, VID 3023 of 1992.  Indeed, I note the same procedure was adopted in relation to the contempts of court alleged in 1993 (before Jenkinson J) and in 1999 (before Kenny J).

80                  In any event, the material to which I was exposed; Jenkinson J’s order of 10 March 1992; an affidavit of service sworn on 31 March 1992; a Notice of Motion of 11 November 1993; Jenkinson J’s order of 6 May 1994; an affidavit of service sworn on 19 May 1994; a Notice of Motion with Statement of Charge of 14 May 1999 alleging a contempt by Mr Reid; Kenny J’s order of 12 February 2002; a warrant dated 12 February 2002 for Mr Reid’s arrest; and the transcript of the hearing before Kenny J of 8 October 2001 was all tendered in the trial.  The applicant’s case relied upon the existence of those previous orders for its charge of contempt on this motion.  The applicant cannot be criticised for adopting the procedure provided for in the Rules.

81                  Next, he argued that the applicant’s witnesses’ evidence-in-chief should not have been led by tendering their affidavit but should have been given orally.  That contention also should be rejected.

82                  Order 40 r 7 provides:

‘(1)      Subject to subrule (2,) the evidence in support of a charge shall be by affidavit.

(2)       The Court may permit evidence in support of a charge to be given otherwise than by affidavit.’

83                  In my opinion, the applicant was bound to reduce all its evidence to affidavit in accordance with the provisions of O 40 r 7.  It did so and cannot be criticised for that.  The contempt proceedings and the civil proceedings then proceeded upon affidavit.  Mr Mancini argued that no order was made to that effect.  An order was made on 17 February 2004 directing the parties to advise each other of those deponents whom the parties wished to cross-examine.  Whilst no order was made in terms that the trial proceed on affidavit, that order assumed such a procedure.

84                  Mr Mancini referred me to O 10 r 1(2)(a)(xiv) which allows the Court to give directions with respect to the giving of evidence at the hearing, including whether evidence of witnesses in chief shall be given orally or by affidavit or both.  Next, he referred me to O 33 r 1 which provides:

‘(1)      Unless the Court otherwise orders or the parties otherwise agree, the evidence of a witness at the trial of a cause shall be given orally.’

85                  Even if no order had been made, the point is without substance.  Order 10 r 1(2)(xiv) is facultative.  It allows the judge to make orders as to how the proceedings shall continue or be heard.  Order 33 must be read subject to O 40 r 7 which provides a specific procedure for hearing contempt proceedings.

86                  Order 40 r 7 is in place for the protection of a person against whom it is alleged is in contempt.  The purpose of O 40 r 7 is to ensure that the person who is charged with contempt shall have, before the hearing of the matter, all of the applicant’s/plaintiff’s evidence upon affidavit.  The rule recognises the seriousness of the charge and demands that the party seeking the order for contempt comply with it.

87                  In any event, in this case, all of the deponents to the affidavits were called for the purpose of cross-examination.  Whether they gave their evidence-in-chief orally or by acknowledging the truthfulness of the affidavit which was presented to them in evidence-in-chief is simply not to the point.  Their evidence was put before the Court in an admissible form.  I reject this contention.

88                  Thirdly, Mr Mancini contended that the trial had miscarried because the contempt proceedings were heard at the same time as the civil proceedings.

89                  The applicant relied on the evidence adduced in these proceedings in the civil proceedings.  There was, however, other evidence led in the civil proceedings which was not relevant to these proceedings.  Thus it was that the respondent argued it was wrong to hear the proceedings together.  Moreover, it was argued that the standard of proof to be applied in the two proceedings was different and that there was a risk that the Court might not apply the correct standard in these contempt proceedings.

90                  There are thus two limbs to this contention.  First, I should not have been exposed to evidence in the civil proceedings which is not relevant to the contempt proceedings.  Secondly, there is a different standard of proof in the two proceedings and therefore a risk that I would, in considering the evidence common to the two proceedings, apply the lesser standard of proof rather than the higher standard in these proceedings.

91                  It was always made entirely clear that the applicant, in these proceedings, only relied upon the respondent’s conduct in relation to Australian Marble and Battstone.  That is clear from the Statement of Charge accompanying the Notice of Motion.  It was made quite clear throughout the trial that the respondent’s conduct in relation to Cottage Meats (see paragraphs [105] to [116] of my reasons in the civil proceedings) and RMS Stone (see paragraphs [117] to [128] of my reasons in the civil proceedings) had no connection whatsoever with these proceedings.

92                  I have not used the evidence which was adduced in relation to those matters in the civil proceedings in any way in these proceedings.  The matters are not relevant and I have ignored those matters completely.

93                  There is more force in the second limb of this argument.  The standard of proof in contempt proceedings is beyond reasonable doubt: Witham v Holloway (1995) 183 CLR 525 at 534.  The standard of proof in civil proceedings is on the balance of probabilities.  Whilst there is no third standard, in some civil proceedings it is appropriate to apply a degree of satisfaction which recognises the seriousness of the allegations made and the gravity of the consequences which might follow: Briginshaw v Briginshaw (1938) 60 CLR 336 (‘Briginshaw’) per Dixon J at 362.  However, applying the Briginshaw test as the standard in civil proceedings is not to apply a standard of proof beyond reasonable doubt.

94                  Therefore, it follows, logically, as Mr Mancini contended, that there is a real risk when considering the same facts in two different proceedings; one of which requires proof beyond reasonable doubt and the other which requires proof on the balance of probabilities that the fact finder could become confused and apply the lesser standard when the higher standard is mandated.

95                  That would not result in a mistrial in relation to the matter which allowed proof according to the lesser standard but could lead to a mistrial in relation to the proceedings which required proof of the higher standard.

96                  For that reason, I decided to approach my consideration of the applicant’s case in the civil proceedings upon the basis that the applicant needed to establish the facts in those proceedings beyond reasonable doubt.  Proceeding in that manner and requiring proof beyond reasonable doubt in both proceedings, means that there could be no risk of confusion and no chance that the respondent in these proceedings would suffer any prejudice by the matters being heard together.

97                  Apart from the potential prejudice which was identified by Mr Mancini, there were two other reasons why I adopted that procedure.  First, because the civil proceedings involved a consideration of a section of the Act which, if the facts were made out, might establish that the respondent had committed an offence.  Secondly, because of the first matter, to avoid the possibility of the Court finding in the civil proceedings that the case had been made out but in the contempt proceedings on the same facts the case had not been made out.  Such a result having regard to the circumstances of both proceedings could be embarrassing.

98                  It seemed to me, in those circumstances, that it would be fair to the respondent and not unfair to the applicant that the applicant be required to prove the applicant’s case in the civil proceedings beyond reasonable doubt.  The decision in the civil proceedings, which I have given today, reflects that approach.

99                  That also allows me to make identical findings on the same facts in the two different proceedings.  Of course, for the reasons already given, I have continued to ignore the allegations relating to Cottage Meats and RMS Stone in the civil proceedings.

100               In those circumstances, no embarrassment was caused, or could have been caused, in any way to the respondent in conducting the two hearings simultaneously.

101               Mr Mancini asked me to disqualify myself for apprehended bias on two grounds.  First, because during the interlocutory processes I had become aware of matters contained in the contempt proceedings which were prejudicial to the respondent.  Secondly, because I had conducted the trial of the contempt proceedings at the same time as the trial of the civil proceedings.

102               In Johnson v Johnson (2000) 201 CLR 488 at [11], Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ formulated the test for apprehended bias:

‘It has been established by a series of decisions of this Court that the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias (which, in the present case, was said to take the form of prejudgment) is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.’

103               That statement of principle was repeated in Ebner v The Official Trustee in Bankruptcy (2000) 205 CLR 337.  At [6] Gleeson CJ, McHugh, Gummow and Hayne JJ said:

‘Where, in the absence of any suggestion of actual bias, the question arises as to the independence or impartiality of a judge (or other judicial officer or juror), as here, the governing principle is that, subject to qualifications relating to waiver (which is not presently relevant) or necessity (which may be relevant to the second appeal), a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide.  That principle gives effect to the requirement that justice should both be done and be seen to be done, a requirement which reflects the fundamental importance of the principle that the tribunal be independent and impartial.  It is convenient to refer to it as the apprehension of bias principle.’

104               In determining whether there is a reasonable apprehension of bias, the inquiry is as to whether the judicial officer might not bring an impartial mind to the issues in question before that officer, not how the officer will approach the matter.  As was said in Ebner v The Official Trustee in Bankruptcy:

‘The question is one of possibility (real and not remote), not probability.’

105               Moreover, the rule is formulated on the basis that the fair-minded lay observer ‘might’ reasonably apprehend that the judge might not bring an impartial mind to the issues before the judge.  The question is not whether the fair-minded lay observer would reach that conclusion but that he might apprehend that the judge might not bring an impartial mind to the question before the judge.

106               The inquiry is as to the appearance of bias, not the actuality.  Of course, the appearance of bias must emanate from the facts and circumstances acting upon the judge’s deliberations.

107               Some assumptions are made about the fair-minded lay observer.  In Livesey v New South Wales Bar Association (1983) 151 CLR 288, Mason, Murphy, Brennan, Deane and Dawson JJ at 299 said:

‘The reasonable observer is to be presumed to approach the matter on the basis that ordinarily a judge will so act as to ensure both the appearance and the substance of fairness and impartiality.  But the reasonable observer is not presumed to reject the possibility of prejudgment or bias; nor is the reasonable observer presumed to have any personal knowledge of the character or ability of the members of the relevant Court (see Hannam v Bradford Corporation [1970] 1 WLR 937; Reg v Liverpool City Justices; Ex parte Topping [1983] 1 WLR 119).’

108               In Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 87, Mason CJ and Brennan J said, after referring to Livesey v New South Wales Bar Association:

‘In assessing what the hypothetical reaction of a fair-minded observer would be, we must attribute to him or her knowledge of the actual circumstances of the case.  …  While it would not be proper to attribute to the fair-minded observer the understanding that a lawyer would have of the capacity of the members of the Tribunal to make an independent decision uninfluenced by previously expressed opinions and conflicting interests (see Vakauta v. Kelly (1989) 167 C.L.R. 568), such an observer must be taken to appreciate that the defences filed by the Tribunal do not amount to assertions of belief or admissions.’

109               In Johnson v Johnson at [53], Kirby J said:

‘The attributes of the fictitious bystander to whom courts defer have therefore been variously stated.  Such a person is not a lawyer.  Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided.  Being reasonable and fair-minded the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all the relevant circumstances.  The bystander would be taken to know commonplace things, such as the fact that adjudicators sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers.  The bystander must also now be taken to have, at least in a very general way, some knowledge of the fact that an adjudicator may properly adopt reasonable efforts to confine proceedings within appropriate limits and to ensure that time is not wasted.  The fictitious bystander will also be aware of the strong professional pressures on adjudicators (reinforced by the facilities of appeal and review) to uphold traditions of integrity and impartiality.  Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context.  Finally a reasonable member of the public is neither complacent nor unduly sensitive or suspicious.’

110               In summary, therefore, the inquiry is into the reaction of an observer who is reasonable and fair-minded, who has a general understanding of the facts and circumstances surrounding the case, who is not a lawyer but is not wholly uninformed and uninstructed about the law in general, and who would ordinarily think that a judge will act so as to ensure both the appearance and substance of fairness and impartiality without at the same time rejecting the alternative possibility.  In a case such as this, the bystander will understand the Court’s obligation which, if not maintained, will be enforced on appeal to act fairly and impartially.

111               In those circumstances, a bystander will not be too quick to reach the conclusion that there is a real rather than a remote possibility that the judge might not bring an impartial mind to the question before the Court.

112               A judge should not be too sensitive to claims that a judge should disqualify himself or herself because of a reasonable apprehension of bias.  In Re JRL; Ex parte CJL (1986) 161 CLR 342, Mason J said at 352 after referring to applications of this kind for judges to disqualify themselves:

‘In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgment and this must be “firmly established”: Reg v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 553; Watson (1976) 136 CLR at 262; Re Lusink; Ex parte Shaw (1980) 55 ALJR 12 at 14.  Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.’

See also Kirby P in Australian National Industries Ltd v Spedley Securities Ltd & Ors (1992) 26 NSWLR 411 at 417-418.

113               As shown from the passage cited in Ebner v The Official Trustee in Bankruptcy, there are at least two qualifications to the general rule.  First, where the parties have waived their right to ask a judge to disqualify himself or herself for the appearance of bias and, secondly, where necessity dictates that the particular judge must determine the issue before the Court because there is no alternative either because there is no other judge or because there is no other judge free of the appearance of bias.

114               The question of necessity does not arise in this case.

115               The applicant argued that even if I were to consider that a fair-minded lay observer might apprehend that I might not bring an impartial mind to the issues in question I should find that the respondent has waived his right to object to my hearing of the matter.  It is true, as the recital of the facts above shows, the respondent did not at any time until after the completion of the evidence claim that I should disqualify myself on the ground of apprehension of bias.  He was aware from the outset that I intended to hear the contempt proceedings and the civil proceedings at the same time.  During the period between the institution of both proceedings and the commencement of the trial, the respondent approached two solicitors who had some form of limited retainer and retained Mr Mancini in relation to the contempt proceedings.  He also retained the counsel who appeared for him on a number of occasions.

116               The respondent was well aware that I had issued the warrant for his arrest and heard his application for bail.  He was also aware from the outset, as I have said, that I intended to hear both matters together.  The time to object to my hearing this matter was prior to the commencement of the trial.  His conduct is likely said to amount to a waiver.

117               However, if I had thought that a reasonable lay observer might have apprehended that I might not be able to bring an impartial mind to the contempt proceedings I would have disqualified myself, notwithstanding that the application was made so late.  I would have taken that action notwithstanding the injunction that judges should not too readily accede to applications for disqualification in Re JRL; Ex parte CJL (1986) 161 CLR 342 per Mason J at 352.  I would have done so because of the importance of the proceedings to the respondent and the necessity for ensuring, in a case of contempt where the Court is seeking to protect the integrity of the Court’s processes, that justice be seen to be done.

118               However, I am not convinced that a fair-minded lay observer might apprehend that I might not be able to bring a fair and impartial mind to the questions on issue before the Court.

119               It was contended, in support of the first ground, that I was acquainted with facts prejudicial to the applicant by reason of matters learned in the interlocutory proceedings leading up to the trial.

120               It was faintly suggested that, because I was aware of the order made by Jenkinson J and the undertaking given to Kenny J, that would be enough for me to disqualify myself.  I can say immediately there is nothing in that point.  The applicant needed to establish that Jenkinson J had made the order on 10 March 1992.  It also had to establish that an undertaking was given to Kenny J on 8 October 2001.  As it happened, because of the form of Kenny J’s order, it also had to establish that an order was made by Jenkinson J on 6 May 1994 because it was paragraph 1 of that order which was discharged by the orders made by Kenny J on 12 February 2002.  There is nothing in the point that I was aware of the orders previously made in the proceedings.

121               However, it was also said, that I should disqualify myself because I had been called upon to consider the issue of a warrant for the arrest of the respondent, issuing that warrant and, subsequently, dealing with a bail application.

122               There are two answers to that submission.  First, the respondent’s failure to attend Court in 2004 and the subsequent issue of a warrant and the hearings relating to bail were not relevant to any issue in determining whether the respondent had breached an order of this Court or failed to comply with an undertaking to this Court.  I did not, in dealing with those matters, make any findings in relation to Mr Reid’s credibility.  In any event, his credibility was not an issue in this trial.  He did not give evidence.  These proceedings fall to be determined not on any evidence given by the respondent but on the evidence adduced by the applicant.  Therefore, the interlocutory matters were wholly irrelevant.  Secondly, the respondent cannot, by his failure to attend Court, thereby requiring the Court to compel his attendance, disqualify that Judge from hearing the trial which the respondent has refused to attend.  If that were so the respondent would be entitled, by his or her own refusal to attend a hearing which he or she was obliged to attend and cause the hearing to be aborted even when brought to the Court.

123               The fact that I was aware that the respondent failed to attend Court and that steps had to be taken to apprehend him to ensure his attendance could not of itself be a reason for me to disqualify myself.  If that were so, in any criminal proceedings a party subject to bail who did not attend could call for a mistrial when his non-attendance was brought to the attention of the trial judge, especially if the trial judge was also the fact finder.  I reject that contention.

124               I have already rejected the second ground as constituting a ground for a mistrial.  I also reject that ground as a ground to disqualify myself.

125               Mr Mancini argued that I should stay the proceedings upon the same grounds as he argued for disqualification.  It was put that the way in which the proceedings had been conducted meant that there had been a mistrial and it would be appropriate, in the circumstances, to stay any further proceedings.

126               Because I do not accept any of the grounds give rise to a mistrial and because I do not accept that I should disqualify myself from hearing the matter, it follows that the proceedings should not be stayed.

127               Next, Mr Mancini argued that the Statement of Charge was such that the respondent was exposed to double jeopardy.  In that regard, he relied upon the decision of the High Court in Pearce v The Queen (1998) 194 CLR 610 (‘Pearce’).

128               Pearce was a criminal case and was an appeal against sentence.  The question which had to be decided in that case was whether the appellant had been punished twice for what was really the one act.  McHugh, Hayne and Callinan JJ said at 623:

‘40       To the extent to which two offences of which an offender stands convicted contain common elements, it would be wrong to punish that offender twice for the commission of the elements that are common.  No doubt that general principle must yield to any contrary legislative intention, but the punishment to be exacted should reflect what an offender has done; it should not be affected by the way in which the boundaries of particular offences are drawn.  Often those boundaries will be drawn in a way that means that offences overlap.  To punish an offender twice if conduct falls in that area of overlap will be to punish offenders according to the acts of legislative history, rather than according to their just desserts.’

129               Mr Mancini argued that the Statement of Charge sought to punish the appellant twice.  The argument which Mr Mancini has advanced is premature.  It was agreed between the parties that I should first consider whether the applicant had established the matters in the Statement of Charge and if I found the respondent guilty of contempt I should hear the parties as to the penalty to be imposed.  Therefore, as I say, the argument advanced by Mr Mancini is premature.  It may be an argument to be advanced if I find the respondent guilty of contempt.

130               In any event, the question of double jeopardy may never arise because the Notice of Motion does not seek cumulative orders but alternative orders: [3].

131               The applicant seeks a punishment for the breach of Jenkinson J’s order or, alternatively, for the breach of the undertaking to Kenny J.  The applicant does not seek punishment for both.  Indeed, the applicant has sought as a further alternative that the warrant which Kenny J ordered to lie in the Registry issue.  If that order were made the applicant does not seek any punishment in respect to the further breach of Jenkinson J’s order or the breach of the undertaking given to Kenny J.  For those reasons, the question of double jeopardy in relation to punishment may never arise.

132               Therefore, it seems to me, the question of double jeopardy must be left for a later time.

133               I therefore turn to the facts of this case.  Before I do, it goes without saying that because the same facts have been relied upon in these proceedings as in the civil proceedings except for the two matters to which I have referred in those civil proceedings and because the same standard has been applied, inevitably I should make the same findings.  It will be seen, therefore, on a reading of these reasons and the reasons given in the civil proceedings that the following findings substantially are identical.

THE FACTS

134               In support of its case in these proceedings, the plaintiff relied upon the first defendant’s conduct in relation to Battstone Australia Pty Ltd (Battstone) between 3 March 2003 and 3 June 2003 and Australian Marble Pty Ltd (Australian Marble) between 1 February 2003 and 14 July 2003.

135               In 1964 Mr Leone Battista commenced business as a concreter and terrazzo layer.  The business was carried on under the name of ‘L & R Battista’.  Gradually, the focus of the business changed and, by 1982, the business was importing granite and marble which was being cut and polished.  Mr Battista was joined in partnership by his son Frank in 1988 and then by his youngest son, John in 1990.  When John joined the firm the partnership name was changed to ‘L & R & J & F Battista’.  Leone Battista retained the responsibility for the day-to-day management of the affairs of the partnership.  Frank worked in the factory.  Until 2001 the business premises were at Blair Athol.  In 2001 the partnership agreed to purchase the plant and equipment of W H Martin Pty Ltd and to lease its premises at 9-17 London Road, Mile End.  As a consequence, Battstone was incorporated.  From October 2001 it conducted the business previously carried on by the partnership.  The Blair Athol property was sold and the proceeds of sale were injected into Battstone.  A further $140,000 was provided by the shareholders in cash.

136               From about the middle of 2002, Quentin Blunden acted as general manager, Alby Trosi as accountant and Gina Battista as sales manager.  Leone Battista assumed the role of quoting on kitchens and vanities, purchasing materials and consumables, and supervising individual jobs.  Frank remained as factory manager.

137               In early 2003, Mr Blunden and Mr Trosi told Leone Battista that Battstone was in financial difficulties.  As a consequence, in January 2003 Joseph Cecere was retained as Battstone’s external accounting adviser.  At the time of his appointment it was his view that the company was insolvent.  It was unable to pay its debts as and when they fell due, in particular, it could not pay a debt owing to the Australian Tax Office (ATO) or WorkCover instalments.

138               Mr Hyland worked for Mr and Mrs Reid who operated a business in partnership called ‘Gemstone Exploration’.  Some time during 2002, Mr Reid requested the second defendant, Mr Smith, to incorporate five companies; one of which was known as ‘Opal Sales Vic Pty Ltd’ which changed its name to ‘Australian Marble Pty Ltd’.  Originally, Mr Smith was the sole director of Australian Marble but, on 6 February 2003, Mr Hyland was also appointed director at Mr Reid’s instigation.

139               Pay Now Pty Ltd (Pay Now), a Sydney based financier was in the business of providing debt factoring facilities by purchasing a business’ debtors at a discount and thereafter recovering payment from those debtors.  On or about 5 February 2003 Mr Reid contacted Pay Now seeking debt factoring facilities.

140               Pay Now provided Mr Reid with a standard application for finance form which was completed on 7 February 2003.  It is not entirely clear who completed the application form, but I accept Mr Hyland’s evidence that he did not.  Further inquiry need not be undertaken.  These proceedings are not about Mr Reid’s dealings with Pay Now, except to the extent that Pay Now effectively, but unknowingly, became Mr Reid’s financier.

141               Mr Reid, Mr Hyland and Mr Smith travelled to Sydney to meet with the representatives of Pay Now on 10 February 2003.  The purpose of the meeting was to acquaint Pay Now with Australian Marble’s business so that Australian Marble could obtain a debt factoring facility of $1 million.  In fact, at the time of this meeting, Australian Marble had no business and had never traded.

142               In a second meeting on 11 February 2003, Mr Reid, Mr Hyland and Mr Smith met with Mr Cunnington, managing director of Pay Now.  It was Mr Cunnington’s evidence:

‘Reid was the negotiator for Australian Marble, he did most of the talking and answered my questions.  He was the one with ideas and the knowledge.  He was the person going through the conditions and seeing if they were fair and reasonable.  He played the lead role.  He talked about a previous business he operated in Coober Pedy and he talked about the sales that Australian Marble planned to make to a company called Battstone Pty Ltd (“Battstone”) and to other customers.’

143               Pay Now agreed to provide Australian Marble with a debt factoring facility of $1 million.

144               Mr Blunden said that in February 2003 Mr Reid, in the company of another man whose name he could not recall, met with him.  Mr Blunden understood the purpose of the meeting was to discuss Battstone purchasing blocks of granite from Australian Marble.

145               During the meeting, Mr Reid enquired of Mr Blunden whether the proprietors of Battstone would be interested in selling Battstone.  Mr Reid, Mr Blunden said, wanted to meet with the owners as soon as possible to discuss the question of a sale.

146               As I have already said, Leone Battista knew that Battstone was in financial difficulties.  So also did Frank Battista.  There was an immediate obligation to pay an amount in excess of $60,000 to the Australian Tax Office and to WorkCover and, at this time, they were considering borrowing that sum from a third party.  Mr Blunden advised them that he had spoken to Mr Reid who had expressed an interest in buying the business.  He told both Leone and Frank Battista that the company may have been trading whilst insolvent and that the business of the company had no value.  A few days later, Mr Reid arrived at Battstone’s premises unannounced.  Mr Blunden introduced Mr Reid to Leone Battista and later, whilst walking through the factory, to Frank Battista.  Mr Reid told Leone Battista that he owned several quarries and that he had made $11 million in the previous year.  Mr Reid told him that money was no problem to Mr Reid.  Near the end of the meeting he told Leone and Frank Battista that he wanted to purchase the business.  They told him that they would only sell half.

147               One or two days later, Mr Reid again attended Battstone’s premises and spoke with Leone Battista.  When Mr Reid arrived, Leone Battista approached him immediately and said: ‘Either 50, 50 if you want to buy half, otherwise I am not interested’.

148               It was Mr Leone Battista’s evidence that he was not prepared to part with more than 50 per cent of the business because otherwise he would have no say in the running of the business.  He thought he had spent 45 years in the business ‘so why would we give away control of it to this guy who just comes along?’.

149               Mr Battista said that Mr Reid accepted the 50 per cent offer.  No price for the 50 per cent was ever discussed.  Instead, there was a discussion about Mr Reid paying all of Battstone’s debts although Mr Reid did not ask what the debts were.  Mr Battista did not inform him because he thought that Mr Reid had got that information from Mr Blunden.

150               On 3 March 2003 Mr Reid returned with a document which purported to be an agreement between Australian Marble and Battstone where Australian Marble ‘agree to enter into a contract with (Battstone) where it purchase fifty (50%) percent of the business enumerated in Recital A’.  The business in Recital A was:

‘BA is the registered owner of the marble and granite business at 9-17 London Road, Mile End, Adelaide, South Australia.’

151               Clause 2 of the agreement provided:

‘2.        The contract will be that [Australian Marble] will pay out all accounts owed by BA to date for its half share in the total business.  AM will also finance purchases of imported marble and granite products required for building of [Battstone] business until [Battstone] can pay for its own purchases.’

152               The agreement contemplated that Australian Marble and Battstone would each appoint one person to be directors of Battstone but that Australian Marble would control the management of Battstone ‘with the help of the director from Battstone’.

153               The agreement is, of course, a nonsense.  It confuses the sale of a business with the sale of shares in a company.  The agreement purports to have Battstone sell 50 per cent of its business to Australian Marble in return for Australian Marble paying all of the accounts owed by Battstone.  That would be a simple enough deal.  However, the agreement also provides that Australian Marble will appoint a director to Battstone and control the management of Battstone.  Australian Marble, at least under this agreement, did not become a shareholder of Battstone.  In those circumstances, it is difficult to understand why the agreement would have provided for Australian Marble to appoint a director to Battstone.

154               Perhaps, more importantly, it was Mr Leone Battista’s evidence that when he read this agreement he learned for the first time of the existence of Australian Marble.  He said, in his evidence that he asked Mr Reid: ‘Is this the name of your company?’ and Mr Reid said: ‘Yes’.

155               When the agreement was presented to Mr Battista it had already been signed by Australian Marble.  He could not read the signature but assumed that it had been signed by Mr Reid.  There was no discussion about the consideration passing.  Mr Leone Battista did not raise that matter because he knew that Mr Reid was well aware that the business needed money.

156               I find that the negotiations which led to the agreement of 3 March 2003 were conducted on behalf of Australian Marble by Mr Smith alone.  I accept Mr Hyland’s evidence that Mr Hyland gave Mr Reid no instructions in relation to the negotiations, nor was he aware of the terms and conditions of the agreement reached.

157               I find that Mr Reid was solely responsible for Australian Marble entering into the agreement of 3 March 2003.

158               Mr Reid commenced work within one or two days of the signing of the agreement of 3 March 2003.  He took up occupancy of Mr Blunden’s office who, in turn, moved into the office occupied with Mr Trosi which they then shared.  Mr Blunden introduced him to the Battstone employees ‘as a new partner of Battstone’.  Mr Reid requested Mr Blunden to explain to him how Battstone operated and who performed what tasks.

159               Mr Blunden said in his evidence:

‘(a)      Reid told me that although he was not a director of Australian Marble Pty Ltd all instructions would come from him and that I was not to consult with the directors of Australian Marble whom he identified to me as Joy Aronsen and Noel Smith;

(b)       I was not to concern myself with the accounting and that Alby Trosi would forthwith report directly to Reid.’

160               Mr Blunden’s evidence was that he was told by Mr Reid that Joy Aronsen would be taking over Gina Battista’s job as receptionist and typist and that Mr Noel Smith and Greg Hyland would be undertaking maintenance work.

161               Mr Hyland said that when he started work at Battstone he was sent to the factory by Mr Reid to look after the maintenance side of things.  He said, and I find, that he had nothing to do with the management of Battstone during the period in which he was involved.  He had nothing to do with any decision-making involving hiring or firing of staff in relation to the company’s finances.

162               Mr Hyland said that when he commenced work Mr and Mrs Smith had already commenced work.  Mr Smith was mainly doing construction and maintenance type work, and Mrs Smith was working as a cleaner.

163               Mr Blunden said in paragraph 34 of his affidavit:

‘I also recall that soon after he started he explained to me that he, Craig Hyland and Noel Smith and their partners had several companies and that they shared costs and directorships, usually with the company having one of the mates and another mate’s partner as directors.  Whilst it was never stated directly to me, I took this explanation as the reason why Reid was not a director of Australian Marble.’

164               Within a few days of commencing, Mr Reid requested Mr Frank Battista to sign an invoice from Australian Marble to Battstone for materials supplied to Battstone by Australian Marble.  Mr Battista initially refused to sign the invoice because no marble had been delivered.  However, he was told by Mr Reid that if anyone did ask where the marble was he should tell them that it was for the blocks of Coober Pedy granite stored at the factory.  These invoices were subsequently faxed to Pay Now and the ‘debts’ factored.

165               Mr Peter Martin, who was Battstone’s landlord, attended Battstone’s premises in March 2003 when he met Mr Reid for the first time.  Mr Martin’s evidence was that Mr Reid introduced himself to him and, during the conversation, said: ‘I have been banned from running a company but really I run it.  I just can’t say that I run it.  I am a salesman here’.  Mr Martin said that Mr Reid told him that he (Mr Reid) was the person to be contacted for rent in the future.  Mr Martin had a number of subsequent contacts with Mr Reid when he attempted to collect the rent.  The rent was often late and Mr Reid would offer excuses as to why a cheque could not be given on a particular day.

166               Shortly after Mr Reid commenced, he gave Mr Blunden a document entitled ‘QUENTIN THINGS TO BE DONE AS SOON AS POSSIBLE:’.  I set that document out because it indicates the degree of control which was being exercised by Mr Reid:

‘1.        Please change locks today on all doors and gates, office doors to be different to the rest.

2.         I want a meeting with all factory staff excluding Battista’s as soon as possible.

3.         Alby is to be shifted out to back office to work with Edna, you may require a new desk for one of them.

4.         Maybe the desk beside the round table in back room can replace the one in Eric’s office, the one that John was using, the computer in back room can be shifted onto that table.

5.         You can keep your place where you are and the new salesperson can table [sic] Alby’s place.

6.         At present I want to use the one I am using.

7.         Full concentration needs to be placed on finishing jobs that are unfinished and not paid for, and concentrate heavily on getting more kitchens out and paid for.

8.         We need to have Frank work on making kitchens full time along with who can help him, there is no excuses for Frank to not be working on kitchens.

9.         Maybe Scotty can look after the saws as well as doing his own job.

10.       It is important now to introduce job cards.

11.       We need to sit down with Frank, Johnny and Vince to discuss their pay and conditions; this has to be done once I have given Alby the form 304 to be handed into the ASIC.

12.       The Battista’s can use a truck to go home but only for this week.

13.       There is to be no keys given to the Battista’s.

14.       Craig and Noel is to remove all the junk that they have been working on then they can go on cleaning rubbish away.

15.       Quentin we need urgently a temporary shed not too far away, to put all good rubbish that is to be sold into it, then we will have a garage sale.

16.       I suggest that we use Craig to go and buy a vehicle for Leone to use both at work and to go home.

17.       Mother does not do the cleaning anymore, at present Barbara is to be used to clean the offices say three times per week, I have told her that she is not to remove or clean the office desks.’

167               First, it demonstrates that Mr Reid exercised power over the general manager, Mr Blunden.  Secondly, paragraphs 14 and 16 of the document shows the power which Mr Reid exercised over the directors of Australian Marble.

168               On 27 March 2003 Mr Blunden was told by Mr Trosi that the company had insufficient funds to meet the employees’ wages.  Mr Reid met with Mr Frank Battista and then called Mr Blunden and Mr Trosi into his office.  Mr Reid told Mr Blunden and Mr Trosi that there was not enough money to pay wages because Mr Frank Battista had failed to complete certain jobs and, as a result, Battstone had not been paid for them.  He requested Mr Blunden and Mr Trosi to organise the employees to meet in the lunch room without the attendance of any of the Battista family.  Mr Reid told Mr Blunden and Mr Trosi that he was going to send the men home after telling them that there was no money to pay their wages.  However, he would see that they were paid for the day.  He said that Mr Blunden and Mr Trosi’s jobs were secure and that they were the key people.  He told them it was his intention ‘to buy’ the company and have total control.  A meeting with the workers did take place in the lunch room.  Mr Reid sent the Battstone staff home.

169               On the same day, Mr Blunden telephoned Mr Cecere and asked him to attend the company’s premises urgently.  Mr Blunden told him of the 50/50 agreement with Australian Marble and that Mr Reid had sent the Battstone employees home.  Mr Cecere then met with Mr Leone and Frank Battista.  He was shown the agreement of 3 March 2003.  He telephoned Mr Reid and was told by Mr Reid ‘that he refused to deal with the Battista’s and that Australian Marble wanted 100 per cent control of Battstone’.

170               The next day, a meeting took place at Battstone’s premises.  Present were Leone, Frank and John Battista, Mr Cecere, Mr Trosi, Mr Reid and Mr Noel Smith.  Mr Hyland said that he did not attend the meeting because he had been instructed by Mr Reid not to do so.  Mr Reid told Mr Hyland that he should stay away in case Mr Reid needed to say that he had to consult with him.  Mr Smith was introduced as an associate of Mr Reid’s.  During the meeting, Mr Reid said words to the effect ‘that he wanted 100 per cent control over the shareholdings and directorships’.  During the meeting, Mr Leone Battista put to Mr Reid that in addition to the payment of all of the Battstone debts he wanted to have his $125,000 loan to Battstone repaid and the $350,000 the partnership put into Battstone also repaid.  Mr Reid refused.  Mr Reid said that the Battistas had until the end of the day to make up their mind whether to accept his offer.  Mr Cecere said in his evidence that Mr Smith did not contribute anything at the meeting.  Mr Cecere’s evidence was that Mr Reid did not consult with Mr Smith during the meeting or consult with any other person during the meeting.

171               After Mr Smith left the meeting, Mr Cecere spoke to Mr Leone Battista and his two sons.  He was told that their primary concern was their personal debts.  He told them that the company would have to be put into voluntary administration or a deal made with Mr Reid.  The Battistas said that they wanted their personal debts paid off and $50,000 cash, and they authorised Mr Cecere to ring Mr Reid with that proposal.

172               Mr Cecere rang Mr Reid on his mobile telephone and put the offer which he had been instructed to put by the Battistas.  Mr Reid said that he would agree to pay Mr Leone Battista’s personal debts but he would not pay the $50,000 cash requested.  Mr Cecere’s evidence was that Mr Reid did not consult with anyone before he put that further counter-offer.  Later that day, Mr Cecere rang Mr Reid asking whether Mr Reid would leave the offer open until Mr Leone Battista had had an opportunity to speak to his wife.  Mr Reid refused and required an answer that day.  Mr Reid’s counter-offer was accepted.

173               On 1 April 2003 a document entitled ‘Conditions of Intent to Purchase’ was executed which purportedly reflected the agreement reached on 28 March 2003.  The parties were again Australian Marble and Battstone.  The document identified the purpose of the agreement, which was for Australian Marble to acquire all of the shares in Battstone and for the current directors to resign and for the directors of Australian Marble to be appointed.  Australian Marble was to assume all liabilities secured, unsecured and contingent of Battstone excluding any liability to the Battista family or to the partnership.  The liabilities were estimated at approximately $125,000.

174               The agreement was executed on behalf of Battstone by Mr Leone Battista and Mr Frank Battista, and on behalf of Australian Marble by Mr Smith and Mr Hyland who were the directors of that company.  It was Mr Hyland’s evidence that he was not involved in the negotiations leading up to the agreement but signed the agreement because Mr Reid asked him to do so.

175               On 1 April 2003 the Battistas resigned as directors of Battstone.  They were replaced by Mr Smith’s wife, Barbara Smith and Ms Aronsen who was Mr Hyland’s partner.

176               Mr Frank Battista said that shortly after the document was executed Mr Reid called a meeting of the staff.  He said:

‘Reid introduced himself to everyone at the meeting and said words to the effect that Australian Marble was merging with Battstone.  Reid said words to the effect, “I am your new boss and I am in charge.  From now on you listen to me, not to Frank or Leone.  If you have something to say you say it to me”.  Reid told the meeting that there were going to be major changes, that new equipment would be brought in and plenty of material as well.’

177               Mr Eliseo, the State Manager of Castle Tools Tyrolit Pty Ltd (Castle Tools) attended Battstone’s premises shortly after 1 April 2003 and spoke to Mr Reid.  Mr Eliseo said that Mr Reid told him that he was the man in charge and that he represented Australian Marble, and it was taking over Battstone.  Mr Reid offered a verbal guarantee that Australian Marble would pay Battstone’s debt.

178               Mr Roger Metcalf of Gosford Quarries (Vic) Pty Ltd (Gosford Quarries) discussed with Mr Reid the purchase of blocks of granite.  During that conversation, Mr Reid also said words to the effect that a new entity Australian Marble had been formed over which he had full control. 

179               Ms Aronsen said that on or about 8 April Mr Reid met with a chartered accountant, Maris Rudaks and instructed him in relation to negotiating with Battstone’s creditors.

180               On 17 April 2003 a Deed of Agreement was executed evidencing the purchase by Australian Marble of all of the shareholding of Battstone from the Battistas.

181               On or about 23 April 2003 Mr Reid presented Mr Blunden with a document entitled ‘QUENTIN JOB DESCRIPTION AS OF 23/04/03:’.  It has to be remembered that Mr Blunden was ostensibly the general manager at the time and he was receiving instructions from Mr Reid.  The document identified the tasks Mr Blunden was to perform:

‘1.        SALES ON BOTH MONUMENTAL AND KITCHENS.

2.         QUOTES ON BOTH MONUMENTAL AND KITCHENS, THESE ARE TO BE KEPT UP TO DATE DAILY.

3.         ALBY TO CHECK EVERY QUOTE BEFORE IT IS SENT TO CLIENT.

4.         RESPONSIBLE FOR ORDERING PARTS, MAINTENANCE OF EQUIPMENT ETC.

5.         ALL PHONE MESSAGES ARE TO BE DEALT WITH IMMEDIATELY.

6.         OVERSEE MONUMENTAL JOBS IN CONJUNCTION WITH MICK.

7.         ORDERING OF BLOCKS AND SLABS AFTER LIAISING WITH MAX.

8.         TO ATTEND A MEETING ON THE FIRST WORKING DAY OF EVERY WEEK AT 7AM WITH ALBY, JASON, MICK, JOHN AND MAX, TO REPORT ON SALES AND PREVIOUS WEEKS JOBS AND PERFORMANCES.

9.         TO MAKE SURE THAT OUR ACCOUNTS DEPARTMENT HAS THE CORRECT INFORMATION ON JOBS SO THAT THEY CAN BE BOOKED OUT WITH DISPATCH OF GOODS.

10.       OVERSEE THE WHOLE OPERATIONS OF BATTSTONE IN MAX’S ABSENCE BUT AFTER LIAISING WITH MAX.

NOT YOUR RESPONSIBILITY ANYMORE:

1.         ADMINISTRATION OF THE BUSINES.

2.         ACCOUNT PAYABLE OR RECEIVABLE.

3.         NO CONNECTION WITH PETER MARTIN REGARDING THIS BUSINESS OR HIS RENT.

4.         NO PASSING THINGS ONTO JOY OR GINA TO DO.

5.         BOTH JASON AND MICK ARE TO ORGANISE THEIR OWN WEEK AFTER THE MEETINGS ON THE FIRST WORKING DAY OF EVERY WEEK.’

182               Mr Craghan first met Mr Reid in about April 2003 when Mr Blunden and Mr Reid visited his workplace at Marble House of Australia.  Mr Blunden introduced Mr Reid to Mr Craghan.  He was also introduced to the other four defendants to these proceedings.  The next Saturday Mr Craghan noticed there was an advertisement in the Adelaide ‘Advertiser’ for two jobs at Battstone and he applied for the job of sales coordinator.  His first interview was with Mr Blunden.

183               On Easter Thursday he was asked whether he could meet with Mr Reid for an interview.  He was interviewed that afternoon for about an hour by Mr Reid and was offered the job of sales coordinator with a salary of $50,000 a year.  He accepted that position on Easter Saturday.  He commenced on 1 May 2003.  Although his job was to report to Mr Blunden, he said that Mr Reid was clearly ‘Quentin’s boss’.  Mr Reid chaired a weekly 8.00am production meeting each Monday which set out the production for the week ahead.  Mr Reid met the key customers and suppliers when they visited the premises.  On the other hand, he said the other four defendants seemed to sit around a lot and have lunch together.  Mr Craghan never saw Mr Hyland or Mr Smith give any instruction to Mr Reid whatsoever.  On the other hand, he did see Mr Reid give instruction to Ms Aronsen who, of course, was apparently a director of Battstone.

184               In April and May 2003, Mr Reid made a number of approaches to Mr Martin (the landlord) to transfer the lease into the names of the new directors.  Mr Martin refused because he understood that the sale of Battstone to Australian Marble had not been completed.

185               On 20 May 2003 Mr Reid met with Paul Borgensen, who was the proprietor of ACE Granite.  Mr Borgensen’s evidence was:

‘Early in the conversation I asked him, “So, is Australian Marble just your business?”  Reid said, “There are three of us, me, Craig and Noel”.  I cannot recall the surnames of either Craig or Noel.  Whilst I cannot precisely recall the words spoken Reid said either “we are partners” or “we are in partnership”.’

186               Mr Reid was asked: ‘What happened to the Battistas?’ and he replied: ‘their time was up there and he was going to take over the business’.

187               Mr Borgensen said that Mr Reid also said during the conversation that ‘we own quarries in Western Australia’; ‘we are in the process of setting up a supply line to get granite blocks to Adelaide for processing’; and ‘our goal is to sell a lot of granite overseas’.

188               ACE Granite agreed to be a supplier of granite to Australian Marble.  However, in June 2003, a cheque which was proffered by Australian Marble was dishonoured and payment was never made although Mr Reid told Mr Borgensen that he would ‘get it taken care of’ and ‘that he did not know why it had not been honoured’.

189               On 22 May 2003 Mr Reid terminated Mr Blunden’s employment and, in doing so, handed him a letter under the heading of Australian Marble and written by Mr Reid.  In that letter he wrote:

‘It has come to our attention over the past few weeks that you cannot cope with your position here at Australian Marble Pty Ltd … 

Under the circumstances we have no alternative but to terminate your employment with the above company immediately.

Regards

Max Reid.’

190               The next day he told Mr Craghan that he had ‘sacked [Blunden] last night’.  He also told Mr Metcalf of Gosford Quarries that he had sacked Mr Blunden.

191               On 3 June 2003 an order was made for the winding up of Battstone and Mr Anthony Broome was appointed liquidator.  Between the date of his appointment and 19 June, Mr Broome attempted to obtain information as to the assets and liabilities of Battstone.  It was not clear to him what assets were owned by Battstone or Australian Marble, or which of those companies had incurred particular liabilities.  Mr Broome’s evidence was that Mr Reid provided some information to him.

192               On 19 June 2003 Mr Reid met with a solicitor, Mr Neate of Lynch & Meyer Solicitors and advised that solicitor that he was a silent partner in Australian Marble.  He provided Mr Neate with a letter signed by Mr Hyland authorising Mr Reid to speak on behalf of the company.  Mr Reid sought advice regarding Australian Marble’s dealing with Battstone’s liquidator.

193               Later, Mr Reid prepared a letter which Mr Hyland signed which was sent to the solicitor.  On 23 June 2003 Mr Neate, Mr Hyland and counsel met to discuss a possible claim by Australian Marble to set aside the acquisition of Battstone.  Although Mr Hyland was present, it was Mr Reid who answered most of the solicitor’s questions.

194               On 24 June 2003 Mr Reid wrote to the solicitor setting out in detail Mr Reid’s role in the negotiations with the Battistas.  I set out the contents of that letter:

‘Further to our discussions yesterday afternoon re: Battstone and the liquidator and the breach of contract.

1.    On the 26/02/03 at 1.30pm I met with Quenten [sic] Blunden at Battstone premises at 9-17 London Rd to ask if they would be interested in doing some cutting and polishing of granite for us from our own quarry because Australian Marble had it’s own customers.  He advised me that Battstone should go into liquidation because it couldn’t pay it’s creditors and he asked if we would be interested in buying it out if the Battista’s would sell it.  I said that we are always interested in talking about these things and he asked if I would be interested in talking to Leone Battista one of the directors who was away from work because he had had a slight stroke.  Quenten [sic] made an appointment for me to be at the factory the next morning at 8am.

2.    On the 27/02/03 I had a meeting with Leone Battista and his general manager Quenten [sic] Blunden at 8.00am at Battstone premises at 9-17 London Rd.  One of the first things Leone said to me was do you understand that things take along [sic] time to do in the stone industry and a year goes by before you know where you are.  At this meeting Quenten [sic] explained to Leone that he Leone needed to take in a partner to survive or sell out.  Leone said that he would speak to his family and get back to me.  Later that day Quenten [sic] phoned me and set up a meeting again for the 28/02/03 at 8.30am at Battstone premises.

3.    At this meeting with Leone and Quenten [sic], they explained to me that they needed to do something about a partnership because Battstone could no longer survive without an injection of cash and Leone asked if we would be interested in talking with his family and I of course said yes.  Later this day Edna my wife and I left for Coober Pedy and we had a phone call from Quenten [sic] Blunden the general Manager asking me when would we be coming back to Adelaide which I told him that we can come back anytime and so we agreed to a meeting with the Battista family on the Sunday 02/03/03 at 10.00am at the Battstone premises.

4.    Myself, Noel Smith one of the directors of Australian Marble, Quenten Blunden the general manager for Battstone, Leone Battista and Frank Battista the two directors of Battstone attended this meeting.  At this meeting the Battista’s [sic] pointed out that they required Australian Marble to take over paying the debts of Battstone and put in stock so that Battstone could operate this would in turn be for a half share in Battstone.  All agreed and it was decided that an agreement would be put in place so that work could go on.

5.    An agreement was signed by both parties the next day 03/03/03 at 5.30pm.

6.    On the 27/03/03 at 11.30am after explaining to all the staff that they were not going to get paid because the Battista’s [sic] had not produced any kitchens for a week and after having a meeting with Frank Battista at 8.45am over money for wages and a meeting with the directors of Australian Marble, Australian Marble walked out of Battstone because nothing had changed to the way Battista’s [sic] had run Battstone.  We received a phone call from Quenten [sic] Blunden later in the day asking if we would come to a meeting at Battstone premises the next morning at 8.30am and we agreed.

7.    Myself, Noel Smith, Quenten [sic] Blunden, Leone, Frank and John Battista, Albi, Battstones internal accountant and Battstones external accountant Joe Cecere, attended this meeting.  Joe Cecere done [sic] most of the talking for the Battista’s but an agreement couldn’t be reached over a total purchase of Battstone by Australian Marble because the Battista’s [sic] did not want to sell out completely, so Noel and I left the meeting and we took our computer equipment with us never to return again.

8.    At 11.30am the same day 28/03/03 we received a phone call from Joe Cecere asking if we would reconsider a total purchase of Battstone and I asked him why and he told me that a friend of the Battista’s [sic] had been into Battstone office and told Battista’s [sic] that Battstone had a wind-up order placed on it and he said that it would be in our best interest if we came back.  All the same people attended as earlier on in the day, it was agreed that Australian Marble would assign the lease on the building, pay out all the debts of Battstone and have all the equipment leases assigned to Australian Marble, it was agreed by all that everything else in the factor such as trucks, equipment, tools, a fork lift and some old stock that L&R Battista partnership owned and moved over to the Battstone premises when they shifted from Blair Athol would remain and we agreed to pay the Battista’s [sic] $125,000.00 for those.  The Battista’s [sic] also agreed to pass over to Australian Marble an insurance claim for $20,000.00 which they had claimed from QBE for tools that had been stolen from their Blair Athol workshop some two years prior.  The Battista’s [sic] and their external accountant told us that there was an $80,000.00 debt outstanding from a Mr Gaucci for work done by Battstone that we could collect.  The Battista’s [sic] and their external accountant also told us that any work in progress would remain with Australian Marble; it was Australian Marble stock anyway.  The Battista’s [sic] and their external accountant also told us that Australian Marble could collect any outstanding debts.

9.    Joe Cecere Battstones external accountant put in place an interim contract until a solicitor could draw up a proper contract; a proper contract was eventually signed.

10.  We eventually went to visit Mr Gaucci and to try and collect the $80,000.00 and to be told by Mr Gaucci solicitor that the work had in fact been carried out under the L&R Partnership and not Battstone and that his client was not going to pay.

11.  The insurance cheque eventually arrived written out on the 02/06/03 to Battstone so the liquidator has taken control of that, this was a claim under L&R Battista Partnership but some how the cheque had been written out to Battstone, we assume because the general manager and the internal accountant had written to the insurance company on numerous occasions on Battstone letter head.

12.  The Battista’s [sic] started taking tools, old stock and plant from the premises at 9-17 London Road, Mile End on the 05/04/03 at 10am, they took more plant and tools on the 06/04/03 at 9am.  The next day 07/04/03 we engaged a security firm to secure the premises at all times and we changed the locks.

James we hope that this is enough information but please contact us if you require more.’

The letter corroborates the evidence of the plaintiff’s witnesses.  It indicates Mr Reid’s involvement in Australian Marble’s acquisition of Battstone.

195               On 30 June 2003 Mr Neate spoke to Mr Reid and, during that conversation said: ‘In my view, they are potentially assisting a further contempt with the orders in allowing (you) to remain in the management of the company’.  Mr Neate told Mr Reid that he would need to clarify these matters with the directors.  Mr Reid told Mr Neate that he thought it likely that they would simply refer Mr Neate back to Mr Reid for instructions.

196               On 10 July 2003 Mr Neate wrote to the directors of Australian Marble regarding his concern about Mr Reid’s involvement in the management of the company.  He wrote:

‘I refer to my long telephone conversation with Mr Hyland of 30^th June 2003 and write to clarify the terms of retainer arrangements for providing instructions to this firm in respect of this matter.

I note that these issues have arisen because it has come to our attention that Maxwell John Reid, an undischarged bankrupt, has also been convicted of various Corporations Law offences.  Importantly and of more concern is that the directors may be allowing Mr Reid to play an active role in the management of the company.  The directors should be aware that in February 2002 Mr Reid was sentenced to 12 months imprisonment, suspended for two years on condition that he have no involvement in directing, managing or administering a company.  These orders arose following guilty pleas entered by Mr Reid in respect of breaches of an order of the Federal Court made on 10^th March 1992 which prohibited Mr Reid from managing a corporation until the year 2036.

We understand from our discussions with Mr Hyland that these matters are all known to the directors of the company.  While these are ultimately matters for the directors of the company to consider and factor into the extent of any authority given to Mr Reid, we are nevertheless obliged to warn the company, via you its directors, that Mr Reid’s current involvement in the management of the business of the company may be sufficient to amount to further breach of his current sentence conditions.

It is therefore our recommendation that the directors structure affairs so that Mr Reid has no involvement in the administration of company matters and a much more limited role, if any, in the management of the business.

In order that there be no uncertainty, we are obliged to insist that our instructions are from the directors of the company.  If you wish to discuss any of the matters we have raised in this letter then please do not hesitate to contact us.’

197               On 14 July 2003 Mr Broome was appointed provisional liquidator of Australian Marble.  At or about the same time, Pay Now appointed receivers to Australian Marble

198               On 17 July 2003 the employees of Battstone and Australian Marble met at Vili’s Café where Mr Reid told them that they were ‘working on a proposal to be back operating by the middle of next week’.  A further meeting of employees took place the next day which Mr Reid again addressed.

199               On 26 August 2003 Mr Reid produced a letter dated 2 June 2003 from Mr Hyland to Mr Reid which included a statement that ‘your services are required for the position of export sales and mining’.  The date of that letter was false.  The letter was created by Mr Reid immediately prior to the other four defendants being examined by the plaintiff.

CONCLUSIONS

200               Mr Reid did not give evidence.  For the reasons given in the civil proceedings, I have inferred nothing from his absence from the witness box.  He was entitled in these proceedings to require the applicant to prove its case: Azzopardi v The Queen (2001) 205 CLR 50.  The most that can be made out of the respondent’s failure to give evidence is that the applicant’s case is uncontradicted.  The evidence which the applicant called from his solicitor, Mr Winter and the liquidator, Mr Broome did not assist his case.

201               I have discussed the concept of management in the civil proceedings.

202               Of course, there is a distinction between those proceedings and these proceedings in as much as these proceedings are not regulated by s 206A of the Act.  The respondent will have disobeyed Jenkinson J’s order if he has managed a corporation.  Section 206A does not assist in determining whether or not he is in breach of that order.

203               It seems to me, therefore, I have to decide whether there has been a breach of the order unassisted by any statutory provision.

204               In Commission for Corporate Affairs (Vic) v Bracht (1989) VR 821, Ormiston J was called upon to consider s 227(1) of the Companies (Victoria) Code which then provided:

‘A person who is an insolvent under administration shall not be a director or promoter of, or be in any way (whether directly or indirectly) concerned in or take part in the management of, a corporation without the leave of the Court.’

205               He was called upon to consider the meaning of the words ‘take part in the management of, a corporation’ and what needed to be established to prove that offence.  He said:

‘It may be difficult to draw the line in particular cases, but in my opinion the concept of “management” for present purposes comprehends activities which involve policy and decision-making, related to the business affairs of a corporation, affecting the corporation as a whole or a substantial part of that corporation, to the extent that the consequences of the formation of those policies or the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs.’

206               He later said at 831:

‘On the other hand, in a small company the activities of management and day to day administration may often appear to be merged or, at least, performed by the same people.  In the present case the fact that the respondent was engaged on what appear to be routine duties as an “estimator” for much of his time does not answer the question whether during a substantial part of the rest of his time he was engaged in the management of the company.’

207               Both Australian Marble and Battstone were small companies.  Australian Marble, apparently, had no employees apart from the respondent.  It had directors but, on the evidence, those directors played no part either as directors or managers of the company.  The evidence establishes, beyond reasonable doubt, that Mr Reid was the mind and will of the company.  He was responsible for policy.  The policy of the company was apparently to take over the business of Battstone.  He implemented that policy.  He negotiated the agreement of 3 March 2003 and later the further agreement which was signed on 17 April 2003.  He, therefore, caused Australian Marble to either obtain 50 per cent of Battstone’s business or 50 per cent of its shareholding on 3 March 2003.  He caused Australian Marble to obtain all of the shareholding of Battstone during the period leading up to and culminating on 17 April 2003.

208               The evidence establishes that no other person took any active part in those acquisitions.

209               It does not appear that Australian Marble had any other business apart from that which it acquired from Battstone.  It acquired Battstone’s business and shareholding without ever paying any consideration.

210               It did deal with Pay Now but, again, it is clear enough that negotiations which led up to the debt factoring facility of $1 million were carried out by Mr Reid.  It may also be inferred from the evidence that he directed the company into the debt factoring facility.  Mr Reid undertook the management of Australian Marble over the relevant period on any understanding of the word ‘management’.

211               Battstone had separate directors and a management structure prior to 3 March 2003.  After 3 March 2003 Mr Reid assumed the senior management role.  He influenced Mr Frank Battista, who was then a director of Battstone, to sign an invoice for submission to Pay Now.  He assumed control of the management team and issued directives to senior management intending that they act upon those directives.  The evidence is all to the same effect and that is that he assumed all of the responsibilities that usually attach to senior management.  He continued to act in that capacity, at least until 3 June 2003 when Mr Broome was appointed liquidator.

212               Thereafter, he continued to act in a management capacity with Australian Marble.  That is evidenced by the instructions given to Mr Neate, solicitor.  He probably continued to act as such until 14 July 2003 when Mr Broome was appointed provisional liquidator at Australian Marble.  Even after that time, he was still acting as if he were manager when he met with the employees of Battstone and Australian Marble at Vili’s Café on 17 July 2003.

213               I am satisfied, beyond any reasonable doubt, that the respondent has been involved in the management of Australian Marble between about 1 February 2003 and 14 July 2003, and Battstone between about 3 March 2003 and 3 June 2003.

214               There is an obligation on all persons to obey orders of the Court.  In Hadkinson v Hadkinson [1952] P 285, Romer LJ said at 288:

‘It is the plain and unqualified obligation of every person against, or in respect of whom, an order is made by a court of competent jurisdiction to obey it unless and until that order is discharged.’

215               The Court enforces its own orders not only for the sake of protecting the parties in whose favour the orders have been made but also to maintain the public’s confidence in the administration of justice.  In Witham v Holloway, Brennan, Deane, Toohey and Gaundron JJ said at 532-533:

‘Even when proceedings are taken by the individual to secure the benefit of an order or undertaking that has not been complied with, there is also the public interest aspect in the sense that the proceedings also vindicate the court’s authority.  Moreover the public interest in the administration of justice requires compliance with all orders and undertakings, whether or not compliance also serves individual or private interests.’

216               I am therefore satisfied that the respondent is guilty of contempt of court by being in breach of paragraph 1 of the order of the Honourable Justice Jenkinson made on 10 March 1992 and guilty of contempt by being in breach of an oral undertaking provided to the Honourable Justice Kenny on 8 October 2001.

217               As I have already said, the parties agreed that I should first make findings as to whether the respondent’s conduct amounted to contempt and hear the parties further on penalty if a contempt was found.  I have not in these reasons categorised the respondent’s conduct as technical, wilful or contumacious contempt: Australasian Meat Industry Employees’ Union and Others v Mudginberri Station Proprietary Limited (1986) 161 CLR 98.  Because that finding will impact on penalty, I will hear the parties on that matter.  Indeed, the parties might wish to call further evidence on that matter.

218               There will be a finding that the respondent is guilty of contempt.  I will hear the parties as to the question of penalty.  The matter will be listed for hearing for further submissions and, if permitted, further evidence.

I certify that the preceding two hundred and eighteen (218) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Associate:

Dated:              13 September 2005

Counsel for the Applicant:	Mr M Hoffmann
Solicitor for the Applicant:	Australian Securities and Investments Commission
Counsel for the Respondent:	Mr G Mancini
Solicitor for the Respondent:	George Mancini & Co
Date of Hearing:	4 July 2005
Date of Judgment:	13 September 2005