FEDERAL COURT OF AUSTRALIA

Australian Prudential Regulation Authority v Siminton (No 9) [2007] FCA 1714

PRACTICE AND PROCEDURE – Notice of motion – Application seeking release of funds for the purpose of paying legal fees – Where judgment in the principal proceeding found that the respondent had no legal right to use the funds – Application refused

PRACTICE AND PROCEDURE – Notice of motion – Application for stay of an order imposed by a Full Court pending the hearing of a proposed appeal – Where respondent found to be in contempt of that order – Where Full Court did not confer on a single judge of the Court the power to vary its orders or delay their implementation – Application refused

PRACTICE AND PROCEDURE – Notice of motion – Application to stay the implementation of the judgment in the principal proceeding in respect of the appointment of a receiver, pending the hearing of a proposed appeal – Where the respondent’s application for a stay was filed before the actual form of the orders was known – Whether proposed appeal is genuine and based on reasonably arguable grounds – Stay application adjourned to allow the respondent to consider orders and draft a notice of appeal

Banking Act 1959 (Cth) ss 7, 66

Andrews v John Fairfax & Sons Limited [1979] 2 NSWLR 184 referred to

Australian Prudential Regulation Authority v Siminton (No 6) [2007] FCA 1608 cited

Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129 referred to

Australian Prudential Regulation Authority v Siminton (No 8) [2007] FCA 1612 cited

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY v DAVID ROBERT SIMINTON

VID 1607 OF 2005

TRACEY J

15 NOVEMBER 2007

MELBOURNE

THE COURT ORDERS THAT:

1.                  The notice of motion dated 5 November 2007 as to paragraph 2 be adjourned to 15 November 2007.

2.                  The notice of motion dated 5 November 2007 as to paragraphs 1 and 3 be dismissed.

3.                  Costs reserved.

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

REASONS FOR JUDGMENT

1                     On 26 October 2007 I delivered judgment in this proceeding:  see Australian Prudential Regulation Authority v Siminton (No 6) [2007] FCA 1608.  I found that Mr Siminton was a person who had carried on and was proposing to carry on the business of banking in Australia and that such conduct constituted or would constitute a contravention of s 7 of the Banking Act 1959 (Cth) (“the Act”).  I also found that Mr Siminton had engaged in conduct which contravened s 66 of the Act.  I foreshadowed making injunctive orders to restrain Mr Siminton from engaging in further contraventions of the Act and orders appointing a receiver to identify the persons who had made deposits in the “bank” established by Mr Siminton, to get in the funds which were the subject of an order, made by Gray J on 10 January 2006, and to provide for an orderly and equitable distribution of those funds to depositors.  I listed the matter for mention on 7 November 2007.  On that day I made the foreshadowed orders.

2                     By notice of motion dated 5 November 2007 Mr Siminton moved the Court for orders that:

·                    $500,000 of the moneys subject to the orders made by Gray J on 10 January 2006, be released to him for the purpose of the payment of his legal expenses including the costs of a proposed appeal;

·                    The execution of the judgment, insofar as it appointed and empowered a receiver be stayed pending the hearing and determination of a proposed appeal; and

·                    The order made by the Full Court on 19 July 2006 that Mr Siminton pay a $50,000 fine within 60 days or such further time and by such instalments as the District Registrar might allow be stayed pending the hearing and determination of the proposed appeal:  see Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129.

3                     I refused the applications for orders that $500,000 be released to Mr Siminton and that there be a stay of the Full Court’s order.  I adjourned the application for a stay of execution of the orders relating to the appointment of a receiver to 15 November 2007.  I indicated that I would publish my reasons for these decisions at a later date.  These are those reasons.

RELEASE OF FUNDS

4                     This proceeding was commenced on 14 December 2005.  Since that time Mr Siminton has accumulated unpaid legal fees totalling almost $500,000.  He sought release of that amount in order to pay his solicitor and counsel their outstanding fees and to provide funds to support the prosecution of an appeal from my judgment and orders in the principal proceeding.  Counsel also submitted that, unless the funds were released, Mr Siminton would be denied natural justice because he might have to prosecute the proposed appeal without legal assistance.  Counsel asserted that Mr Siminton had the right to use the funds in the manner proposed.

5                     In my judgment in the principal proceeding I found that most, if not all, of the funds to which Mr Siminton seeks partial access were contributed by depositors to the Terra Nova Cache which Mr Siminton established and controlled.  Mr Siminton had no legal right to hold and use these funds.  The purpose of appointing a receiver was to ensure that the depositors were identified and their deposits returned to them.  This objective would be substantially frustrated were depositors’ funds to be used by Mr Siminton to pay his legal expenses.  Put simply:  he has no legal right to use the other people’s money to pay his legal bills.

6                     For these reasons the application was rejected.

STAY OF THE FULL COURT’S ORDER

7                     The order sought by para 3 of Mr Siminton’s notice of motion was that:

“There be a stay in the payment by the Respondent of the funds imposed on him in this matter by the Full Court pending the hearing and determination of an Appeal by the Respondent with respect to the Judgment herein or until further Order.”

8                     It became apparent during argument that what was being sought was an order which would have the effect of relieving Mr Siminton from the on-going obligation to pay the $50,000 fine which had been imposed on him by the Full Court on 19 July 2006.

9                     The Full Court’s order read:

“2        Paragraph 2 of the orders of Merkel J made on 10 April 2006 is set aside and in lieu thereof it is ordered:

(a)               A fine in the sum of $50,000 be imposed on the appellant in respect of the contempt …

(b)               The fine be paid to the District Registrar within 60 days or such further time and by such instalments as the District Registrar may allow.

(c)                In the event that there is default in payment of the fine or of any instalment, the District Registrar shall apply to a judge of the Court for direction concerning enforcement.”

On 18 September 2006, the day on which the sixty day period prescribed by Order 2(b) expired, Mr Siminton applied for an extension of time within which to make payment of the $50,000.  By order dated 18 September 2006 the District Registrar extended the time for payment to 5:00 pm on 2 October 2006.  On that day Mr Siminton’s solicitors wrote to the District Registrar seeking a further extension of one month for Mr Siminton to pay the fine.  No reason for seeking the extension was given.  The application was refused.  The fine has not since been paid.  On 7 November 2007 I found that Mr Siminton had committed a contempt of the Full Court’s order by failing to make the $50,000 payment (or that part of it which he had the capacity to pay) in a timely manner:  see Australian Prudential Regulation Authority v Siminton (No 8) [2007] FCA 1612. 

10                  I harbour grave doubts as to whether I have the power, should I be minded to exercise it, to stay the operation of the Full Court’s order.  The Full Court imposed the fine and provided the mechanism by which Mr Siminton could be relieved of the obligation to pay it in whole or in part within the 60 days which the Court allowed.  The Full Court did not confer on a single judge of the Court the power to vary its orders or delay their implementation. 

11                  Even if I had the power to grant the stay I would not be disposed, in the exercise of my discretion, to do so.  Mr Siminton has been in default of the Full Court’s orders since 2 October 2006.  No explanation for the delay in making the application has been proffered.  More importantly, it is difficult to conceive of what purpose would be served by granting a stay pending the hearing and determination of the foreshadowed appeal from my judgment.  Even if a Full Court were to hold that Mr Siminton had not contravened any of the provisions of the Act such a finding would not impinge in anyway on the efficacy of the Full Court’s order that Mr Siminton pay a $50,000 fine or the legal consequences of his failure to do so.  Mr Siminton appears to continue to labour under the misconception that the contempt for which the fine was imposed can, in some way, be purged or excused by findings that the orders of Sundberg J which Mr Siminton was found to have breached, should not have been made because Mr Siminton had not, in fact, contravened the Act.  This misconception was disabused by the Full Court over a year ago:  see Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129 at 137-8.  It may be that the stay is sought on the assumption that, if he is successful in persuading the Full Court that he has not contravened the Act, the money will immediately become available to him to use as he wishes, including paying the fine.  Such an assumption would be misplaced.  Deposits were made on terms which required that they would be invested so as to yield interest at promised rates.  They were not invested so that they could be used by Mr Siminton for his own purposes.  Mr Siminton’s fiduciary obligations to depositors may well prevent him from drawing on depositor’s funds to pay the fine.  Any stay would, therefore, be of doubtful utility.

12                  For these reasons the application for a stay of the Full Court’s order was refused.

STAY OF ORDERS RELATING TO RECEIVER

13                  Although, in the judgment which I handed down on 26 October 2007, I had foreshadowed making orders in relation to the appointment and duties of a receiver, the orders were not made until 7 November 2007.  Mr Siminton’s notice of motion was filed on 5 November 2007.  The application for a stay of my orders was therefore made in anticipation of those orders being made but at a time when Mr Siminton was unaware of the terms of those orders.  He had not, therefore, had the opportunity of framing a notice of appeal, even in draft form.

14                  One of the relevant considerations on a stay application of this kind is whether the proposed appeal is genuine and based on reasonably arguable grounds:  see Andrews v John Fairfax & Sons Limited [1979] 2 NSWLR 184 at 188-9.  I could form no judgment on this point in the absence of a notice of appeal and submissions from counsel.  No doubt other potentially relevant considerations could arise from Mr Siminton’s consideration of the terms of the orders.

15                  For these reasons I adjourned the further hearing of this stay application until 15 November 2007. 

Associate:

Dated:         15 November 2007