FEDERAL COURT OF AUSTRALIA

Sydney Medical Service Co-operative Limited v Lakemba Medical Services Pty Ltd (No 3) [2016] FCA 1367

ORDERS

THE COURT ORDERS THAT:

1.    The Interlocutory Application filed on 25 October 2016 is dismissed.

2.    The Applicant in that Interlocutory Application, Lakemba Medical Services Pty Ltd, is to pay the costs of Sydney Medical Service Co-operative Limited.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 29 June 2016 judgment was published in this matter in favour of the Applicant, Sydney Medical Service Co-operative Limited (“Sydney Medical Service”). Orders were then made, including orders restraining the Respondent, Lakemba Medical Services Pty Ltd (“Lakemba Medical Services”) from engaging in specified conduct: Sydney Medical Service Co-operative Ltd v Lakemba Medical Services Pty Ltd [2016] FCA 763.

2    Sydney Medical Service thereafter alleged that there had been non-compliance with those orders and filed an Interlocutory Application on 18 August 2016 alleging that Lakemba Medical Services was guilty of contempt. Orders were made in that Interlocutory Application on 6 October 2016, including an Order for the payment of a fine of $30,000 within 14 days: Sydney Medical Service Co-operative Ltd v Lakemba Medical Services Pty Ltd (No 2) [2016] FCA 1188. Orders were also made for the payment of a daily fine. There has been no appeal from that decision.

3    The sum of $30,000 has not been paid. On 25 October 2016 an Interlocutory Application was filed by Lakemba Medical Services seeking a variation of the Order so as to permit the payment of the fine by way of instalments of $1,000 per month. The Application was dated 20 October 2016 but was filed five days later – namely at a point of time when the fine should have been paid. That Application first came before the Court on 1 and 2 November 2016. Then before the Court was an affidavit of Dr Mukhtar Sayid. The proceeding was adjourned to 9 November 2016 in order to permit Lakemba Medical Services a further opportunity to file evidence in support of its Interlocutory Application. Deficiencies in the evidence previously sought to be relied upon were brought to the attention of the solicitor appearing for Lakemba Medical Services on each of those occasions.

4    The hearing of the Interlocutory Application came back before the Court yesterday. On that occasion a further affidavit of Dr Sayid was sought to be relied upon, notwithstanding the fact that it had not been filed and served in accordance with directions previously made. Leave was nevertheless granted to file the affidavit in Court and, after a short adjournment, the hearing proceeded. Dr Sayid was present in Court throughout the hearing and gave instructions from time to time to the solicitor appearing for Lakemba Medical Services.

5    It is respectfully concluded that there remains insufficient evidence to found a conclusion that Lakemba Medical Services is presently unable to pay the fine of $30,000 and should be granted an indulgence of paying that fine by way of instalments.

6    There is, for instance, a disturbing lack of correlation between the evidence as previously filed and as now sought to be relied upon in respect to such matters as:

    the income received by Lakemba Medical Services; and

    the amount of rent payable by the company for the premises it occupies.

But such discrepancies perhaps can be left to one side. The solicitor appearing for Lakemba Medical Services repeatedly stressed that the evidence to be relied upon was being prepared (as he would have it) quickly. Perhaps the later evidence reflects a greater and more detailed focus upon the true facts.

7    But what is of greater concern is the fact that the unsatisfactory nature of the evidence previously sought to be relied upon had been brought to the attention of Lakemba Medical Services and that much of that unsatisfactory state of evidence still remains. Thus, for example, questions remain as to:

    whether the tax return of the company for the 2015/2016 financial year has in fact been filed — the return annexed to Dr Sayid’s latest affidavit not being signed; and

    the status of the Director’s Declaration forming part of the Financial Report of the company for the year ended 30 June 2016 — that Declaration not being signed by either director.

8    Even if such reservations were to be placed to one side, and even if it were to be found that Dr Sayid’s affidavit does establish that:

    for the financial year 2015/2016 the company was trading at a loss — the income for that year being stated as being $145,921 but with a loss of $320,799; and

    the company’s tax return for the same year reporting no taxable income

there remain further difficulties emerging from these very documents. Thus, by way of further example, the Balance Sheet for the company for the year ended 30 June 2016:

    discloses accumulated liabilities of $320,787 – and, accordingly, the financial ability of the company to carry forward some considerable loss, including potentially the additional sum of $30,000. Included with those liabilities, it may be noted, is a sum of $44,275 for “renovation expenses”; the directors were paid $82,454.

There was also no evidence as to:

    the ability of (or, indeed, the willingness of) the medical practitioners who stand behind the company to lend further monies to the corporate vehicle through which they practice.

9    There also remains undisclosed:

    an express statement as to the quantum of fees for professional services rendered by Lakemba Medical Services for the period from 1 July 2016 to date — there being no explanation as to the whether the entirety of those fees is deposited to one or other of the four bank accounts operated by the company.

And, even if it were to be assumed that all income is in fact deposited to one or other of the four bank accounts referred to in Dr Sayid’s affidavit, there remains undisclosed:

    the current balance of any of those accounts — the most recent bank statement being for a period up to 30 September 2016, that being an account held with the Commonwealth Bank. The remaining bank statements issued by Westpac Banking Corporation being up to the periods ending in May and August 2016.

A generalised statement by Dr Sayid that the “Directors have resolved that in order to remain solvent the companies [sic] capacity to pay is limited to $1,000 per month” takes the matter no further. Similarly, a generalised statement by Dr Sayid as to “financial hardship and cash flow issues”, in the absence of supporting documents by which that statement can be tested, assumes little persuasive force.

10    Although it may readily be accepted that it might be desirable from the company’s perspective to pay any fine by way of instalments, there was also no satisfactory explanation as to why:

    any instalment should be fixed in the sum of $1,000 per month as opposed to some other figure.

11    Consideration has separately been given to the approach to be adopted in respect to the deficiencies in Dr Sayid’s most recent affidavit and whether it is either possible or appropriate to “overlook” those deficiencies or to take a “more generous” approach to the case sought to be advanced on the company’s behalf. But such an approach is not considered open to the Court. The deficiencies in the evidence have been repeatedly brought to the attention of Lakemba Medical Services. Every opportunity has been extended to the company to allow it to prove that it is unable to pay the fine of $30,000 other than by way of instalments. Remaining deficiencies in the affidavit were again brought to the attention of the solicitor for Lakemba Medical Services yesterday. A short adjournment was then granted so that the solicitor could give consideration to making any application that he thought was desirable or prudent. When the case resumed, however, no application was made (for example):

    to adduce further evidence from Dr Sayid, who was present in Court, to address the deficiencies identified; or

    to further extend the time within which the fine of $30,000 was to be paid.

The only application that was made was to repeat the request that the fine be paid by way of instalments.

CONCLUSIONS

12    It has been assumed that the Court has power both to vary the Order made on 6 October 2016 and to order the payment of a fine for contempt by way of instalments: cf. Australian Competition and Consumer Commission v Info4pc.com [2003] FCA 641 per R D Nicholson  J; Universal City Studios LLLP v Hoey t/as DVD Kingdom [2007] FCA 806 per Buchanan J.

13    The Interlocutory Application filed on 25 October 2016 is dismissed. Sydney Medical Service should be paid its costs in attending the hearings on 2, 9 and 16 November 2016.

14    It is noted that the fine initially ordered to be paid was to be paid within 14 days from 6 October 2016. Despite having been previously told that the Interlocutory Application filed on 25 October 2016 did not operate as a stay on the order for the payment of the fine, no stay of that order has been sought at any point of time. There remains the very real prospect of a further contempt having been committed by reason of continuing non-compliance with the order made on 6 October 2016. Whether any daily fine that may be payable has in fact been paid is a matter not canvassed in the present Interlocutory Application.

THE ORDERS OF THE COURT ARE:

1.    The Interlocutory Application filed on 25 October 2016 is dismissed.

2.    The Applicant in that Interlocutory Application, Lakemba Medical Services Pty Ltd, is to pay the costs of Sydney Medical Service Co-operative Limited.

Associate:     

Dated:    17 November 2016