FEDERAL COURT OF AUSTRALIA Australian Securities & Investments Commission v Reid [2002] FCA 84 CONTEMPT OF COURT –contempt admitted – breach of order prohibiting respondent from managing a corporation – second contempt of the order – mitigating considerations – real steps genuinely taken to organise business outside corporate structure - determination of punishment – imprisonment suspended on agreed conditions Federal Court of Australia Act 1976 (Cth), s 31 Judiciary Act 1903 (Cth), s 24 Re Wakim; Ex parte McNally (1999) 198 CLR 511 referred Matthews v Australian Securities and Investments Commission (2000) 97 FCR 396 referred Australian Securities and Investments Commission v Matthews (1999) 32 ACSR 404 referred Deputy Commissioner of Taxation v Hickey (1999) ATC 5124 referred Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 referred Adlam v Noack [1999] FCA 1606 referred In the Marriage of English (1986) FLC 91-729 referred In the Marriage of Sahari (1976) 11 ALR 679 referred Australian Competition and Consumer Commission v Hughes (2001) ATPR 41-807 referred Morris v Crown Office [1970] 2 QB 114 referred Lee v Walker [1985] QB 1191 referred Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435 referred Australian Securities Commission v Macleod (No 3) (1993) 40 FCR 475 referred Macleod v Australian Securities Commission (Lockhart, Lee and Hill JJ, 13 August 1993, unreported) referred Burton v Winters [1993] 3 All ER 847 referred Hudson v Australian Competition and Consumer Commission [1999] FCA 891 followed Australian Securities Commission v Matthews (2001) 39 ACSR 110 referred Yager v Musa [1961] 2 QB 214 referred Vaughan v Vaughan [1973] 3 All ER 449 referred AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MAXWELL JOHN REID VG 3023 of 1992 KENNY J 12 FEBRUARY 2002 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 3023 OF 1992 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: MAXWELL JOHN REID Respondent JUDGE: KENNY J DATE OF ORDER: 12 FEBRUARY 2002 WHERE MADE: MELBOURNE 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 of 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 warrantlie 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 ceases 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. 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 VG 3023 OF 1992 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: MAXWELL JOHN REID Respondent JUDGE: KENNY J DATE: 12 FEBRUARY 2002 PLACE: MELBOURNE REASONS FOR JUDGMENT the application 1 By motion, notice of which was dated 14 May 1999, the Australian Securities and Investments Commission ("the Commission") sought orders, including that Maxwell John Reid: be committed to prison or otherwise punished for contempt of Court for breaching an 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. 2 The Statement of Charge, which accompanied the notice of motion in conformity with O 40 r 6 of the Federal Court Rules ('the Rules"), was in the following terms: 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. 3 As will be apparent, this proceeding has had a lengthy history in this Court. The hearing of the motion has been adjourned from time to time for diverse reasons, including considerations raised by Re Wakim; Ex parte McNally (1999) 198 CLR 511 ("Re Wakim") and difficulties in locating Mr Reid. The details of the history of the proceeding can, however, be put to one side for present purposes. Further, for present purposes, it is immaterial that s 230 of the Corporations Law has been repealed and that the statutory provisions concerning corporate management are different: see, e.g., Corporations Act 2001, ss 206A, 206E, 206F. The jurisdiction of the Court in connection with the motion is not in issue: cf Matthews v Australian Securities and Investments Commission (2000) 97 FCR 396 at 401-402 per Ryan, Lee and Branson JJ. 4 Numerous affidavits in support of and in opposition to the motion were filed before the hearing on 8 October 2001. Since, however, Mr Reid admitted the charge at the hearing that day and the Court was invited to proceed on the facts agreed between the parties, it is unnecessary to refer in any detail to the contents of these affidavits. 5 Written submissions filed on behalf of Mr Reid stated that he pleaded "guilty on the basis that his actions, which constitute the breach of the relevant order, were wilful". At the hearing on 8 October 2001, counsel for the Commission accepted that "the actions which constitute the breach were wilful but not necessarily contumacious". The only issue that now arises is what punishment should be imposed. In this connection, I accept as correct the statements of Sackville J in Australian Securities and Investments Commission v Matthews (1999) 32 ACSR 404("Matthews No 1") at [22]: The standard of proof in contempt is the criminal standard of proof beyond reasonable doubt: Witham v Holloway (1995) 183 CLR 525; 131 ALR 401. The standard of proof that should be applied at the sentencing stage in contempt proceedings was not the subject of submissions before me. However, I am content to proceed on the basis that a plea of guilty, in itself, carries with it an admission only of the essential elements of the offence admitted by the plea and no more (R v O'Neill [1979] 2 NSWLR 582, at 588, per Moffitt ACJ; Chow v DPP (1992) 28 NSWLR 593, at 605) and that any dispute as to the facts beyond that must be proved by evidence and any reasonable doubt about them resolved in favour of the respondent (R v O'Neill, at 590; Chow v DPP, at 605; R v Stehbens (1976) 14 SASR 240, at 244-5). See also Deputy Commissioner of Taxation v Hickey (1999) ATC 5124 ("Hickey") at 5135. 6 The agreed facts can be briefly stated. On 10 March 1992, a Judge of the Court ordered that: 1. The Respondent Maxwell John Reid be prohibited pursuant to section 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. 3. An office copy of this Order be served personally on the Respondent and served on the Respondent's solicitors forthwith. 7 Notwithstanding these orders, Mr Reid admits that, at various times in and between June 1998 and January 1999, he was involved in the management of 5 Star Mining Pty Ltd ("5 Star"); Birkdale Heights Pty Ltd ("Birkdale Heights"); and Tri-Star Minerals Pty Ltd (Tri-Star"). He admits that during the relevant period he made decisions affecting these corporations, and he communicated his instructions to their directors with the intention that they act in accordance with his instructions. Mr Reid admits that he was involved in the hiring and firing of directors, in determining who was to receive what shareholdings, in deciding whether the corporations would purchase equipment, in negotiating for entry into mining leases, and in organising credit and opening bank accounts. 8 Counsel for the Commission also referred me to statements at pars 13 and 17 in Mr Reid's affidavit sworn 18 September 2001, in answer to an affidavit by Annette Reid. Counsel for Mr Reid referred me to statements at par 18 of the same affidavit of Mr Reid. Neither counsel contested the other's reliance on these passages. They showed that Mr Reid wanted the directors of the companies to run the companies' businesses in accordance with his wishes as he considered "the mining side and the ideas" were his own. mr reid – background and business interests 9 Mr Reid will be fifty-eight on 10 August this year, having been born on 10 August 1944. Counsel for Mr Reid stated that Mr Reid: … first started in the sheep and cattle farms in Tasmania. That's where he comes from. Then he went into the logging and contracting business. That was about 1965, 66, 67. Several sawmills had to close at that time and he first went into bankruptcy as a result of that. He was then involved in the trucking industry, involved in the fishing industry and later in the steel and fabrication industry, but in 1986 or thereabouts, he became involved in all aspects of the opal business – including mining, development of the opals for sale. That's been really his major business ever since. … He currently … would have approximately 30-odd employees or people working who are engaged in looking for opal. At the hearing on 8 October 2001, Mr Reid gave evidence about his involvement in the opal mining industry at Coober Pedy in South Australia. His evidence was that around 1991-1992 he "came across the technology of setting up a particular darkroom which picks up the opal under a special light". In cross-examination, he said that a company had been formed in September 2000, the directors of which were his wife, Mrs Edna Reid, and ultimately Mr Graham Dasborough. Mr Reid was neither a director nor a shareholder, although he was the company's business and mining consultant. The gist of Mr Reid's evidence, so far as I understand it in light of his evidence in cross-examination, is that the company has invested in new plant, which utilises this technology. The new plant is three-quarters built, and there is no money owing on it. In the course of his evidence, Mr Reid also referred to a number of other companies with which he was associated, although he denied any involvement other than as a consultant. 10 Mr Reid gave evidence that he had sought advice from a reputable firm of solicitors as to how the opal business could be restructured in order to ensure that he would not in the future be in contempt of the Court's order of 10 March 1992. Upon considering that advice, he had instructed his professional advisers to dismantle the company structures with which he was associated. He proposed that he would carry on business in partnership. Mr Reid stated that he had received financial advice from an accounting firm on the running of the new venture as a partnership. 11 When asked by his counsel why he had not sought advice at an earlier stage, he stated: I did seek the advice … but was promptly told without a company structure that we wouldn't be able to finance it. … [W]e're now to where we can stand on our own feet, without financial people, and it has been pointed out to us this morning by our counsel and our accountant that we're okay, we don't need the company structure. There was a problem with tax too, but that's now overcome. 12 On 8 October 2001, at the close of his evidence-in-chief, Mr Reid gave an undertaking to the Court that he would not be involved in the management of a company in any form at all in the future. other factors raised on 8 october 2001 13 This is not the first time that Mr Reid has appeared in this Court charged with contempt of the Court, constituted by a contravention of its orders of 10 March 1992. On 6 May 1994, a Judge of the Court found that Mr Reid was guilty of a contempt of the Court by being concerned in the management of Mistoil Pty Ltd and Resourceful Mining Pty Ltd. His Honour ordered 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. 14 In short reasons for judgment, his Honour said: Mr Reid has been shown, by the evidence and by his admission of guilt after considering that evidence, to have been extensively concerned in the management of both Mistoil Pty Limited and Resourceful Mining Pty Limited after he knew that the order prohibiting him from managing a corporation had been made. It is true that he had received dangerously incomplete advice by an accountant about the meaning of the words of the order, and I will assume that he received similar dangerously incomplete advice from a solicitor, but he has had business experience and experience of the means by which companies are managed and controlled. The incompleteness of the advice, and the likelihood that the activities he undertook in respect of the two companies might be regarded in law as managing those companies, must have been obvious to Mr Reid. Breaches of an order of the kind contravened by Mr Reid are often detectable only with difficulty and after the expenditure of substantial public funds. Such breaches threaten the commercial integrity of society, as well as flouting the law. These contraventions by Mr Reid call for a response adequate to deter him and others from similar offences. … . 15 On 21 April 1997, in the Magistrates' Court, Reid pleaded guilty to charges under s 230 of the Corporations Law that, on and between 1 October 1994 and 31 July 1995, he was involved in the management of South Australian Opal Mining Pty Ltd and Australian Opal House Pty Ltd. He was convicted and sentenced to be imprisoned for three months on each of two charges, the sentences to be served concurrently. 16 I note, however, that Mr Reid has never been brought up under the orders made on 6 May 1994. the submissions at the hearing on 8 october 2001 17 After referring to the decision of the High Court in Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 ("Mudginberri")and to the decision of Sackville J in Matthews (No 1) at [26]-[32], counsel for the Commission submitted that, in determining what orders the Court should subsequently make, the Court should take into account the following matters. They were: (a) Mr Reid "appears to have been rolling over companies, going from one company to the next when people weren't falling in with his schemes"; (b) Mr Reid told people he was bankrupt, and on some occasions that he shouldn't manage corporations and was not allowed to be a company director; (c) Mr Reid had been found guilty of contempt in May 1994 and had been convicted of offences against s 230 of the Corporations Law in April 1997; and (d) Mr Reid had admitted the charge at the hearing on 8 October 2001. 18 In an outline of submissions, counsel for Mr Reid submitted, amongst other things, that: It is not necessary for the purpose of accepting the plea that the Court must at the same time find that the conduct was contumacious. The degree of deliberation is relevant to the penalty. In this instance the respondent says his actions arose out of his frustration in being unable to persuade the directors of the various companies to 'do things his way'. Imprisonment should only be imposed if there is no alternative method available to achieve the remedy the breached order seeks to effect. In other words imprisonment is a last resort. It is important that the Court should seek to prevent repetition of the offence. In this case, given the history of the matter, it is incumbent on the respondent to demonstrate that he has taken the necessary steps to ensure there are no further breaches of the order. [Original underlining omitted.] 19 After referring to Adlam v Noack [1999] FCA 1606, In the Marriage of English (1986) FLC 91-729 and In the Marriage of Sahari (1976) 11 ALR 679, counsel for Mr Reid listed the following mitigatory factors: 1. Plea of guilty. 2. A scheme to prevent repetition of offence and costs involved. 3. Payment of costs ($15,000). 4. Legal costs. 5. The issue of what constitutes 'management' is complex for a lay person. That is, as already mentioned, Mr Reid's evidence was that he had engaged solicitors to take him out of the corporate structure in which he had previously carried on his businesses and to arrange for his business to be carried on in the future in a partnership. Further, as part of an agreement with the Commission, $15,000 of the $20,000 surety that Mr Reid had lodged with the Court was to be paid out to the Commission in respect of its legal costs. 20 Having regard to Mr Reid's evidence that he genuinely desired to extract himself from the companies with which he was associated and that he was taking steps to do so, I adjourned the further hearing of this matter to afford him an opportunity to complete the task. the hearing on 1 february 2002 21 Prior to the resumed hearing on 1 February 2002, there were numerous affidavits filed on Mr Reid's behalf, and relied upon at the hearing. These were affidavits of Mr Reid sworn 8 December 2001 and 23 January 2002, Edna Reid sworn 20 December 2001, John Kyle Waters sworn 24 January 2002, John Bernard Hall sworn 23 January 2002, John Gabriel Cummins sworn 22 January 2002, Josephine Curran sworn 19 January 2002, and Christopher Townsend sworn 24 January 2002. Mr and Mrs Reid were subject to cross-examination by counsel for the Commission. 22 The affidavit sworn by Mr Reid's solicitor established that 5 Star was deregistered some time ago. I am also satisfied, on the basis of the affidavit evidence relied upon by Mr Reid, and his own and his wife's evidence in cross-examination, that, since 8 October 2001, Mr Reid has sought, with the assistance of professional advisers, to bring about the deregistration of many of the other companies with which he has been involved, although the process of deregistration is not complete. These companies included Tri-star and Birkdale Heights, as well as companies that were not the subject of the present charge, such as Austrock Haulage Pty Ltd, Austrock Industries Pty Ltd, Austrock Australia Pty Ltd, Austrock Pastoral Company Pty Ltd, and Gemstone Mining Pty Ltd. 23 I am also satisfied that Mr and Mrs Reid have given up directorships or shareholdings that they previously held. I refer, for example, to such interests in National Tractors Pty Ltd, Radnom Pty Ltd, ACN 098 736 184 Pty Ltd, Melnat Nominees Pty Ltd, and South Eastern Minerals Pty Ltd. It is plain enough, however, that some of Mr Reid's former associates remain in positions within corporate management that would enable Mr Reid effectively to manage the companies through them if he and they were so minded. I refer specifically to Messrs Noel Smith and Graham Dasborough. 24 Mr Smith is currently the director of a number of companies in which Mr and/or Mrs Reid were formerly involved. Mr and Mrs Reid gave evidence, in cross-examination, that, although Mr Smith had worked for them in the preceding year, he no longer did so and had returned to Tasmania. When asked by counsel for ASIC why Mr Smith agreed to take on the directorships, Mr Reid said: I explained to him that they [the companies] were going to be deregistered and that he wouldn't have them for long. … He's doing it because he was an employee I assume … . … I had no one else … to do it and I asked Mr Smith if he would do it for us because it was going to be deregistered and he came back the next day and said yes, he would. Mr Reid's evidence was that Mr Smith was no longer subject to his direction because Mr Smith no longer worked for Mr Reid. I accept, for present purposes, that Mr Smith was appointed as part of a genuine effort by Mr Reid to disengage himself from corporate management. 25 Mr Graham Dasborough was, according to Mrs Reid, no longer involved with the Reids' businesses. Mr Reid stated that Mr Dasborough was to be removed as a signatory from a company bank account. 26 For present purposes, I accept that, at a significant cost to himself, Mr Reid has taken steps to organise his business so that it may be carried on free of corporate structures, and that he genuinely intends to carry on business without such structures. He has acquired a number of business names and entered into partnership with his wife in respect of at least part of his business interests. the submissions at the hearing on 1 februaury 2002 27 In closing address, counsel for the Commission submitted: [Mr Reid] has just ignored Jenkinson J. Having said that, we came here and indicated last time round that provided he unravelled his involvement in companies we wouldn't push for him to go to gaol, directly to gaol. He has certainly made attempts. There is no doubt as we go through those companies that they're being wound up but they haven't yet been finalised. … [W]hen we cross-examine [Mr Reid] he doesn't really know to a large extent what has happened, but having said that, he has attempted to do it, and provided we're left with something hanging over his head that is a sufficient deterrent not just a slap on the wrist, so it would be a reasonably suspended sentence … . 28 Counsel for Mr Reid submitted that Mr Reid had done the very best he could in the circumstances to take himself out of corporate involvement. legal principles 29 By virtue of s 31 of the Federal Court of Australia Act 1976 (Cth), this Court has the same power to punish contempts as is possessed by the High Court of Australia in respect of contempts of that Court. The High Court has the same power to punish contempts as was possessed in 1903 by the Supreme Court of Judicature in England: see Judiciary Act 1903 (Cth), s 24. 30 By his plea, Mr Reid admits that his contempt involved a deliberate act of unlawful disobedience to the Court's order of 10 March 1992. His disobedience was not casual, accidental or unintentional. The Court has power in these circumstances to impose a term of imprisonment, to fine, to make costs orders, or to punish the contempt by a combination of these means: see Mudginberri at 113; Hickey at [34] per Carr J; and Adlam v Noack at [2] per Mansfield J. In appropriate circumstances, the Court may suspend any term of imprisonment: see Matthews (No 1) at [29] per Sackville J; Australian Competition and Consumer Commission v Hughes (2001) ATPR 41-807 at [28]; Morris v Crown Office [1970] 2 QB 114 at 125; and Lee v Walker [1985] QB 1191 at 1201-1202. 31 Contempt of court is a serious matter. People who, like Mr Reid, are subject to an order of a court are under a duty to observe the terms of the order strictly. A failure on their part to do so may undermine the due administration of justice. As McHugh J said in his dissenting judgment in Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435 at [88]: In considering the appropriateness or otherwise of a sentence imposed for a contempt of court, it must always be borne in mind that the jurisdiction to commit for contempt exists so that the authority of the courts of law can be maintained. If breaches of the orders of the courts were regarded as a little moment, respect for and observance of the law would inevitably deteriorate and, ultimately, pose a threat to social order. (Authority omitted) Kirby J's observations are to similar effect at [147]-[149]. 32 The factors militating against Mr Reid are plain enough. By his conduct he has threatened the commercial integrity of society and the due administration of justice. Moreover, the history of the proceeding illustrates that, as the Court previously observed, breaches of an order of the kind contravened by Mr Reid are often detectable only with difficulty and after the expenditure of substantial public funds. 33 As already noted, this is the second time on which Mr Reid has been found to have committed a contempt of the Court's order of 10 March 1992, prohibiting him from managing a corporation. In May 1994, Mr Reid's imprisonment for six months was suspended on condition that there was no further breach. Three years later, Mr Reid was charged with two offences against s 230 of the Corporations Law and convicted and sentenced on each count to three months imprisonment, to be served concurrently. At the hearing on 1 February 2002, Mr Reid has admitted to other convictions for offences involving dishonesty, although none of them are recent. 34 Mr Reid is in a different position from a person charged with contempt for the first time. It may be that the legal concept of management of a corporation can be difficult for a non-lawyer to appreciate fully. Bearing in mind, however, that he has previously been found in contempt of the order of 10 March 1992, Mr Reid must have been well aware of the need to observe the order and of the responsibilities that it imposed on him. His plea establishes that he wilfully disobeyed the order over a period in and between June 1998 and January 1999. The agreed facts establish the nature of this disobedience. His personal frustration in the failure of others to do his commercial wishes is no excuse for his contempt. 35 A fine would not be appropriate in this case because it would not properly reflect the seriousness of Mr Reid's contempt. But for one critical matter, it would be appropriate to make an immediate custodial order. Imprisonment is, however, a course of last resort. In this case, Mr Reid has acted to take himself away from involvement in corporate management, and has set about reorganising his business interests outside corporate structures. As already noted, I accept that, in so doing, he has incurred significant financial costs. His efforts signal some contrition and recognition of his wrongdoing. He has also given his undertaking on oath that he will not be involved in the management of any corporation in the future. For present purposes, I am satisfied that his efforts betoken a genuine commitment to obey the order of 10 March 1992 in the future. 36 Other factors militating in Mr Reid's favour include that he has admitted the charge of contempt and he has agreed that the Commission should receive $15,000 by way of costs out of the $20,000 lodged by him by way of security. Further, as counsel for the Commission conceded, Mr Reid has made no secret of his legal status. From time to time he has told his associates that he was bankrupt, and that he should not manage corporations and was not allowed to be a company director. There is, moreover, no evidence that anyone has suffered any particular hurt, financial or otherwise, by reason of Mr Reid's contempt, save, of course, that he is in breach of an order designed to protect the commercial integrity of society. 37 What should the Court order by way of punishment? In Australian Securities Commission v Macleod (No 3) (1993) 40 FCR 475 at 480, Drummond J referred to the cases dealing with sentences for contempt that counsel had mentioned. Of these cases, his Honour said: They range from a period of two months to six months where the contempt, as here, is constituted by breaches of court orders or undertakings given to the court. All those cases, however, involve a single breach, although it is obvious that each involves a serious breach of a court order. In that case, his Honour ordered that, in respect of two charges, Mr Macleod serve a period of two months imprisonment, to be served concurrently and a period of four months imprisonment in respect of a third charge, to be served cumulatively upon the other sentences. The decision was upheld on appeal: see Macleod v Australian Securities Commission (Lockhart, Lee and Hill JJ, 13 August 1993, unreported). 38 My researches indicate that, generally speaking, the range referred to by Drummond J in Macleod remains the same today. There are, however, exceptions. For example, in Burton v Winters [1993] 3 All ER 847, the English Court of Appeal dismissed an appeal against a sentence of two years imprisonment. Mrs Burton appealed against orders imposing a prison sentence of two years, suspended on condition she commit no further breach of an injunction restraining her from trespass, disturbance or wrongful interference with the property of the defendants, Mr and Mrs Winters, and against subsequent orders made activating the prison sentence of two years. Lloyd LJ, with whom Connell J agreed, said at 850: The sentence undoubtedly contains a punitive element for the serious and repeated breaches of the injunctions granted on 21 April and 17 July 1992. It also contains a coercive element, (see Lightfoot v Lightfoot [1989] FCR 305). The defendants are entitled to the protection of the law and the court must do its best to provide such protection by coercing the plaintiff in the only way it can. She has been given every chance and afforded every indulgence but all to no avail. 39 Burton v Winters was cited with approval in Hudson v Australian Competition and Consumer Commission [1999] FCA 891 ("Hudson") at [24] per Spender, Burchett and Hely JJ in upholding a sentence of six months imprisonment. In Hudson at [21] their Honours described as a "highly material factor" the fact that the sentence appealed from was the second occasion on which a term of imprisonment had been imposed for conduct in contempt of undertakings given to the court, or orders of the court. 40 In a case that is relatively close factually to the present, Australian Securities Commission v Matthews (2001) 39 ACSR 110, Foster AJ, New South Wales Supreme Court, Equity Division, sentenced Mr Matthews to 12 months imprisonment, and suspended the sentence pursuant to the Rules of the Court. His Honour observed at 121: In my opinion I should seek, in the public interest, to find, in the present case, the most effective remedy. Although Mr Matthews did not respond sensibly to the suspended sentence imposed earlier by Sackville J, it must be recognised that the sentence was, then, a relatively short one. I have formed the view that Mr Matthews is more likely to curb his foolhardy attitude to the court's orders, if he is under the threat of a substantial suspended sentence, to be served should he offend again. I consider the appropriate sentence to be one of 12 months imprisonment in respect of these offences. I have power under Pt 55 r 13(3) of the Supreme Court Rules 1970 (NSW) to suspend 'punishment in case the contemnor gives security in such manner and in such sum as the court may approve for good behaviour and performs the terms of the security'. I propose to suspend this sentence on condition that Mr Matthews provides security in the sum of $5000 to be of good behaviour for a period of 2 years from today and performs the terms of that security. 41 His Honour's observations are generally apposite to Mr Reid's case. Mr Reid has already had the benefit of Jenkinson J's order, and he did not respond sensibly to it. As well as punishing Mr Reid for his contempt, the Court must find the most effective remedy it can to deter Mr Reid from further breaches of the 10 March 1992 order. I accept, as counsel for the Commission and Mr Reid submitted, that a suspended sentence that requires Mr Reid to observe certain conditions is most appropriate in the circumstances. Bearing in mind that Mr Reid has already had the advantage of Jenkinson J's order, the sentence must be relatively substantial: see Hudson; Yager v Musa [1961] 2 QB 214 at 218-219 per Devlin LJ, with whom Davies LJ agreed; Vaughan v Vaughan [1973] 3 All ER 449 at 454 per Davies LJ, 454 per Stephenson LJ and 455 per Sir Seymour Karminski; and Burton v Winters [1993] 3 All ER 847 at 850 per Lloyd LJ. 42 I propose to order that Mr Reid be committed to prison for 12 months, but that the operation of the order for his committal be suspended on condition that during the ensuing two years: (a) Mr Reid abstain from contravention of the order of the Court made 10 March 1992 save to the extent permitted in par (b) below; (b) Mr Reid have no involvement in directing, administering or managing any company, save where it is necessary to divest himself, his wife or associates 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 Commission out of the sum of $20,000 lodged by Mr Reid by way of surety pursuant to Court order; and (d) The balance sum of the sum of $20,000 lodged by Mr Reid by way of surety ($5,000) be paid to the trust account of John Cummins, solicitor, 201 Victoria Square, Adelaide, South Australia 5000. I note that these were the conditions that both parties proposed, and that Mr Reid has stated that he agrees to them. Further, Mr Reid has undertaken to the Court that he will not in the future involve himself in the management of any corporation (save to the extent permitted by these orders). I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. Associate: Dated: 12 February 2002 Counsel for the Applicant: Mr P Rose SC Solicitor for the Applicant: Australian Securities and Investments Commission Counsel for the Respondent: Mr K Borick Solicitor for the Respondent: John Cummins Date of Hearing: 8 October 2001 and 1 February 2002 Date of Judgment: 12 February 2002