New South Wales Supreme Court CITATION : Registrar in Equity v Froome [2001] NSWSC 1029 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3299/01 HEARING DATE(S) : 06/11/01 JUDGMENT DATE : 16 November 2001 Registrar in Equity - Applicant PARTIES : Lindsay Froome & Craig Froome t/as Froome Consulting - First Respondents/Defendants Froome Consulting Pty Ltd - Second Respondent/Defendant JUDGMENT OF : Barrett J COUNSEL : Mr D. Cowan - Applicant Mr T.J. Moore - Respondents SOLICITORS : State Crown Solicitor - Applicant Hovan & Co - Respondents CATCHWORDS : PROCEDURE - Contempt, attachment and sequestration - punishment for contempt consisting of failure to comply with court orders - contempt classified as wilful but without specific intent to defy the authority of the court - one order capable of being complied with now substantially satisfied - apology by each contemnor - fine not appropriate as limited funds better deployed elsewhere - imprisonment not appropriate as contemnors should be free to devote efforts to substantive proceedings - punishment by direction to enter into good behaviour bond sufficiently indicate seriousness of conduct and community disapproval - contemnors also ordered to pay costs on indemnity basis LEGISLATION CITED : Fines Act 1996 Crimes (Sentencing Procedure) Act 1999 Pelechowski v Registrar of the Court of Appeal (1999) 198 CLR 435 CASES CITED : Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309 Tynan v Meharg [1999] NSWCA 157 Principal Registrar of the Supreme Court v Jando [2001] NSWSC 969 DECISION : Refer paragraph 21 8 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J FRIDAY, 16 NOVEMBER 2001 3299/01 – REGISTRAR IN EQUITY v LINDSAY FROOME and CRAIG FROOME T/AS FROOME CONSULTING & ANOR JUDGMENT HIS HONOUR: 1 Mr C. Froome and Mr L. Froome have been adjudged guilty of contempt of court in that they failed to comply with certain orders of the court. One was an order for the payment of money into court, the other an order for the filing and serving of an affidavit detailing dealings with and the destination of certain moneys entrusted to Mr C. Froome or Froome Consulting Pty Limited. The terms of the orders and the basis on which Mr C. Froome and Mr L. Froome have been adjudged guilty of contempt appear from reasons for judgment delivered by me on 31 October 2001: Fitts v Froome [2001] NSWSC 965. Submissions on punishment were made on 6 November 2001. I now give my decision on that aspect. 2 The seriousness of the contempt committed by each of Mr C. Froome and Mr L. Froome needs to be judged according to the circumstances of the case. The substantive proceedings involved the assertion by Mr and Mrs Fitts of rights to recover a sum of $200,000 placed with either Mr C. Froome or Froome Consulting Pty Limited for investment. It appears that Mr C. Froome caused that sum to be paid away in a manner which was unauthorised and which, in all probability, has caused it to be lost or, at least, to be beyond the reach of easy and expeditious recovery. 3 Mr and Mrs Fitts commenced proceedings against Mr C. Froome and Mr L. Froome trading as "Froome Consulting" and the company Froome Consulting Pty Limited of which Mr L. Froome is the sole director and shareholder, although its controlling mind and will, as a factual matter, are those of Mr C. Froome. The orders in question were made against all three parties ostensibly by consent but, whereas the instructions to consent were given by Mr C. Froome purportedly for all three parties, Mr L. Froome was probably not party to such instructions and neither, therefore, was Froome Consulting Pty Limited in any formal sense. 4 The orders were not complied with. The proceedings for contempt followed. Mr C. Froome pleaded guilty. Mr L. Froome pleaded not guilty. Submissions made on the latter's behalf as to guilt were dealt with in my judgment of 31 October 2001. 5 I turn to factors relevant to punishment, the first being the extent to which compliance with the orders has now been forthcoming. As to the second order, steps have been taken to assemble and put on record much of the information required. Steps have also been taken to place Froome Consulting Pty Limited in administration, with the result that a disinterested professional is now privy to its affairs and in charge of its assets, such as they are. These are positive steps. 6 There has been no attempt, however, to comply with the first order; nor, in any realistic sense, can there be. None of the defendants has the remotest chance of assembling $200,000 unless efforts to get back Mr and Mrs Fitts' money from the company to which it was paid are successful. The present situation of that company, as outlined to the court, makes this very unlikely in the short or medium term and probably at all. It is unlikely that the court would have made the first order (that is, the order for the payment of $200,000 into court) unless it had either been shown that $200,000 was available or, as did happen, was informed that the making of the order was consented to by those against whom it was sought. As I have said, it was Mr C. Froome who gave the instruction to consent and it may be that, at that point, he entertained an expectation of being able to recover the funds and pay them into court. Whether that was a realistic expectation is another thing. There is evidence (including from Mr C. Froome himself) that he always tends to hope for the best and does not face up to adversity. That characteristic may have been at work at the time. 7 It is also pertinent to note that both Mr C. Froome and Mr L. Froome have apologised to the court. I am satisfied that each was genuine in his apology and had entirely under-estimated the significance of the orders and the consequences that might follow from non-compliance. 8 Against that, however, there was an irresponsible attitude on the part of both of them. Each is an undischarged bankrupt, although their bankruptcies occurred at different times and arose out of different circumstances. Mr C. Froome became bankrupt as a result of the dissolution of an accounting partnership of which he was a member. His bankruptcy resulted in the removal or suspension of his right to practise as a chartered accountant and of the authority held from the Australian Securities and Investments Commission permitting him to carry on an investment advisory business. He admitted in cross-examination that he was very late in complying with his obligations under the bankruptcy legislation to make known to the official trustee particulars of his assets and liabilities. 9 Mr L. Froome became bankrupt because of debts owed to a bank. The bankruptcy occurred in 1993. He says he did not know of it until 17 October 2001, the day on which I heard the charge of contempt against him. He went overseas some time after his difficulties with the bank and remained away for several years. When he came back, he ran a credit check on himself and, finding nothing adverse, assumed that his earlier problems had somehow evaporated. Having discovered his bankruptcy, he has now come to grips with the need to co-operate appropriately with the bankruptcy administration. 10 Mr Craig Froome is not in employment. He entertains hopes of purchasing the business of Froome Consulting Pty Limited from its administrator. A price of $14,000 has been mentioned. He has made some moves to borrow this sum but so far without any positive result. His prospects of doing so must be considered remote, given his bankruptcy. Mr L. Froome, on the other hand, is in employment. He has been with his current employer for something less than three months. His base salary is $52,000 per annum. 11 Evidence about possible sources of funds within their families makes it clear that neither Mr C. Froome nor Mr L. Froome has any real prospect of accessing any meaningful amount. Their costs of the contempt proceedings are being met by certain family members but there is no expectation that more will be forthcoming from those sources; nor is there any reason why it should be. 12 The purpose of punishment for contempt of court is a combination of denunciation of conduct constituting contempt and deterrence against such conduct, so that the community in general and others who may be minded to act in a similar way will be in no doubt about the seriousness with which defiance of court orders must be viewed. These principles are discussed in Pelechowski v Registrar of the Court of Appeal (1999) 198 CLR 435. The matter is put thus in the judgment of Kirby J: "Unless courts are seen to respond firmly to deliberate defiance of their orders, their effectiveness in the authoritative determination of disputes of law would be undermined. And if they were not effective, 'serious and lasting damage to the fabric of the law may result' ( Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CKR 98 at 115). Obviously, the culpability of the contemnor is relevant to the order which must be made ( Director of Public Prosecutions v John Fairfax & Sons Ltd (1987) 8 NSWLR 732 at 741). The contemnor must then be punished in an emphatic way. He or she must be deterred effectively from any temptation to re-offend. However, the focus of attention is not solely on the contemnor. It is also addressed to the community at large and to any others who might consider acting in a similar manner." 13 Kirby J observed that contempt consisting of non-compliance with an order of the court may be technical (that is, casual, accidental or unintentional), wilful but without a specific intent to defy the authority of the court or contumacious (involving a serious act of deliberate defiance of judicial authority). I characterise the present contempts as within the second of these categories, that is, wilful but without a specific intent to defy the authority of the court. Lack of appreciation of the seriousness of the obligation to comply with the orders, coupled with the fact that the orders were consent orders based on a consent to which Mr L. Froome was apparently not a party and which Mr C. Froome gave without due care and consideration, persuades me that this case falls short of one of a serious and deliberate defiance of judicial authority. 14 Speaking of the penalty appropriate in such a case, Kirby J said: "Where a wilful contempt is shown, in the sense of deliberate conduct but without specific intent to defy judicial authority, a finding of contempt and an order for the payment of costs may not be sufficient ( European Asian Bank G v Wentworth (1986) 5 NSWLR at 461-463; Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 112). In such a case, a fine (and sometimes more) may be needed to vindicate the authority of the court." 15 A costs order is thus clearly an appropriate element of the punishment in this case. The order in that respect should be that Mr C. Froome and Mr L. Froome jointly and severally pay on an indemnity basis the costs of the Registrar's Notice of Motion filed on 2 August 2001. The indemnity basis is indicated by the decision of the Court of Appeal in Tynan v Meharg [1999] NSWCA 157. 16 As the observations of Kirby J in Pelechowski indicate, a fine may be the other component of penalty in a case such as this. However, two considerations make me think that a fine is inappropriate in this instance. The first is that neither Mr C. Froome nor Mr L. Froome has any assets of consequence. Mr C. Froome has no apparent source of income. Mr L. Froome is admittedly in employment but has been in his present position for less than three months. Each is an undischarged bankrupt. In those circumstances, it may well be that s.6 of the Fines Act 1996 would restrict the fines that could be imposed to a level not commensurate with the wrong done. The second consideration which weighs against the imposition of a fine is that there is no point in depleting the slender financial resources of Mr C. Froome and Mr L. Froome in that way when they face claims by Mr and Mrs Fitts for the payment of money which, at least in the case of Mr C. Froome, appear even at this early stage likely to result in the making of orders. I should interpolate here by way of explanation that the possible outcome of those proceedings and any apparent wrongdoing in that connection are not, in any direct sense, an issue relevant at this stage where the only question before the court is the proper punishment for the contempt constituted by failure to comply with its orders. 17 Once a fine is rejected, I must turn to other possibilities and, in so doing, remind myself of the need to have regard to the provisions of the Crimes (Sentencing Procedure) Act 1999, the applicability of which to punishment for contempt of court was confirmed by Studdert J in the recent case of Principal Registrar of the Supreme Court v Jando [2001] NSWSC 969 (2 November 2001). I also remind myself that the references in Part 55 rule 13 of the Supreme Court Rules to fine or imprisonment or both as penalties for contempt by an individual are "declaratory of the court's power of punishment and do not exhaust it": Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309. As Studdert J observed in Jando (above): "Punishment for contempt of court attracts the application of sentencing considerations generally applicable." 18 In the circumstances of this case, a sentence of imprisonment is not warranted. There has been a genuine apology by each contemnor as well as substantial compliance with the one order with which the contemnors are capable of complying. But there must be an alternative which both impresses upon each of Mr C. Froome and Mr L. Froome the seriousness of his conduct and shows to the community that such conduct will attract punishment. I have decided that the correct course is for each of Mr C. Froome and Mr L. Froome to be at large, if only so that both of them may have the opportunity to devote appropriate time and effort to the claims of Mr and Mrs Fitts. Each should be allowed to go free upon entering into a good behaviour bond. But it should not be lost on either of them that that form of punishment is one which Parliament has seen fit to make applicable to criminal acts. They should recognise that they are being punished in a way provided for by the criminal law. Their conduct will thus be seen by them and others to have earned strong and serious censure according to prevailing community standards. 19 The court directs that Mr C. Froome enter into a good behaviour bond for a term of four months. The court directs that Mr L. Froome enter into a good behaviour bond for a term of four months. The terms are the same despite disparity in their conduct. While Mr C. Froome was the principal actor in the relevant events, he pleaded guilty at the first opportunity. Mr L. Froome, although not the principal actor, did not acknowledge his guilt. 20 The good behaviour bond will, in each case, conform with paragraphs (a) and (b) of s.95 of the Crimes (Sentencing Procedure) Act 1999. To comply with s.96(1), I record, for the information of each of Mr C. Froome and Mr L. Froome, four things: first, that, under the bond, he will be required to appear before this Court if called upon to do so at any time during the period of four months for which the bond operates; second, that he must be of good behaviour during that period of four months; third, that he must inform the Registrar in Equity of any change in his residential address; fourth, that if he fails to enter into the bond or fails to comply with it, a warrant for his arrest may be issued and the court may impose a sentence as if the order for a good behaviour bond had not been made. Orders 21 The order and directions of the Court are as follows: 1. Order that Craig Froome and Lindsay Froome do jointly and severally pay on an indemnity basis the costs of the Registrar in Equity's Notice of Motion filed on 2 August 2001 as agreed or, in default of agreement within one month, in such sum as the Court shall fix, with liberty to the Registrar in Equity to apply on seven days notice in that event. 2. Direct that Craig Froome do forthwith enter into a good behaviour bond for a term of four months. 3. Direct that Lindsay Froome do forthwith enter into a good behaviour bond for a term of four months. ****** Last Modified: 11/20/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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