New South Wales Supreme Court CITATION : Turner v Oates Properties Pty Ltd [2004] NSWSC 732 HEARING DATE(S) : 06/08/04 JUDGMENT DATE : 17 August 2004 JURISDICTION: Equity Division JUDGMENT OF : Barrett J DECISION : Plaintiff to pay costs of both defendants CATCHWORDS : PROCEDURE - costs - where no determination on the merits - claim that defaulting purchaser company subject to consent order for specific performance be punished for contempt - compliance before motion for contempt heard - immediate claim to remedy of last resort - no statement of charge as required by rules - no personal service - claim that director of defaulting company be punished for contempt - no order against director - contempt claim misconceived - claim for committal or sequestration against director - no personal service - both claims would have failed - conduct of plaintiff unreasonable so as to warrant adverse costs order LEGISLATION CITED : Supreme Court Rules Part 1 rule 12, Part 52A rule 11, Part 55 rules 8, 9, Part 42 rules 6, 8, Part 9 rule 3 ANS Nominees Pty Ltd v Beverly Manufacturing Co Pty Ltd [1979] 2 NSWLR 875 Antoniadis v TCN Channel 9 Pty Ltd (unreported, NSWSC, Levine J, 5 December 1997) CASES CITED : Construction, Forestry, Mining & Energy Union v BHP Steel (AIS) Pty Ltd [2001] FCA 1758 Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460 Withal v Holloway (1995) 183 CLR 525 Elizabeth Ann Turner - Plaintiff PARTIES : Oates Properties Pty Limited - First Defendant Cameron Donald-Oates - Second Defendant FILE NUMBER(S) : SC 2424/04 COUNSEL : Mr S T White - Plaintiff Mr A J L Ogborne - Defendants SOLICITORS : Freidman Reeves - Plaintiff Davidsons Solicitors - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J TUESDAY, 17 AUGUST 2004 2424/04 – ELIZABETH ANN TURNER v OATES PROPERTIES PTY LIMITED & ANOR JUDGMENT 1 Before me for decision is the question of the costs orders that should be made in respect of a notice of motion filed by the plaintiff on 16 July 2004. The motion was dismissed by consent in circumstances to which I shall come. The only matter outstanding is costs. 2 The substantive proceeding was one in which the plaintiff, as vendor, sought as against the first defendant, as purchaser, an order for specific performance of a contract for the sale of land. That order was made by consent on 4 June 2004. It was ordered that the first defendant perform and carry into execution, within 28 days, a contract for the sale and purchase of a house property at 7 Victoria Street Paddington which the court declared to exist and to be binding. There had been a like claim for a declaration and order for specific performance against the second defendant. By the consent orders, that claim against the second defendant was dismissed. 3 The plaintiff, by the notice of motion filed on 16 July 2004, claimed an order that the first defendant be found guilty of contempt of court in failing to comply with the order for specific performance. There was also a claim for an order that the second defendant be found guilty of contempt of court "in that he failed to specifically perform and carry into execution the agreement between the first defendant as purchaser and the plaintiff as vendor". That claim in respect of the second defendant was supplemented by a claim for the issue of a warrant for his arrest and an order that the Sheriff bring him before the court and a claim for leave to issue a writ of sequestration against the second defendant. The second defendant has been, at all material times, the sole director and sole shareholder of the first defendant. 4 The return date of the notice of motion was originally 18 August 2004. On 27 July 2004, the return date was brought forward to 30 July 2004. When the notice of motion came before me on that day, it was, by consent, stood over to 2 August 2004. On that day, it was further stood over to 6 August 2004. On the lastmentioned date, Mr S T White of counsel, who appeared for the plaintiff, announced that the first defendant had, on the preceding day, complied with the order for specific performance by completing the purchase of the Paddington property. The plaintiff therefore ultimately did not press the claims in the notice of motion. Those claims were then dismissed by consent. 5 The plaintiff contends that she should have her costs of the notice of motion. The defendants say that the plaintiff should pay their costs of the notice of motion. The case is therefore one of those somewhat unsatisfactory cases where the court is asked to determine the question of costs in circumstances where there has been no determination on the merits and therefore no relevant "event" for the purposes of the general rule as to costs reflected in Part 52A rule 11 of the Supreme Court Rules. The guiding principle in such cases was stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-5: "In an appropriate case, a court will make an order for costs even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical question between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. ... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. ... But such cases are likely to be rare. ... If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion would usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases." The threshold question is therefore whether either party acted unreasonably or each acted reasonably. 6 There is evidence to the effect that the first defendant needed the proceeds of the sale of certain shares in order to comply with the order for specific performance and that certain disputes with the issuer of the shares delayed receipt of those proceeds. There is also evidence that the first defendant took steps to raise bridging finance by loan from a bank. Against this evidence of temporary liquidity problems for the first defendant, the plaintiff put into evidence, without objection, a magazine article of 27 June 2004 saying of the second defendant that, by "his own rough estimate", he is "now worth about $40 million". 7 In my opinion, there is no alternative but to accept that the first defendant did encounter difficulties in actually obtaining cash to the extent needed to complete the purchase. That is not a defence or an excuse, so far as compliance with the order for specific performance is concerned. But it is an explanation to which the court may have regard in addressing the question of costs. 8 In Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460, a case in which specific performance was sought against a defaulting purchaser of land, Holland J observed that, in the particular context, "contempt is the remedy of last resort". His Honour said that, if an order for specific performance was not obeyed, "it would be open to the court to leave the plaintiff [vendor] to its right to execute against the defendants [purchasers] for all money due to the plaintiff including its right, with the leave of the Court if required, to enforce its lien over the subject land for the unpaid purchase money …". 9 This, in the submission of Mr Ogborne of counsel who appeared for the defendants, indicates a general principle, applicable to cases such as this, which is against the immediate initiation of contempt proceedings against the defaulting purchaser. The alternative described by Holland J – or, for that matter, any other reasonable and viable alternative – should, in Mr Ogborne's submission, be preferred by the court. Punishment for contempt should, he says, be regarded as a true "remedy of last resort" appropriate only where no other course is feasible. Immediate adoption of the "last resort" should therefore, it is said, be seen as a manifestation of unreasonable conduct on the part of the plaintiff. 10 There are also serious procedural problems facing the plaintiff in relation to the contempt claim against the first defendant. Part 55 rule 7 of the Supreme Court Rules is in the following terms: "A statement of charge, that is, a statement specifying the contempt of which the contemnor is alleged to be guilty, shall be subscribed to, or filed with, the notice of motion or summons." 11 This rule contemplates, clearly enough, a distinct set of words constituting a "statement specifying the contempt" and either "subscribed to" or "filed with" the notice of motion or summons filed in accordance with Part 55 rule 6. The nature and function of a statement of charge appear from the following passage in the judgment of Lee and Finn JJ in Construction, Forestry, Mining & Energy Union v BHP Steel (AIS) Pty Ltd [2001] FCA 1758: "It has long been accepted that a person should not be punished for contempt unless the specific charge against him or her be distinctly stated and an opportunity of answering it given to that person ( Coward v Stapleton (1953) 90 CLR 573 at 579-580.) "[T]his principle must be rigorously insisted upon" ( Coward v Stapleton at 580; Doyle v The Commonwealth at 516). It is reflected in O40 r6 and r8 of the Federal Court Rules which require that, on a proceeding for punishment of an alleged contempt a statement of charge 'specifying the contempt of which the accused person is alleged to be guilty, shall be subscribed to, or filed with, the notice of motion or application' and that the 'notice of motion or application, the statement of charge, and the affidavits [in support of the application] shall be served personally on the accused person'. The requirement that the statement of charge specify the contempt alleged is so as to allow the accused person to know the case he or she has to meet and to defend ( Concrete Constructions Pty Ltd v Plumbers and Gasfitters Employees' Union (No 2) (1987) 15 FCR 64 at 73; see also: Cotroni v Quebec Police Commission (1977) 80 DLR (3rd) 490 at 497 'Precision is necessary if the accused is to be able to defend himself effectively'). The vehicle most commonly used to specify the conduct relied on to support the charge laid is the provision of appropriate particulars in, or annexed to, the statement of charge itself ( Concrete Constructions at 73-74). If the statement of charge itself does not sufficiently specify the contempt, the affidavit evidence served with the statement cannot be relied upon to remedy the deficiency ( Harmsworth v Harmsworth [1987] 1 WLR 1676 at 1683)." 12 Under Part 55 rule 7 and the equivalent provision of the Federal Court Rules, the statement of charge thus has a clear function of delineating, in particularised form, the case that the alleged contemnor is required to meet. And, by being "subscribed to" or "filed with" the notice of motion or summons, the statement of charge must be recognisable as possessing a distinct existence of its own, even though the "subscribed to" possibility leaves room for it to be included within the same paper as the notice of motion or summons. 13 In the present case, so far as the first defendant is concerned, the document embodying the notice of motion filed on 16 July 2004 has no content identifiable as a statement of charge; nor was any separate document answering that description filed with the notice of motion. The notice of motion merely gave notice, so far as the first defendant was concerned, that the plaintiff, as applicant, would on the specified date apply to the court for the following order: "The first defendant be found guilty of contempt of Court in failing to comply with the order of the Court made on 4th June, 2004 in that it failed to specifically perform and carry into execution the agreement between the first defendant as purchaser and the plaintiff as vendor for the sale by the plaintiff to the first defendant of the property situate at and known as 7 Victoria Street, Paddington being the land comprised in folio identifier 2/224449 within 28 days." 14 In relation to the first defendant, the plaintiff failed to comply with Part 55 rule 7, in that she did not cause any statement of charge to be subscribed to or filed with the notice of motion filed on 16 July 2004. The position is therefore as described in Antoniadis v TCN Channel 9 Pty Ltd (unreported, NSWSC, Levine J, 5 December 1997). After referring to the gravity of a contempt charge, as recognised by the High Court in Withal v Holloway (1995) 183 CLR 525, Levine J said: "Bearing in mind the position of the defendant to which I have referred in the context of the criminal nature of a contempt allegation (and at this point not being critical of it), I am obliged to come to the conclusion, and do, that in an allegation of contempt of the kind to which the Notice of Motion and supporting material appears to be pointing must be the subject of clear exposition in a statement of charge in accordance with the rules. There has been no such statement of the charge as is required in my view and whilst no doubt that defect easily and very quickly can be cured, the remedy the defendant respondent seeks in relation to the Notice of Motion inevitably must be granted." The reference here to "the remedy the defendant respondent seeks" is a reference to dismissal of the notice of motion. 15 The notice of motion in the present case, as it affects the first defendant, must be regarded as having merited precisely the same fate for precisely the same reason. 16 A second issue in relation to the contempt alleged against the first defendant arises from Part 55 rule 9 and the requirement that the relevant notice of motion or summons, the statement of charge and the supporting affidavit called for by Part 55 rule 8 "be served personally on the contemnor". To the extent that there was no statement of charge, the plaintiff failed to comply with Part 55 rule 9. But leaving that aside, there is no evidence of the notice of motion and affidavit having been served on the first defendant – whether "personally" (in the sense emerging from Part 9 rule 3(2)) or at all. Again, there is a parallel with the situation in Antoniadis v TCN Channel 9 Pty Ltd (above) and I quote further from the judgment of Levine J: "There remains the question of service. The entity that will be said to be the contemnor is TCN Channel 9 Pty Ltd. There is of course nothing extraordinary about a corporation being charged with contempt of Court either of the kind with which the present application is concerned or of the more usual kind relating to the interference with the administration of justice by an instrument of the media. Whilst in the light of the respondent's success on the first component renders unnecessary a decision on the second, two observations can be made. The first is that which commonsense demands, namely that the notion of personal service in r9 of Pt55 in relation to corporation is a little difficult to cope with and, second, it would not be inappropriate, at least if there is doubt, for an application to be made for dispensing with personal service under r9 and an order being sought as to the sufficiency of service by delivery of the Notice of Motion, supporting affidavits and separate statement of charge by service on the attorneys still on the record for that corporation." 17 Similarly in the present case, the fact that the first defendant appeared by counsel upon the return of the notice of motion would likely have been sufficient to justify an order dispensing with personal service if an application to that effect had been made. 18 To sum up in relation to the first defendant, it may be said that immediate pursuit by the plaintiff of what Holland J described as "the remedy of last resort" carried clear overtones of unreasonableness; but more particularly that the absence of a statement of charge, identifiable as such, would, as in Antoniadis' case, have led to dismissal of the notice of motion. 19 I turn now to the position of the second defendant who, as I have said, has been, at all material times, the sole director and sole shareholder of the first defendant. Insofar as the plaintiff seeks a determination that the second defendant be adjudged guilty of contempt of court, the first thing to be noted is that, in the substantive proceedings, the only order affecting the second defendant was an order that the proceedings, as against him, be dismissed with no order as to costs. The court did not order the second defendant to do anything. Nor did it restrain him from doing anything. As a result, non-compliance by the first defendant with the order directed to it caused the second defendant to be exposed only in the secondary or derivative sense dealt with by Part 42 rule 6(2)(c) of the Supreme Court Rules. It is convenient to set out Part 42 rule 6 in full: "(1) This rule applies: (a) where: (i) a judgment requires a person to do an act within a time specified in the judgment, and (ii) he refuses or neglects to do the act within that time or, if that time has been extended or abridged under Part 2 rule 3, within that time as so extended or abridged, and (b) where a judgment requires a person to do an act forthwith or forthwith upon a specified event and he refuses or neglects to do the act as the judgment requires, and (c) where: (i) a judgment requires a person to abstain from doing an act, and (ii) he disobeys the judgment. (2) In a case in which this rule applies, a judgment may, subject to rule 8, be enforced by one or more of the following means: (a) committal of the person bound, (b) sequestration of the property of the person bound, and (c) where the person bound is a corporation: (i) committal of any officer of the person bound, and (ii) sequestration of the property of any officer of the person bound. (3) Subrule (2) has effect subject to section 98 of the Act (which restricts the enforcement, by attachment or committal, of a judgment for the payment of money) and Part 2 of the Fines Act 1996 . (4) Where there is a judgment for the delivery of goods or payment of their assessed value: (a) the judgment shall not be enforced by committal under subrule (2), and (b) the Court may order the person bound to deliver the goods within a specified time, and (c) an order under paragraph (b) may be enforced by committal under subrule (2)." 20 It is also convenient to quote Part 42 rule 8(2): "Subject to the rules, where the person bound by a judgment is a corporation the judgment shall not be enforced by committal of an officer of the person bound or by sequestration of the property of an officer of the person bound unless, in addition to service under subrule (1) on the person bound: (a) a minute of the judgment is served personally on the officer, and (b) if the judgment requires the person bound to do an act within a specified time, the minute is so served before that time expires." 21 The scope and effect of Part 42 rule 6(2)(c) were discussed by Needham J in ANS Nominees Pty Ltd v Beverly Manufacturing Co Pty Ltd [1979] 2 NSWLR 875. His Honour saw Part 42 as concerned only with means of enforcing of judgments and orders. That distinguished Part 42 from Part 55 dealing with contempt of court. It must follow that the plaintiff's claim for an order adjudging the second defendant guilty of contempt of court "in failing to comply with the order of the Court made on 4 June 2004 in that he failed to specifically perform and carry into execution the agreement between the first defendant as purchaser and the plaintiff as vendor" (and that he be arrested, brought before the court and committed to prison) was, of its very nature, misconceived and doomed to fail. 22 As to the balance of the relief sought against the second defendant – contemplating committal and sequestration – there is, on the basis of the order for specific performance against the first defendant and the second defendant's position as a director of the first defendant, a procedural foundation in Part 42 rule 6(2)(c) to which I have already referred. There is, however, a requirement of personal service under Part 42 rule 8(2). The particular significance attached to that requirement is emphasised by the introductory part of Part 42 rule 6(2) which uses the words "subject to rule 8". Compliance with Part 42 rule 8 is thus an express precondition to the availability of the means of judgment enforcement provided for in Part 42 rule 6(2)(c). 23 In view of Part 9 rule 3(1), that express precondition is not satisfied by service on a solicitor: see Part 9 rule 7. In the absence of evidence that the relevant documents were left with the second defendant (or put down in his presence with a statement to him of their nature), the plaintiff has not shown fulfilment of the express precondition to the availability of the relief she seeks against the second defendant by way of committal or sequestration. 24 The fact that the second defendant appeared by counsel upon the hearing of the notice of motion may well not have been sufficient, in this special context, to warrant dispensation from the personal service requirement. Part 24 rule 9(2), dealing with the special case of failure to answer interrogatories, says that, where a party has a solicitor, the relevant order need not, for the purposes of enforcement by committal or sequestration, be served personally but, if it has not been served personally, the order may not be enforced by committal or sequestration if the person concerned shows that he or she did not have notice or knowledge of it in time to comply. This is obviously a qualification upon the operation of Part 42. 25 The existence of such a specific exception to the rule of personal service in one context serves to underline the importance attached to the rule in all other contexts. That, it seems to me, would require a quite compelling case to be made before any dispensation from the requirement of personal service would be granted under Part 1 rule 12. Dispensation could never be assumed. 26 Both legs of the plaintiff's claim on the second defendant would have failed. The attack based on Part 55 was misconceived. The attack under Part 42 was based on (and derived from) the Part 55 claim against the first defendant that would itself have failed. The Part 42 claim was also procedurally flawed. In short, the case against the second defendant miscarried in both its branches, apart altogether from any assessment on the merits. 27 Initiation of proceedings for contempt of court and allied relief by way of sequestration is not something to be undertaken lightly or without due regard for the serious consequences – including, for an individual, deprivation of liberty – faced by those who become the object of such proceedings. Attention to fundamental requirements shaped by the quasi-criminal context and designed to put the alleged contemnor on notice of the case to be met should be punctilious. An immediate move to the "last resort" in a way that fails to recognise and give effect to those requirements and asserts susceptibility to penalties that the law will not recognise is unmeritorious. When the situation as a whole, as it affects both of the present defendants, is assessed, it is readily seen that the plaintiff's action in bringing them to court in the way she did to answer the claims in the notice of motion filed on 16 July 2004 was unreasonable in the sense relevant to the making of an order for costs in the defendants' favour. 28 The order of the court is that the plaintiff pay the costs of the first defendant and the costs of the second defendant of and incidental to the notice of motion filed on 16 July 2004. ********** Last Modified: 08/17/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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