Australian Securities and Investments Commission v Jorgensen & Ors [2008] QSC 91

SUPREME COURT OF QUEENSLAND CITATION: ASIC v Jorgensen & Ors [2008] QSC 91 PARTIES: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION (applicant) v ALAN BRADLEY JORGENSEN (first respondent) ROBERT WILLIAM MORTON AS TRUSTEE OF THE BANKRUPT ESTATE OF ALAN BRADLEY JORGENSEN (second respondent) JIM’S WATER TANKS PTY LTD (ACN 123 918 721) (third respondent) ZHI LI also known as LINYA JORGENSEN (fourth respondent) FILE NO: BS7032 OF 2007 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court, Brisbane DELIVERED ON: 15 May 2008 DELIVERED AT: Supreme Court, Brisbane HEARING DATE: 29 January 2008 – 1 February 2008 JUDGE: Douglas J ORDER: Application dismissed. CATCHWORDS: PROCEDURE – CONTEMPT, ATTACHMENT AND SEQUESTRATION – CONTEMPT – WHAT CONSTITUTES – DISOBEDIENCE OF ORDERS OF COURT – INJUNCTION – whether breach of an order has been established. Evidence Act 1977, s84, s95 Uniform Civil Procedure Rules 1999, r925 Chiltern District Council v Keane [1985] 1WLR 619, cited Commissioner of Water Resources v FED & FA [1988] 2 Qd -- 1 of 11 -- 2 R 385, applied Evenco Pty Ltd v ABCE & BLF (Qld Branch) [2001] 2 Qd R 118, applied Hafele Australia Pty Ltd v Maggbury Pty Ltd [2000] QCA 397, cited Harmsworth v Harmsworth [1987] 1WLR 1676, cited Johnson v Miller (1937) 59 CLR 467, applied Walsh v Tattersall (1996) 188 CLR 77, cited COUNSEL: J W Peden for the applicant L F Kelly SC with D J Pyle for the respondents SOLICITORS: ASIC for the applicant Lillas & Loel Lawyers for the respondent [1] Douglas J: When Roger Casement was executed for treason in 1916 the hyperbolical claim was made that he had been “hanged by a comma”. 1 It may be said of this case that Mr Jorgensen’s liability to be dealt with for contempt of Court depends on the placement of an apostrophe, but there are more substantial reasons for dismissing the application than that. Background The orders, application and particulars [2] The charge of contempt is said to arise from breaches of five orders of judges of this Court. The relevant passage of the orders said to have been infringed reads as follows in cl. 5 of the order made by me on 12 September 2007; “5. Until 4.00pm on 12 October 2007, or earlier order, the Respondents are restrained from dealing with any credit card payments made by any third party, in favour of them, as yet unprocessed, received in connection with the Respondents’ business.” [3] In the order of Martin J made 12 October 2007 the equivalent order’s wording was: “4. Until 4.00pm on 12 November 2007, or earlier order, the Respondents are restrained from dealing with any credit card payments made by any third party in favour of them, as yet unprocessed, received in connection with the Respondents’ business.” [4] I refer to those two orders in particular because they cover the period during which Mr Jorgensen’s offending conduct is said to have occurred by the applicant. The application refers, however, to five orders in seeking this relief: “1. An order that the First Respondent is in contempt of Court constituted by failure to comply with Clause 5 of each of the Orders of Lyons J dated 13 August 2007, de Jersey CJ dated 22 August 2007, de Jersey CJ dated 5 September 2007, 1 E. Stewart Fay, Hanged by a Comma London, (1937); and see A. Garran The Significance of the Form of Acts of Parliament (1956) 29 ALJ 630, 634 and Trial of Roger Casement, Notable English Trials pp. 241-242. See also R v Casement [1917] 1 KB 98, 122, 129, 132, 134, 143-144. -- 2 of 11 -- 3 Douglas J dated 12 September 2007, Martin J dated 12 October 2007, in that: (a) in and around October 2007, the First Respondent dealt with credit card payments made by third parties and received in connection with the Respondent’s business that had been unprocessed as at the date of the abovementioned Orders (b) the abovementioned payments were processed into a back account in the name of JWT Marketing maintained with the St George Bank account number 128293463;” [5] Particulars were sought of the relief by a letter dated 21 January 2008 in these terms: “As regard to paragraph 1A of the relief sought please provide the following particulars; 1. Full particulars of each dealing with credit card payments alleged including; a) The date of such dealing; b) The amount of each such dealing; c) Details of the credit card dealt with; and d) The manner of processing alleged. 2. Identify the Respondent referred to therein. 3. As regards each such dealing alleged, state the facts, matters and circumstances relied upon to assert that dealing was in connection with the Respondents business as alleged. Please provide the particulars sought by the close of business today. Given the seriousness of the charges and the fact that they are to be heard on 29 January 2008, this request is not thought to be unreasonable.” [6] The response, supplied early the next day was: “In response to your request for further and better particulars, the details you request at paragraph number 1 appear in the affidavits listed in the application and filed as Court documents 53-56 and 60. Furthermore, see Ex. SM2 to the affidavit of Milton filed 29 December 2007 and the Affidavit of Hunter filed 29 December 2007. Given the urgency with which you seek a response these particulars are sufficient to enable your client to understand the allegations against him. -- 3 of 11 -- 4 As to request number 2, the application is brought against the First Respondent. As to request number 3, we are unable to answer your request because it does not reflect the Applicant’s complaint. The alleged contempt is that your client dealt with the unprocessed credit card payments, which is unrelated to the question whether the dealing was in connection with the business.” [7] No further particulars were sought or supplied before the hearing. It is worth noting that the order refers to the plural “Respondents’ business” while the application refers to the singular “Respondent’s business”, a problem I shall discuss presently. The respondent’s conduct [8] The orders were made because of a controversy surrounding Mr Jorgensen’s management of a company of which he was said to be a director and manager at relevant times. Its name was Jim’s Water Tanks Pty Ltd (“JWT”) and it had offered to sell rainwater tanks to members of the public in advertisements placed through a Mr Moloney. [9] Mr Moloney conducted an agency which placed advertising for, and was owed a significant sum of money by, JWT. It was unable to pay him for the advertising he had placed, partly because it then had no tanks to sell to the customers who wished to buy them, and partly because its bank accounts were frozen by the Commonwealth Bank and later, after 22 August 2007, were unable to be used to pay Mr Moloney’s business because of orders this Court had made. [10] The conduct said to be in breach of the Court’s orders was summarised by the applicant in the following terms. Between April 2007 and June 2007 JWT conducted a business marketing plastic rainwater tanks for sale. By the end of June 2007, Mr Jorgensen had, in connection with the business, presumably that of JWT, a large number of credit card vouchers provided by members of the public as deposits for the purchase of the rainwater tanks. The deposits ranged in value from $100 to $1000 with the majority for between $300 and $500. On or about 27 or 28 June 2007, JWT’s banker, the Commonwealth Bank, froze or cancelled the merchant facility by which it could process the credit card payments for the water tank deposits. Thereafter, JWT sought to arrange another merchant facility through which the credit vouchers could be processed. On 22 August 2007, ASIC obtained interlocutory orders against the respondents including an injunction restraining the respondents from dealing with the unprocessed credit card vouchers. [11] The injunction was extended on numerous occasions, including, after a further contested hearing on 5 September 2007, before de Jersey CJ, where the first respondent appeared on his own behalf, by a consent order on 12 September 2007 before me, again at which the first respondent appeared on his own behalf, after a further contested hearing on 12 October 2007, before Martin J, at which the first respondent also appeared on his own behalf. [12] In late September, early October 2007, Mr Jorgensen made arrangements with Mr Moloney to process the unprocessed credit transactions, on the basis that Mr Moloney would open a merchant facility in the name of “JWT Marketing” through -- 4 of 11 -- 5 which Mr Jorgensen would arrange the credit cards to be processed, with the proceeds then being deposited to the bank account associated with the facility opened by Mr Moloney, the proceeds then being used in part to repay Mr Moloney’s debt. [13] Mr Moloney opened the account and the merchant facility. A significant number of credit card vouchers were then processed at the direction of Mr Jorgensen, by staff at JWT’s premises in Cairns through the merchant facility from 15 October 2007. The proceeds were deposited to the bank account of JWT Marketing. In all more than $100,000 was received into that bank account. [14] After this processing had been commenced, several of the managers at JWT’s business became concerned about their conduct and independently checked ASIC’s website and obtained a copy of an order of the Chief Justice. Forming the view that the order appeared to prohibit the processing which they were undertaking, one of them, Mr Hutchinson, raised the issue of potential contempt of court with Mr Jorgensen, specifically drawing to his attention that what they were doing was in contempt of the Chief Justice’s order to which Mr Jorgensen’s response was said to be “It’s only a hundred thousand dollars.” The contentious issues on the application Uncertainty and ambiguity [15] Mr Jorgensen challenged the application on many bases. The first was that the charge in the application was uncertain and ambiguous. As I have said, the application refers to five orders of the Court made one after the other between 13 August 2007 and up to and after 12 October 2007. The conduct complained of in the application was said to have occurred in or around October 2007, a period relevant to only two of the Court orders referred to in the charge. This was said to infringe the requirement that a respondent to such a charge have a reasonably clear and intelligible statement of the offence or matter with which he is charged; see the statement by Evatt J in Johnson v Miller (1937) 59 CLR 467, 495-496. Part of the rationale for that approach is that the defendant cannot plead unless he knows what is the precise charge being preferred against him. As Evatt J went on to say at 498; “If he so chooses, a defendant has a right to plead guilty, and therefore to know what it is he is being called upon to answer.” [16] See also Walsh v Tattersall (1996) 188 CLR 77, 105. In the case of a charge of contempt the need for a respondent to know “with sufficient particularity to enable him to defend himself, what exactly he is said to have done or omitted to do which constitutes a contempt of Court” is also clear; Chiltern District Council v Keane [1985] 1WLR 619, 622. In my view this complaint was not clear at least because of the reference to the five different orders said to have been breached. The orders were also unclear in other aspects to which I shall refer later. Duplicity [17] Mr Jorgensen also argues that the charge in the application is bad for duplicity. The duplicity alleged is that Mr Jorgensen is charged with contempt of five separate orders of the Court in circumstances where the charge and particulars do not identify which alleged conduct relates to an alleged contempt of any particular order. The argument is that he cannot consider sensibly which acts alleged against -- 5 of 11 -- 6 him are alleged to contravene which order without making uncertain assumptions or drawing inferences themselves unclear. Again that complaint is a valid one. Confusion between cl. 5 of the order of Lyons J and cl. 5 of the order of Martin J [18] As I have already pointed out the numbering of the paragraph in the order made by Martin J equivalent to that made in cl. 5 of the other orders referred to in the application was different, cl. 4 instead of cl. 5. The application, in referring to cl. 5 of Martin J’s order therefore confuses the issue, something which could, however, have been corrected by an amendment without any real prejudice to Mr Jorgensen. Difference between the wording of the orders and the wording of the charge in the application [19] There is, however, a more substantial argument relating to the form of the charge. The orders made similar to that made by Lyons J on 13 August 2007 restrained the “respondents”. Those respondents were, apart from Mr Jorgensen, his bankruptcy trustee, JWT and Mr Jorgensen’s wife, Zhi Li, also known as Linya Jorgensen. The respondents were restrained from dealing with “any credit card payments made by any third party in favour of them, as yet unprocessed, received in connection with the Respondents’ business.” (emphasis added) The plural form of the word “respondents” where it occurs in each order is significant, including the plural possessive in “the Respondents’ business”. [20] The charge in the application as particularised was, however, that Mr Jorgensen dealt with credit card payments made by third parties and received in connection with his business where no particulars were provided of how the dealings alleged were in connection with his business. The words “in favour of them” emphasised above were not included in the breach alleged in the application. [21] These problems reflect a lack of attention to detail in the framing of the orders as well as in the application which has produced a degree of uncertainty both in the meaning of the orders sought to be enforced and in the application itself. [22] It was submitted for Mr Jorgensen that it was necessary for ASIC to prove, in order to establish a breach of the order, that payments had been made in favour of the respondents (plural) where the only evidence was that payments were made in favour of the third respondent, JWT, and later in favour of a business, Jim’s Tanks, conducted by another company that was not a respondent. Nor was there evidence that a business was being conducted by the respondents collectively. [23] The orders, some of which were made by consent, would have been expressed more effectively if the restraints had covered the respondents or any of them but that did not occur. Again that creates significant problems for the success of the application. Deficiency in the particulars [24] The attempt by ASIC to particularise the dealing referred to in the application by reference to exhibits to affidavits compounded the problem as the particulars, in referring simply to affidavits and an exhibit were not sufficient; see Harmsworth v Harmsworth [1987] 1WLR 1676, 1683. Nor did the response address the request adequately in respect of the second and third requests for further and better -- 6 of 11 -- 7 particulars. Those requests were legitimate but were not the subject of clear responses as I shall discuss presently. [25] The problem with the particulars became clearer when Mr Peden tried to reformulate the applicant’s case in his reply by reference to dealings said to have been constituted by Mr Jorgensen making arrangements and giving directions in respect of the opening of and making payments into the JWT Marketing account. The particulars sought to be added were: “The dealing relied upon by the applicant includes causing or permitting to be processed the unprocessed credit card payments, namely credit card vouchers, by: (i) Making an arrangement with Mr Moloney for Mr Moloney to open a merchant facility capable of receiving credit card payments; (ii) Permitting a person or persons unknown access to the credit card vouchers so as to allow them to be processed; (iii) Directly or indirectly (by Mr Hutchinson or Mr Cook) instructing staff under his overall supervision (one Sheena) to enter such details of the credit card vouchers through the above-mentioned merchant facility such as to credit the proceeds of such transactions to bank account with the St George Bank Limited numbered 128293463." [26] Dealings of that nature were not referred to either in the letter providing the particulars before the hearing or in the documents sought to be incorporated by reference in that letter. There was also a request that I interpreted initially as one to change the identity of the respondent referred to in paragraph 1(a) of the relief sought from the first respondent to include or perhaps to substitute the third respondent. For reasons I gave at the hearing I refused those applications.2 No evidence that payments received in connection with Mr Jorgensen’s business [27] The particulars and the evidence are also criticised on the basis that they do not identify dealings having anything to do with a business conducted by Mr Jorgensen. He is said not to have conducted any business at any relevant time himself but at best as an employee or director of JWT. The response to the request regarding the facts, matters and circumstances relied on to assert that the dealing was “in connection with the respondent’s business as alleged” was criticised, validly, as unresponsive. The answer was “unable to answer your request because it does not reflect the applicant’s complaint”. [28] Unfortunately it did reflect the wording of the application and the request focussed on an issue made relevant by that wording, namely whether Mr Jorgensen dealt with credit card payments made in connection with a business described as “the Respondent’s” where he appears to have been particularised as the relevant respondent. It may be argued, and was, that the JWT business was Mr Jorgensen’s in the sense that he was a director, secretary and controller of it but the contrary argument put on behalf of Mr Jorgensen was that such an approach ignored the 2 T335-337. -- 7 of 11 -- 8 separate legal personality created by the existence of JWT. He was also only a 20 per cent shareholder of the company. [29] At a late stage of the proceedings, again during his reply, Mr Peden for ASIC also applied to amend the application to refer to the “Respondents’ business”, changing the position of the apostrophe, but Mr Kelly’s response to that application was to argue that, even if I allowed the amendment, which he did not resist, the case would still fail as there was no evidence that the respondents were carrying on business in common. Again there is substance to that criticism and although I would allow such an amendment even at this stage of the proceedings it does not seem to me to overcome the other problems facing the applicant. Lack of clarity of the orders made [30] The clarity of the order made originally and as repeated was also criticised. The terms of an order or undertaking sought to be punished by committal for contempt must be clear; see Evenco Pty Ltd v ABCE & BLF (Qld Branch) [2001] 2 Qd R 118, 133, [48]; Commissioner of Water Resources v FED & FA [1988] 2 Qd R 385, 390. In that context, the expression “the Respondents’ business” in each order was criticised because, grammatically, it refers to a single business conducted by a number of respondents where the evidence is that that was not the case, the relevant business being simply that conducted by JWT. [31] It was also argued that the plural use of “Respondents” in the expression: “… the Respondents are restrained from dealing with any credit card payments made by any third party, in favour of them …” was a reference in its natural meaning to payments made in favour of all respondents jointly. If it was meant to refer to Mr Jorgensen having dealt with payments made in favour of JWT the submission made was that it was not clear because of the orders’ references to payments received in connection with “the Respondents’ business”. Again those criticisms are valid. [32] It was also submitted that it was not clear what the order meant when it referred to dealing with credit card payments as yet unprocessed already made in favour of the respondents. But that complaint is not so strong as it is a fair inference from the words “as yet unprocessed” that processing payments previously proffered to JWT in the form of a credit card voucher would be a form of dealing with them. Lack of appropriate financial evidence [33] The next defect complained of was that there was no appropriate financial evidence sufficient to prove the nature of any dealing with credit card vouchers that had been processed. [34] An officer of the St George Bank proved a number of documents that had previously been produced as an exhibit to an affidavit of an ASIC officer, Ms Hunter. They were extracted from that bank’s records as copies of books that it keeps in its centralised accounting system. His evidence did not establish that they were books of account under s. 84 of the Evidence Act 1977 nor did he prove them as computer records under s. 95 of that Act. Accordingly they were said not to be admissible against Mr Jorgensen as to the truth of their contents. There was substance in that submission too. -- 8 of 11 -- 9 Failure to prove the case beyond reasonable doubt [35] The final argument about defects in the applicant’s case was that the evidence led by it did not establish its case beyond a reasonable doubt. The evidence establishes that some payments entered into the JWT marketing account were made by Jim’s Tanks and were not necessarily all the product of credit card payments processed by the third respondent or at the initiative of Mr Jorgensen; see the evidence of Mr Moloney at T. 205 ll. 28-30 and of Mr Allingham at T. 130, ll. 27-30. It was argued that Mr Allingham did not prove that a document he referred to in his evidence only had credit card transactions on it because, although he referred to “card numbers” at T. 130 l. 45 he did not explain specifically whether they were numbers for credit cards, debit cards or ATM cards. Nor, it was submitted, did he prove that the documents he produced evidencing the processing of payments were related to the particular bank account in the name of JWT Marketing with an account number 128293463, something required, it was submitted, by the terms of the application. [36] There is force in that submission. That account number was given by Mr Moloney to a Mr Hutchinson on about 17 October 2007. Mr Hutchinson was a registered owner of the business named “Jim’s Tanks” and gave evidence about the processing of credit card payments in a statement criticised as likely to be based on hearsay rather than direct evidence and which could not be made the subject of cross- examination because he was not able to be called as a witness by ASIC. Apparently it was he who was supposed to deposit monies into the JWT Marketing account at St George Bank but the case for Mr Jorgensen was that this was paid for advertising for Jim’s Tanks and that any alleged admissions by Mr Jorgensen about the processing of credit card payments for JWT were too vague to rely upon, on the criminal standard of proof, as they may have referred to unprocessed payments not made in favour of the respondents but in favour of Jim’s Tanks; see T 261 ll. 29-40 and T 266 ll. 28-53. [37] Mr Hutchinson’s evidence, as I have said, was not able to be tested by cross- examination. His reliability as a witness was also questioned given his potential for prosecution as a participant in the alleged contempt because of his involvement as the registered owner of the business named “Jim’s Tanks”. Documents referred to in his statement, apparently the originals of the credit card vouchers said to have been processed, were not proved and the transcript of his evidence refers to him being confused about the identity of the business in whose favour the payments would have been processed, whether JWT or Jim’s Tanks; see p. 63 ll. 3-6 of his interview. [38] The response by Mr Jorgensen to Mr Hutchinson’s statement that his conduct was in breach of the Chief Justice’s orders was significant if it were established that those orders had actually been breached. The point was made that those orders of the Chief Justice had expired by October 2007 but Martin J’s order was in force at that time. If a relevant order had been proved to be breached the attitude expressed in that statement would have been very significant in establishing the seriousness of the contempt but the real question is whether a breach of an order has been established. [39] There is also evidence that Mr Jorgensen said to Mr Cook: 3 3 T266 ll.53-54. -- 9 of 11 -- 10 "We have an account set up. We can now process credit cards." [40] The argument for ASIC was that that evidences an intention at least to commit contempt. The submissions on behalf of Mr Jorgensen included that it was not clear when that was said or if and when Mr Jorgensen acted on it which itself gave rise to the question which of the orders referred to in the application was said to have been breached. Nor, it was argued, was it clear whether his comments related to unprocessed payments not caught by any order as not having been paid in favour of the respondents, but instead in favour of Jim’s Tanks. [41] The original documents of those said to have been processed on the evidence given by Mr Cook were not produced nor were the original records referred to in Mr Hutchinson's transcript. The absence of that evidence was criticised. [42] Mr Milton's evidence of his analysis of customer lists and transaction lists was also criticised because the primary documents were not put into evidence or made available for examination in circumstances where the original evidence of the transactions and of the dates when processing occurred was based on hearsay from Mr Cook. [43] It was possible to trace several credit card payments made to JWT into the JWT Marketing account but they were few in number compared to the many payments made into the account. [44] It seems to me, therefore, that the criticism of the strength of the evidence, that it does not meet the standard of proof beyond reasonable doubt required to establish that there has been a contempt of court, is valid. Discussion [45] The lack of precision in the orders made and in the application as particularised creates real difficulties for the valid enforcement of the orders. The strictness of proof required in contempt proceedings is not met here where there is real confusion about which orders are said to have been breached and when and by what conduct and where the particulars provided of the conduct alleged are in themselves inadequate. [46] Where the orders themselves restrain all respondents from dealing with credit card payments made in favour “of them …received in connection with [their] business” and the application seeks to punish the first respondent, Mr Jorgensen, because of his dealing with credit card payments received in connection with his business, apparently in respect of payments that were actually made in favour of the third respondent and in connection with its business the problems are compounded. [47] It may be possible, in lay terms, to characterise the third respondent's business as also that of Mr Jorgensen because of his apparent control of it but the combination of the lack of clarity in the orders made, the uncertainty and duplicity associated with the form of the application as particularised and the lack of precision and doubtful admissibility and reliability of the evidence relied on lead me to the conclusion that the conditions necessary for me to decide that Mr Jorgensen should be found to have breached the orders made against him have not been met. -- 10 of 11 -- 11 [48] The form of the application, in seeking an order that Mr Jorgensen was in contempt of court, was also criticised in reliance on the decision in Hafele Australia Pty Ltd v Maggbury Pty Ltd [2000] QCA 397 at [34]-[37]. The argument was that the application should have sought to punish Mr Jorgensen for the alleged contempt rather than seeking what was, in effect, a declaration that he was in contempt of court. The criticism accurately reflects the decision of the Court of Appeal but there were more significant problems facing the application than that. Decision [49] The application should be dismissed. I shall hear the parties further as to costs. -- 11 of 11 --