Mark Bouris raises Contempt of Court case against former directors

The Situation - Ignoring Interim Freezing Order

 In June 2009, Mr Mark Bouris became the chairman of TZ Ltd. Mr Bouris is well known as the star of The Apprentice reality TV show and as founder of Wizard Home Loans.
TZ Ltd commenced action to recover monies from former directors of the company.  One of the proceedings commenced was against an entity called ZMS Investments Pty Ltd (‘ZMS’).  On 16 September 2009 the Supreme Court of New South Wales made interim freezing orders (also called Mareva orders) under Uniform Civil Procedure Rule (UCPR) 5.11.  These orders restrained ZMS, by its directors, officers or agents, employees or others acting on its behalf, from:


Assets were defined in the orders to include a number of specifically identified properties.  It was alleged that after the making of the freezing orders, Mr Andrew John Sigalla (‘Sigalla’) caused ZMS to enter into a contract of sale for one of the properties that were subject of the Freezing Orders of September 2009.  The properties were listed for auction on 3 December 2009 and one of the properties was exchanged on 10 November 2009.  By Notice of Motion under Part 5 of the Supreme Court rules an application was made by TZ Ltd who also filed a Statement of Charge dated 13 November 2009, seeking orders that ZMS and Sigalla be found guilty of contempt for failing to comply with the orders of the court of 16 September 2009 and that they be convicted and made liable to such punishment as the court considers appropriate.

The Court Decision

Justice Austin, as Corporations Judge, heard the application in a hearing on 16 December 2009 and handed down a 12 page judgment on 23 December 2009.  His Honour found the contempt proved and imposed a $5,000 fine by way of penalty on each of ZMS and Sigalla and that ZMS and Sigalla pay TZ Ltd’s costs on an indemnity basis jointly and severally.

Comment from Mark Streeter Sydney Lawyer

Compliance with court orders is critical for the continued proper administration of justice in New South Wales and public confidence in the judicial system. This case is a helpful reminder of the sharp edge of the judicial system and the application of force, in this case through $5,000 fines, for failing to comply with orders made by the Court.

The court extracted a helpful summary of principles applicable in an application for contempt.  In short these principles are as follows:
(a) The order alleged to be breached must be clear and unambiguous.
(b) The proper construction of an order is not a matter of fact but a question of law.
(c) It is not necessary for an applicant to approve an alleged contemnor intended to disobey the order.
(d) Deliberate conduct which is in breach of the order will constitute wilful disobedience of the order and therefore civil contempt unless the conduct be casual, accidental, or unintentional.
(e) The facts in issue in a contempt charge must be proved beyond reasonable doubt.

The Situation – Theft of Intellectual Property

An Australian company had an extremely well developed website. Hundreds of hours had gone into its development in optimising design and content to inform and direct new business. A competitor was accused of “cutting and pasting” significant portions of text from the company web site onto their own website.

The Solution

Streeterlaw wrote a letter of demand requesting the removal of the infringing text from the website. Only part of the text was removed in response to the letter of demand. Urgent proceedings were then commenced in the court seeking an injunction requiring the removal of the offending text within two days.

The Defendant provided an “enforceable” undertaking to the Court that they would remove the text. The deadline for removal of the offending text expired without compliance with the enforceable undertaking. Streeterlaw sought enforcement orders and filed an application for contempt joining the Directors of the defendant corporation as a further respondent and defendant to the action.

The Result

The situation was resolved with the offending text being removed. The defendant company paid all legal costs plus a confidential sum for damages.

This is just one example of Streeterlaw's very precise strategy for clients. Protect your intellectual property. Call Streeterlaw for a free no-obligation phone consultation.

The Australian Securities and Investments Commission (ASIC) has found a North Sydney Solicitor guilty of advising eight of his clients engage in activity which breached the Corporations Act. This significant case sends a warning to all business advisors. These two judgments of Acting Justice Windeyer are very important decisions of the Court in considering Section 79 of the Corporations Act 2001 (CTH).

The Facts - ASIC v Somerville & Ors (No 2) [2009] NSWSC 998 & ASIC v Somerville & Ors [2009] NSWSC 934 

The First Defendant was a solicitor practicing in North Sydney.  He was sued together with eight of his clients for alleged “phoenix” activity.  The solicitor had provided similar advice to each of the eight businesses (which were facing insolvency) on separate occasions. 

The effect of the advice and the transactions taken by the companies and directors in reliance on this advice was that the company would sell its “business” to a new entity in consideration for being issued “V Class” shares in the new entity which will be paid by dividends.  The debts and liabilities of the previous company stayed in the old company.  No dividends were ever paid by the new entity back to the old company.

The result of the implementation of this advice was that the purchaser acquired all the assets of the old company free of any of the liabilities of the old company leaving trade creditors, taxation debts and debts for insurance premium to sue an asset-less company.  

The Decision

The solicitor was found to be involved in the Directors’ misconduct.  The Company Directors were found to have breached Sections 181, 182 and 183 Corporations Act 2001 (CTH). In the second judgment the directors unsuccessfully sought to make an application for exoneration under section 1318 on the basis that they relied on their solicitor’s advice and should not be personally liable. The solicitor was disqualified from managing corporations for a period of six years and the other directors (of the subject corporations) were disqualified from managing corporations for a period of 2 years.  

Comment from Mark Streeter Sydney Lawyer

This case stands as a solitary warning to all participants involved in advising debtors in respect of their statutory obligations under the Corporations Act.

When ASIC investigators give you a notice of examination it means they believe you have information which will help them in an investigation. You do not have the "right of silence".

The Situation

A businessman who had had dealings with a particular Company and had purchased a substantial amount of goods and services from it and was then issued a notice under Section 19 of the Australian Securities and Investments Commission Act 2001 (the ‘ASIC Act’) requiring the businessman to appear for examination on oath and answer questions put to him by ASIC investigators.

ASIC Power

ASIC has the power to require a person to attend to be examined if it believes, on reasonably grounds, or suspects or believes that a particular person can give information relevant to a matter that it is investigating under Division 1 of Part 3 of the ASIC Act.

The notice to the proposed person to be examined may require them  to give ASIC all reasonably assistance in connection with their investigation; including answering questions put to them by the ASIC investigators or deliver up documents.

What Protections do you have?

There are limited protections afforded to the examinee.  Unlike the police, you do not have an unqualified “right” to silence.  If you refuse to answer or provide this responsible assistance you may be liable for contempt of ASIC or contempt of the ASIC Act and liable for substantial penalties.  You are permitted to take a lawyer with you to attend the examination and you are permitted to claim the protection under Section 128 of the Evidence Act 1995 (Cth) in respect of privilege against self-incrimination.

Section 68(3) of the ASIC Act limits the scope of the protection against self-incrimination and excludes the proceedings specified in Section 1349 of the Corporations Act 2001.

You may maintain the protection in respect of Solicitor Client Legal Professional Privilege. 

How does The Examination work?

Section 22 provides that the examination is to be in private and often the ASIC investigator will provide a direction that no question, information, document or anything related thereto can be discussed to any other person for a period of in access of a year.  

Evidence will be required to be provided under oath or affirmation and failure to comply without reasonable excuse will expose the person to a penalty of $11,000.00 or 2 years in prison or both. Often there is a record of the examination and Section 24 provides that there may be a transcript and if this transcript is reduced to writing a copy will be provided to the examinee who may be required to read it and sign it.

In some cases you will not even be able to tell your business colleagues why you were required to be out of the office for the day!

Comments from Mark Streeter Sydney Lawyer

There are important lessons to be learnt.

• Treat this examination process very seriously
• If you are in receipt of a notice of examination you should immediately seek independent legal advice

You should not rely this information memorandum as anything but general information.

Luna Park Sydney has has had a long and sometimes turbulent history in Sydney. Luna Park Amusement Park is located on the north side of Sydney Harbour at Milsons Point. It's smiling face has been part of Sydney landscape for much of the park's life since it opened in 1935. When information gathered for a court case was released to Sydney's Daily Telegraph for an article it was considered to be "contempt" - a misuse of the information.

The Facts - Hearne v Street [2008] HCA 36 (6 August 2008)

After being closed for a period of time Luna Park recommenced operations in April 2004.  Local residents objected to the noise which was alleged to have included music, loud speaker announcements and mechanical noises from the rides.  Proceedings were commenced in the Supreme Court of New South Wales relying on the Tort of nuisance.

In the course of the preparation for hearing the Plaintiffs served affidavits and expert reports.  It was alleged that some of this material was then distributed by the Defendants to the Daily Telegraph and used as a basis for an article published on 18 April 2005 and also used in communication to the State Government as part of a lobbying campaign for legislation that was introduced Luna Park Site Amendment (Noise Control) Act 2005 to protect the operators of the Park from complaints of  noise and claims for nuisance.  

The Decision

An application was made by the Plaintiffs that the Defendants had improperly used affidavits and expert reports in whole or in part (with all the information contained within them) for a purpose not directly connected with the conduct of the proceedings.  It was alleged that this was in breach of an express or alternatively an implied undertaking to the Court.

An application before the primary judge was unsuccessful.  The Applicants then appealed to the Court of Appeal who upheld the finding of Contempt.  An appeal was then made to the High Court who handed down judgment on 6 August 2008.

The majority judgment in the High Court comprising  HAYNE, HEYDON AND CRENNAN JJ found that;
"The Court should not allow any party – whether a party to the proceedings or not, to use documents for any ulterior or alien purpose.  Used with knowledge of the circumstances of, and the source of the documentation would be an improper use.

Comment from Mark Streeter Sydney Lawyer

This case serves as a very useful restatement of the law of contempt.  The prosecutor of the contempt were the parties in the litigation.  It was a charge of “civil contempt”.   In this case the Applicant (one the Plaintiffs in the action) became the “prosecutor”. The burden of proof is the civil burden.

It is necessary to specifically particularise the allegations against each of the Defendants.  The Court Rules require the filing and service of a “statement of charge” setting out these details.

Parties, lawyers, their clients, experts and any other person who is provided access to documents obtained in the course of litigation should be very, very careful about how this information and documents are used and be mindful of the constraints imposed upon the parties. The documents produced in the course of legal proceedings were subject to the rule against their use for any other purposes apart from the proceedings. Once an affidavit is “read” in open court or evidence otherwise is provided through a witness, the evidence becomes “public” and accordingly the constraints described dissolve.

Many people wonder what can and can't a bankrupt individual do when they are declared bankrupt?

Bankruptcy has serious effects on the individual.  Upon becoming bankrupt almost all of their property goes to (‘vests in’) the persons Trustee in Bankruptcy.

It is then an offense for an undischarged bankrupt person to engage in the following:

a)    Obtain credit or enter a commercial transaction for value in excess of $4,623.00 without disclosing that they are bankrupt.
b)    To carry on a business under an assume name without disclosing the true name and status of bankruptcy.
c)    May not leave Australia or do any act to prepare to leave Australia without the permission of the persons Trustee in Bankruptcy.

Property acquired by the person after being made Bankrupt but before being discharged from Bankruptcy is generally divisible among creditors.

If the bankrupt was in a partnership this partnership is automatically dissolved by becoming bankrupt unless specifically agreed in the partnership agreement to be otherwise.

The bankrupt cannot be:

a)    A director of a company.
b)    A member of the Local Council, a Member of House of representatives or the Senate or a member of the State or Territory Houses of Parliament.
c)    Any civil action commenced by the bankrupt (before they became bankrupt) is “stayed” until the Trustee elects to pursue or discontinue the action.

See also What is Bankruptcy?