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O'Connor v Hough (No 2)

 

[2017] QSC 68

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

O’Connor & Ors v Hough & Ors (No 2) [2017] QSC 68

PARTIES:

TERRENCE JOHN O’CONNOR

(first applicant)

and

JUDITH ANN O’DONOGHUE

(second applicant)

and

JOHN NEIVE O’DONOGHUE

(third applicant)

v

BERNARD WILLIAM HOUGH

(first respondent)

and

KENNETH MICHAEL HOUGH

(second respondent)

and

DENBROOK INVESTMENTS PTY LTD ACN 010 236 978

(third respondent)

and

GLENRICK PTY LTD ACN 080 390 745

(fourth respondent)

and

PETER JOHN RIMMINGTON

(fifth respondent)

FILE NO/S:

No 5819 of 2014

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

2 May 2017

DELIVERED AT:

Brisbane

HEARING:

11 April 2016; 12 April 2016; 13 April 2016; 14 April 2016;  15 April 2016; Revised Outline of Argument on behalf of the second applicant received 22 April 2016; Outline of Argument on behalf of the second respondent received 3 May 2016; Outline of Argument in Reply on behalf of the second applicant received 9 May 2016; Supplementary written submissions on behalf of the second applicant received 12 October 2016; Supplementary written submissions on behalf of the second respondent received 24 October 2016; 27 April 2017; Further written submissions on behalf of the second respondent received 27 April 2017

JUDGE:

Burns J

ORDER:

The orders of the court are:

  1. It is declared that the second respondent, Kenneth Michael Hough, committed contempt of court by breaching one of the undertakings contained in the orders of Martin J made on 26 June 2014 and 14 October 2014;
  2. The parties are directed to make submissions on penalty, compensation and costs.

CATCHWORDS:

PRACTICE – CONTEMPT OF COURT – CIVIL CONTEMPT – BREACHES OF COURT ORDERS – BREACHES OF UNDERTAKINGS TO COURT – application seeking committal for contempt of court for failure to comply with undertakings contained in court orders –construction and meaning of undertakings – time for compliance with orders – whether the undertakings, or either of them, were breached – whether a declaration should be made 

Uniform Civil Procedure Rules 1999 (Qld), r 900, r 930, r 931, r 932

Advan Investments Pty Ltd v Dean Gleeson Sales Pty Ltd [2003] VSC 201, cited

ASIC v Sigalla (No 4) (2011) 80 NSWLR 113; [2011] NSWSC 62, cited

Afkos Industries Pty Ltd v Pullinger Stewart (A Firm) [2001] WASCA 372, cited

Australasian Meat Industry Employees’ Union v Mudginberri Station (1986) 161 CLR 98; [1986] HCA 46, cited

Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483; [1965] HCA 21, cited

Azzopardi v R (2001) 205 CLR 50; [2001] HCA 25, cited

Bakir v Doueihi & Ors [2002] QSC 19, cited

Camm v ASI Development Company Pty Ltd [2007] QCA 317, cited

Colefax v Colefax [1933] St R Qd 222, cited

Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375; [2015] HCA 21, cited

Construction, Forestry, Mining and Energy Union v Grocon Constructions (Vic) Pty Ltd [2014] VSCA 261, cited

Costello v Courtney [2001] 1 Qd R 481; [2000] QSC 67, cited

Emmanuel College v Rowe [2014] QSC 238, cited

Evenco Pty Ltd v Australian Building Construction Employees and Builders Labourers Federation (Qld Branch) [2001] 2 Qd R 118; [2000] QCA 108, cited

Grocon v Construction, Forestry, Mining and Energy Union [2013] VSC 275, cited

Hafele Australia Pty Ltd & Anor v Maggbury Pty Ltd & Anor [2000] QCA 397, cited

Hinch v Attorney-General (Vic) (1987) 164 CLR 15; [1987] HCA 56, cited

Jones v ACCC (2010) 189 FCR 390; [2010] FCAFC 136, cited

Kirkpatrick v Kotis (2004) 62 NSWLR 567; [2004] NSWSC 1265, cited

Kooky Garments Ltd v Charlton [1994] 1 NZLR 587, cited

Lade & Co Pty Ltd v Black [2006] 2 Qd R 531; [2006] QCA 294, cited

Matthews v ASIC [2009] NSWCA 155, cited

O’Connor v Hough [2016] 2 Qd R 543; [2016] QSC 4, cited

Palios Meegan & Nicholson Holdings Pty Ltd v Shore (2010) 108 SASR 31, cited

Plomp v R (1963) 110 CLR 234; [1963] HCA 44, cited

Re Colina; Ex parte Torney (1999) 200 CLR 386; [1999] HCA 57, cited

Wainter Pty Ltd, in the matter of New Tel Limited (in liq) [2006] FCA 656, cited

Weissensteiner v R (1993) 178 CLR 217; [1993] HCA 65, cited

Witham v Holloway (1995) 183 CLR 525; [1995] HCA 3, cited

COUNSEL:

C Wilson for the second applicant

A M Christie for the second respondent (until 24 October 2016 and, thereafter, the second respondent appeared in person)

SOLICITORS:

Kenmore Mediation & Law Centre for the second applicant

Aitken Whyte Lawyers for the second respondent (until 24 October 2016 and, thereafter, the second respondent was not legally represented)

  1. The second applicant, Judith Ann O’Donoghue, applies to the court for orders pursuant to the provisions of Chapter 20 of the Uniform Civil Procedure Rules 1999 (Qld) that the second respondent, Kenneth Michael Hough, be dealt with for contempt. She alleges that Mr Hough breached certain undertakings contained in orders of the court made on 26 June 2014 and 14 October 2014.
  2. In support of her application, Mrs O’Donoghue advanced an extensive body of affidavit material. This consisted of six affidavits sworn by her, two by John Neive O’Donoghue (the third applicant and her brother-in-law),[1] two by Margaret-Anne James (a bookkeeper and director of JBS Corporation Pty Ltd) and one by Janet Boulton (a bookkeeper employed by JBS). The exhibits to the affidavits, taken as a whole, filled over ten arch-lever folders. Except for Ms Boulton,[2] each deponent was cross-examined at the hearing. Based on the observations I noted at the time, each did his or her honest best to recall the events about which they gave evidence.
  3. Mr Hough took a different approach. He did not give evidence on his own behalf, whether by affidavit or otherwise, and called only one witness – Della Nicholson, a chartered accountant – to give brief evidence. In other words, save for Ms Nicholson’s evidence, Mr Hough put Mrs O’Donoghue to proof.
  4. For the reasons that follow, I am satisfied beyond reasonable doubt that Mr Hough breached one of the undertakings in question and that, when he did so, he acted with the accompanying state of mind necessary to found a contempt. It will be declared that Mr Hough committed a contempt of the court.

Background

  1. Between late 1995 and early 2014, Mrs O’Donoghue and Mr Hough worked together in the conduct of a business providing accommodation for backpackers in Quay Street, Brisbane. For a period of approximately two years from early 2009, Mrs O’Donoghue was away from the business because of ill health and, in her absence, sole responsibility for its management largely fell to Mr Hough. When Mrs O’Donoghue returned to work in early 2011 she did not like what she saw; the accounts had fallen into disarray and money could not be accounted for by Mr Hough, or at least not to her satisfaction. The pair had a falling out and this led to the commencement of the principal application on 23 June 2014.[3]
  2. The applicants in the principal proceeding (including Mrs O’Donoghue) seek relief under the Trusts Act 1973 (Qld) with respect to the administration of three particular trusts that were used for the conduct of the business. Only two are germane to the contempt application – the Davidson House Trust and the Glenrock Trust. At all material times until 14 October 2014, the trustee for the Davidson House Trust was the third respondent, Denbrook Investments Pty Ltd, and the trustee for the Glenrock Trust was the fourth respondent, Glenrick Pty Ltd. In addition, an associated corporation – Tenancy Management Pty Ltd – features prominently in the context of the contempt application.
  3. The dispute that underlies all of this has been bitter and protracted, and so the parties were encouraged to discuss and, if necessary, mediate their differences. However, although steps were taken in that regard, my overwhelming impression was that Mrs O’Donoghue and Mr Hough did so with heavy feet. In any event, whatever they did in response to the court’s entreaties came to nought.

The undertakings

  1. The principal application came on for hearing before Martin J on 26 June 2014 and was adjourned by consent to a date to be fixed. The order adjourning the application was supported by a number of mutual undertakings given by Mrs O’Donoghue and Mr Hough. These were considered necessary to facilitate, amongst other things, the preparation of financial accounts with respect to the two relevant trusts[4] as well as the associated company.[5] To that end, the firm of bookkeepers to which reference has already been made – JBS – had already been engaged to assist with the task[6] and it was also proposed that a firm of chartered accountants – Merrotts – be retained to complete the task.
  2. The undertakings relevantly required Mrs O’Donoghue and Mr Hough:
    1. “[T]o co-operate, act reasonably and genuinely in, and do all things necessary on their part to assist [JBS] and the said Merrotts to complete their respective engagements in a timely manner”; and
    2. “[T]o answer truthfully queries by [JBS] or Merrotts relating to the third respondent, the fourth respondent, the Davidson House Trust, the Glenrock Trust, Tenancy Management Pty Ltd or the said business”.[7]
  3. On 14 October 2014, the principal application came back on for hearing before Martin J, at which time his Honour made various orders by consent for the removal of the third and fourth respondents as trustees of the Davidson House Trust and the Glenrock Trust respectively. An independent solicitor was appointed in their place. Again, his Honour’s orders were supported by mutual undertakings on the part of Mrs O’Donoghue and Mr Hough.
  4. The undertakings given to the court by Mrs O’Donoghue and Mr Hough on this second occasion relevantly required them:
    1. “[T]o continue to co-operate, act reasonably and genuinely in and do all things necessary on their part to assist [JBS] and [Merrotts] to complete their respective engagements in a timely manner”; and
    2. “[T]o continue to answer truthfully queries by JBS and Merrotts relating to the third respondent, the fourth respondent, the Davidson House Trust, the Glenrock Trust, Tenancy Management Pty Ltd and the backpackers business formerly conducted by that company under the style of ‘Yellow Submarine’”.
  5. As I have previously observed,[8] although there are some variances of expression between the undertakings given on 26 June 2014 and those given on 14 October 2014, they:

“[Are] in substance identical. They operate with respect to the same subjects, and convey the same obligations. The only difference is of a temporal kind; the second of the two orders serves to continue in operation the undertakings given in the first.”[9]

  1. It should be made clear that the undertakings extracted above (at [9] and [11]) were not the only mutual undertakings given by Mrs O’Donoghue and Mr Hough; they were (in the case of each order) two in a series of undertakings that were designed to establish a protocol by which a proper accounting for the business (and the entities through which the business was conducted) could be obtained. For example, another mutual undertaking given in each case was that there be no direct or indirect contact or communication with, relevantly, JBS except in response to a communication initiated by JBS and only then in writing and copying in the solicitors for Mrs O’Donoghue at the time of sending.[10]
  2. Before a person can be found in contempt for breach of an undertaking given to the court, the terms of the undertaking must be readily ascertainable,[11] and the ordinary rules of construction apply.[12] Here, the terms of the two undertakings in question were readily ascertainable, and their meaning was clear. By the first of the two undertakings in question, Mr Hough undertook to cooperate with JBS and, further, to act reasonably and genuinely in, and to do all things necessary on his part to, assist that firm to complete their engagement. Whether Mr Hough satisfied the requirements of that undertaking will involve questions of fact and degree. He was required to act reasonably and genuinely and, for that reason, his conduct falls to be considered with those relative terms in mind. Obviously, Mr Hough could not be expected to assist JBS on matters outside his knowledge or means of knowledge, and the same observation can be made in relation to supporting documents that are not in his possession and which he cannot be expected to obtain.  The position is however different in the case of the second of the two undertakings; Mr Hough undertook to be truthful in his responses to JBS. That undertaking was therefore expressed in more absolute terms. What Mr Hough promised to do – that is to say, to tell the truth – cannot be whittled down “as if it were merely an undertaking … to use ‘genuine and reasonable attempts’” to tell the truth.[13] Thus, in the responses to the queries made of him by JBS, Mr Hough was obliged by his undertaking to at least give his honest recollection in any response. But, whichever one of the two undertakings is under consideration for the purpose of determining the charges, it must be kept in mind that it is one thing to breach an undertaking but it is quite another to breach it in such a way as to be guilty of contempt. I will say more about that when discussing the applicable principles.
  3. It is, however, convenient to deal at this juncture with the submissions advanced on behalf of Mr Hough regarding the proper construction of the undertakings.
  4. First, it was submitted that the first of the two undertakings imposed “no obligation on Mr Hough to act by any particular time” and, for that reason, was unenforceable. That submission must be rejected. The undertaking obliged Mr Hough to act in such a way as to allow, relevantly, JBS to complete their engagement “in a timely manner”. That necessarily meant that Mr Hough was obliged to fulfil his undertaking in the same way, that is to say, within a reasonable time. It is also to be observed with respect to that undertaking that the gist of the allegations made against Mr Hough by Mrs O’Donoghue is not that he failed to cooperate, act reasonably and genuinely in, and do all things necessary on his part to assist JBS in a timely manner; it is that he failed to do so at all.[14]
  5. Second, in written submissions following the conclusion of the hearing, counsel for Mr Hough sought to develop an argument to the effect that, whatever Mr Hough was alleged to have done (or not done) in relation to the undertakings in question, the queries relied on by Mrs O’Donoghue fell outside the ambit of JBS’ engagement specified in the relevant order. Such an argument would appear to fly in the face of a concession made by Mr Hough’s counsel at the hearing to the effect that he would not be submitting that Mrs James (of JBS) went beyond the scope of her engagement.[15] Be that as it may, Mrs James was cross-examined about the terms of her engagement and, at least to that extent, I am prepared to deal with the written submissions subsequently made. In that regard it was submitted that, because Mrs James agreed to prepare standard bookkeeping reports (and not draft financial accounts), the work she was doing was not the type of work contemplated by the engagement specified in the undertakings contained in the order of 26 June 2014, that is, an engagement “to complete the financial books, and prepare draft financial accounts and the Business Activity Statement of the third respondent, the fourth respondent, the Davidson House Trust, the Glenrock Trust and Tenancy Management Pty Ltd for the years ended 30 June 2010, 2011, 2012, 2013 and 2014”.[16] It was therefore submitted that any queries directed to Mr Hough could not have been for the purpose of assisting JBS to complete that particular engagement. For this reason, it was submitted, it does not matter how or if Mr Hough responded to those queries. I do not agree. The protocol established by the mutual undertakings incorporated in the two orders contemplated that JBS would work hand in hand with Merrotts to prepare and then finalise, amongst other things, financial accounts for the entities conducting the business. The work JBS was required to do, including the quality assurance reviews and draft ledgers in relation to which the relevant queries were made, was all necessary to enable Merrotts to finalise the financial reports and prepare income tax returns with respect to the specified financial years. To the point, although the engagement recorded in the order of 26 June 2014 was described to be an engagement of JBS to “complete the financial books and prepare draft financial accounts”, what the undertaking required was that the engagement be confirmed. In that regard, what JBS agreed to do was to prepare “standard bookkeeping reports for each financial year to enable [Merrotts] to prepare the … financial accounts”.[17] JBS did not agree to do anything else. That was the engagement to which the order referred and that was the engagement in relation to which the queries related. There is accordingly no substance in this submission.

The contempt application

  1. By the contempt application,[18] Mrs O’Donoghue alleges that Mr Hough breached the undertakings set out above (at [9] and [11]). In particular, it is charged that Mr Hough did so by:

“(a) failing to co-operate, act reasonably and genuinely in, or do all things necessary on his part to assist [JBS] to complete their engagement by failing or refusing to answer all queries by JBS; [and]

  (b) failing to answer truthfully queries raised by JBS.”

  1. The two charges therefore solely relate to what Mr Hough undertook to do in connection with JBS. They otherwise follow the language of the undertakings. Extensive particulars for each are supplied in the body of the contempt application. The charges, together with these particulars, are reproduced in the Schedule to these reasons for ease of reference.
  2. Lastly, I record for completeness that, by an amended application filed on 17 November 2015, Mr Hough sought to strike out the contempt application on various grounds. The strike out application was heard by me on 2 November 2015, and subsequently dismissed. I published my reasons on 8 January 2016.[19]

Applicable principles

  1. The jurisdiction of the court to punish for contempt is both inherent and provided for under Chapter 20 UCPR.[20] Because the liberty of the subject is potentially at stake, it is well established that nothing short of proof to the criminal standard will suffice in order to make out a case of contempt.[21] When an applicant moves the court to punish someone for contempt, the onus is at all times on the applicant and never leaves the applicant.[22]
  2. A proceeding such as this for contempt is essentially criminal in nature, but it is not a proceeding that can be equated with a trial on indictment.[23] Rather, it is a proceeding in the civil jurisdiction of the court[24] and, as such, the UCPR applies. Strict compliance with those rules of procedure is required.[25] That said, although all of the elements of a charge of contempt must be made out, the particulars of the charge do not need to be made out in their entirety; it is enough if those particulars which are established by the evidence are sufficient to constitute proof of the essential elements of the charge.[26]
  3. In order to prove a contempt involving the breach of an undertaking, under the general law it must be established that “the order is clear and capable of compliance, that the alleged contemnor has knowledge of the terms of the order and has by his act or omission breached the terms of the order”.[27]  Furthermore, “the public interest requires that any disobedience more than casual, accidental or unintentional must at least be regarded as wilful”.[28] In that respect, a “deliberate act or omission which is in breach of an … undertaking will ordinarily constitute wilful disobedience unless the alleged contemnor is able to show, by way of exculpation, that the default was casual, accidental or unintentional”.[29] There must be “actual disobedience”, and that will not be so where the breach “occurs by reason of circumstances outside the control of the alleged contemnor”.[30]
  4. In addition to the general law, there is a statutory basis for the court to deal with cases of contempt. By r 900 UCPR, an undertaking, other than for the payment of money, may be enforced in various ways. In the case of an individual, this includes punishment of contempt: r 900(1)(a). Furthermore, if a party is in breach of an undertaking, another party may apply for compensation to the court and, if the court decides that the first party is in breach and that the second party suffered loss because of the breach, the court may give judgment for the second party in an amount the court decides should be paid: rr 900(3) and (4). Rule 930 UCPR applies if the court decides that a contempt has been committed. In the case of an individual, the court may punish that individual by making any order that could be made under the Penalties and Sentences Act 1992 (Qld): r 930(2). The court may also make an order for punishment on conditions, including, for example, a suspension of punishment during good behaviour, with or without the giving of security: r 930(4). If the court orders that the contemnor be imprisoned, it must specify the prison at which he or she is to be imprisoned: r 931(1) UCPR. Costs are at the discretion of the court whether a specific punishment is imposed or not: r 932 UCPR.
  5. Rule 930 UCPR does not require that it be established that the breach of the order was worse than “casual, accidental or unintentional”.[31] As such, the circumstances of intention attending a breach are not relevant to whether a contempt has occurred, but they will be relevant to whether the contempt is punishable by sanctions previously thought to be appropriate only to intentional disobedience of a court order. As Keane JA (with whom Jones J agreed; Jerrard JA dissenting) said in Lade & Co Pty Ltd v Black:[32]

“The general language in which these rules are cast does not encourage the introduction of a limitation on their operation. It is clear from the discussion above that, historically, disobedience to a court order, even if not wilful, was accurately described as a ‘contempt’ even though it was also referred to as a civil contempt (and thus a contempt which was not apt to attract criminal punishments under the general law apart from statute).

Furthermore, r 930 appears in the UCPR, a body of rules designed to regulate civil proceedings and, in particular, to provide generally for sanctions for disobedience to orders of the court in civil proceedings. In such a context, it is unlikely that the lawmaker intended a general reference to ‘contempt’ to be confined to a narrow class of contempts which were traditionally described as ‘criminal’.

I consider that it is necessary to give the word ‘contempt’ its well understood general meaning without importing limitations on the language of the rules which would mean that those contempts previously referred to as ‘civil contempts’ are excluded from the scope of the UCPR. This approach has the advantage of bringing clarity and certainty to the extent of the powers which may be exercised by the court to deal with contempts of all kinds. No doubt, the historical limitations on the exercise of the power to punish by fine draw support from the reluctance of the courts to punish conduct which is not intentionally wrongful by criminal sanctions; but there is a substantial degree of indeterminacy associated with the common law basis for the court's power to punish for contempts. This Court should not be astute to frustrate a legislative attempt to put the court's power on a simpler and clearer footing than that which can be discerned from judicial discussion of this subject. And, as will be seen in a moment, in Queensland, rules of court having the force of statute have long avoided the need to proceed by reference to the somewhat elusive differences in judicial language which characterised the discussion of these matters in the older English authorities. The policy of the law against the imposition of punitive orders on those who are not guilty of wilful misconduct will, no doubt, be reflected in the exercise of the judicial discretion conferred by the rules and the Act. Indeed, a real benefit of r 930 of the UCPR is that it enables the court to come to a view of the nature of a contemnor's conduct and the sanction appropriate for that conduct without having to mediate those considerations through indeterminate formulae, such as ‘casual, accidental or unintentional’. Under r 930 of the UCPR, a court may deal with contempt on a case-by-case basis according, inter alia, to the degree of personal fault revealed by the circumstances of the case.”[33]

  1. What then is the approach to be taken to the determination of these charges? Is it necessary for Mrs O’Donoghue to prove that Mr Hough wilfully breached the undertakings in question, or either of them? That would be so if the contempt application was being determined in accordance with the general law but it is not necessary when the court is exercising the power conferred by r 930 UCPR.
  2. By the contempt application, Mrs O’Donoghue seeks “an order under rr 900, 930 and 931 [UCPR], or alternatively, in the exercise of the inherent jurisdiction of the court”.[34] However, in her counsel’s oral address it was submitted that “the requirements of a mental element would apply to both [charges] equally”.[35] Then in the submissions filed on Mrs O’Donoghue’s behalf following the hearing it was again conceded, that “the same mental element applies” to both charges.[36] The submissions then proceed to discuss the authorities at general law as well as r 930 UCPR and the judgment of Keane JA in Lade & Co Pty Ltd v Black.[37] As I apprehend those submissions, following as they do the concession that was expressed, Mrs O’Donoghue does not submit that, if Mr Hough’s breach was merely casual, accidental or unintentional, he should be adjudged guilty of contempt. Rather, she appears to accept that it must be proved beyond reasonable doubt that Mr Hough acted (or failed to act) wilfully before either of the charges can be made out.[38] Indeed, that the court should approach the determination of the charges in this way was confirmed by a submission later made by Mrs O’Donoghue’s counsel:

“Because the contempt of court consists of a failure to comply with an undertaking of the court, Mrs O’Donoghue must demonstrate that Mr Hough’s misconduct was wilful (not merely casual, accidental or unintentional).”[39]

  1. At first glance that may appear to be a generous concession because it assumes a higher onus than might be necessary to establish a contempt under r 930 UCPR. However, given the way in which the charges had been framed, particularised and prosecuted, I think Mrs O’Donoghue’s counsel’s concession is entirely appropriate. The cases advanced in support of both charges alleged deliberate conduct – in the case of Charge (a), deliberate failures or refusals to cooperate, etc and, in the case of Charge (b), deliberate lies.[40] Neither case was put on the basis that an unintended breach of the terms of the undertaking would be enough. Furthermore, the wording of the charges does not support such an approach; neither charge introduces any notion of neglect or inadvertence. Rather, positive failures, refusals and untruths are pleaded and are alleged to have occurred. It is also to be observed that, in the submissions filed on Mr Hough’s behalf following the hearing, it was submitted that the breach must be “wilful and not casual, accidental or unintentional” before a breach may be regarded as constituting a contempt,[41] and no demur was expressed to that proposition in the submissions in reply filed on behalf of Mrs O’Donoghue.[42] I will therefore proceed in accordance with the concession made on behalf of Mrs O’Donoghue and consistently with the way in which the case was litigated to require proof to the criminal standard that the alleged breaches were wilful.
  2. Two final points should be mentioned. The first is that, because a finding that Mr Hough was guilty of contempt necessarily depends on the court’s willingness to draw an inference (in the case of each charge) that he acted (or failed to act) wilfully, it is important to keep in mind that such an inference must not only be a rational inference from the proven circumstances but it must also be the only rational inference capable of being drawn.[43] The other point is that, among the submissions that were put in writing on Mrs O’Donoghue’s behalf following the hearing, was a submission that the court should draw an adverse inference based on Mr Hough’s failure to give evidence. In supplementary written submissions invited by the court on this point, counsel for Mrs O’Donoghue clarified that this submission “chiefly” concerns Charge (b) rather than Charge (a).[44] I shall accordingly consider it when determining Charge (b).[45]

Findings

  1. As already discussed,[46] the terms of the undertakings in question were clear and capable of compliance. Also, it was not disputed that Mr Hough had knowledge of those terms. The real question therefore is whether Mr Hough has, by act or omission, breached the undertakings in either of the respects charged and particularised and, if so, whether he did so wilfully.
  2. In that regard, what in broad scope is charged and particularised is that Mr Hough failed or refused to act reasonably and genuinely in, and do all things necessary on his part to, answer JBS’ queries[47] and, further, that he was being untruthful in the answers he gave in response to a number of those queries.
  3. It matters not whether what is alleged in the particulars by way of default in the performance by Mr Hough of what he undertook to do was important or even critical to the completion by JBS of its engagement, although that is something that may go to penalty. Again as already discussed,[48] the relevant queries in each case were made of Mr Hough by JBS for the purpose of completing their engagement. To the point, the draft ledgers and quality assurance reports about which the queries were directed were part and parcel of the work necessary to be undertaken by JBS in order to complete that engagement. As such, if Mr Hough did fail or refuse to act reasonably and genuinely in, and do all things necessary on his part to, answer those queries, he will have acted (or failed to act) in breach of the first of the two undertakings set out above (at [9] and [11]). Of course, that does not mean that Mr Hough thereby committed a contempt; that will only be so where his failure or refusal was at least wilful, for the reasons explained above (at [23] to [29]). As to the second of the two undertakings, if Mr Hough did not respond truthfully to the relevant queries, he will have breached that undertaking but, again, it does not follow that a contempt will have been committed unless it is also found that he was deliberately untruthful.
  4. What follows are the facts as I find them to be and my conclusions on the ultimate question whether I am satisfied beyond reasonable doubt that Mr Hough wilfully acted in contempt of the undertakings, or either one of them. It is useful to commence with some further background regarding the requests made by JBS for assistance, that is to say, the so-called “queries”. In this regard, it is to be observed that, after the abandonment of a number of the particulars of the charges, what remains has a focus on the queries contained in two emails from Mrs James to Mr Hough’s solicitor, Robert Aitken, dated 29 May 2015 and 16 June 2015 and two responding emails from Mr Aitken dated 12 and 22 June 2015. Of course, that is not to say that there is not a considerable body of surrounding evidence because there is, but at the centre of the charges and remaining particulars was the contents of those four emails together with their attachments.

The queries

  1. In about April 2013, Mrs O’Donoghue and Mr Hough engaged JBS to prepare draft financial accounts in respect of Tenancy Management, Denbrook and Glenrick. From that date on, they each progressively provided JBS with business records and other documents relating to the business. Relying on those records along with information provided to them by Mrs O’Donoghue and Mr Hough, JBS attempted to construct the draft financial accounts. Over time, Mrs James of JBS had a number of queries for Mrs O’Donoghue and Mr Hough and they needed to be answered so that she could finalise the accounts and, as matters developed, provide them to Merrotts for finalisation.
  2. Following the making of the first order in which the undertakings were contained, on 3 July 2014 Mrs James received a box of records from Mrs O’Donoghue’s solicitor. One week later, Mr Hough’s solicitor provided her with “boxes of records, primarily business records relating to Tenancy, Denbrook and Glenrick”. Subsequently, she directed her staff to sort through the records and documents and enter the data on their computer system using MYOB software. In consultation with her senior bookkeeper, Ms Boulton, it was decided that draft ledgers, profit and loss statements, balance sheets and GST and payroll summaries should be prepared for the group of companies. Once the data entry was completed for each financial year under consideration, draft balance sheets, profit and loss statements and general ledgers would be prepared. It was at this point that any queries would be raised with Mrs O’Donoghue and Mr Hough.
  3. It is important to note some observations that were made by Mrs James at around this time. She observed that there was no systematic recordkeeping for receipts or expenses with respect to the business in the period from 1 July 2009 to early 2011. In the same period, other than cash deposits on 13 September 2010 and 29 November 2010, no cash deposits were made to Tenancy Management’s bank account when, as Mrs James deposed in her affidavit, “the nature of the business necessarily indicated there must be cash receipts”. She also observed that the Business Activity Statements with respect to Tenancy Management and Denbrook for the 2010, 2011, 2012, 2013 and 2014 financial years were “substantially incomplete”. Wage sheets signed by the employees for the period from 1 July 2009 to January 2011 were missing. Company cheques were “used in a haphazard manner; butts had little detail”. Recordkeeping for employee superannuation was regarded by her as “poor”.
  4. So far as events of relevance are concerned, on 1 October 2014 Mrs James forwarded an email to the respective solicitors for Mrs O’Donoghue and Mr Hough. Attached was a “query list” dated 30 September 2014 with respect to the financial performance of Tenancy Management in the 2011 financial year together with “all relevant reports pertaining to these queries”. A “query list”, also with respect to the 2011 financial year, was forwarded by Mrs James in a separate email regarding Denbrook. Mrs James advised in both emails that “these queries will need to be resolved prior to us forwarding reports relating to this financial year onto the accountant”.[49]
  5. Leaving to one side the responses received on behalf of Mrs O’Donoghue, on 3 October 2014, Mrs James received an email by way of reply from Mr Hough. This related to the queries made about Glenrick. Mrs James responded on the same day, incorporating in her reply email her further comments in red font. Mr Hough’s solicitor at the time was Greg Romans. Mr Romans responded by email on 7 October 2014, and he incorporated Mr Hough’s “replies” in his reply email in blue font.
  6. On 8 October 2014, Mr Romans forwarded an email to Mrs James by way of response to her queries about Denbrook. He did so by forwarding a copy of an email he had received from Mr Hough. Mrs James responded on the same day, incorporating her comments in her reply email in red font. At the same time she wrote:

“It would be appreciated if the balance of these queries and the [Tenancy Management] queries could be addressed as soon as possible to enable completion of the 2011 FY, thank you.”

  1. On 9 October 2014, Mr Romans forwarded an email to Mrs James that he had received from Mr Hough in which he advised that he had been “temporarily diverted with other urgent issues”. On 13 October 2014, Mrs O’Donoghue’s solicitor wrote to Mrs James noting that Mr Hough had “not addressed the Tenancy Management queries”.
  2. On 20 October 2014, Mr Hough forwarded an email to Mr Romans in which he set out his response to a number of the queries that Mrs James had raised with respect to Tenancy Management, Denbrook and Glenrick. On the following day, Mr Romans forwarded a copy of that email to Mrs James as well as to the solicitor for Mrs O’Donoghue. Attached to the email was a copy of various documents that had been referred to in Mr Hough’s email. Among these were documents related to a debt said by Mr Hough to have been owed by Denbrook to a company trading as “Magic Fencing” along with an invoice for a debt Mr Hough said was owed by Denbrook to a wastewater treatment company.
  3. On 23 October 2014, Mr Romans forwarded an email to Mrs James. By then, the second of the two orders containing the undertakings had been made. Mr Hough’s responses to the queries appeared in the body of the email in blue font. The solicitor wrote:

“Below in blue are Ken’s responses to your attached queries. Ken want [sic] to know if there are any other outstanding queries that remain unanswered.”

  1. Mrs James responded by email on the same day (23 October 2014). She thanked Mr Romans for “Ken’s responses” and said that she appreciated “Ken taking the time to answer the question [sic] in some depth”. However, she made the point that she was “aware of most of the issues Ken has highlighted … when dealing originally with both directors”. She then set out a list of “remaining queries that we still require specific answers to” from Mr Hough relating to both Tenancy Management and Denbrook. She later deposed in her affidavit that she “did not regard [Mr Hough’s] responses contained within Mr Romans’ email as satisfactory as they did not address the queries that [she] had raised in her queries list of 30 September 2014”.
  2. On 21 November 2014, Mrs James forwarded an email to the respective solicitors for Mrs O’Donoghue and Mr Hough. It attached a “query list” bearing the same date with respect to the financial performance of Tenancy Management in the 2012 financial year. Again, Mrs James advised that “these queries will need to be resolved prior to us forwarding reports relating to this financial year onto the accountant”.
  3. On 27 November 2014, Mr Romans forwarded an email to Mrs James in reply to her queries. Again, what he did was to forward a response that he had received from Mr Hough which he reproduced in his email in black font. Before dealing with the specific queries, Mr Hough wrote:

“The only information I have in connection with … all the queries received to date is the actual email on which they are presented. I have no records with which to refer the queries. In most cases previously, I have relied on my memory to recall the topics raised, and ventured best estimates and beliefs in my replies.

1.  In any event, due to the barrier created by the current Supreme Court Orders, I do not have access to the actual bookkeeping and Bookkeepers which give rise to the queries presented. There is no context for my review.

2.  About two years ago, I received an extract of bookkeeping prepared by JBS for the Company. At the time I realised that due to my lack of knowledge and comprehension of the bookkeeping system, I had no idea how to interpret their figures. I need the help and explanatory advice of the Company Bookkeepers to understand the product output.

3.  Therefore it should be understandable that I would not necessarily comprehend the accounts presently being prepared without explanations from the Bookkeepers during a review of their material. I would have hoped this would be a part of the service normally supplied to Directors of Client Companies by Bookkeepers.

4. The present position eventuating from the Supreme Court Orders:-

1.  prevents me from seeking advice and explanations from the Bookkeepers of material presented by them to me and vice-versa,

2.  prevents me from checking and ensuring the material presented by me is being interpreted and recorded in accordance with my intentions when I created transactions,

3.  prevents the Directors of the Companies from seeking advice and supplying explanations and correct interpretations to Bookkeepers whose role includes collection of raw data and processing it in the way which was intended by the creator of transactions. Presently, the bookkeepers are unfortunately faced with a terrible dilemma of deciding the most likely interpretation of data in their view.

4. Allows only the transfer of information to be messaged via a Solicitor who understandably is not necessarily qualified to assist with accounting or bookkeeping input or comment.

5.  An implication in the 21-11-14 JBS email is that the 2010 and 2011 accounts may have been sent to Accountants for further processing. I understood that the periodically finalised accounts from JBS would be presented to the Directors to ensure faithful interpretation of the data presented to them by the Directors.”

  1. On 7 December 2014, Mrs James forwarded an email to Mr Romans and others in which she responded to Mr Romans’ email of 27 November 2014. She incorporated her comments in red font in a copy of that email which she included in her response. She said a further email to all parties later that day to update them is to progress and, on the following day, she forwarded an email to Mr Romans listing the bank statements that she required in order to complete the accounts.
  2. On 10 December 2014, Mrs James received an email from Mr Hough responding to her email of 27 November 2014. Excerpts from the cash receipt book for Tenancy Management were attached. On 12 December 2014, she received another further email from Mr Hough by way of further response.
  3. On 9 March 2015, Mrs James forwarded an email to Mrs O’Donoghue, her solicitor (Mr O’Donoghue) and Mr Romans, along with others. There were a number of attachments, and all related to the financial performance of Tenancy Management. The attachments included balance sheets for the 2009 and 2010 financial years, a profit and loss statement for the 2010 financial year, a general ledger for the 2010 financial year, verifying balance sheet for the 2009 financial year, a quality assurance review for the 2010 financial year and a payroll analysis. Two days later (11 March 2015), Mrs James forwarded another email to the same persons (and others) with more attachments. Again, they all related to the financial performance of Tenancy Management in the 2011 financial year. They included a balance sheet, profit and loss statement, general ledger and quality assurance review. On the same day, by separate email, Mrs James forwarded an email to the same recipients attaching a balance sheet, profit and loss statement, general ledger and quality assurance review with respect to the financial performance of Denbrook in the 2011 financial year. Further similar emails from Mrs James were sent and followed the same pattern.
  4. Ultimately, the point was reached by April 2015 that draft ledgers in respect of Tenancy Management including those for the 2010, 2011, 2012 and 2014 financial years along with the draft ledgers in respect of Denbrook for the 2011 financial year (all of which were prepared by JBS) had been sent to, relevantly, the solicitors for Mr Hough. Accompanying a number of these were the various “query lists”, financial reports and quality assurance reviews by which additional information or verification was sought to enable the ledgers to be finalised and then submitted to Merrotts. Relevantly, by 20 May 2015, Mrs O’Donoghue had answered all queries directed to her;[50] the only outstanding queries were for Mr Hough.
  5. Two days earlier (18 May 2015) Mr Aitken replaced Mr Romans as the solicitor on the record for Mr Hough. He had been acting on Mr Hough’s behalf in lieu of Mr Romans since at least 16 March 2015 and, thereafter, he remained as Mr Hough’s solicitor at all times material to the charges.
  6. On 21 May 2015, the trustee who had been substituted for the third and fourth respondents by the order of the court made on 14 October 2014 forwarded a letter by email to Mrs James, Mr Aitken and Mrs O’Donoghue. He noted that he had reviewed the “various correspondence between you all over the last few weeks” and felt “obligated to respond to some of the issues raised” in that correspondence. After doing so, he proposed a number of steps to “progress the matter” and, as an alternative, suggested that a meeting be convened at his office “between all the parties” on 1 or 2 June 2015 “to see if we can agree on a way forward”.
  7. On 25 May 2015, Mrs James forwarded an email to Mr Aitken (copying in others) in which she commented on an email forwarded to her by Mr Aitken on 16 March 2015. Her comments appeared in red font in a copy of Mr Aitken’s email that was included in her response.
  8. On 29 May 2015, Mrs James forwarded by email a letter to Mr O’Donoghue, Mr Aitken and the trustee. Enclosed with that letter was a “list of all entities [sic] outstanding queries”. The covering letter concluded in these terms:

“In my opinion a meeting between all parties at this stage would not be advantageous until such time as all queries been responded to and resolved.”

  1. Mr Aitken attempted to respond by email on 12 June 2015. Mr O’Donoghue as well as the trustee were copied in on the response. His email commenced:

“I refer to your correspondence of 29 May 2015 which was in response to [the trustee’s] request for you to document outstanding matters. Please find attached my client’s comments to the matters and relevant documents.”

  1. Mr Aitken’s email went on to state that these comments were “printed on the reply to [the] email from” the trustee and that they were “handwritten to refer to each point”. He stated that the “exceptions are to a great degree answered as best my client is able” given, inter alia, “he does not have access to most of the source data” and the “propositions are not in a familiar context to him”. The handwriting on the attachment to which Mr Aitken referred was in red. His email concluded:

“It appears there is a need for discussion to resolve any outstanding queries. My client is generally available as required.

I confirm my client disagrees with the books that have been prepared and believes they are incorrect. As he said on many occasions, he also requires access to the documents and information provided in total, as the journals provided are to a large extent meaningless without such access”.

  1. It appears that Mr Aitken’s email “bounced” because of the size of the attachment and so, about an hour later, he forwarded a monochrome copy to Mrs James together with a copy of his earlier email. Mr Aitken stated:

“I’ve tried to send you what my client provided. His answers were in colour and easy to read. I [note] the attachments appear [too] large for your server. I have re-scanned these in black-and-white and attached here.”

  1. Three days later (15 June 2015) Mr Aitken forwarded to Mrs James a colour copy of the same attachment although, on this occasion reduced in size. His email read:

“I have reduced the size of the attachments and so re-send these now so you can see the commentary in colour which may make it easier to see my client’s comments.”

  1. On 16 June 2015, Mrs James responded to Mr Aitken. She had inserted comments in red font in a copy of Mr Aitken’s email of 12 June 2015 as well as on a copy of one of the documents that had been attached to that email. These comments, she advised in the covering email, had been inserted by way of “response to [Mr Hough’s] reply to queries”.
  2. Lastly, on 22 June 2015, Mr Aitken forwarded an email to Mrs James (copying in others). Attached was a document entitled, “Comments by KH in bright blue”, and the attachment bears a large number of comments typed in blue font. Mr Aitken’s covering email was in these terms:

“Attached is JBS [sic] latest list of questions with Ken Hough’s comments. Mr Hough has worked on this constantly since it was received.

I am instructed that the original records were stored in the work shed at the hostel in cardboard boxes. Some older records were stored offsite but were from the distant past. These records could not have been involved in any mix-up. He has been searching the retrieved old records for more recent documents mixed with them. While he has found some, they are not relevant to the current questions. There are boxes of records missing for fy/e 2007, 2008 and 2009. Some of these which were stored at 58 Quay St were removed in early 2011. Mr Hough does not have these records. There are boxes of overlooked older records he collected from the work shed after Mrs O’Donoghue had removed company records from the hostel (by agreement) just prior to the property being handed over to the new owners.

No matter how hard Mr Hough tries, he cannot make sense of many of the statements by JBS referring to bulk amounts with questions. JBS state Mr Hough does not need to see the original documents they have posted from. This is rejected by Mr Hough as they would give context to the questions and make them understandable and answerable.

I am instructed and stated previously, all transactions between 1-7-09 and 18-1-2011 required only Mr Hough’s approval, and all transactions after 18-1-11 required joint approval. He is aware of only a small percentage of the still unauthorised transactions carried out by Mrs O’Donoghue without his knowledge or consent after 18-1-11. The wages transactions made by Mrs O’Donoghue of which Mr Hough is aware are incorrect.

My client believes that JBS is going to unreasonable lengths to avoid going through the work with him. He considers an enormous amount of time and money has been wasted by the current process of seeking explanations of concepts put with insufficient context to identify them. Answers can only be supplied by Mr Hough by starting at a common level of understanding – i.e. the source documents and information provided by both entity Managers.

I am instructed that as he has seen names on the JBS bookkeeping of people who should not be there and has not seen the names of creditors on the Balance Sheet who should be there, it is reasonable for Mr Hough to ask to see detail of the transactions being posted. He requires access to the source documents to these transactions.

There are many questions about ‘whose cash’ paid for accounts. Many times he has pointed out that the entities were sufficiently indebted to my client that all cash received during the period was applied to reducing the line of credit he supplied to the entities. Having no cash of their own, the entities could not pay for cash purchases. Therefore the purchases were paid for by the only other source of cash available to them – my client.

My client has no qualms about JBS finding calculation errors or transcription errors. He looks to JBS to address and correct this as part of their review of source information.”

  1. I turn now to a consideration of the individual charges.

Charge (a) – failing or refusing to answer JBS’ queries

  1. By this charge, it is alleged that Mr Hough failed to co-operate, act reasonably and genuinely in, or do all things necessary on his part to assist JBS to complete their engagement. The respects in which Mr Hough is alleged to have so failed are particularised as a series of failures to “provide information known by him in relation to” a number of specified queries and, further, by failing to provide “verification” with respect to the information sought in each instance.
  2. For the reasons I am about to state, it is not necessary to examine each particular in order to determine this charge. There are a number of difficulties with the charge, and ultimately it must fail.
  3. First, there is no evidence as to what information was “known” by Mr Hough with respect to any of these matters. Of course, it may be possible for the court to infer knowledge from other facts that are proved but the particularised instances are quite specific. They concern particular balances in the draft ledgers prepared by JBS in relation to the movement of cash and funds allegedly given to Mr Hough to bank (particulars (a)(i)((A)(1), (a)(i)(B)(2) and (a)(i)(C)(3)) the use of cash allegedly given to Mr Hough for company expenses (particular (a)(i)(A)(2)), the source of funds for the payment of wages (particulars (a)(i)(B)(2A) and (a)(ii)(B)(1)), the source of cash funds (particular (a)(i)(B)(3)), the movement of cash (particular (a)(i)(C)(2)), his use for company expenses of funds from shifts that had been allegedly given to him for banking (particulars (a)(i)(D)(2) and (a)(i)(E)(2)), the source of funds for payment of Magic Fencing (particular (a)(i)(E)(2A)), the source of funds used to pay land tax (particular (A)(ii)(A)) and the source and “proof of payment” of wages to employees in the 2011 financial year (particular (a)(ii)B)(1)). In the case of each particular a specific amount (or balance) is particularised. The evidence overall is quite insufficient in my view to draw a rational inference either way as to Mr Hough’s state of knowledge regarding these specific matters.
  4. Secondly, what the evidence does clearly establish is that the records for the business were in a state of disarray before JBS was engaged and that the records in the possession of Mrs O’Donoghue and Mr Hough were then passed on to JBS. There is no evidence, for example, that Mr Hough retained possession of any records that might have assisted him to answer the queries that are particularised in support of this charge. Mr Hough asked on more than one occasion for access to the source documents in order to answer the queries but that request was not acceded to. A meeting between all parties was suggested by the trustee and later requested by Mr Hough’s solicitor but, like the requests for access to the source documents, no such meeting ever took place. Mr Hough also expressed, either through his solicitor or directly in the responses from him that were forwarded to Mrs James, his concern about the accuracy of the draft ledgers about which he was being questioned. After all, they were not of his creation; the draft ledgers were constructed by JBS in accordance with the process earlier described. When he subsequently consulted Ms Nicholson to assist him to answer the outstanding queries, she told him that she would need the MYOB data files as well as the source documentation in order to do so.[51] In such circumstances, and although it might be accepted that Mr Hough failed to respond to the particularised queries on which Mrs O’Donoghue relies, it cannot be said that any failure to provide “verification” with respect to those matters could amount to a failure to co-operate, act reasonably and genuinely or do all things necessary on his part.
  5. Thirdly, it was submitted on behalf of Mrs O’Donoghue in the case of each particular that:

“Mr Hough did not provide proof. He did not produce any supporting documentation at all. Mr Hough did not respond that he could not or that he depended on access to documents not in his possession before he could provide proof”.

Whilst it may again be accepted that Mr Hough “did not provide proof” or “any supporting documentation”, I do not accept the balance of that submission. Although Mr Hough may not have provided a discrete response in relation to each of the specific queries in question to the effect that he required “access to documents not in his possession before it can provide proof”, that was the very complaint made either by him or on his behalf by his solicitor, and on more than one occasion.[52]

  1. Fourthly, the grievance that underlies this charge is that, although Mr Hough answered a large number of queries, he failed to answer all of them. Although that may be true, before I could be satisfied beyond reasonable doubt that the charge has been made out, I would also need to be satisfied that Mr Hough’s failure to answer these particular queries, or any one of them, was sufficient to constitute a failure to co-operate, act reasonably and genuinely or do all things necessary on his part to assist JBS. After all, it is not suggested that Mr Hough did nothing. To the contrary, he answered a significant number of queries which I must infer were answered to Mrs James’ satisfaction because those matters were not queried by her again. Furthermore, although the queries the subject of this charge were “outstanding”, some sense of proportion must be factored into the equation. To the point, I am not persuaded that, in an overall sense, a failure to co-operate, to act reasonably or to act genuinely can be imputed in circumstances where most, but not all, queries have been responded to by Mr Hough or, at least, I am not persuaded about that to the criminal standard. On the other hand, a failure to answer the outstanding queries might constitute a failure to “do all things necessary” on Mr Hough’s part to assist JBS but, in such a case, I would also need to be persuaded to the same standard that such a failure was wilful as opposed to something that has been overlooked, misapprehended or considered by Mr Hough to have already been covered by the catch-all reservations expressed on more than one occasion to Mrs James. None of those possibilities can be dismissed as fanciful or even unlikely. Given their existence, I am left in reasonable doubt about whether Mr Hough’s alleged failures were wilful.
  2. It follows that Charge (a) must fail.

Charge (b) – failing to answer truthfully JBS’ queries

  1. In contrast to the position that obtained in relation to Charge (a) where it was alleged that Mr Hough failed to act, each of the particulars relied on in support of Charge (b) allege a positive act on his part, that is, the making of a response was untruthful, and deliberately so.
  2. In written submissions advanced on Mr Hough’s behalf, a number of arguments were advanced to the effect that the factual premise for a number of the queries to which Mr Hough responded was flawed, that the draft ledgers to which the queries were directed were documentary hearsay and that they were otherwise unreliable. These submissions must be rejected. Even if the factual premise for a particular query was flawed or the part of the draft ledger in question was wrong, that will not excuse a failure to tell the truth. Once Mr Hough embarked on a response, he was obliged by his undertaking to be truthful in that response. It was also submitted that there was no direct evidence to prove that Mr Hough told a deliberate untruth, but that submission overlooks the ability of the court, if appropriate, to draw inferences from proven facts as to Mr Hough’s state of mind.
  3. As to the submissions made on Mr Hough’s behalf that there was no satisfactory evidence to prove that Mr Hough was the author of the handwritten or typed responses in question, these must also be rejected. I have no doubt that Mr Hough was the author of the handwritten and typed comments and responses in question. Indeed, that is the only rational conclusion that can be reached on the available evidence. Such a conclusion flows from the language employed in the comments and responses by Mr Hough (including use of the personal pronoun), the clear attribution by his solicitor of the authorship of those comments and responses to Mr Hough, the requirements of the communications protocol embodied in the undertakings (which effectively required Mr Hough to communicate with JBS through his solicitor) and the absence of any other evidence to the contrary. I am satisfied beyond reasonable doubt that Mr Hough was, in the case of each of the responses particularised in support of this charge, the author of them and, further, that they were forwarded by his solicitor to Mrs James at Mr Hough’s direction and on his instructions. To the extent that a number of his responses were supplemented by comments supplied by Mr Aitken, I am also satisfied beyond reasonable doubt that those comments were made on Mr Hough’s instructions and, further, that they accurately reflected those instructions.[53]
  4. I turn now to the particulars. Although each will be considered below, it is helpful to state by way of overview that the success of Mrs O’Donoghue’s case in support of this charge depends on the court being satisfied beyond reasonable doubt that Mr Hough was deliberately untruthful when, in his comments and responses, he conveyed that: (1) as at 1 July 2009, Tenancy Management, Denbrook and Glenrick were indebted to him and had no cash of their own apart from the front desk cashier float; (2) at no time since 1 July 2009 were the advances that he made to Tenancy Management, Denbrook and Glenrick ever repaid; and (3) as none of the three entities had cash of their own between 1 July 2009 and 14 January 2011, all cash payments and bank cash deposits were funded by him.

Particulars (b)(i)(A)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 12 June 2015 that “cash received from [Tenancy Management], Denbrook and Glenrick in the period after 1 July 2009 was paid to him in reduction of loans that he had made to each of the three entities” was untruthful.
  2. The query in relation to which Mr Hough provided that response first appeared in a quality assurance review emailed by Mrs James to Mr Aitken on 9 March 2015 and concerned a particular sum of money. This was noted by JBS to be “the difference between cash received, purchases made directly from cash and funds given to [Mr Hough] to bank”. JBS required “clarification about what happened to these funds”. JBS also recorded that “during the financial year cash was given to [Mr Hough] (as detailed in the daily shift reports) to bank” and requested that Mr Hough “provide information and proof of the balance of these funds being used for company expenses”. Because this query was not answered, it was later included in the “outstanding query list” attached to Mrs James’ email to Mr Aitken of 29 May 2015.
  3. Mr Hough’s response to the query was handwritten in red on a copy of relevant parts of the quality assurance review to which I have referred to on a copy of a document entitled, “Reply to email received from Scott Whitla – McCullough Robertson Lawyers 21.5.15”. These attachments were emailed by Mr Aitken to Mrs James of 12 June 2015. The covering email from Mr Aitken made plain that Mr Hough had handwritten the comments on the attachment and, as I have already found, I am satisfied beyond reasonable doubt that this was so. On the quality assurance review, Mr Hough wrote:

COMMENT 3

AT NO TIME WERE SHORT TERM LOANS BY DIRECTORS SPECIFIED AS ‘CAPITAL CONTRIBUTIONS’. THESE TEMPORARY LOANS WERE REPAID AS A PRIORITY IN ORDER TO KEEP THE LINE OF CREDIT OPEN FROM KH.

COMMENT 4

AS AT 1-7-2009, THE THREE ENTITIES WERE INDEBTED TO KH AND HAD NO CASH OF THEIR OWN APART FROM THE [TENANCY] CASHIER FLOAT.

AT NO TIME SINCE 1-7-2009 WERE THE SHORT TERM ADVANCES BY KH TO THE ENTITIES EVER REPAID.

A CONSIDERATION OF FURTHER ADVANCES BY KH TO THE ENTITIES WAS THE ENTITIES’ PRIORITY OF REPAYMENT TO KH.

KH FUNDED THE ENTITIES WITH SHORT TERM LENDING SINCE 1997, REGULARLY REFERRED TO AS “THE BANK OF KEN”.

COMMENT 5

AS NONE OF THE ENTITIES HAS CASH OF THEIR OWN FROM 1-7-09 TO 14-1-2011 OR CASH PAYMENTS] + BANK CASH DEPOSITS WERE FUNDED BY KH.

A DRAFT SUMMARY OF [EXPENSES] PLUS REIMBURSEMENTS IS ATTACHED.  IT DOES NOT YET INCLUDE CASH BANKED TO THE 3.”

  1. On the document entitled, “Reply to email received from Scott Whitla – McCullough Robertson Lawyers 21.5.15”, Mr Hough wrote:

“AS STATED REPETIVELY [sic]: all cash payments of deposits to Suncorp were of expenses on behalf of the three entities were made KH CASH 1-7-2009 – 17-1-2011.  The three entities had no cash of their own during this period, and their debts to me remain unpaid.”

  1. Also, in the covering email, Mr Hough’s solicitor conveyed these instructions:

“(E)  Since 1-7-2009, cash received by my client is a partial repayment of short term loans owed by the entities to him.

(G)  Without the supply of loans by Mr Hough to the entities over many years, the entities would not have survived.

(H)  A condition of Mr Hough making advances to meet the entities’ obligations was that he had first priority for repayment of the funds as cash was received.”

  1. It will be seen from the comments and statements extracted above (at [74] to [76]) that Mr Hough asserted that the position as at 1 July 2009 was that he had loaned unspecified sums of money to each of Tenancy Management, Denbrook and Glenrick and that, subsequent to 1 July 2009, further unspecified sums of money were advanced to these companies. These he described as “short term loans”. Further, he asserted that he did so because the cash position of the three companies in the period from 1 July 2009 to 14 January 2011 meant that they could not meet, or might not be able to meet, their liabilities as they fell due without his assistance in the form of cash advances. The cash sum queried, he therefore asserted, had been paid to him in reduction of these loans.[54]
  2. As earlier noted, Mrs James responded on 16 June 2015. Her comments appeared in red font in the body of the email from Mr Aitken to which she was replying: Relevantly, Mrs James said:

“Comment 4:  ‘1.7.09 to current – KH short term loans/advances

  • There is no documentary evidence that the three entities were indebted to KH as at the 1.7.09
  • The end of financial year balance sheet supplied to JBS and forwarded to all parties does not reflect ‘loans’ or ‘capital introduced’ or ‘advances’ owing to either director at this time
  • ‘Sort [sic] term advances by KH never repaid’ – there is no documentary proof that KH actually funded the entities
  • As mentioned in Part E below amounts paid to Magic Fencing by KH – proof is still required to where these funds actually came from personal or TMPL cash from shift sheets given to Ken
  • ‘The Bank of Ken’ pre 1.7.09 is irrelevant to the task at hand

Comment 5:  ‘Entities having no cash of their own’

  • Comments have been noted by JBS, however, during the period ending 30.6.10 the income received by TMPL is $354,840.60[55] (excluding GST).”
  1. Mrs O’Donoghue submits that I should be satisfied beyond reasonable doubt that Mr Hough’s assertion that the queried sum had been paid to him in reduction of loans that had been made to the three companies was deliberately untrue. For the reasons that follow, I am.
  2. As Mrs James deposed, there was no evidence in the material provided to JBS by either Mr Hough or Mrs O’Donoghue to support Mr Hough’s assertion. It is a claim that is, in every sense apart from Mr Hough’s unsworn assertions, unsubstantiated.
  3. No advances from Mr Hough – whether in the form of cash or otherwise – were ever credited to the bank account for Tenancy Management, or any other bank account for that matter. Indeed, there is no evidence that Mr Hough had the wherewithal to loan any money to the companies, and the source of the funds he claims he advanced by way of loan was never identified.
  4. Furthermore, after JBS was engaged, Mr Hough provided Mrs James with draft profit and loss statements and draft balance sheets for the three companies for the 2009 financial year. Nothing appears in any of those drafts to reflect any loans by Mr Hough to any of the companies. Indeed, the first occasion on which Mr Hough asserted that he had loaned money to the companies (or any one of them) was his response of 12 June 2015. In addition, the assertions made by Mr Hough, if true, would have to be supported by some sort of compact between Mr Hough on the one hand and each of the three companies on the other hand. In other words, any loan arrangement would have to be agreed and any repayments made by any one of the companies pursuant to the loan arrangement approved. Indeed, the comment by Mr Hough that there was a “priority of repayment” to him could have no basis in fact unless there was an agreement to that effect. In fact, nothing was advanced to support the existence of any agreement. Mrs O’Donoghue did not support the claim in any respect but, importantly to this point, gave unchallenged evidence to the effect that there was never any discussion with Mr Hough about the need for him to make advances to the companies.
  5. Furthermore, the minimum monthly opening and closing account balances for Tenancy Management show that it had a credit balance at all times over this period. There is accordingly no evidence to indicate that the company was unable to pay its debts as and when they fell due without Mr Hough contributing by way of advances. In this regard, reference may be made to the observations made by Mrs James which I earlier summarised (at [36]). In the period from 1 July 2009 to early 2011, other than cash deposits on 13 September 2010 and 29 November 2010, no cash deposits were made to Tenancy Management’s bank account when “the nature of the business necessarily indicated there must be cash receipts”. This is the period of course when Mrs O’Donoghue was away due to ill health. Given the absence of bankings over this period, a strong inference is available to the effect that Mr Hough retained the cash receipts and, in fact, he admitted having received an amount of $100,052.02 over this period for what he described as “expenses” from Tenancy Management. But, whatever the true position, if the cash received by Mr Hough was retained by him, it should also have been available to meet any other credit requirements of the companies on whose account the cash had been received. Shortly stated, before the assertion that the companies needed to be supported by “short term loans” over the relevant period could be accepted, it would have to be established that there was such a need but the evidence is all the other way.
  6. The assertion made by Mr Hough in the emailed response of 12 June 2015 to the effect that cash received from Tenancy Management, Denbrook and Glenrick in the period after 1 July 2009 was paid to him in reduction of loans that he had made to each of those companies depends for its truthfulness on the proposition that Mr Hough made loans to those companies. For the reasons I have just expressed, the evidence is overwhelmingly to the effect that no such loans were ever made, and I am satisfied beyond reasonable doubt about that.
  7. At the time this assertion was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  8. It follows that I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is therefore made out.

Particular (b)(i)(B)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 12 June 2015 that “cash deposits to the bank accounts of [Tenancy Management], Denbrook and Glenrick between 1 July 2009 and 17 January 2011 represented amounts that he had lent each company as none of them had any cash and otherwise had no capacity to meet operating expenses during that period” was untruthful.
  2. For the same reasons I have expressed in reaching the conclusion that I have in the case of particular (b)(i)(A), I am satisfied beyond reasonable doubt that no loans were made by Mr Hough to Tenancy Management, Denbrook or Glenrick and, further, that over the period from 1 July 2009 and 17 January 2011, those companies had the capacity to meet their operating expenses.
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. It follows that I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is also made out.

Particular (b)(i)(C)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 12 June 2015 that “[Tenancy Management], Denbrook and Glenrick are still indebted to him for sums lent by him to them” was untruthful.
  2. Again for the same reasons I have expressed in reaching the conclusion that I have in the case of particular (b)(i)(A), I am satisfied beyond reasonable doubt that no loans were made by Mr Hough to Tenancy Management, Denbrook or Glenrick and that those companies were and are not indebted to him.
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is made out.

Particular (b)(i)(D)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 12 June 2015 that “he lent amounts to [Tenancy Management] which in turn lent the sum advanced to Denbrook and Glenrick which in turn applied the sums lent in part payment of an invoice issued by Magic Fencing in an amount of $16,000” was untruthful.
  2. I am satisfied beyond reasonable doubt, for the same reasons I expressed in reaching the conclusion that I have in the case of particular (b)(i)(A), that no loans were made by Mr Hough to Tenancy Management, let alone a loan in a sum that was then on-loaned to Denbrook and Glenrick. It is unnecessary to make any finding about the authenticity (or otherwise) of the Magic Fencing invoices or the agreement for the performance of work to which Mr Hough asserted they related.
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is also made out.

Particular (b)(i)(E)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 12 June 2015 that “all accounts paid by Denbrook in cash, including the balance of land tax owing to the ‘Queensland Government’, were paid from cash advanced by him” was untruthful.
  2. Although it may be that the land tax in question was paid with cash generated by the business, the proposition that the cash was advanced by Mr Hough cannot be accepted for the reasons I expressed in reaching the conclusion that I have in the case of particular (b)(i)(A). I am satisfied beyond reasonable doubt that, if cash was used to pay land tax, it was not advanced by Mr Hough.
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. It follows that I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is also made out.

Particular (b)(i)(F)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 22 June 2015 that “he supplied [Tenancy Management], Denbrook and Glenrick a ‘line of credit’ and that all cash amounts received by him from those entities between 1 July 2009 and 18 January 2011 were in reduction of the balance owing under ‘the line of credit’” was untruthful.
  2. Reference to the asserted existence of a “line of credit” can be found in the penultimate paragraph of the email of 22 June 2015, Mr Aitken stated:

“Many times [Mr Hough] has pointed out that the entities were sufficiently indebted to my client that all cash received during the period was applied to reducing the line of credit he supplied to the entities. Having no cash of their own, the entities could not pay for cash purchases. Therefore the purchases were paid for by the only other source of cash available to them – my client.”

  1. Further, it will be recalled that, ten days earlier, in one of his handwritten comments on the copy of the quality assurance review attached to the email from Mr Aitken to Mrs James of 12 June 2015 Mr Hough wrote:

COMMENT 3

AT NO TIME WERE SHORT TERM LOANS BY DIRECTORS SPECIFIED AS “CAPITAL CONTRIBUTIONS”. THESE TEMPORARY LOANS WERE REPAID AS A PRIORITY IN ORDER TO KEEP THE LINE OF CREDIT OPEN FROM KH.”

  1. For the reasons I expressed in reaching the conclusion that I have in the case of particular (b)(i)(A), there was never any need for a “line of credit” from Mr Hough. Further, if a line of credit had been needed, the proposition that one could have been established and operated without the concurrence of Mrs O’Donoghue is risible.  I am satisfied beyond reasonable doubt that no such line of credit was ever established, let alone operated in the ways asserted by Mr Hough.
  2. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  3. It follows that I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. The particular is made out.

Particular (b)(i)(G)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 22 June 2015 that “[Tenancy Management], Denbrook and Glenrick were reliant on cash advances that he made each of the companies for them to pay for cash purchases and they otherwise were unable to do so” was untruthful.
  2. For the same reasons I expressed in reaching the conclusions that I have in the case of particulars (b)(i)(A) and (b)(i)(F), none of the three companies in question were reliant on cash advances from Mr Hough, whether to make purchases or at all. I am satisfied beyond reasonable doubt that no such cash advances were ever made.
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is also made out.

Particular (b)(i)(H)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 22 June 2015 that “the only source of cash available to [Tenancy Management], Denbrook and Glenrick was cash that he had lent them which they used to pay for cash purchases” was untruthful.
  2. Again, for the same reasons I expressed in reaching the conclusions that I have in the case of particulars (b)(i)(A) and (b)(i)(F), I am satisfied beyond reasonable doubt that this assertion was untrue. The proposition that underlies it – that a cash business such as the one which was being carried on generated no cash – only has to be stated to be rejected. 
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is made out.

Particular (b)(ii)(A)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 12 June 2015 that “he lent a sum or sums to [Tenancy Management] which on-lent the sum or sums that he advanced to Denbrook and Glenrick which in turn applied the sum or sums lent in part-payment of an invoice issued by Magic Fencing in an amount of $16,000” was untruthful.
  2. I am satisfied beyond reasonable doubt, for the same reasons I expressed in reaching the conclusion that I have in the case of particular (b)(i)(A), that no loans were made by Mr Hough to Tenancy Management, let alone a loan in a sum that was then on-loaned to Denbrook and Glenrick. As I have previously stated, it is unnecessary to make any finding about the authenticity (or otherwise) of the Magic Fencing invoices or the agreement for the performance of work to which Mr Hough asserted they related.
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is also made out.

Particular (b)(ii)(B)

  1. By this particular, it is alleged that Mr Hough’s assertion in the emailed response of 12 June 2015 that he “lent amounts to Denbrook to meet its payroll obligations” was untruthful.
  2. I am satisfied beyond reasonable doubt, for the same reasons I expressed in reaching the conclusion that I have in the case of particular (b)(i)(A), that no loans were made by Mr Hough to Denbrook whether to meet its weekly payroll obligations or at all.
  3. At the time the assertion in question was made, Mr Hough must have known that it was untrue. On the proven facts, that is the only rational inference available.
  4. I am satisfied beyond reasonable doubt that the particularised assertion was deliberately untrue. This particular is made out.

One last matter

  1. For completeness, I return to the submission made on behalf of Mrs O’Donoghue to the effect that the court should draw an adverse inference because of Mr Hough’s failure to give evidence. This submission was based on what was said by Mason CJ, Deane and Dawson JJ in Weissensteiner v R,[56] that is to say, that “doubts … about the inferences to be drawn from the evidence may be more readily discounted in the absence of contradictory evidence from a party who might have been expected to give or call it.”[57] Subsequently, in Azzopardi v R,[58] Gaudron, Gummow, Kirby and Hayne JJ emphasised that the cases in which the court will give a Weissensteiner direction will be both “rare and exceptional”, and will occur only if the evidence is capable of explanation by disclosure of additional facts known only to the accused.  I am not particularly attracted to the notion that such an inference should be drawn in a case alleging contempt, although there is authority to support such a course.[59] It is, however, unnecessary to decide this point because the evidence in support of Charge (b) was not so finely balanced as to require its further consideration. 

Conclusion and disposition

  1. For these reasons, I am satisfied beyond reasonable doubt that Charge (b) has been proved and that Mr Hough is guilty of contempt so far as that charge is concerned. A declaration will accordingly be made in terms that Mr Hough committed contempt of court by breaching one of the undertakings contained in the orders of Martin J made on 26 June 2014 and 14 October 2014.
  2. I am not satisfied beyond reasonable doubt that Mr Hough is guilty of the contempt so far as Charge (a) is concerned. That charge has not been made out.
  3. The punishment for contempt, and any accompanying claim for compensation and costs is governed, as previously mentioned,[60] by the UCPR. For the reasons expressed by Atkinson J in Bakir v Doueihi & Ors,[61]  it is appropriate that those issues be decided together:

“An indemnity costs order which is often made in cases of this kind can be onerous and therefore impose a further sanction. A compensation order may impact on any other order for penalty that may be imposed. The amount of compensation to be awarded will be affected by the findings of contempt made in these reasons. The parties have made written submissions as to penalty but I propose to allow them the opportunity to make further oral submissions should they so wish, in particular, as to whether or not imprisonment should be imposed on the first respondent and if so, for how long; whether a fine should be imposed and if so, in what amount and whether all or any of it should be paid to the applicant and what compensation, if any, should be ordered.”[62] [citations omitted]

  1. It may be also that Mr Hough wishes to take the opportunity that time will provide to purge his contempt by supplying truthful answers to the queries that were the subject of Charge (b). If so, that is something which might very well have a reducing effect on penalty.
  2. The parties will accordingly be directed to make submissions about penalty, compensation (if any) and costs.

Schedule

Charge (a) – failing or refusing to answer queries by JBS

Failing to co-operate, act reasonably and genuinely in, or do all things necessary on his part to assist JBS Bookkeepers (JBS) to complete their engagement by failing or refusing to answer all queries by JBS:

  1. in relation to Tenancy Management Pty Ltd (TM):
  1.  for the year ended 30 June 2010, by omitting to provide information known by him   in relation to:
  1. the movement of cash and funds given to him to bank (as detailed in ledger account No 1-4005 at pages 31 to 35 of ex ‘JAO’D-3’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification that the debit balance of $3,530.20 in the net activity column of the said ledger No 1-4005 was applied for company purposes, as requested by JBS in JBS’s Quality Assurance and Compliance Report (at page 120 of ex ‘JAO’D-3’ to the said affidavit Judith Ann O’Donoghue), and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (for Mr Hough) (at page 169a of ex ‘JAO’D-3’ to the said affidavit);
  2. his use of cash given to him for company expenses (as detailed in ledger account No 1-4008 at pages 35 to 37 of ex ‘JAO’D-3’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification that the debit balance of $54,980.15 in the net activity column of the said ledger No 1-4008 was applied for company purposes, as requested by JBS in  JBS’s Quality Assurance and Compliance Report (at page 120 of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue), and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169a of ex ‘JAO’D-3’ to the said affidavit);
  3. [abandoned];
  1.  for the year ended 30 June 2011, by omitting to provide information known by him in relation to:
  1. [abandoned];
  2. the use of funds given to him to bank (as detailed in ledger account No 1-4020 at pages 38 to 40 of ex ‘JAO’D-5’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification that the debit balance of $46,082.75 in the net activity column of the said ledger No 1-4020 was applied for company purposes, as requested by JBS in JBS’s list of queries dated 30 September 2014 (at pages 129 to 130 of ex JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue), JBS’s Quality Assurance and Compliance Report (at page 3 of ex ‘JAO’D-3’ to the said affidavit), and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169a of ex ‘JAO’D-3’ to the said affidavit);

(2A) the source of funds for wages payments (as detailed in ledger account No 1-1200 at pages 25 to 27 of ex ‘JAO’D-5 to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of the source of funds from which the debit balance of $50,659.00 in the net activity column of the said ledger No 1-1200 was paid, and that the said debit balance represents wages that Mr Hough actually paid staff, as requested in the email sent 23 October 2014 from Margaret James (for JBS) to Greg Romans timed at 5:04pm (at page 146 of ex ‘JAO’D-3’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), JBS’s Quality Assurance and Compliance Report (at page 4 of ex ‘JAO’D-5’ to the said affidavit of Judith Ann O’Donoghue),  and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169a of ex ‘JAO’D-3’ to the said affidavit);

  1. source of cash funds (as detailed in ledger account No 2-9400 at page 63 of ex ‘JAO’D-5’ to the affidavit to Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of the source of funds representing the debit balance of $1,624.50 in the net activity column of the said ledger No 2-9400, as requested by JBS  in JBS’s Quality Assurance and Compliance Report (at page 11 of ex ‘JAO’D-5’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169b of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue), and the list of queries attached to an email sent 16 June 2015 from Margaret James to Robert Aitken, timed at 5:01pm (at page 29 of ex ‘JAO’D-10’ to the affidavit of Judith Ann O’Donoghue filed 22 June 2015);
  1.  for the year ended 30 June 2012, by omitting to provide information known to him in relation to:
  1.  [abandoned];
  1.  the movement of cash (as detailed in ledger account No 1-4100 at pages 38 to 50 of ex ‘JAO’D-6’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of how and when the debit balance of $1,498.15 in the net activity column of the said ledger No 1-4100 was applied for company purposes, as requested by JBS in JBS’s list of queries dated 21 November 2014 (at page 22 of ex ‘JAO’D-11’ to the affidavit of Judith Ann O’Donoghue filed 29 July 2015), JBS’s Quality Assurance and Compliance Report (at page 3 of ex ‘JAO’D-6’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169b of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue), and the list of queries attached to an email sent 16 June 2015 from Margaret James to Robert Aitken, timed at 5:01pm (at page 29 of ex ‘JAO’D-10’ to the affidavit of Judith Ann O’Donoghue filed 22 June 2015);
  1.  his use for company expenses of funds from shifts given to him for banking (as detailed in ledger account No 1-4120 at page 50 of ex ‘JAO’D-6’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of how and when the debit balance of $1,929.61 in the net activity column of the said ledger No 1-4120 was applied for company purposes, as requested by JBS in JBS’s list of queries dated 21 November 2014 (at pages 22 and 23 of ex ‘JAO’D-11’ to the affidavit of Judith Ann O’Donoghue filed 29 July 2015), JBS’s Quality Assurance and Compliance Report (at page 3 of ex ‘JAO’D-6’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169b of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue), and the list of queries attached to the email sent 16 June 2015 from Margaret James to Robert Aitken, timed at 5:01pm (at page 29 of ex ‘JAO’D-10’ to the affidavit of Judith Ann O’Donoghue filed 22 June 2015);
  1.  [abandoned];
  1.  for the year ended 30 June 2013, by omitting to provide information known to him in relation to:
  1. [abandoned]
  2.               his use for company expenses of funds from shifts given to him for banking (as detailed ledger account No 1-4220 at pages 59 and 60 of ex ‘JAO’D-7’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of how and when the debit balance of $8,460.00 in the net activity column of the said ledger No 1-4220 was applied for company purposes, as requested by JBS in the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169c of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue);
  1.  for the year ended 30 June 2014, by omitting to provide information known by him in relation to:
  1. [abandoned];
  2. his use for company expenses of funds from shifts given to him for banking, including a sum of $16,000 paid to Magic Fencing (as detailed in ledger account No 1-4320 at page 29 of ex ‘JAO’D-8 to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of how and when the debit balance of $14,160.85 in the net activity column of the said ledger No 1-4320 was applied for company purposes, as requested by JBS in JBS’s  Quality Assurance and Compliance Report (at page 72 of ex ‘JAO’D-8’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169c of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue);

(2A) the source of funds for payment of Magic Fencing (as detailed in ledger account No 2-9400 at page 40 of ex ‘JAO’D-8’ of the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of the source of funds representing the debit balance of $16,000 in the net activity column of the said ledger No 2-9400, as requested by JBS in JBS’s  Quality Assurance and Compliance Report (at page 75 of ex ‘JAO’D-8’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at pages 169c to 169d of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue)

  1. [abandoned];
  1. [in relation] to Denbrook Investments Pty Ltd (Denbrook):
  1. for the year ended 30 June 2010, by omitting to provide information known to him in relation to the source and movement of cash used to pay land tax (as detailed in ledger account No 2-7000 at page 9 of ex ‘JAO’D-4’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly, verification of the source of funds representing the debit balance of $7,416.65 in the net activity column of the said ledger No 2-7000, as requested by JBS in JBS’s Quality Assurance and Compliance Report (at page 15 of ex ‘JAO’D-4’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169d of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue);

 

  1. for the year ended 30 June 2011, by omitting to provide information known to him in relation to:
  1. the source and proof of payment of wages to employees during the year (as detailed in ledger account No 1-1200 (payroll cheque account) at page 143 of ex ‘JAO’D-5 to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), and, more particularly,  verification that the debit balance of $23,077.00 in the net activity column of the said ledger No 1-1200 was paid to staff, as requested by JBS in JBS’s Quality Assurance and Compliance Report (at page 152 of ex ‘JAO’D-5’ to the affidavit of Judith Ann O’Donoghue filed 11 June 2015), JBS’s Quality Assurance and Compliance Report (at page 14 of ex ‘JAO’D-11’ to the affidavit of Judith Ann O’Donoghue filed 29 July 2015), and the list of queries attached to the email letter dated 29 May 2015 from JBS to Robert Aitken (at page 169d of ex ‘JAO’D-3’ to the said affidavit of Judith Ann O’Donoghue filed 11 June 2015);
  2. [abandoned];
  3. [abandoned];
  4. [abandoned].

Charge (b) – failing to answer truthfully JBS’ queries

Failing to answer truthfully queries raised by JBS:

  1. in relation to TM:
  1.               for the year ended 30 June 2010, by asserting in an email sent 12 June 2015 from Robert Aitken to Margaret James, timed at 11:57am (at pages 6, 8 and 16 of ex ‘JAO’D-10’ to the affidavit of  Judith Ann O’Donoghue filed 22 June 2015), that cash received by Mr Hough from TM, Denbrook and Glenrick Pty Ltd (Glenrick) in the period after 1 July 2009 was paid to him in reduction of loans that he had made to each of the three entities;
  1.               by asserting in an attachment to the said email sent 12 June 2015 from Robert Aitken to Margaret James (at pages 6, 8, and 14 of ex ‘JAO’D-10’ to the affidavit Judith Ann O’Donoghue filed 22 June 2015) that cash deposits to the bank accounts of TM, Denbrook and Glenrick between 1 July 2009 and 17 January 2011 represented amounts that he had lent each company as none of them had any cash and otherwise had no capacity to meet operating expenses during that period;
  1.               for the year ended 30 June 2011, by asserting in the attachment to the email sent 12 June 2015 from Robert Aitken to Margaret James (at pages 6, 8, and 14 of ex ‘JAO’D-10’ to the affidavit Judith Ann O’Donoghue filed 22 June 2015), that TM, Denbrook and Glenrick are still indebted to him for sums lent by him to them;
  1.               for the year ended 30 June 2014, by asserting in the attachment to the said email sent 12 June 2015 from Robert Aitken to Margaret James, timed at 11:57am (at page 16 of ex ‘JAO’D-10’ to the affidavit of  Judith Ann O’Donoghue filed 22 June 2015) that he lent amounts to TM which in turn lent the sum advanced to Denbrook and Glenrick which in turn applied the sums lent in part payment of an invoice issued by Magic Fencing in an amount of $16,000; 
  1.               for the year ended 30 June 2014, by asserting in the attachment to the email sent 12 June 2015 from Robert Aitken to Margaret James, timed at 11:57am (at page 16 of ex ‘JAO’D-10’ to the affidavit of Judith Ann O’Donoghue filed 22 June 2015), that all accounts paid by Denbrook in cash, including the balance of land tax owing to the ‘Queensland Government’, were paid from cash advanced by him;
  1.               by asserting in an email sent 22 June 2015 from Mr Aitken to Ms James, timed at 2:27pm (at page 26 of ex ‘JAO’D-11’ to the affidavit of Judith Ann O’Donoghue filed 29 July 2015), that he supplied TM, Denbrook and Glenrick a ‘line of credit’ and that all cash amounts received by him from those entities between 1 July 2009 and 18 January 2011 were in reduction of the balance owing under ‘the line of credit’;
  1.               by asserting in the said email sent 22 June 2015 from Robert Aitken to Margaret James (at page 26 of ex ‘JAO’D-11’ to the affidavit of Judith Ann O’Donoghue filed 29 July 2015) that TM, Denbrook and Glenrick were reliant on cash advances that he made each of the companies for them to pay for cash purchases and they otherwise were unable to do so;
  1.               for all years, by asserting in the said email sent 22 June 2015 from Robert Aitken to Margaret James (at page 26 of ex ‘JAO’D-11’ to the affidavit of Judith Ann O’Donoghue filed 29 July 2015) that the only source of cash available to TM, Denbrook and Glenrick was cash that he lent them which they used to pay for cash purchases;
  1. [abandoned];
  1.  In relation to Denbrook:
  1.               by asserting in the attachment to the email sent 12 June 2015 from Robert Aitken to Margaret James,  et al, timed at 11:57am (at page 16 of ex ‘JAO’D-10’ of the affidavit Judith Ann O’Donoghue filed 22 June 2015) that he lent a sum or sums to TM which on-lent the sum or sums that he advanced to Denbrook and Glenrick, which in turn applied the sum or sums lent in part-payment of an invoice issued by Magic Fencing in the amount of $16,000;
  1.               for the year ended 30 June 2011, by asserting in the attachment to the email sent 12 June 2015 from Mr Aitken to Ms James,  et al., timed at 11:57am (at page 17 of ex ‘JAO’D-10 of the affidavit of  Judith Ann O’Donoghue filed 22 June 2015) that he lent amounts to Denbrook to meet its weekly payroll obligations.

Footnotes

[1] Mr O’Donoghue also acted (and continues to act) as solicitor for each of the applicants, including Mrs O’Donoghue. That may not be thought to be a particularly desirable state of affairs in a case infected with so much unnecessary emotion. The risk is that “the client will not be represented with the objectivity and independence which the client is entitled to and which the Court demands”: Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 at 589. And see Afkos Industries Pty Ltd v Pullinger Stewart (A Firm) [2001] WASCA 372 at [29]; Wainter Pty Ltd, in the matter of New Tel Limited (in liq) [2006] FCA 656 at [4]. However, Mr O'Donoghue is an experienced, senior practitioner who gave appropriate consideration to the question whether he should act and could see no impediment, no application was made on behalf of Mr Hough to restrain Mr O’Donoghue from acting and, although Mr O’Donoghue also gave evidence by affidavit and was cross-examined, his credit was not in issue.

[2] Ms Boulton was not required for cross-examination: T 2-66.

[3] By way of originating application filed that day.

[4] The Davidson House Trust and the Glenrock Trust.

[5] Tenancy Management Pty Ltd.

[6] In fact, JBS was engaged by Mrs O'Donoghue and Mr Hough as far back as April 2013 to prepare draft financial accounts, Business Activity Statements and the like for the business. See below at [34] and [35].

[7] From the other terms of the order, the “said business” was intended as a reference to “the business formerly conducted by Tenancy Management Pty Ltd under the style of the ‘Yellow Submarine’ ”. See par 2(a) of the order.

[8] O’Connor v Hough [2016] 2 Qd R 543 at [6].

[9] O’Connor v Hough [2016] 2 Qd R 543 at [6].

[10] See order of 14 October 2014; par 6.

[11] Evenco Pty Ltd v Australian Building Construction Employees and Builders Labourers Federation (Qld Branch) [2001] 2 Qd R 118 at 133.

[12] Australian Consolidated Press v Morgan (1965) 112 CLR 483 at 491, 492 and 503; Bakir v Doueihi & Ors [2002] QSC 19 at [19]-[20] and Kirkpatrick v Kotis [2004] NSWSC 1265 at [38]-[45].

[13] Lade & Co Pty Ltd v Black [2006] 2 Qd R 531 at [42] per Keane JA (with whom Jones J agreed).

[14] As to the second undertaking, it required Mr Hough to tell the truth when responding to queries made of him by, relevantly, JBS. It was not limited in any temporal sense, but nor could it be. Mr Hough was obliged by the undertaking to tell the truth whenever responding to JBS’ queries.

[15] T. 3-78 to 3-79.

[16] Paragraph 1(c) of the undertakings recorded in the order made on 26 June 2014.

[17] T. 2-117.

[18] That is to say, the further amended application filed on 10 February 2016.

[19] O’Connor v Hough [2016] 2 Qd R 543.

[20] Bakir v Doueihi & Ors [2002] QSC 19 at [6]–[8] per Atkinson J.

[21] Witham v Holloway [1995] HCA 3 at [19]; (1995) 183 CLR 525 at 534 per Brennan, Deane, Toohey and Gaudron JJ.

[22] Witham v Holloway (1995) 183 CLR 525 at 530; Lade & Co Pty Ltd v Black [2006] 2 Qd R 531 at [65], [101].

[23] Hinch v Attorney-General (Vic) [1987] HCA 56; (1987) 164 CLR 15 at 89; Witham v Holloway [1995] HCA 3 at [19]; (1995) 183 CLR 525 at 534; Matthews v ASIC [2009] NSWCA 155 at [38]–[39].

[24] Re Colina; Ex parte Torney [1999] HCA 57 at [109]; (1999) 200 CLR 386 at 428 per Hayne J; Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [2015] HCA 21; (2015) 256 CLR 375 at 388.

[25] Colefax v Colefax [1933] St R Qd 222 at 224; Hafele Australia Pty Ltd & Anor v Maggbury Pty Ltd & Anor [2000] QCA 397 at [29]; Costello v Courtney [2000] QSC 67 at [9]; [2001] 1 Qd R 481 at 483 per Wilson J; Camm v ASI Development Company Pty Ltd [2007] QCA 317 at 10 per Keane JA.

[26] Matthews v ASIC [2009] NSWCA 155 at [48] and [67]; Emmanuel College v Rowe [2014] QSC 238.

[27] Construction, Forestry, Mining and Energy Union v Grocon Constructions (Vic) Pty Ltd [2014] VSCA 261 at [139].

[28] Ibid [140].

[29] Ibid. And see Australasian Meat Industry Employees’ Union v Mudginberri Station (1986) 161 CLR 98 at 111-112; Witham v Holloway (1995) 183 CLR 525 at 530-534 and 538-542; Advan Investments Pty Ltd v Dean Gleeson Sales Pty Ltd [2003] VSC 201 at [32]-[33]; Lade & Co Pty Ltd v Black [2006] 2 Qd R 531 at [26], [55]-[65] and [101]-[103].

[30] Lade & Co Pty Ltd v Black [2006] 2 Qd R 531 at [63].

[31] That is to say, that it is unnecessary for an applicant, to establish contempt, to prove that the breach of the undertaking was wilful, in the sense that such a term was used in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 (as meaning a deliberate act or omission breaching an order, and not one which was a casual, accidental, or unintentional breach).

[32] See Lade & Co Pty Ltd v Black [2006] 2 Qd R 531 at [67]-[75]; See also Australian Consolidated Press Limited v Morgan (1965) 112 CLR 483 at 500.

[33] Lade & Co Pty Ltd v Black [2006] 2 Qd R 531 at [69]-[71].

[34] Further amended application filed on 10 February 2016; par 2.

[35] T. 4-44.

[36] Second Applicant’s Revised Outline of Argument received on 22 April 2016; par 350. This concession was made after her counsel was invited by the court to reconsider the oral submission made to the same effect when revising his Outline: T. 4-45.

[37] [2006] 2 Qd R 531.

[38] It was however emphasised that the court should reject any submission to the effect that a finding of contempt is not open unless it is found that the relevant act (or omission) was accompanied by an intention to disobey the court’s orders, and that proposition must be accepted.

[39] Second Applicant’s Revised Outline of Argument received on 22 April 2016; par 375. And see, by way of further example, par 239.

[40] See, for example, what is submitted at pars 369 and 370 of the Second Applicant’s Revised Outline of Argument received on 22 April 2016:  “The court will find that Mr Hough’s conduct constituted a wilful, deliberate and intentional breach of undertaking. … The court is invited to find that Mr Hough’s answers were untruthful. If the court so finds, the court is asked to make the concurrent finding that the breaches of undertaking involved in the particulars of contempt to charge (b) were more than technical or merely ‘casual, or accidental and unintentional disobedience’.” 

[41] Second Respondent’s Outline of Argument on Trial received on 3 May 2016; par 350.

[42] Outline of Argument in Reply on behalf of the second applicant received 9 May 2016.

[43] Plomp v R (1963) 110 CLR 234 at 252.

[44] Second Applicant’s Supplementary Submissions received on 11 October 2016, par 2.

[45] At [125].

[46] At [14].

[47] As I have previously held, this charge contains a series of compound allegations: O’Connor v Hough [2016] 2 Qd R 543 at [26].

[48] At [17].

[49] A reference to Merrotts.

[50] Or, at least, all queries that had been directed to her up to that point in time. Confirmation to that effect was contained in an email from Mrs James to Mr O’Donoghue dated 20 May 2015.

[51] T. 3-90-91.

[52] See the emails to Mrs James of 27 November 2014, 12 June 2015 and 22 June 2015.

[53] It was not in issue that Mr Aitken was Mr Hough’s solicitor and agent at all times material to the responses. In that regard, where the doing of an act is prohibited by a court order or undertaking or, if permitted, is required to be performed in a particular manner, the act need not be done personally; it may be done by an agent or servant of the person or body corporate: Forestview Nominees Pty Ltd v Perron Investments Pty Ltd [1999] FCA 405 at [47] per Cooper J (dissenting as to the result, but citing Rantzen v Rothschild  (1865) 14 WR 96; 13 Law Times 399;  Stancomb v Trowbridge Urban Council  [1910] 2 Ch 190 at 194; Heaton's Transport (St Helens) Ltd v Transport and General Workers' Union [1973] AC 15 (HL) at 99 - 100, 109 - 110;  Director of Fair Trading v Pioneer Concrete (UK) Ltd  [1995] 1 AC 457 (HL) at 476 - 481; AMIEU v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 112).

[54] And see the comments emailed by Mr Romans to Mrs James on 23 October 2014 in which it was said that, “The operation of the Companies, as had always been the case, depended on KH lending his capital, earned wages and contract earnings to the Companies for their cash flow. […] A cash flow analysis should show that the Companies were always indebted to KH.”

[55] This figure is the total of Tenancy Management’s receipts from sales for the 2010 financial year.

[56] (1993) 178 CLR 217.

[57] Ibid 227-228.

[58] (2001) 205 CLR 50, 75 [67].

[59] ASIC v Sigalla (No 4) (2011) 80 NSWLR 113 at [149]-[152]; Grocon v Construction, Forestry, Mining and Energy Union [2013] VSC 275 at [58]-[59]. Palios Meegan & Nicholson Holdings Pty Ltd v Shore (2010) 108 SASR 31, [67]. Cf Jones v ACCC (2010) 189 FCR 390; [2010] FCAFC 136.

[60] At [24].

[61] [2002] QSC 19.

[62] Ibid [149].

Close

Editorial Notes

  • Published Case Name:

    O'Connor & Ors v Hough & Ors (No 2)

  • Shortened Case Name:

    O'Connor v Hough (No 2)

  • MNC:

    [2017] QSC 68

  • Court:

    QSC

  • Judge(s):

    Burns J

  • Date:

    02 May 2017

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QSC 68 02 May 2017 -

Appeal Status

No Status