Madang Development Corporation Ltd v Rabtrad Niugini Ltd [2013] PGNC 113; N5259 (13 June 2013)

N5259

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 225 OF 2006

BETWEEN:

MADANG DEVELOPMENT
CORPORATION LIMITED
Plaintiff/Cross Defendant

AND:

RABTRAD MADANG LIMITED
First Defendant

AND:

RABTRAD NIUGINI LIMITED
Second Defendant

AND:
G. LITZ & COMPANY LIMITED
Third Defendant/First Cross Claimant

AND:

ANDERSONS FOODLAND LIMITED
Second Cross Claimant

Waigani: Hartshorn, J.
2012: December 12th,
2013: February 11th, 21st, March 20th, June 13th

Contempt – disobedience contempt – practicing lawyer – failing to comply with court order to pay K700,000 from his trust account – contempt continuing - penalty to be imposed - whether a term of imprisonment appropriate

Facts:

The contemnor Mr. Emmanuel Mai pleaded guilty to a charge of contempt of court for knowingly and wilfully failing to comply with an order of this court. This is the decision concerning the punishment to be imposed upon Mr. Mai. Mr. Mai is a lawyer and at the relevant time practiced on his own account as Mai Lawyers.

Held:

The very substantial amount of money that remains owing, the continuing breach of the court order and the fact that Mr. Mai was a practicing lawyer at the time that the court order for payment was made leads to the conclusion that a monetary penalty is not appropriate.

Cases:

Yap v. Tan [1987] PNGLR 227
Ross Bishop v. Bishop Brothers [1988-89] PNGLR 533
Bishop Brothers v. Ross Bishop (1989) N690
Concord Pacific Ltd v. Thomas Nen [2000] PNGLR 47
Liriope v. Usurup (2009) N3931
Bank of South Pacific Ltd v. Anton Sekum & Ors (2011) N4588
Milupol Development Corporation Ltd v. Garai (2012) N4635

Counsel:

Mr. W. Bigi, for the Plaintiff
Mr. B. Ovia, for the Contemnor

13th June, 2013

1. HARTSHORN, J: The contemnor Mr. Emmanuel Mai pleaded guilty to a charge of contempt of court for knowingly and wilfully failing to comply with an order of this court. This is the decision concerning the punishment to be imposed upon Mr. Mai. Mr. Mai is a lawyer and at the relevant time practiced on his own account as Mai Lawyers.

2. The order of this court with which Mr. Mai failed to comply was made on 11th May 2012 and required him to pay the sum of K700,000 together with any interest earned into the trust account of Henao's Lawyers within three days (Payment Order). The sum of K700,000 was being held in the trust account of Mai Lawyers on behalf of the plaintiff, Madang Development Corporation Ltd. The Payment Order was made after Henao's Lawyers were instructed to act for the plaintiff instead of Mr. Mai.

3. Mr. Mai has admitted that he did not comply with the Payment Order as he had applied the sum of K700,000 for his own use. He had intended to repay the money to his trust account from legal fees due to him. The payment of these legal fees however did not eventuate and he was not able to replace the sum that he had taken from his trust account. Mr. Mai has since made a part payment of K100,000 to Henao's trust account. This has been confirmed by Henao's Lawyers. Mr. Mai has ceased to practice as a lawyer because of his inability to repay the K700,000 and is now engaged in project consultancy work to try and repay the money owing.

4. No maximum punishment is prescribed for contempt. Pursuant to Order 14 Rule 49(1) National Court Rules, where the contemnor is not a corporation, the court may punish contempt by committal to prison or fine or both.

5. The category of contempt in respect of which Mr. Mai has pleaded guilty is referred to as disobedience contempt. That is, the failure to comply with an order of the court or an undertaking given to a court. The punishments that have been imposed in this jurisdiction for disobedience contempt were considered by Cannings J in Liriope v. Usurup (2009) N3931. Cannings J noted that in four of the seven cases considered, the primary punishment was committal to custody and in two cases, Yap v. Tan [1987] PNGLR 227 and Bishop Brothers v. Ross Bishop (1989) N690 (appeal against conviction upheld: Ross Bishop v. Bishop Brothers [1988-89] PNGLR 533), committal to custody was the default penalty. In Yap (supra) and Bishop (supra), where fines were imposed with committal to custody being the default penalty, the contempts were in relation to the operation of businesses. In the case of Concord Pacific Ltd v. Thomas Nen [2000] PNGLR 47 in which the contempt was business related, the punishment was an order for costs on a solicitor client basis against the contemnor.

6. In Bank of South Pacific Ltd v. Anton Sekum & Ors (2011) N4588, I sentenced the contemnor who had been found guilty of a disobedience contempt that was business related, to a fine and imprisonment if not paid within thirty days, and costs to be paid on a solicitor client basis. Then in Milupol Development Corporation Ltd v. Garai (2012) N4635, I sentenced the contemnor who had also been found guilty of a disobedience contempt that was business related, to a fine and imprisonment if not paid within six months and costs to be paid on a solicitor client basis.

7. As I said in Anton Sekum (supra):

"The punishment of a fine with or without a default penalty and an order for the payment of costs, to an extent, reflects the punishment that was imposed for disobedience contempt historically. This was referred to in Australian Consolidated Press Ltd v. Morgan [1965] HCA 21; (1965) 112 CLR 483 by Windeyer J:

"When contempt lies in disobedience of a court's order to do something, the contemnor may be imprisoned, until by doing what was ordered he purges his contempt. When contempt lies in disobedience of an injunction not to do something, the contemnor is ordinarily permitted to purge his contempt by an apology to the court, making reparation for the damage done by the forbidden act and paying the costs as between solicitor and client."

The imposition of a fine, which was not permitted in earlier times, can be seen to have replaced the making of reparations in the passage cited.

The payment of a fine with or without imprisonment as the default penalty is often the punishment for disobedience contempt imposed in the courts of Australia. The Federal and High Courts of Australia have the power to order that a contemnor, "pay a fine, be committed to prison or both pay a fine and be committed to prison." The decisions of these Courts are persuasive in this jurisdiction.

In the recent case of Vaysman v. Deckers Outdoor Corporation Inc [2011] FCAFC 17, a decision of the Full Court of the Federal Court of Australia, Gray J said that:

"The starting point for the process of reasoning in sentencing is the gravity of the offence... In the case of contempt of court involving contravention of, or failure to comply with, court orders, that means assessing the seriousness of the defiance of the Courts authority."

Then later,

"... Restraint is appropriate in imposing sentences of imprisonment for contempt of court involving contravention of, or failure to comply with, orders of the Court. The authority of a court can be brought into disrepute, rather than enhanced, by too great a tendency to punish severely in cases that do not warrant severity."

In the judgment of Bromberg J in Vaysman (supra), His Honour had this to say as to punishment for contempt:

".... The question is whether by reference to the harm done, the seriousness of the contempt, any prior relevant misconduct and the physical, mental and other personal conditions of the person to be sentenced, no sentence other than imprisonment is (in all the circumstances) appropriate." "... non-compliance with court orders necessarily constitutes an interference with the administration of justice and thus the public interest of vindicating judicial authority is raised...." "The vindication of judicial authority must necessarily reflect the nature of the challenge to that authority inflicted by the conduct in contempt in question." "Imprisonment, as a disciplinary sanction for contempt, ought to be confined to the most serious of contempts.." "As Keane CJ, Dowsett and Reeves JJ recently observed in Jones v. Australian Competition and Consumer Commission [2010] FCAFC 136 at [36], there would be a serious question of the propriety of a sentence of imprisonment if the charges raised only a case of civil contempt; that is, a case where contumacious conduct was not contended for.""

8. In this instance, Mr. Mai has pleaded guilty to disobeying an order that he pay K700,000 together with interest to another lawyer's trust account. Counsel for the plaintiff submitted that Mr. Mai should be sentenced to a term of imprisonment for one year as the aggravating factors of his actions outweighed the mitigating factors. The aggravating factors are that the use of the K700,000 without the plaintiff's authorisation was akin to stealing, that such use was contrary to s. 4 Lawyers (Trust Account) Regulation 1990 and clearly breached the trust bestowed upon Mr. Mai by the plaintiff and breached the fiduciary duty owed to the plaintiff by him. Further, Mr. Mai's actions have brought the law profession into disrepute and the breach of the Payment Order is continuing. The mitigating factors are that Mr. Mai has pleaded guilty and that a sum of K100,000 has been paid to Henao's trust account.

9. Mr. Mai submits amongst others that he has acknowledged his culpability for applying trust funds for his own use and breaching his fiduciary duty to his client, he thought he would be able to repay the sum he misapplied, he has forgone his profession as a lawyer, he is fully aware of the serious consequences of being in contempt of court, he is to use part of the proceeds of the sale of the family home that he jointly owns with his wife to pay part of the amount owing, he has maintained communications with Henao's Lawyers since receiving the Payment Order, he is presently employed as the Chief Executive of a company engaged in the development of major infrastructure projects of National consequence and is a member of a Provincial Government task force that is facilitating the development of other major projects, and that he undertakes to repay the sum of K700,000 together with interest.

10. Mr. Mai further submits that any period of imprisonment imposed upon him would have the most detrimental and devastating effect upon his family and his future as the provider for his immediate and extended families. He is a chronic asthmatic requiring daily asthmatic treatment and the conditions of prison could be life threatening given his condition.

11. The disobedience of the Payment Order is continuing and has not been purged. As at the date of submissions upon penalty, K600,000 remains to be paid together with interest. The continuing failure to comply with a court order to pay a very substantial amount of money is serious. I take into account Mr. Mai's undertaking to pay the amount owing and his attempts to ensure that eventuates by way of his change of profession and occupation and sale of assets. I also take into account his cooperation with the new lawyers for the plaintiff, the part payment of K100,000 and his plea of guilty.

12. As to the majority of the submissions made by counsel for the plaintiff, they were mainly concerned with Mr. Mai's use of the K700,000 as distinct from his breaching the Payment Order . I am of the view that such submissions would be more appropriately made at a hearing concerning any criminal liability or the professional conduct of Mr. Mai given the matters to which he has admitted. It is to be understood though that I am concerned here only with the penalty to be imposed for being found guilty of contempt of court for breaching a court order. I will however direct the Registrar of the National Court to forward a copy of this decision to the Commissioner of Police and the President of the Papua New Guinea Law Society for their consideration as to what action may be warranted arising from the circumstances of this case.

13. As to Mr. Mai's submissions concerning the hardship and distress that will be caused if a term of imprisonment is imposed, I am mindful that there will be adverse effects upon him and his family. There will always be adverse effects when a person is imprisoned. I am not satisfied that Mr. Mai has demonstrated that his circumstances are such that he should warrant special treatment in this regard. As to Mr. Mai's health being adversely affected, although his doctor has informed as to his condition and the treatment that he receives, there is no evidence that imprisonment will be harmful as submitted by Mr. Mai and no evidence that Mr. Mai would not be able to receive his treatment whilst in prison.

14. This may be the first occasion as far as I am aware, of a lawyer in this jurisdiction being found guilty of contempt of court for failing to comply with a court order for the payment of money. The seriousness of the continued breach of the Payment Order by Mr. Mai, a practicing lawyer at the time that the Payment Order was made, in my view dictates that the punishment that should be imposed should properly reflect this court's attitude to the disobeying of a court order and the concomitant interference with the administration of justice and undermining of judicial authority.

15. Notwithstanding that it may be said that Mr. Mai's contempt is business related, it arising from him holding part of the proceeds of the sale of a property on behalf of a client, and therefore that a fine is appropriate, the very substantial amount of money that remains owing, the continuing breach and the fact that Mr. Mai was a practicing lawyer at the time that the Payment Order was made, leads me to the conclusion that a monetary penalty is not appropriate. In this regard, it must be remembered that a lawyer's first and paramount duty is to the court. The seriousness of the non-payment of such an amount warrants a term of imprisonment. A term of imprisonment will also serve as a warning to others, especially lawyers, that court orders must be obeyed and that there are consequences for non-compliance. Given the circumstances, I am not satisfied that any part of the term of imprisonment that I intend to impose should be suspended.

16. I make the following orders:

a) the contemnor Emmanuel Mai, shall be punished for contempt by committal to prison for a period of nine months, with effect forthwith,

b) no part of the punishment is suspended,

c) the contemnor is to pay the costs of the plaintiff of and incidental to its notice of motion seeking orders for contempt, on a solicitor client basis,

d) the Registrar of the National Court is directed to forward a copy of this decision to the Commissioner of Police and the President of the Papua New Guinea Law Society for their consideration as to what action may be warranted arising from the circumstances of this case.
____________________________________________________________
Henaos Lawyers: Lawyers for the Plaintiff
Kundu Legal Services: Lawyers for the Contemnor