Two for one: The Court may issue two arrest warrants for failure to attend an examination

The appeal of the decision of the Federal Court in the case of Mensink v Parbery [2018] FCAFC 101 examines the governing principles the Court considers when granting:

• an arrest warrant to secure appearance at an examination; and

• an order for contempt of court for failing to comply with an order requiring attendance for examination.

The facts

Mr Clive Theodore Mensink (Mr Mensink) was the sole director of Queensland Nickel Pty Ltd (Queensland Nickel) and placed the company into voluntary administration in 2016. The company shortly afterwards went into liquidation. The special purpose liquidators of Queensland Nickel, Stephen Parbery and Michael Owen (the Liquidators) applied for an examination summons requiring Mr Mensink and four other named individuals to attend for examination in relation to Queensland Nickel’s affairs.

Two examination dates were set requiring Mr Mensink to appear, however he failed to appear on both dates as he had left Australia and indicated he had no plans of returning anytime soon. Unsurprisingly, the Liquidators applied to Court for arrest warrants against Mr Mensink. Justice Dowsett issued two arrest warrants, the first to secure Mr Mensink’s appearance at an examination and the second to have Mr Mensink attend court to answer charges of contempt. The contempt charge related to failing to comply with an order of the Court requiring him to attend the examination.

Mr Mensink appealed Justice Dowsett’s decision.

Arrest warrants granted – what are the rules?

1. 1. 1. Examination Warrant

The first arrest warrant to secure Mr Mensink’s appearance at an examination was made pursuant to rule 11.10 of the Federal Court (Corporations) Rules 2000 (Cth) (the Corporations Rules).

1. 1. 2. Contempt Warrant

The second arrest warrant to secure Mr Mensink’s appearance to answer contempt charges for failing to comply with court orders (orders to appear for examination) was made pursuant to rule 42.14 of the Federal Court Rules 2011 (Cth) (the Rules).

Grounds of Appeal

It was contended on behalf of Mr Mensink that Justice Dowsett had erred in making the orders for the arrest warrants on three grounds:

In relation to the validity of the Examination Warrant:

1. 1. 1. No notice was given to Mr Mensink pursuant to rules 41.06 and 41.07 of the Rules regarding  the two orders made requiring his attendance for examination on two dates; and
      2. Justice Dowsett failed to consider that Mr Mensink had “reasonable cause”, which is a mandatory factor to consider under rule 11.10 of the Corporations Rules, for not attending both examination dates.

In relation to the validity of the Contempt Warrant:

1. 1. 3. Justice Dowsett failed to consider rule 42.14(2) of the Rules correctly, and failed to consider the defects in the statement of charge for contempt.

Decision

The Court concluded that an arrest warrant made under rule 11.10 of the Corporations Rules is an independent source of power and compliance with other Rules of the Court such as those in the Rules only apply to the extent it is relevant and not inconsistent with the Corporations Rules.  As the notice requirements under the Corporations Rules are different to those under the Rules, there exists an inconsistency. The Court held that compliance with the Rules (as contended by Mr Mensink) did not apply to the making of the Examination Warrant.  Compliance with the Corporations Rules was sufficient.  Mr Mensink’s first ground consequently failed.

In relation to the second ground of appeal, the Court determined that Mr Mensink had no reasonable cause not to appear for both examinations. The Court held Mr Mensink had only indicated it was inconvenient for him to attend given his travel plans and it was not up to him to determine, unilaterally that his travel plans gave him reasonable cause not to attend the examinations. Further, even if reasonable cause is raised, the onus of rebutting it only requires “slight evidence”. The Court found Mr Mensink did not have reasonable cause to not attend the examinations. As such, Mr Mensink’s second ground also failed.

Mr Mensink also challenged the validity of the Contempt Warrant, on two grounds.  He first submitted that the Court failed to consider sub-rule 42.14(2) of the Rules, being whether Mr Mensink was “likely to abscond or otherwise withdraw from the jurisdiction of the Court”. The Court determined that Mr Mensink was aware he was required to attend for examination on the dates set and decided not to return to Australia to appear until it suited him. His ongoing intention not to return to the jurisdiction for a considerable length of time amounted to a “withdrawal” from the jurisdiction of the Court. The first ground failed.

Additionally, Mr Mensink also contended there were defects in the statement of charge of Mr Mensink’s contempt charges, due to a failure to comply with the procedural requirements for enforcement in rules 41.06 and 41.07 of the Rules. The Court held that procedural defects required under the Rules are generally not fatal to contempt charges and may be dispensed with, except in limited circumstances. It was held that the procedural defect in respect of one of the two charges for contempt was fatal, however since the basis for the arrest warrant for each charge is independent and the erroneous part of the statement of charge was easily severed, this ground failed.

As such, the Full Court found that all three grounds of appeal failed and the appeal was dismissed with costs.

Key takeaway

The principles governing Examination Warrants made under rule 11.10 of the Corporations Rules are different to those that apply to a Contempt Warrant made under rule 42.14 of the Rules. Liquidators should be mindful of this when seeking either arrest warrants requiring examinees to appear for an examination or to answer for contempt of court charges.

The only precondition to issue an arrest warrant under rule 42.14 of the Rules is that an application for punishment for contempt has been filed. Failure to comply with procedural requirements under the Rules is generally not fatal to the validity of the warrant except in limited circumstances. This reflects the policy that contempt is meant to be a serious response but is still a flexible remedy.

Authored by:
Scott Couper, Partner
Neil Nguyen, Solicitor