Chhoeu v Watson

Australian Consolidated Press Limited v Morgan (1965) 112 CLR 483 Kirkpatrick v Kotis [2004] NSWSC 1265 Wyszynski v Bill [2005] NSWSC 110 CASES CITED : Baiada & Ors v Waste Recycling and Processing Service of NSW (1999) 130 LGERA 52; [1999] NSWCA 139 Hawksford v Hawksford [2005] NSWSC 463 Witham v Holloway (1995) 183 CLR 525

Simon Chhoeu PARTIES : v Michael Watson

Plaintiff: M Watts COUNSEL : Defendant: G McVay

Plaintiff: Wintergate Solicitors SOLICITORS : Defendant: Spencer Whitby & Co

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST

3877/04 Simon Chhoeu v Michael Watson JUDGMENT 1 HIS HONOUR: I am dealing with a motion brought by the plaintiff for an order that the defendant be punished for contempt of court. The plaintiff has closed his case. The defendant submits there is no case to answer. 2 The contempt charge arises from orders made by Mr Justice Hamilton on 21 July 2004. The defendant had sold his accountancy practice to the plaintiff. The plaintiff alleged that the defendant was in breach of provisions of the agreement for sale which restrain the defendant from soliciting clients and obliged him to use his best endeavours to retain the benefit of the goodwill of the practice for the plaintiff. 3 His Honour made an interlocutory order, restraining the defendant from soliciting former clients of the practice with some exceptions. His Honour also ordered, until further order, that: "(2) The defendant keep full accounts and records in relation to work carried out on or after 1 July 2004 directly or indirectly by or on behalf of the defendant or by or on behalf of any accounting practice with which the defendant has any association where that work is carried out for any client who was a client of the accounting practice 'Watson, Le & Partners' as at 18 April 2003 with the exception of the first clients named in the schedule of clients attached hereto.

(3) The defendant provide by facsimile copy the accounts and records kept in accordance with order 2 to the solicitors acting for the plaintiff on the 10th day of each calendar month or the first business day thereafter."

4 The plaintiff's evidence establishes that on 10 August, 2004, the defendant sent the following documents by facsimile to the plaintiff's then solicitor. They were a cash flow report for the period 25 June 2004 to 31 July 2004 which recorded receipts from certain clients and payments of expenses; a summary of bank account movements for the same period showing deposits and withdrawals; a summary of work in progress for the same period in respect of specified clients showing the number of hours worked in that period for each client and a charge out rate; and a summary of time sheets from 28 June to 7 August 2004.

5 On 22 December 2004 the defendant sent by facsimile to the plaintiff's former solicitor, documents covering the period from 1 August 2004 to 30 November 2004. Those documents comprised what appear to be extracts from the defendant's cashbook and bank statements. The pages from the cashbook show a cash balance as at 31 July 2004, receipts, including receipts from clients who were clients of the practice, and payments by way of drawings and expenses. The bank statements show deposits and withdrawals to and from the defendant's bank account including deposits from clients. 6 On 14 January 2005, the defendant sent by facsimile to the plaintiff's former solicitor a page from his cash book, or an extract made from the cash book, showing deposits and payments from 30 November to 31 December 2004 and bank statements for that period. The document showed receipts from two clients. 7 On 7 March 2005 the defendant sent by facsimile to the plaintiff's solicitor a copy of his bank statements for January 2005 and the bank reconciliation for that month showing deposits and payments including receipts from clients. 8 The plaintiff's evidence is that this is all that was provided by the defendant in respect of the period from 1 July 2004 to 31 January 2005.

9 The notice of motion was filed on 28 February 2005. The statement of charge is in the following terms: " Statement of Charge Michael Carl Watson is guilty of contempt by reason of, contrary to orders 2 and 3 of the court on 21 July 2004, entered on 27 July 2004, he did not provide accounts in proper form to the plaintiff on 10 August 2004 and did not provide any accounts to the plaintiff being the accounts due on 10 September 2004, 10 October 2004, 10 November 2004, 10 December 2004, 20 January 2004 and 10 February 2004."

10 As the defendant's counsel submits, the charge can conveniently be divided into two. The first part is that the defendant did not provide accounts in proper form to the plaintiff on 10 August 2004. The second part is that the defendant did not provide any accounts to the plaintiff, being those due on the nominated dates. He correctly submits that the charge does not allege a breach of the orders by reason of accounts being delivered late; rather, the second part of the charge is that those that were due on the nominated dates were not provided. Again, in relation to the second part of the charge, counsel correctly points out that the charge is not that incomplete accounts were provided, but that none was provided. Nor is the defendant charged with not providing records in relation to work done on or after 1 July, 2004, as distinct from accounts. 11 I will deal first with the first part of the charge relating to the information provided on 10 August 2004. The charge is that the defendant did not then provide accounts in proper form and this was a breach of orders 2 and 3. 12 Order 2 deals with accounts and records which must be kept. The defendant could only be in breach of order 2 if he did not keep the requisite accounts and records.

13 There is no charge, even as an alternative count, that the defendant failed to keep accounts or records as required by order 2. In my view orders 2 and 3 impose two distinct obligations. The first one, imposed by order 2, was that the defendant keep full accounts and records. The second obligation, imposed by order 3, was that he provide copies of the accounts and records kept in accordance with order 2. If the defendant failed to keep accounts or records as required by order 2, he would not breach order 3 by failing to provide the records required to be kept in accordance with order 2. The two orders and the obligations created by them are distinct. There is not one obligation comprising two elements. 14 It follows that to establish a breach of order 3, the plaintiff must prove that the defendant kept accounts in accordance with order 2, but did not provide them. Neither order 2 nor order 3 specifies the form of accounts to be kept. Order 2 is silent as to what is denoted by the expression "full accounts". That itself creates a difficulty. It is a prerequisite for the enforcement of an order that the order be unambiguous, at least in what it denotes. (Australian Consolidated Press Limited v Morgan (1965) 112 CLR 483 at 506, 515-516; Kirkpatrick v Kotis [2004] NSWSC 1265 at [50]-[56]; Wyszynski v Bill [2005] NSWSC 110 at [30]-[35].) 15 Counsel for the plaintiff explained the charge of not providing accounts in proper form as being that what the defendant provided on 10 August 2004 were not "accounts" of work done at all. The summary of time sheets and work in progress may have been records of work done for the periods they cover, but they were not accounts, let alone full accounts, in relation to the work carried out. Nor was a statement of receipts an account of the work carried out during the period. 16 Counsel submitted that it was the accounts sent to clients for work done which comprised the "full accounts" which had to be provided, and that no "accounts in proper form" had been supplied on 10 August 2004, as such accounts to clients were not provided. 17 Counsel for the defendant submitted that any accounts to clients would be "records" to be kept in relation to the work carried out, not "accounts" or "full accounts" in relation to the work carried out. He submitted that the defendant was not charged with not providing such records, and there was no evidence that such records had been kept. Neither the time sheets, nor work in progress, for July 2004, nor moneys received in that month and subsequent months, was capable of proving beyond reasonable doubt that such records had been kept. 18 It is unclear what distinction is drawn in the orders between records and accounts. I do not accept that they define two separate classes of documents which cannot overlap. A document may be both an account and a record. I consider that an account to clients in relation to work done for the relevant period may be both a record and an account of that work. 19 There is a problem with the formulation of the charge which implies that accounts were provided but not in proper form, as distinct from alleging that accounts or records required to be provided, were not. 20 It is unnecessary to consider whether, in the absence of amendment to the charge, and no amendment was sought, the court can disregard that defect. No submissions were advanced on that topic. 21 It is necessary that the plaintiff adduce evidence capable of establishing beyond reasonable doubt that the defendant kept, that is, he prepared, accounts to clients in relation to work carried out in the month of July 2004, which should have been provided on 10 August 2004. There is no such evidence. 22 The plaintiff's evidence of the classes of documents which he believed a defendant would need to keep in order to operate and manage his practice, is not evidence that the defendant prepared or sent such accounts to clients in relation to work done in July 2004. 23 The plaintiff suggested there was an evidentiary onus on the defendant to show no such accounts were prepared. Counsel referred to the decision of the Court of Appeal in Baiada & Ors v Waste Recycling and Processing Service of NSW (1999) 130 LGERA 52; [1999] NSWCA 139 at [55]. That was not a criminal or quasi-criminal proceeding. The passage relied on concerned the onus of ordinary evidence to prove a negative, in that case, that no development consent had been given for the use of land for a particular purpose. As Campbell J said in Hawksford v Hawksford [2005] NSWSC 463 at [54], again in a civil context: "Where party A has the legal onus of proving a negative proposition, and relevant facts are peculiarly in the knowledge of party B or where party B has the greater means to produce evidence relating to those facts, then provided party A establishes sufficient evidence from which the negative proposition may be inferred, party B then comes under an evidential burden, or an onus of adducing evidence: Hampton Court Ltd v Crooks (1957) 97 CLR 367 at 371-372; Apollo Shower Screens Pty Ltd & Anor v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561 at 564-5; Baiada & Ors v Waste Recycling & Processing Service Of NSW [1999] NSWCA 139; (1999)130 LGERA 52 at [55]."

24 Quite apart from the fact this is a proceeding criminal in nature (see Witham v Holloway (1995) 183 CLR 525), the onus is on the plaintiff to establish not a negative proposition but an affirmative one: that the defendant kept the account in question. 25 In my view the evidence is not capable of discharging that onus beyond reasonable doubt. 26 I turn to the second part of the charge. Here the plaintiff faces two difficulties. First, he has to adduce evidence capable of proving beyond reasonable doubt that the documents provided were not accounts in relation to the carrying out of work on or after 1 July 2004 for any relevant client. If the documents which the defendant provided are such accounts, or are not shown not to be, then the defendant cannot be guilty of the charge as laid, as he would have provided some of the accounts due on the specified dates. It must be remembered that the charge is that the defendant did not provide "any accounts" due on the specified dates. Then the plaintiff must adduce evidence capable of showing beyond reasonable doubt that the defendant kept such accounts in accordance with order 2 that he could have provided. 27 The documents provided by the defendant were records of moneys received from clients. Has it been shown that they were not "accounts" in relation to work done on or after 1 July 2004 for relevant clients? The defendant asserted that that was what they were. The plaintiff said they were not accounts, but records, and that they were records of receipts of money, not of work done. 28 As I have said, I do not consider, in construing orders 2 and 3, that there is a dichotomy between records and accounts. A document may be both. One of the dictionary meanings of "account" is a statement of pecuniary transactions. That would include a record of receipts. 29 It is possible, perhaps even likely, but it is not self-evident, that the receipts were in relation to work done from 1 July 2004. However, the onus lies on the plaintiff to adduce evidence capable of establishing the charge beyond reasonable doubt. He has not led evidence capable of proving that the account for the receipt of moneys was not "in relation to" the carrying out of work for clients after 1 July 2004. If it was, then, at least some of the accounts required were provided and the charge that the defendant did not provide any of the required accounts must fail. 30 If the accounts and receipt of moneys did not refer to the carrying out of work for relevant clients from 1 July 2004, then there is no evidence that the defendant kept any such accounts as required by order 2. 31 There is evidence that time sheets were kept, but that is not what the plaintiff claims were "accounts" for the purposes of order 2. He did not charge the defendant with not providing time sheets. 32 There is no evidence that accounts to relevant clients were prepared, except for what I infer from receipts. If the receipts were not in relation to work carried out after 1 July 2004, then there is no basis for inferring that accounts for clients were kept. That might be a breach of order 2, but the defendant is not charged with failure to keep accounts. 33 For these reasons I consider that the defendant has no case to answer. 34 I have not found it necessary to decide whether the charge could not succeed in any event because of the ambiguity in what is denoted by the obligation to keep full accounts and records in order 2. 35 This conclusion may be regarded as technical by those concerned to ensure that the defendant do what was intended and, perhaps, required, that he do under the orders. However, charges of contempt are criminal in nature, and can lead to a fine or imprisonment. They are determined according to the statement of charge and must be proved beyond reasonable doubt. Statements of charge should be precise and, as I think in this case, an overstatement can be counter-productive. 36 I understand that the plaintiff's aim is to obtain the documents which he says the defendant should provide. The dismissal of the contempt charge will not preclude the plaintiff from seeking a more explicit order as to what the defendant should provide. However, the notice of motion filed on 28 February 2005 is dismissed with costs.

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