CLGC Pty Ltd v Zhang

Relevant principles

1. Part 55, r 13 of the Supreme Court Rules 1970 (NSW) (SCR) provides: Punishment (1) Where the contemnor is not a corporation, the Court may punish contempt by committal to a correctional centre or fine or both. … (3) The Court may make an order for punishment on terms, including a suspension of punishment or a suspension of punishment in case the contemnor gives security in such manner and in such sum as the Court may approve for good behaviour and performs the terms of the security.
2. As noted by Rees J in Seven Network (Operations) Ltd v Dowling (No 2) [2021] NSWSC 1106 at [6], the provisions of Pt 55 are only declaratory of the Court's power to punish for contempt and alternatives to committal to a correctional centre or a fine may be fashioned by the Court in the exercise of its inherent jurisdiction. One such alternative is imposing an obligation of community service as a condition of suspending a term of imprisonment or the operation of a fine: Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309; Zhang v Shi (No 6) (2022) 67 VR 469; [2022] VSC 271; D Rolph, Contempt (2023, Federation Press) at 810. Other examples of the imposition of a suspended sentence subject to specified conditions are Council of New South Wales Bar Association v Rollinson [2022] NSWSC 407 and Prothonotary of the Supreme Court of New South Wales v Ibrahim [2023] NSWSC 1275.
3. The underlying rationale of sentencing for contempt (be it civil or criminal contempt) is that it is necessary to uphold and protect the effective administration of justice which it does by demonstrating that the court's orders will be enforced: Australian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 107; [1986] HCA 46. In setting the punishment for contempt it is necessary to bear in mind the purpose of punishing the contemnor, which is deterrence of the contemnor and others in the future from committing similar contempts and denouncing the conduct concerned in an emphatic way: Maniam (No 2) at 314; NHB Enterprises Pty Ltd v Corry (No 8) [2022] NSWSC 97 at [26]-[27].
4. The importance of this underlying rationale to the determination of the appropriate penalty for contempt was explained by the Full Court in Kazal v Thunder Studios Inc (California) (2017) 256 FCR 90; [2017] FCAFC 111 at [97]: Viewed in that way, contempt proceedings are essentially protective in nature as to the judicial function and the role of the courts, even if they also serve to vindicate private interests and rights. Contempt proceedings are therefore to be viewed as essential in facilitating courts being able to function properly. That includes being, and being seen to be, effectual in adjudicating upon and resolving disputes, and in particular making orders that will ordinarily be obeyed. This means that individual contempt cases have an importance transcending the instant case by supporting and enhancing the integrity of judicial proceedings, both in respect of orders made, and more generally. That view of contempt proceedings can be seen to permeate longstanding sentencing authority in this area.
5. The Crimes (Sentencing Procedure) Act 1999 (NSW) and the Crimes (Administration of Sentences) Act 1999 (NSW) do not apply to punishments for civil contempts: Dowling v Prothonotary of Supreme Court of New South Wales (2018) 99 NSWLR 229; [2018] NSWCA 340 at [46], [57]-[58]; NHB Enterprises at [29].
6. While the Court has power to sentence a person to a term of imprisonment for contempt, it is well established that this is a penalty of last resort: see He v Sun (2021) 104 NSWLR 518; [2021] NSWCA 95 at [68]; NHB Enterprises at [30]. In He v Sun, McCallum JA said at [68]: … imprisonment is a punishment of last resort: R v Way (2004) 60 NSWLR 168; [2004] NSWCCA 131 at [115] (Spigelman CJ, Wood CJ at CL and Simpson J). While that is a proposition that arises most commonly in the discourse of the criminal law, there is no reason in principle why the same restraint should not apply to punishment of contempt and every reason why it should. That is a necessary incident of the common law's acceptance that the right to personal liberty is a fundamental common law right which "cannot be impaired or taken away without lawful authority and then only to the extent and for the time which the law prescribes": Williams v The Queen (1986) 161 CLR 278; [1986] HCA 88 at 292 (Mason and Brennan JJ). In my view, it is appropriate to proceed on the basis that, where a person is being dealt with for contempt in civil proceedings, as where a person is being sentenced for a criminal offence, the course of committing the contemnor to a correctional centre or sentencing the offender to a term of imprisonment should not be taken before considering whether there is any alternative course that is appropriate in the circumstances, having regard to the nature and object of the function in question.
7. In Australian Securities and Investments Commission v Matthews [2009] NSWSC 285 Barrett J set out at [27] the following matters as relevant to the determination of the appropriate penalty for contempt including breach of court orders: (1) The seriousness of the contempt proved. (2) The contemnor's culpability. (3) The reason or motive for the contempt. (4) Whether the contemnor has received, or sought to receive, a benefit or gain from the contempt. (5) Whether there has been any expression of genuine contrition by the contemnor. (6) The character and antecedents of the contemnor. (7) The contemnor's personal circumstances. (8) The need for deterrence of the contemnor and others of like mind from similar disobedience. (9) The need for denunciation of contemptuous conduct.
8. This list was referred to with approval on appeal: Matthews v Australian Securities and Investments Commission [2009] NSWCA 155 at [129], [144]; see also He v Sun at [10] and [55]. In Kazal at [102] the Full Court described this as a useful, although not exhaustive, list of the relevant factors in assessing the appropriate penalty and added at [103]: The burden of the additional authority in this Court is to add weight to the factors listed in Matthews, rather than requiring any change by way of addition, subtraction or variation. The focus remains on the core themes of the objective seriousness of the conduct and, in particular, its effect on the administration of justice, subjective factors such as the contemnor's culpability, antecedents and attitude, including in particular any apology or other palpable sign of contrition, the capacity to pay a fine, and imprisonment being a last resort. Deterrence remains a dominant theme, both specific and general. Even denunciation and punishment can be seen as bolstering deterrence. That is especially so when the conduct entails contemplation and the opportunity to reflect and desist.
9. As noted by Payne JA in Council of the New South Wales Bar Association v Rollinson (No 2) [2023] NSWSC 1390 at [67] to this list should also be added the likely effect that punishment will have on the contemnor, including any hardship it may cause.
10. In respect of factor (2) (culpability), the contemnor's state of mind is a relevant matter as it may aggravate or mitigate the seriousness of the contempt. In Kazal the Full Court said: [105] State of mind can serve to mitigate or aggravate conduct by a contemnor. In the case of aggravation, this is reflected in the conclusion reached as to whether or not the nature of the contempt, combined with the proven state of mind, may be regarded as contumacious. Evidence of an innocent or inadvertent state of mind may serve to mitigate. It follows that state of mind will almost always be a relevant consideration when it comes to penalty, somewhat analogous to the situation with civil penalty contraventions ... [106] Aggravation by way of conduct and a state of mind found to be contumacious can be seen to be on a sliding scale. For example, it may range from deliberate and wilful defiance, to an unsuccessful attempt to get around a prohibition, to an unsuccessful attempt to comply with a prohibition. Proven recklessness or carelessness may be seen not to be contumacious at all. This process of characterisation is inevitably driven by close attention to what was done. This includes what can be said about state of mind able to be ascertained from all of the evidence, including by way of inference.
11. Contempt will be contumacious if it involves deliberate defiance, and in the context of a breach of the Court's orders it is enough that there is deliberate conduct which is calculated to thwart the fundamental purpose of the Court's orders: Witham v Holloway (1995) 183 CLR 525 at 530; [1995] HCA 3; Grocon Constructors (Victoria) Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2014] VSC 134 at [102]-[114]; Brennock & Dixon v Norman [2021] NSWSC 1182 at [12]-[13]. However, it is open to the Court to punish contempt by imprisonment even if the contempt is not contumacious: BCEG International (Australia) Pty Ltd v Xiao (No 3) [2023] NSWSC 554 at [17]-[18].
12. If the contemnor suffers from a mental illness and this contributes to his commission of the contempt in a material way, this will be relevant to his or her culpability: Director of Public Prosecutions (DPP) (Cth) v De La Rosa (2010) 79 NSWLR 1; [2010] NSWCCA 194 at [177]; Ibrahim at [79]-[80]. In addition, the fact that the contemnor is suffering from a mental illness is potentially relevant in other ways as it may indicate that the offender is an unsuitable vehicle for the application of the principle of general deterrence, and it may mean that a prison sentence will 'weigh more heavily' on that offender than it would on others each of which is relevant to sentencing: Barbieri v R [2016] NSWCCA 295 at [53] per Simpson JA. Thus, Yehia J held in Carl v R [2023] NSWCCA 190 at [67] (Weinstein J agreeing at [115]) that an offender's mental illness which was not casually connected to the wrongdoing may moderate general deterrence, as well as mitigating the sentence by reason of more onerous conditions in custody. Mental illness in this context is not limited to a serious psychiatric illness and may extend to a mental disorder of moderate severity: De La Rosa at [178].
13. In respect of factor (6) (character and antecedents), when determining the penalty for contempt the relevant history of the offender includes other findings of contempt or convictions for offences similar to contempt. In Ferguson v Dallow (No 5) [2021] FCA 698, O'Callaghan J said the following about this at [20] (adopted by Rees J in Seven Network at [9]): As a general principle, when determining a penalty for contempt, the relevant history of the offender includes, and is limited to, other findings of contempt. In fixing a penalty for contempt the court should take into account only other findings of contempt and should treat as irrelevant the existence of prior convictions of another kind, except for convictions for offences similar to contempt. See Australian Competition and Consumer Commission v Levi (No 3) [2008] FCA 1586; ATPR 42-257 at 49,611-12 [101]-[110] (McKerracher J); R v Vasiliou (No 2) [2012] VSC 242 at [8] (Beach J); Grocon Constructors (Victoria) Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2014] VSC 134; 241 IR 288 at 354-5 [187] (Cavanough J); Admark Property Group Pty Ltd (in liq) v GJ Building and Contracting Pty Ltd (2017) 94 NSWLR 777 at 787 [33], 790 [45] (Black J); R v Murray [2018] VSC 133 at [44] (Riordan J); Victoria International Container Terminal Ltd v Construction, Forestry, Maritime, Mining and Energy Union [2018] VSC 794; 285 IR 28 at 36-7 [19]-[20] (McDonald J).
14. As noted above, in imposing a penalty for contempt, the court has power sourced in its inherent jurisdiction to impose a sentence of imprisonment which is suspended upon conditions to which the contemnor is required to adhere. This involves a two-step process in which the court considers first the appropriate length of the period in custody without regard to the possibility it may be suspended and then considers whether it should be suspended by reference to such matters as the nature of the offence, its objective seriousness, the need for specific or general deterrence and the subjective circumstances of the offender: Rollinson at [90] and Ibrahim at [82]-[87]. In suspending a sentence subject to a conditional bond, the duration of the bond may exceed the term of the suspended sentence: Ibrahim at [86].
15. I have had regard to the decisions in other cases where penalties were imposed for contumacious contempt ranging from 40 hours of community service (Pisano v Dandris (No 4) [2015] NSWSC 1689) to imprisonment for two years (Vaysman v Deckers Outdoor Corporation Inc (2014) 222 FCR 387; [2014] FCAFC 60). There is a helpful table of the range of penalties forming Annexure A to the decision of Zammit J in Moira Shire Council v Sidebottom Group Pty Ltd [2018] VSC 556. Rollinson and Ibrahim each involved the imposition of a sentence of imprisonment for contumacious contempt suspended subject to specified conditions. A significant number of cases where a sentence of imprisonment was imposed involved the breach of court orders including freezing orders, and in several of these cases sentences of six months were imposed: eg. Huang v Liao [2022] NSWSC 526 and Yuan v Huang (No 2) [2023] NSWSC 1618.
16. While I have taken these prior decisions into account and recognise that they provide a yardstick against which to examine a proposed sentence, the sentencing here requires an evaluative exercise which must be focused on the consideration of the particular circumstances of this case: Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45 at [54].

Submissions as to penalty

1. Both parties approached the question of the appropriate penalty by reference to the nine factors stated by Barrett J in Matthews set out above.

CLGC's submissions

1. CLGC submitted that the appropriate penalty was a custodial sentence.
2. In relation to the seriousness of the contempts, CLGC noted that Mr Zhang has properly accepted that his contempt in this matter was objectively serious. CLGC submitted that it was relevant to take into account that the breach of the freezing orders caused direct loss to the plaintiffs of $900,000. Also, it was relevant that there were three separate breaches of the freezing orders and repeated breaches of the undertaking, and Mr Zhang's intention was not to comply with the undertaking but only to give the appearance that he was: see Judgment at [114], [116] and [119]-[120].
3. In relation to culpability, CLGC submitted that Mr Zhang's actions were calculated, wilful and indicative of his total lack of respect for the court's orders and the other parties to the litigation.
4. In relation to the reason or motive for the contempts, Mr Zhang had personal uses for the money and so he took it (including the sale proceeds) and received a benefit, to the tune of almost $1 million, which remains unaccounted for; in particular, he has not provided proper assistance to the bankruptcy trustee explaining where that money went, and to date there has been no indication that any recovery of that money is likely. This is apparent from the report to creditors dated 16 November 2023 by Mr Gavin King, the trustee in bankruptcy, which states that there has been a failure by Mr Zhang to cooperate with the trustee in relation to a debt owed to him by Ms Tracy Cui for a loan he made in 2018.
5. In relation to contrition, it was submitted that while Mr Zhang has provided an apology to the court in his affidavit, this does not indicate contrition. In Patel v R [2022] NSWCCA 93 at [41], Brereton JA (N Adams and Lonergan JJ agreeing) said that contrition (or remorse) is concerned with the attitude of an offender after the event to his offending, and involves genuine regret in contrast to 'the anguish of being caught and punished'. His Honour agreed with the observation of the Victorian Court of Appeal in Barbaro v R; Zirilli v R [2012] VSCA 288 at [38] that 'a person wishing to rely on remorse as a mitigating factor needs to satisfy the court that there is genuine penitence and contrition and a desire to atone'. What Mr Zhang has said in his affidavit amounts to no more than regret. If he truly was contrite he would have assisted the bankruptcy trustee in his investigations to recover the money paid away by Mr Zhang in breach of the freezing orders and undertaking.
6. In relation to Mr Zhang's character and antecedents his criminal history and bail record indicates a number of offences for which he has been sent to prison. While those offences were different to the contempts in the present case, it is relevant should the court consider whether to suspend any sentence on condition of good behaviour because it discloses several instances where Mr Zhang has repeated several times the same offence (of driving a motor vehicle during a period of disqualification). Having previously been given repeated opportunities not to offend and not to breach court orders, he has repeatedly failed to do so.
7. In relation to Mr Zhang's personal circumstances, the evidence regarding Mr Zhang's mental health does not establish that he is in a vulnerable position, or that the treatment he requires could not also be provided to him in prison. Nor is it relevant that Mr Zhang has a fear of going to prison because of a violent assault while he was in custody at the Wellington Correctional Centre in June 2024, as prison is often a violent place and there is scant evidence of the circumstances of the assault and why it occurred.
8. In relation to the need for deterrence and denunciation, freezing orders and undertakings to the court are a critical part of the tools by which the court seeks to address the risks of asset dissipation. There is a need for serious denunciation of his conduct, particularly as he was a practising solicitor at the time of the acts giving rise to the contempts. It was submitted that the fact that Mr Zhang has ceased to practice and gave up his practising certificate is of no relevance because it was the inevitable consequence of his actions including his forgery of a signature of Mr Guo: see CLGC Pty Ltd v Zhang [2021] NSWSC 946 at [73].
9. CLGC also submitted that as the contempt had a consequence of causing a direct loss to the plaintiffs of $900,000, it would be appropriate for orders to be made that Mr Zhang be obliged to return those funds, disclose the full and specific destination for those funds and to take all necessary steps to assist the bankruptcy trustee to recover those funds. I do not accept this submission. A bankrupt has extensive obligations under s 77 of the Bankruptcy Act 1966 (Cth) to assist the trustee in bankruptcy in connection with the administration of the estate, including giving all relevant information required by the trustee about the bankrupt's conduct and examinable affairs. The sanction for non-compliance by the bankrupt with these obligations is potentially his arrest and imprisonment: s 78(1)(f). In my view, the focus of this penalty hearing is not the making of orders to assist the plaintiffs to recover funds from any of the defendants, but rather the identification of the appropriate punishment for the undermining of the court's authority which occurred by the breach of the freezing orders and the undertaking.

Mr Zhang's submissions

1. It was submitted by Mr Olson that because imprisonment is the last resort, the proper question is not simply whether imprisonment is appropriate, but whether any other penalty would be inappropriate or inadequate to satisfy the purpose of punishment for contempt, being to uphold the undisturbed and orderly administration of justice. The appropriateness of any penalty is to be assessed according to whether it is apt to serve this purpose, and hence the correct approach requires consideration of whether any other sanction is appropriate in the circumstances, before deciding that imprisonment is appropriate: He v Sun at [68].
2. In relation to seriousness of the contempt, it is acknowledged that the contempt found by the court to have been committed was objectively serious; however, its seriousness is to be assessed specifically by reference to the seriousness of the defiance of the court's authority: Vaysman at [43]. Here the defiance of the court's authority was 'private resistance' rather than 'public defiance', which is less serious than public defiance. Reference was made to the following observations of Bromberg J in Vaysman at [177]-[178]: The vindication of judicial authority must necessarily reflect the nature of the challenge to that authority inflicted by the conduct in contempt in question. Not all contempts involve an intention to disobey the order of the court let alone contumacy and public defiance. In terms of degree of gravity there is a broad spectrum. A civil contempt does not require an intention to breach the court's order and may result from casual, accidental or unintentional disobedience. If, however, the act or omission is wilful, a court will have the capacity to fine or imprison the contemnor. A wilful breach is to be distinguished from the more serious contumacious breach required as a necessary element of establishing a criminal contempt. As McHugh J pointed out in Witham (at 542) by reference to Lord Wilberforce speaking on behalf of the House of Lords in Heatons Transport (St Helens) v Transport and General Workers' Union [1973] AC 15 at 108-9, wilful breach is not the same as "contumacious or insulting behaviour or interference with the administration of justice". The seriousness of contumacious conduct will also depend upon whether the disobedience was constituted by private resistance or public defiance. The use of imprisonment (or the threat thereof) in order to coerce compliance with court orders is a necessary tool in dealing with contempt of court and will be justifiably utilised from time to time. Imprisonment, as a disciplinary sanction for contempt, ought to be confined to the most serious of contempts. If, as Merkel J in Louis Vuitton identified, imprisonment should be reserved "for the most serious criminal contempt cases", it follows that in the absence of serious contumacious disobedience, imprisonment should rarely be imposed as a disciplinary sanction. 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.
3. It was also submitted in relation to seriousness that the number instances of contempt in this case is relatively low.
4. In relation to culpability, it was accepted that given the findings in the Judgment at [112], [119]-[120] that Mr Zhang acted in deliberate defiance of the freezing orders and the undertaking and that his conduct was calculated to conceal the breaches, Mr Zhang's culpability may properly be regarded as high. However, the evidence does not establish that Mr Zhang actually received a benefit, as contended for by CLGC, of 'almost $1m', given that there was evidence before the court on the last occasion that Mr Zhang returned $900,000 to the SEPAM account on 31 March 2021 (although this did not cure the breaches of the undertaking which had already occurred): Judgement at [117].
5. In relation to contrition, Mr Olson accepted that the apology has come late but it is genuine nevertheless. Further, he submitted that the mere fact that Mr Zhang put the plaintiffs to proof and did not admit the contempt should not be regarded as an aggravating factor, because to do so would be inconsistent with the accusatorial nature of the jurisdiction: Siganto v The Queen (1998) 194 CLR 656; [1998] HCA 74 at [21]-[22]. I accept this submission.
6. In relation to character and antecedents, Mr Olson submitted that a contemnor's criminal antecedents are only relevant to the extent that they include prior convictions for contempt, or offences similar to contempt, relying on the authorities referred to above. Mr Zhang does not have prior convictions for contempt of court or similar offences, and his criminal history can therefore not be regarded as a relevant aggravating matter. Conversely, it is acknowledged that Mr Zhang cannot be regarded as a person of good character, as he otherwise might have been entitled to be regarded given his former status as a legal practitioner, accordingly this factor is a neutral consideration.
7. As regards Mr Zhang's personal circumstances, reliance was placed on the evidence given about his mental illness and fear of returning to custody given the previous assault referred to above, which mean that he might reasonably be regarded as a relatively vulnerable person in custody thereby making incarceration a more onerous penalty for him than for other contemnors who do not suffer from the same personal circumstances.
8. As to deterrence and denunciation, it was accepted that there is a need for general deterrence and denunciation, particularly because Mr Zhang was a legal practitioner at the time of the offending. However, the fact that the offending did not involve public defiance of the court does attenuate the need for general deterrence in this case. It was submitted that specific deterrence was a less significant factor in the present case principally because the offending which gave rise to the contempt arose in a specific factual context which no longer exists. It is also relevant that he is no longer a legal practitioner (and has not been since 2021) and is most unlikely to practice law again. Hence it is not realistically likely that Mr Zhang will commit such contempt again.
9. Mr Olson submitted that, in all the circumstances, the appropriate sentence is a term of imprisonment suspended on condition of good behaviour. Reliance was placed on the decision in Rollinson which involved repeated breaches of undertakings and injunctions by a barrister, for which the penalty was committal to a correctional centre for a period of nine months, suspended on condition that he was not to engage in legal practice for a period of three years. In that case, Beech-Jones CJ at CL (as his Honour then was) observed at [104] that 'the authority of the court is not so fragile that it can only be vindicated by committing a vulnerable person to jail …'.

Consideration of relevant factors

1. I will now turn to the consideration of the matters relevant to the imposition of the appropriate penalty for the contempts.
2. As was properly conceded by Mr Olson, the objective seriousness of the contempts is high and Mr Zhang's culpability is high. The contempts involved breaches of freezing orders on three occasions and separate breaches of an undertaking he had given to the Court, each directed to preventing the dissipation of the assets of the defendants (including himself) to which recourse could potentially have been made to meet any judgment, thereby frustrating the Court's process in the proceedings. However, I accept Mr Olson's submission that the contempts do not involve public defiance of the Court, but rather private defiance of the Court's orders and the undertaking.
3. Turning now to the reason or motive for the contempts, Contempt 1 involved payments of $900,000 from the SEPAM Account on 9, 11, and 13 November 2020 as part of a series of transactions which I am satisfied were designed to give the appearance that, as at 13 November 2020, the SEPAM Account had a balance of slightly more than $900,000 when it did not, thereby hiding the fact that Mr Zhang had earlier on 23 March 2020 withdrawn $900,000 from the SEPAM Account to repay the N1 Venture loan: Judgment at [55]. After that withdrawal on 23 March 2020, the balance of the SEPAM Account was $792.85. Immediately prior to 4 November 2020, the SEPAM Account had a balance of $364.60. On 4 November 2020, there was a deposit to the SEPAM Account of $900,000 from the Joint Account which took the balance of the SEPAM Account up to $900,364.60. The next entries to the SEPAM Account were a series of withdrawals and deposits of $900,000 following which the balance of the account had returned to $364.60. It remained at that level until the transfer of amounts totalling $900,000 from the Joint Account to the SEPAM Account on 31 March 2021: Judgment at [75]; CB244-245.
4. Contempt 2 relates to the failure to apply the net proceeds of sale of the Northbridge property (of $1,032,338.62) in accordance with the undertaking. Rather, the net proceeds of sale were applied in the manner set out in the Judgment at [75]. It is apparent from the bank statements for the SEPAM Account and the Joint Account that most of the net proceeds of sale of the Northbridge property (ie. $900,000 out of $1,032,338.62) were ultimately used to make the deposit to the SEPAM Account of $900,000 on 31 March 2021: Judgment at [75]-[76]. I am satisfied that Contempt 2 was, to the extent of $900,000, designed to replenish the SEPAM Account for the withdrawal made on 23 March 2020 to repay the N1 Venture loan. Viewed in this way, the motive for Contempts 1 and 2 can be seen (largely) as his mistaken attempt to discharge the N1 Venture loan which was at a very high interest rate, for which he and his former wife had given a guarantee to the lender secured by a mortgage over the Northbridge property. This is consistent with the explanation he gave in his affidavit, set out at [10] above, although there is no clear explanation in the evidence as to the use or application of the remainder of the net proceeds of sale of the Northbridge property ($132,338.62).
5. As to the question of benefit, I accept Mr Olson's submission that CLGC has not discharged its burden of establishing that Mr Zhang received a benefit of 'almost $1 million'. First, the earlier withdrawal of $900,000 from the SEPAM Account on 23 March 2020 was replenished on 31 March 2021. Second, Mr Zhang and his former wife were jointly entitled to the net proceeds of sale of the Northbridge property rather than Mr Zhang alone, and their interest in that property had been subject to a mortgage to secure the N1 Venture loan until that loan was discharged on around 8 April 2020 (partly sourced from the $900,000 withdrawn from the SEPAM Account on 23 March 2020).
6. As to contrition, I am satisfied that Mr Zhang's apology is genuine. He has displayed genuine regret and a desire to atone by agreeing to the removal of his name from the roll of solicitors in Victoria.
7. As to Mr Zhang's character and antecedents, his criminal history shows convictions for firearm offences, drug-related offences, assault, driving offences and possession of stolen goods. Though he has prior convictions, they are not convictions for contempt or offences similar to contempt.
8. In relation to Mr Zhang's personal circumstances, I have referred above to the evidence of his current position in life, including his mental illness and fear of further assault if he is imprisoned again. I am satisfied based on this evidence that he would be a vulnerable person if a sentence of imprisonment is imposed.
9. As regards deterrence and denunciation, general deterrence and denunciation are important considerations in imposition of the penalty in contempt cases, including a case like this involving failure to comply with freezing orders and undertakings to the court as compliance with them is central to the administration of justice. I do not regard specific deterrence as a significant matter in the present case as it is unlikely that Mr Zhang will find himself in circumstances where he is subject to freezing orders or would need to give an undertaking to the court in litigation again.
10. Taking all these matters into account and bearing in mind that the purpose of the imposition of a penalty for contempt is to uphold and vindicate the court's authority, the seriousness of the contempts and the importance of general deterrence and denunciation for breaches of freezing orders and undertakings to the court, I consider that the imposition of a term of imprisonment is warranted. After consideration of the relevant factors referred to above and the evaluative exercise required, I consider that the appropriate term of imprisonment for Contempt 1 is six months and the appropriate term of imprisonment for Contempt 2 is three months, to be served concurrently so that the total term is six months.
11. However, I consider that the term of imprisonment should be wholly suspended, on the conditions set out below, which require Mr Zhang (for a period of one year) to be of good behaviour, to engage in 40 hours of community service (if Corrective Services NSW consider that he is a suitable person for such community service), to comply with his mental health treatment plan, and to apply to the Supreme Court of Victoria for removal of his name from the roll of solicitors in that State consistently with his apology. I have reached this conclusion having taken into account, in particular, the nature of the contempts and their seriousness and the need for general deterrence, and weighed these matters against his apology, his personal circumstances including his mental illness and personal vulnerability if returned to prison, which mean that imprisonment will weigh more heavily on him than it would for others. Bearing in mind that imprisonment is a punishment of last resort, I consider that a suspended sentence on these relatively onerous conditions is an alternative course that is appropriate in the circumstances. If Mr Zhang breaches any of the conditions, he will be at risk of the suspension of the sentence being lifted. Compliance with these conditions and the risk of imprisonment if he does not is adequate in all the circumstances to vindicate the authority of the Court.
12. In relation to the condition relating to removal of Mr Zhang's name from the roll of solicitors, I am satisfied based on the observations of Parker J in CLGC Pty Ltd v Zhang [2021] NSWSC 946 at [71]-[73] and my findings in the Judgment that Mr Zhang is not a fit and proper person to be on the roll of solicitors. However, as he was admitted to practice in Victoria, it is the Supreme Court of Victoria which has, in its inherent jurisdiction, the power to remove his name from the roll rather than this Court.
13. In relation to costs, the parties did not make submissions on costs at the hearing, although CLGC seeks costs on the indemnity basis in the Contempt Motion. In my view, the appropriate order is that costs be paid on the ordinary basis for the reasons I gave in Yuan at [76]. If either party seeks a different order as to costs, I will allow a timetable for submissions on costs.

Conclusion

1. For the reasons given above, the Court will make the orders set out below. At the hearing Mr Olson sought a stay of orders imposing a penalty on Mr Zhang to give Mr Zhang the opportunity to contest the Judgment by an appeal, as to which he is represented by different counsel. The orders incorporate a stay for that purpose. However, Mr Zhang will need to attend the registry and enter into the bond today, which will operate subject to the stay. If he commences the foreshadowed appeal then the bond will be subject to the stay and if he does not, it will operate without the need for him to attend the Court again.
2. There was no suggestion by the parties that it was necessary for Mr Zhang's trustee in bankruptcy to be heard in relation to penalty. However, I will include a direction that the trustee in bankruptcy be given a copy of this judgment and if any issue arises on which the trustee in bankruptcy wishes to be heard, the liberty to apply may be exercised.
3. I acknowledge the assistance which the Court received from counsel in this matter, particularly Mr Olson and Mr Vuu both of whom appeared for Mr Zhang on a pro bono basis at the penalty hearing and made submissions on behalf of Mr Zhang which were careful and measured.

Sentence

1. The Court makes the following orders: 1. The first defendant, Ronglai (Martin) Zhang (Ronglai Zhang), is sentenced to a term of imprisonment for a period of six months commencing on the date on which orders 1, 2 and 3 of these orders come into effect under order 4 or order 6 below, such sentence is wholly suspended upon entering into a bond, self, to be of good behaviour for a period of one year and to comply with the following conditions for the term of the bond: 1. Ronglai Zhang must consent to supervision by one or more community corrections officers from Corrective Services NSW. 2. Ronglai Zhang must obey all reasonable directions given by the relevant Community Corrections Officer/s. 3. Ronglai Zhang must not travel interstate or overseas without written permission from the Commissioner of Corrective Services. 4. Ronglai Zhang must attend all interviews and participate in any assessments required by Community Corrections. 5. Ronglai Zhang must perform 40 hours of community service for a school, church or other registered charitable organisation. 6. Ronglai Zhang must continue treatment for his mental health conditions with, and obey all reasonable directions of, his general practitioner, Dr Andrew Sun or his delegate, including as to medication, for as long as deemed necessary by Dr Sun or his delegate. 7. Ronglai Zhang waives his rights to medical confidentiality, with respect to treatment for his mental health conditions, for all his doctors and other health professionals, and a community corrections officer who is supervising him, to enable them to immediately notify the Court of any breach by him of the above orders. 8. Ronglai Zhang must promptly apply to have his name removed from the roll of barristers and solicitors of the Supreme Court of Victoria and take all steps reasonably required of him for his removal from that roll. 1. The Court notes that: 1. Corrective Services NSW is to supervise Ronglai Zhang for the term of the bond, namely 1 year, but may suspend (and may thereafter reinstate) supervision at an earlier stage if considered appropriate by Corrective Services NSW. 2. In the event of any suspected or known non-compliance of a condition in order 1 by Ronglai Zhang, Corrective Services NSW must notify the Court so that the Court can take such further action (including issuing a warrant for arrest if required) as the Court considers appropriate. 3. The condition in order 1(v) is subject to Corrective Services NSW undertaking an assessment as to the suitability of Ronglai Zhang to perform community service of the kind stated, and if Corrective Services NSW determines that he is unsuitable, that condition will not apply. 1. The first defendant is to pay the costs of the third plaintiff of these proceedings in respect of the charges of contempt against him, on the ordinary basis. 2. Orders 1, 2 and 3 are stayed until the determination of the first defendant's foreshadowed appeal against the declarations made in these proceedings that he was in contempt of this Court. 3. The first defendant to file his notice of appeal against the judgment of Richmond J in these proceedings dated 22 May 2024 by no later than 2pm on 28 February 2025, and to prosecute the appeal with all due diligence and dispatch. 4. If the first defendant does not file his notice of appeal by the date and time stated in order 5, the stay in order 4 will cease to have effect and orders 1, 2 and 3 will come into immediate effect on that date. 5. Directs the third plaintiff to provide a copy of these orders and the reasons for judgment in CLGC Pty Ltd v Zhang (No 3) [2025] NSWSC 36 to Mr G King, the trustee in bankruptcy for the regulated debtor estate of Ronglai Zhang. 6. Liberty to apply.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 February 2025