Crane Distribution Limited v Gary Van Schellebeeck

PARTIES : Crane Distribution Limited (Plaintiff) Gary Van Schellebeeck (Defendant)

COUNSEL : Mr D Lloyd (Plaintiff) Litigant in person

SOLICITORS : Lee & Lyons Lawyers (Plaintiff)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50011/09 Crane Distribution Limited v Gary Van Schellebeeck JUDGMENT - redacted The notice of motion 1 There is before the court a notice of motion filed by the plaintiff [Crane Distribution Ltd] on 19 March 2009 seeking:

i. A declaration that the defendant is in breach of the Court's order made on 27 February 2009 requiring him to swear and serve an affidavit disclosing his assets and liabilities as required in paragraph 8 of the Freezing Order made on 30 January 2009, by 4 March 2009;

ii. That the defendant be found guilty of contempt of court for breaching the Court's orders requiring him, by 4 March 2009, to swear and serve an affidavit disclosing his assets and liabilities as required in paragraph 8 of the Freezing Order made on 30 January 2009;

iii. Further or in the alternative, that the defendant not be permitted to take any step in defence of the proceedings unless and until he complies with paragraph 8 of the Freezing Order made on 30 January 2009. The proceedings 2 On 30 January 2009 the plaintiff obtained ex parte orders against Mr Van Schellebeeck freezing his assets up to the unencumbered value of $350,000 and various other ancillary orders. Order 8 [which was subject to paragraph 9] required that he:

(a) at or before the further hearing on the return day (or within such further time as the Court may allow) to the best of his ability inform the applicant in writing of all his assets worldwide including details of bank account numbers, giving their value, location and details (including any mortgages, charges or other encumbrances to which they were subject), the extent of his interest in the assets, details of what had become of any of the assets he had disposed of since 2003

(b) within three working days after being served with the order, swear and serve on the applicant an affidavit setting out the above information. The circumstances giving rise to the orders sought in the notice of motion 3 Notwithstanding the above described orders and notwithstanding the defendant having been given a number of extensions of time to comply with paragraph 8 of the Freezing Order, Mr Van Schellebeeck failed to produce any such affidavits until 1 April 2009 on which date he swore and served an affidavit purporting to comply with paragraph 8 of the Freezing Order. 4 The evidence before the court makes clear that in swearing that affidavit, Mr Van Schellebeeck has still not complied with paragraph 8 of the Freezing Order, because:

i. The affidavit contains information which is false, inaccurate and misleading; and

ii. The affidavit omits critical information which Mr Van Schellebeeck is required to provide by the orders. The statement of charge 5 The statement of charge appended to the 19 March 2009 notice of motion recites the sundry failures of Mr Van Schellebeeck to comply with the terms of the Freezing Order in paragraph 8 over an extended period of time in respect of which the Freezing Order had been served on 2 February 2009; by 10 February 2009 Mr Van Schellebeeck had not complied with paragraph 8 of the Freezing order; on 10 February 2009 time for compliance with that paragraph was extended until 19 February 2009; by 27 February 2009 Mr Van Schellebeeck had not complied with paragraph 8 of the Freezing Order; on 27 February 2009, Mr Van Schellebeeck was ordered to comply with paragraph 8 of the Freezing Order by 4 March 2009; he did not swear and serve an affidavit complying with paragraph 8 by 4 March 2009 and as at the date of the statement of charge, had not filed an affidavit complying with that paragraphs of the freezing Order at all. The particulars of Charge 6 The particulars of charge are in the following terms:

i. In breach of the Court's orders of 27 February 2009, Mr Van Schellebeeck did not swear and serve an affidavit complying with paragraphs 8 of the Freezing Order made by the Court on 30 January 2009, by 4 March 2009;

ii. In breach of the court's orders made on 30 January 2009, Mr Van Schellebeeck has not sworn and served an affidavit complying with paragraphs 8 of the Freezing Order made on 30 January 2009. The importance of compliance with the disclosure order 7 It is of course well settled that securing compliance with a disclosure order is critical to the efficacy of a Freezing Order: s First, the proper disclosure of assets makes it more difficult for a defendant to disobey the Freezing Order s Secondly, disclosure allows notice to be given to relevant third parties s Thirdly, the disclosure of assets makes it possible for a plaintiff to make a rational assessment of whether to continue its undertaking as to damages The materials before the Court in terms of the evidence adduced by the plaintiff 8 The Plaintiff read the following affidavits:

i. That of Mr Andrew Bray sworn on 29 January 2009 and filed first on 30 January 2009 and then again on 3 April 2009;

ii. That of Mr Gregory Begeni sworn on 3 February 2009 and filed on 3 April 2009;

iii. That of Mr Sean O'Connor sworn on 6 March 2009 and filed on 19 March 2009;

iv. A further affidavit by Mr Gregory Begeni sworn on 24 March 2009 and filed on 3 April 2009;

v. That of Dallas Campbell sworn on to April 2009 and filed on 3 April 2009. 9 Additionally the plaintiff tendered the affidavit of Mr Van Schellebeeck made on 1 April 2009 as well as the 2007 Sydney and Blue Mountains Street Directory 43rd edition 10 The defendant addressed the Court from the bar table but adduced no sworn evidence. However his own affidavit was before the Court together with its annexures. The affidavit made by Mr Van Schellebeeck Background 11 Before reviewing the affidavit made by Mr Van Schellebeeck, it is useful to set out some history [in which regard the detail is furnished by reference inter alia to a number of documents which were before the court on the application including exhibits to affidavits relied upon by the plaintiff:

i. On 12 April 2006 the defendant purchased, as the sole Registered Proprietor, the property at 6 Baringa Place Green Valley ("Green Valley"); see Campbell annexure DJC7 and DJC5, and paras 4 and 8.

ii. The defendant acquired Green Valley for a consideration of $320,000; Campbell annexure DJC5.

iii. On 16 January 2007 the defendant entered into a building contract in respect of the Green Valley property, for building works said to be to the value of $150,000; defendant's affidavit annexure B.

iv. In August 2007, the defendant and another person took out a loan in the sum of $422,750 from Perpetual Trustee secured by registered mortgage over Green Valley; defendant's affidavit para 6 and Campbell DJC6.

v. The loan was a construction loan; defendant's affidavit para 6.

vi. The loan funds were payable by Perpetual to the borrowers on 12 August 2007; defendant's affidavit annexure C.

vii. On or about 24 August 2007 the defendant transferred for the consideration of $1, one fifth of his interest in Green Valley to Mary Van Schellebeeck; Campbell annexure DJC4. 12 The terms of paragraph 8 of the Freezing Order are plain on their face. The paragraph requires the defendant to swear and serve an affidavit that does the following:

"to the best of your ability inform the [plaintiff] in writing of all your assets world wide including details of bank account numbers, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject), the extent of your interest in the assets, details of what has become of any assets you have disposed of since 2003". 13 The consequences of a failure to comply are drawn to the defendant's attention in plain terms on the first page of the Freezing Order. The affidavit made by Mr Van Schellebeeck 14 In his affidavit Mr Van Schellebeeck deposed as follows: 2. I own the property at 12 Baldini Place, Hinchinbrook NSW 2168 ("The Property") jointly with my mother Mary Murielle Van Schellebeeck. Annexed hereto and marked with the letter 'A' is a copy of title search dated 1 April 2009 for the property at 12 Baldini Place Hinchinbrook NSW 2168. 3. The property at 12 Baldini Place, Hinchinbrook NSW 2168 ("The Property") is currently valued at approximately $220,000.00 in land value as per Council rate schedule 2009. The improvements on the property are currently valued at approximately $150,000 as per Building Contract. Annexed hereto and marked with letter 'B' is a copy of the Building Contract dated 16 January 2007 with Simon Elias.

4. I currently have the sum of $1,255.71 in cash in my savings account with St. George Bank BSB [ ] Account Number [ ]. 5. I have no other assets apart from those detailed in paragraph 2, 3 and 4 above. 6. I have a construction loan with Novasure (Perpetual Trustee Company Limited) in the sum of approximately $425,500.00 and currently pay $469.13 per week in mortgage repayments. The property at 12 Baldini Place, Hinchinbrook NSW 2168 is held by Novasure (Perpetual Trustee Company Limited) as security for this loan. The Construction Loan with Novasure (Perpetual Trustee Company Limited) was taken out on 12 July 2007 for the sum of $413,177.78 plus fees of $9,572.22 total loan of $422,750.00 Loan Number [ ]. Annexed hereto and marked with the letter "C" is a copy of the Construction loan through Novasure.

7. I owe Simon Elias the sum of $67,000.00 for building work completed by him on the property at 12 Baldini Place, Hinchinbrook NSW 2168.

8. I have a personal loan with St George Bank loan account number [ ] in the sum of approximately $16,522.46 and pay $392.00 per month in loan repayments.

9. I make repayments in the sum of $586.05 per month for a personal loan taken out by mother with St George Bank in the sum of $29,000.00 loan account number [ ]. This loan was taken out by mother for me to pay for building works and my legal fees for my criminal matter involving Crane Group Limited.

10 I have not been able to attend to my civil matter with Crane Group Limited due to my medical condition. Annexed hereto and marked with Letter "D": is a copy of a Report dated 25 March 2009 from Dr Sam Borenstein, Clinical Psychologist detailing my medical condition. The shortcomings in the affidavit 15 I am satisfied from the evidence that the failure of Mr Van Schellebeeck to comply with the dictate of the orders fall into two categories:

i. Firstly, the information contained in the affidavit is false, misleading and inaccurate.

ii. Secondly, there is critical information missing from the affidavit which is required by para 8 of the Freezing Order. False, inaccurate and misleading information in the defendant's affidavit Paragraph 2 16 The evidence is false. The defendant is not the Registered Proprietor of 12 Baldini Place, Hinchinbrook ("Hinchinbrook"); see Campbell annexure DJC1. 17 Annexure A of the defendant's affidavit is not what the defendant says it is; see Campbell annexure DJC1. 18 The plaintiff does not appear to have been the Registered Proprietor of the property any time recently; see Campbell annexure DJC2. Paragraph 3 19 The evidence is misleading. The defendant says something about the value of Hinchinbrook, by reference to a building contract which on its face has nothing to do with that property; see annexure B to defendant's affidavit. Paragraph 5 20 This evidence is false. The defendant owns a 4/5 share of Green Valley; see Campbell annexure DJC 3. Paragraph 6 21 The evidence that the loan is secured over Hinchinbrook is false; see page 8 of the loan agreement at annexure C of the defendant's affidavit. Required information that is not contained in the affidavit The defendant's interest in Green Valley 22 The defendant does not mention that he holds a 4/5 share of Green Valley. 23 There is no evidence given about the value of the defendant's interest in Green Valley. The evidence is that the property was purchased in April 2006 for $320,000. It appears that $150,000 worth of building work has been done to the property since then. 24 No explanation is given about how the defendant came to purchase Green Valley in April 2006. The purchase occurred during the period of the alleged fraud; see Andrew Bray affidavit annexure AB3. Disbursement of the Perpetual loan funds 25 The defendant and his mother took a loan from Perpetual in the sum of $413,177.78. The advance was made on 12 August 2007. The loan purportedly was a construction loan; see defendant's affidavit annexure C. 26 The loan funds no doubt constituted an "asset". However, the defendant gives no evidence about how these funds were disbursed. 27 This is particularly alarming having regard to the defendant's own evidence that the building contract was for the sum of $150,000, and the "construction loan" was for a sum vastly in excess of this. Transfer of 1/5 of Green Valley to Mary Van Schellebeeck 28 A one fifth share of the defendant's interest in Green Valley was transferred to the defendant's mother Mary Van Schellebeeck on 24 August 2007. This constitutes the disposal of an asset by the defendant after 2003. The defendant was required to give evidence about it. The personal St George loan 29 The defendant gives no information about when the loan was taken out. If it was taken out after 2003, evidence is required as to what came of the advanced funds. Mary Van Schellebeeck's loan from St George 30 The defendant says that his mother took out a personal loan for him in the sum of $29,000. The defendant gives no evidence about when the loan funds were advanced. Only the vaguest evidence is given about the disbursement of the loan funds; see defendant's affidavit para 9. A consideration of the Court's general jurisdiction to find a person guilty of contempt of court 31 In Registrar of the Court of Appeal v Maniam [No 2] (1992) 26 NSWLR 309 Kirby P (as he then was) said this:

"A conviction of contempt of court is a conviction of an offence, criminal in nature. Punishment of the convicted contemnor must therefore take into account the considerations normally applicable to the punishment of crime and apt to uphold the purpose of this jurisdiction, viz, the undisturbed and orderly administration of justice in the courts according to law. Thus, in determining the punishment which is apt to the circumstances which have led to a conviction of contempt, it is appropriate to bear in mind the purposes of punishing the contemnor; deterring the contemnor and others in the future from committing like contempts; and denouncing the conduct concerned in an approximately emphatic way: see Director of Public Prosecutions v John Fairfax& Sons Ltd (1987) 8 NSWLR 732 at 741. In this jurisdiction, contempt is a common law offence for which there is therefore no maximum penalty in this Court: R v Dunbabin; Ex parte Williams (1935) 53 CLR 434 at 442. Any limits which are imposed upon the Court's powers derive from the purposes stated above and the limitations expressed in the Tenth Article of the Bill of Rights 1688 which restrains the imposition of cruel or unusual punishments or "excessive fines": see Smith v The Queen (1991) 25 NSWLR 1, noted (1991) 65 ALJ 695" (at 314). 32 More recently Campbell J in NCR Australia v Credit Connection [2005] NSWSC 1118 had had occasion to examine a number of parameters concerning inter alia the range of types of an and the standard of proof:

"The Range of Possible Types of Penalty 20 Part 55 rule 13 Supreme Court Rules 1970 provides :

(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."

The provisions of Part 55 rule 13 declare the Court's inherent power to punish for contempt but do not exhaust it: Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309.

21 The expression "contempt of court" covers a family of different types of legal wrong, all of which have an element in them of interfering with the administration of justice in the courts. Some types of contempt of court, such as interfering with witnesses, have always been recognised as crimes. Others, such as disobedience to court orders made in civil proceedings, are not in themselves criminal, though some aspects of the criminal law can become applicable to them. That Part 55 rule 13 confers on the Court a power to punish contempt by imprisonment does not determine the question of whether it would be in accordance with principle to impose a sentence of imprisonment for the particular type of contempt arising from disobedience to court orders made in civil proceedings.

22 One strand in the historical development of the power of the equity court to punish for a disobedience of its orders has been to impose a sentence of imprisonment of indefinite duration, as a means of persuading the person bound by the order to comply with it. That justification for imprisonment is not available in the present case, where the Mareva order has been broken in ways which are incapable of remedy.

23 The history of the law of contempt concerning breach of orders in civil proceedings shows a fitful recognition of another strand, whereby punishment can be imposed even in relation to breaches of order which are incapable of remedy. Since the decisions of the High Court in Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 and Witham v Holloway (1995) 183 CLR 525 it has been clear that punishment can be imposed for a breach of order made in civil proceedings even if the breach is incapable of remedy. The justification for the punishment in those circumstances is that it is a means of vindicating the court's authority. In particular, imprisonment has been imposed as a sanction for breach of Mareva orders: Australian Securities and Investments Commission v Michalik and others [2004] NSWSC 1259; (2004) 52 ACSR 115. As Palmer J said in Australian Securities and Investments Commission v Michalik and others [2004] NSWSC 1259; (2004) 52 ACSR 115 at [32]: "… in punishing a contempt, a court of equity acts no differently from a court of common law. The distinction between common law and equity in this context is meaningless. In punishing for contempt, a judge of the Supreme Court is vindicating the authority of the Court itself, regardless of the Division in which the judge happens to be sitting."

24 Punishment of someone for contempt should take into account the same principles as are applicable to punishment for crime: Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309 at 314. That includes the sentencing principles contained in the Crimes (Sentencing Procedure) Act 1999 : A-G for NSW v Whiley (1993) 31 NSWLR 314 at 321 (in relation to its predecessor, the Sentencing Act 1989 ); Principal Registrar of the Supreme Court of New South Wales v Jando (2001) 53 NSWLR 527 at 536-537; Ryan v Wright (No 2) [2004] NSWSC 1019 at [18] per Gzell J; Australian Securities and Investments Commission v Michalik and others (No 2) [2004] NSWSC 1260; (2004) 62 NSWLR 335 at 343, [38]. (An appeal relating to Ryan v Wright (No.2) was taken, but on guilt, not penalty, and was dismissed: Wright v Ryan [2005] NSWCA 368.)

25 In principle, a contempt of court could be punished by anything within the range of penalties that can be imposed for a crime, pursuant to the Crimes (Sentencing Procedure) Act 1999 . That range consists of imprisonment (section 5) periodic detention (section 6), home detention, (section 7) community service orders (section 8) good behaviour bonds (section 9), dismissal of the charge accompanied by either a good behaviour bond or a condition that the offender participate in an intervention programme (section 10), deferral of sentence (section 11), suspended sentence (section 12), fine (section 14), or the making of a non association or a place restriction order (section 17A).

26 Sections 6 and 7 make clear that penalties of periodic detention, and home detention, respectively, can be imposed only by " a court that has sentenced an offender to imprisonment … ". Thus, if a sentence of imprisonment has not actually been imposed on a particular offender, it is not open to the court to impose penalties of periodic detention or home detention on that offender. Standard of Proof of Facts Relevant to Sentence

27 When a Judge is finding facts for the purpose of a sentence concerning crime, a fact which will be used in a way which is detrimental to the offender must be proved beyond reasonable doubt, while a fact which will be used in a way which will be advantageous to the offender can be proved on the balance of probabilities: R v Olbrich (1999) 199 CLR 270 at 281, approving R v Storey [1998] 1 VR 359 at 369. In Witham v Holloway (1995) 183 CLR 525 the High Court held that a contempt could be found proved only if it was established beyond reasonable doubt. The reason was that the punitive nature of the proceedings brought with it the criminal standard of proof. Consistently with that principle, the standard of proof used in deciding factual matters for the purpose of imposing a sentence for contempt of court should be the same as is used in imposing a sentence in criminal matters." 33 These observations are adopted in the approach taken to the current application. Decision 34 It is to be recalled that in the specific context of imposing punishment for a contempt of court consisting of a breach of Mareva orders, Palmer J in Australian Securities and Investments Commission v Michalik [2004] NSWSC 1259 [noted by Campbell J] listed as appropriate factors for consideration the following matters: "i) the seriousness of the contempt proved;

ii) whether the contemnor was aware of the consequences to himself of what he proposed to do; iii) the actual or potential consequences of the contempt on the proceedings in which the contempt was committed;

iv) whether the contempt was committed in the context of a proceeding alleging crime or conduct seriously prejudicial to the public interest: see, for example, Von Doussa v Owens (No 3) (1982) 31 SASR 166;

vi) whether the contemnor has received, or sought to receive, a benefit or gain from the contempt;

vii) whether there has been any expression of genuine contrition by the contemnor;

viii) the character and antecedents of the contemnor;

ix) what punishment is required to deter the contemnor and others of like mind from similar disobedience to the orders of the Court;

x) what punishment is required to express the Court's denunciation of the contempt" 35 Incarceration is one possible punishment. It should be noted that Mr Van Schellebeeck already is serving a period of home detention in relation to a conviction for fraud. 36 Notably Mr Lloyd of Counsel appearing for the plaintiff submitted that the appropriate penalty for the contempt if found would be to impose a fine of $10,000 and in addition, the making of an order that Mr Van Schellebeeck be debarred from defending the proceedings until the contempt is remedied: that is to say an order that Mr Van Schellebeeck not be allowed to take any further step in the proceedings until he satisfies the court that he has remedied the contempt. 37 There is of course authority in support of the 'fundamental rule that a party guilty of contempt should not be heard in respect of an application made on his part to a court': Hutley HA in Permewan Wright Consolidated Pty Limited v Attorney-General (NSW) (1978) 35 NSWLR 365. 38 Having taken all of the above circumstances into account I am satisfied that the plaintiff has made good to the requisite standard of proof, the contempt of Court for which it contends. The contempt is found to have been established beyond reasonable doubt. Orders 39 The orders of the Court are as follows:

1 The Court makes declaration 1 as sought in the notice of motion filed on 19 March 2009.

2 The defendant is found guilty of contempt of Court for breaching the courts orders requiring him, by 4 March 2009, to swear and serve an affidavit disclosing his assets and liabilities as required in paragraph 8 of the Freezing Order made on 30 January 2009.

3 The Court orders that the defendant not be permitted to take any step in defence of the proceedings unless and until he satisfies the court that he has remedied the contempt

4 The defendant is convicted and fined $10,000. This is a redacted copy of the reasons for judgment herein of the Hon. Justice Einstein given on 8 April 2009 **************

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