DC Rd DC Pty Ltd v Zhang

Charge 1: Alleged Contempt by Belrose COB 17 It is well-established that in relation to an allegation of contempt by way of breach of an order allegedly committed by the party to the order, there are five matters which must be established: (1) an order was made by the Court; (2) the terms of the order are clear, unambiguous and capable of compliance; (3) the order was served on the alleged contemnor or service was excused in the circumstances or dispensed with pursuant to rules of court; (4) the alleged contemnor has knowledge of the terms of the order; and (5) the alleged contemnor has breached the terms of the order. See Humane Society International Inc v Kyodo Senpaku Kaisha Limited [2015] FCA 1275; (2015) 238 FCR 209 at [9] (Jagot J); Australian Securities and Investments Commission v One Tech Media Limited (No 3) [2018] FCA 1071 at [20] (Moshinsky J). In the present case, the only issue in relation to the alleged contempt by Belrose COB is in relation to the fifth of those requirements, namely whether Belrose COB has breached the terms of the freezing order. It is not necessary in relation to the charge against Belrose COB, being the party to the freezing order, for the applicants to prove that Belrose COB intended to disobey the order, nor is it necessary to prove that Belrose COB understood the true meaning of the terms of the order or that it was aware that its conduct constituted a breach of the order: Metcash Trading Ltd v Bunn (No 5) [2009] FCA 16 at [9] (Finn J), approved in Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; (2017) 256 FCR 90 at [26] (Besanko, Wigney and Bromwich JJ). 18 The charge of contempt must be proved beyond reasonable doubt: Witham v Holloway (1995) 183 CLR 525 at 534 (Brennan, Deane, Toohey and Gaudron JJ). In relation to the particular issue which arises on the charge of contempt against Belrose COB, namely whether the relevant dealing falls within the ordinary and proper course of business exception, the onus is on the applicants to prove beyond reasonable doubt that the dealing does not fall within that exception: Jorgensen v Fair Work Ombudsman [2019] FCAFC 113; (2019) 271 FCR 461 at [15] and [69] (Greenwood, Reeves and Wigney JJ). In that case at [69], the Full Court referred to the reasoning of the primary judge as having proceeded on the basis that the alleged contemnor bears an evidential onus to adduce evidence that raises a reasonable possibility that the impugned transaction falls within the ambit of the exception, and it is then for the applicants, who at all material times bear the legal onus, to negative that proposition beyond reasonable doubt, consistently with the decision of Zammit J in Fortune Holding Group Pty Ltd v Zhang (No 2) [2017] VSC 738 at [49], and in contrast to the reasoning of White J in Australian Securities and Investments Commission v Sigalla (No 3) [2010] NSWSC 1076 at [46]-[48]. In the present case, Senior Counsel for the applicants said that he was content for the Court to proceed on the basis adopted by Zammit J. In relation to the evidential burden on an accused person, it should be borne in mind that the placing of such a burden on the accused does not require the accused to meet it by giving or calling evidence, and the accused person can meet it by pointing to evidence called in the prosecution case: The Queen v Khazaal [2012] HCA 26; (2012) 246 CLR 601 at [100] (Heydon J). 19 In the present case, Belrose COB does not resist the proposition that the granting of the second mortgage in favour of Secured Lending constituted a dealing with its assets in Australia in circumstances where the unencumbered value of those assets is less than $36 million. The issue which arises is whether the exception in para 10(b) of the freezing order made against Belrose COB applies, namely whether that dealing was in the ordinary and proper course of the business of Belrose COB. 20 The meaning of the ordinary and proper course of business exception was the subject of detailed analysis by the Full Court in Jorgensen at [166]-[179]. In that passage, the Full Court referred extensively to the decision of the Court of Appeal of England and Wales in Michael Wilson and Partners Ltd v Emmott [2015] EWCA Civ 1028, in which Lewison LJ (with whom Black and Gloster LJJ agreed) said: (a) whether a payment is in the "proper course of business" is likely to depend on the purpose of the payment, and if the payment is to be made in order to discharge a pre-existing liability of the business incurred in good faith, then it is difficult to see why that would not be in the "proper course of business" (at [20]); (b) in relation to the question whether the payments were made in the "ordinary course of business", that question is not necessarily the same as asking whether the payments themselves were "ordinary". Rather, the exception deals with the course of business and it is thus the course of business that must be "ordinary" (at [21]); (c) a payment can be made in the ordinary course of business even if it is not a "routine" or "recurring" payment, and the exception is not limited to the payment of "trade creditors" (at [22] and [28]); and (d) the large and irregular nature of the payment in that case had to be approached in the context of all the facts concerning the conduct of the business (at [30] and [31]). 21 The Full Court in Jorgensen referred to the decision in Emmott as turning on its own facts, but said that the reasoning in Emmott did highlight some difficulties with the primary judge's reasoning in concluding that the relevant transfers in that case were not made in the ordinary and proper course of the company's business. First, the primary judge erroneously focused on whether the transfers themselves were "proper" or "ordinary", as opposed to determining whether they were made in the ordinary and proper course of the company's business: [175]. The evidence showed that even though the relevant payments or transfers were "sporadic", Mr Jorgensen had conducted his business in essentially the same way for some time before the making of the freezing order: [176]. Further, the primary judge appeared to have found that the transfers were not proper because of the haphazard and unsatisfactory way that Mr Jorgensen conducted his businesses generally. While the Full Court described those business practices as undesirable or unsatisfactory in a general sense, it emphasised that this was how Mr Jorgensen had always conducted his businesses, such that it was at least open to find that the relevant transfers were made in the ordinary and proper course of what was a poorly or unsatisfactorily run business: [177]-[178]. The Full Court said that the question was not whether Mr Jorgensen's business practices were not "proper" in some general business or accounting sense; rather, the question was whether the transfers or payments themselves were made in the ordinary and proper course of the relevant business: [178]. Finally, the Full Court said that the primary judge's finding that the transfers did not relate to business expenses was beside the point, referring to the reasoning in Emmott to the effect that the exception is not limited to the payment of "trade creditors" and explaining that the payment of a "financial obligation" can in some circumstances be a payment in the ordinary and proper course of a business even if it is not a business expense: [179]. 22 The respondents also draw attention to several decisions in the context of construing company charges (as distinct from freezing orders) as to the meaning of the ordinary course of business. In Reynolds Bros (Motors) Pty Ltd v Esanda Limited (1983) 8 ACLR 422 at 428, Mahoney JA said that the word "ordinary" is not to be confined to what is in fact ordinarily done in the course of the particular business of the company, and transactions will be within the concept even though they be, in relation to the company, exceptional or unprecedented. In Fire Nymph Products Ltd v The Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365 at 370-71, Gleeson CJ cited with approval the statement in Francis Palmer and Alfred Topham, Palmer's Company Precedents (Stevens, 16th ed, 1951) at 51 to the effect that the phrase "ordinary course of business" includes "sales, leases, mortgages, charges, payment of debts, discharge of liabilities, and other transactions with a view to carrying on the concern". In BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2015] NSWCA 319 at [103], Bathurst CJ (with whom Beazley P and Macfarlan JA agreed) referred with approval to that statement by Gleeson CJ, and said at [104] that raising funds to repay debts would fall within the ordinary course of a company's business. 23 The applicants also refer to several examples of cases where freezing orders have been held to have been breached when the property subject to a freezing order is further encumbered by way of a mortgage: Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (in liq) (No 3) [2022] NSWSC 1702 at [111] (Rees J); Zhang v Shi (No 5) [2021] VSC 695 at [82]-[85] (Delany J); BCEG International (Australia) Pty Ltd v Xiao [2023] NSWSC 57 at [32]-[33] (Darke J). These cases all depend on their own particular facts. While the applicants placed particular reliance on BCEG, it should be borne in mind that the disputed transaction in that case required that an amendment be made to a unit trust deed to empower the relevant company to enter into it (at [32]). 24 The applicants submit that the evidence shows that the ordinary course of Belrose COB's business was the ownership and leasing of one commercial property, together with the receipt of rent, the carrying out of maintenance and the payment of outgoings in relation to that property. The applicants submit that, given that Belrose COB is its own shareholder, it is not part of some larger corporate group and bears no legal relationship with Smithfield, being the company whose obligations to Secured Lending it has guaranteed. The applicants submit that the common directorship of Mr Zhang does not make Belrose COB and Smithfield members of the same corporate group (which I understand to be a reference to the meaning of "related body corporate" in s 50 of the Corporations Act). The applicants say that Belrose COB has procured an unrelated party to obtain a loan at "usurious" interest rates of 18-28%, and, while it gets the benefit of some of the loan monies (such as the sum of $2.6 million which was used to cure the breaches with ING), other parts of the loan monies were advanced to, or for the benefit of, the unrelated party, Smithfield. 25 Belrose COB submits that the circumstances involve a landlord of commercial premises which has loan covenants with its commercial lender, which were in existence almost from the time the landlord was created as a corporate entity, and a breach of those covenants has been triggered by the most ordinary of things that can happen, namely a tenant vacating the premises. Belrose COB then pursued several different proposals to deal with those breaches, and ultimately the proposal which was adopted involved securing a loan agreement with another entity (Smithfield), which is also associated with Mr Zhang. Belrose COB also draws attention to the fact that Belrose COB is the trustee of the Belrose Investment Unit Trust. Belrose COB submits that it is not unusual for a company to secure the debt of a commercially related company, and in circumstances where all previous efforts that had been made to raise the money to make the necessary payments to ING had been unsuccessful. 26 It does not strike me as being outside the ordinary course of Belrose COB's business that it would be (at the very least) sailing close to the wind in terms of breaching its loan covenants, then be in actual breach, and then need to provide a second mortgage to secure financing to cure those breaches. Further, there is no evidence to indicate that the high interest rates demanded by Secured Lending were not a fair exchange for the risk taken by Secured Lending. 27 In my view, it is artificial to regard the business of Belrose COB as being confined to the ownership, leasing and maintenance of the Belrose Property in circumstances where it holds that property as trustee of a unit trust in which all the units are held by Mr Zhang, who in turn is the trustee of a family trust. It may therefore be inferred that Belrose COB carries on its business for the benefit of Mr Zhang as trustee of the family trust. Mr Zhang also has a substantial commercial interest in Smithfield, in that TECP Family Pty Ltd (a company which the applicants accept is associated with Mr Zhang) is a 50% shareholder in Smithfield's holding company, Harvest Smithfield. Mr Zhang is a director of Smithfield, and is the sole director of Belrose COB. It is thus likely, or at least a realistic possibility which has not been excluded beyond reasonable doubt, that the ordinary and proper course of the business of Belrose COB involves engaging in transactions (within the limits of its duties as trustee) which it bona fide believes to be in the best interests of Mr Zhang, being the beneficiary of the trust of which Belrose COB is trustee, including transactions with (and for the benefit of) other companies and entities in which Mr Zhang has commercial interests. I note that no submission was made by the applicants to the effect that the granting of the second mortgage by Belrose COB to secure Smithfield's borrowings from Secured Lending involved a breach by Belrose COB of its duties as trustee of the Belrose Investment Unit Trust. 28 That reasoning is reinforced by the contents of the ING internal memorandum of 15 August 2023, which sets out the events which led to Belrose COB providing the second mortgage to secure the facility that Secured Lending made available to Smithfield. The initial strategies pursued by Mr Zhang involved either a loan facility secured by the Smithfield Property or the sale of shares in Smithfield in order to raise the funds to cure the breaches of loan covenants by Belrose COB. When discussions concerning those strategies fell through, and all avenues to raise those funds in those ways had been exhausted, the revised strategy involved a loan facility by Secured Lending to Smithfield secured (among other things) by a second mortgage over the Belrose Property. That narrative of events confirms that there was no clear separation between the business of Belrose COB and the business of Smithfield, and that Mr Zhang carried on the affairs of those companies on the basis that he would use the assets and financial resources of either of those companies to support transactions entered into by the other. Accordingly, the facts that the second mortgage granted by Belrose COB secured the obligations of Smithfield, and that some of the money drawn down under the loan facility with Secured Lending was used by Smithfield to meet the expenses of the project that it was undertaking, do not take the dealing by Belrose COB outside the ordinary and proper course of Belrose COB's business. 29 In those circumstances, in my view, the applicants have failed to discharge the onus of proving beyond reasonable doubt that the conduct of Belrose COB in granting a mortgage to secure the loan facility between Secured Lending and Smithfield, whereby some of the proceeds of the loan would benefit Belrose COB and some of those proceeds would benefit Smithfield, fell outside the ordinary and proper course of Belrose COB's business. Accordingly, the applicants have failed to prove the breach of the freezing order on which Charge 1 is based.

Charge 2: Alleged contempt by Mr Zhang 30 In light of the conclusion which I have reached in relation to Charge 1 that Belrose COB did not breach the freezing order, Charge 2 must also fail, as it pre-supposes that Belrose COB did commit a breach of the order. However, as the matter has been fully argued before me and there is at least a possibility of the matter being the subject of an application for leave to appeal, it appears to me to be desirable that I set out my views in relation to Charge 2 against Mr Zhang on the hypothesis (contrary to my conclusion above) that Belrose COB did breach the freezing order. It may also assist in any decision as to whether any Full Court should consist of five judges, rather than three judges, if I expose some of the difficulties facing a judge at first instance in dealing with a charge of contempt made against someone who is not a party to the order which is alleged to have been breached. 31 The central question on which the relevant authorities are divided is whether, in the case where the alleged contemnor is not a party bound by the court order (such as where the alleged contemnor is a director of a company which is bound by the order), such a third party is liable for contempt only if it is proved beyond reasonable doubt that the alleged contemnor not only knew of the order but also had actual knowledge that the relevant conduct constituted a breach of the order, and did not honestly but mistakenly believe that the conduct fell outside the scope of the order. I will deal in turn with the relevant authorities in the High Court, Full Federal Court and New South Wales Court of Appeal.

High Court Authorities 32 In Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 at [30], Gaudron, McHugh, Gummow and Callinan JJ said that "the contempt power extends to third parties who, whilst not themselves bound by an order, so conduct themselves as to obstruct the course of justice". Two cases were cited in support of that proposition. The first was Seaward v Paterson [1897] 1 Ch 545 at 555, in which Lindley LJ drew a distinction between a motion to commit someone bound by an injunction for breach of the injunction, and a motion to commit someone for contempt not because that person is bound by the injunction but because the person "is conducting himself so as to obstruct the course of justice". The plaintiffs had objected to the noise and disturbance created by boxing matches conducted at the defendant's private club. The injunction in question restrained the defendant from doing anything which may interfere with the quiet enjoyment of tenants in adjoining or neighbouring premises to the defendant's premises. After the order was made the defendant's premises were again used for boxing matches on two occasions, causing substantially the same nuisance to the occupants of the adjoining and neighbouring premises to which there had been objection at the initial trial. What Lindley LJ meant by the expression "conducting himself so as to obstruct the course of justice" is readily apparent from the findings which his Lordship made (at 556) that the alleged third-party contemnor "knew perfectly well that what was objected to and what was restrained was making a disturbance by betting [sic: query whether 'boxing' was intended]" and "he knew very well what the objections were, and there is not the slightest doubt that what was done was a gross breach of the injunction". The essential fact for the finding of contempt by the third party was therefore the actual knowledge on the part of the third party that his conduct involved a breach of the injunction. 33 The second case cited by the High Court was Z Limited v A-Z and AA-LL [1982] QB 558 at 572 and 578-9. At 572, Lord Denning MR cited with approval Seaward v Paterson. At 578-9, Eveleigh LJ said that the true nature of the liability of a third party to an order which has been breached is not that the third party is an accessory to the breach but rather that the conduct amounts to contempt of court by the third party himself, and said that the liability is for conduct which "knowingly interferes with the administration of justice by causing the order of the court to be thwarted". Eveleigh LJ then cited the relevant passage of Lindley LJ's reasons in Seaward v Paterson at 555. Accordingly, the High Court's reasons expressly approved long-established UK authorities for the propositions that the liability of the third party depends on the knowledge and intention of that third party to interfere with the administration of justice, and that the third party must be proved to have had actual knowledge that his or her conduct has caused a breach of the order to occur. 34 In Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530 at [121], Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ referred to the liability of a third party who obtains trust property from a trustee in breach of trust and the liability of persons who knowingly assist other fiduciaries to breach their duty, and then said the following: Intervention against persons who, though not personally bound by a court order, procure those who are bound by it to contravene it, or otherwise thwart it, rests on a different basis: those persons are not liable as accessories who aided and abetted the persons bound by the order, but are directly liable for independent contempt committed by themselves in obstructing the course of justice. The High Court cited four authorities for that proposition, three of which I have discussed above, namely Seaward v Paterson at 555 (Lindley LJ), Z Limited v A-Z and AA-LL at 578-579 (Eveleigh LJ) and Cardile v LED Builders Pty Ltd at [30] (Gaudron, McHugh, Gummow and Callinan JJ). The other case cited by the High Court was ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 255 (Lockhart J) and 266 (Gummow J). In that case, Lockhart J (with whom French J agreed) said at 255 that parties bound by injunctions and "persons who knowingly counsel, procure or induce breaches of injunctions" are themselves directly responsible for those breaches and are answerable for contempt. The reference to "knowingly" plainly meant with knowledge not only of the injunction but also that the conduct would constitute or cause a breach of it. Gummow J at 266 referred to the committal of a third party for contempt as arising not because that party is bound by the injunction but because "the party is so conducting himself as to obstruct the course of justice", with reference to Seaward v Paterson and Z Limited v A-Z. Gummow J also referred to Attorney-General v Newspaper Publishing Plc [1988] Ch 333 at 342-6, in which Sir Nicolas Browne-Wilkinson VC expressed the relevant principle pertaining to a third party's liability for contempt as being that "the court will not allow its order to be knowingly flouted, thwarted or frustrated by any person" (at 346C). Accordingly, it is clear that the High Court in Zhu was approving the long-established principle that the direct liability of a third party to the order depends on that party knowing that his or her conduct has caused a breach of the order. 35 Those statements of principle by the High Court were obiter dicta. However, the High Court has held that intermediate appellate courts and trial judges in Australia should not depart from long-established authority and seriously considered dicta of a majority of the High Court: Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 at [134] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). That proposition contains two requirements, namely that the dicta conform with long-established authority and be the dicta of a majority of the High Court: Pape v Commissioner of Taxation [2009] HCA 23; (2009) 238 CLR 1 at [473] (Heydon J); Harvard Nominees Pty Ltd v Tiller [2020] FCAFC 229; (2020) 282 FCR 530 at [54] (Lee, Anastassiou and Stewart JJ), citing Perry Herzfeld and Thomas Prince, Interpretation (Lawbook Co, 2nd ed, 2020) at [33.320]. Both of those requirements are satisfied in relation to this particular issue of legal principle. In Cardile, the relevant statement appears in the reasons of four of the five judges of the High Court who heard the case, and in Zhu, the relevant statement appears in the unanimous judgment of the Court. As to the seriously considered obiter dicta being based on long-established authority, in the present case that line of authority begins with Seaward v Paterson in 1897 (as adopted in ICI Australia Operations in 1992). Accordingly, I regard myself as bound to follow those statements of the High Court, in support of the principle that the liability of a third party requires proof that the third party had actual knowledge that the conduct in question involved a breach of the order. 36 While none of those cases involved the position of directors of a company where the company is the party which is bound by the order, a director in that situation is a third party to the order and is therefore governed by the principle which applies to third parties generally. I note, however, that in the UK directors and officers of a company which breaches an order are treated as falling within a special category: see ADM International SARL v Grain House International SA [2024] EWCA Civ 33 at [53] and [142] (Popplewell LJ, with whom Snowden and Singh LJJ agreed). In light of the High Court authorities discussed above, the same cannot be said of Australian law.

Full Federal Court Authorities 37 In Jorgensen, to which I have already referred, the Full Court said at [11] that in the case of an alleged contemnor who is not a party bound by the court order, the alleged contemnor is liable for contempt only if it is proved, beyond reasonable doubt, that he or she knowingly aided, abetted, counselled or procured the breach of the order, referring to Seaward v Paterson at 555, ICI Australia Operations at 255 and 266 and Cardile at [30]. The Full Court said at [11] that in such circumstances, the alleged contemnor is not liable as an accessory, but rather is directly liable for an independent contempt committed by themselves in obstructing the course of justice, citing Zhu at [121]. The Full Court also said at [12] that a third party who is not bound by the court order will be liable for contempt only if he or she not only knows of the order but also engages in conduct which is intended to frustrate, thwart or subvert the purpose of the order, citing CCOM Pty Ltd v Jiejing Pty Ltd (1992) 36 FCR 524 at 530-31 (Drummond J). At [13], the Full Court referred to Drummond J also having held that a party not bound by the order will not be liable if he or she had an honest but mistaken belief as to the meaning or operation of the order which, if correct, would mean that his or her conduct could not amount to an interference with the operation of the order. At [15], the Full Court said that the critical point for the purposes of that appeal was that, because Mr Jorgensen was not a party to or directly bound by the freezing order, the Ombudsman was required to prove that when Mr Jorgensen caused funds to be transferred from the frozen bank accounts, he knew that the transfers breached the freezing order, which required the Ombudsman to prove, beyond reasonable doubt, not only that the transfers did not fall within the "ordinary and proper course of business" exception, but also that Mr Jorgensen knew that to be the case and did not honestly but mistakenly believe that the transfers fell within the exception. 38 The appeal in Jorgensen succeeded on a ground of appeal directed to a denial of procedural fairness by reason of excessive interventions by the primary judge, and the Full Court held that there should be a re-trial. The Full Court then decided that, although it was not necessary to deal with the remaining grounds of appeal, it would, in all the circumstances, be desirable to address the legal issues arising on those grounds so as to provide guidance for the purposes of the re-trial: [164]. It was in that context that the Full Court dealt with the primary judge's misconstruction of "ordinary and proper course of business" (which I have referred to above), and also the issues concerning Mr Jorgensen knowingly impeding the administration of justice. Accordingly, I regard the Full Court's reasons on those grounds of appeal as obiter dicta. 39 The ground of appeal concerning whether Mr Jorgensen knowingly impeded the administration of justice was said to raise two questions: at [210]. The first question was whether the primary judge found, beyond reasonable doubt, that in authorising or directing the impugned transfers, Mr Jorgensen knowingly impeded the administration of justice. The second question, which only arose if the primary judge did find that Mr Jorgensen knowingly impeded the administration of justice, was whether the primary judge erred in so finding. The Full Court then said at [210] that the more fundamental issue raised by those questions was whether the primary judge misdirected himself or otherwise proceeded on the basis of a misconception or misunderstanding concerning this element of the contempt charges faced by Mr Jorgensen. At [217], the Full Court said that one of the fundamental problems in the primary judge's finding of contempt was that the contempt charges that had been brought against Mr Jorgensen did not allege that he had knowingly impeded the administration of justice by the relevant conduct. At [218], the Full Court identified a further fundamental difficulty being that there was no direct evidence that Mr Jorgensen knowingly impeded the administration of justice by acting in a way that was intended to defeat the judgment and penalty orders that had been made against the company. Accordingly, the only basis upon which such a finding could have been made was that it was an inference that was drawn from the evidence as a whole, but in order to be satisfied beyond reasonable doubt that Mr Jorgensen was guilty of contempt, it was necessary for the primary judge to be satisfied that that inference was the only reasonable inference and that no other reasonable inference consistent with innocence was open or available on the evidence, being a question which the primary judge had not addressed. 40 At [219], the Full Court considered a possible explanation or basis for the primary judge's finding that Mr Jorgensen had knowingly impeded the administration of justice, namely that his Honour was proceeding on the basis that that element would be made out if it was simply proved beyond reasonable doubt that Mr Jorgensen authorised or directed the relevant transfers from the frozen accounts and those transfers breached the freezing order. However, the Full Court said that such an approach would involve a fundamental misunderstanding of that element of the contempt charges against Mr Jorgensen, in that the authorities referred to earlier in their Honours' reasons clearly established that a third party who is not bound by a court order will only be liable for contempt arising from a breach of that order if it is found that they engaged in conduct which was intended to frustrate, thwart or subvert the purpose of the order, which involves proof that the alleged contemnor not only knew about the order, but also knew that their conduct involved or gave rise to a breach of the order: [222]. A party not bound by the order will not be liable for contempt if they had an honest but mistaken belief as to the meaning or operation of the order which, if correct, would mean that their conduct could not amount to an interference with the operation of the order: [222]. In order to convict Mr Jorgensen of the charges of contempt, it was necessary for the primary judge to be satisfied beyond reasonable doubt that Mr Jorgensen knew that the transfers breached the freezing order: [223]. 41 Accordingly, Jorgensen contains clear statements of principle consistent with what I regard as the effect of the High Court authorities considered above, although, like the High Court authorities, the point was dealt with only by way of obiter dicta. 42 The Full Court in Jorgensen does not appear to have been referred to the earlier Full Court decision in Hurd v Zomojo Pty Ltd [2015] FCAFC 148. That case involved a finding by the primary judge of contempt on the part of Mr John Hurd, who was a director of the corporate respondents that had been found to have breached the orders made against them. One of the arguments made by Mr Hurd on the appeal was that the primary judge had not explained the basis of Mr Hurd's liability and, had the matter been addressed, the primary judge would have exonerated Mr Hurd. Besanko and Gilmour JJ rejected that argument. Their Honours cited the decision of Kiefel J in Australian Competition and Consumer Commission v Goldstar Corporation Pty Ltd [1999] FCA 585 at [41] as follows: Directors who have notice of a Court order … are under a duty to take reasonable steps to ensure that it is obeyed, and if they wilfully fail to do so and the Order is breached they may also be held liable for contempt: Attorney-General for Tuvalu v Philatelic Distribution Corporation Ltd [1990] 1 WLR 926, 336 [sic: 936]. As the judgment there shows, it may be a defence that the director reasonably believed some other director or officer was taking those steps. Omission may also suffice for a finding of contempt since a failure to supervise, investigate, "or wilful blindness" on the part of a director may qualify the conduct as contemptuous: A-G for Tuvalu, 938. Besanko and Gilmour JJ then referred to the appellants' submission that the primary judge did not address the question of whether Mr Hurd was knowingly involved in the contraventions, and their Honours accepted that that question was not discussed in the primary judge's written reasons: [103]. However, Besanko and Gilmour JJ said that on a number of occasions in the written reasons, the primary judge referred to Mr Hurd as the sole director or a director of one or more of the corporate respondents, and referred to the fact that Mr Hurd swore his affidavits on behalf of the corporate respondents, and said that it seemed that the primary judge considered those facts to be sufficient to make Mr Hurd liable for aiding and abetting or otherwise causing the contraventions: [103]. Besanko and Gilmour JJ then said that Mr Hurd was the sole director of the corporate respondents at the relevant time and that if the companies were to comply, or fail to comply, it was because of Mr Hurd's conduct or inaction, and Mr Hurd swore his affidavits to deal with compliance with the orders by those companies: [104]. Their Honours then concluded that Mr Hurd was liable in relation to the contraventions by the corporate respondents because he assisted or procured the contraventions. I note that Beach J dissented in relation to the appeal by Mr John Hurd on the basis that it was not open to find beyond all reasonable doubt that he deliberately omitted to perform the acts required by the relevant orders: at [171]. 43 The reasoning of Besanko and Gilmour JJ constituted a necessary part of the process of reasoning leading to the decision, and was accordingly part of the ratio decidendi of the case. In my view, that reasoning adopts the error identified by the Full Court in Jorgensen, namely that in the case of alleged contempt by a third party it is insufficient to show merely that the third party caused a breach of the order with knowledge of the order, and there must in addition be proof beyond reasonable doubt that the third party had actual knowledge that the conduct in question constituted or caused a breach of the order. Although Besanko and Gilmour JJ had earlier referred to the High Court's decision in Zhu at [121], their Honours did not appear to consider whether the High Court had in that passage approved long-established authority requiring that the third party must be proved to have had actual knowledge that the relevant conduct would constitute or cause a breach of the order. 44 The upshot is that, were it not for the considered obiter dicta of the High Court based on the long-established authority referred to by the High Court, which I regard as binding me, I would have been faced with a decision whether to follow the obiter dicta in Jorgensen (which I regard as correct) or the ratio of Hurd (which I regard as wrong). The principles concerning stare decisis would have required me in those circumstances to follow the reasoning in Hurd, despite my reservations as to its correctness. 45 In accordance with the observations of the High Court in Farah, I consider myself bound to follow the seriously considered obiter dicta of a majority of the High Court based on long-established authority in preference to the ratio of a decision of the Full Court. Such dicta of the High Court would be binding on the Full Court were this judgment to be appealed, and so must a fortiori bind me as primary judge.

New South Wales Court of Appeal Authorities 46 In Sigalla v TZ Limited [2011] NSWCA 334 at [28], Young JA (with whom Macfarlan JA and Handley AJA agreed) said that in relation to a person who is not a party to the relevant order it was necessary for the prosecutor to prove beyond reasonable doubt that he intended to prevent or impede the purpose of the injunction, and if the evidence shows that he had an honest, but mistaken belief as to the meaning or operation of the injunction which, if correct, would mean that his conduct would not be an interference with its operation, then there is the lack of mens rea necessary to put him in contempt. Young JA had earlier cited with approval the reasons of Drummond J in CCOM Pty Ltd v Jiejing Pty Ltd and the statement of the High Court in Zhu at [121]. In Sigalla, the charge against the relevant person was merely that he caused the company to enter into a contract for the sale of the particular property and therefore was involved in the breach of the orders. Young JA said at [18] that that would not appear to be a charge in accordance with the principles which his Honour had set out. 47 However, in Mahaffy v Mahaffy [2018] NSWCA 42; (2018) 97 NSWLR 119 at [121], Simpson JA said that there was another line of authority to which the Court of Appeal in Sigalla did not appear to have been referred, citing Attorney-General for Tuvalu, ACCC v Goldstar Corporation Pty Ltd at [41] and Hurd v Zomojo Pty Ltd. Simpson JA said that that line of authority was directly referable to the present case in that the appellant was the sole shareholder and director of the company which was the party to the relevant order, and if that company could be held in contempt for failure to comply with the order then it followed that the appellant could also be held in contempt, being the person who controlled what the company did and what it did not do: at [125]. Payne JA at [251] said that, as Simpson JA had explained, "the weight of authority is in favour of the proposition that, depending on the nature of the order, a non-party director of a company may be in contempt for breaching an order directed at the company of which he or she is a director". Payne JA said that whether the authorities go so far as to provide that an omission by a non-party company director to take steps to cause a company to pay a costs order was not something which his Honour needed to decide. Emmett AJA said at [291] that persons who, although not personally bound by a court order, procure those who are bound by it to contravene it or otherwise thwart it, may be directly liable for contempt in obstructing the course of justice, and that where a company is ordered to do certain acts and a director of a company who is aware of the order wilfully causes the company to do the acts, the director himself may be guilty of contempt, citing Attorney-General for Tuvalu. However, Emmett AJA said that where an order is made against a company requiring the company to take some positive step, such as the payment of a sum of money, the position may be different: at [291]. 48 I note that in Mahaffy, no consideration appears to have been given as to whether the issue of principle may have been resolved by the obiter dicta of the High Court based on long-established authority, which intermediate appellate courts and trial judges must follow. Further, I note that Mahaffy was decided before Jorgensen, and the reasons of the Full Court in Jorgensen would now affect any assessment as to where the "weight of authority" lies. I note also that Mahaffy does not appear to have been cited before the Full Federal Court in Jorgensen.

Application to the present case 49 As I have indicated above, I regard myself as bound to follow the obiter dicta of the High Court, based on long-established authority, in Cardile and Zhu to the effect that a third party to an order is not liable for contempt unless it is proved beyond reasonable doubt that the third party had actual knowledge that the relevant conduct would constitute or cause a breach of the order, and it is insufficient to show merely that the third party knew of the existence of the order and engaged in the relevant conduct. It follows that Charge 2 in the present case is defective in that it contains no allegation that Mr Zhang had actual knowledge that the grant of the second mortgage by Belrose COB constituted or caused a breach of the freezing order against Belrose COB. Further, the evidence is insufficient to establish beyond reasonable doubt that Mr Zhang knew that the grant of the second mortgage would constitute or cause a breach of the freezing order against Belrose COB. Accordingly, even if I had been of the view that Belrose COB had breached the freezing order, I would have dismissed Charge 2 and I would have held that Mr Zhang was not liable for contempt. 50 There is one final line of argument advanced by the applicants which I should also deal with. The applicants draw attention to the fact that Mr Zhang is a party to the principal proceedings, being the first respondent, and is also subject to a freezing order himself in substantially the same terms as the order made against Belrose COB. The applicants submit that the principle concerning contempt of court by third parties applies to persons or entities who are not parties to the proceedings, in contrast to those who are not parties to the particular order. I reject that submission. The High Court authorities to which I have referred are expressed in relation to persons who are not bound by the relevant order, as too is the long-established authority of Seaward v Paterson, and I regard the principle concerning contempt by third parties as being applicable to persons who are not parties to the particular order, rather than applying only to those who are not parties to the proceedings at all. Occasionally, the authorities in this area do refer to the third party as not having been a party to the proceedings (eg, in Sigalla at [12]), but there is no indication in the reasons of any of the cases that that is the distinguishing feature which characterises such persons as third parties, rather than the fact that they are not a party to the order itself.

Conclusion 51 It follows that the interlocutory application dated 18 December 2023 should be dismissed. The applicants should pay the costs of Belrose COB and Mr Zhang in relation to that interlocutory application. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.

SCHEDULE OF PARTIES NSD 247 of 2023 Respondents Fourth Respondent: CHARM TEAM DEVELOPMENT LTD CR NO 2271791 Fifth Respondent: LINK INVESTMENTS LTD CR 2871791 Sixth Respondent: CENTRAL ADVISORY CAPITAL PTY LTD ACN 621 169 015 Seventh Respondent: CENTRAL ADVISORY GROUP ASIA LTD CR NO 2367749 Eighth Respondent: XUENAN (EUDORA) WANG Ninth Respondent: BELROSE COB PTY LTD Tenth Respondent: CENTRAL ACCOUNTING AND TAXATION ADVISORY PTY LTD