CONTEMPT OF COURT - what constitutes criminal contempt - where first defendant breached undertaking given to the Court not to sell a residential property - whether conduct amounts to contempt of a criminal nature

Court Procedures Rules 2006 (ACT) rr 2500, 2501, 2506

Evidence Act 2011 (ACT) s 128

Supreme Court Act 1933 (ACT) s 20

Supreme Court Act 1970 (NSW) ss 101, 101A

Attorney-General v Leveller Magazine Ltd [1979] AC 440

Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98

Australian Consolidated Press Ltd v Morgan [1965] HCA 21; (1965) 112 CLR 483

Australian Securities and Investments Commission v Sigalla (No 4) [2011] NSWSC 62; 80 NSWLR 113

Bhagat v Global Custodians Ltd [2002] NSWCA 160

Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [2015] HCA 21; 256 CLR 375

Dong v Song (No 2) [2018] ACTSC 180

Hinch v Attorney-General (Vic) [1987] HCA 56; (1987) 164 CLR 15

Jennison v Baker [1972] 2 QB 52

John Fairfax & Sons Pty Ltd v McRae [1955] HCA 12; (1955) 93 CLR 351

Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; 256 FCR 90

Knight v Clifton [1971] Ch 700

Kostov v YPOL Pty Ltd [2018] NSWCA 306

Markisic v Commonwealth [2007] NSWCA 92; 69 NSWLR 737

Matthews v Australian Securities and Investments Commission [2009] NSWCA 155

Metcash Trading Ltd v Bunn (No 5) [2009] FCA 16

Microsoft Corporation v Marks (No 1) [1996] FCA 709; (1996) 69 FCR 117

Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69

R v Metal Trades Employers' Association; Ex parte Amalgamated Engineering Union, Australian Section [1951] HCA 3; (1951) 82 CLR 208

Registrar v Unnamed Respondent [1994] ACTSC 24; (1994) 234 FLR 248

TZ Ltd v ZMS Investments Pty Ltd [2009] NSWSC 1465

Witham v Holloway (1995) 183 CLR 525

Borrie and Lowe's Law of Contempt, 2nd ed. (1983)

1. By application filed 9 April 2018, the plaintiff has charged the first defendant, Ms Shaoqing Song, with contempt of court under r 2501 of the Court Procedures Rules 2006 (ACT) (Rules). The nature of the contempt is a breach of an undertaking, which she had given to the Court, not to sell a residential property she owned in the suburb of Lawson in the Australian Capital Territory (the Territory), described as Section 37 Block 15 in Deposited Plan 11268 (Lawson property), without first notifying the plaintiff, Ms Xin Dong, through her solicitors. The contempt of this Court is admitted, but the parties are in dispute as to whether the contempt is civil or criminal in nature and that is the sole issue for determination on the present application.

2. The genesis of the original dispute was the purchase of a restaurant business by the parties in 2014. The parties were all friends at the time they decided to purchase the business, but subsequently the plaintiff discovered that she had been misled by the defendants, Ms Song and her now husband, Mr Zheng Zhou. The plaintiff commenced proceedings, which were heard over a number of days in February and April 2018, and resulted in a judgment delivered on 21 June 2018: see Dong v Song (No 2) [2018] ACTSC 180. The defendants were found to have engaged in misleading and deceptive conduct and were ordered to pay to the plaintiff the sum of $251,503 plus interest in the sum of $51,472.06.

3. The present application was stood over until after the hearing and the delivery of judgment, with Ms Song given the opportunity to purge the contempt in the meantime. However, Ms Song has subsequently entered into voluntary bankruptcy. The hearing of this application was further delayed due to health issues that arose in relation to Ms Song.

4. The relief sought in this application is an order (although it is more accurately a declaration) that Ms Song is in contempt of court for contravening her undertaking, by selling the Lawson property, fully knowing that the property was the subject of the undertaking, and for Ms Song to be punished for that contempt as the Court thinks appropriate.

5. An applicant seeking such relief must ensure that the application contains sufficient particulars to enable the alleged contemnor to meet the charge against them: see Matthews v Australian Securities and Investments Commission [2009] NSWCA 155 at [40]-[47] per Tobias JA, Campbell JA relevantly agreeing. There was no dispute here that the procedural requirements had been met.

6. An amended application in proceeding was filed on 31 August 2018 relating to Ms Song's conduct in declaring herself bankrupt shortly after judgment was delivered. Ultimately, Ms Dong did not press that aspect of the amended application. Thus, the only contempt that is alleged against Ms Song concerns the breach of the undertaking.

7. Ms Dong relied on a number of affidavits affirmed by her solicitor. Ms Song chose not to give evidence. She had previously been issued with a certificate under s 128 of the Evidence Act 2011 (ACT) in relation to her evidence under cross-examination on 5 February 2018, following the issue of the breach of undertaking first being identified at the end of January 2018.

8. Evidence as to the consequences of the breach, and any attempts to remedy the breach or subsequent conduct by Ms Song, are not relevant to determining the limited issue of whether the Court is dealing with civil or criminal contempt. To the extent that this type of evidence was contained in the affidavit material admitted, it has not been taken into account.

The undertaking given by Ms Song to the Court

9. As part of the progress of the substantive proceedings, ex-parte freezing orders were made by Refshauge J on 15 March 2016, in respect of a number of assets owned by the first defendant, including the Lawson property.

10. On 18 March 2016, by consent, those freezing orders were discharged, and Ms Song instead gave an undertaking to the Court that she would not:

... sell, encumber, further mortgage or assign her interest if any in the following property without giving the plaintiff through her solicitor Mr Hudson Lu of Luminous legal 14 days' notice:

(a) [The Lawson property]

(b) The share in AVS Kingston Pty Ltd (ACN 603 126 227); and

(c) Property in Kingston in the Australian Capital Territory being unit 156, 45 Eastlake Parade Kingston which has the following title reference...

11. Before a court will find that a person who has breached the undertaking is in contempt of court, the terms of an undertaking must be certain, or unambiguous: Australian Consolidated Press Ltd v Morgan (1965)112 CLR 483. There is no dispute between the parties as to the clarity of the undertaking here. It can only be construed to mean that Ms Song would not sell the Lawson property without giving 14 days' notice to the plaintiff's solicitor.

12. On 25 January 2018 (the week before the substantive hearing commenced), KWL lawyers, the former solicitors acting for Ms Song, wrote to Ms Dong's legal representatives stating:

It is come to our attention that our client has sold her property situated at ...Lawson in the ACT and is in breach of her undertaking on 18 March 2016, which still applies.

13. It must be noted that Ms Song had engaged different solicitors to act for her on the sale of the Lawson property. No criticism is to be made of Ms Song's former solicitors, as they simply did not know what their client was doing.

14. The Supreme Court has inherent jurisdiction and the general conferral of jurisdiction by s 20 of the Supreme Court Act 1933 (ACT) (Supreme Court Act) to deal with contempt: TZ Ltd v ZMS Investments Pty Ltd [2009] NSWSC 1465 (TZ Ltd) at [48], citing John Fairfax & Sons Pty Ltd v McRae [1955] HCA 12; (1955) 93 CLR 351. Although both cases were in the New South Wales jurisdiction, the principle is uncontroversial and has equal application in the Territory.

15. Specifically, r 2500 of the Rules provides that div 2.18.16 applies to (among other things) contempt for contravention of an order of the Court or an undertaking given to the Court. This rule simply reflects the legal effect of an undertaking given to the Court, in that it has the force of a court order and its terms must be obeyed: see Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69 (Pang v Bydand) at [51] and the authority there-cited.

16. Division 2.18.16 of the Rules applies regardless of whether the contempt is determined to be criminal or civil in nature. This is because the prosecution of a charge of criminal contempt by way of application in civil proceedings is not, of itself, a criminal proceeding. Notwithstanding that a contempt may be described as a criminal offence, the proceedings do not attract the criminal jurisdiction of the court: see Hinch v Attorney-General (Vic) [1987] HCA 56; (1987) 164 CLR 15 (Hinch) at 89 (which was the costs judgment delivered by the Court).

17. Consequently, the applicable procedural rules are those that apply to other civil proceedings, subject to certain qualifications: Kostov v YPOL Pty Ltd [2018] NSWCA 306 (Kostov) at [17]. The Court was there referring to qualifications identified by Nettle J in Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [2015] HCA 21; 256 CLR 375 (Boral) at [66]-[67], namely those safeguards, or 'accepted notions of elementary justice', that apply to criminal proceedings, including privileges against self-incrimination and self-exposure to penalty: Kostov at [18]. To this list may be added the requirement that all contempts, whether characterised as civil or criminal, must be proven on the criminal standard of proof: Witham v Holloway (1995) 183 CLR 525 (Witham v Holloway) at 542.

18. The regime for punishment is provided for in r 2506 of the Rules. I am not at all convinced that r 2506 sets out the limits of the available remedies, as contempt of court is a distinctive offence attracting remedies which are sui generis: see Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 (AMIEU v Mudginberri) at 115 and the authority there-cited. However, it is not necessary to deal with that aspect of the application, as the parties are agreed that at this stage, the Court should only determine whether the contempt admitted is civil or criminal in nature, with the nature of the appropriate sanction to be considered following a separate hearing.

19. An approach of making a declaration of contempt separately from matters relevant to any punishment appears to be consistent with the position stated elsewhere, to the effect that, although there is no necessary strict division into pre-verdict and post-verdict stages of the proceedings, such a division usually occurs in practice: Pang v Bydand at [99] per Beazley JA (as her Honour then was).

20. Proceedings involving whether a declaration or finding of contempt should be made do not necessarily involve the Court being required to make a separate finding as to whether the conduct the subject of the charge amounts to civil or criminal contempt. There are a number of statements in the authorities that the distinction between civil and criminal contempt is 'unsatisfactory', as described in AMIEU v Mudginberri at 107, in that it is:

(a) 'illusory' - see Witham v Holloway at 534;

(b) 'artificial' - see Markisic v Commonwealth [2007] NSWCA 92; 69 NSWLR 737 at [39], AMIEU v Mudginberri at 108; or

(c) a distinction that is 'difficult to draw' - see Bhagat v Global Custodians Ltd [2002] NSWCA 160 at [32] per Spigelman CJ (with whom Ipp AJA and Brownie AJA agreed).

21. Further, the majority in AMIEU v Mudginberri (Gibbs CJ, Mason, Wilson and Dean JJ) noted at 106 that the practical consequences attending the distinction between civil and criminal contempt - procedure, onus of proof, right of appeal, mode of punishment, privilege from arrest, pardon and power to release an offender - have largely disappeared in more recent times. The majority went on to state that any theoretical distinction between the two classes overlooks the underlying rationale of every exercise of the contempt power, namely that it is necessary to uphold and protect the effect administration of justice: AMIEU v Mudginberri at 107.

22. Nevertheless, in Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; 256 FCR 90 the Full Court of the Federal Court of Australia noted (at [24]) the real distinction that remains between contempt proceedings being "essentially criminal in nature", and ordinary criminal proceedings. The Court referred (at [25]) to Nettle J's explanation in Boral (at [65]) of the distinction between civil contempt proceedings, criminal contempt proceedings and criminal proceedings (citations omitted):

A proceeding for punishment for contempt constituted by disobedience of an injunction granted in a civil proceeding is not part of the criminal justice system in the sense essayed in Caltex, X7 or Do Young Lee v The Queen. Although "all proceedings for contempt 'must [now] realistically be seen as criminal in nature'", not all contempts are criminal. Failure to obey an injunction is not a criminal offence unless the failure to comply is defiant or contumacious. A proceeding for contempt is not a proceeding for criminal contempt if the proceeding appears clearly to be remedial or coercive in nature as opposed to punitive. A criminal contempt is a common law offence, albeit not part of the ordinary common law. But even a proceeding for criminal contempt is not a criminal proceeding.

23. At least in this jurisdiction, it does not appear to be necessary that this Court make a specific finding as to whether the nature of the contempt was civil or criminal before it may deal with the punishment of the contemnor. The position might be different in NSW where appeal rights are different depending on whether a contempt was traditionally regarded as civil or criminal, due to the words of ss 101(5) and 101A(11) of the Supreme Court Act 1970 (NSW). However, there is no such distinction in the Territory.

24. In Registrar v Unnamed Respondent [1994] ACTSC 24; (1994) 234 FLR 248, Miles CJ emphasised at [9] that contempt proceedings are proceedings of a criminal nature, going on to say (at [12]) that the nature of contempt is 'not precise and is not to be divided into precise categories'. His Honour then cited Lord Diplock in Attorney-General v Leveller Magazine Ltd [1979] AC 440 at 449 as follows:

... although criminal contempts of court may take a variety of forms they all share a common characteristic: they involve an interference with the due administration of justice either in a particular case or more generally as a continuing process. It is justice itself that is flouted by contempt of court, not the individual court or judge who is attempting to administer it.

The pertinent issue is whether the conduct itself in all the circumstances has an inherent tendency to interfere with the administration of justice: John Fairfax and Sons Pty. Limited v. McRae, or was calculated so as to interfere, considering not the state of mind of the person involved, but the inherent nature of the act itself: Attorney-General v. Butterworth and Others (1963) 1 QB 696 at 725 per Donovan LJ.

26. Given the above state of the authorities, and the fact that no legislative distinction between civil and criminal contempt is made in the Territory, including as to the mode of punishment that may be applicable (set out in r 2506), the preferable approach appears to be to simply consider whether the conduct constitutes contempt (which has been admitted here), and if so, what should be the punishment, if any, in the exercise of the Court's discretion. Such an approach may be better viewed as part of the one scale, with conduct that might be described as a technical contempt at the one end and conduct that is contumacious at the other.

27. Nevertheless, in deference to the parties' arguments on the sole issue fully argued before the Court, the reasons below address whether the conduct of Ms Song ought to be categorised as civil or criminal contempt.

Principles applicable to the distinction between civil and criminal contempt

28. The authorities below provide some context to the pithy summary of the distinction between civil and criminal contempt, as explained by Nettle J in the extract from Boral at [22] above.

29. Generally, a civil contempt involves disobedience of a court order or breach of an undertaking in civil proceedings, whereas criminal contempt is committed either when there is a contempt in the face of the court or there is an interference with the administration of justice: AMIEU v Mudginberri at 106.

30. Deliberate conduct (an act or omission) which is in breach of an injunctive order or an undertaking will constitute such wilful disobedience, and therefore a civil contempt, unless it be casual, accidental or unintentional: AMIEU v Mudginberri at 111, 113. However, if the conduct involves deliberate defiance, or if it is contumacious, the disobedience will amount to a criminal contempt: Witham v Holloway at 530 per Brennan, Dean, Toohey and Gaudron JJ. See also Metcash Trading Ltd v Bunn (No 5) [2009] FCA 16 at [9] per Finn J, in terms that have been repeated on a number of occasions (see, for example, TZ Ltd at [3]).

31. Further, criminal contempts are acts or omissions that have a tendency to interfere with or undermine the authority, performance or dignity of the courts of justice or those who participate in their proceedings. Their characteristic attribute is an interference with the due administration of justice either in a particular case or as part of a continuing process: see Witham v Holloway at 538 per McHugh J (and the cases there-cited).

32. The basis of the distinction lies between proceedings which are remedial or coercive in the interest of the private individual and proceedings in the public interest to vindicate judicial authority or maintain the integrity of the judicial process: Witham v Holloway per at 531 per Brennan, Dean, Toohey and Gaudron JJ.

33. The difference is the primary purpose of the exercise of the power. One purpose is to vindicate the rights of the plaintiff. The other purpose is to vindicate the authority of the court. However, these two objects have been thought to be 'inextricably intermixed': Jennison v Baker [1972] 2 QB 52 at 64, approved in AMIEU v Mudginberri at 108.

34. To that end, proceedings whose essential purpose is to punish the contemnor for past breaches, rather than to coerce the contemnor into complying with the orders or to remedy past breaches, are classified as criminal contempts: Australian Securities and Investments Commission v Sigalla (No 4) [2011] NSWSC 62; 80 NSWLR 113 at [9]. This is consistent with the following reasoning of Deane J in the substantive judgment of Hinch at 49:

The classification of contempts of court as criminal or civil has, in the past, involved the anomaly that some contempts have been classed as civil notwithstanding that they have been or may be visited with the consequences of imprisonment or fine... It should no longer be accepted in this country where, regardless of whether it be imposed in proceedings brought by the Attorney-General or...by a private individual for the indirect or coercive enforcement of a civil order, imprisonment or fine as a consequence of a finding of contempt of court cannot be justified otherwise than as a punishment for past or continuing breach of law. Proceedings seeking the imposition of such punishment upon an alleged contemnor...must realistically be seen as essentially criminal in nature...

[Emphasis added.]

35. The emphasised words were cited with approval in Witham v Holloway at 534.

36. A breach of an undertaking in and of itself is not necessarily to be characterised as criminal in nature. However, civil and criminal contempts may overlap: R v Metal Trades Employers' Association; Ex parte Amalgamated Engineering Union, Australian Section [1951] HCA 3; (1951) 82 CLR 208 at 253. Citing that authority among others, McHugh J stated at 538:

Thus, disobedience to the order of a court constitutes criminal contempt when the disobedience is contumacious. Defiance of the court's order renders criminal what would be otherwise civil contempt. Where non-compliance with a judgment or order goes beyond mere breach and involves misconduct, civil contempt also has "a penal disciplinary distinction [that is] exercised by the court in the public interest".

[References omitted.]

37. The overlapping nature of civil and criminal contempt may be further seen in statements made about a contemnor's intention. It is not necessary to prove that the contemnor committed the breach with an intention to disobey the order: Knight v Clifton [1971] Ch 700 at 721. The authorities above in relation to civil contempt make that clear. However, similar statements have also been made in Hinch at 49 per Deane J, at 69 per Toohey J. which was a case concerning criminal contempt. Their Honours stated that it was not necessary that the offending conduct be carried out with the actual purpose or intention of prejudicing the due administration of justice.

Does Ms Song's conduct constitute criminal contempt?

38. Once the above principles are properly understood, the resolution of the issue is, in my view, straightforward.

39. Ms Song's conduct in selling the Lawson property was a deliberate or wilful act. One cannot accidentally sell a residential property. This fact is established beyond reasonable doubt. It was also in clear and total breach of the undertaking, completely depriving it of all effect. On no view can it be said that the conduct was casual or a mere technical breach.

40. The legal representative for Ms Song argued that the conduct was not contumacious, in the sense of a deliberate refusal to obey the law. However, he accepted that whether Ms Song was aware that her conduct was a breach of the undertaking (that is, Ms Song's state of mind or intention to disobey the undertaking) is not a factor to be considered when determining the initial question of contempt, drawing the Court's attention to Microsoft Corporation v Marks (No 1) [1996] FCA 709; (1996) 69 FCR 117 in addition to the authorities already cited above.

41. In my view, whether the conduct was contumacious is therefore more properly a question to be answered at the punishment stage. It suffices for the present application to find that the contempt is of a criminal kind because, while it is certainly true that the purpose of the initial undertaking was coercive and in the interest of the private individual (being the plaintiff), the breach of the undertaking calls into question the proper administration of justice and the integrity of the judicial process. If a court's orders (or an undertaking) could be disobeyed with impunity, not only would individual litigants suffer, the whole administration of justice would be brought into disrepute: AMIEU v Mudginberri at 107, citing Borrie and Lowe's Law of Contempt, 2nd ed. (1983).

42. The present application is for punishment for a past and continuing breach of law. On the principles set out above, the contempt must realistically be seen as criminal in nature.

43. The parties requested that a decision on costs be deferred until after they had been given the opportunity to consider the findings of the Court. Accordingly, I will hear the parties as to costs.

44. I have found that the conduct as admitted constitutes contempt, and that if it be necessary to make such a finding, the conduct is of a criminal nature. It is therefore appropriate to make the following declaration:

(1) The first defendant, Shaoqing Song, is guilty of contempt by her conduct in breaching the undertaking she gave to the Court on 18 March 2016, in that she sold the property comprised in Section 37 Block 15 on Deposited Plan 11268 in the suburb of Lawson in the Australian Capital Territory.

I certify that the preceding forty-four [44] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam.