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[2019] ACTSC 273
Supreme Court of the ACT
2019-11-19
McWilliam AsJ
Original judgment source is linked above.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
CRIMINAL LAW - JURISDICTION, PRACTICE AND PROCEDURE - Judgment and Punishment - contempt - sentence - power to impose - subjective factors outweighing objective seriousness - community service
Bankruptcy Act 1966 (Cth) s 82
Court Procedures Rules 2006 (ACT) rr 1720(3), 2506, 2507
Legislation Act 2001 (ACT)
Supreme Court Act 1933 (ACT) s 20
Australian Meat Industry Employees' Union and Others v Mudginberri Station Pty Ltd [1986] HCA 46; 161 CLR 98
Attorney-General (NSW) v Whiley (1993) 31 NSWLR 314 Australian Securities and Investments Commission v Michalik [2004] NSWSC 1259; 52 ACSR 115
Australian Securities and Investments Commission v Sigalla (No 4) [2011] NSWSC 62; 80 NSWLR 113
Circuit Finance Australia Limited v Sobbi [2010] NSWSC 912
Dong v Song (No 2) [2018] ACTSC 180
Dong v Song (No 3) [2018] ACTSC 226
Dong v Song (No 4) [2019] ACTSC 168
Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52
Menzies v Paccar Financial Pty Ltd [2016] NSWCA 280; 93 NSWLR 88
Principal Registrar of the Supreme Court of New South Wales v Jando [2001] NSWSC 969; 53 NSWLR 527
Re Colina; Ex parte Torney [1999] HCA 57; 200 CLR 386
The Registrar of the Court of Appeal v Gilby [1991] NSWCA 235
Registrar of the Court of Appeal v Maniam [No 2] (1992) 26 NSWLR 309
Ryan v Wright (No 2) [2004] NSWSC 1019
Wood v Staunton (No. 5) (1996) 86 A Crim R 183
1. On 27 June 2019 the first defendant, Shaoqing Song (who is also known as Vivian Song), was found guilty of contempt of court: Dong v Song (No 4) [2019] ACTSC 168 (Dong (No 4)). The conduct that gave rise to the contempt was the breaching of an undertaking that she had given to the court on 18 March 2016 to not sell any interest in certain property in the suburb of Lawson in the Australian Capital Territory (the Lawson property). In breach of that undertaking, in December 2017 she entered into a contract to sell that property and that contract was completed on 15 January 2018. It is now necessary to consider how this conduct should be punished.
2. The plaintiff and the first and second defendants were friends at the time they decided to purchase a restaurant business in 2014. The vehicle for the purchase was a company called Ms Vivian Pty Ltd. The plaintiff received 45 shares in the company and the second defendant received 55 shares. The plaintiff contributed $298,980 to what she understood was a purchase price of $550,000, plus $80,000 in additional expenses. She received some payments of dividends after the purchase. In March 2016, she obtained a copy of the contract for the purchase of the business and discovered that the purchase price was in fact only $220,000, not the $550,000 that she had been told. She commenced proceedings on 15 March 2016 and on that day, ex parte freezing orders were made by Refshauge J against the defendants.
3. On 18 March 2016, the freezing orders were discharged and replaced by an undertaking to the court given by the first defendant, which included an undertaking not to sell, encumber, further mortgage or assign her interest in the Lawson property.
4. The proceedings were then prepared for hearing. On 9 November 2017, the proceedings were listed for hearing to commence on 5 February 2018.
5. On 5 December 2017, the first defendant exchanged contracts on a sale of the Lawson property. Settlement of that contract occurred on 15 January 2018. On 16 January 2018, the defendants paid into their then solicitors' trust account $90,035.
6. On 25 January 2018, the defendants' solicitors (who were not the solicitors who had acted on the sale of the Lawson property) notified the plaintiff's solicitors that the property had been sold in breach of the first defendant's undertaking. The first defendant filed an Application in Proceeding on 30 January 2018 seeking to excuse her breach of the undertaking.
7. The substantive hearing commenced on 5 February 2018. By 6 February 2018, the defendants had paid a further $166,715 into their solicitors' trust account. On
7 February 2018 the Court noted the undertaking of the solicitor for the first defendant that the firm would preserve in its trust account $161,715 and would not disperse those monies without a further order. This amount represented the net proceeds of the sale of the property.
8. On 9 April 2018, the plaintiff filed an Application in Proceeding seeking that the first defendant be punished for contempt for breaching her undertaking to the court.
9. The substantive hearing ran over seven days up until 27 April 2018 when judgment was reserved. During the course of the hearing the defendants' solicitors withdrew and from 3 April 2018, the defendants were not represented in the substantive proceedings.
10. On 21 June 2018, I delivered judgment in the substantive proceedings: Dong v Song (No 2) [2018] ACTSC 180. I found that the first and second defendants had engaged in misleading and deceptive conduct, contrary to s 18 of the
Australian Consumer Law (Cth). I awarded damages in the sum of $251,503 as well as pre‑judgment interest in the sum of $51,472.06. This was a total sum of $302,975.06. I ordered that the defendants pay the plaintiff's costs.
11. On 29 June 2018, the first defendant entered into voluntary bankruptcy and a trustee in bankruptcy was appointed.
12. It is apparent that no steps were taken by the first defendant to inform the plaintiff of the bankruptcy. On 24 July 2018, the plaintiff's solicitor spoke to the first defendant concerning a payment plan for the judgment debt. During that conversation the first defendant did not disclose to the plaintiff's solicitor that she was now a bankrupt. However, the next day, 25 July 2018, solicitors for the trustee in bankruptcy disclosed the appointment of a trustee in bankruptcy to solicitors for plaintiff.
13. On 22 August 2018, I published my reasons for declining to vary the cost order that I had made in favour of the plaintiff: Dong v Song (No 3) [2018] ACTSC 226. Following this decision, the first defendant suffered health and legal representation issues. These resolved and the application seeking punishment of the first defendant for contempt proceeded.
14. As at 1 March 2019, a summary of proofs of debt provided by the trustee in bankruptcy show total proofs of $1,932,552.28 and admitted amounts being $359,751 (which included the plaintiff's claim of $302,975). The trustee in bankruptcy was at that time seeking further information in relation to the majority of the proofs of debt. No update was provided during the sentencing hearing.
15. On 21 March 2019, I heard the application dated 9 April 2018 seeking that the first defendant be punished for contempt. The first defendant did not give evidence for the purposes of that application.
16. On 27 June 2019, I found the first defendant guilty of contempt: Dong (No 4). I found that selling the Lawson property was a deliberate or wilful act in breach of the undertaking: at [39]. I further found that the essential purpose of the application was for punishment, where the proper administration of justice and the integrity of the judicial process was at stake, rather than for the purpose of coercing the first defendant to comply with the order or to remedy the past breach. Accordingly, the nature of the conduct in question was criminal, notwithstanding it was dealt with as a civil proceeding (see [34], [41] and [42]). I indicated that whether the conduct was contumacious was more properly a question to be answered at the punishment stage: at [41].
17. A criminal contempt of court is a common law offence: Re Colina; Ex parte Torney [1999] HCA 57; 200 CLR 386 at 393, 399, 428-429, 433; Attorney General (NSW) v Whiley (1993) 31 NSWLR 314 (Whiley) at 320. That is so, notwithstanding that a contempt is sometimes described as "an offence sui generis and ... not part of the ordinary criminal law": Australian Securities and Investments Commission v Sigalla (No 4) [2011] NSWSC 62; 80 NSWLR 113 at [37] and the authorities there-cited.
18. In the Territory, the rule relevant to the punishment of contempt is r 2506 of the Court Procedures Rules 2006 (ACT) (the Rules). At the time, the rule was in the following terms:
(1) This rule applies if the court decides that a person has committed a contempt.
(2) If the person is an individual, the court may punish the individual by making an order that may be made under the Crimes (Sentencing) Act 2005.
...
(4) Without limiting subrule (2), the court may make an order for punishment on conditions, including, for example, a suspension of punishment during good behaviour, with or without the respondent giving security satisfactory to the court for good behaviour.
Note An example is part of these rules, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
(5) Without limiting subrule (2), if the person is imprisoned for a term, the court may order the person's release from imprisonment before the end of the term.
19. The effect of r 2506 is to permit the court to make an order that could be made under the Crimes (Sentencing) Act 2005 (ACT) (Sentencing Act) but to also confirm the power, where a sentence of imprisonment is imposed, to subsequently make an order permitting the person's release from imprisonment before the end of the term. This accommodates circumstances in which a person purges the contempt, or otherwise take steps to reduce its impact in a manner warranting mitigation of punishment.
20. Although the rule refers to the Sentencing Act and orders the Court may make, the Rules are not the source of the Court's power to punish. The source of the Court's power arises in two ways. First, in its inherent jurisdiction. Rule 2506 is merely declaratory of the Court's power of punishment; it does not prescribe or exhaust the Court's inherent jurisdiction: see Registrar of the Court of Appeal v Maniam [No 2] (1992) 26 NSWLR 309 (Maniam) at 314 per Kirby P; Whiley at 320, both of which were cited in Menzies v Paccar Financial Pty Ltd [2016] NSWCA 280; 93 NSWLR 88 at [14]. Those authorities were dealing with the procedural rules applicable in the Supreme Court in New South Wales; however, the same reasoning applies here, as the Supreme Court of the ACT has relevantly the same inherent jurisdiction, reflected in s 20 of the Supreme Court Act 1933 (ACT).
21. The second source of the Court's power arises under statute, through the Sentencing Act, s 9 of which provides:
(1) The penalty a court may impose for an offence is the penalty provided under this Act or any other territory law.
(2) Chapter 4 (Sentencing procedures generally) applies to the imposition of all penalties imposed by a court, whether under this Act or otherwise
22. The word "offence" is not defined in the Dictionary to the Sentencing Act. The ordinary meaning of the term is broad enough to cover common law offences such as contempt. Similarly, the words "or otherwise" are also broad enough to refer to the Court's inherent jurisdiction.
23. Support for such a construction of the Sentencing Act can be found in the line of authority that has developed in NSW. It has been held that the equivalent legislation, the Crimes (Sentencing Procedure) Act 1999 (NSW) (the NSW Sentencing Procedure Act), is applicable where the punishment for contempt involves consideration of a custodial sentence: Principal Registrar of the Supreme Court of New South Wales v Jando [2001] NSWSC 969; 53 NSWLR 527 (Jando) at [40]-[45], Ryan v Wright (No 2) [2004] NSWSC 1019 at [21]; Australian Securities and Investments Commission v Michalik [2004] NSWSC 1259; 52 ACSR 115 (Michalik) at [38]; Circuit Finance Australia Limited v Sobbi [2010] NSWSC 912 at [6]).
24. Section 4 of the NSW Sentencing Procedure Act provides:
(1) The penalty to be imposed for an offence is to be the penalty provided by or under this or any other Act or law.
(2) The penalty to be imposed for a statutory offence for which no penalty is so provided is imprisonment for 5 years.
(3) Part 3 [dealing with sentencing procedures] applies to the imposition of all penalties imposed by a court, whether under this Act or otherwise.
25. It can be seen that the words of that section are similar to those set out in s 9 of the Sentencing Act. "Offence" is similarly not defined in the NSW Act. In Jando, Studdert J stated at [43]:
The word "offence" is a word of broad import and there can be no question but that a contempt is an offence and an offence which is criminal in nature: see Whiley (supra).
(1) This section applies if a court is sentencing an offender convicted of an offence punishable by imprisonment.
(2) The court may, by order, sentence the offender to imprisonment, for all or part of the term of the sentence, if the court is satisfied, having considered possible alternatives, that no other penalty is appropriate.
27. The possible alternative penalties are set out in the Sentencing Act. They relevantly include a fine (s 14) and a Good Behaviour Order, which may be conditional upon the completion of community service (s 13). The Court may also make a reparations order of its own initiative (s 19(3)) if an offender is convicted or found guilty of an offence against a territory law. A territory law is defined in the Legislation Act 2001 (ACT) to include the common law.
28. Such remedies are also available as part of the Court's inherent jurisdiction. In Australian Meat Industry Employees' Union and Others v Mudginberri Station Pty Ltd [1986] HCA 46; 161 CLR 98, Gibbs C.J., Mason, Wilson and Deane JJ had cause to consider the
Federal Court's power to issue a fine in the circumstances before it. Their Honours delivered the majority judgment, stating at 114:
There is much to be said for securing to a superior court a wide range of remedies so that it will be better able to meet the exigencies of particular circumstances.
Contempt of court is a distinctive offence attracting remedies which are sui generis: Morris v. Crown Office (1970) 2 QB 114, at p 129. It is required of the chosen remedy that it be effective, no more but no less. For, if it is not effective, serious and lasting damage to the fabric of the law may result.
30. Kirby P's discussion of the considerations relevant to punishment in Maniam is an apt starting point. His Honour said at 314 (again with the concurrence of Mahoney JA and Hope A-JA):
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.
31. Whiley is to similar effect, with the Court of Appeal further noting in that case (at 320) that because criminal contempt is a common law offence, it has no statutory maximum penalty.
32. In Michalik, Palmer J identified the relevant factors to be considered in determining the appropriate penalty for a contempt of this type:
33. His Honour drew the above considerations together from earlier authorities such as Wood v Staunton (No. 5) (1996) 86 A Crim R 183. Before that, some of the above considerations were also set out in Registrar of the Court of Appeal v Gilby [1991] NSWCA 235. I consider these factors to now be uncontroversial in determining the appropriate sentence for an offence of criminal contempt.
34. As the Sentencing Act applies, I have also had regard to the factors set out in
ss 33, 34 and 35 of that Act, some of which overlap with the considerations set out above.
35. I will proceed by considering, as would be appropriate in relation to sentencing for a criminal offence, the objective seriousness of the contempt followed by the subjective circumstances of the contemnor.
36. The objective seriousness must be assessed by reference both to the nature of the conduct engaged in as well as the consequences of that conduct for the administration of justice.
37. The conduct itself involved a clear and obvious breach of an undertaking to the Court. The undertaking, which was given in substitution for the freezing order that had been made earlier, was fundamental to the proceedings insofar as it sought to prevent the dissipation of the first defendant's assets pending determination of the matter.
38. The first defendant's attitude to the order of the Court was at best casual and at worst contumacious. However, I am unable to make any conclusive finding in that regard due to the lack of evidence as to the first defendant's explanation.
39. There are a number of other matters relevant to the state of mind of the first defendant as contemnor and the consequences of the contempt for the administration of justice. These matters are significant and may reduce the objective seriousness of the contempt.
40. First, I cannot be satisfied beyond reasonable doubt that the breach of the order of the Court was done so as to shield the assets of the first defendant from any judgment. Rather, it appears that the motivation to sell the property was to raise funds sufficient to pay her lawyers to conduct the proceedings on her behalf. That is consistent with what happened subsequently. When the breach of the undertaking was disclosed, the undertaking was given by her solicitors not to pay the proceeds of sale out of their trust account. Shortage of funds may have been what led the solicitors to cease acting for the first defendant prior to the conclusion of the hearing.
41. Second, if the purpose of the transaction was indeed to raise funds to pay for legal representation then it is likely that, had an application been made to the Court so as to permit the Lawson property to be sold for that purpose, that permission would have been given.
42. Third, the amount paid into the solicitors' trust account and subsequently paid out to the trustee in bankruptcy appears to be a significant part of, if not the whole of, the net proceeds of the sale of the Lawson property. By the first defendant's conduct, the asset was liquidated, but the monies were not dissipated.
43. As a consequence of these matters, the first defendant's conduct falls in the lower range of objective seriousness for a contempt. While the breach was a direct and obvious breach of the undertaking given, it has not been established that it was done in order to frustrate the orders of the Court through a dissipation of assets or otherwise interfere with the administration of justice. Further, it has not in fact had the effect of putting the equity in the Lawson property beyond the reach of the successful plaintiff. That is because the net proceeds were quarantined in the solicitors' trust account until they were paid to the trustee in bankruptcy. Whilst it is not at all clear that there will be any return for the plaintiff from the first defendant's bankruptcy, that will not be the result of the breach of the undertaking, but rather the result of the bankruptcy and the existence of any other liabilities of which proof is accepted by the trustee in bankruptcy.
44. The personal circumstances of the first defendant are outlined in a pre‑sentence report dated 5 August 2019. It addresses many of the considerations listed in s 33 of the Sentencing Act. The first defendant is aged 31 years. She was born in China. She is the elder of two children and had an unremarkable upbringing. She moved to Australia during her late adolescence. Her family remains in China and she described the relationship with her mother father and brother in positive terms. She is married with no children. She has no criminal history. She lives with her husband and has stable private rental accommodation.
45. She completed the equivalent of Year 12 in China. She completed a Bachelor of Accounting at a university in Sydney. She managed the restaurant the subject of the proceedings up until approximately three years ago. Since then she has been casually employed as a waitress working full-time hours.
46. She and her husband each own a share in a company which in turn owns a valuable commercial property in Kingston. The total value of the property was, in early 2018, in excess of $3 million with an outstanding mortgage of somewhat more than $2.2 million. The evidence does not disclose what action the trustee in bankruptcy has taken in relation to her ownership of that share.
47. The first defendant has no drug or alcohol problems. She did not identify any mental or physical health problems to the author of the pre-sentence report. I am aware she suffered from pyelonephritis in November 2018 and was hospitalised for a brief period (as it was partly the reason for the delayed hearing of this Application). There were no health considerations that contributed to the commission of the offence.
48. The first defendant claimed to the author of her pre‑sentence report that she was unaware that selling the property would place in contempt of court. She said that her actions had been financially motivated as a means of securing the required funds to persist with legal action. She did not recognise any wrongdoing.
49. She is assessed as at a low risk of general reoffending.
50. I have accepted the contents of the pre-sentence report. In addition, notwithstanding the lack of appreciation of any wrongdoing, it is relevant to note that the breach of the undertaking was brought to the attention of the court at a very early stage soon after the solicitors involved in proceedings became aware of what had occurred.
51. There has been no expression of genuine contrition, although the first defendant's legal representative pointed to the fact that the conduct was disclosed early and the contempt was admitted. The plaintiff's legal representative emphasised that it was the lawyers for the first defendant who brought the matter to light, not the first defendant herself, and once that occurred, the case for contempt was strong. I agree that although the contempt was admitted, the case was strong. However, I have taken into account that through her lawyers, the first defendant did voluntarily raise and address the breach of the undertaking before the substantive hearing took place and before the motion for contempt was later filed.
52. Not all wilful and deliberate contempts should attract a custodial sentence: Maniam at 313-316. In light of what has been set out above, the objective seriousness of this offence is towards the lower end of the range. The consequences of the contempt did not affect the outcome of the proceedings in which the contempt was committed. Rather, they had the potential to affect the enforceability of the judgment obtained. Ultimately, the consequences of the contempt were immaterial in terms of depriving the plaintiff of the fruits of her judgment, due to the bankruptcy of the first defendant.
53. The contempt was not committed in the context of a proceeding alleging crime.
54. The asserted motive was financial difficulty, although ultimately the contemnor did not receive any gain from her conduct. The contemnor was previously of good character and has no criminal record.
55. There do not appear to be any particular hardship considerations or dependants affected.
56. The harm done or the 'victim' of the conduct is not only the plaintiff for whose benefit the undertaking was given, it is the injury to the administration of justice that is now of primary concern. As stated previously in Dong (No 4), the integrity of the judicial process is at stake.
57. Accordingly, to my mind, the most significant considerations are: the form of punishment required to deter others of like mind from disobeying orders of the Court; and, the form of punishment required to express the Court's denunciation of the contempt.
58. The remaining considerations in s 33 of the Sentencing Act are not relevant here.
59. Having regard to the circumstances outlined above, I am not satisfied that this is a case in which imprisonment is the only appropriate punishment. Notwithstanding the dishonesty that the first defendant exhibited in her dealings with the plaintiff, her personal circumstances are such that the offence does not warrant a custodial sentence.
60. In Maniam, Kirby P, with whom Mahoney JA and Hope A-JA agreed, stated at 319:
The Court has no express power to impose an obligation of community service on the opponent...Although punishment for contempt is criminal in nature, it derives from the inherent power of the Supreme Court. It therefore does not attract the express statutory provisions relating to community service. Nevertheless, it was not contested by either party that the Court might, in effect, impose an obligation of community service...as a condition for suspending the operation of a fine which would otherwise be imposed: cf Adams v Carr (1987) 47 SASR 205 at 211.
61. Similarly here, neither party has contested the imposition of a community service order as an available remedy, either pursuant to its inherent jurisdiction or under the Sentencing Act. In any event, either through statute or through the Court's inherent jurisdiction, the Court has available to it at least the same suite of remedies available under the Sentencing Act and these remedies are adequate to deal with the present case.
62. The present bankruptcy of the first defendant suggests that the imposition of a fine would be an ineffective remedy. Whether the debts that were said to trigger the bankruptcy were genuine (it was suggested some of the debts were family loans, although there was insufficient evidence to enable the Court to properly assess that contention) is a matter for the trustee in bankruptcy.
63. A reparations order in the sum of the judgment would also be inappropriate because, as I have stated above, it was not the contempt that caused the plaintiff's loss of the ability to recover monies from the first defendant. The direct and proximate cause of the loss of recourse to funds held by the first defendant's former solicitors was the entry into bankruptcy by the first defendant.
64. Rather, the matter should be dealt with by the first defendant entering into a Good Behaviour Order for a period of two years, a condition of which is that she perform 125 hours of community service. That significant time commitment to the community reflects the Court's intention that the punishment act as a genuine deterrent to all those who choose to ignore court orders or undertakings. It serves to mark the Court's denunciation of the contempt. Under sub-s 91(2)(a) of the Sentencing Act, the Court must allow a minimum period of 12 months in which to complete such service. I will allow 18 months to accommodate the potential vicissitudes of life during that period.
65. Further, under r 2507 of the Rules, the cost of a proceeding for punishment for contempt are in the court's discretion, whether a specific punishment is imposed or not. In my view, it is appropriate that the first defendant pay the plaintiff's costs. Although the first defendant may appear to presently lack any capacity to pay the costs, I note that such a liability postdates the bankruptcy of the first defendant and hence the bankrupt first defendant may be pursued for that amount in the future: see s 82 of the Bankruptcy Act 1966 (Cth); Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52. It would not be just for the plaintiff to be deprived of an order for costs simply because of the present impecuniosity of the first defendant.
66. I also consider it appropriate to make the costs order in a fixed sum under
sub-r 1720(3)(c) of the Rules to avoid the necessity that the plaintiff expend further sums in quantifying those costs. I will allow the parties the opportunity to put before the Court evidence and/or submissions directed to that question.
67. Accordingly, the orders of the Court are as follows:
(1) The first defendant is convicted of the offence of contempt.
(2) The first defendant is to enter into an undertaking to comply with her good behaviour obligations under the Crimes (Sentence Administration Act) 2005 (ACT) for a period of 18 months from 19 November 2019 until
18 May 2021, which, in addition to the core conditions, includes the following condition:
(a) That she perform 125 hours of community service within 18 months from 19 November 2019.
(3) The first defendant is to pay the plaintiff's costs of the Application in Proceeding dated 9 April 2018, with such costs to be fixed.
(4) The plaintiff is to file and serve any evidence and/or submissions solely directed to the quantum of costs on or before 3 December 2019.
(5) The first defendant is to file and serve any reply evidence and/or submissions on or before 10 December 2019.
(6) Unless either party seeks otherwise, the fixing of the quantum of costs payable will then proceed on the papers.
I certify that the preceding sixty-seven [67] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam.
Dong
Song
(1993) 31 NSWLR 314
(1992) 26 NSWLR 309
(1987) 8 NSWLR 732
(1982) 31 SASR 166
(1987) 47 SASR 205