//
[2018] VSC 22
General information, not legal advice.
Supreme Court of Victoria
2018-02-13
ZAMMIT J
Original judgment source is linked above.
CONTEMPT OF COURT - Breaches of freezing order - Breaches wilful - Whether court should convict - Appropriate penalty - Supreme Court of Victoria (General Civil Procedure) Rules 2005, r 75.11.
2 Of the 38 charges pressed by the plaintiffs, 22 were primary charges, with a further 16 charges being pleaded in the alternative. In light of my findings regarding the primary charges, each of the alternative charges fell away.
3 The contempt arose as the result of the defendant repeatedly breaching a freezing order ('the order') made by Macaulay J on 18 September 2013 and varied by Cavanough J on 27 September 2013.
(a) calculate the amounts dissipated by the defendant's breaches of the freezing order; and
(b) make submissions as to:
(i) the quantum of the breach;
(ii) whether the breaches were technical, wilful or 'contumacious';
(iii) what penalty, if any, should be imposed; and
(iv) whether there is any reason why the Court should not exercise the contempt jurisdiction.
5 It is well established that this Court has a discretion not to convict and punish a defendant notwithstanding a prima facie finding of contempt.[3]
6 It bears repeating what the Court of Appeal said in CFMEU v Grocon Constructors (Victoria) Pty Ltd.[4] The Court (Ashley, Redlich and Weinberg JJA) made the following general observations:
If contempt proceedings are brought in respect of breach of a court order, their object is most often to coerce the recalcitrant party into compliance, and not to punish the party for that breach. Notwithstanding the fact that such conduct is usually described as 'civil contempt', the offending party may be imprisoned or fined as an incentive to comply with court orders.
...
It is not in doubt that, in relation to breach of a court order, a finding of contempt can be made whether the breach was technical, wilful or contumacious. It is sufficient to establish that the acts of an alleged contemnor were intentional and were calculated (in the sense of 'likely') to interfere with the course of justice. It is unnecessary to establish a specific intention to breach the order of the court or to interfere with the proper administration of justice.
...
The public interest requires that any disobedience more than casual, accidental or unintentional must at least be regarded as wilful. Thus, a deliberate act or omission which is in breach of an injunctive order or an undertaking, will ordinarily constitute wilful disobedience unless the alleged contemnor is able to show, by way of exculpation, that the default was casual, accidental or unintentional.
The intention with which the act was done will, of course, be highly relevant in determining what penalty (if any) is to be imposed by the court. However, liability for contempt is 'strict' in the sense that all that needs to be proved is knowledge of the order, and the subsequent conduct of the party bound by that order which is prohibited.
There is a discretionary character to the jurisdiction which enables a court to decline to exercise the contempt jurisdiction at all even though the court may be satisfied that the contempt has been established. Such a discretionary outcome is more likely where the court concludes the contempt to be of a technical nature, as for example where the act or omission may be described as casual, accidental or unintentional. The authorities have rarely regarded such contempts as deserving of punishment by fine or committal.[5]
7 The defendant's breaches of the order arose by reason of his:
(a) failing to give the plaintiffs notice of the prior existing obligations, for example in connection with periodic mortgage payments, interest and bank fee payments direct debited from his bank account; and
(b) causing the limit imposed by the order to be exceeded by expenditure on items including, dining, entertainment, luxury items and overseas travel costs.
8 Annexed to the plaintiffs' written submission dated 18 September 2017 is a schedule which sets out the charges against the defendant, my findings with respect to each charge, and the quantum (individually and cumulatively) that the plaintiffs say was dissipated by the defendant in breach of the order. I annex a copy of the plaintiffs' schedule (see Annexure A) and adopt the contents of it.
9 I have reviewed the breakdown of the plaintiffs' calculations and consider them to be accurate. The calculations indicate that the breaches occurred in the period between 26 September 2013 and 4 June 2014. In this period the defendant dissipated $33,051.73 from his several bank accounts.[6] Of that sum $24,857.34 related to transactions undertaken in breach of the order.
10 The plaintiffs submit that, save for charge 5, the breaches are far from trivial, inadvertent or unintentional and, accordingly, a conviction should be entered in respect of each. Counsel for the plaintiffs conceded, in the course of oral argument, that the breaches relating to the defendant's prior existing obligations are of a lesser order in terms of culpability.[7] However, she submitted that even these breaches were wilful in circumstances where the defendant was aware of the requirement to give notice, but did not comply with it. Counsel submitted that such breaches might attract lighter sanctions.[8]
11 Counsel for the plaintiffs submitted that the remaining breaches were serious and deliberate. The defendant was aware of and understood the terms of the order and 'repeatedly and willingly ignored it, spending several hundred and, on occasion, thousands of dollars on items such as Ugg boots, duty free purchases, extravagant dinners and overseas trips and at karaoke bars and "massage parlours".'[9]
12 The defendant maintained in evidence and in his oral submissions that the breaches were unintentional. He sought to rely on evidence presented in Zhang (No 2) that he was aware of the freezing order but never received any advice from his legal representative at the time as to the contents of the order.[10] The defendant maintained that during the relevant period (20 September 2013 to 31 October 2013)[11] his legal representative did not give him any advice about the requirement to give notice to the plaintiffs of any prior obligations.[12]
13 I traversed these issues in Zhang No (2). I found that the defendant understood the contents of the order and his obligations pursuant to it. I stated that:
There were some aspects of the defendant's evidence that gave me concern as to his credit. For example, his evidence in relation to his understanding and knowledge of the content of the order. The defendant maintained that he was never given any legal advice about the order and that he never appraised himself of its contents. This evidence does not sit comfortably with the fact that:
(a) he had legal representation at the time of the first return date and until 31 October 2013;
(b) upon service he immediately retained a lawyer to act for him and provided them with the order and other relevant documents;
(c) he is fluent in English and attended secondary school and university in Australia;
(d) the email correspondence from his lawyers dated 20 September 2013 is consistent with him knowing the terms of the order; and
(e) the concession that he made in cross-examination that he understood his obligations under the terms of the order.[13]
14 Rule 75.11(1) of the Supreme Court (General Civil Procedure) Rules 2015 provides that where the Court finds a person guilty of contempt it may punish the contemnor by imposing a term of imprisonment, a fine, or both. It may do so on terms.[14]
15 I am satisfied that a conviction is warranted. The question is what penalty is appropriate in the circumstances?
16 In Deputy Commissioner of Taxation v Gashi (No 3)[15] Dixon J summarised the relevant considerations in determining an appropriate penalty. His Honour considered the following matters in assessing whether to proceed to conviction, and what sanction to impose:
(a) the contemnor's personal circumstances;
(b) the nature and circumstances of the contempt;
(c) the actual consequences of the contempt;
(d) the effect of the contempt on the administration of justice;
(e) the contemnor's culpability;
(f) the need to deter the contemnor and others from repeating the contempt;
(g) the contemnor's reasons for his or her conduct;
(h) the absence or presence of a prior conviction for contempt;
(i) the contemnor's financial means; and
(j) whether the contemnor has exhibited general contrition and made a full and ample apology.[16]
17 It is important to record that at all material times the defendant was self-represented throughout this proceeding. He was so when I found him prima facie in contempt on 11 December 2017 and again at the conviction and penalty hearing on 31 January 2018.
18 The defendant's evidence was that he was unable to afford legal representation and had been deemed ineligible by Victorian Legal Aid. Having said that, the defendant then said he did have legal representation, namely from an individual called 'Calvin' who helped prepare his affidavit material.[17]
19 The defendant has been on notice since the issuing of the summons - and was again informed during the course of this hearing - that a finding of contempt can result in a term of imprisonment.
20 The defendant also understood the necessity of putting cogent evidence before the Court in support of his defence. He was informed by the Court and given repeated adjournments to enable him to organise his evidence by way of affidavit and the calling of witnesses.
21 At the hearing on 31 January 2018 the defendant did not rely on any affidavit material and did not call any witnesses. He gave viva voce evidence which on the whole I consider to be unreliable.
22 The plaintiffs relied on an affidavit of Benjamin Weintraub affirmed 30 January 2018 and written submissions dated 18 December 2017.
23 The defendant's evidence was that, since ceasing his employment with the first plaintiff some five years ago, he has been involved in three civil proceedings. He was the sole defendant in the first proceeding and the fifth defendant in the second. The third is this proceeding for contempt of court.
24 In the first proceeding, Fortune Holding Group Pty Ltd v Zhang,[18] Riordan J delivered judgment in favour of the plaintiffs. His Honour found the plaintiffs had proved their claims in the sum of $792,370.07 and ordered the defendant to pay that sum (together with interest of $218,309.37) as well as the plaintiffs' costs to be taxed.[19] The plaintiffs issued a letter of demand dated 23 January 2018 seeking payment of the judgment debt along with interest.[20] There has been no response from the defendant. Nor has any payment been made in relation to the judgment debt.
25 The defendant gave evidence that, in 2017, the second proceeding was discontinued by the plaintiffs with no order as to costs. The original summons in this proceeding was issued on 16 October 2014.
26 The defendant is 35 years old. He has two children, the eldest 5 years of age, the youngest 2 years of age. He is married and his wife does not work. He lives in Sydney and shares his residence with his wife, children and parents.
27 The defendant deposed that the first plaintiff did not pay him for the last 6 months of his employment. He went to China in May 2013 so his wife's family could assist with their first child who was born premature. On his return to Australia, in September 2013, he set about trying to establish a business. He has been trying to do so ever since and has 'spent a lot of funds' in the process.[21] The defendant stated that, despite his best efforts, he has been unable to secure or develop any business opportunities in the last five years. In March 2014, he moved to Sydney in the hope of being able to develop a business there, acknowledging that his difficulties with the plaintiffs had damaged his reputation in Melbourne.
28 In cross-examination it was revealed that the defendant has incorporated a company and is selling milk products through an internet platform to the Chinese market. He also stated that the company was making a profit in the order of $2,000 or $3,000.[22]
29 In evidence in chief the defendant said that due to his financial situation he had been unable to meet his mortgage repayments and the bank had foreclosed on his South Melbourne apartment. He said that the property was sold at a price less than its original purchase price.
30 The defendant deposed that his three civil proceedings have placed major demands on him in terms of time and travel from Sydney to Melbourne and made it difficult for him to work. His proposed LED lighting business never eventuated due to a drop off in demand in the Australian market. He said that the moneys he withdrew from his bank accounts in breach of the order were mostly used to develop client relationships in the hope that he would later turn a profit.
31 The defendant has been unable to secure any permanent paid employment. He deposed that he has used his privately owned vehicle to pick up passengers from the Sydney airport and has worked as an Uber taxi driver. He did not produce any evidence as to his casual work nor as to the efforts he has made to obtain permanent employment.
32 The defendant gave evidence that he was about to secure employment with a 'new investment bank' in Melbourne. When pressed in cross-examination as to what this employment opportunity was, the defendant said he had a meeting that evening (and again the next morning) with the director of the company, a person called 'Wayne'. The meeting would take place at the Crown casino waiting room and was for the purposes of setting up a branch in Sydney. The defendant indicated that at the meeting he would discuss what sort of arrangements would be in place and his job requirements.
33 I note for completeness that the defendant has, after the hearing date of 31 January 2018, sent emails to the Court and the plaintiffs providing further information about the prospective job offer. No application was made to put further evidence before the Court. The defendant was given ample opportunity to produce evidence at the 31 January 2018 hearing. The emails are no more than unsubstantiated assertions by the defendant and do not take the evidentiary matters any further.
34 The defendant stated that, if this Court was to impose a fine on him, his parents would be willing to pay it. He said his parents are 60 years of age. His father works as a taxi driver and his mother works in a document or data collection company. However, he did not produce sworn affidavits or call his parents to give evidence, since he did not think it necessary. He conceded in cross-examination that he had not discussed any specific amount of money with his parents.[23]
35 The defendant revealed in cross-examination that he has an 'verbal job offer' from a person called 'Wayne' and expects to start working for him in one or two weeks' time.[24] This did not sit comfortably with his evidence in chief. Further, he stated he had been assisting 'Wayne' with his business from late 2017, but was yet to be paid for it. He explained that he wanted to show he was 'genuine', 'helpful', 'reliable' and keen to be involved.[25] The defendant said he did not call 'Wayne' or anyone from the latter's business because he did not want them to know about his difficulties with the plaintiffs.[26] The defendant indicated that he expected to receive a salary and a commission in his new role but was unable to be more specific as the details had not yet been discussed.
(a) the breaches were unintentional and that he did not receive legal advice on the extent or nature of the freezing order;
(c) he will be commencing new employment and incarceration 'would destroy my life completely';[27]
(d) this is the first time he has been held in contempt;
(f) he is sorry for the breaches of the freezing order and will never allow himself to get into such a situation again and apologises to the court.
37 The defendant's evidence on the whole was unsatisfactory and unreliable. He did not call a single witness to support his assertions, either his parents in relation to the payment of a fine, or someone who could vouch for his new job prospects. Nor did he produce a single affidavit. This is in circumstances where the defendant, who at one stage ran his own civil trial, is fully aware of the need to put cogent evidence before the Court.
38 The defendant's evidence about his new job opportunity with 'Wayne' appears at best speculative. There were no particulars as to his potential earnings, salary or commission. The business was loosely described as providing mortgages out of a $300 million capital pool to Chinese borrowers. He described his prospective role as essentially that of a 'broker'.
39 On the one hand, the defendant conveyed his failed business ventures over the last five years, which have left him with no financial means (and so have prevented him from repaying the judgment debt). On the other hand, in cross-examination, it was revealed that he has a company, selling milk products to China, which is making a profit. There was no documentary evidence to support the defendant's bald assertions in relation to any of the substantive matters he deposed to.
40 It is not clear how long the defendant worked as a private driver or Uber taxi driver, why he stopped or how much money he earned.
41 The defendant wanted the Court to accept that he has been consumed with his several legal proceedings and so has been prevented from working. Despite this, he was prepared to engage in business development projects, including setting up a new company and developing contacts through dinners, meetings and karaoke. None of this, on his evidence, has generated any real income for him to discharge his judgment debt to the plaintiffs.
42 The defendant's personal circumstances include his wife and two young children. It is not clear who is responsible for his accommodation costs. He says he parents live with him.
43 The defendant's breaches, save for that detailed in charge 5, do not involve large sums of money. However, they are not trivial, flowing from the defendant's defiance of the order. The total quantum of the breaches is approximately $25,000. I have found that the defendant was aware of and understood the terms of the order and repeatedly breached it over a 36 week period (the breaches occurring in 18 of the 36 weeks). Of the 21 breaches, I note that a number consist of a failure to give notice to the plaintiffs of any payment relating to a prior obligation, which are of a less serious nature. Nevertheless, a majority of the breaches were caused by expenditures like extravagant dinners, attendance at karaoke bars, overseas trips, luxury items and gifts, which took the defendant over his weekly allowance of $1000 for ordinary living expenses.
44 The defendant has not made any attempt to pay the judgment debt against him. Having said that, the order makes such payment difficult, and the plaintiffs have only recently made a demand for payment.
45 To breach a court order is a serious matter. The breaches commenced just one week after the order was made and continued over the following 36 weeks. The breaches were wilful and therefore interfered with the administration of justice.
46 The defendant's conduct has had the effect of removing approximately $25,000 from his bank accounts that might otherwise have been used to pay part of the judgment owed to the plaintiffs. I have already found that the defendant was aware and understand the terms of the order. The defendant has throughout this proceeding placed the blame and responsibility for his actions on everyone but himself.
47 The defendant says he is sorry for what he has done and that it will not happen again. I consider this apology disingenuous. He maintained that he had committed no contempt until I found otherwise. I do not consider that such an apology shows any genuine remorse that can be taken into account.[28] As I have said, the defendant has tried to pass the blame for his breaches to advisors, who he complains did not give him proper advice. This does not show mitigatory contrition.
48 The defendant did not put any character evidence before the Court.
49 The defendant has had every opportunity to provide evidence about his current financial circumstances. There is no evidence that he has the capacity to pay a fine. In such circumstances, the imposition of a fine is not likely to have a significant effect upon the defendant, making it an insufficient vehicle for vindicating the authority of the Court.
50 The penalty imposed in this proceeding is for the breaches of the order and not for his conduct with which Justice Riordan's judgment dealt.
51 The plaintiffs submitted that an appropriate penalty would be a term of imprisonment for each breach of the order. The total term of imprisonment should be around four to six weeks. Further, and consistent with the usual approach in contempt proceedings, the plaintiffs' costs should be paid on an indemnity basis.
52 It is appropriate to take into account specific and general deterrence.[29] The defendant and any others who may contemplate disobedience of a court order should realise that this will not be tolerated. As I have said, on the evidence before the Court, it is clear that the defendant's contempts were serious. They were precisely the kind of mischief to which the order was directed.
53 I am satisfied that the defendant was wilfully disobedient in disregarding the order. I take into account the defendant's personal circumstances and the nature and circumstances of the contempt. As I have said, the effect of the contempt was significant, eroding confidence in the administration of justice. I consider the defendant culpable. There is a need to deter him and others like him from such conduct.
54 Even though the quantum of the breaches is less than that found in other comparative cases, quantum by itself does not determine the type of penalty to be imposed (nor the severity of that type).[30] Indeed, while the quantum was small, the defendant's conduct was highly disturbing. He adopted a somewhat reckless and cavalier approach to the order and decided to breach it so as to engage in what can only be described as speculative business opportunities. He clearly wished to make a great deal of money quickly rather than obtain ordinary employment. On his evidence, the LED lighting company never made a profit, yet he continued to engage in speculative business opportunities. His evidence in relation to his recent job prospect with 'Wayne' smacks of a high-risk low-return employment opportunity. In addition, the defendant attempted to maintain what appears to be a lifestyle beyond his means, including repeated trips to China, dinners and luxury purchases (i.e. $350 Ugg boots for an eight month old child).
55 Consonant with the principle of parsimony, I have considered all possible available penalties, including suspended sentences and fines.[31] It is essential that persons subject to court orders be aware that they may face grave consequences if they breach them. In my opinion, this is a case in which it is appropriate to impose a term of imprisonment, and nor do I consider that any other penalty would adequately reflect the objective gravity of the contempt.
56 Having regard to the above factors, and the submissions of the parties, I convict and sentence the defendant to a term of four weeks' imprisonment.
57 I have carefully considered each of the following:
(i) the defendant is a family man with no prior convictions for contempt;
(ii) his financial circumstances are such that, in an indirect sense, his family will have to bear the burden of his behaviour; and
(iii) he will be required to pay the plaintiffs' costs on an indemnity basis (as discussed below).
58 The Court may order costs against a contemnor on an indemnity basis.
60 I was informed that the costs to the conclusion of this proceeding were approximately $55,000.
Having regard to the introduction of r 63.30.1 of the Rules, a matter not specifically adverted to in the authorities that I have referred to, I consider taxation of costs on an indemnity basis is proper in the circumstances of contempt proceedings. I would not expect that there would be any, or any significant, difference between taxation on a solicitor-client basis or on an indemnity basis with a responsible litigant such as this plaintiff. I will order that the defendants pay the plaintiff's costs of the contempt proceeding, including any reserved costs, on an indemnity basis.[34]
62 It is appropriate that the defendant pay the plaintiffs' costs of the proceeding, including any reserved costs, on an indemnity basis.
(1) The defendant, Ian Yan Zhang, is adjudged guilty of contempt of court in that, in breach of the order of Macaulay J on 18 September 2013 (as varied), he withdrew $24,857.34 in 18 separate withdrawals, made between 26 September 2013 and 4 June 2014, from eight bank accounts; and Ian Yan Zhang is convicted and sentenced to 4 weeks' imprisonment which expires Tuesday 13 March 2018.
(2) The defendant pay the plaintiffs' costs of and incidentals to the proceeding, including any reserved costs, on an indemnity basis.
[1] Fortune Holding Group Pty Ltd v Zhang (No 2) [2017] VSC 378 ('Zhang (No 2)').
[2] The charges proven were charges 1, 2, 4, 5, 6, 8, 9, 10, 11, 12, 15, 17, 18, 21, 25, 26, 27, 29, 32, 34 and 39.
[3] See generally Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201.
[5] Ibid 563-4, [136], [138], [140]-[142] (citations omitted).
[6] The defendant's bank accounts are listed in Zhang (No 2) [2017] VSC 378 [67].
[7] Transcript of proceedings, Fortune Holding Group Pty Ltd v Zhang (Supreme Court of Victoria, Zammit J, 31 January 2018) 5, LL 5-13 ('T').
[9] Plaintiff's written submissions dated 18 December 2017 at [15].
[11] The evidence in Zhang (No 2) was that the defendant's legal representative ceased acting for him on 31 October 2013.
[13] Zhang (No 2) [2017] VSC 738 [51].
[20] Affidavit of Benjamin Weintraub, exhibit BW-2.
[28] Australian Competition and Consumer Commission v Info 4 PC.com Pty Ltd [2002] FCA 949; (2002) 121 FCR 24, 57-58 [155]; Australian Prudential Regulation Authority v Siminton (No 3) [2006] FCA 397; 2006 230 ALR 528, 531 [14].
[30] See, eg, Deputy Commissioner of Taxation v Gashi (No 3) [2011] VSC 488 ('Gashi (No 3)'); CC Containers Pty Ltd v Lee (No 10) [2015] VSC 757.
[31] Sentencing Act 1991 ss 5(3) and (4). See also Vaysman v Deckers Outdoor Corporation [2011] FCAFC 17.
[33] Gashi (No 3) [2011] VSC 488 [20].
Fortune Holding Group Pty Ltd
Zhang
(2014) 47 VR 527
(2002) 121 FCR 24