Gao v Zhu [2001] VSC 500

5. These proceedings have a long history. The plaintiff issued his writ on 10 August 1999, and this is one of a series of proceedings brought in the County Court and the Family Court. The plaintiff's statement of claim was written without legal advice and in its latest manifestation, dated 9 July 2001, the plaintiff seeks damages for unconscionable dealing, fraud, deception, and breach of constructive trust. The proceedings arise out of a failed relationship where the defendant was sponsored to come to Australia by the plaintiff for the purpose of commencing a relationship. The plaintiff claims that in the expectation of such a relationship he provided property and cash to the defendant, but was deceived by her into believing that he was the father of her child and that she was genuinely interested in a relationship with him.

8. On 23 May 2001 the plaintiff had judgement in default of an appearance entered in his favour by Master Evans, who assessed damages at $163,000 together with interest of $35,681.37 and continuing.

11. By summons dated 10 August 2001 the defendant has applied to have the judgment set aside pursuant to Rule 21.07.

14. By summons dated 19 July 2001 the plaintiff applied to the Court for an order restraining the defendant from disposing of any assets, in particular a property at 853 Springvale Road, Mulgrave. On Thursday 19 July 2001 Gillard J sitting in the Practice Court made an order ex parte restraining the defendant until Tuesday 24 July from disposing of any assets, and adjourned the summons to that date. That summons was served on the defendant by it being left at her place of work. On Wednesday 25 July the matter came on before Gillard J and the defendant was represented by counsel. Gillard J gave leave to the defendant to file an appearance out of time but extended the injunction, restraining the defendant from disposing of any assets until 14 August 2001, but ordered that the sale of the property at 853 Springvale Road Mulgrave might proceed provided that the defendant's net proceeds of sale be paid into court. On 5 September 2001 $85,974.47 was paid into court following such sale.

17. The plaintiff sought leave to appeal from the decision of Gillard J at the Court of Appeal but that application was refused

20. On 26 July 2001 the plaintiff issued a summons seeking that the defendant be restrained from acting in contempt by disobedience of the order of Gillard J prohibiting disposal of her assets, and by further summons dated 30 July 2001 the plaintiff sought an order that the defendant be held to have been in contempt of court by virtue of having disobeyed the order of Gillard J made on 19 July. The plaintiff asserted that the defendant had transferred ownership of her Mazda 323 vehicle QRT641 to her "boyfriend" on 23 July 2001, thereby breaching the order. On 1 August 2001 Gillard J adjourned those summonses for hearing and they are now before me, together with the defendant's summons seeking to set aside the judgement in default.

23. A multitude of affidavits have been filed by the plaintiff and a lesser number by the defendant. Conduct of these applications has been exceedingly difficult given that neither party is now legally represented and that the plaintiff's English is extremely difficult to understand. Notwithstanding my suggestion that he needed an interpreter he insisted that he was able to cope, and said he preferred to continue without one. Both parties say that they cannot afford the cost of transcript and I have no transcript of these proceedings.

26. I deal first with the contempt summons. The plaintiff said that he served a copy of the restraining order of 19 July by leaving it with the defendant's place of work on 20 July 2001. In an affidavit and in sworn oral evidence before me the defendant claimed that although on 20 July 2001 she collected a sealed envelope which she knew had been served by the plaintiff and which she later learned contained a copy of the order of Gillard J, she did not open the envelope that day but instead delivered it to her solicitor, whom she had engaged earlier that day. She said that her solicitor required that she pay $5000 in advance for costs and in order to obtain such funds she sold her car to a workmate, whom she already owed $10,000. She claimed that the transfer of ownership of the car took place at 9am on Monday 23 July, and that it was not until 4.30pm that day that her solicitor explained to her the effect of the order of Gillard J.

29. In her oral evidence she said that she had received a letter from the Sheriff on 19 July advising that her assets were to be seized in execution of judgement, and that she had sought legal advice in response to that threat to her assets. She also admitted that she had telephoned the plaintiff at 5.30 am on Friday 20 July. She denied his affidavit evidence that he had expressly told her during that conversation that he had obtained an order the previous day restraining disposal of her assets. She admitted that she also rang the plaintiff on Saturday 21 July and once again denied that the restraining order had been mentioned. In assessing the defendant's credibility as to this question I have regard also to an affidavit filed by her solicitor and to the outline of argument filed by her counsel when they acted for her, briefly, in defence of the contempt summons.

32. I am satisfied beyond reasonable doubt that the defendant disposed of her car well knowing that she had been prohibited by order of Gillard J from dealing with such an assert in that way. I am quite satisfied that in so acting the defendant was in contempt of the court.

35. I turn to the defendant's summons seeking to set aside the judgement in default. The plaintiff has sworn many affidavits as to the merit of his claim and the lack of merit of the defence advanced by the defendant. I tried without success to explain to the plaintiff that it is not my task on such an application to determine where the truth lies between competing contentions made on affidavit. In order to set aside such a judgment the defendant must establish that she has a prima facie or arguable defence; she does not have to satisfy me that her defence is bound to succeed: See Williams Supreme Court Practice par 21.07.20 and the cases therein cited. It is not permissible for me to attempt to resolve disputed questions of fact: see Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34.

38. The defendant asserts in her affidavit that her failure to file an appearance was caused by the fact that the plaintiff expressly advised her that he was abandoning the Supreme Court proceedings, which she said was consistent with the fact that he abandoned all other proceedings which he had brought against her in other courts. The plaintiff denies having made any such statement to the defendant. As to the merits of the plaintiff's case, and the strength of her defence to his claim case the defendant claimed that the funds which she received from the defendant were in part freely give as gifts at a time when they were in a relationship, and in part were given to her for the purpose of hiding assets from his wife in China who he believed was divorcing him and in endeavouring to obtain child support was anxious to locate his assets. One other explanation for the payment of funds to her was, she said, that the plaintiff was seeking to hide assets from the taxation authorities.

41. The defendant claimed that the plaintiff gave her $140,000 to take to China to place in her name for these purposes, but that he later requested her to return $70,000 to him, which she did, and the other $70,000 was obtained by him, she said, when he travelled to China and got the funds, in cash, from her father. The plaintiff contends that these allegations are all lies and that he has not returned to China since leaving that country. The Plaintiff asserts that he provided the funds to be invested in property in China in joint names but later discovered that it had all been invested in the sole name of the defendant who had later transferred the funds to Australia and purchased property in her sole name.

44. In September 1996 the plaintiff purchased property at 6/68 Raleigh St Thornbury for $83,728, in joint names and in June 1997 transferred it to the plaintiff's sole name. The defendant claims that that was done in order to hide assets. The plaintiff claims that it was done because he believed, from what the defendant told him, that he was the father of the defendant's child, which later proved not to be the case. The plaintiff claims that there was a written agreement between the parties that the property could not be sold without his consent. The plaintiff claims that the defendant later conspired with others to sell the property for a false low price. The defendant said in her evidence that it was when the relationship broke up that she sold that property and gained $69,000 thereby. She did not seem to dispute that she had no obvious claim to those funds.

47. The plaintiff deposes that the defendant purchased a property at 168 Harnsworth Street Mulgrave on 16 July 2001, advancing $45,000 of her own funds and borrowing $178,000 from the Commonwealth Bank. The defendant admits owning that property but says she no longer lives there, and is not paying her mortgage instalments. The plaintiff contends that the defendant has assets including that property and a late model vehicle which have been purchased from misappropriation of his funds.

50. It is unnecessary to set out the plaintiff's contentions in more detail. Fundamentally the affidavits of the plaintiff assert that defendant is lying in her accounts concerning the funds of the plaintiff and that she is likely to dispose of assets in defiance of the court order of Gillard J.

53. There are many reasons why one might be suspicious of the accounts advanced by the defendant, but her version of events, if true, would give her a defence to most if not all of the claims made by the plaintiff. As I have said, however, on such an application it is not my task to assess where the truth lies but to consider whether the defendant has an arguable case.

56. In my view, this is a case where the defendant should be permitted to have the judgement set aside and to defend the action, but only upon terms. I propose that the judgement will be set aside upon payment into court by the defendant of a further sum of $35,000. Those funds may come from the sale of the property at 168 Hansworth Street, Mulgrave, being more particularly described in Certificate of Title Volume 8938 Folio 042. In order to facilitate that sale, if that is to be the source of the funds I propose to vary the order of Gillard J to permit such a sale provided that the sum of $35,000 from the net proceeds is paid into court. The defendant is not living in that property and she accepted that it could be sold if I imposed a condition on the setting aside of the judgment which necessitated such sale. The plaintiff has no solicitor but I reject his contention that the court should oversee the sale of the property. If the property is to be sold then it is for him to take such steps with the mortgagee of the property to ensure that the mortgagee is aware of the orders of the court. I will however direct that a copy of my order be served on Commonwealth Bank of Australia, 385 Bourke Street, Melbourne.

59. The plaintiff already has the advantage of a substantial sum being paid into court from which he might satisfy any judgement and he has an order freezing disposal of assets. The terms of the order which I make mean that if the property is sold and funds of $35,000 are paid into court either in that way or from other sources then the plaintiff will have funds in court well in excess of $100,000 from which to satisfy any judgement, a position much more favourable than would be the situation of most plaintiffs conducting litigation in the court.

62. I will order that the defendant file a defence within 28 days of payment into court of the sum of $35,000. I will order that the defendant serve on the plaintiff a copy of a signed contract of sale for the sale of the property at 168 Hansworth Street Mulgrave within 3 days of such contract being signed. I will grant the plaintiff liberty to apply to the court for further orders if at the expiration of 42 days from the date of my order the defendant has failed to pay the sum of $35,000 into court or else has failed to serve on the plaintiff a signed contract of sale for the sale of the property at 168 Hansworth Street Mulgrave.

65. As to the contempt of court, the plaintiff seeks an order that he be paid money, in the order of $30,000 to $35,000, representing what he claims is the lost value of the vehicle which would have been an asset available to him in satisfaction of judgment. I do not propose to make such an order.

68. The contempt here was quite blatant, but was falsely denied by the defendant. By Rule 75.11(4) I have power to make an order for punishment on terms, including a suspension of punishment. The court also has wide inherent power in dealing with contempt: see Harris v Harris [2001] EWCA Civ 714; (2001) 3 WLR 765. I propose to make the following order. The defendant will be convicted of contempt of court, and fined $2000, but I wholly suspend payment of that fine upon the defendant, within 14 days, paying into court the sum of $2000.

(A) WITH RESPECT TO PLAINTIFF'S SUMMONSES DATED 26 JULY AND 30 JULY 2001 I ORDER: 1. That upon finding the defendant Yu Jing Zhu guilty of contempt of court she be convicted and fined $2000. I further order that upon payment into court of the sum of $2000 within 7 days of the date of this order the punishment of the defendant by payment of the fine be permanently suspended. 2. I order that there be no order as to costs of these applications. (B) WITH RESPECT TO THE DEFENDANT'S SUMMONS DATED 10 AUGUST 2001 I ORDER: 1. That the orders of the Honourable Justice Gillard dated 25 July 2001, as varied by order of His Honour on 1 August 2001 and as varied by order of the Honourable Mr Justice Beach dated 14 August 2001, save as to any order as to costs, or as otherwise are not inconsistent herewith, are varied and replaced by these orders. 2. That upon payment into court of the sum of $35,000 the judgment entered in default of appearance against the defendant on 23 May 2001 be set aside. 3. That until the hearing of this action or further order of the Court the defendant is restrained from transferring, dealing, charging or disposing of any of her assets, save that, in the event that payment into court of the sum of $35,000 has not been effected, settlement of the property at 168 Hansworth Street, Mulgrave, being the land more particularly described in Certificate of Title Volume 8938 Folio 042, can be completed, on condition that the sum of $35,000 from the net proceeds of sale shall be paid into court pending further order. 4. Notwithstanding Paragraph 3 of this order, the defendant is at liberty to spend up to $500.00 per week for her living expenses and up to $3000.00 per week for her legal expenses. 5. That a copy of this order shall be served by the plaintiff on Commonwealth Bank of Australia 385 Collins Street Melbourne within 7 days of the date of this order. 6. That the plaintiff and the defendant shall be permitted to inspect and make copies of documents produced to the Prothonotary by the National Bank of Australia, the Commonwealth Bank of Australia, the Hong Kong Bank (HSBC Bank Australia Limited), and the Bank of Melbourne pursuant to subpoenas filed in this action, and inspection of such other documents produced under subpoena as may be ordered by a Judge or Master of the Court. 7. That the defendant shall serve on the plaintiff a copy of each and every signed contract of sale for the sale of the property referred to in paragraph 3 herein, within 3 days of the signing of each such contract. 8. That if within 42 days of the date of this order the defendant has not paid into court the sum of $35,000 and also, in that event, has not served on the plaintiff a signed contact of sale for the property referred to in paragraph 3 herein the plaintiff shall have liberty to apply to the court to vary the terms of these orders. 9. That the defendant shall file and serve a defence to the plaintiff's statement of claim within 28 days of payment into court of the sum of $35,000, and thereafter may take such steps to defend the plaintiff's claim as are in accordance with the Rules. 10. The costs of this application are reserved.

75. I will note in the remarks column of the order that a copy of my reasons for decision are to be placed on the court file.