George Sassine v Ray & Sons Construction Pty Ltd

Supreme Court of NSW|2012-10-04|Before: Brereton J, Palmer J

Judgment (ex tempore) 1HIS HONOUR: By an amended notice of motion filed on 19 July 2012 the second defendant Charlie Sassine seeks that the plaintiff George Sassine be committed for contempt of court "for failing to comply with an order made by Justice Palmer on 15 October 2010", in accordance with the subscribed statement of charge, which is as follows: 1. The plaintiff was guilty of contempt of court in that in breach of Order 1 of the orders made by the Court on 15 October 2010, he did not, after the making of those orders, take all such steps as were reasonably necessary or desirable to ensure that the funds held by Veritas Legal Pty Ltd be paid forthwith to the first defendant or paid to the first defendant at all. Particulars (a) On or about the 26 November, 2010 the plaintiff knowingly took possession of the Veritas Legal Pty Ltd trust account cheque given to him by his solicitors, HWL Ebsworth in the amount of $258,746.10. (b) Thereafter, in defiance of the Court's order, the plaintiff endorsed the reverse of that cheque to an unknown third party, Habib Boustany who then deposited the funds into his own account. (c) On or about 2 December, 2011 the plaintiff entered into a Deed of Release with Mr Boustany the terms of which included, inter alia, payment of funds to the plaintiff out of the funds deposited into the Boustany account and an amount to be kept by Mr Boustany. (d) After repeated requests by the second defendant as to the whereabouts of the trust fund monies it was ordered on 21 May 2012 that the plaintiff account for the whereabouts of that money by 28 May 2012 verified by affidavit to be filed and served on the second defendant. The plaintiff served an affidavit on the second defendant on 28 May 2012 but did not file that affidavit in the Court registry. The affidavit states the plaintiff took possession of the Veritas Legal trust account cheque for $258,746.10 and diverted the funds away from the intended recipient, the Ray and Sons Construction Pty Limited NAB account by negotiating it to a third party and dispersing the money for various purposes. (e) To date this money has never been deposited into the NAB account of the first defendant in contumelious disregard for the Court's Order. 2For convenience, and without intending any disrespect, I refer to the relevant members of the Sassine family in this judgment by their first names. 3The question presently for determination is whether, the prosecutor's case on the application having been completed, there is a case to answer. That depends on whether, taking the prosecutor's case at its highest, there is evidence that, if accepted, is capable of establishing beyond reasonable doubt that the respondent is guilty of the contempt charged. 4The consent order of 15 October 2010 was in the following terms: 1. Order that any remaining undertakings or orders in relation to the funds (however held) deposited by the second defendant with Veritas Legal Pty Limited ("Veritas") pursuant to Order 1 made on 7 September 2009 be discharged and that the funds held by Veritas be paid forthwith to the first defendant. 2. Order 1 is stayed until the plaintiff executes a Deed of Release providing for the resolution of these proceedings between himself and the second defendant. 5The consent to the order was signed by George Sassine's counsel as "Counsel for plaintiff", and by the (then) third defendant Milaad Sassine's counsel as "Counsel for second defendants" [sic]. Although the orders refer to the funds held by Veritas as being deposited by the second defendant, it appears uncontroversial that it was the third defendant who deposited the funds. The evidence also reveals that at that time a settlement of the proceedings between the plaintiff and the second defendant, not the third defendant, was in contemplation and, indeed, was ultimately consummated by consent orders made between them on 11 May 2011. 6Despite the infelicity of drafting, the orders, properly construed, should be taken to refer to the third defendant, not the second defendant. For the purpose of the final disposition of this application, that will not be conclusive if the plaintiff - the respondent on this application - honestly and reasonably acted on a different interpretation of them, but, for present purposes, and Mr Pesman for the respondent did not seriously otherwise contend, I proceed on the basis of the construction that I think is the correct one.

Contempt by obstructing performance of order 7Mr Pesman submitted that it would not be open to the Court to find the contempt as charged because the order did not bind George, so that he could not contravene it. In this connection, he referred to the well recognised distinction in the law of contempt between a contempt committed by a person who, being bound by an order, disobeys it, and one committed by a person not so bound, who obstructs the performance of an order with knowledge of its terms [CCOM Pty Ltd v Jiejing Pty Ltd [1992] FCA 325; (1992) 36 FCR 524, 530-531; Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530, 571 [121]; Sigalla v TZ Limited [2011] NSWCA 334, [14]]. 8The cases in which that distinction has been drawn are cases in which the alleged contemnor was not a party to the substantive proceedings. In the seminal case of Lord Wellesley v Earl of Mornington (1848) 11 Beav 180, 181; (1848) 50 ER 785, 786, the defendant Earl had been restrained from cutting timber on certain land. His agent and manager Mr Batley, with knowledge of the injunction, though he had not been served with it, cut timber on the land. An initial attempt to commit him for contempt for contravening the injunction failed, because the order was solely against the Earl and did not extend to his servants and agents, but a second application for "being part and privy to and in aiding and abetting the breach of the injunction", succeeded. 9In Seaward v Paterson [1897] 1 Ch 545, an injunction restrained Paterson, his servants and agents, inter alia, from "doing or suffering to be done anything which may interfere with the full and quiet enjoyment of the plaintiff ... of the premises...". In contravention of the injunction, Paterson allowed boxing matches to be held on his adjoining premises, and a motion to commit was brought against not only Paterson but also others, including one Murray, who were alleged to have aided and abetted the breach. In upholding the primary judge's decision to commit Murray, even though he was neither a party to the suit nor named in the injunction, Lindley LJ in the Court of Appeal said (at 554): There is no injunction against him - he is no more bound by the injunction granted against Paterson than any other member of the public. He is bound like other members of the public, not to interfere with, and not to obstruct, the course of justice; and the case, if any, made against him must be this - not that he has technically infringed the injunction, which was not granted against him in any sense of the word, but that he has been aiding and abetting others in setting the Court at defiance, and deliberately treating the order of the Court as unworthy of notice. If he has so conducted himself, it is perfectly idle to say that there is no jurisdiction to [punish] him for contempt as distinguished from the breach of the injunction, which has a technical meaning. 10The distinction has recently been explained by Young JA in Sigalla, as follows: [14] It is trite law that where there is an injunction against X, only X will commit a contempt by disobeying the injunction as opposed to a different contempt for obstructing the process of the court: Wellesley (Lord) v Mornington (Earl) (1848) 11 Beav 180 at 181; 50 ER 785 at 786. The non-party to the original proceedings who knows of the order and assists in the breach of the order and thereby obstructs the process of the court is liable to be punished for that offence against the court, not for a breach of the original order: the Wellesley case at Beav 183; ER 787 and the Newspaper Publishing case at 367. [15] Thus the appellants are right to point out this vital distinction. The question is whether the learned primary judge observed it. [16] It is useful to cite what Drummond J said in CCOM Pty Ltd v Jiejing Pty Ltd (1992) 36 FCR 524 at 530-31: [X] however is not a party to the action and is not bound by the undertaking. Such a person is not subject to the strict liability in contempt which rests upon a person bound by an undertaking that is breached. However a person who is not in terms bound by an undertaking but who knows of it and who then does something which disrupts the situation created by the undertaking may, but not necessarily must, be guilty of contempt of court. Such a person will be guilty of contempt where his conduct, coupled with his knowledge of the undertaking, shows that he is flouting the authority of the court by doing something which he knows will prevent the undertaking given to the court achieving its intended object. Such a person will be in contempt, because he has "knowingly impeded or interfered with the administration of justice by the court in the action between A and B". (The quote derives from Attorney General v Times Newspapers Ltd [1992] 1 AC 191 at 206. These principles were applied by this court in Reid v Howard (1993) 31 NSWLR 298 at 309.) [17] In Zhu v Treasurer of NSW [2004] HCA 56;(2004) 218 CLR 530 at 571 [121], the High Court said: Intervention against persons who, though not personally bound by a court order, procure those who are bound by it to contravene it, or otherwise thwart it, rests on a different basis: those persons are not liable as accessories who aided and abetted the persons bound by the order, but are directly liable for independent contempts committed by themselves in obstructing the course of justice. 11The critical distinction, as explained by his Honour, is that while a party bound is strictly liable for breach of an order, a party who is not in terms bound by an order but who knows of its existence, though not strictly liable, may be guilty of contempt if he or she does something which he or she knows will prevent the order achieving its intended object, thereby flouting the Court's authority. 12In the present case, George, although not named in the order, was and is a party to the suit. He, by his counsel, signed the minute of consent order, thereby indicating his consent to it. The order was one in respect of a fund of money, analogous to an order in rem [cf Z Ltd v AZ and AA-LL [1982] QB 558, 574; [1982] 1 All ER 556, 563 (Lord Denning MR)], such orders themselves being an exception to the principle that, prima facie, court orders bind only the parties to the suit [Re X (a minor); X County Council v A [1985] 1 All ER 53, although this was doubted in R v Central Independent Television Plc [1994] Fam 192; [1994] 3 All ER 641]. 13Thus, this case is far removed from one in which the alleged contemnor is neither a party to the proceedings nor named in the order, such that it could be said, as it was in Seaward v Paterson, that the order was "not granted against him in any sense of the word". Nonetheless, I accept that it would be inappropriate to hold George liable on the basis of strict liability. That is because when the order was made, and the funds were held by Veritas, no act on his part was necessary or sufficient to procure compliance. At that point, performance of the order was beyond his power, and it would be wrong to regard him as a party bound so as to be strictly liable for any breach. However, as Lindley LJ put it, even if he has not technically infringed the injunction, but has so conducted himself as to intentionally defeat its intent, setting the Court at defiance and deliberately treating its order as unworthy of notice, "it is perfectly idle to say that there is no jurisdiction to punish him for contempt as distinguished from the breach of the injunction, which has a technical meaning." 14Although it is less than perfectly drafted, it is clear enough that this is what the charge in substance alleges. While the charge admittedly refers to a "breach" of the order, it elaborates it as a failure to take necessary or desirable steps to ensure performance of the order, and is particularised relevantly in particulars (a) and (b) as knowingly taking possession of the cheque, and, in defiance of the order, endorsing it away to a third party. It is plain enough on the face of the charge that its gravamen is that by that conduct, George, in defiance of the Court's authority, brought about a state of affairs that defeated the intent of the order. As Young JA said in Sigalla, what is important is that the Court be alert to the distinction and its implications. The relevant implication here is that the contempt alleged would not be established by a mere non-performance of the order. It is necessary that there be intentional interference on the part of the alleged contemnor with the attainment of the intent of the order, such as to amount to defiance of the Court's authority. In other words, it is necessary to bear in mind that the contempt alleged is one not established by the strict liability of a party bound, but requires the additional component of intentional interference. The charge alleges that critical additional component in particular (b).

Whether order unclear so as to be unenforceable? 15It was also submitted that the order was neither sufficiently clear nor unambiguous to support contempt proceedings - even allowing for the process of construction identified by Campbell J, as his Honour then was, in Kirkpatrick v Kotis [2004] NSWSC 1265, [46]-[60] - in particular, because it was directed to the fund rather than to a person [Iberian Trust Limited v Founders Trust & Investment Co Ltd [1932] 2 KB 87; Kirkpatrick v Kotis, [52]]. In Iberian Trust, the order required that "the plaintiffs do have the return of the said shares within fourteen days", and the Court declined to spell out of the order that the defendant company had been ordered to do anything. 16At first sight the analogy is a close one, but there are significant distinctions. In the present case, Veritas drew a cheque that, properly dealt with, would have resulted in compliance with the intent of the order. Although George could not have compelled Veritas to pay the funds to the company, and no action on his part was necessary at the initial stage to bring about performance of the order, once Veritas delivered the cheque to him, it was in his power either to ensure or to prevent compliance. He intervened in a manner that defeated compliance, when it was in his power to ensure compliance. His potential liability is not the strict liability of a party bound for technical breach, but that of a person with notice who deliberately brings about a state of affairs that prevents compliance.

Notice of the order 17As to notice of the order, there is no evidence and no suggestion that George was served personally, or at all, with a copy of the order, with or without the endorsed 'notice to party bound' referred to in (NSW) Uniform Civil Procedure Rules 2005 ("UCPR"), r 40.7. The motion claims an order under r 40.7(5) dispensing with that requirement. In addition, r 40.7(4) provides as follows: (4) If a person liable to committal or sequestration by way of enforcement of a judgment has notice of the judgment: (a) by being present when the judgment is directed to be entered, or (b) by being notified of the terms of the judgment, whether by telephone, telegram or otherwise, the judgment may be enforced against that person by committal or sequestration without service having been effected in accordance with this rule. 18The effect of that sub-rule is that the Court may enforce an order by committal, notwithstanding that no endorsed copy of the order has been personally served, if satisfied that the respondent otherwise has notice of the order [Anderson v Hasset [2007] NSWSC 1310, [9] - [10]; Davies v Beyond Building Systems Pty Ltd [2009] NSWSC 1282, [5] - [6]; Sofroniou v Szegetti [1991] FCR 336]. The Court will readily infer such notice, and dispense with the requirement for service of the order, where the order is made by consent [Duncan Strelec v Tate [2008] NSWSC 1145, [29]; Leung v Good Friend Development Pty Ltd [2008] NSWSC 142, [8]], as it would in the case of an undertaking to the Court. This has been explained, in the case of an undertaking, on the basis that, as it is volunteered rather than imposed, the person giving an undertaking is presumed to know of it, so that proof of service is not required [Hussain v Hussain [1986] Fam 134; [1986] 1 All ER 961; D v A & Co [1900] 1 Ch 484; Re Launder (1908) 98 LT 554; Taylor v Whelan [1962] VR 306, 307; Douglas v Douglas (1976) 10 ALR 285]. The same rationale applies in the case of a consent order. 19Given my conclusion that this is not a case of a party bound who is strictly liable, but one of intentionally obstructing or frustrating a court order, service under UCPR r 40.7 is not an applicable requirement; the proceeding lies under (NSW) Supreme Court Rules ("SCR"), Part 55, and while notice of the order is an essential requirement, it is unnecessary that notice be through service of an endorsed copy of the order [Seaward v Paterson; Gerondal v Eurobodalla Shire Council (No 5) [2011] NSWLEC 104, [45]]. At the least, in the absence of evidence to the contrary, the Court would be entitled to infer, from the circumstance that the order in question was a consent order signed on his behalf, that George had notice of it. Even if UCPR, r 40.7, were applicable, it would be open in those circumstances to proceed to committal under r 40.7(4), notwithstanding that he had not been served with an endorsed copy of the order. 20Further, it was submitted that the notice of motion and supporting affidavit had not been personally served on George, as required by SCR, r 55.9. This objection was first raised by George's counsel at an earlier time, when other defects in the original motion were also raised, some of them successfully, to the point that an amended motion was filed. There is no question that George was then on notice of the contempt proceedings, through service of them on his solicitors. On 3 September 2012, I made directions fixing the motion for hearing, and associated procedural directions in respect of service of evidence and submissions. I did not in the circumstances regard absence of personal service as an obstacle to the motion proceeding. Requiring personal service at that stage would have achieved nothing, given that George was on notice of the proceedings, but to increase costs and incur delay. When the motion was called on for hearing, George appeared by his counsel. There was therefore no requirement formally to prove service, although I note that it has been held more than a century ago that the defendant's appearance at the motion does not amount to waiver of requirement for personal service [Mander v Falcke [1891] 3 Ch 488]. Without foreclosing argument on the issue, it would, on the current state of the evidence, and having regard to the course of the proceedings to date, be open to the Court to dispense with the requirements of SCR, r 55.9, for personal service of the motion.

Material findings of fact 21There is evidence before the Court capable of establishing the following relevant material facts: (1)On 16 November 2010, Veritas drew a trust cheque in favour of "Ray & Sons Pty Limited" (sic) in the $258,746.10. (2)On 26 November 2010, George acknowledged receipt of that cheque. (3)Thereafter, George endorsed the cheque to one Habib Boustany. (4)The cheque was deposited into an account with the Bank of Queensland. 22George's solicitors have, on his behalf, proffered several accounts of what had become of the funds formerly held by Veritas. On 16 March 2011, apparently in response to matters raised in an affidavit sworn by Charlie, George's solicitors, HWL Ebsworth ("HWLE"), wrote to Charlie's solicitors, Slattery Thompson, relevantly as follows: One of the irrelevant matters about which your client complains (in paragraph 70) is the treatment of the funds belonging to Ray & Sons returned by Milaad Sassine. We refer to our letter dated 25 January 2011 to which we have still had no reply. Our client attempted to bank those funds into the Ray & Sons account. Upon attempting to do he was advised by the bank that he could not bank the cheque into the Ray & Sons account because the cheque was made out to Ray & Sons Pty Limited as opposed to Ray & Sons Construction Pty Limited. He was then advised by the bank to authorise the banking of the cheque into his own account and then transfer the moneys to the Ray & Sons account. Upon banking the cheque into his own account, he then attempted to transfer the funds to the Ray & Sons account only to discover that the details he had for the Ray & Sons account were for an old account that had been closed. The current Ray & Sons account with the NAB (which was opened by your client and John Sassine without our client's knowledge) has been frozen by the bank and we understand will remain that way until your client and John Sassine (the current signatories on the account) allow our client (a 50 per cent shareholder and a director) to become an authorised signatory on the account and to access the records. Your client may assume that failure to deal with that correspondence and to act in accordance with the obligations to Ray & Sons will be raised at the hearing. 23On 11 November 2011, in response to an e-mail received that day from Charlie which threatened to make a complaint against the relevant solicitors at HWLE, and demanded immediate payment of the funds to the account of Ray & Sons Constructions Pty Limited, HWLE responded to Slattery Thomson, relevantly as follows: At no stage after the settlement between our client and Milaad Sassine on 26 November 2011 were those moneys, which were formerly held by Veritas Legal banked to our firm's trust account or any account held by our firm. We are instructed that those moneys formerly held in Veritas Legal's bank account were banked into our client's bank account after the settlement with Milaad Sassine on 26 November 2011. This is noted in our letter to your office on 16 March 2011 (copy enclosed). 24On 18 November 2011, in response to a facsimile letter from Slattery Thompson dated 14 November, and apparently received on 15 November 2011, which requested, "As agreed with you that you will forward today a copy of the bank cheque for $260,00 and advise us of the whereabouts of these funds", HWLE responded, "Please find enclosed a copy of cheque drawn from Veritas Legal's trust account dated 16 November 2011, which is made out to Ray & Sons Pty Limited in the sum of $258,746.10", but was silent as to the whereabouts of the funds. 25In a further letter of 18 November 2011, HWLE repeated the explanation that had been given in the 16 March 2011 letter, and added: We are instructed that since banking the cheque into his account, our client has only used those funds for Ray & Sons' purposes in the best interests of Ray & Sons, including but not limited to: (i) paying GST owed by Ray & Sons; (ii) accountant's costs incurred by Ray & Sons; (iii) legal costs associated with leases involving Ray & Sons; and (iv) to rectify urgent and critical building non-compliance issues, including but not limited to fire regulations. Regardless which back account the cheque was deposited into, payment of, for example GST owed by Ray & Sons would have been required to be paid from those moneys in any event. 26On 25 November 2011, in response to an inquiry by Slattery Thompson dated 22 November 2011, which requested advice as to what amount was left in George's account from the $260,000, and the amount paid out, HWLE responded, inter alia: We are instructed that our client banked the cheque into his own account. Our letter to you dated 16 March 2011 indicates that our client has instructed us that he attempted to transfer the funds to the Ray & Sons account only to discover that the details he had for the Ray & Sons account were for an old account that had been closed, and that the current Ray & Sons account with NAB (which was opened by your client and John Sassine without our client's knowledge) had been frozen by the bank and would remain that way until your client and John Sassine (the current signatories on the account) allowed our client (a 50 per cent shareholder and director) to become an authorised signatory on the account and to access some records. 27The letter also repeated the additional explanation that had been contained in the letter of 18 November 2011. 28In light of that evidence, uncontradicted and unexplained, the Court would be entitled to accept that the cheque was endorsed by George Sassine to Habib Boustany, and deposited into an account with the Bank of Queensland; the Court would also, in the absence of further explanation, be entitled to infer that the explanations proffered through HWLE were proffered on George's instructions, and were mere dissembling such as to demonstrate consciousness on his part of wrongdoing [cf Re Bramblevale Limited [1970] Ch 128, 137 (Lord Denning MR)]. 29Although there is not evidence of all of the particulars of the charge, those particulars of which there is no evidence are not essential. There is evidence which, taken at its highest, is capable of establishing that George received the cheque payable to Ray & Sons Pty Limited and endorsed it to Boustany, inconsistently with the requirement and intent of the order that the funds be paid to the first defendant company. 30On the evidence so far adduced, as summarised above, taken at its highest, and in the absence of explanation, it would be open to the Court to be satisfied beyond reasonable doubt that, with knowledge of the Court's order, George Sassine deliberately diverted the Veritas cheque from the destination of funds as intended by the order - namely the company - to Mr Boustany, and thereby treated the Court's order as unworthy of notice, intentionally obstructed its performance.

Conclusion 31For the foregoing reasons, it would be open to the Court to dispense with personal service of the motion. Taking the prosecutor's case at its highest, there is evidence which, if ultimately accepted, is capable of establishing beyond reasonable doubt, that with knowledge of the order of 15 October 2010, George Sassine, in defiance of the authority of the court, intentionally defeated the intent of the order, by endorsing the Veritas cheque, and thereby diverting the Veritas funds from the intended payee in accordance with the order, to Mr Boustany. 32Of course, whether the Court would be so satisfied, especially in the light of such evidence as might be adduced in the respondent's case, is entirely another matter. 33I therefore find that there is a case to answer.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 January 2013

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