Plaintiff v Defendants

Supreme Court of Victoria|2011-09-15|Before: DIXON J

CONTEMPT OF COURT - breach of freezing order - entering into uncompleted contracts to sell property restrained - sentencing considerations - punishment on terms, including suspension - Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 75.11.

1 In this proceeding, on 28 July 2011, I announced I was satisfied that the plaintiff has established the contempts alleged against Rasim Gashi and Gashi Nominees Pty Ltd, constituted by entering into contracts of sale of the properties at Diggers Rest and Hamilton Street respectively, in breach of a restraint by order of this court in dealing with these properties. I was satisfied that Rasim Gashi was aware of and understood the constraints imposed by the court upon himself and upon Gashi Nominees Pty Ltd in dealing with each of these properties. I was satisfied that the entry into these contracts of sale was not casual, accidental or unintentional - it was deliberate conduct.

(a) I am satisfied beyond reasonable doubt that on or about 17 November 2010 when, as vendor, he entered into the Diggers Rest contract of sale, Rasim Gashi committed a contempt of the freezing order.

(b) I am satisfied beyond reasonable doubt that Gashi Nominees Pty Ltd, acting by its sole director Rasim Gashi who signed each of the Hamilton Street contracts of sale on its behalf as vendor, committed a contempt of the freezing order on or about 1 December 2010.

3 I provided to the plaintiff and to Mr Gashi and Gashi Nominees Pty Ltd the opportunity to further address me on penalty.

4 The court may decline to convict where contempt has been established,[2] an outcome more likely in the case of a technical contempt. I use that term to refer to casual, accidental or unintentional conduct in breach of an order. This is not a technical contempt in that sense.[3] Neither do I consider that Mr Gashi and Gashi Nominees Pty Ltd have engaged in acts of deliberate defiance of judicial authority of the most serious kind.

5 The considerations relevant to determining an appropriate penalty include the following:[4]

(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.

6 Concerning personal circumstances, no prior convictions have been alleged. No evidence of good character was tendered. In Ferrier v Kelada,[5] Cummins J, when sentencing for a contempt committed by breach of an injunction restraining dealings in land, recognised that where disobedience of court orders in civil proceedings has been brought about by strained financial circumstances, this factor may be considered in mitigation.

7 The court may punish a natural person for contempt by committal to prison or fine or both.[6] The Court may make an order for punishment on terms, including a suspension of punishment. To punish by imprisonment a contempt for breaching a court order, a copy of the order indorsed as required by r 66.10(3) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) must be served personally on the respondent.[7] There was no issue that these requirements were satisfied in this case. Where the respondent is a corporation, the court may punish for contempt by sequestration or fine or both.

8 The plaintiff submitted that I should consider the following matters in assessing whether to proceed to conviction, and what sanction to impose:

(a) The court found that the entry into the contracts of sale was not casual, accidental or unintentional. Being deliberate conduct, it falls into that category of wilful contempt where punishment is appropriate.

(b) Disobedience of freezing orders affects the administration of justice. If a perception develops that freezing orders are able to be disobeyed with impunity, the ability of courts to effectively administer justice according to law may be significantly undermined.[8]

(c) The plaintiff has a particular interest - freezing orders assist to protect the revenue - in seeking adequate sanctions for disobedience of freezing orders.

(d) The following features of the circumstances of the contempts are relevant:

(i) Mr Gashi decided to sell the Diggers Rest property by at least 1 July 2010. When he applied to the court to discharge the orders to allow him to do so, that application was refused. It was only a couple of weeks later that Mr Gashi retained a solicitor to prepare a contract of sale for the Diggers Rest property. The critical period when, according to Mr Gashi's story, he might have sought the consent of the plaintiff to the dealing is from 1 July to 17 November 2010, and then in the period of the uncompleted contract due to settle on 20 December 2010 when he might have sought consent to the sale.[9]

(ii) Mr Gashi decided to sell the Hamilton Street property by at least 14 October 2010. Again, his decision to do so follows on an application to the court when he was unable to obtain all of the relief that he was seeking. The critical period when, according to Mr Gashi's story, he might have sought the consent of the plaintiff to the dealing in this instance is from 14 October to 1 December 2010, with the period of the uncompleted contract running to settlement on 20 December 2010.

(iii) Mr Gashi was aware of and understood the constraints imposed by the court in dealing with each of the properties.

(iv) The sales were calculated and disguised. In each case, there was plainly ample time to seek the consent of the plaintiff prior to entering into any contract. A solicitor, other than the solicitor dealing with the plaintiff, acted in respect of the conveyancing. Although Mr Gashi emphasises that his solicitor informed the plaintiff prior to settlement of the contracts, the communication was at the last moment and at a time when Notices of Action noted on titles were queried by the purchaser. The plaintiff was obliged to obtain orders in the Practice Court restraining completion of the sales.

(e) Regarding the culpability of Mr Gashi, the plaintiff contended that Mr Gashi and Gashi Nominees are wholly responsible for the contempts. They were not inadvertent and the court did not accept that they were justified or recommended by advisers. Further, Mr Gashi engaged in separate acts of contempt. He entered into the contract of sale for the Diggers Rest property in breach of the freezing order, and later he wilfully assisted Gashi Nominees in breaching the freezing order by entering into contracts of sale for the Hamilton Street property.

(f) The value of the contract of sale for the Diggers Rest property was $670,000. The combined value of the three contracts of sale for the Hamilton Street property was $1,250,000. Thus, in total, the dealings were in real property worth $1,920,000.

(g) It is impossible to determine the financial position of Mr Gashi and Gashi Nominees. There is no evidence that Mr Gashi has any capacity to pay a fine. Together with his wife, he has been assessed for tax related liabilities in excess of $9 million. The imposition of a fine is not likely to have a significant effect upon him and would be insufficient to vindicate the authority of the court in respect of his conduct.

(h) Mr Gashi has not demonstrated general contrition. Mr Gashi and Gashi Nominees maintain they did not commit any contempt, contending that the breach of the freezing orders was due to incorrect advice from advisers. No attempt was made to cancel the contracts of sale or otherwise reverse the effects of the breach. The contracts of sale were presented as a fait accompli to the plaintiff, whose acceptance of that fact was propounded as a defence that the plaintiff had waived the contempts. This was rejected by the court.

(i) The plaintiff submitted that the appropriate penalty is a term of imprisonment for Mr Gashi for each of the contempts of which he is to be adjudged guilty, with each term to be served consecutively, and a substantial fine for Gashi Nominees. Further, the plaintiff's costs should be paid in accordance with the usual rule, namely on a solicitor-client basis.

9 Mr Gashi and Gashi Nominees submitted I should consider the following matters in assessing whether to proceed to conviction and what sanction to impose:

(a) Disobedience of the freezing order should be regarded as a civil contempt amounting to a private wrong.[10]

(b) Proceedings for civil contempt are primarily to compel obedience rather than to punish disobedience.[11]

(c) The court ought to conclude that there has been no deliberate defiance of or contumacious disregard for the court's order.

(d) Contact was made with the plaintiff's solicitors seeking consent to settle the contracts by solicitors for Mr Gashi and Gashi Nominees. The transaction was not clandestine. Far from being caught red-handed by the plaintiff, the plaintiff learned of the contracts from Mr Gashi's solicitor prior to settlement.

(e) It was always intended by Mr Gashi and Gashi Nominees that the transaction would result in paying out the bank debts secured over the subject properties to avoid the consequences of default under mortgages, with the surplus paid to, or at the direction of, the plaintiff, subject to the freezing order.

(f) Accepting that this was their intention and that their advisers recommended the properties be sold to avoid mortgage default and forced sales, Mr Gashi's and Gashi Nominees' conduct is explained.

(g) There has not been any injury suffered as a result of the plaintiff's decision to permit the sales to proceed, subject to the terms of the order of Ferguson J. Completing the sales of the properties has maximised the return for the benefit of both parties.

(h) In the event, nothing done by Mr Gashi and Gashi Nominees has impeded the administration of justice, as they did not intend to settle the contracts except with the consent of the plaintiff.

(i) Committal orders are remedies of last resort. With freezing orders, the real purpose of bringing the matter back to court is to secure compliance with the court's order, and this was achieved in the negotiations leading to the consent orders made by Ferguson J permitting completion of the contracts. As the contracts have been, or are being, completed on terms acceptable to the plaintiff, there was no harm caused beyond legal costs and there is nothing to remedy.

(j) Mr Gashi has apologised to the court for his contempt and offered to pay the costs of the plaintiff on a solicitor-client or indemnity basis.

(k) The court ought not consider a punitive sanction. Rather, the primary object of any sanction ought to be coercive, to ensure Mr Gashi and Gashi Nominees observe and respect the freezing order. In the circumstances, that objective has been achieved.

(l) The court should not impose a term of imprisonment. The apology and a costs order are an appropriate penalty.

10 I accept the submission for the plaintiff that I should deal with Mr Gashi for two distinct counts of contempt. The court's power to deal with contempt is sufficiently broad to extend to an individual's involvement in conduct constituting a contempt by the company he or she controls.[12] Four contracts were entered into on two separate occasions. I am satisfied that when he signed the Hamilton Street contracts for Gashi Nominees, Mr Gashi was knowingly assisting in the breach of the freezing order by Gashi Nominees, that is to say knowing the terms of the freezing order he wilfully assisted Gashi Nominees, to whom it was also directed, to disobey it.[13]

11 I consider it appropriate that I take into account the need to deter both the defendants and others who may contemplate disobeying court orders. On the evidence before the court, it is clear that their contempts were serious, precisely the kind of conduct that Bell J restrained by making the freezing order. I am satisfied that there was wilful disobedience and contumacious disregard of the court's orders. I reject counsel's submission that I ought not so find. In so concluding, I am influenced, not by the matters emphasised by the defendants (that they would not have settled the contracts without first obtaining the plaintiff's consent) but by the fact that despite several applications to the court, when the issue of orderly sales of mortgaged property to clear secured debts could have been raised, the contracts followed in a clandestine way. The eleventh hour revelation of the contracts to the plaintiff's solicitors with the assertion that the net proceeds were always going to the plaintiff, does not support an inference of co-operative obedience to court orders as the defendants would have it. The contracts should not have been made at all.

12 Mr Gashi went into the witness box on the plea hearing and stated baldly, 'I am deeply sorry for what I have one'. I consider this apology disingenuous. The defendants maintained they were not guilty of any contempt until I found otherwise. They did not offer any undertaking to comply with the freezing order in the future. Although such an undertaking would be no more than the defendants are obliged to do in any event, there was no explanation by Mr Gashi of precisely what it was that he regretted. I do not consider that such an apology shows any significant degree of remorse that might be taken into account.[14] I accept the plaintiff's submission that passing the blame off onto advisers, who either gave no evidence or who did not distinctly accept having given that advice, does not show mitigatory contrition.

13 Neither Mr Gashi nor Gashi Nominees has provided evidence about their current financial circumstances. There was some general evidence presented to an earlier hearing when access was sought to some of the equity in frozen properties to pay living expenses and legal fees, that Mr Gashi 'was struggling to make ends meet' and could not pay his legal and accounting advisers. It is not possible to determine the financial position of Mr Gashi or Gashi Nominees individually and no assistance was provided to the court in that exercise. There is no evidence that Mr Gashi has any capacity to pay a fine and the freezing order prevents him from accessing any of the funds upon which he might otherwise lawfully draw to pay any fine.

14 In these circumstances, the imposition of a fine on Mr Gashi is not likely to have a significant effect upon him. For this and for other reasons, a fine would be insufficient to vindicate the authority of the court in respect of Mr Gashi's contempts.

15 The contempts are very serious matters. The need to uphold the authority of the court and the dignity of the law, the need for specific and general deterrence, and the need to impose an appropriate punishment are each significant matters. Although a sentence of imprisonment is a last resort, I consider that in the circumstances of these contempts a term of imprisonment is warranted.

16 Having regard to the factors set out above and the matters put forward by counsel, I convict and sentence Mr Gashi to imprisonment for three months for the contempt constituted by entering into the Diggers Rest contract, and to imprisonment for three months for complicity in the contempt of Gashi Nominees in entering into the Hamilton Street contracts. The sentences are to be served concurrently. Gashi Nominees Pty Ltd is convicted and fined $50,000.

17 There are some significant mitigatory circumstances and the court has a broad discretion on punishment for contempt. I have carefully considered each of the following matters. Mr Gashi is a family man who has no prior contempt convictions. The financial circumstances of the Gashi family are intertwined and, in an indirect sense, his family must bear the burden of his behaviour. I take into account in mitigation that disobedience of the freezing order may have been brought about by strained financial circumstances. I take into account that the defendants will be required to pay the plaintiffs' costs of the contempt proceeding on an indemnity basis, as discussed below. Finally, and significantly, I take into account that Mr Gashi and Gashi Nominees have not obtained the proceeds of the sales of the properties. As agreement was reached with the plaintiff, the proceeds are secure. If the net equity in the properties had escaped from the strictures of the freezing order by these contracts, the penalty would have been significantly greater. I am not satisfied that Mr Gashi's intentions were as his counsel would have me find. Having heard both Mr Gashi and his solicitor Mr Skinner in evidence, I strongly suspect Mr Gashi's intentions were otherwise. I am, however, prepared to give Mr Gashi the benefit of the doubt as to his intentions, and the benefit of the fact that the sales were completed with the plaintiff's consent so that the effect of the freezing order was not, ultimately, thwarted. None of these extenuating circumstances lead me to conclude that imprisonment is not a proper and appropriate punishment, necessary to vindicate the authority of the court.

18 I have the power under r 75.11(4) to make an order for punishment on terms, including a suspension of punishment. In this context, I have further considered the extenuating circumstances put forward. Mr Gashi and Gashi Nominees must observe and respect the freezing order. I am not satisfied about the future prospects of compliance by the apology. If Mr Gashi is prepared to give an undertaking to the court that he will obey and respect the freezing order, in all the circumstances I am prepared to exercise the power to punish on terms. The punishment I will impose will be on terms that a warrant of committal to prison will not issue until further order of this court and the sentence of imprisonment imposed on Mr Gashi will be suspended for one year on Mr Gashi's undertaking to the court to observe and comply with the freezing order of 14 April 2010 (as subsequently varied).

19 If Mr Gashi breaches that undertaking to obey and respect the freezing order, he will, in all likelihood, be brought back before this court. Depending upon the nature and seriousness of his transgression, the court may: take no action; or extend the period of suspension of issue of the warrant of committal; or impose a fine; or impose a different penalty; or issue the warrant to commit Mr Gashi to prison to serve the sentence. If Mr Gashi honours his undertaking over the next 12 months, that will be the end of the sentencing process insofar as this court is concerned.

20 The court may in its discretion order costs against the contemnors on an indemnity basis. I emphasise that costs are in the discretion of the court[15] and that discretion is unfettered but it is the common or usual practice in such cases.[16] The reasons this practice has developed can be traced back at least to Colgate Palmolive Co v Cussons Pty Ltd.[17] Sheppard J's comprehensive and oft-quoted review of the cases in Colgate Palmolive informs the modern practice. Identifying that particular facts and circumstances of the case in question must warrant making an order for payments of costs other than on a party and party basis, his Honour's examples of circumstances from past cases, which justified an award of costs on an indemnity basis, included contempt of court.[18] More recently, in National Australia Bank Limited v Juric (No 2),[19] Gillard J observed that it is only when special circumstances are shown that costs should be paid on any basis other than that of solicitor-client, as a 'litigant who must come to court to enforce an order which has been breached by contempt, or to have a person dealt with [for] contempt, should not be out of pocket'. His Honour is referring to the fact that one reason the plaintiff is bringing proceedings is to vindicate the public interest in upholding the rule of law.

21 I was informed that costs to the conclusion of the liability hearing were approximately $130,000. The costs liability for the defendants, consequent upon my order, will be substantial. The defendants have offered to pay the plaintiff's costs on a solicitor-client basis or on an indemnity basis and that offer is appropriate. 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.

Rasim Gashi is adjudged in contempt of this court, in that contrary to the orders made by Bell J on 14 April 2010, Rasim Gashi did on 17 November 2010 deal with the property situate at 105 Duncans Lane, Diggers Rest, Victoria, described in Certificate of Title Volume 8875 Folio 553 by entering into a contract of sale of land to sell that property to Hilmi Kusari, and is convicted and committed to prison for three months.
Rasim Gashi is adjudged in contempt of this court, in that contrary to the orders made by Bell J on 14 April 2010, Rasim Gashi did on 1 December 2010 wilfully assist Gashi Nominees Pty Ltd to deal with the property situate at 25 Hamilton Street, Niddrie, Victoria, described in Certificate of Title Volume 08076 Folio 489 by signing on its behalf the following contracts of sale of land:

(a) a contract of sale of land dated 1 December 2010, between Gashi Nominees Pty Ltd as vendor and Hilmi Kusari as purchaser, for the sale of Unit 1, 25 Hamilton Street, Niddrie, Victoria, being described therein as Lot 1 on proposed Plan of Subdivision 628873L and being part of the land described in Certificate of Title Volume 08076 Folio 489;

(b) a contract of sale of land dated 1 December 2010, between Gashi Nominees Pty Ltd as vendor and Hilmi Kusari as purchaser, for the sale of Unit 2, 25 Hamilton Street, Niddrie, Victoria, being described therein as Lot 2 on proposed Plan of Subdivision 628873L and being part of the land described in Certificate of Title Volume 08076 Folio 489;

(c) a contract of sale of land dated 1 December 2010, between Gashi Nominees Pty Ltd as vendor and Hilmi Kusari as purchaser, for the sale of Unit 3, 25 Hamilton Street, Niddrie, Victoria, being described therein as Lot 3 on proposed Plan of Subdivision 628873L and being part of the land described in Certificate of Title Volume 08076 Folio 489;

and is convicted and committed to prison for three months, to be served concurrently with the sentence under paragraph 1.

Gashi Nominees Pty Ltd is adjudged in contempt of this court in that, contrary to the orders made by Bell J on 14 April 2010, it did on 1 December 2010 deal with the property situate at 25 Hamilton Street, Niddrie, Victoria, described in Certificate of Title Volume 08076 Folio 489 by entering into the following contracts of sale of land:

and Gashi Nominees Pty Ltd is convicted and fined $50,000.

Upon giving the following undertaking to the court and signing the form of undertaking which is to be annexed to this order -

I, RASIM GASHI of 14 Palmerston Crescent, Taylors Lakes in the State of Victoria, UNDERTAKE to the court that I will obey and comply in every respect with the order of the Honourable Justice Bell made on 14 April 2010 (as varied), during the period until 14 September 2012, or until the order of the Honourable Justice Bell made on 14 April 2010 ceases to operate, whichever occurs first;

the orders of imprisonment will be suspended for a period of 12 months from this date or until the order of the Honourable Justice Bell on 14 April 2010 ceases to operate, whichever occurs first.

5. A warrant of committal to prison shall not issue until further order of the court.

The defendants pay the plaintiff's costs of and incidental to the proceeding, including any reserved costs, on an indemnity basis.

[1] Deputy Commissioner of Taxation v Gashi (No 2) [2011] VSC 351 (28 July 2011).

[2] Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201 (13 June 2003) [50].

[3] There is a different sense in which the expression is used, explained in Lexis Nexis, Halsbury's Laws of Australia (at 13 September 2008) 105 Contempt, '2 Criminal Contempt' [105-70]; see also the discussion by Kirby J in Pelechowski v Registrar, Court of Appeal (NSW) [1999] HCA 19; (1999) 198 CLR 435, 484 [147]-[148].

[4] Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98; Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13; (2003) 196 ALR 350 (21 February 2003); Wood v Staunton (No 5) (1996) 86 A Crim R 183 (28 March 1996) 185; Louis Vuitton Malletier SA v Design Elegance Pty Ltd [2006] FCA 83; (2006) 149 FCR 494, 501-2; Haritopoulos Pty Ltd v Scott [2007] VSCA 174 (30 August 2007); Bovis Lendlease Pty Ltd v Construction Forestry, Mining and Energy Union (No 2) [2009] FCA 650.

[5] [2005] VSC 138 (22 April 2005) [22]-[23].

[7] Primelife Corp Ltd v Newpark Pty Ltd [2003] VSC 106 (26 March 2003).

[8] Australian Prudential Regulation Authority v Siminton (No 3) [2006] FCA 397; (2006) 230 ALR 528, 532 [16]; Scott v Evia Pty Ltd [2007] VSC 15 (9 February 2007) [203]-[204]; Scott v Evia Pty Ltd (No 2) [2007] VSC 110 (20 April 2007) [31].

[9] The plaintiff's solicitors were informed of the sales on 16 or 17 December 2010.

[10] Witham v Holloway (1995) 183 CLR 525, 530, 548 fn119.

[11] Australian Consolidated Press Ltd v Morgan [1965] HCA 21; (1965) 112 CLR 483, 532.

[12] TZ Ltd v ZMS Investments Pty Ltd [2009] NSWSC 1465 (23 December 2009) [48], relying upon the principles in Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121.

[13] Kim Man Chan v David Weiping Chen (No 2) [2007] VSC 24 (16 February 2007) [68] (Kaye J) and the cases there cited.

[14] Australian Competition and Consumer Commission v Info4pc.com Pty Ltd [2002] FCA 949; (2002) 121 FCR 24, 57-8 [155]; Australian Prudential Regulation Authority v Siminton (No 3) [2006] FCA 397; (2006) 230 ALR 528, 531 [14].

[16] National Australia Bank v Juric (No 2) [2001] VSC 398 (10 October 2001) [67]-[70]; Pico Holdings Inc v Voss [2002] VSC 319 (9 August 2002) [87]-[96]; Law Institute of Victoria Ltd v Nagle [2005] VSC 47 (3 March 2005) [26]; Chan v Chen (No. 3) [2007] VSC 52 (8 March 2007) [27]-[36]; Scott v Evia Pty Ltd (No 2) [2007] VSC 110 (20 April 2007) [34]-[38].

[18] Australian Competition and Consumer Commission v Hercules Iron Pty Ltd [2008] FCA 1182 (8 August 2008) [29].

[19] [2001] VSC 398 (10 October 2001) [70].

Court (General Civil Procedure) Rules 2005

At a glance

Court

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Judgment (63 paragraphs)

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Legislation Cited (8)

Cases Cited (10)