Plaintiff v Respondents

Supreme Court of Victoria|2011-07-28|Before: DIXON J

CONTEMPT OF COURT - alleged breach of freezing order - uncompleted contracts to sell property restrained - relevant principles - whether breach need be contumelious - whether orders clear and unambiguous - whether contempt waived by subsequent variation to order to permit completion of contracts.

1 In this proceeding, the plaintiff seeks orders pursuant to r 75.06 of the Supreme Court (General Civil Procedure) Rules 2005 that Rasim Gashi and Gashi Nominees Pty Ltd each be punished for civil contempt of court for breaching a freezing order, constituted by entering into contracts to sell properties affected by the order.

2 On 26 March 2010, Cavanough J made an ex parte freezing order in this proceeding. The order was continued by Bell J, inter partes, on 14 April 2010. There have been numerous further orders amending the order of Bell J. When speaking of the freezing order, I refer to the order of Bell J, as amended.

3 The substance of the application against Rasim Gashi is that he was restrained from disposing of or dealing with, including selling, a property at 105 Duncans Lane, Diggers Rest, Victoria and that on 17 November 2010, without the consent of the plaintiff, Mr Gashi entered into a contract of sale in respect of that property.

4 Gashi Nominees was also restrained from disposing of or dealing with, including selling, the property at 25 Hamilton Street, Niddrie, Victoria as the freezing order also operated to freeze assets of related entities who were not parties to the proceeding. On 1 December 2010, without the consent of the plaintiff, Gashi Nominees entered into three contracts of sale to sell lots off an unregistered plan of subdivision. Rasim Gashi, on behalf of Gashi Nominees as its sole director, signed each of the Hamilton Street contracts.

5 The relevant parts of the applicable freezing order provided that:

[5] The first defendant, Rasim Gashi, is restrained from removing from Australia or in any way disposing of, dealing with or diminishing the value of any of his assets which are in Australia (first defendant's Australian assets) including selling, transferring, charging, mortgaging, or leasing, these assets up to the unencumbered value of AU$9,019,402.65.

[8] For the purposes of this order, the first defendant's Australian assets ... include:

...

(c) ...

(ii) the property known as 105 Duncans Lane, Diggers Rest, Victoria described in Certificate of Title Volume 08875 Folio 553 or, if it has been sold, the net proceeds of the sale.

[13] Subject to paragraph 15 of these orders (not relevant in present circumstances) each of the following:

(a) Gashi Nominees Pty Ltd ACN 118 816 158 ... [and others who are referred to with other parties as] collectively, Third Parties.

[14] Subject to paragraph 15 of these orders, each of the third parties must by 4 pm on 28 April 2010 make and serve on the plaintiff and affidavit setting out all relevant facts, circumstances and matters relating to ... :

(e) Gashi Nominees Pty Ltd (ACN 118 816 158) - 25 Hamilton Street, Niddrie, Victoria ...

[16] This order does not prohibit either of the defendants from ...

(c) giving with or disposing of any of his or her assets in the ordinary and proper course of business, including paying business expenses bona fide and properly incurred;

(e) in relation to matters not falling within sub-paragraph (a), (b), (c) or (d) dealing with or disposing of assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so he or she gives the plaintiff, if possible, at least two working days written notice of the particulars of the obligation.

[17] The plaintiff may agree in writing with the defendants or either of them that the exceptions in the preceding paragraph are to be varied. ...

[21] Gashi Nominees Pty Ltd ACN 118 816 158 is restrained from disposing of, diminishing the value of or dealing with, including selling, transferring, charging, mortgaging or leasing, the property known as 25 Hamilton Street, Niddrie, Victoria, described in Certificate of Title Volume 08076 Folio 489 or, if it has been sold, the net proceeds of the sale.

6 Relevantly to the circumstances of this application, on 28 April 2011 Ferguson J by consent ordered:

[1] Pursuant to paragraph 17 of the order of Justice Bell made on 14 April 2010, varied on 23 April 2010, 20 May 2010, 8 July 2010, 23 July 2010 and 8 October 2010 (freezing order), the freezing order is varied to allow:

(a) subject to paragraphs 2, 4, 6 and 7 of this order, the completion of the contact of sale that Rasim Gashi entered into with Hilmi Kusari dated 17 November 2010, to sell the property at 105 Duncans Lane, Diggers Rest, Victoria described in Certificate of Title Volume 8875 Folio 553 (Diggers Rest property); and

(b) subject to paragraphs 3, 5, 6 and 7 of this order the completion of the contract of sale that Gashi Nominees Pty Ltd (ACN 118 816 158) entered into with Hilmi Kusari dated 17 November 2010 to sell the property at 25 Hamilton Street, Niddrie, Victoria described in Certificate of Title Volume 8076 Folio 489 (Hamilton Street property).

7 The solicitors for the plaintiff first became aware of the Diggers Rest and Hamilton Street contracts of sale when contacted by a solicitor acting for the vendors, in respect of those contracts, on 16 December 2010. The summons seeking punishment for contempt was filed on 24 December 2010, coming on initially before Almond J in the Practice Court and being adjourned to the hearing which occurred before me on 18 May 2011, on an amended summons. As I have noted, the freezing order was varied by consent by Ferguson J on 28 April 2011. Gashi Nominees, while a respondent to the application, is not a party to the proceeding.

8 The plaintiff relied on affidavits sworn by its solicitor Mr Ken Tong Yee, Mr Aris Zafiriou, a director of the Strategic Debt section of the plaintiff, and Mr Andrew Taranto. None of these witness was cross-examined. Mr Karafili, who was Mr Gashi's accountant, also provided two affidavits to the plaintiff. He is married to Ms Mirka Carmelli, who was formerly Mr Gashi's solicitor. Although called to the witness box, for reasons I need not explain, Mr Karafili was excused from giving evidence and the plaintiff did not rely on his affidavits.

9 The respondents relied on affidavits of Mr Rasim Gashi, Mr Adrian Skinner, a solicitor, Mr George Liberogiannis, Mr Noel Magee QC, and Mr Con Kiatos, Mr Gashi's current solicitor. Mr Gashi and Mr Skinner were cross-examined.

10 From the evidence and the submissions of counsel, six issues are identified for resolution.

11 The first issue is whether there was a breach of the freezing order because, as Mr Gashi and Gashi Nominees contended, no contract of sale became effective until the plaintiff consented to it. Alternatively, there could be no settlement of the contracts of sale unless the plaintiff consented. The plaintiff's position is that there was no condition precedent affecting contract formation on the proper construction of the contract. In any event, it is the act of entering into the contracts which constitutes a breach of the order.

12 The second issue is whether the contracts were permitted as transactions in the ordinary course of business, being excluded from the operation of the freezing order by paragraph 16(c) of the order. The plaintiff contends that the exception applies only to Rasim Gashi and his wife Manuela Gashi, the defendants to the proceeding. The exception does not, in terms, apply to the third parties who were subject to paragraphs 21 - 24 of the order. Gashi Nominees is a third party. In this context, the business being referred to is the property development business of Gashi Nominees. Thus, if Gashi Nominees entered into the Hamilton Street contracts in the ordinary course of its business, it is not entitled to the benefit of the paragraph 16(c) exception, while Rasim Gashi, who is entitled to the benefit of that exception, was not carrying on the business of property development.[1] Mr Gashi and Gashi Nominees contend that the corporate and trust structure being employed was transparent, and that references to the property development business are plainly understood.

13 The third issue is whether paragraph 3 of the freezing order (referring specifically to the order of Bell J on 20 May 2010, made on the papers by consent), authorised the sale of the Hamilton Street property and thereby rendered the effect of paragraph 21 of the freezing order to be too ambiguous or uncertain to sustain a charge of contempt against Gashi Nominees.

14 The fourth issue was whether there was disobedience, or contempt of, the freezing order when Rasim Gashi himself instigated the request of Norton Rose, solicitors, for the plaintiff's consent to be sought on 16 December 2010. The plaintiff's position on this issue is that the evidence is to the contrary. Further, referring to the first issue, the plaintiff contends that it is the respondents' conduct in entering into the contracts which is in breach of the freezing order, not any subsequent conduct purporting to regularise those contracts.

15 The fifth issue is whether the plaintiff's consent, to the order of Ferguson J made 28 April 2011, is a waiver of breach of the freezing order and thus the basis of the contempt, and that the plaintiff's right to continue to prosecute the charges of contempt was lost.

16 The sixth issue is whether, because of the advice given to the respondents by their accountants and lawyers, the act of entry into the contracts cannot constitute a contempt. On this issue the plaintiff's position is that there is no evidence of advice to this effect, and that it was unlawful for the respondents to enter into contracts to sell the properties without the plaintiff's consent.

17 It is well established that a failure by a party to comply with an order, such as a freezing order made in a civil proceeding, constitutes a contempt of court. Such a contempt is commonly described as a "civil" contempt, although drawing a distinction between civil and criminal contempts, usually constituted by contempt in the face of the court or obstructing the course of justice, may not be helpful.[2] In all cases of contempt the charge of contempt must be proved on the criminal onus, beyond reasonable doubt.

18 To establish a charge of contempt of this nature, the plaintiff must establish the following:[3]

(b) the terms of the order are clear, unambiguous and capable of compliance;

(c) the order was served on the defendant or excused in the circumstances or service was dispensed with pursuant to the rules of Court;

(d) the defendant had knowledge of the terms of the order; and

19 Where acts or omissions contrary to the terms of an injunction have been established, it is not merely the person against whom the order is made, if he has acted in breach of the order after receiving notice of it, who will be liable for contempt of court. A third party who knowingly assists in the breach, that is, a third party who knows the terms of the injunction and wilfully assists the person enjoined to disobey it, will also be liable for contempt of court. This would be so whether or not the person enjoined had notice of the injunction.[4]

20 A point of distinction in applying the relevant principles emerged between the positions of the parties. For the respondents, Mr Parncutt of counsel contended, relying on Fairclough v Manchester Ship Canal Co[5] and Witham v Holloway,[6] there is no evidence of a contumacious disobedience of a court order and the plaintiff is seeking punishment for contempt on the basis of "wilful disobedience". Mr Parncutt submitted that if the Court finds that there has been any non-compliance with the freezing order, it is manifestly clear that the act of seeking the plaintiff's consent to the contracts prior to settlement shows the respondents did not intend to disobey the order.

21 Mr Martindale SC, who appeared with Mr E F Wheelahan for the plaintiff, contended that it is unnecessary for the plaintiff to demonstrate that the defendant intended to disobey the relevant order. What the plaintiff had to prove was that the act or omission constituting the breach of the order was deliberate and voluntary. Mr Martindale submitted that the circumstances, particularly the admitted signing of the contracts of sale, were properly characterised as deliberate and voluntary acts which constituted the conduct by which the respondents breached the terms of the freezing order and further, by which Rasim Gashi wilfully assisted Gashi Nominees to breach the terms of the freezing order.

22 In Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd,[7] Gillard J, after considering the English cases and the High Court's decision in Australasian Meat Industry Employees Union & Ors v Mudginberri Station Proprietary Limited,[8] identified the principle applying in Victoria to be that, given the requisite knowledge of the order, a civil contempt usually requires that the plaintiff establish that the alleged contemnor had knowledge of the terms of the order and that he deliberately committed an act or omitted to do some act which had the effect of breaching the order. Unless the terms of the order require otherwise, the plaintiff does not have to prove that the act or omission constituting the breach was accompanied by an intention to deliberately breach the order.[9] Neither do the proofs require the contemnor to be aware of the full terms of the court order. It is sufficient if the contemnor knows the substance of the prohibition and knowingly acts in a manner contrary to it.[10]

23 In Scott v Evia Pty Ltd,[11] Dodds-Streeton J agreed that the authorities established it is generally unnecessary to prove that the contemnor committed the breach with an intention to disobey. If, however, the disobedience were "casual or accidental or unintentional" as distinct from "deliberate and voluntary", then although it would prima facie give rise to liability, the Court might nevertheless decline to exercise the contempt jurisdiction. If the Court did exercise the jurisdiction, the casual or accidental or unintentional nature of the breach would be relevant to whether a penalty should be imposed, and if so, what it should be. Thus, any disobedience of an injunction which is worse than casual, accidental or unintentional will be regarded as wilful. The distinction is between the deliberate or intentional nature of the act constituting the breach of the order and a breach characterised by an element of defiance - contumacious disobedience.

24 It may be that Mr Parncutt's submission was directed to the well-established principle that the Court has a discretion not to convict and punish a defendant notwithstanding the Court finding that the defendant knowingly breached the terms of an order pronounced against him or her. Plainly, the task of persuading the Court to exercise that discretion in favour of a defendant would be a difficult one where there is evidence of contumacious disobedience of a court order. To the extent that Mr Parncutt submits that to establish a liability for contempt the plaintiff must prove wilful disobedience, in the sense of an intention to disobey the court order, I reject that submission.

25 The interim freezing order made by Cavanough J was served on 26 March 2010 on Mr Gashi and on 29 March 2010 on Gashi Nominees. Service was not in issue. Mr Gashi was legally represented when the order was extended, inter partes, by Bell J. Mr Gashi's solicitor was Mirka Carmelli of MCK Legal, who, on instructions, accepted service of the order of Bell J on 15 April 2010. There was a flurry of dealings between the solicitors in the period from March to July 2010 and several applications to the court to either discharge or vary the freezing order.

26 Mr Gashi's daughter, Samira, owned a property at Ross Street, Niddrie. On 5 March 2010, a contract of sale of this property was entered into before the interim freezing order was made by Cavanough J. Also, at that time Gashi Nominees had pre-sold off the unregistered plan of subdivision the three units to be constructed at 25 Hamilton Street. Unit 2 was sold to a Michael Koula and unit 3 to a Renthi Enida. The name of the purchaser of unit 1 could not be recalled but it was not Mr Hilmi Kusari, the current purchaser. When the order was made, the development had not been completed and the plan of subdivision had not been registered. Another development property at Dudley Street, Essendon was owned by Mr Gashi's son, Arif. Two units in that uncompleted development had been pre-sold before the interim freezing order was made by Cavanough J. Mr Gashi stated that this development was not a development on behalf of Gashi Nominees: "It was my son. We wanted to help him". At the time of the interim application, uncertainty on the part of the plaintiff as to whether properties had been sold is evident and reflected in the terms of the order.

27 Before the freezing order was extended inter partes, Gashi Nominees had received a letter of offer from the ANZ Bank to refinance the outstanding debt to the Commonwealth Bank. The facilities becoming available on refinancing were to provide funds to complete construction of the developments at Hamilton Street and Dudley Street. When served with the interim freezing order, Mr Gashi "retained a barrister to get rid of the freezing order immediately", to allow the refinancing with the ANZ Bank to proceed. After the order was continued by Bell J, another barrister was retained and, again, a variation of the order to allow the ANZ refinancing to proceed was sought. Bell J refused this further application.

28 Negotiations then followed between the lawyers for the parties which were directed towards the same objective of allowing the ANZ refinancing to proceed. During the course of these negotiations Mr Gashi consulted with Mr Karafili and Mrs Carmelli, his accountant and solicitor respectively. On 20 May 2010, consent orders were made, varying the freezing order and permitting the ANZ refinancing to proceed.

29 The order of 20 May 2010 also directed that Samira Gashi must direct that the net proceeds of the sale of unit 3 at Ross Street, Niddrie be paid into court or into the trust account of the plaintiff's solicitors. Further, all net proceeds of sale of Hamilton St (and the Dudley St, Essendon property) were also to be directed to be paid, at settlement, to the ANZ Bank to discharge liabilities secured against those and three other nominated properties. This latter provision of the order requires context. The deposits received on the pre-sales of Hamilton St were being held by the agent, Raine & Horne. There was a prospect, plainly in contemplation in the negotiations between the parties, that Gashi Nominees may have successfully refinanced, completed the developments and settled on these contracts. This order provided for the surplus equity, if any, from the completion of these developments, to be paid into court or into the trust account of the plaintiff's solicitors.

30 Mr Gashi was questioned about Samira's sale of unit 3 at Ross Street, Niddrie, which settled at the end of May 2010. Mr Adrian Skinner, a solicitor, handled the sale for Samira. The ATO received nearly $600,000 from the sale, which was paid to the trust account of Norton Rose in accordance with Bell J's order of 20 May 2010. Mr Gashi stated he had no dealings before settlement with Mr Skinner. At settlement Mr Gashi discussed with Mr Skinner that the Tax Office was receiving the proceeds of sale. When Mr Skinner asked Mr Gashi about it, Mr Gashi said, "I didn't have any authority to keep the money. I did not ask Skinner about the effects of the freezing order on the sale". Mr Gashi said he did not know why the ATO wanted the money. Mr Skinner said the ATO would be taking the money. Mr Gashi said, "He just told me. I don't know why they wanted it. He called me over the phone. He said the Tax Office would be taking the cheque. I said I'm not able to do anything. We did not discuss the freezing order because I didn't know what they meant". Mr Gashi stated that he did not remember this conversation exactly.

31 The offer to refinance was withdrawn by the ANZ Bank on 2 June 2010.

32 Mr Gashi made another application to Bell J on 7 July 2010. In his supporting affidavit sworn 1 July 2010, Mr Gashi exhibited a copy of the variation order made on 20 May 2010. In the affidavit he also deposed that:

The variation to the original order was granted to facilitate the refinancing of my business with the ANZ Bank. Prior to the making of the freezing order, the ANZ Bank had made an offer to refinance my business. This would have allowed the discharge of Viridian Lines of Credit with the Commonwealth Bank and the completion of two building projects located at 25 Hamilton Street, Niddrie and 19 Dudley Street, Essendon North. However, the variation to the freezing order did not achieve the objective and the ANZ Bank on 2 June 2010 advised me that the offer to refinance was withdrawn.

In evidence before me, Mr Gashi could not recall the exhibit. He told me that he was informed of these matters by Mr Karafili and he believed what Mr Karafili said.

33 Mr Gashi's application in July 2010 again asked the Court to discharge the freezing order to enable him "to continue his work and his life as he wasn't able to get any money from the bank". Mr Gashi explained that he knew he suffered these impediments because of the freezing order: "They stopped me getting any money from September 2010 because I couldn't give [the properties] to the bank as security. I couldn't sell them. I couldn't do anything with the properties. I knew this in September 2010 and that's why I asked the Court to get rid of the order".

34 On 20 July 2010, only a couple of weeks after failing to have the order discharged, Mr Gashi retained Mr Skinner to prepare a contract of sale of Diggers Rest. At that time, other solicitors were acting for Mr Gashi and other members of his family in their dealings with the ATO. Mr Gashi retained Mr Skinner after discussions with Mitch Karafili and Mirka Carmelli who, he said, stated he could sell the property. In evidence Mr Gashi said: "I had to sell it. I couldn't pay for other things". Why Ms Carmelli was not retained for the sale was unexplained.

35 A title search, for the purposes of preparing a contract of sale of that property, was first obtained on 20 July 2010. It revealed unregistered dealings in the form of a Notice of Action lodged by the plaintiff. Later, on 17 November 2010, Mr Gashi entered into a contract with Hilmi Kusari for the sale of the Diggers Rest property, to be settled on 20 December 2010.

36 There was a further application, heard on 4 October 2010, to discharge the freezing order or vary it to permit funds to be raised by a mortgage secured advance for legal expenses. The application for discharge was not pressed and a variation of the freezing order was agreed, although not to permit sale of the two properties.

37 When shown in evidence a spreadsheet exhibited to an affidavit sworn 1 October 2010 in support of this further application, Mr Gashi agreed that the spreadsheet accurately represented, as at 1 October 2010, the assets which were held by Gashi family entities. He agreed that he did not then have assets in Australia or anywhere else in the world of more than $9,000,000. Mr Gashi's present financial position is, he said, a lot worse than that represented in the spreadsheet. He agreed that he had not, in the period since 1 October 2010, had assets worth $9,000,000 or more either in Australia or anywhere else in the world. He agreed that as at 17 November 2010, the summary of financial position represented in the spreadsheet was accurate. The whole of the amount stated in the right-hand column of the spreadsheet, representing net equity, was taken by the bank. Mr Gashi's financial position then became much worse.

38 Mr Gashi affirmed in evidence that he is the sole director and shareholder of Gashi Nominees, which is trustee for the Gashi family trust, a property developer. His evidence was that the property development business is the business of Gashi Nominees and that he had no other business. The property development activities are the only source of income for him and the major source of income for his family. He confirmed that on 17 November 2010 and on 1 December 2010 that statement held true.

39 Mr Gashi agreed that he understood, on 1 October 2010 when he swore an affidavit, that he was unable to grant mortgages over the property, being prevented from doing so by the freezing order. He also understood that the freezing order precluded selling, mortgaging or doing anything with these properties. Mr Gashi stated that he was told that he could get approval from the ATO and then sell the properties, that is, that he must first get approval. He agreed that he was present in court when counsel sought orders on his behalf permitting the properties to be mortgaged for legal and accounting fees. I made consent orders on this application to this effect.

40 On 14 October 2010, soon after these consent orders were made, Mr Skinner was again retained, this time for the sale of Hamilton Street. Mr Gashi told Mr Skinner to prepare a contract of sale for Hamilton Street. Mr Skinner searched the title for the purpose of preparing these contracts, and discovered an unregistered dealing, being a Notice of Action lodged by the plaintiff. The Hamilton Street contracts were entered into on 1 December 2010, between Gashi Nominees Pty Ltd and Mr Hilmi Kusari, for settlement on 20 December 2010.

41 It appears that, notwithstanding these instructions to Mr Skinner, the original contracts of sale were extant, having not been terminated. Mr Gashi stated that by mid-November 2010, the purchasers of Hamilton Street and Diggers Rest were becoming anxious and wanted their deposits returned. There had been no further development at either property.

42 When asked why he thought he could sell the Hamilton Street property, Mr Gashi stated that he did not think he could sell the property without the approval of the ATO due to the freezing order. At that time, Mr Gashi had not sought such consent from the ATO or the court. He also understood that he needed the consent of the ATO when he came to sell the Diggers Rest property due to the freezing order.

43 Mr Gashi identified his signature on each of the contracts of sale for the units at Hamilton Street and the property at Diggers Rest, and admitted that he, or Gashi Nominees respectively, had entered into those contracts. He stated, "All contracts I signed were with the condition providing that I got the approval from the ATO they will go through". There was no written term to this effect. The court was asked, in substance, to accept that this was so, without evidence from Mr Gashi, or more significantly, the purchaser Mr Hilmi Kusari of any communications between vendor and purchaser to this effect.

44 Mr Gashi stated that Mr Magee QC, who had represented him on the October application, explained that he could sell his properties, but only with the consent of the Tax Office. Mr Magee explained that his advice to Mr Gashi was always aimed at getting him to understand the very difficult legal situation he was in. It is clear that Mr Magee spoke of Mr Gashi selling his properties in an orderly way, and of having no choice but to sell, to avoid forced sales by mortgagees and to meet legal and accounting expenses. Mr Magee explained that it was far better for him to sell the properties than for the bank to repossess and sell them. Mr Magee described his advice as consistent and emphatic. He makes no mention in his affidavit of sales subject to the consent of the Tax Office. Having regard to what Mr Magee has not said about the advice he gave to Mr Gashi and why his affidavit is so brief, I consider it likely that Mr Gashi was fully and properly advised of his obligations under the freezing order, but on the basis of Mr Magee's affidavit alone and without reference to other matters, I would not conclude beyond doubt that Mr Gashi was so advised.

45 Mr Gashi sought refuge by claiming a limited understanding of English. I accept that his English is quite limited. Such refuge was necessary to avoid the consequences of his affidavits of 1 July 2010 and 1 October 2010 when, seeking discharge or variation of the freezing order, he deposed to the existence and effect upon him of the freezing order. The affidavit in opposition to this application sworn 22 February 2011, is the first affidavit Mr Gashi has sworn by translation into Albanian. In evidence, he was presented with various other commercial transactions, such as contracts for the construction of a new home and other sale contracts. Mr Gashi agreed he had signed these documents without having them translated. He explained that he does understand some English but does not have a comprehensive understanding. He is assisted by and otherwise relies on his wife and his advisers, such as his accountant and his solicitor, in reading documents. Mr Karafili, Ms Carmelli, Mr Magee, other barristers, and Mr Skinner, to name a few, all seem to have been able to deal with Mr Gashi in English. I am satisfied that his limited understanding of English plays no direct part in respect of the matters I must consider.

46 Considering the evidence in its totality, in particular:

the nature of the various applications made to discharge or vary the order;
what Mr Gashi said in affidavits in support of such applications, particularly his affidavit of 1 July and 1 October 2010;
Mr Gashi's conduct in respect of the contracts with Mr Kusari, including the timing of, and Mr Gashi's instructions to Mr Skinner;
the extensive involvement of advisers: barristers, solicitors and accountants; and
the evidence given before me by Mr Gashi and Mr Skinner.

I have no doubt Mr Gashi understood the constraints of the freezing order in respect of his capacity to sell the properties and that he understood the nature of the transaction entered into by the contracts in November and December 2010, and I so find.

47 Mr Kusari did not give evidence. His absence from the witness box was not explained.

48 Mr Gashi's solicitor, Mr Adrian Skinner, gave evidence. I did not find Mr Skinner to be a satisfactory witness. He explained that on each occasion when he was instructed to prepare contracts he became aware of a Notice of Action lodged by the plaintiff as an unregistered dealing affecting the relevant property. He said Mr Gashi told him on each occasion that the consent of the ATO would be required. Mr Skinner said he was not provided with a copy of the freezing order, and was not told of the dealings between his clients and the plaintiff. Mr Skinner stated that he understood the Notice to be a matter to be dealt with prior to settlement, and to that end, first contacted the solicitors for the plaintiff on 17 December 2010, shortly prior to the due date for settlement.

49 In cross-examination, Mr Skinner admitted that he was advised that there was a freezing order in place but did not see a copy of it until 17 December 2010. It was put to Mr Skinner that a copy of the freezing order was emailed to him when the contract for Ross Street, Niddrie was settled at the end of May 2010, but Mr Skinner maintained that he did not open any attachments to that email, asserting he received it ten minutes prior to settlement. His concern at that time was to know who was to receive the proceeds of sale at settlement. Mr Skinner stated he had no opportunity to take instructions from Mr Gashi and, at some later stage, advised Mr Gashi where the cheque had gone. Mr Skinner rejected any suggestion that he read the freezing order at that time. He stated, in effect, that he handed the net proceeds of the sale to the plaintiff's solicitor because Mr Gashi had previously informed him that he had "issues with the Tax Office". There was no mention of the order of Bell J of 20 May 2010, which dealt specifically with this issue.

50 When Mr Skinner was subsequently engaged to act on the sale of the Diggers Rest and Hamilton Street properties he was aware of the freezing order from these prior dealings and from his title searches. When Mr Skinner was questioned closely about his knowledge of the freezing order, I was satisfied that he was aware of the existence of the freezing order well before 15 December 2010. He attempted, under cross-examination, to distinguish knowledge of the existence of the freezing order from an awareness of the precise terms of the order. I consider it likely he knew of the terms of the freezing order from the sale of Ross Street, Niddrie.

51 The contracts of sale for each property, drawn up by Mr Skinner, are in standard form. None of these contracts contain a special condition, a condition precedent that the contract is subject to the consent of the plaintiff, or a condition regulating the obligation to complete the contract. When asked to explain why such a special condition was not included in the contract, Mr Skinner answered, fatuously, that such a special condition was unnecessary because an unregistered notice of charge will prevent any dealings occurring with the property.

52 The terms of the contracts of sale were also irregular and the evidence of the circumstances of the signing of the contracts was unsatisfactory. In his affidavit, Mr Skinner states that on 17 November 2010 he was provided with a signed copy of the contract of sale for the Diggers Rest property, which disclosed the purchaser as Mr Kusari. On 1 December 2010, Mr Skinner was provided with signed copies of the contracts of sale for the Hamilton Street properties which disclosed the purchaser as Mr Kusari. A later affidavit from Mr Skinner told a different story. Mr Skinner deposed that Mr Kusari attended at his office on 17 November and 1 December 2010, respectively, for the purpose of signing the contracts of sale for the properties. The irregular feature of these contracts is that they do not provide for a deposit. The contract for Diggers Rest shows that the ten percent deposit, which was hand-written into the particulars of sale, has been crossed out and the initialled hand-written alteration shows there was no deposit, the full purchase price being payable at settlement. The contracts for the Hamilton Street property show the full purchase price payable at settlement with no deposit being the original hand-written entry to the particulars of sale.

53 Mr Skinner agreed that it was incumbent upon him to obtain the consent from the ATO to settle the transaction which, he asserted, had been sought by a letter to Mr Yee. That letter was not produced in evidence. Mr Skinner agreed that when the contract was due for settlement on 20 December, he was still waiting for the ATO's consent. Mr Skinner professed a belief that the contracts could never have settled on time, yet he seemed to be seeking consent to settlement by this inquiry. In cross-examination on this issue, the following exchange occurred:

MR WHEELAHAN: After the contracts were entered into, did Mr Gashi instruct you to make arrangements for the settlement?No.

Did he instruct you to obtain consent from the ATO's lawyers?Yes.

He instructed you to obtain the consent from the ATO's lawyers?Yes, I told him that we would need consent and he agreed that consent should be obtained from the Tax Office.

....

So it was incumbent upon you to obtain the consent from the lawyers from the ATO?That's right, and I sent a letter to - prior to that I'd probably sent the letter.

....

Did you receive instructions from Mr Gashi on 17 December to postpone settlement?I can't recall.

Were you waiting for consent?Yes.

...

Were you waiting to receive an answer from Mr Yee?I was waiting to receive an answer from Mr Gashi's legal representative in this matter before then.

Wasn't it your responsibility to obtain the consent?I was waiting for MCK to tell me when the freezing orders were going to be varied to allow the settlement to take place.

You do accept that it was your responsibility to obtain the consent?I accept that the consent was required before settlement would take place.

Is it your evidence that it was your responsibility to obtain the consent?No.

Were you instructed by Mr Gashi and did you agree that you would have to obtain a consent?I agreed that consent would be required from the Tax Office, I didn't agree that it was up to me to get the consent.

So your evidence now is that it wasn't up to you to get the consent?No, it wasn't my responsibility.

Wasn't your responsibility?No.

54 In re-examination by Mr Parncutt, Mr Skinner's credibility was not rehabilitated. The following exchange occurred.

MR PARNCUTT: Now, you sent a letter to the ATO seeking consent, is that correct?Yes.

Can you better recall when that was?I can't recall, no.

Did you receive any response to that letter?No.

So your recall is you got no response?I received no response from the Tax Office and in my email I asked for the consent. I was never given any reply.

MR WHEELAHAN: If Your Honour pleases, we call for production of that email - the letter to Mr Yee.

MR PARNCUTT: No, we don't have access to that correspondence unfortunately, Your Honour. I am not able to produce it.

MR MARTINDALE: Your Honour, it's reasonably important and our instruction is that no such letter was sent by Mr Skinner from his firm to Norton Rose seeking consent ... I have Mr Yee here in court and I've got those instructions. There wasn't any such prior letter. If it can be produced, we'll stand corrected.

WITNESS: Okay, statement withdrawn then.

HIS HONOUR: I beg your pardon, Mr Skinner?Statement withdrawn.

Statement withdrawn?Yes.

MR PARNCUTT: Would that letter be available?I'd have to look through my files and see if I could find it.

Would you be able to - - -

HIS HONOUR: What has been withdrawn, then?My statement that the letter was sent. I can't be sure when it was sent. I'd have to find it. So, I withdraw that statement.

55 It is disappointing to have to make an adverse credit finding about an officer of the court. I do not accept Mr Skinner's evidence. Under cross-examination, he was evasive and argumentative. I do not accept his statement that Mr Gashi and Mr Kusari had agreed that a deposit was not required because the contracts could not proceed without written authorisation from the Australian Tax Office. I do not accept Mr Skinner's evidence that he suggested to Mr Kusari that Mr Kusari should seek independent legal advice. Mr Skinner also made inconsistent statements which he could not satisfactorily explain.

56 By February 2011, Mr Gashi was represented by Kiatos & Co. The subsequent dealings between the parties was by correspondence between that firm and the plaintiff's solicitors. On 18 February 2011, Kiatos & Co asserted that Mr Kusari intended to withdraw from the contracts of sale if they were not settled within 14 days, arguing that putting the properties on the market would be financially detrimental to all. The solicitors proposed that, there having been no wilful disobedience of the freezing order, the sale be permitted to proceed and that "consideration be given that appropriate consent orders be entered into which dispose of the application by consent". The plaintiff's solicitors rejected the assertion that there had been no wilful disobedience of the freezing order stating, in correspondence on 22 February 2011, that the plaintiff will proceed with its contempt application.

57 Although negotiations continued, resulting in a variation by consent to the freezing order permitting the contracts of sale to be completed, there was no further suggestion in correspondence that the withdrawal, or other compromise, of the contempt application was negotiable or had been compromised. The correspondence demonstrates that the plaintiff's solicitors submitted minutes of a proposed order varying the freezing order. That minute became the subject of further negotiation. Neither the further covering correspondence, nor the term for the proposed order, makes reference to the contempt application.

58 For the plaintiff, it was submitted that the elements of a contempt have been shown. Firstly, an order was, relevantly, made by the Court, being the freezing order made by Bell J on 14 April 2010. This proof was not in dispute.

59 Mr Martindale submitted the terms of the order were clear, unambiguous and capable of compliance. The order is substantially in the form prescribed under the Rules.[12] There is nothing ambiguous about the order and it is capable of being complied with. In Chan & Ors v Chen & Ors,[13] orders in similar terms were held to be sufficiently clear, unambiguous and capable of compliance.

60 Next, the order was served on the respondent's solicitors. The fact of service of the freezing order was not in issue.

61 It was clear beyond doubt that Mr Gashi had knowledge of the terms of the freezing order. Finally, Mr Martindale submits that the contracts of sale of 17 November and 1 December 2010 clearly constitute a dealing in the relevant properties in breach of the explicit, unambiguous restraint imposed by the freezing order. The contracts were not entered accidentally or unintentionally. Rather, entry into the contracts was a wilful act.

62 As I have already stated, Mr Parncutt submitted that there is no evidence of contumacious disobedience of the court order although, I understood when I sought clarification, that this submission was put primarily to the issue of penalty rather than the elements of a civil contempt.

63 Mr Parncutt submitted that Mr Gashi had not dealt in the properties in the relevant sense. He contended that to deal with property means doing something that frustrates the freezing order, which could not here occur for two reasons: first, because no deposit was paid by the purchaser and, second, because the contract was subject to the consent of the ATO. Mr Parncutt submitted that it was a common understanding between the parties to the contracts that the ATO's consent was a condition precedent to the performance of the contract, and that without approval of the ATO there is no contract. This was, he submitted, the reason for the absence of a deposit, a fact which demonstrated that Mr Gashi was being careful not to deal with the properties.

64 I find that the contract was not subject to the consent of the ATO. There was no condition of the contract to that effect, whether as a condition precedent or a term regulating the obligation to complete the contract. Further, the contracts were plainly a dealing with the property in a manner precluded by the freezing order.

65 Mr Parncutt contended that the entry into the contracts was permissible as a dealing with or disposing of assets in the ordinary and proper course of business, pursuant to paragraph 16(c) of the freezing order. Mr Gashi is, he submitted, a property developer and his only assets are the development properties he was attempting to dispose of with the consent of the ATO. Further, Mr Gashi was acting upon advice in doing so.

66 Assuming I so found, I consider that this submission must fail. The terms of the freezing order are clear. I accept the contentions of Mr Martindale as to their proper construction, which I have noted above. The exemption applies to Mr and Mrs Gashi, not to Gashi Nominees. If it was thought necessary to extend that exemption to Gashi Nominees, there were numerous opportunities for that application to have been made when Mr Gashi was competently represented. I would not, in any event, find that Mr Gashi is a property developer and his only assets are the development properties of which he was attempting to dispose. I have no evidence about any business of Mr Gashi which might involve the Diggers Rest property. The evidence does not reveal the nature of the investment by Mr Gashi in the Diggers Rest property. It was not to be re-developed using the refinance facility. The evidence is that the property development business is the business of Gashi Nominees and that Mr Gashi had no other source of income. Finally, I do not consider that this transaction was one which could be described as having been in the ordinary course of a business, either as a general concept, or in the context of the business conducted by Gashi Nominees. The unusual features of the transaction are inconsistent with the concept of "ordinary course" and there was no evidence as to what might define the "ordinary course" in these particular circumstances.

67 Mr Parncutt also contended that the plaintiff had waived the conduct on which the contempt is based by its consent to the order made by Ferguson J on 28 April 2011. Authority for the principle that a civil contempt can be waived by an aggrieved party was, he submitted, to be found in Witham v Holloway[14] and Roberts v Albert Bridge Co.[15] Mr Parncutt contended that Halsbury's Laws of Australia, in the chapter on civil contempt[16] correctly states the applicable principle:

If the parties enter an agreement, following the making of orders, on terms different to those orders, one or both parties may not be able to enforce those orders by means of contempt to proceedings, those orders having been superseded by the agreement. However, the original orders may be enforceable by contempt proceedings if the subsequent agreement contains a saving of rights and liabilities. In every case, whether contempt proceedings remain available for the mechanism for the enforcement of orders in such circumstances depends upon the proper construction of the terms of the agreement.

68 The authors of Halsbury's Laws cite Melksham v Fraser Island Barge Transport Pty Ltd[17] as authority for this proposition. I make two observations. First, unlike the circumstances in Melksham, the acts alleged to constitute the contempt occurred before the agreement, which led to the making of the consent order by Ferguson J. The facts of the decision in Melksham are quite different from the present circumstances. There, the restraint concerned carrying on barge activities within particular designated areas, pursuant to permits held from the Port Corporation of Queensland. It was clear that an agreement between the parties varied the effect of the order, and as a result the designated area of the restraint was changed. The precise circumstances of the offending conduct are not set out in the report of the appeal. However, it seems fairly clear that the basis of the contempt was the use of barges after the date of the agreement.

69 My second observation is that, as in Melksham, where the parties by the agreement expressly intended the order and undertakings, given earlier to the Court, to continue to have full force and effect, here the parties by their agreement excluded the application for punishment for contempt from their negotiation.

70 Williams JA, with whom the other members of the Court agreed, stated:

[15] The correct statement of principle, in my opinion, is that found in Oswald's Contempt of Court (3rd ed 1910) at 122: "If an arrangement is made after the judgment or order for payment, under which its terms are interfered with, as by agreeing to take payments by instalments or otherwise, without saving the rights under the judgment or order, the right to a subsequent attachment to enforce the judgment or order will be lost.". The relevance for the present purposes is obvious; here the agreement expressly states its rights and obligations under the order. That statement is supported by the judgment of Vice Chancellor Bacon in Harvey v Hall (1873) L R 16 EQ 324. The reasons are not fully reported but it is clear from the statement of facts that the agreement, subsequent to the original order, to pay by monthly instalments, without saving rights under the original order, compelled the conclusion that default in payment could not lead to an attachment order being made by the Court. As Bacon VC observed: "There had been such an interference with the terms of the original order that an attachment could not now be issued.".

71 Here, it is clear that negotiations subsequent to the contracts of sale, which resulted in the consent order made by Ferguson J, did not compromise the extant application by the plaintiff for punishment for contempt. This is clear, not only from the correspondence between the parties but also from the absence of any provision in the order disposing of the plaintiff's summons for contempt. It was not, as Mr Parncutt submitted, a situation where it was necessary for the plaintiffs to expressly reserve their rights to proceed with the application. The converse was the case, and Mr Gashi and Gashi Nominees have failed to show that there was any agreement to compromise the contempt application.

72 Mr Parncutt also submitted that the terms of the freezing order were not clear and unambiguous. This submission was based on paragraph 3 of Bell J's order on 20 May 2010, which I have referred to above. Mr Parncutt contended that paragraph 3 of the order of 20 May permitted the sale of Hamilton Street, creating an ambiguity, or some uncertainty, in the extent of operation of the original constraint.

73 I reject this submission. The paragraph in question does not permit the sale of Hamilton Street. At the time of the interim order there was justifiable uncertainty as to whether Hamilton Street had been sold and the relevant asset of Gashi Nominees to be frozen was the property itself or the net proceeds of sale. So much is clear from the terms of paragraph 21 of the principal order. Such concern was well placed. Paragraph 3 of the 20 May order more specifically directs how any surplus proceeds of sale are to be held. I have already explained the context of this order. There is no uncertainty or ambiguity created. The basis of Mr Parncutt's submission, that paragraph 3 of the 20 May order permits a sale of Hamilton Street, is misconceived.

74 Bearing in mind that the criminal onus of proof applies in this proceeding, I am satisfied that the plaintiff has established the contempts alleged against Rasim Gashi and Gashi Nominees Pty Ltd, constituted by the entry into contracts of sale of the properties at Diggers Rest and Hamilton Street respectively. I am 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 am 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.

76 I will provide to the plaintiff and to Mr Gashi and Gashi Nominees Pty Ltd the opportunity to address me on whether I should proceed to conviction on these contempts, and also on the question of penalty should I proceed to conviction.

[1] The plaintiff refers, for support of this submission, to the orders made 20 May 2010 to which I will later refer.

[2] Australasian Meat Industry Employees Union & Ors v Mudginberri Station Proprietary Limited [1986] HCA 46; (1986) 161 CLR 98, 107 - 8; Witham v Holloway (1995) 183 CLR 525, 534; Chan & Ors v Chen & Ors (No 2) [2007] VSC 24 at [21].

[3] National Australia Bank v Juric [2001] VSC 375 at [37]; Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201 at [31]; Scott v Evia Pty Ltd [2007] VSC 15 at [36]; Chan & Ors v Chen & Ors (No 2) [2007] VSC 24 at [22].

[4] See Z Limited v A-Z and AA-LL [1982] 1 QB 558, 578 (Eveleigh LJ). The passage has been referred to with apparent approval by the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 395; Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530 at [121]; Chan & Ors v Chen & Ors (No 2) [2007] VSC 24 at [69].

[10] Madeira v Roggette Pty Ltd (No 2) [1992] 1 QB R 394, 403.

[12] See form 37AA; Rule 37A.02(3) and Practice Note No. 5 of 2010 (replacing No. 3 of 2006).

[13] Op cit [23]-[27]. See also Witham v Holloway op cit.

[14] (1995) 183 CLR 525, 540 (McHugh J).

[17] [2002] QCA 218; [2003] 1 Qd R 520, 523-527 (Williams JA).

Court (General Civil Procedure) Rules 2005

At a glance

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Judgment (106 paragraphs)

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Legislation Cited (7)

Cases Cited (4)