Plaintiffs v Defendants

3 Rule 75.11(1) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) provides that the court may punish a natural person for contempt by committal to prison or fine or both.

4 In Deputy Commissioner of Taxation v Gashi (No 3),[2] Dixon J listed considerations relevant to determining an appropriate penalty for contempt of court and I will refer to a number of those considerations which are of particular relevance in this case.

5 The first three charges that I found proved were connected and related to transactions that occurred on 10 November 2010, which was the day after the freezing order was made. By a series of transactions, Mr Lee transferred the sum of $300,000.00 from a National Australia Bank account to a Crown gaming account in his name. The amount of $300,000.00 was used to purchase a gaming chip voucher.

6 The records of Mr Lee's Crown gaming account show gambling transactions between 10 November 2010 and 6 January 2011 on his gaming account. His account had reached a zero balance by 6 January 2011.

7 I also found that Mr Lee withdrew a further sum of $5,000.00 at approximately 5.46 pm on 10 November 2010, in breach of the freezing order.

8 The fourth charge that I found proved beyond reasonable doubt against Mr Lee was that he had transferred $38,987.60 from a Bank of Queensland account, by 10 separate monthly withdrawals of $3,898.76, between 27 November 2010 and 27 August 2011. Those transfers were to a loan account. Each withdrawal was a direct debit to pay for a BMW vehicle and was preceded by a credit to the account.

9 The financial consequences of the contempts were the withdrawal of amounts totalling more than $340,000.00 in breach of the freezing order. That amount might otherwise have been used in part satisfaction of the very large court judgment obtained by the plaintiffs, or some of them, against Mr Lee, which amounted to approximately $7,280,707.33.[3]

10 Mr Lee gave evidence at the second hearing. He said that Mr Thompson, the plaintiffs' solicitor, had explained the freezing order to him but that the order was not clear to him. At the suggestion of a friend, to whom incidentally he owed a large amount, he went to a bank and asked a staff member which accounts he could withdraw money from and then withdrew the money.

11 He gave evidence of the transactions at Crown Casino. He told the Court that he had converted the money at Crown into gaming plaques. He agreed that he gambled around $5,000.00, and that his fiancée had also placed bets. He could not convert the whole value of $300,000.00 worth of chips back into cash without appearing to money launder. He said that he used about 80 per cent of the $300,000.00 to pay debts, apparently for drugs and gambling, and that he used the rest for living expenses and $5,000.00 for personal gambling.

12 An initial question is whether the Court should proceed, as the plaintiffs submitted, to convict Mr Lee of the contempts of court that I have found proved. His counsel submitted that he should not be convicted and referred to my reasons for imposing fines on Mr Chong, the third defendant, without convicting him.[4] Counsel submitted that it would be a denial of procedural fairness to convict Mr Lee because he was not given any notice, until the plaintiffs' solicitor filed an affidavit dated 20 November 2015, that the plaintiffs sought an order that he be convicted. The attempt to have Mr Lee now convicted was incongruous with the terms of the plaintiffs' summons and supporting affidavit, the way they ran their case, the submissions of their senior counsel, the Court's judgment in the contempt proceedings against Mr Lee and the penalty that the Court imposed on Mr Chong.

13 However, I consider that Mr Chong's situation was quite different and does not govern the outcome of the present case. In that proceeding, the penalty of imprisonment was not available because an order with the endorsement required by Rule 66.10 had not been served on Mr Chong. In this proceeding, senior counsel for the plaintiffs on 3 June 2015 opened their case stating that their application was made under Rule 75.06 against Mr Lee and his company that they be punished for civil contempt of court for breaching a freezing order made by the Court.[5]

14 While disobedience to a court order in civil proceedings is a civil contempt, it amounts to a criminal contempt if the disobedience was contumacious or if the punishment of the contempt serves no remedial purpose, but only the punitive purpose of punishing a past breach. No allegation of contumacious breach was made. But, where the substance of the proceeding is for the purpose of punishing past breaches, the contempt may be characterised as criminal.[6]

15 On the first day that Mr Lee appeared in court, being 16 April 2015, I informed him that if the charges were proved that the most serious penalty that could be imposed was to impose a gaol term. I asked him if he realised he might go to gaol if the case was proved.[7] Mr Lee acknowledged that he did. I then stood the case down, to ensure that he had legal representation and the Court's self-represented litigants' coordinator arranged legal representation under the Victorian Bar Duty Barristers Scheme. I again informed Mr Lee that in cases of serious breach of court orders, courts sometimes send people to prison.[8] I again stated that these matters were very serious matters that may have a serious effect on him.[9]

16 When counsel appeared pursuant to the Bar Scheme, I explained that the plaintiffs were seeking orders that Mr Lee and his company were guilty of contempt of court for breach of the freezing orders.[10]

17 I again informed Mr Lee when adjourning the matter until 3 June 2015, that if the charges were proved, significant penalties may be imposed on him and that he needed to consider his position.[11]

18 Although I expressed the view that the proceeding remained a civil proceeding,[12] Mr Lee's counsel submitted that the proceedings concerned a criminal contempt, as counsel put it 'the only purpose which remains for this application is one of the punitive punishment of a past breach'.[13] A similar submission had been put in the first hearing when Mr Lee unsuccessfully sought to have the proceeding dismissed because the plaintiffs had already obtained a sequestration order against him.[14]

19 In addition, once the second hearing phase of the proceeding commenced, the plaintiffs' submissions and their solicitor's affidavit made it very clear that they were submitting that this was a criminal contempt and that the plaintiffs were seeking orders that Mr Lee be convicted and imprisoned. As the Victorian Court of Appeal stated in Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd,[15] there has been a well-entrenched practice in this country of allowing a civil contempt to be converted into a criminal contempt in the penalty phase.[16]

20 During the first hearing, Mr Lee did not contest the plaintiffs' formal proofs that a freezing order was made, the terms of which were clear, unambiguous and capable of compliance, that the order was served on him and that he had knowledge of the terms of the order.

21 The question of whether procedural fairness has been provided to a party depends on the facts of the case, particularly how the trial was conducted. Assessing the matter overall, I consider that it should have been clear to Mr Lee throughout the proceeding, that if the charges of contempt, or any of them, were proved, he faced convictions for contempt and significant punishment, including imprisonment.

22 The plaintiffs sought orders that Mr Lee be convicted to vindicate the Court's authority and that he be imprisoned.

23 Mr Lee made an affidavit about his personal circumstances and gave oral evidence and was cross-examined. He is 35 years of age and has two children, a boy aged 5 and a girl aged 6. He was married in 2008 but is divorced. He lives with his fiancée, but maintains regular contact with his mother, sister and his children. He had a challenging upbringing. He became dependent on opiates, primarily heroin, from around the age of 16.

24 Mr Colin Richardson, who was formerly the unit manager at the Parkville Youth Training Centre, met Mr Lee in 1997 when Mr Lee was serving six months' youth training adult sentence. He described how Mr Lee as a teenager had become involved with a gang in an area where heroin was rife. He said that Mr Lee never gave him any trouble and described him as a very obliging young man. Mr Lee's father kept in contact with Mr Richardson for some years.

25 From about 1996 until late 2009 Mr Lee was a heavy user of heroin. He is now drug free, however, the effects of his prolonged and heavy drug use remain. In 2013, he was diagnosed with significant illnesses. Although one of the illnesses is no longer active, however, the treatment has had side effects. His other illness is not curable and he finds himself physically exhausted each day. That illness requires monitoring. A statement of medical evidence supported this evidence.

26 The funds obtained in breach of the freezing order were used to pay various drug and gambling debts, which were in excess of $600,000.00. He had received physical threats from his previous heroin suppliers, and he feared for his safety and that of his children.

27 He said that he had overcome significant adversities including a 19year drug addiction. There is some prospect of him obtaining a job with a friend on a parttime basis, however at present his financial future is bleak. He is an undischarged bankrupt.

28 Mr Lee stated that if he was placed into the penal system he would be exposed to negative influences which may lead to his relapse. His fiancée works and supports him.

30 Mr Lee's counsel submitted that he had conducted himself appropriately at the trial and not run a positive case, but rather, as he was entitled to, put the plaintiffs to their proof in respect of the breaches of the order.

31 Counsel relied on Mr Lee's apology to the Court which they described as sincere and whole-hearted. In comprehensive submissions, his counsel contended that a fine was the only option in the present case but it should not have to be paid until he is discharged from bankruptcy and should not be a crushing burden. However, they also made submissions about other possible penalties.

32 Breaches of freezing orders are serious matters. These breaches were particularly serious. They were committed in large part on the day that Mr Lee was informed that a freezing order had been made and of its terms. The breaches were wilful. They involved ignoring orders of the Court and therefore significantly interfered with the administration of justice. Mr Lee's conduct constituted wilful breaches of the freezing order.

33 Mr Lee's actions had the effect of removing a large sum of money, over which he had control, that might otherwise have been received by the plaintiffs in partpayment of the large judgment that they later obtained.

34 I do not accept that Mr Lee's conduct on 10 November 2010 was caused by the explanation that a bank staff member gave him of the order. The plaintiffs' solicitor had previously explained the terms of the order to him.

35 So far as charge 4 is concerned, Mr Lee took no steps to prevent the direct debits continuing to be charged to his account, and thereby withdrew the amounts that are the subject of that charge. He did not inform the plaintiffs of those withdrawals and did not seek a variation of the freezing order.

36 I take into account Mr Lee's apology, which he gave in oral evidence, and his plea for leniency.

37 It is important to keep in mind that I am imposing penalties for Mr Lee's breaches of the freezing order and not for his conduct with which the judgment of Ferguson J dealt.

38 I take into account Mr Lee's personal circumstances. But, I also take into account the nature and circumstances of the contempt and its actual consequences. As I have stated, the effect of the contempts was significant on the administration of justice. I consider that Mr Lee was culpable. There is a need to deter Mr Lee and others from repeating or engaging in such conduct.

39 I have considered all possibly available penalties, including community corrections orders, assuming they are available, suspended sentences and fines.

40 I consider that the contempts were very serious. It is important that persons subject to freezing orders are aware that they may face serious consequences if they breach them. The only appropriate penalty is committal to prison. I do not consider that any other penalty would sufficiently reflect the seriousness of the contempts.

41 Taking all the matters into account, I impose on Desmond Ming Lee a sentence of two months' imprisonment on charges 1 to 3. I impose the one sentence for those charges, as they arise out of the same course of conduct.[17] I impose a sentence of one month's imprisonment on charge 4, to be served concurrently with the sentence in respect of charges 1, 2 and 3.

42 Had it not been for two factors, the Court would have imposed a substantially longer period of imprisonment in respect of the contempts. Those factors were first, the length of time that this matter has been awaiting determination, which was largely due to awaiting the outcome of the civil proceedings on foot, and not due to any fault of Mr Lee's. The second factor is Mr Lee's personal circumstances, in particular his health issues.

43 The plaintiffs did not seek an order for costs, because of the lack of utility of such an order.

1. The First Defendant, Desmond Ming Lee, is adjudged guilty of contempt of court in that, in breach of the order made by Sifris J on 9 November 2010 he withdrew:

(a) $300,000 from the National Australia Bank Ltd, Lee Holdings (Australia) Pty Ltd t/as CC Cartage Business Cheque Account (BSB 083 106, Acc 17004 1892), on 10 November 2010;

(b) $305,000 from a gaming account held at Crown Melbourne Limited in the name of Desmond M Lee (Patron No 259 7366), in separate withdrawals, in the amounts of $300,000 and $5,000 on 10 November 2010;

(c) $142,733.74 from the National Australia Bank Ltd, Lee Holdings (Australia) Pty Ltd t/as CC Cartage Business Cash Maximiser Account (BSB -083 106, Acc 83 416 9793) on 10 November 2010;

and in respect of charges 1 (a), (b) and (c), Desmond Ming Lee is convicted and sentenced to two months' imprisonment expiring on 20 February 2016;

1. The First Defendant, Desmond Ming Lee, is adjudged in contempt of court, in that in breach of the order made by Sifris J on 9 November 2010 he withdrew $38,987.60 from the Bank of Queensland Ltd Account, Mr Desmond Ming Lee Ultimate Account (BSB 124 001 Acc 2012 1322) in 10 separate withdrawals made between 27 November 2010 and 27 August 2011;

and Desmond Ming Lee is convicted and sentenced to one month's imprisonment to be served concurrently with the sentence in respect of charges 1 to 3 set out in paragraph 1 (a), (b) and (c), which expires on 20 February 2016.

[1] CC Containers Pty Ltd v Lee (No 8) [2015] VSC 478.

[2] [2011] VSC 448 [5].

[3] See CC Containers Pty Ltd v Lee (No 6) [2014] VSC 151; Chang & Neale v CC Containers Pty Ltd [2015] VSCA 137.

[4] CC Containers Pty Ltd v Lee (No 9) [2015] VSC 595.

[5] Transcript of Proceedings, CC Containers Pty Ltd v Lee (Ginnane J, SCI 2010 06056, 3 June 2015), 22.

[6] Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd [2014] VSCA 261 [270] see also [264] [270] [272] [275] referring to Mosman Municipal Council v Kelly (No3) [2009] NSWLEC 92; (2009) 167 LGERA 91, 108 [58]-[59] (Biscoe J) and see Hearne v Street [2008] HCA 36; (2008) 235 CLR 125, 168 [133] (Hayne, Heydon and Crennan JJ) and Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [2015] HCA 21; (2015) 320 ALR 448, 461-2 [65] (Nettle J).

[7] Transcript of Proceedings, CC Containers Pty Ltd v Lee, (Ginnane J, SCI 2010 06056, 16 April 2015), Transcript ('T') 4-5.

[12] Transcript of Proceedings, _CC Containers Pty Ltd v Le_e, (Ginnane J, SCI 2010 06056 3 June 2015) T8-9, 120-1.

[13] T 6. See also T 32, 34, 36, 121 and 136-7.

[14] CC Containers Pty Ltd v Lee (No 8) [2015] VSC 478 [19]-[22].

[15] [2014] VSCA 261.

[17] The provisions of the Sentencing Act 1991 are not strictly applicable.