Schnabel v Lui

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

50017/01 PETER R SCHNABEL & ORS v KEVIN YUNG LUI & ORS JUDGMENT - On application to issue warrant for arrest under Part 55 r 10 1 HIS HONOUR: What I am determining is an amended notice of motion filed on 29 November 2002 by which the plaintiffs sought the issue of a warrant for the arrest of the first defendant and his detention in custody pursuant to Part 55 r 10 of the Supreme Court Rules 1970 ("the SCR"). That rule provides as follows: "10 Where: (a) notice of a motion for punishment of a contempt has been filed or proceedings have been commenced for punishment of a contempt, and

(b) it appears to the Court that the contemnor is likely to abscond or otherwise withdraw himself from the jurisdiction of the Court,

the Court may issue a warrant for the arrest of the contemnor and his detention in custody until he is brought before the Court to answer the charge, unless he, in the meantime, gives security in such manner and in such sum as the Court directs, for his appearance in person to answer the charge and to submit to the judgment or order of the Court. " 2 The facts of that matter are that, prior to May 2002, the plaintiffs obtained judgment for a large sum of money against the first defendant. It had in place Mareva relief in support of execution whereby the first defendant was forbidden from transferring assets. The plaintiffs allege that on 28 May 2002 the first defendant executed transfer # 8962456 of a home unit at Marrickville of which he was the registered proprietor under the provisions of the Real Property Act 1900. The plaintiffs allege that the first defendant thereby breached that order and was in contempt of this Court. It is only recently that the existence of that transfer has been discovered by the plaintiffs and the present motion consequently brought. 3 The motion was first filed on 26 November 2002 and was, as I have said, amended on 29 November 2002. The time for preparation on either side has therefore been short and the evidence is sparse and largely hearsay. The evidence reveals two areas of contention between the parties. 4 The first area is that, although the signature "Kevin Yung Lui" appears on the relevant transfer, it is denied by the first defendant that it is his signature. There is some history behind this. The first defendant has alleged before now that, although he is the registered proprietor of the property, he is not the beneficial owner, the beneficial owner being his father. The father apparently held at the relevant time the son's power of attorney, at least in relation to the Marrickville property. It is alleged that the signature on the transfer was written by the father. It is all rather curious, since the execution of the transfer purports to be an execution by the first defendant personally and not an execution under power of attorney. However, it should also be said that, although it is certainly not appropriate for me to determine any of these matters on this motion, a comparison of the signature as it appears on the transfer with other signatures of the first defendant at least raises doubts as to whether they are written in the same hand. 5 The other area of contention is as to the first defendant's present whereabouts (he is said to be in Beijing), the likelihood and time of his return to New South Wales, and his location when he is in New South Wales. There is dispute as to when he was last in New South Wales, the first defendant alleging that this was in October, the plaintiffs producing some evidence that he was seen in Sydney on 11 and 12 November 2002. 6 On the present evidence one can only conclude that he is out of Australia, probably in Beijing, and was out of Australia at the time the present motion was filed. The evidence of his solicitor, whose word there is no reason to doubt, is that during 2001 and 2002 he has on various occasions been out of Australia but up till now has always returned. On the solicitor's evidence, when he is in New South Wales he adopts a curious position as to his whereabouts, those whereabouts in essence being concealed from, or at least kept from, his solicitor. There are ongoing proceedings between the plaintiffs and the first defendant, in the Commercial List, in the Court of Appeal and in the Federal Court in its bankruptcy jurisdiction. Frequent contact between him and his solicitor is necessary, but no address is furnished to the solicitor, nor any permanent landline telephone number. Contact is maintained by him telephoning the solicitor frequently, at times virtually daily. The solicitor from time to time reaches him by telephone either by ringing a mobile phone number or by ringing his brother in law and asking the brother in law to get the first defendant to contact him. 7 The evidence appears to show that the first defendant is divorced from his wife, but that he maintains apparently friendly contact with his ex wife. It is at the former matrimonial home now owned by her that it is said that he was seen on 11 or 12 November 2002. He has other family in New South Wales. The father who has been mentioned is here. There are three infant children of the marriage who the evidence indicates live in New South Wales, presumably with the ex wife. He therefore clearly has an ongoing association with New South Wales. 8 It is on this evidence that the plaintiffs ask for his arrest under Part 55 r 10. But there is not a great deal of authority concerning the incidence of that rule. With the research that has been possible in the couple of days that I have had available, I have not been able to determine conclusively the origins of Part 55 r 10. There does not appear to be or to have been a corresponding rule in English procedure. In Australia, so far as I can tell, the first appearance of the rule was in the original High Court Rules as Order XLIX r 5. That flowed over into the High Court Rules 1952 as Order 52 r 6. That rule is cited in historical notes as the source of Part 55 r 10 and also of the corresponding rule in the Federal Court Rules (Order 40 r 9). Furthermore, there are corresponding rules in the rules of court in Queensland (rule 927); Western Australia (Order 55 r 6); and, in a modernised but similar form, in Victoria and the Northern Territory (in each case rule 75.08). Despite this widespread adoption of the rule in Australia, there is very little authority concerning its incidence, and that mostly in New South Wales. 9 A situation in which the rule was used appears in the judgment of the Court of Appeal in Patton v Australian Consolidated Press Ltd (No 1) NSWCA 6 October 1989 unreported. The factual situation was a clear one. Upon a subpoena being served upon a prospective witness to attend on 23 October 1989, she wrote, "I write to notify the court that I will not be attending on 23 October 1989 to give evidence. I will in fact be returning home to Los Angeles." The witness thereafter made herself hard to find in Sydney. As a result the Court of Appeal ordered in Patton v Harrison [No 1] NSWCA 12 October 1989 unreported that a warrant issue under Part 55 r 10 for her apprehension. In ordering its issue Kirby P said: "It is plain from materials before the Court that process is now before us by which punishment of contempt is sought against Mrs Harrison. Proceedings have been commenced for that purpose and she has been named as a party. So far as the second requirement in par (b) of the rule is concerned, it does seem to me from the material placed before the Court (including the material placed before it today in the affidavit of Mr Hill) that unless steps are taken to bring Mrs Harrison into custody she is likely to abscond or otherwise withdraw herself from the jurisdiction. So much she said she would do in the letter to Mr Landers which originally initiated these proceedings.

Accordingly, the order which I would propose is that a warrant for the arrest of Mrs Harrison be issued in the form of the document which has been handed to the Court, and which I initial. If the Court makes that order, the warrant will be signed by one of the Judges of Appeal. The document which has been tendered omits the monetary sum the payment of which will be taken to the security for her appearance before the Court. I would propose that such sum be $50,000." 10 The matter again received consideration in The Registrar, Court of Appeal v Ritter (1985) 34 NSWLR 641. In the end, what was said concerning Part 55 r 10 in that case was obiter, since no order was made for arrest and the majority of the Court of Appeal thought it more appropriate that, if an order were to be made, it should be made under Part 42 r 7 of the SCR. However, concerning the meaning, particularly of paragraph (b) of Part 55 r 10, Kirby P said:

"Although this is plainly a case to which Pt 55, r 10(a) applies (proceedings having been commenced for the punishment of a contempt), the difficulty is presented by the terms of par (b). It is only where the conditions of that paragraph are made out that the Court is empowered to issue the warrant for the arrest of the contemnor.

There is absolutely no evidence (as the Registrar properly conceded) that the defendants are 'likely to abscond'. On the contrary, such evidence as the Court may properly consider discloses that the defendants have always been readily found at their family home. They have been served with the summons. They simply choose not to attend, as indeed they chose not to attend on the second day of the trial before Sudano DCJ and a jury in the circumstances giving rise to the proceedings.

Nor, as it seems to me, can it be said that they have 'otherwise withdrawn ... from the jurisdiction of the Court'. Some meaning must be given to this additional clause. 'Abscond' implies fleeing the jurisdiction, in order, by inference, to avoid the punishment which might follow from a proved contempt. What kind of 'withdraw ... from the jurisdiction' is implied differently to 'abscond'? It was suggested, in argument faintly, that 'withdrew - from the jurisdiction of the Court' included withdrawal from the power of the Court to make an order binding on the defendant; for example, by refusing to attend in the endeavour to frustrate the power of the Court to proceed with the Registrar's summons. But there are two answers to this contention. First, it is not the case that the defendants, by their failure to attend, frustrate the proceedings. Nor is this contended in the plaintiff's summons. On the contrary, the summons warns the defendants that the proceedings will continue in their absence. Secondly, meaning must be given to the word 'jurisdiction' in a way compatible with the word 'abscond'. Just as 'abscond' implies leaving the 'jurisdiction' of New South Wales I take 'withdrew ... from the jurisdiction to mean leaving New South Wales in circumstances that would not amount to abscondment. Thus, were it to be established that the defendants were preparing to leave New South Wales to return to Romania because of fear of the present proceedings, such facts would attract the jurisdiction of the Court on the grounds of likely abscondment. Were they to be leaving Australia simply because they had changed their minds about their migration, that would amount to 'withdrawal'. There is not the slightest evidence of either. Accordingly this rule does not apply."

In addition to this discussion of par (b), two things may be said about the rule arising from this decision. It is clear that it is not the only rule under which an alleged contemnor may be arrested to answer a charge of contempt. And it is made plain that, although contempt proceedings may proceed in the absence of the contemnor, the Court has power to order an alleged contemnor to appear to answer the charge and, if need be, to order the arrest of the contemnor so to do. 11 I turn to the structure of Part 55 r 10. Although some matters of the construction of the rule do not appear to be clear, the general structure of the rule does seem clear to me. Initially there must be established two matters. The first, in paragraph (a), is simple, that is, that a charge of contempt has been brought. The second, far more difficult, is set out in paragraph (b), to which I shall return. Once those matters are established as a matter of fact, the word "may" in the body of the rule makes it plain that the Judge then has a discretion as to whether or not to issue the warrant. Without in any way attempting to spell out exhaustively the considerations that may be material in relation to the exercise of this discretion, it does seem to me that the strength of the case in support of the charge of contempt is one such consideration. 12 Another difficulty that arises in relation to the interpretation of the rule is whether or not the warrant, when issued, should contain a provision for the giving of security and the sum in which security should be given, or whether the intention of the rule is that that subject matter should be attended to only when the alleged contemnor is brought before the Court on the warrant. The latter view, namely, that it should not initially be included in the warrant, was taken by the learned authors of Neville & Ashe, Equity Proceedings with Precedents (New South Wales) (1981). Their form of warrant does not include a provision for security: Precedent 23(9). The opposite view was taken by Kirby P in Patton v Harrison [No 1] supra. It seems to me that the view taken by his Honour should govern the practice of the Court, so that warrants when issued provide a mechanism whereby the contemnor may avoid arrest or obtain immediate release by the giving of the security which has already been defined. 13 At first it seemed to me that the terms of the rule precluded the issue of a warrant when the contemnor was not within the jurisdiction. Mr Kunc, of counsel for the plaintiffs, countered this suggestion with the example of a hypothetical person writing an explicit letter (as did the contemnor in Patton v Consolidated Press Ltd (No 1) supra), but in the following terms: "I am in New Zealand, I am about to return to Sydney, pack my bag, leave Australia, and I will not be present on the relevant occasion." This, he said, would indicate a likelihood of absconding, although the writer was not in Australia. Essentially, in my view, Mr Kunc's contention is correct. In a sense what his contention does is highlight yet again the general dangers of glosses on statutes or rules. What is important to focus on as the vital question is the question posed by the relevant statute or rule. Here it is the question of whether it is likely that the contemnor will abscond. The considerations going to the answer to that question may be rather different depending on whether the contemnor is within or without the jurisdiction at the time in respect of which the question is to be answered. But Mr Kunc's example demonstrates that there are circumstances in which the central question, whether it is likely that the contemnor may abscond, may be answered, yes, although at the time the contemnor is not within the jurisdiction. 14 Turning back to the content of paragraphs (a) and (b) of r 10, it seems to me that the strength or weakness of the case of contempt is not a relevant consideration within paragraph (a), much less is there a requirement that a prima facie case of contempt be shown in order to establish precondition (a). As I have already said, the precondition is simply that a charge of contempt has been brought. 15 The content of the second precondition in paragraph (b) is a matter of much greater difficulty. The first difficulty arises from the use of that slippery word "likely". I describe the word as "slippery" because there is no doubt that the meaning to be attributed to it differs widely in different contexts: see the definition of "Likely" in Butterworth's Australian Legal Dictionary (1997); and see Tillmanns Butcheries Pty Ltd v Australian Meat Industry Employees' Union (1979) 42 FLR 331 at 339 - 340 per Bowen CJ; and Boughey v The Queen (1986) 161 CLR 10 at 20 per Mason, Wilson and Deane JJ. In some contexts it means "probable" as opposed to "possible": Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 14 SASR 303 at 311 - 312 per Bray CJ. In other contexts it means only "having a substantial, real, and not remote chance of causing the result.": R v Teremoana (1990) 54 SASR 30 at 40 per Cox J. Where it is to be found in the spectrum between these extremes varies according to the statutory context. 16 In the present context it seems to me that "likely" should be construed as requiring the establishment of a probability on the balance of probabilities. I come to this conclusion because the rule is draconian in effect, permitting the arrest and deprivation of liberty of a person at an early stage of contempt proceedings and before the alleged contemnor has in any way defaulted in appearing to answer the charge, much less been found guilty of contempt. In those circumstances it seems to me that the rule should be construed as justifying arrest only where a case is made out on the probabilities that the person will absent himself or herself as outlined in the balance of the rule. 17 The other difficulties in relation to the interpretation of this rule arise as to the meaning in it of "abscond" and "withdraw". "Abscond" is defined in the Macquarie Dictionary (3rd Ed, 1997) as, "to depart in a sudden and secret manner, especially to avoid legal process." There is, I think, no doubt, and it is not contended otherwise, that the word "abscond" contains the notion of a purpose of avoidance. The word "withdraw" as used in the rule is relevantly defined in the same Dictionary as "to retire; retreat; go apart or away." I do not think there is a notion in the word "withdraw" of a purpose of avoidance. However, I do not think that the word is used in the rule to refer to a fleeting or a short absence. It seems to me that the word suggests an absence that is of some considerable length or indefinite. This is because it is in a context where what is contemplated is that the alleged contemnor will not appear in answer to the proceedings. The absence, in any event, of a sense of purpose from the meaning of "withdraw" in the context is confirmed by what Kirby P said in Ritter supra. 18 There has been more controversy before me as to the meaning of the word "abscond". Mr Epstein, of Senior Counsel for the first defendant, has contended that the verb "abscond" in paragraph (b) is modified by the adverbial phrase "from the jurisdiction" as much as is the verb "withdraw". Mr Kunc has on the contrary contended that "from the jurisdiction" modifies only "withdraw" and that departure from the jurisdiction is not necessary to the concept of abscond within the meaning of the rule. He says, therefore, that the plaintiffs may rely, in establishing the proposition in paragraph (b), on the behaviour of the defendant concealing his whereabouts when he is in New South Wales, even from his own solicitor, being likely to be repeated upon his return to the State. I am of the view, however, that Mr Epstein's contention is correct. In some circumstances where an adverbial phrase is used after two verbs, it may be unclear whether it modifies only the latter of the two or modifies both. However, in my view, the use of the word "otherwise" before "withdraw" makes it plain in paragraph (b) that, whilst inherently one may be able to abscond within the jurisdiction, it is absconding from the jurisdiction that is referred to in the paragraph. The conclusion I have come to is again supported by the conclusion come to by Kirby P in Ritter's case as set out above at [10]. Incidentally, a different conclusion may well be indicated by the wording of r 75.08 in Victoria and the Northern Territory. 19 On the basis of my conclusions as to the construction of the rule, I turn first to the question of whether the preconditions for the exercise of the discretion have been established. As I have already indicated, it is quite clear that a charge of contempt has been brought. However, I am not prepared to find that the plaintiffs have established that it is likely that the first defendant will abscond or withdraw from the jurisdiction within the meaning of paragraph (b). There is strength in Mr Kunc's reference to the peculiarity of the first defendant's behaviour as to his whereabouts whilst in New South Wales. However, the question here is whether he is likely to leave New South Wales in circumstances which will preclude his answering the charge of contempt. So far as it is established, he has a pattern of moving between New South Wales and overseas, particularly China, in the course of conducting his life. He has been out of New South Wales on a number of occasions over the last two years and has always returned. He still has considerable family connections with New South Wales. He was out of New South Wales when this motion was taken out, so that his present absence cannot be attributed in any way to the making of the charge of contempt. There is at the moment no hard evidence which casts doubt on his word conveyed to the Court that he intends to return to New South Wales at Christmas. The likelihood required by paragraph (b) is not in my view established in the requisite way on the present evidence. 20 In those circumstances, the exercise of the Court's jurisdiction for the issue of a warrant is not invigorated. If the discretion did fall to be exercised, one factor that would have to be borne in mind is that, at least on the present evidence, it cannot be said that the case in favour of the commission of a contempt is entirely clear. There certainly appear at this stage to be issues as to facts that will have to be determined before contempt can be established. 21 In those circumstances the motion brought by the plaintiffs must fail and will be dismissed. …oOo… 22 I have now heard debate on the orders that I ought make as a result of views that I have formed as to the costs of the application before me. The application for the issue of a warrant of arrest under Part 55 r 10 is not the whole subject matter of the notice of motion and will not lead to the notice of motion being dismissed. The appropriate order is that I dismiss the plaintiff's application for the issue of a warrant under Part 55 r 10. I have further heard argument as to the order for costs that should be made on that application. Whilst, as Mr Kunc has said, this application is part of an ongoing process which is not yet completed, on the other hand it is, as Mr Epstein has said, a discrete application which depended on conflicting views of the law. The view that the plaintiffs took of the law has been held to be incorrect and it has failed accordingly. In those circumstances, in my view, the appropriate order is that the plaintiffs pay the first defendant's costs of this application.

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