Sigalla v TZ Limited

Judgment 1MACFARLAN JA : I agree with Young JA. 2YOUNG JA : This is an appeal from a decision of Justice Austin in the Corporations List of the Equity Division of this Court which found the appellants guilty of contempt of court and fined them each $5,000 with costs. 3The charge was as follows: "(1) ... ZMS Investments Pty Limited and Andrew John Sigalla, are guilty of contempt of the Court in that in breach of the Orders made by the Court on 16 September 2009 whereby the First Defendant, ZMS Investments Pty Limited, was restrained until 5:00pm on 19 March 2010 (by itself, its directors, officers, partners, agents, employees or others acting on its behalf or instructions) inter alia from selling, charging, mortgaging or otherwise dealing with or disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of its assets whether located within Australia or outside Australia, specifically any of the properties known as Units 6, 12, 18 and 19 at 19 Aero Road, Ingleburn (being the whole of the lands in Folio Identifiers 6, 12, 18 and 19/SP76296) (' the Orders '):- (a) the First Defendant, ZMS Investments Pty Limited, did on or about 10 November 2009 sell the property known as Unit 6, 19 Aero Road, Ingleburn (being the whole of the land in Folio Identifier 6/SP76296 (' the Property '); and (b) the Third Defendant, Andrew John Sigalla, caused the First Defendant, ZMS Investments Pty Limited, to enter into a contract for the sale of the Property to Yuanhui Li and Honghui Li on about 10 November 2009 (' the Contract ') and therefore was involved in the breach of the Orders." 4The relevant orders were "... the Court orders that up to 5pm on 19 March 2010, the first defendant [ie ZMS] is restrained (by themselves, their directors, officers, partners, agents, employees or others acting on their behalf or instructions) from: (i) removing, or causing or permitting to be removed from Australia all or any of its assets; and (ii) from selling, charging, mortgaging or otherwise dealing with or disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of its assets whether located within Australia or outside Australia." 5"Assets" were defined in such a way that they included No 19 Aero Road, Ingleburn. 6There is no doubt that on or about 10 November 2009, ZMS Investments Pty Ltd did enter into a contract for sale of Unit 6, 19 Aero Road, Ingleburn to Yuanhui Li and Honghui Li for $910,000 in the 2005 edition of the standard form. 7The original dispute between the parties has now been settled and TZ Ltd, the prosecutor, has no further interest in the case. As a matter of courtesy, Mr Pozniak appeared and acknowledged that fact. Both fines have been paid. The first appellant, Mr Sigalla, has been a bankrupt from 12 July 2010. The second appellant, ZMS Investments, was wound up on 10 September 2010. However, the Court made a conditional order giving leave to proceed against the company in liquidation. It was a term of the consent that, should the appeal succeed and the order for fine be set aside, any refunded fine should be paid to the liquidator. 8As TZ has no current interest in this case, it proceeded, more or less ex parte, with Mr G O'L Reynolds SC, Mr J C Hewitt and Ms G R Rubagotti appearing for the appellants. It was acknowledged, before Mr Pozniak was excused and departed, that there was to be no order for costs against the respondent here or below and that the order for costs made below was to remain in any event. Mr Reynolds agreed. 9Mr Reynolds put forward a number of propositions in his written submissions and in the oral argument he presented on 23 September 2011. 10I can divide these into basic propositions (Group A) and secondary propositions (Group B). I will list these, deal with each in turn and then, under heading C, deal with my view of the result of the appeal: A1. The primary judge failed to distinguish between the situations of the individual and corporate appellants. A2. The primary judge did not deal with the individual appellant on the basis that he was a non-party to the proceedings in which the relevant order was made. A3. The primary judge failed to appreciate that he needed to determine the matter on the criminal standard of proof. A4. The primary judge drew inferences as if the matter was a civil matter rather than a criminal case. A5. The primary judge did not consider the mental element. 11Secondary propositions: B1. The prosecution did not prove that the appellants entered into the alleged contract for sale. B2. Assuming against proposition B1, in entering into a contract for sale of 6/19 Aero Street, Ingleburn, the appellants did not "sell" that property. B3. The orders were ambiguous and should not have been the subject of contempt proceedings. B4. The charge was defective. B5. New evidence should be permitted to show that in fact there was no contempt. B6. Even though the usual result of the above propositions or some of them being upheld would be a new trial, in the circumstances this is not warranted and the orders below should be set aside and the proceedings dismissed. 12A1. It is clear that Mr Sigalla was not a party to the proceedings in which the order was made. It would appear that he and his wife were the sole proprietors and controllers of ZMS Investments, but they, of course, were distinct legal persons from the company. 13It is also clear that when an order is made injuncting X by himself, his servants or agents, that that is not an order against the servants or agents but merely a warning that if they knowingly assist X in the breach of the injunction, they may be in trouble: Marengo v Daily Sketch and Sunday Graphic Ltd [1948] 1 All ER 406, 407 (HL); Attorney General v Newspaper Publishing plc [1988] Ch 333, 366 (CA). 14It is trite law that where there is an injunction against X, only X will commit a contempt by disobeying the injunction as opposed to a different contempt for obstructing the process of the court: Wellesley (Lord) v Mornington (Earl) (1848) 11 Beav 180 at 181; 50 ER 785 at 786. The non-party to the original proceedings who knows of the order and assists in the breach of the order and thereby obstructs the process of the court is liable to be punished for that offence against the court, not for a breach of the original order: the Wellesley case at Beav 183; ER 787 and the Newspaper Publishing case at 367. 15Thus the appellants are right to point out this vital distinction. The question is whether the learned primary judge observed it. 16It is useful to cite what Drummond J said in CCOM Pty Ltd v Jiejing Pty Ltd (1992) 36 FCR 524 at 530-31: "[X] however is not a party to the action and is not bound by the undertaking. Such a person is not subject to the strict liability in contempt which rests upon a person bound by an undertaking that is breached. However a person who is not in terms bound by an undertaking but who knows of it and who then does something which disrupts the situation created by the undertaking may, but not necessarily must, be guilty of contempt of court. Such a person will be guilty of contempt where his conduct, coupled with his knowledge of the undertaking, shows that he is flouting the authority of the court by doing something which he knows will prevent the undertaking given to the court achieving its intended object. Such a person will be in contempt, because he has 'knowingly impeded or interfered with the administration of justice by the court in the action between A and B' ". (The quote derives from Attorney General v Times Newspapers Ltd [1992] 1 AC 191, 206). These principles were applied by this Court in Reid v Howard (1993) 31 NSWLR 298, 309). 17In Zhu v Treasurer of NSW [2004] HCA 56; 218 CLR 530 at 571 [121], the High Court said: "Intervention against persons who, though not personally bound by a court order, procure those who are bound by it to contravene it, or otherwise thwart it, rests on a different basis: those persons are not liable as accessories who aided and abetted the persons bound by the order, but are directly liable for independent contempts committed by themselves in obstructing the course of justice." 18The charge against Mr Sigalla was that he "caused ... ZMS Investments Pty Limited, to enter into a contract for the sale of the Property ... and therefore was involved in the breach of the Orders." That would not appear to be a charge in accordance with the principles that I have set out. 19At [44] of his judgment, the primary judge noted that the position regarding Mr Sigalla was more complicated than the position with respect to ZMS, and so it was. He then cited the charge and italicised the words "and therefore was involved in the breach of the orders". 20His Honour then went on to consider cases such as Hamilton v Whitehead [1988] HCA 65; 166 CLR 121, dealing not with contempt but with actual or vicarious liability for crimes committed by a corporation. He discussed the concept of vicarious responsibility. This was unfortunately irrelevant to the matter before him. 21At [48] the primary judge comes back to the real question by saying "Additionally, Mr Sigalla was personally involved in the contravention by virtue of his conduct". He then said that there was no express provision in the relevant Act or rules declaring that where an order of the court is directed to one party and another party causes that person to breach the order, the latter is punishable for contempt because of his or her involvement in the contravention. However, he then says: "But if that were not the case, the efficacy of the court's orders would be put into question ... The court's power to deal with contempt flows from the inherent jurisdiction". His Honour then goes on to consider further cases under the Trade Practices Act 1974 (Cth) . 22With great respect, his Honour was not considering the right question. Not, however, that his Honour was assisted in finding the right question by the submissions that were made to him. 23The judge did deal in a slightly different way with the situations of the individual and corporate appellants. He said at [43] that ZMS acted in contempt by the action of its agent, Mr Sigalla, in causing it to exchange contracts. He then went on to say that the position of Mr Sigalla was more complicated, but unfortunately dealt with him as an accessory rather than as a principal to a separate contempt. 24A2. It follows from what I have said under A1, that the primary judge was in error in not dealing with Mr Sigalla according to the appropriate principles. 25A3. I could spend considerable time to no purpose in citing cases in which the line between civil contempts and criminal contempts has been discussed. It is of no moment because it is quite clear that, no matter which way one classifies the contempt, it needs to be proved beyond a reasonable doubt: Witham v Holloway [1995] HCA 3; 183 CLR 525, 534. 26There is no indication in the primary judge's reasons that he was dealing with the evidence on the basis that he had to be satisfied beyond reasonable doubt that the contempts had occurred. The submissions made by the prosecutor referred to the fifth of Finn J's principles in Metcash Trading Ltd v Bunn (No 5) [2009] FCA 16 at [9] where his Honour actually stated that the facts in the contempt charge must be proved beyond reasonable doubt. However, this seems to be the only reference in the submissions as to the standard of proof. Some of the comments of the primary judge as to the evidence show that he did not have reasonable doubt in mind. For instance in [26] he says: "his evidence indicates to me ... he was aware" and again his reference in [42] to regarding the evidence as showing that Mr Sigalla knowingly and intentionally caused ZMS to exchange contracts and his reference later in that paragraph to the natural inference that he drew from the fact that a solicitor engaged in correspondence on behalf of his client. It would seem accordingly that this objection is made out. 27A4. It is clear that the primary judge did draw inferences. In Chamberlain v The Queen (No 2) [1984] HCA 7; 153 CLR 521 at 536, Gibbs CJ and Mason J said: "When the evidence is circumstantial, the jury, whether in a civil or in a criminal case, are required to draw an inference from the circumstances of the case; in a civil case the circumstances must raise a more probable inference in favour of what is alleged, and in a criminal case the circumstances must exclude any reasonable hypothesis consistent with innocence." There is no indication that the primary judge, when drawing inferences, did so in accordance with what should be done in cases where the facts alleged before him have to be proved beyond reasonable doubt. 28A5. So far as Mr Sigalla is concerned, it was necessary for the prosecutor to prove beyond reasonable doubt that Mr Sigalla intended to prevent or impede the purpose of the injunction. In this connection, if the evidence shows that he had an honest, but mistaken, belief as to the meaning or operation of the injunction which, if correct, would mean that his conduct could not be an interference with its operation, then there is the lack of mens rea necessary to put him in contempt (see CCOM at 532). I cannot see from the judgment where his Honour directed himself to this particular question. 29It follows that, on consideration of the basic propositions, the primary judge's decision cannot stand and his orders should be set aside and a new trial ordered. However, the Court does not involve itself in making orders which have no consequence. There is an interest in the Court in not permitting persons to disobey or flout its orders without being in danger of punishment. It is no part of the judicial office to police orders which the Court has made sua sponte. The basal dispute between the parties has been settled, the prosecutor no longer has any interest in prosecuting the matter, and it seems to me that without a prosecutor, it is idle to have a new trial. Accordingly, we should simply allow the appeal. In accordance with the agreement between the parties there should be no order for costs of the appeal and the order for costs below is to stand. 30Although, for reasons which I have given the grounds for allowing the appeal in the case of Mr Sigalla are stronger than those involving ZMS, because the trial was not conducted on the basis of finding contempt beyond reasonable doubt, that appeal must be allowed as well. 31I pass briefly to the secondary propositions. 32It is quite obvious from the primary judge's reasons that he was more irritated by these propositions than thought that they had any merit whatsoever. Indeed, at [31] the primary judge noted that "Senior counsel for ZMS and Mr Sigalla made the incredible submission that an exchange of contracts for sale does not constitute a breach of order 1(a)(ii) because an exchange of contracts is not a 'sale' for the purposes of the order." 33I will briefly deal with the matters I have listed as B1 to B6. 34B1. B1 puts that the prosecution did not prove that the appellants entered into the alleged contract for sale. The simple answer to this is that the judge did accept the evidence that ZMS did enter into the contract for sale and indeed, it was admitted in Mr Sigalla's cross examination. It may be that the judge did not consider whether he was satisfied beyond a reasonable doubt, but there was really no dispute about this matter at all at the trial. There is no substance in this point. 35B2 and B3. The allegation is that an order preventing a person from selling something is ambiguous. I disagree. It is certainly the case that the classic meaning of the word "sell" or "sale" is that the property in something is exchanged for money, but in the real world no-one has any difficulty in understanding that they sell their house when they enter into a contract to sell it. At that point, if there is an estate agent's sign on the house, the word "Sold" is plastered across the sign. 36It is also the law that equitable fee simple is not created in the purchaser unless the contract is specifically enforceable, but in 95% of the cases of the sale of a block of land or a building, it is specifically enforceable. An injunction against selling something is clearly breached by entering into a contract for sale in respect of the property. 37B4. The charge was defective. I have already dealt with this under A. So far as Mr Sigalla is concerned, the charge was defective for the reasons given above. However, that criticism cannot be properly made about ZMS. 38B5. There was a motion before us to allow new evidence. The new evidence was that counsel and solicitors had advised Mr Sigalla that he would not be in contempt in entering into a contract for the sale of Unit 6. In the light of the fact that the appeal should be allowed on other grounds, I do not feel inclined to enter into this matter and enter into the situation where it is alleged that the appellants took the view after hearing from lawyers of high reputation that they would not be committing a contempt of court. 39B6. I have already dealt with this above. 40C. The result is accordingly that the appeal is allowed. Orders 1, 2 and 3 made by Austin J on 23 December 2009 are set aside. The Court does not disturb the order for costs made below, and there is to be no order for costs of the appeal. 41In case there is some difficulty in repayment of the fines, I propose that there be liberty to apply to a judge of the Equity Division. 42HANDLEY AJA: I agree with Young JA.