Sun v He

Contempt Motion and findings of contempt

1. It will be recalled that there were four separate charges of contempt, each of which I found to have been proven beyond reasonable doubt. My conclusions as to each of those charges were summarised in the Contempt Judgment as follows.
2. As to charge 1 (which concerned the alleged deletion of electronic data), I found (see Contempt Judgment at [272]) that: 272. Having regard to the factual findings that I have made, I am satisfied that this charge is established beyond reasonable doubt. There is no doubt that Mr He intentionally deleted electronic files and data relating to these files in his possession, power, custody or control. He did so at a time when I have found he was aware that a search order had been made. The evidence has also established that Mr He, at that time, thought it was to do with the existing court proceedings and he had been given a clear explanation as to what he was obliged to do (and, significantly, that he was not to destroy any of the electronic data or devices). And yet, he systematically proceeded to delete a large number of files relating to the proceedings. The only logical reason for so doing (given that, on any view, the deletions went way beyond personal photos or the like) was to prevent access to the data. This clearly had the inherent tendency, and was calculated, to interfere with the administration of justice.
3. As to charge 2 (which concerned the alleged failure to provide all passwords), I found (see Contempt Judgment at [274]) that: 274. Having regard to the factual findings that I have made above, I am satisfied that this charge is established beyond reasonable doubt. None of the passwords provided by Mr He enabled access to Mr He's online or email accounts and Mr He appears to have made no effort since then to facilitate the provision of such passwords…
4. As to charge 3 (which concerned the alleged refusal to allow access to the premises), I found (see Contempt Judgment at [279]) that: 279. Having regard to the factual findings I have made, I am satisfied that this charge is established beyond reasonable doubt. At the very least, by 11.45am, Mr Leung [Mr He's solicitor] had (according to Mr Blaxell [the independent solicitor appointed in relation to the execution of the Search Order]) confirmed that he had advised Mr He that he was required to permit access. Again, the same conclusion follows as to the purpose of preventing access and the tendency to interfere with the administration of justice.
5. As to charge 4 (which concerned the alleged failure to disclose the location of devices), I found (see Contempt Judgment at [283]) that: 283. Again, having regard to the factual findings I have made above, I am satisfied that this charge is established beyond reasonable doubt. My conclusion as to the failure to disclose this device is reinforced by the fact that Mr He performed a factory reset on the device. I make the same findings as to purpose and the tendency to interfere with the administration of justice.
6. I turn now to consider the relevant principles as to the imposition of sentence for criminal contempt.

Relevant principles

1. In Mirus Australia Pty Ltd v Gage [2018] NSWSC 35 (Mirus v Gage), I considered (at [7]ff) the general sentencing principles to be applied following a finding of criminal contempt. In that case, the finding of criminal contempt (see the principal judgment reported in Mirus Australia Pty Ltd v Gage [2017] NSWSC 1046) comprised the deliberate deletion of electronic files and computer data at a time after the proceedings had been commenced and initiating process had been served on Mr Gage, but before any orders had been made in the proceedings (other than orders for short service). I found that the conduct there engaged in was for the material purpose of preventing some or all of those files and data being produced to the Court and available for use as evidence in the proceedings (see Mirus v Gage at [2]).
2. I there noted (see at [7]-[8]) that the underlying rationale of sentencing for contempt (be it civil or criminal contempt) is to protect the effective administration of justice (referring to Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 107; [1986] HCA 46 (Australasian Meat Industry Employees' Union); Kazal v Thunder Studios Inc (California) (2017) 256 FCR 90; [2017] FCAFC 111 (Kazal v Thunder Studios) at [97] per Besanko, Wigney and Bromwich JJ; and Australian Securities and Investments Commission v Matthews [2009] NSWSC 285; (2009) 71 ACSR 279 (ASIC v Matthews) at [26]-[27] per Barrett J, as his Honour then was).
3. In particular, in ASIC v Matthews, Barrett J noted the following matters as relevant when sentencing for contempt (see at [26]-[27]): the seriousness of the contempt proved; the contemnor's culpability; the reason or motive for the contempt; whether the contemnor has received, or sought to receive, a benefit or gain from the contempt; whether there has been any expression of genuine contrition by the contemnor; the character and antecedents of the contemnor; the contemnor's personal circumstances; the need for deterrence of the contemnor and others of like mind; and the need for denunciation of contemptuous conduct.
4. As I there also noted, his Honour's observations were referred to with apparent approval by the Court of Appeal in Matthews v Australian Securities and Investments Commission [2009] NSWCA 155 (see at [129]-[130], [137], [141] per Tobias JA, with whom Basten JA relevantly agreed at [181] and Campbell JA relevantly agreed at [194]) and by the Full Court of the Federal Court of Australia in Kazal v Thunder Studios (see at [101]-[102]), albeit that the Full Court there noted that it was not an exhaustive list of potentially relevant matters.
5. I also noted in Mirus v Gage (see at [9]) that there is no statutory maximum penalty (whether by way of fine or imprisonment) for the common law offence of contempt (referring to Attorney-General (NSW) v Whiley (1993) 31 NSWLR 314 (AG v Whiley) at 320 per Clarke, Meagher and Handley JJA).
6. Since then, the Court of Appeal has made clear (see Dowling v Prothonotary of the Supreme Court of New South Wales (2018) 99 NSWLR 229; [2018] NSWCA 340 (Dowling)) that the Crime (Sentencing Procedure) Act 1989 (NSW) (Crimes (Sentencing Procedure) Act) does not apply with respect to proceedings for contempt in the civil jurisdiction of this Court (see Basten JA at [46], [57]-[58], with whom Meagher JA agreed at [139]). The significance of this, for present purposes, is that (as Mr He now accepts - see T 1.43) the alternatives to imprisonment for which the Crimes (Sentencing Procedure) Act provides (which include a community service order (s 8), a conditional release order (s 9), dismissal of the charges, if the Court is satisfied that it is inexpedient to inflict any punishment other than nominal punishment (s 10), conviction with no other penalty (s 10A) and a suspended sentence of imprisonment (s 11)), some of which I was urged in Mr He's written submissions to consider, do not here apply or are not here available.
7. Relevantly, by way of sentence for Mr He's contempt, it is submitted by Mr Sun (and, I accept) that the sentencing options are essentially limited to a custodial sentence or fine or a combination thereof, deriving from the powers in relation to penalty under Part 55 r 13 of the Supreme Court Rules 1970 (NSW) (the Supreme Court Rules). Pausing here, although I considered that other orders (such as the strike-out or dismissal of Mr He's defence and cross-claim) might also be open, subject to the principles and considerations engaged on such an application, the authorities to which I refer below make clear that the power summarily to dismissal or strike-out proceedings is not for punitive purposes. In that connection, I note (and, as I explain further in due course - see [124]ff) that, having considered that matter, I have concluded that the summary dismissal or wholesale striking out of the defence and cross-claim would not be appropriate.
8. As I also noted in Mirus v Gage (see at [67]), It is important here to bear in mind that an important purpose in sentencing is to make clear the Court's disapproval of such conduct (as well as to set a punishment that will further the purpose of general deterrence). Specifically, I said (at [67]): 67. … As any regular observer of the duty judge list in the Equity Division will know, time and again there are applications brought for urgent (usually ex parte) relief in relation to allegations of misappropriation of confidential information. In the modern electronic era, for those accused of such wrongdoing to consider that they are in a position with impunity to destroy or manipulate electronic evidence in an attempt to render forensic investigation of the subject matter of the complaint impossible cannot be encouraged…
9. In Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309 (Maniam (No 2)), where there had been deliberate and contumacious refusals to comply with subpoenas on repeated occasions, Kirby P (as his Honour then was), Mahoney JA and Hope JA concurring, said (at 313-315): Contempt law has been fashioned by the courts to protect the administration of justice. This is an activity, self-evidently of the greatest importance to society. It represents a vital part of the peaceful government of a community such as ours… … A conviction of contempt of court is a conviction of an offence, criminal in nature. Punishment of the convicted contemnor must therefore take into account the considerations normally applicable to the punishment of crime and apt to uphold the purpose of this jurisdiction, viz, the undisturbed and orderly administration of justice in the courts according to law. Thus, in determining the punishment which is apt to the circumstances which have led to a conviction of contempt, it is appropriate to bear in mind the purposes of punishing the contemnor; deterring the contemnor and others in the future from committing like contempts; and denouncing the conduct concerned in an approximately emphatic way… … The most serious class of contempt, from the point of view of sanction, is contumacious contempt. Not every intentional disobedience involves a conscious defiance of the authority of the Court which is the essence of this class of contempt: see Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 at 500. This class of contempt is reserved to cases where the behaviour of the contemnor has been shown to be aimed at the integrity of the courts and designed to degrade the administration of justice, as distinguished from a simple interference with property rights manifested by a court order: cf Root v MacDonald 157 NE 684 (1927) at 688; 54 Am LR 1422 (1927) at 1429. In cases where such a measure of wilfulness is established, the court may proceed to punish the convicted contemnor by the imposition of a custodial sentence or a fine or both. In such a case the elements necessary to establish wilfulness, carrying as they do the potential of penal consequences, must all be proved to the criminal standard: see Consolidated Press Ltd v McRae (1955) 93 CLR 325 at 333. The procedures of a criminal prosecution must be strictly observed: see Spindler v Balog (1959) 76 WN (NSW) 391 at 393.
10. I note also authorities such as Wood v Galea (1996) 84 A Crim R 274, Wood v Staunton (No 5) (1996) 86 A Crim R 183, Principal Registrar of the Supreme Court of New South Wales v Jando [2001] NSWSC 969 (Jando); and Reliance Financial Services Pty Ltd v Allyma Express Holdings Pty Ltd (No 3) [2019] NSWSC 511 (Reliance Financial Services v Allyma).
11. With the preceding in mind, I now turn to consider Mr Sun's submissions in relation to sentencing for contempt.

Mr Sun's submissions on the Contempt Motion and sentencing

1. Mr Sun, quite properly, did not seek to make any submission as to the specific penalty to be imposed upon Mr He in respect of the contempts in respect of which he was charged and found guilty (see Barbaro v The Queen (2014) 253 CLR 58; [2014] HCA 2). Rather, his submissions were directed to the proposition only that, in the circumstances of this case, a custodial penalty is the only appropriate penalty.
2. Mr Sun noted that the application before this Court was commenced in the manner prescribed by Part 55 rules 6 and 7 of the Supreme Court Rules and engaged the Court in its civil jurisdiction (referring to Dowling at [57]) and that (by reference to Part 55 rules 13 and 14 of the Supreme Court Rules) the options, as adverted to above, available in terms of punishment are limited to imprisonment, fine or a combination of both (though, Mr Sun accepts that there is power to suspend such punishment on terms).
3. As to the factors to which Barrett J referred in ASIC v Matthews, Mr Sun makes the following submissions.

Seriousness of the contempts proved

1. Mr Sun submits that Mr He's contempts were contumacious and that they fall into the most serious class as described by Kirby P in Maniam (No 2) (referring to the findings and observations at [234]-[283] of the Contempt Judgment as to Mr He's awareness of the nature and terms of the Search Order and his actions).
2. Mr Sun emphasises that the conduct was engaged in deliberately, both in the sense that, at all material times, Mr He knew that he was deleting and withholding material, and in the sense that he was aware at the time of the Search Order that it related to the existing Court proceedings and he knew his actions in so doing contravened the terms of it (as to which, see Contempt Judgment at [237]-[240]).
3. Mr Sun also emphasises that Mr He's conduct extended over a period of hours, during part of which time Mr He simultaneously sought to access the processes of the Court (in applying to vacate the Search Order) while abusing the Court's processes by engaging in the contempts; that the conduct cannot be said to have been undertaken in haste without the benefit of advice (noting the finding that Mr He's actions were "systematic" and "calculated" - see at [272] of the Contempt Judgment); that Mr He's contempts continued after his failed application to vacate the Search Order and even after the Search Party was finally permitted access to his premises; that the contempts were committed in spite (and, indeed, in open defiance) of the Court's proper regime for the independent execution of Search Orders designed to ensure the fairness and integrity of that process; and, also, that the contempts were all calculated directly to subvert the Court's authority over its processes (including, the proper conduct of substantial litigation pending before it), noting that the deletions included a large number of files relating to the proceedings (and referring to [272] of the Contempt Judgment).
4. Mr Sun submits that each of these matters militates in favour of a substantial penalty in respect of the contempts proved. I have no hesitation in accepting that submission.

Mr He's awareness of the consequences to himself of his actions

1. Mr Sun submits the following as to Mr He's awareness of the notional consequences of his actions.
2. First, by reference to the evidence of the independent solicitor (Mr Blaxell) that he read the emboldened "Penal Notice" to Mr He (see [46] and [138] of the Contempt Judgment) and the findings and observations made at [56] and [231]-[240] of the Contempt Judgment, it is submitted that Mr He was aware that his actions in contempt might lead to his "imprisonment, sequestration of property or other punishment" yet he acted as he did nonetheless.
3. Second, Mr Sun submits, by reference to the above, that it may be inferred that Mr He considered that the consequences to himself of engaging in the contempts were at least beneficial enough to warrant the risk or actuality of "imprisonment, sequestration of property or other punishment" (and so determined to act as he did).
4. Mr Sun submits that both of these factors call for a substantial penalty in respect of the contempts that have been proved.
5. In this regard, I accept that the Penal Notice was read to Mr He and that he was put on notice of the consequences that might follow from a breach of the Search Order. However, I am not persuaded that I should draw the inference that Mr Sun suggests (see at [35] above) should be drawn therefrom. It seems to assume that Mr He engaged in a risk versus reward consideration at the time and I am not persuaded that I should proceed on that assumption. That said, the fact that Mr He was made aware of the seriousness of the Search Order (and had the benefit of legal advice at the time), yet acted as he did, is a serious matter and one that I accept also militates in favour of the imposition of a substantial penalty.

Consequences of the contempt on the substantive proceedings and trial

1. Mr Sun says that, without knowing the content of the material that has been deleted or withheld by Mr He, the actual consequences of the contempts cannot be precisely or exhaustively stated.
2. However, he emphasises that: the deletions included a large number of files relating to the proceedings (see [272] of the Contempt Judgment); the WeChat application was on Mr He's then current mobile telephone device before he "factory reset" it (see [215] of the Contempt Judgment); each of the other devices that was "factory reset" by Mr He (including the Apple iPhone X that he factory reset in the afternoon on 22 November 2019 in the presence of the independent computer expert, Ms Balit) or devices in respect of which Mr He deleted material did contain or may have contained records of WeChat communications (see [215] of the Contempt Judgment).
3. In this regard, I note that some weight was placed by Mr Sun in the course of submissions on the present occasion on a statement made by Counsel for Mr He during the course of the hearing on 12 May 2010, namely that "the whole case revolves around the WeChat evidence" (see T 45.21-24 of 12 May 2020 and see also T 7 of 21 August 2020). In this connection, I note that Counsel for Mr He does not accept that, when read in context with earlier parts of the transcript on that occasion, this is a complete or accurate statement of the position (pointing to his earlier statement that Mr Sun was "rather elevating the importance of this WeChat evidence" - see at T 44.26 of 12 May 2020). Indeed, it was submitted that the reference to the whole case revolving around the WeChat evidence, read in context, was a reference to the whole contempt application revolving around the WeChat evidence (see T 14.36-15.20). I accept that such a construction, or understanding, of what was said is more in accord with the written submissions that had been made on that occasion and I accept that it was not the subjective intention of Counsel for Mr He to suggest that the WeChat evidence would be dispositive of the ultimate issues in substantive proceedings.
4. Mr Sun nevertheless says that an abuse of process has been perpetrated by Mr He (referring to [284]-[297] of the Contempt Judgment), the usual procedure established under Practice Note SC Gen 13 in relation to the form, content and execution of Search Orders (necessary to safeguard the interests of litigants) and the processes of the Court have been subverted by Mr He, the availability of a "fair trial" has been seriously prejudiced (both in the sense of a trial at which the plaintiff has a proper opportunity to test Mr He's evidence and also in the sense that a fair trial is one "conducted without an undue expenditure of time and money; and with a proper regard to the demands of other litigants upon the finite resources of the court") (referring to [296] of the Contempt Judgment) and that the orderly progress of this large and complex litigation has now been burdened by further significant delay and expense in connection with the contempt applications.
5. I interpose to observe that, as to the last of those matters, this is to a very real extent the product of Mr Sun's forensic decision to prosecute the contempt application. While I here make no criticism of that decision, I do consider that, in interests of fairness to Mr He, this must be noted and borne in mind.
6. It is submitted by Mr Sun that, irrespective of whether some forensic prejudice to him might be ameliorated in consequence of the determination of the Strike Out Motion, it remains the case that the authority of this Court over the proceedings has been deliberately undermined by Mr He to the objective detriment of Mr Sun in connection with his suit and the Court in connection with the administration of justice.
7. It is said that each of these factors represents a matter of importance which justifies the imposition of a substantial penalty. With the observations made above (at [40] and [42]) in mind, I accept that submission.

Reason for the contempt

1. Mr Sun points to the reasons given by Mr He for his actions as, variously, a fear of robbers (see [54] of the Contempt Judgment), unawareness of the terms of the Search Order (see [106] of the Contempt Judgment); and embarrassment in relation to personal data (see [80] of the Contempt Judgment).
2. Mr Sun contends that none of these reasons credibly accounts for the extent of Mr He's actions and points out that none of these explanations was accepted by me (referring to [160]-[174] of the Contempt Judgment). Mr Sun says that there is therefore no substantive explanation from Mr He for his actions, pointing to the finding (at [259] of the Contempt Judgment) that: 259. … Mr He's actions were calculated to interfere with (and to frustrate) legitimate investigations into the electronic devices in his possession and hence that they had a tendency to (and were calculated to) interfere with the administration of justice (by making it difficult for Mr Sun to establish the reliability of the WeChat conversations deposed to in the extant evidence).
3. It is submitted that, against the background of Mr He's state of knowledge, the inference must be drawn that Mr He engaged in the contempts proved because he considered that his interference with, and frustration of, the investigation of his devices would achieve some outcome beneficial to him (whatever that might be) and that it may here be concluded that Mr He wished to prevent access to the data on the electronic devices the subject of the Search Order (see at [272] of the Contempt Judgment), that Mr He engaged in the contumacious contempts in pursuit of his own perceived interests and that, in so doing, Mr He preferred his interests to those of Mr Sun, this Court and the public generally in connection with the proper administration of justice.
4. In general, I see force to these submissions, albeit that, as I have indicated above, I am not persuaded that I should proceed on an assumption that Mr He consciously engaged in some kind of risk versus reward balancing exercise. However, it does seem beyond argument that Mr He wished to prevent access to data on his electronic devices and that included data relevant to the proceedings and the subject of the Search Order (and, indeed, that he went to extraordinary lengths to achieve that result).

Whether there has been any apology

1. While, in written submissions, Mr Sun maintained that that there had been no apology or public expression of contrition by Mr He, and no acceptance of any wrongdoing, attached to Mr He's written submissions on this sentencing hearing was a letter, in which Mr He stated: I, Xin He (known as Ethan He), to [sic] hereby unreservedly apologise to the Court for my conduct as described in the Contempt findings of her Honour Justice Ward. I have reflected on my conduct on the relevant day, and accept that I acted wrongly. I am very sorry for my conduct.
2. I accept that, although not made on oath or by affirmation and not able to be tested in cross-examination, Mr He has now proffered an apology to the Court for his actions. I also note that (although inconsistent with the stance recorded in the pre-sentence report - see below), Mr He now professes to accept that he behaved wrongly (and his Counsel informed me from the bar table that Mr He is chastened).
3. Nevertheless, Mr Sun further complains that, notwithstanding the Contempt Judgment, Mr He had made no attempt to purge any of his contempts, either by providing passwords or otherwise. As to this, it is inexplicable to me that (faced with a serious application such as the present) Mr He would not have taken all steps to purge the contempt that was found to have been proved in relation to Charge 2 (i.e., by the provision of an operative password). It was suggested in oral submissions (see T 5-6) that the password had already been provided (and that this had been the case when the hearing of the Contempt Motion took place). However, that is inconsistent with the evidence that was given at the hearing of the Contempt Motion. Moreover, during the course of the submissions on this issue on the sentencing hearing, Mr He (who was sitting at the back of the Court without the assistance of an interpreter) voluntarily proffered the password(s) to his solicitor. It is left wholly unexplained as to why this could not have been, and was not, done at a much earlier time (see T 5-6).
4. Mr Sun further submits that the view might reasonably be taken that Mr He has compounded his wrongdoing in view of his "dishonest stance" in defending the contempt charges (pointing to the observations that I made as to Mr He's credibility and where his evidence was not accepted - see at [164]-[174] and [230]-[283] of the Contempt Motion).
5. Pausing here, I must note that I do not accept that Mr He's evidence in Court before me was dishonest. There is a distinction - indeed, an important distinction - to be drawn between not accepting a witness' evidence (or finding it implausible) and a finding of actual dishonesty (see Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88; (2016) 332 ALR 126). Moreover, I do not consider that Mr He should be criticised for defending a serious application such as the Contempt Motion, notwithstanding that his defence was unsuccessful, in circumstances where he clearly did so with the benefit of legal advice.
6. Mr Sun also says that Mr He's demeanour in giving evidence to this Court was indignant and unapologetic (referring to my observations at [167] of the Contempt Judgment). Mr Sun submits that Mr He's approach to disputing the charges as brought represents a clear indication of Mr He's underlying attitude towards the authority of this Court and its role in the administration of justice. It is said that Mr He was prepared not only deliberately to breach the Search Orders by way of the contempts ultimately proved, but was similarly prepared to be disingenuous upon the curial investigation of his conduct in that regard.
7. At this point, I see no need to add to my earlier comments as to Mr He's credibility as a witness, other than to note that I did not form the view that Mr He was contemptuous of the Court during the course of the contempt hearing itself (albeit, of course, that his conduct during the execution of the Search Order exhibited contempt for the Court's authority and processes).
8. Mr Sun submits that the above matters do not militate in favour of any leniency being afforded to Mr He. There is some force to this. However, I do consider that the fact of the apology goes some way towards leniency and is a factor militating towards a reduction in sentence (although the extent of Mr He's contrition is somewhat hard to gauge, not least having regard to some of the statements reported in the pre-sentence report).

Mr He's character and antecedents

1. As to Mr He's character and antecedents, Mr Sun points to the previous admission by Mr He (in his affidavit of 29 April 2019) to breach of the freezing orders made by this Court (by way of pre-payment of school fees of around $238,000) and to the fact that there is an extant application seeking relief based upon what are alleged to be further breaches of the freezing orders occurring between June 2019 and January 2020.
2. It is sufficient here to note that there is no evidence of any prior criminal conduct and I am prepared to accept that Mr He is otherwise of good character (though, noting the admitted and unfortunate breach of the freezing orders to which Mr Sun has referred - as to which, see further below).

General and personal deterrence

1. As to the issues of deterrence, Mr Sun emphasises that Mr He's contempts involved deliberate disobedience of this Court's specific orders during the pendency of litigation. It is submitted that the determination as to punishment must be of sufficient magnitude to pose deterrence to others who might contemplate similar conduct. Further, it is said that the penalty must be appropriate effectively to punish Mr He for his wrongdoing and to dissuade him from repeating it. I accept entirely this submission.

Denunciation of the contempts

1. As to denunciation of the contempts, Mr Sun invokes the observations made by me (at [67]) in Mirus v Gage in this context (see above at [22]).

Appropriate penalty

1. Mr Sun has referred to a number of prior decisions as to the appropriate penalty (see Mirus v Gage at [70]-[71] and the authorities there cited; Maniam (No 2); Jando at [19] per Studdert J; Australian Securities and Investments Commission v Michalik (No 2) [2004] NSWSC 1259; (2004) 52 ACSR 115 at [126] per Palmer J; D B Mahaffy & Associates v Mahaffy [2015] NSWSC 1959 (D B Mahaffy) per Schmidt J; Dowling; and Reliance Financial Services v Allyma per Parker J).
2. Mr Sun submits that Mr He's conduct and culpability is properly characterised as being at the very serious end of the spectrum of offending, in which respect there must be a commensurate response.
3. Mr Sun submits that the imposition of a fine by way of penalty in respect of any of the contempts proved would, in this context, represent an inappropriate and inadequate punishment in terms of personal deterrence for the following reasons.
4. First, it is said that (having regard to the evidence as to Mr He's financial circumstances and lifestyle expenditure), the Court is in no position to assess an appropriate punishment in pecuniary terms and, therefore, the Court could have no confidence that the imposition of any fine would have the proper punitive effect upon Mr He relative to his actions. In this regard, reference is made inter alia to assertions having been made by Mr He as to his wealth and having substantial financial backing from both his and his wife's families. I interpose to observe that I am not in a position to assess this, although I note that, during the course of the sentencing hearing, Mr He gave instructions as to his ability to meet a fine that might be imposed by way of financial support from family members, which is consistent with him having resources available through his family (although, at least to some degree inconsistent, with the extant application to vary the freezing orders) (see T 25).
5. Second, it is said that the imposition of any substantial fine poses obvious practical difficulties in the circumstance of the extant freezing regime applicable to the assets of Mr He and his related entities. I interpose to note that I agree with this submission.
6. Third, and seemingly related to the second, Mr Sun apprehends that any payment of a substantial fine by Mr He would be by way of recourse to funds allegedly misappropriated by Mr He from him (the subject of the present substantive proceedings) and which would thereafter potentially be unrecoverable by Mr Sun. In such circumstances, it is said that the Court's punishment would, in effect, be visited upon Mr Sun, rather than Mr He.
7. I interpose to observe that, although Mr He's Counsel resisted that proposition and submitted that this issue should not be approached with a predisposition that Mr Sun's claim will succeed, that, with respect, rather misses the point. If Mr He has no assets of his own from which to meet a fine - which was the tenor of his written submissions - other than those the subject of the misappropriation claim, then there is obviously a prospect that the burden of a fine imposed on Mr He, if paid out of the allegedly misappropriated funds, would ultimately be borne by Mr Sun if he does in fact succeed in the proceedings. I am of the view that this possibility cannot simply be ignored.
8. In any event, as noted above, during the course of the sentencing hearing, Mr He gave instructions as to financial support that he might be able to obtain from family members, such that the burden of a fine would not, in practical terms, be visited upon Mr Sun in the manner suggested by Mr Sun (see T 22) (as to the preceding, see further at [107]-[112] below).
9. Mr Sun submits, by reference to the above matters, that this is a case where "nothing short of imprisonment will do" (quoting D B Mahaffy at [100]) given that each of the contempts proved represents an egregious attack on the integrity of the civil justice system (coupled, he says, by no hint of contrition by Mr He). It is said that Mr He has taken no steps to mitigate or diminish his culpability, nor to purge his contempt insofar as may be now possible; rather, that he has sought to defend his actions by leading evidence "marked by falsity and prevarication" and, again, that he has exhibited no remorse and no appreciation of the wrongfulness of his actions.
10. I note that I treat the submissions as to lack of contrition and remorse with some caution in light of the apology that has been made to the Court, along with those other matters, to which I have referred above.
11. Mr Sun says that this is not a case where orders can now be made in order to coerce compliance with the orders of this Court. Again, it is submitted that, in vindication of the authority of this Court, a term of imprisonment represents the only appropriate penalty in respect of Mr He's contempts. It is said that anything short of imprisonment is most unlikely to achieve any specific deterrence and, having regard to the seriousness of the contempts, would serve both as an inadequate general deterrent and insufficient denunciation of the contempts perpetrated by Mr He.

Mr He's submissions on the Contempt Motion and sentencing

1. Mr He, at the outset, cautions against "too much" weight being placed upon any submissions made by Mr Sun as to the appropriate penalty, given that Mr Sun here is an adversarial litigant against him in collateral civil proceedings.
2. Pausing here, while I accept that the parties are engaged in adversarial litigation, I do not consider that Mr Sun can fairly be criticised for making the submissions that have here been made nor could it be suggested that they be dismissed as self-serving. Similarly, I do not think it can be said that the bringing of the Contempt Motion was improper or that Mr Sun necessarily ought have taken a different course. There can be no doubt that Mr He's conduct was contumacious and is deserving of punishment. Having said this, I do bear in mind, as Mr He here cautions, that Mr Sun is an adversarial litigant in proceedings on foot against Mr He.
3. Mr He places weight on the fact that a pre-sentence report of Mr Stephen Kleboe dated 27 July 2020 identifies that: Mr He has no criminal history (antecedents) and no history of anti-social behaviour; the offences were not intended to be dishonest; the offences were not intended to pervert the course of justice; and Mr He expressed remorse and regret for any duress or inconvenience he has caused the Court and Mr Sun. It is noted that Mr He attended the offices of Community Corrections (Corrective Services NSW) on two occasions and, on the second occasion, to provide the requisite information to Mr Kleboe. Mr He points to the fact that he has been identified as being at low risk of re-offending. Mr He says he regrets his actions and that he is remorseful. Mr He also says that such actions are not going to occur again.
4. As to his personal circumstances, Mr He is a married man with two young children (aged six and eight years) and the sole income provider for the family (as his wife, Ms Vivien Zheng, does not work). Mr He is a business owner. As to the last of those circumstances, Mr He says that he would suffer more than just wage loss with any custodial sentence but, rather, face a loss of his business. However, I must observe that there is little to enable me to assess the likelihood of such a consequence eventuating.
5. Mr He says that the events that led to the contempt charges happened over the course of one day (the relevance of which seems to me to be doubtful - more relevant, in my opinion, is the fact that the conduct took place over a number of hours during which Mr He had the opportunity to receive, and did have the benefit of, legal advice; yet acted as he did). Nevertheless, it is submitted by Mr He that, although accepting the findings made as to his knowledge upon service of the Search Orders, there is nonetheless room to consider that an element of panic by Mr He led to poor choices and grave misjudgments by him. Again, I interpose to note that I have dealt with similar submissions in the course of the Contempt Judgment and do not here repeat my earlier comments and disposition thereof.
6. Mr He submits that a custodial sentence should not be imposed. It is noted that he has written a letter apologising to the Court and expressing remorse; that he has had no prior contact with the criminal justice system; and that he can thus be accepted as an otherwise upstanding citizen.
7. As to the imposition of a fine, as adverted to above, in written submissions it was noted that Mr He is currently under "significant financial restriction due to a comprehensive set of freezing orders obtained by [Mr Sun]" and that Mr He has a motion pending seeking variations to the freezing orders in order to afford legal representation for his defence and cross-claim. It was also submitted in the written submissions that, in those circumstances, Mr He was and is not in a position to meet a fine without variation to the freezing orders, which sum would reduce the funds frozen for the contingent benefit of the plaintiff. However, in oral submissions, as adverted to above, a markedly different stance was adopted (as to which, see above at [68]).
8. In regard to the need for sufficient penalty or deterrent, it was said that, if the Court were minded to make a costs order against Mr He in respect to some or all of the Contempt Motion hearing, that could safely be assumed to be a "very costly impost" that Mr He will ultimately have to meet.
9. Although in written submissions it was suggested that an alternative sentencing option of the kind available under the Crime (Sentencing Procedure) Act would be appropriate, that was not pressed in light of the decision of the Court of Appeal in Dowling (to which, see above at [20]). Ultimately, what was urged upon me was the imposition of a fine of some kind (which would be met by Mr He's family) (or, perhaps, simply the imposition of costs orders).

Determination as to penalty for contempt

1. I note, again, that, as the Court of Appeal held in Dowling (see at [46], [57]-[58] and [139]), the Crimes (Sentencing Procedure) Act does not apply to contempt proceedings determined in the civil jurisdiction of this Court.
2. Nevertheless, I bear in mind the statutory prescription under s 5(1) of that Act and the principles of procedural fairness and related concerns embodied in that instrument and elsewhere, and so here record in some detail my reasons for the sentence that I have determined should be imposed.
3. Insofar as Mr He has cautioned against the weight to be placed on submissions as to penalty by an adversarial litigant, as I have noted above, I do not consider that Mr Sun has in any way exceeded the boundaries of proper conduct in the submissions that have here been made. Nevertheless, again, I note that I bear in mind the context of the case and the relationship between the parties.
4. I have set out above the relevant principles and have made a number of observations as to the submissions made by the respective parties. With that in mind, and in amplification of those observations, I now proceed to consider the sentence to be imposed.
5. As I have observed above (see at [15]-[25]), the underlying rationale of sentencing for both civil and criminal contempt is to protect the effective administration of justice (see, particularly, Australasian Meat Industry Employees' Union at 107; Kazal v Thunder Studios at [97] per Besanko, Wigney and Bromwich JJ; and ASIC v Matthews at [26]-[27] per Barrett J, as his Honour then was).
6. More specifically, I here have particularly in mind those matters which, as observed by Barrett J in ASIC v Matthews (and referred to with apparent approval by the Court of Appeal in that proceeding and by the Full Court of the Federal Court in Kazal v Thunder Studios at [101]-[102]), are of primary relevance in the sentencing exercise (see at [26]-[27]).
7. These matters, as noted above, are as follows: the seriousness of the contempts; the contemnor's culpability; the reasons or motives for the contemptuous conduct; whether the contemnor has received, or sought to receive, a benefit or gain from the contempt; whether there has been any expression of genuine contrition by the contemnor; the character and antecedents of the contemnor; the contemnor's personal circumstances; the need for specific and general deterrence; and, finally, the need for denunciation of contemptuous conduct.
8. While I note that, as adverted to above (see at [18]), the Full Court in Kazal v Thunder Studios observed (see at [101]-[102]) that this is not an exhaustive adumbration of potentially relevant matters, I consider these factors to be an appropriate starting point to proceed in the exercise that I must here undertake.
9. Before so doing, I again note (as I did in Mirus v Gage at [9]) that there is no statutory maximum penalty (whether by way of fine or imprisonment) for the common law offence of contempt (and see AG v Whiley at 320 per Clarke, Meagher and Handley JJA). Furthermore, I am here constrained, having in mind the decision of the Court of Appeal in Dowling, as to the means of disposal available to me.
10. As to the seriousness of the contempts, I have reached the view that the contumacious conduct here engaged in by Mr He does, indeed, fall into the most serious class of case, noting particularly the observations of Kirby P in Maniam (No 2) (and see, particularly, the Contempt Judgment at [234]-[283]). This is a matter that militates strongly towards the imposition of a custodial sentence.
11. As to Mr He's culpability, as I have noted (see at [37] above), I accept that the Penal Notice was read to Mr He and that he was put on notice of the consequences that might follow from a breach of the Search Order. However, I am not persuaded that I should, or can, infer from this that Mr He considered that the consequences to himself of engaging in the contempts were at least beneficial enough to warrant the risk or actuality of those consequences. In this sense, I accept that there would be other cases where the contemptuous conduct was relatively more calculated and premeditated such that, in terms of parity, this factor militates towards a reduction in sentence from that imposed in the most extreme of cases.
12. Having said this, and even putting aside any such inference as to whether Mr He engaged in such a process of deliberation, I am of the view that, in the circumstances of the case and the findings that I have made (as to which, see the Contempt Judgment), the contempts here committed by Mr He nevertheless disclose a high degree of culpability. Again, as noted, I have found that, at the time of the contemptuous acts committed, Mr He was aware of the existence and effect of the Search Orders and yet (without here again reciting the factual findings that I have earlier made) Mr He proceeded to engage in the systematic deletion of data and files over a number of hours (and did so not only while he was seeking and obtaining legal advice but also while he was taking steps to seek a variation of the Search Order and thus invoking the very processes of the Court that he was at the same time abusing). I consider that these considerations also militate towards the imposition of a custodial sentence.
13. As to Mr He's reasons or motives for the contemptuous conduct, the evidence does not establish to the requisite standard exactly what motivated Mr He to do what he did. Implausible as at least several of those reasons were, the reasons proffered by Mr He do, at least in part, suggest that Mr He was motivated to destroy evidence knowing that, as the issues had fallen in the proceedings, the information and data which he deleted would make it harder for Mr Sun to make good his claim. I say this not least because various of the reasons put forward by Mr He (particularly, that he feared the search party were robbers - see at [54] of the Contempt Judgment - and that he was unaware of the terms of the Search Order - see at [106] of the Contempt Judgment) are not credible. Having said this, I understand that Mr He might have felt uncomfortable, and feared embarrassment, in relation to persons accessing his and his family's personal data (see [80] cf [160]-[174] of the Contempt Judgment).
14. I reiterate the conclusion (see at [259] of the Contempt Judgment) that Mr He's actions were calculated to interfere with (and to frustrate) legitimate investigations into the electronic devices in his possession and, hence, had a clear tendency and were calculated to interfere with the administration of justice. Again, his conduct involved deliberate disobedience of specific orders of this Court during the pendency of litigation in which he was, and is, an active participant. To my mind, these considerations also militate towards the imposition of a custodial sentence.
15. As to whether Mr He has received, or sought to receive, a benefit or gain from the contempt, it is sufficient here to note that, in the context of the case and as outlined in the preceding, Mr He's actions have, on any view, substantially frustrated the further conduct of this litigation and, at least to some extent, have made it now more difficult for Mr Sun to make good his claims against Mr He. In that way, while not a benefit or gain in the sense that one might usually think of it, I see that this factor also militates towards a more severe sentence.
16. Having said this, I again record that I accept that, as things have transpired, it would appear that the WeChat evidence might not be dispositive of the ultimate issues at the trial (see at [40] above). That is to say, in this sense, Mr He has not necessarily obtained a substantial gain by his contempts; or, put differently, if as events transpire the WeChat evidence (and other data deleted) does not take on much, or any, significance in the proceedings, then in this sense Mr He would have obtained little or no benefit by his conduct.
17. As to whether there has been any expression of genuine contrition by Mr He, as I have said (see at [49]ff above), I accept that Mr He has now proffered an apology to the Court for his actions and I do not place much significance on the fact that this apology was not made on oath or by affirmation and was not able to be tested in cross-examination.
18. Similarly, I also accept that Mr He now professes to accept that he behaved wrongly and, again, I do not place much significance on the fact that this has not been tested in cross-examination. However, it is not irrelevant to note that this seems to have been a very belated recognition of wrongdoing (since the pre-sentence report suggests that, at that stage, Mr He was still denying or resisting acceptance of wrongdoing).
19. As I have said, I consider the fact of Mr He's apology as militating towards a reduction in sentence (although, again, the extent of Mr He's contrition is hard to gauge, particularly having regard to the pre-sentence report) and this apology, and expression of contrition, has come most belatedly. As noted above, it is inexplicable to me that Mr He did not take steps to purge the contempt that was found to have been proved in relation to Charge 2 (i.e., the provision of an operative password) and, indeed, it was not until the sentence hearing that further passwords were provided (see T 5-6). As also noted (see at [51] above), the suggestion in oral submissions that the password(s) had already been provided (and that this had been the case when the hearing of the Contempt Motion took place) is inconsistent with the evidence that was given at the hearing of the Contempt Motion.
20. As to Mr He's character, as I have said (see at [53] above), I do not accept that Mr He was dishonest in his evidence. Likewise, as I have also said, I do not see that any criticism should, or can, be made of Mr He in defending these most serious charges, notwithstanding that his defence was ultimately unsuccessful. I express no view as to Mr He's underlying attitude, at least as to his giving of evidence in the contempt hearing, about the authority of this Court and its role in the administration of justice. Accordingly, I have placed only limited significance on this factor in determining the sentence to be imposed.
21. As to Mr He's antecedents and personal circumstances, I place weight on the fact that Mr He has no criminal history and no history of anti-social behavior. I also place weight on the fact that he has been identified as low risk of re-offending and is a man of otherwise good character (see at [74]ff above).
22. While the admission by Mr He as to a previous breach of freezing orders might be said to indicate a pattern of behavior by Mr He of non-compliance with or breach of court orders, it seems to me that it is of a very different character to the conduct which has been found to constitute contempt; and I do not place weight on this. Similarly, I do not take into account, except to the extent matters are disclosed in the evidence presently before me, those matters arising on the extant application for variation of the present regime of freezing orders.
23. I place significant weight on the fact that Mr He is a married man with two young children aged six and eight years old. Furthermore, I place weight on the fact that Mr He is the sole income provider for his family and that his business may be affected by a custodial sentence, though as I have noted above (see at [75]), to what extent I cannot here determine. Nevertheless, I accept, and take into account, the fact that the imposition of a custodial sentence will have a severe personal and financial impact upon Mr He and his family, as well as potentially substantially adversely impacting Mr He's business endeavours. I consider that these matters also militate towards leniency and reduction in sentencing.
24. As to the need for specific and general deterrence, I place significant weight on the need to make clear the Court's disapproval of such conduct, and that doing so is necessary to fulfil the essential purposes of both specific and general deterrence (as I also noted in Mirus v Gage at [67]).
25. In this regard, I consider that the contempts here committed by Mr He, and the circumstances of that conduct, involved the conscious defiance of the authority of this Court which it seems, inescapably, was directed at the integrity of the courts and designed to degrade the proper administration of justice in these proceedings. In that connection, I bear in mind what was said by Kirby P, as his Honour then was, in Maniam (No 2) that the law of contempt "has been fashioned by the courts to protect the administration of justice. This is an activity, self-evidently of the greatest importance to society. It represents a vital part of the peaceful government of a community such as ours…" (see at 313-315).
26. Finally, as to the need for denunciation of contemptuous conduct, it is sufficient to note, and reiterate, the preceding observations.
27. I should also record my disposition as to the imposition of a fine, either as an alternative to a custodial sentence or in combination with a custodial sentence.
28. I have reached the view that the imposition of a fine would not be an appropriate, and for that reason an available, sentence in this case. This is because the imposition of a fine would be inadequate, having regard to the preceding matters.
29. Quite apart from the difficulty I face in assessing what would be an appropriate punishment in pecuniary terms (having regard to what Mr He has submitted as to his personal financial circumstances), I can have little certainty that the imposition of a fine would have the necessary punitive effect upon Mr He (and also, thereby, satisfy the needs of specific deterrence, along with other sentencing rationales).
30. In this regard, I again note that, during the course of the sentencing hearing, Mr He suggested through his Counsel that he would be able to meet any fine that might be imposed by way of financial support from family members (see T 22). In this respect, I see that the availability of such means would, at least to some extent, substantially undermine the punitive effects of a fine and thereby undermine an imperative, or imperatives, in the sentencing exercise.
31. In this connection, if one were to reason alternatively that Mr He would himself suffer the burdens of any fine imposed, then I would then have concern that that burden might well, in the events that happen, ultimately be visited upon Mr Sun, having regard to the extant freezing regime applicable to the assets of Mr He and his related entities along with the extant claims in the substantive proceedings.
32. For these reasons, I have concluded that the imposition of even a substantial fine is not an appropriate or available sentence.
33. I should say also, in this connection, that I do not consider that, on any view, the imposition of a costs order alone would be an adequate penalty.
34. Accordingly, and as I am required to do, having in mind the principles set out above, I here record that I am satisfied that no sentence other than a custodial sentence is appropriate. It remains only to say that I have found this matter difficult and I have arrived at the conclusion which I have reached only after extensive reflection. In short, I feel that there is no alternative in this case other than to impose a term of imprisonment.
35. As to each of the charges, I will impose the following sentences.
36. In relation to charge 1 (which concerned the alleged deletion of electronic data), I consider that a six week custodial sentence should be imposed. This takes account of the particularly egregious and contumacious nature of the conduct to which this charge relates.
37. In relation to charge 2 (which concerned the alleged failure to provide all passwords), I consider that a two week custodial sentence should be imposed. This takes account that the conduct relating to this charge was, relatively, less egregious and contumacious.
38. In relation to charge 3 (which concerned the alleged refusal to allow access to the premises), for the same reasons as the sentence for charge 2, I consider that a two week custodial sentence should be imposed.
39. In relation to charge 4 (which concerned the alleged failure to disclose the location of devices), I consider that a six week custodial sentence should be imposed. Again, this is to take account of the particularly egregious and contumacious nature of the conduct to which this charge relates.
40. Having in mind the fact that each charge relates to conduct that is connected and, in one sense, forms part of a single circumstance of offending, I consider that the sentences should be served concurrently from the date of arrest.
41. To my mind, having in mind the totality of the criminality, an aggregate term of six weeks imprisonment is the least that will satisfy the need for general and specific deterrence and the need to vindicate the contempts that have occurred, along with those other factors considered above, while taking into account the factors tending towards a reduction in sentence (and, particularly Mr He's personal circumstances, along with the fact that he is a first-time offender and is otherwise of good character).
42. I note (and by reference to s 48 of the Crimes (Sentencing Procedure) Act had it here applied) that this means that Mr He will be entitled to be released from custody six weeks after the date of his arrest.
43. I now turn to the Strike Out Motion.

Strike Out Motion

1. It will be recalled that Mr Sun seeks orders striking out Mr He's defence dated 17 May 2019 and his cross-claim dated 23 July 2019; and, alternatively, an order prohibiting any reliance by Mr He upon the evidence identified in the schedule to the Strike Out Motion. Mr Sun's submissions on strike out

Mr Sun's submissions on strike out

1. Mr Sun invokes Part 14 and Part 13 of the Uniform Civil Procedure Rules 2005 (NSW) in this regard; and refers to the principles articulated in the authorities as applicable to applications to strike out based upon abuses of process (see British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524; [2002] VSCA 197 (British American Tobacco Australia v Cowell); Clark v State of New South Wales (2006) 66 NSWLR 640; [2006] NSWSC 673 (Clark); Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264 (Palavi v Radio 2UE); Moody Kiddell & Partners Pty Ltd v Arkell [2013] FCA 1066; and Mirus v Gage [2017] NSWSC 1046, to which I have referred above).
2. Mr Sun accepts that the power to strike out the pleadings of a party is an exceptional power that should be exercised sparingly (see Clark at [63] and [147] per Johnson J; Palavi v Radio 2UE at [93]-[95] per Allsop P, as his Honour then was, and with whom Macfarlan JA agreed); and that the power exists to ensure the proper administration of justice, and to ensure a fair trial (see British American Tobacco Australia v Cowell at [178] per Phillips, Batt and Buchanan JJA, citing Millett J, as his Lordship then was, in Logicrose Ltd v Southend United Football Company Ltd (Chancery Division, 5 February 1988, unrep) (Logicrose)), not to punish the wrongdoer.
3. It is noted that the intention of the party in default is relevant both to a finding of abuse of process and to the drawing of inferences about the potential significance of the destroyed material to the issues in the case (see Clark at [76]-[81]); and that the consideration of fairness of the trial requires an assessment of the nature and extent of the prejudice to other parties (see British American Tobacco v Cowell at [178]). It is also noted that the question of prejudice involves an assessment of the significance of the destroyed material to the proceeding, even allowing for the capacity to draw adverse inferences against the party in default (see Clark at [104]).
4. Applying those principles, Mr Sun submits that, in the exceptional circumstances of the present case, the whole of Mr He's defence and cross-claim ought be struck out (noting the conclusions that I expressed as to an abuse of process having occurred by way of Mr He's deliberate deletion and withholding of material, such conduct amounting to criminal contempt as charged). It is submitted, pointing to the finding that the material deleted and withheld clearly fell within the scope of the Search Order, that the observation in Mirus v Gage [2017] NSWSC 1046 (at [220]) is here apposite, namely that: 220 … what has been destroyed, and cannot now be delivered up or accessed on a forensic examination of the devices, is the material that would or potentially might have shown any manipulation of the information on those devices.
5. Mr Sun contends, broadly, that the determination of his case ultimately rests upon the issue as to whether Mr Sun: gave some $80 million to Mr He to hold and invest on his behalf (referring in particular to [17]-[20] of the statement of claim) or lent some $60 million to Mr He (referring to Mr He's defence, in particular at [14]-[19], and his cross-claim, in particular at [3]-[12] of the first cross-claim).
6. It is said that, unlike Mirus v Gage, this is not a case where parts of Mr Sun's cause of action (nor of Mr He's defence and cross claim) can be said to arise directly out of the material that was deleted and withheld, or where proof of certain matters is clearly prejudiced, to the exclusion of others. Here, it is said that, on both pleaded cases, the arrangements between Mr Sun and Mr He were arrived at in face-to-face discussions and, on both evidentiary cases, the arrangements as alleged are said to be reflected in records of WeChat conversations.
7. It is submitted that, in essence, the evidence of the WeChat conversations informs every assertion made by Mr Sun in his statement of claim, and every denial and positive assertion made by Mr He in his defence and cross-claim. In this connection, reliance is again placed in this context on Mr He's Counsel's statement in argument that "the whole case revolves around the WeChat evidence" (although, as noted above at [40], I do not place the same weight or complexion on that statement as that for which Mr Sun contends). Mr Sun submits that, for this reason, it would not be appropriate to strike-out only parts of the relevant defence or cross-claim.
8. Mr Sun also points to the forensic disadvantage to which he has been put by the conduct of Mr He. It is said that, noting the discrepancies between the evidence of the WeChat conversations as produced by each of Mr Sun and Mr He, it follows that either the version of the WeChat conversations as relied by the plaintiff or those produced by Mr He, or both, must have been fabricated. It is said that a determination as to which version was fabricated would ordinarily be decisive against the credit of the party relying upon it and that Mr He has always been able to have access to the plaintiff's mobile telephone devices for the purpose of his forensic examination of WeChat data to identify any evidence of fabrication but that, as a result of Mr He's contempts, Mr Sun cannot now have access to the material that would (or, potentially, might) have shown that Mr He's versions were fabricated. Therefore, it is said that Mr He's actions have created a significant forensic disadvantage for the plaintiff in this regard respective to "the whole case", in that Mr Sun has been deprived of the opportunity to challenge the credit of Mr He with respect to the WeChat conversations by reference to direct evidence.
9. It is said that, ordinarily in such circumstances, strong inferences would be drawn against Mr He that the material would not have assisted his case, adverse to his credit and that the deletion of the material constituted an admission by conduct that his case was weak, and lacking in merit and truth (referring to Allen v Tobias (1958) 98 CLR 367; [1958] HCA 13 (Allen v Tobias); Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181; (1977) 52 ALJR 189 and Marsden v Amalgamated Television Services Pty Limited [2001] NSWSC 510). In that regard, reference is made to the statement of principle in Wigmore on Evidence (3rd ed, 1940), Vol 2, at [278]. It is submitted that such inferences would apply across the spectrum of facts constituting the defence and cross-claim of Mr He.
10. Mr Sun says that, having regard to the findings set out in the Contempt Judgment as to the calculated nature of the deletion and withholding of material by Mr He, the Court would proceed on the basis that the material must have been of some great significance in the determination of the substantive dispute between the parties (otherwise, it is said, it is difficult to see why Mr He would have gone to such lengths, at the risk of such penalty, to act in the way he did).
11. As to the circumstances in Clark, it is submitted that this case represents a new "high watermark" (at [121]) of the class of abuse of process involving destruction of potential evidence, noting that, on an objective view, this is not a case where items of potential evidence were destroyed before the commencement of proceedings or in ignorance of their significance (rather, Mr He deleted and withheld material after the proceedings were on foot and in spite of specific orders being made with respect to the preservation of the items in question) and that, having regard to Mr He's state of mind, it has been concluded, applying the criminal standard of proof, that what took place was an intentional destruction over a period of hours of items of potential evidence at a point when the evidentiary significance was known to Mr He and he was actively preventing the proper execution of an Order of this Court. Furthermore, and by reference to the pre-sentence report, Mr He (at least at that stage) continued to deny any wrongdoing, offered no substantive explanation for his actions other than one already discredited and refused to acknowledge the seriousness of his actions.
12. It is said that the availability of Allen v Tobias inferences does not alter the need to protect the integrity of the processes of the Court and the administration of justice. It is said that, as was the case in Clark, there is a near contemporaneous link between the Search Orders and the destruction of potential evidence by Mr He in the face of those orders; and that this "is a significant and unusual feature of this case which requires a judicial response" (see at [151]).
13. Mr Sun argues that the fact that such strong inferences of admission and adverse to credit would arise against Mr He further militates in favour of striking out his whole defence and cross-claim. It is said that, in terms of the availability of a fair trial, even if Mr He is not permitted to rely on his versions of the WeChat conversations and all available inferences are drawn against him, unless the defence is struck out: Mr Sun is still put to the expense of time and money prosecuting (and the Court of determining) a fully-contested trial that might otherwise have been foreshortened or not have proceeded at all; that, unfairly, Mr Sun is still put to proceeding oath-against-oath against Mr He in a trial expected to run for many weeks' of hearing time, in circumstances where evidence that might have been decisive as against Mr He's credit has been intentionally destroyed, despite Mr Sun having followed a legitimate path to access that material; and that the Court's own interest in having that evidence available and in the application of sections 56 to 60 of the Civil Procedure Act 2005 (NSW) is irredeemably prejudiced. It is said that the orderly progress of the case towards the tentative six-week fixture has been derailed and that this is all in circumstances where Mr He will always ultimately have strong inferences drawn against him.
14. Thus, in view of the exceptional combination of the gravity of the contempts, the obvious and irreversible prejudice to Mr Sun's ability to test evidence going to the whole of the defence and the subversion of all of the interests of this Court in connection with this litigation specifically and its processes generally, Mr Sun submits that this is one of the few case where striking out the whole defence and cross-claim is the proportionate and appropriate course to adopt.
15. Otherwise, as noted above, Mr Sun contends that Mr He should be prohibited from relying on the evidence that Mr Sun has now been wrongfully deprived of the opportunity of testing (identified in the schedules to the Strike Out Motion).

Mr He's submissions on strike out

1. Mr He emphasises that the substantive proceedings are very complicated and involve numerous banking and property transactions between Mr Sun and the defendants, involving large sums of money; and that he (and related defendants) have filed a defence and cross­claim traversing the numerous financial and business dealings between the parties and alleging that Mr Sun is, in fact, indebted to the defendants in a sum of approximately $5 million, and with some rental payments continuing to accrue.
2. Mr He also emphasises (and, as noted, Mr Sun here accepts - see above at [126]) the caution that striking out claims is a sanction to be imposed only sparingly in an appropriate case (referring to Palavi v Queensland Newspapers Pty Ltd (2012) 84 NSWLR 523; [2012] NSWCA 264 (Palavi) at [55] per Beazley JA, as Her Excellency then was, with whom Tobias JA agreed and Basten JA not deciding) and that such a sanction is "draconian" and to be exercised with caution and "only in the most exceptional or extreme case" (see Palavi v Radio 2UE at [266], citing Walton v Gardiner (1993) 177 CLR 378 at 392; [1993] HCA 77 per Mason CJ, Deane and Dawson JJ).
3. Mr He points to the fact that there has already been a substantial exchange of affidavit evidence. Mr He contends that it does not follow from the deletion of the data in the present case that Mr Sun's ability to have a fair trial has been harmed. Mr He contends (as he did at the contempt hearing) that it is not tenable to "elevate" the integrity of WeChat records to the status of a matter upon which the pleaded cases might rise or fall. It is said that, in the substantive case, Mr He has already filed affidavit evidence detailing relevant money transfers to Mr Sun and Mr Zeng in answer to the allegations made against him and that reference is made to numerous bank transfer records attached to his evidence (referring generally to [7] to [22] of Mr He's affidavit).
4. It is said that the primary remedy sought in the statement of claim is an accounting exercise. Mr He contends that money transactions, especially in such large sums as pleaded in this case, invariably involve transactional records, statements and other such paperwork; and that many of the transactions relate to the acquisition of real property. It is said that this "tracing exercise" has been substantially addressed by Mr He in his affidavits and does not depend on WeChat messages to prove.
5. Mr He notes that any order made as a consequence of conduct found to be in contempt of court (or abuse of process) must be proportionate to the prejudice that is likely to be suffered as a result of the relevant material, which requires a careful consideration of what the prejudice in question is or is likely to be, by reference to what is required to be proved in the substantive proceedings in order to establish the pleaded case (citing Mirus v Gage at [225]).
6. Mr He submits that this is, on any view, a very different case to that considered in Clark, noting that, even in the circumstances of that case, the Court of Appeal overturned the decision to strike out the whole of the statement of claim (see Clark v State of New South Wales [2012] NSWCA 139) and that the orders of the trial judge were varied to permit the causes of action for false arrest, false imprisonment and malicious prosecution to continue. It is noted that only those aspects of claim inextricably dependent on the destroyed tape (relating to misconduct on the part of the police) were struck out. In this regard, reference is also made to the principles summarised in the Contempt Judgment (see at [284] to [307]).
7. Mr He says that the Anton Pillar orders were addressed to the WeChat evidence. Mr He submits that an appropriate order in the Strike Out Motion to address the prejudice in question which has or is likely to be suffered by the plaintiff, by reference to what is required to be proved in the substantive proceedings in order to establish the pleaded case, would be one which limits Mr He in proffering his records of the WeChat conversations. It is said that such an order might limit Mr He's reliance upon the disputed WeChat conversations.
8. Mr He maintains that the orders argued for by Mr Sun are disproportionate to the prejudice suffered. It is said that the defendants' case, as pleaded in his defence and cross-claim, is that he does not owe any money to Mr Sun and, in fact, on an accounting basis, the plaintiff owes many millions to Mr He.
9. As adverted to above, Mr He's affidavit in the contempt hearing noted that he has already filed affidavit evidence in the substantive proceedings detailing relevant money transfers to the plaintiff and Mr Zeng in answer to the allegations made against him (see at [7]). Mr He refers also to the numerous bank transfer records attached to his evidence (see at [8]-[9]). Reference is made to [11]-[13] of his affidavit in which Mr He deposes to some $34,398,532.00 worth of transactions that he says are admitted in the defence to the second cross­claim filed by Mr Zeng (not the subject of the present applications). It is said that this does not include an estimated $27 million relating to the shares in CHGPL and two lots in the "Thornleigh Project". Mr He argues that the admitted receipt by Mr Zeng of over $60 million contradicts the assertion by Mr Sun that such sums are owed to Mr Sun by Mr He. Mr He also refers to an attachment to his affidavit which he says amounts to an admission that Mr Sun received from Mr He or his companies a transfer in ownership of the Palisade Hotel with a value of at least $16 million together with a number of luxury cars estimated at about $1.6 million (see at [17]). Additionally, Mr He refers (at [18]-[22] of his affidavit) to concessions said to have been made in the evidence, and a total of $27,736,807 received in various forms by Mr Sun.
10. It is submitted that these matters demonstrate why a strike-out of the defence and cross-claim would be an excessive, or disproportionate, response. As noted, it is submitted that an appropriate order would be one which limits Mr He in proffering his records of the disputed WeChat conversations.

Determination of strike-out application

1. At the outset, I fully accept that the power to strike out the pleadings of a party is an exceptional power and one that must be exercised sparingly (as noted above, see Clark at [63] and [147] per Johnson J and Palavi v Radio 2UE at [93]-[95] per Allsop P, as his Honour then was, and with whom Macfarlan JA agreed; and see also Palavi at [55] per Beazley JA, as Her Excellency then was).
2. Furthermore, I bear acutely in mind that the power to strike out exists to ensure the proper administration of justice and to ensure a fair trial. Perhaps most relevantly to the present circumstances, I abide by the caution that this power should not be exercised to punish a wrongdoer (again, see Millett J, as his Lordship then was, in Logicrose, cited in British American Tobacco Australia v Cowell at [178]).
3. With those cautions in mind, it must be recognised (as I found in the Contempt Judgment) that Mr He, by his contempts, has perpetrated a clear abuse of process (see [284]-[297] of the Contempt Judgment). By that conduct, the processes of this Court have been subverted and the availability to Mr Sun of a fair trial has been seriously prejudiced (in the various senses in which that phrase is used, and not least in the sense that Mr Sun has been deprived of the proper opportunity to test aspects of Mr He's evidence, such as the extent to which if at all the WeChat records were manipulated by Mr He) (see [296] of the Contempt Judgment).
4. Indeed, I accept that the forensic disadvantage that Mr Sun suffers as a result of the loss of the opportunity to investigate the WeChat evidence goes beyond the relevance of that material to the issues in the proceedings but also undermines what would be the obvious challenge to Mr He's credit were such manipulation able to be established.
5. Having said that, there is force to the submission for Mr He that the records of the WeChat conversations will not necessarily be dispositive of the issues in the substantive proceeding (at least to the extent that inferences can be drawn from the flow of moneys traced through the banking records). In this regard, I recognise and accept that the orders made as a consequence of conduct found to be in contempt of court (or abuse of process) must be proportionate to the prejudice likely to be suffered by Mr Sun and that this requires careful consideration of what that prejudice is or is likely to be, having in mind what is required to be proved in order to establish the pleaded case (again, see Mirus v Gage at [225]).
6. Indeed, I understand that the pleadings, and evidence, extend far beyond the WeChat evidence. Although there was some confusion in the course of submissions as to whether the pleaded "loans" are in fact said by Mr He to be loans as such, I am prepared to accept that the characterisation of the moneys received by Mr He will not necessarily depend on evidence of the WeChat conversations.
7. In that connection, I see force to the submission for Mr He, relying on the disposition of the appeal from the decision in Clark, that only those aspects of the claims inextricably dependent on the WeChat conversations should be struck out. To my mind, I do not here need to rely upon (as here urged upon me by Mr Sun) any inferences as to the probative value, and importance to the case, of the WeChat conversations. Instead, I am prepared to accept the submission for Mr He on this issue and propose to proceed on that basis.
8. I should say that, while I accept that proceeding in this way will still see Mr Sun put to the expense of prosecuting a contested trial that might otherwise have been foreshortened (or not have proceeded at all) and in circumstances where evidence that might have been decisive as against Mr He's credibility has been intentionally destroyed by Mr He, I do not see that these matters justify the wholesale striking out of the pleadings, particularly having in mind what has been said by Counsel for Mr He in relation to the full extent of issues and evidence in the case.
9. Likewise, while I am acutely aware of those considerations adumbrated under ss 56 to 60 of the Civil Procedure Act and the statutory mandate for the just, quick and cheap resolution of the real issues in dispute, I do not here see that these matters outweigh Mr He's interests (and, indeed, his right) to defend the claim and to prosecute his own (subject to the striking out of those aspects of the case which rely upon evidence of the WeChat conversations).
10. As to the making of any inferences from the events that have happened, I say nothing of that (other than to note that I have taken this into account as I must in disposing of the strike out application). The making of any such inferences adverse to Mr He in the disposition of the substantive proceedings is a matter for the trial and for the trial judge (which, in light of the findings I have already made in relation to Mr He, will obviously not be me).
11. Finally, it is appropriate that these proceedings be listed for further directions before the Registrar in Equity.

Orders

1. For the preceding reasons, I make the following orders: 1. Order that the first defendant, Xin He (also known as Ethan He), be sentenced, on charge 1, to a term of imprisonment of six weeks commencing from the date of his arrest. 2. Order that the first defendant, Xin He (also known as Ethan He), be sentenced, on charge 2, to a term of imprisonment of two weeks to be served concurrently with the sentence imposed for charge 1. 3. Order that the first defendant, Xin He (also known as Ethan He), be sentenced, on charge 3, to a term of imprisonment of two weeks to be served concurrently with the sentence imposed for charge 1. 4. Order that the first defendant, Xin He (also known as Ethan He), be sentenced, on charge 4, to a term of imprisonment of six weeks to be served concurrently with the sentence imposed for charge 1. 5. Order that a warrant issue for the committal of the first defendant, Xin He (also known to Ethan He), to prison for the said fixed term do issue. 6. Order that the warrant for the committal of the first defendant, Xin He (also known to Ethan He), to prison be executed forthwith. 7. Order that pursuant to s 61(3) of the Civil Procedure Act 2005 (NSW), r 2.1 of the Uniform Civil Procedure Rules 2005 (NSW) and the Court's inherent jurisdiction, the first, second, third, fourth, ninth, thirteenth, fourteenth and fifteenth defendants and first and second cross-claimants may not, without the consent of the plaintiff or the leave of the Court, rely upon: 1. any evidence in relation to, or documents purporting or asserted to contain, communications transmitted between the plaintiff and the first defendant by way of "WeChat" and/or "WhatsApp" and/or any other communications applications and services between January 2016 and January 2019, including without limitation those documents referred to in "Schedule A" of the notice of motion filed by the plaintiff on 11 February 2011; 2. any evidence in relation to, or documents purporting or asserted to contain, communications transmitted between the first defendant and any other person (other than the plaintiff) by way of "WeChat" and/or "WhatsApp" and/or any other communications applications and services between January 2016 and January 2019, including without limitation those documents referred to in "Schedule B" of the notice of motion filed by the plaintiff on 11 February 2011; and 3. any evidence in relation to, or documents purporting or asserted to be, spreadsheets created by the first defendant in tracking his receipt and expenditure of money received from or on account of the plaintiff. 1. Order that the first defendant pay the costs of the notice of motion filed by the plaintiff on 11 February 2020 and the notice of motion filed by the plaintiff on 18 February 2020. 2. List the proceedings for further directions on 19 October 2020 before the Registrar in Equity.

ADDENDUM At the delivery of judgment, Mr He sought a stay of the sentence pending an appeal. The Court made orders staying the sentence, on conditions that Mr He surrender his passport and give security in the sum of $200,000 and on the undertaking that Mr He prosecute the appeal without delay.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 September 2020