CC Containers Pty Ltd v Lee (No 7)
[2015] VSC 477
•9 September 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
S CI 2010 06056
| CC CONTAINERS PTY LTD and others (according to the attached schedule) | Plaintiffs |
| v | |
| DESMOND MING LEE and others (according to the attached schedule) | Defendants |
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JUDGE: | GINNANE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23-25 March 2015 |
DATE OF JUDGMENT: | 9 September 2015 |
CASE MAY BE CITED AS: | CC Containers Pty Ltd v Lee (No 7) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 477 |
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CONTEMPT – Freezing order – Breach by withdrawals from bank account – Exceptions to order – Onus of proof of exceptions – Whether increase in indebtedness breaches order – Whether bank account an asset of director of company – Whether charges should be dismissed in exercise of discretion – Supreme Court (General Civil Procedure) Rules 2005 r 75.06
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S R Horgan QC and Mr J M Brereton | K & L Gates |
| For the third Defendant | Dr B Orow | Jack Bock Lawyers |
SCHEDULE OF PARTIES
S CI 2010 06056 BETWEEN: CC CONTAINERS PTY LIMITED Firstnamed Plaintiff MEDITERRANEAN SHIPPING COMPANY (AUST) PTY LTD Secondnamed Plaintiff MSC MEDITERRANEAN SHIPPING COMPANY SA Thirdnamed Plaintiff - and - DESMOND MING LEE Firstnamed Defendant LEE HOLDINGS (AUSTRALIA) PTY LTD Secondnamed Defendant KEVIN SENG YEE CHONG Thirdnamed Defendant KAIN PATT CHONG Fourthnamed Defendant GEORGE PANTZOGLOU Fifthnamed Defendant CHRISTOPHER HOWARD NEALE Sixthnamed Defendant
HIS HONOUR:
The plaintiffs by amended summons seek declarations and orders, including orders as to penalties, that Mr Kevin Seng Yee Chong, the third defendant, is in contempt of court by breaching a freezing order.
On 9 November 2010, Sifris J made the freezing order against the first three defendants and it was later continued. It contained the following terms:
4. In this order –
(a)“applicant”, if there is more than one applicant, includes all the applicants;
(b)“you”, where there is more than one of you, includes all of you and includes you if you are a corporation;
(c)“third party” means a person other than you and the applicant;
(d)“unencumbered value” means value free of mortgages, charges, liens or other encumbrances.
…
6.(a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets which are in Australia (“Australian assets”) up to the unencumbered value of AUD$1,630,000 (“the relevant amount”).
(b)If the unencumbered value of your Australian assets exceeds the relevant amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the relevant amount.
…
7.For the purposes of this order —
(a)your assets include —
(i)all your assets, whether or not they are in your name and whether they are solely or co-owned;
(ii)any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and
(iii)the following assets in particular —
(A)the assets of your business or, if any or all of the assets have been sold, the proceeds of the sale; and
(B)any money in the following account: BSB 083 266, Account Number 872575493 in the name of CC Containers at the Glen Waverley Branch of the National Australia Bank;
(C)any money in the following account: BSB 083 266, Account Number 554405560 in the name of Desmond Ming Lee at the Glen Waverley Branch of the National Australia Bank;
(D)any money in the following account: BSB 083 106, Account Number 831814769 in the name of Lee Holdings Australia at the Altona North Branch of the National Australia Bank;
(b)the value of your assets is the value of the interest you have individually in your assets.
…
EXCEPTIONS TO THIS ORDER
10. This order does not prohibit you from –
(a) the first and third defendants paying up to $1,000 a week on your ordinary living expenses;
(b) paying $20,000 in respect of your reasonable legal expenses;
(c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred;
(d) in relation to matters not falling within sub-paragraphs (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation;
but this order does prohibit you absolutely from dealing with or disposing from dealing with or disposing of or diminishing the present value of any of the bank accounts set out in paragraph 7 (a)(iii) above save for payment of the expenses referred to in (a) and (b) above.
11. You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may thereafter order that the exceptions are varied accordingly.
12.(a) The order will cease to have effect (except for its operation over the accounts set out in paragraph 7 (a)(iii) above) if you –
(i) pay the sum of $1,630,000 into Court; or
(ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the applicant as agreed in writing between them; or
(iii) provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.
…
The plaintiffs sought the following order by amended summons as filed on 24 March 2015:
4.Declarations and orders (including orders as to penalties) that the third defendant is in contempt of the Supreme Court of Victoria by:
a. withdrawing the amount of:
i.$81,375.17 from the BoQ, Kevin Seng Chong Cash Management Account (BSB 124 001 Acc 2022 0296) in twenty-two separate withdrawals made between 26 November 2010 and 1 July 2011 as particularised in the document entitled Amended Paragraph 4(a)(i) of the Contempt Summons initialled by the Judge and placed on the Court file on 24 March 2015;
ii.$17,925.00 from the BoQ Laniere Holdings Pty Ltd Business Cheque Account with Overdraft Facility (BSB 124 001 Acc 2140 1471) in nineteen separate withdrawals made between 23 December 2011 and 15 May 2012 as particularised in the document entitled Amended Paragraph 4(a)(ii) of the Contempt Summons initialled by the Judge and placed on the Court file on 24 March 2015;
iii.$5,500 from the NAB, KS Chong NAB Classic Banking Account (BSB 083 893 Acc 46072 4800) in three separate withdrawals, one in the amount of $3000 on 23 September 2011, another in the amount of $1,500 on 30 September 2011, and the other in the amount of $1,000 on 30 September 2011;
iv.$1,276.02 from BoQ, Kevin S Chong Premier Investment Account (BSB 124 001 Acc 2094 0420) in two separate withdrawals, one in the amount of $638.01 on 1 January 2012, and the other in the amount of $638.01 on 1 February 2012;
v.$1032.96 from ANZ, Kevin Seng Chong and Patricia Lee Access Select Cheque Account (BSB 013 412 Acc 5548 53355) in four separate withdrawals, one in the amount of $719 on 25 November 2010, another in the amount of $29 on 29 November 2010, another in the amount of $24.95 on 30 November 2010, and the other in the amount of $264 on 9 December 2010.
b.in circumstances where:
i.on 9 November 2010 the Supreme Court of Victoria ordered that the first and second defendants were restrained from removing from Australia or in any way disposing of, dealing with or diminishing the value of any assets which are in Australia up to an unencumbered value of AUD$1,630,000;
ii.the third defendant had been aware of the terms of that order from the time it was made;
iii.the third defendant was informed of the terms of the order by telephone and email at about 6.50 pm on 10 November 2010;
iv.the third defendant was represented by his solicitor before Judd J upon the extension of the order on 12 November 2010; and
v.the withdrawals were not reasonably necessary for the third defendant’s ordinary living expenses.
The application was brought under r 75.06 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic).
The freezing order was made on 9 November 2010 and then extended on 12 November 2010 and 6 December 2010.
The plaintiffs did not pursue the fourth and fifth charges contained in the amended summons (paragraphs a iv and v).
Matters that require proof
The High Court has recently confirmed in Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd[1] that a contempt proceedings brought for breach of an injunction is a civil proceeding.
[1](2015) 322 ALR 448 [3], [35], [45], [65]–[66].
In Grocon (Victoria) Pty Ltd v Construction, Forestry, Mining and Energy Union,[2] Cavanough J stated:
It is common ground that, in general terms, the elements of a civil contempt, ie a contempt constituted by a breach of a court order, are as follows:
(a) that the order was made by the court;
(b) that the terms of the order are clear, unambiguous and capable of compliance;
(c) that the order was served on the alleged contemnor or that service was excused in the circumstances or dispensed with pursuant to the Rules of Court;
(d) that the alleged contemnor has knowledge of the terms of the order;
(e) that the alleged contemnor has breached the terms of the order.[3]
[2][2013] VSC 275.
[3]Ibid [8] (citations omitted).
Mr Chong’s knowledge of the order
Mr Chong did not contest that he was served with the order and was aware of its terms. I am satisfied that those matters are proved by the evidence given by the plaintiffs’ solicitor, Mr Stephen Thompson, in his affidavit sworn on 19 December 2012.
Mr Thompson swore, and I accept, that on the evening of 10 November 2010 at 6.50pm he called Mr Chong on his mobile telephone and told him that proceedings had been commenced in this Court in connection with the falsification of ‘Gate In moves’ for the shipping line APL and other lines, as well as falsified container repairs and that the plaintiffs would be pursuing him for damages. He also informed him that the freezing order had been obtained the previous day, and that he was banned from dealing with his assets to the value of approximately $1.6 million until the following Friday, 12 November 2010, when the matter would be back in Court. He told him that he would be emailing the papers to his Gmail account and that people were trying to serve the original papers on him. He said that Mr Chong should get legal advice and call him with any questions. Mr Thompson then immediately sent an email to Mr Chong’s email account, attaching the writ, supporting affidavit, freezing order and summons for directions. In the email, he reiterated the effect of the freezing order, stating that:
The effect of the Freezing Order is that you may not dispose of any of your assets (with certain limited exceptions), up to the value of $1.63m until Friday, when the proceedings are back before the Court. If you do not comply, you may be liable for contempt of Court.
Please read these documents carefully, and feel free to call me to discuss.
The freezing order that was served contained the required Penal Notice describing the possible consequences of breaching the order.
On the return of the order on 12 November 2010, Mr Chong was represented by a solicitor.
The proceeding
I will describe something of the context in which the freezing order was made. I take the following matters from the facts stated in the judgment of Ferguson J at trial. The third plaintiff operates a shipping business transporting containerised cargo around the world. The second plaintiff is its wholly owned agent in Australia and New Zealand. The second plaintiff used the services of CCC Old Co[4] to repair, maintain and store empty containers in Melbourne. That company was controlled by two of the defendants, Kevin Chong and his father, Kain Chong. A new company was established to purchase and operate CCC Old Co’s business. It was the first plaintiff CC Containers Pty Ltd (“CC Containers”). The Chongs held 25 per cent of the shares in CC Containers.
[4]The name by which the original CC Containers Pty Ltd was referred to in the judgment of Ferguson J.
The proceeding came to trial and Ferguson J gave judgment in favour of the plaintiffs against several defendants, including Mr Chong, for substantial damages for a number of frauds.[5] An appeal from her Honour’s judgment was dismissed except in respect of an adjustment of the interest on the judgment that had been awarded.[6]
[5]CC Containers Pty Ltd v Lee (No 6) [2014] VSC 151.
[6]Chong & Neale v CC Containers Pty Ltd [2015] VSCA 137.
Mr Chong had been declared bankrupt and did not participate in the trial. His counsel submitted that the findings of fact made by Ferguson J could not be relied on by the plaintiffs to prove the contempt charges that they had brought against him. I accept that submission. I have stated the facts taken from Ferguson J’s judgment to give the context in which the freezing order was sought and I do not rely on those facts in determining whether the plaintiffs have proved the contempt that they allege.
Evidence called in the proceeding
The plaintiffs relied on a number of affidavits in support of their summons. Two of the deponents were called for cross-examination: Ms Karlee Prior and Mr Stephen Thompson. I will next describe the substance of the affidavit evidence.
Ms Prior
Ms Karlee Prior was at relevant times employed by the Bank of Queensland (“BoQ”). She made three affidavits about the BoQ’s response to the plaintiffs’ subpoena for production of documents. She was given the task of responding to the subpoena.
I have only taken into account those parts of Ms Prior’s affidavits and the other affidavits filed by the plaintiffs that concern Mr Chong and which were ruled to be admissible.
Ms Prior, in her second affidavit, described the BoQ’s response to the plaintiffs’ solicitors request for production of a number of withdrawal slips and cheque copies from bank accounts held in the name of Laniere Holdings Pty Ltd and in the names of Kevin Seng Yee Chong and Susie Shiow Lin Wong.
In her third affidavit, Ms Prior described the production of a number of deposit slips for deposits in a BoQ bank account in the names of Mr Chong and Ms Wong. Five pages of the deposit slips were admitted into evidence.
Ms Haidar
Ms Kristy Haidar, an employee of the National Australia Bank Ltd (“NAB”), made two affidavits describing her response on behalf of the NAB to subpoenas issued by the plaintiffs.
A number of the documents that were produced by the BoQ and NAB on subpoena were tendered[7] and formed part of the evidence on which the plaintiffs relied to prove the charges.
[7]Exhibit J; Application Book 30–43 (first charge), 44–66 (second charge) and 67–69 (third charge).
Mr Stephen Thompson
The other witness called was Mr Stephen Thompson, the solicitor for the plaintiffs. He made a number of affidavits in support of the plaintiffs’ summons.
He agreed in cross examination that more than 2 years or 110 weeks had passed between the making of the freezing order on 9 November 2010 and the issuing of the contempt summons on 20 December 2012. This fact led to the suggestion that was put to him in cross-examination that, because the order permitted Mr Chong to spend $1,000.00 a week on living expenses, he had been entitled to withdraw from bank accounts an aggregate of $110,000.00 for living expenses. It was also contended that if, in any week, he withdrew less than $1,000.00 for living expenses, he could carry forward the balance of the $1,000.00 that he did not withdraw and add it to the $1,000.00 a week permitted for living expenses in a later week or weeks. Mr Chong pointed out that many ordinary living expenses amount to more than $1,000.00 and are payable on a monthly or yearly basis.
Mr Thompson gave evidence that, in preparing the contempt summons, he did not include as impugned withdrawals, transactions that he considered could reasonably be regarded as having occurred in the ordinary course of business. However, he did not recall the criteria that he used to determine which transactions had that character.
Mr Thompson was asked about various contracts entered into by Mr Chong which provided for direct debit payments. All of those contracts pre-dated 9 November 2010. However, the direct debit contracts, or the obligations that they imposed, were not proved. Some documents that provided details of direct debits were not proved and therefore not admitted into evidence.
Nonetheless, Mr Chong submitted that the Court should infer that the withdrawals by way of direct debits were in discharge of obligations bona fide and properly incurred under contracts entered into before the freezing order was made.
Mr Chong’s no case submission
At the conclusion of the plaintiffs’ case, Mr Chong submitted that he had no case to answer. I did not put Mr Chong to his election. However, I ruled that he did have a case to answer.
Mr Chong did not call any evidence, as part of his case. His counsel stated that he was suffering from severe anxiety and would not be giving evidence.
The parties again relied on their submissions made on the no case submission in their final submissions.
The significance of Mr Chong not giving evidence
Mr Chong submitted that no adverse inference should be drawn from his decision not to give evidence. He was entitled to rely on the privilege against self-incrimination.[8] However, assuming in his favour that he invoked that privilege, that does not prevent the absence of evidence from him or other relevant witnesses having an effect in the determination of issues in the case, particularly on those on which he had the onus of proof. In RPS v The Queen, Gaudron ACJ, Gummow, Kirby and Hayne JJ stated:
[W]here an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference.
…
In a civil trial there will often be a reasonable expectation that a party would give or call evidence. It will, therefore, be open in such a case to conclude that the failure of a party (or someone in that party’s camp) to give evidence leads rationally to an inference that the evidence of that party or witness would not help the party’s case.[9]
[8]Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 322 ALR 448 [65]–[67].
[9](2000) 199 CLR 620, 632 [26].
The authorities considering the significance of a party not giving evidence where the party has claimed the privilege against self-incrimination were discussed in Chong & Neale v CC Containers Pty Ltd[10], in determining the appeal from the judgment of Ferguson J. The Victorian Court of Appeal stated:
Our tentative view is that the privilege, if properly claimed pursuant to s128, would not have precluded the application of the rule in Jones v Dunkel to a party or witness who fails to give evidence. But as it is clear that Neale did not effectively claim the privilege, we find it unnecessary to express a concluded opinion on this question.[11]
[10][2015] VSCA 137.
[11]Ibid [229].
I consider that the fact that Mr Chong, or other appropriate witnesses, did not give evidence as part of his case has relevance in determining whether he proved that exceptions to the freezing order on which he relied were applicable.
Mr Chong’s submissions applicable to all of the charges
Mr Chong advanced a number of submissions that were applicable to all of the charges. He submitted that if all the contractual arrangements that led to debits to the bank accounts were put to one side, the withdrawals or debits said to have breached the freezing order would amount to $26,881.00. And if the additional two cheques, which formed part of charge 1, were removed, the amount of the withdrawals remaining would be $12,382.69. Most of the withdrawals were offset by amounts credited to the particular account.[12]
[12]See eg Exhibit 1.
Mr Chong therefore submitted that, if he had breached the order, then the breach was of an insignificant and technical nature for a small amount, which could be attributed to contractual obligations or living expenses.
I have previously noted Mr Chong’s submission that the freezing order permitted the carrying forward of the portion of $1,000.00 per week for ordinary living expenses that had not been withdrawn in a particular week.
Mr Chong’s counsel submitted that, in order for the plaintiffs to prove their allegations of contempt, they had to establish that the freezing order was clear in its terms. They also had to establish that the conduct was calculated to interfere with the course of or administration of justice.
I will next consider the three charges of contempt on which the plaintiffs’ summons relies.
The first charge
The first paragraph of the plaintiffs’ amended summons relating to Mr Chong alleged 22 withdrawals totalling $81,375.17 from a BoQ account, being the Kevin Chong Cash Management Account number 20220296 made between 26 November 2010 and 1 July 2011. The withdrawals were particularised in a separate document.
The withdrawals were proved from the entries on the BoQ statements that were in evidence. The 22 withdrawals were mainly direct debits to the account with the exception of 2 bank guarantee line fees, four cash withdrawals and two cheques. Mr Chong relied on a letter from Mr Thompson, the plaintiffs’ solicitor, dated 3 July 2012 to Mr Chong’s solicitor, which stated that the two cheques were payable to Capital Finance Australia Ltd.
As the plaintiffs proved that the withdrawals occurred when the freezing order was in force, the issue became whether the withdrawals were permitted by exceptions to the freezing order. For ease of reference, I will set out again the relevant exceptions:
This order does not prohibit you from-
(a) the first and third defendants paying up to $1,000 a week on your ordinary living expenses;
…
(c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred;
(d) in relation to matters not falling within sub-paragraphs (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation.
Onus of proof with exceptions to the freezing order
The question of who bears the onus of proving that conduct comes within an exception to a statutory provision is a matter of substantive statutory construction.[13] Generally, a person relying on an exception to a freezing order bears the onus of proving that the withdrawal falls within the exception. White J in Australian Securities and Investments Commission v Sigalla (No 3)[14] explained why this was so in the following passage:
The onus of establishing that the transfer of funds was for the payment of reasonable ordinary living expenses or reasonable ordinary operating expenses is on Mr Sigalla (Vines v Djordjevitch). Provisos (c)and (d) of the orders express an ‘exculpation justification, excuse, grounds of defeasance, or exclusion which assumes the existence of the general or primary grounds from which the liability arises, but denies the liability in a particular case by reason of additional or special facts.’
[13]Bropho v Human Rights and Equal Opportunity Commission (2004) 135 FCR 105 [75](French J) and D C Pearce and R S Geddes, Statutory Interpretation (LexisNexis, 8th ed, 2014) 201–2.
[14][2010] NSWSC 1076 [46].
I consider that in view of the wording and structure of exceptions 10 (c) and (d) Mr Chong bore the onus of proving that the withdrawals came within them.
Mr Thompson’s affidavit of 19 December 2010 exhibited a disclosure affidavit by Mr Chong sworn on 9 December 2010 and which he received that day. In it Mr Chong stated that he was the owner of a Maserati motor vehicle that was registered in the name of, and was in the possession of, Brents Prestige. He stated:
I estimate that its value is approximately $240,000.00 and is encumbered by a hire purchase agreement with BMW Finance Ltd of 283 Springvale Road, Mulgrave with a payout figure of approximately $290,000.00.
He also swore that he was registered as the owner of an Audi S5 2008 motor vehicle, which, in fact, was owned by his father and had an estimated value of $80,000.00. He said that it was encumbered to Capital Finance Australia Ltd with a payout value of $90,000.00.
The plaintiffs tendered an affidavit sworn by Mr Chong on 7 May 2013 in which he stated that:
[B]oth motor vehicles referred to have been repossessed by BMW Finance as a result of my inability to maintain the payments.
In another part of that affidavit, Mr Chong replied to parts of an affidavit of Mr Thompson in which he listed in Table A item 9, 26 withdrawals totalling $84,572.40 from a BoQ Kevin Seng Chong Cash Management Account. Mr Chong stated that:
Item 9 – The withdrawals represent direct debits which I previously authorised the Bank to pay to BMW Finance. I requested the Bank to cease making those payments however the Bank advised me they were unable to cease the direct debits unless I obtained agreement from the beneficiary namely BMW Finance Pty Ltd.
Accordingly, the payments just continued.
Only 2 of the 10 direct debits recorded on the BoQ Cash Management Account statements were for payments to BMW Australia Finance Pty Ltd.
Mr Chong’s counsel sought to tender contracts and correspondence which were said to prove the details of the direct debits. No witness was called to prove them and, upon the plaintiffs objection, I refused the tender.
Mr Chong’s submissions
Mr Chong relied on the pre-existing obligations exception 10(d)to the freezing order and submitted that entries on the BoQ statement revealed that the obligations predated the freezing order.
The requirement in exception (d) to give, if possible, at least two working days’ written notice with particulars of the obligation, was not mandatory. In any event, the plaintiffs had received notice of the debits in Mr Chong’s affidavit of 9 December 2010. The plaintiffs knew of the direct debit obligations within one month of the making of the freezing order. Mr Chong’s failure to give formal notice of two days was at most a procedural irregularity. The requirement to give notice only existed if it were possible to provide notice.
The direct debits were attributable to obligations incurred prior to 9 November 2010. The debits were all payments to the same companies in the same amounts and giving the same loan or transaction number. The inference should, therefore, be drawn that the debits were made to comply with a pre-freezing order, contract or contractual arrangement. Mr Chong had sworn that the bank advised him that he could not revoke the direct debit authority.
Mr Chong submitted that the freezing order did not freeze property acquired after it was made. The order was not designed to freeze cash deposited in a bank account to provide an offset against a later liability or withdrawal. The order only prevented conduct that diminished the value of Mr Chong’s interest in assets.
Mr Chong also relied on the form of the charges and the fact that each contempt charge relied on a number of withdrawals to make up a total amount said to constitute a contempt of court. He submitted that if the court found that the plaintiffs had not proved even one of the withdrawals, then the charge of which the withdrawal formed part had not been proved.
The plaintiffs’ submissions
Mr Chong’s contention that he had to obtain BMW Aust Finance’s permission to end the direct debit was unsustainable. He knew that the moneys were withdrawn from the account by the direct debit. A withdrawal of funds pursuant to a direct debit contravened the freezing order.
There was no proof that the withdrawals came within any exception to the freezing order. Mr Chong did not give the plaintiffs the required notice of any obligation to make the direct debit. He bore the onus of proving that the exception was applicable.
The order was in the form prescribed by the Supreme Court (General Civil Procedure) Rules2005[15] and its terms were clear.
[15]Form 37AA.
The plaintiffs submitted that each withdrawal which formed the basis of charge 1 of the plaintiffs’ summons was a separate allegation of contempt.
Mr Chong had made a number of withdrawals from bank accounts in March, April, May and June 2011 which breached the freezing order. It was no answer to say that those breaches were cured by deposits that replaced the amounts that were withdrawn.
The plaintiffs submitted that the effect of the order was to freeze Mr Chong’s assets from time to time, including after acquired assets. They relied on the decision in R on the Application of Minshall v Marylebone Magistrates Court[16], in which Langstaff J considered an argument whether a freezing order in relevantly similar terms applied to ‘after acquired property’ and stated:
The matter may be tested by asking what, two years after the event, a defendant would understand the order to mean? If he took it out from his top drawer and looked at it, he would see that in terms it prohibited him from dealing with, or diminishing, the value of any of his assets…
The first re-course has to be the wording of the order. In any event, it does not seem to me at all realistic to suppose, nor do I think the order could be sensibly construed to mean, that under paragraph 9 a defendant would be restrained only in respect of property current at the time of the order. It would be impossible to police. The meaning is plain. It does not prohibit the defendant from spending up to £250 a week but caps it at that. The words ‘from property which he had at the time of the order’ do not appear. The prohibition seems to me clear.[17]
[16][2007] EWHC 214.
[17]Ibid [17]–[18].
There was no evidence that entitled Mr Chong to rely on the ‘ordinary and proper course of business’ exception contained in the freezing order. There was no evidence that he was running a business.
The breaches of the freezing order interfered with the administration of justice.
Conclusion on charge 1
I consider that each of the withdrawals by Mr Chong has been proved by the production of the bank statements and the withdrawals that they recorded.
I consider that the freezing order was clear and followed the terms of the prescribed form.
I accept the plaintiffs’ submission that the freezing order did apply to after acquired assets. The reasoning in R on the application of Minshall v Marleybone Magistrates Court[18] is equally applicable in this case.
[18]Ibid.
I do not agree that the freezing order permitted Mr Chong to carry forward any part of the amount $1,000.00 per week permitted for ordinary living expenses that he did not withdraw in a particular week. The order did permit the parties to agree on variations. If Mr Chong needed to increase the amount permitted to be withdrawn for ordinary living expenses, he could have sought the plaintiffs’ agreement to a variation of the freezing order or applied to the Court to vary the order.
I take into account that the BMW Aust Finance direct debits, the bank guarantee line fees and the cheques written in favour of Capital Finance Australia Ltd appear to have discharged obligations that commenced before the freezing order was made. But the terms of those obligations were not proved and the required notice of them was not given. There is no evidence that Mr Chong could not have given written notice with particulars of the contracts under which the debit obligation arose within two days. I do not consider that Mr Chong’s affidavit of 9 December 2010 gave the required notice as it did not contain sufficient particulars. Therefore, Mr Chong has not established that any of the withdrawals which constitute the first charge came within exception 10 (d).
I consider that Mr Chong’s conduct was intentional in relevant respects as he permitted the direct debits to occur without giving the required notice of them.
I am satisfied beyond reasonable doubt that on each of the 22 occasions between 26 November 2010 and I1 July 2011, Mr Chong withdrew amounts totalling $81,375.17 occurred from BoQ account 20220296, Mr Chong committed contempts of court.
The second charge — Laniere Holdings Pty Ltd
The second charge alleged that Mr Chong breached the freezing order by 19 withdrawals, totalling $17,925.00, from a BoQ Cheque Account with Overdraft Facility in the name of Laniere Holdings Pty Ltd (“Laniere”) made between 23 December 2011 and 15 May 2012.
The Laniere account was opened on 2 March 2010. It was in debit pursuant to a credit facility throughout the period of the withdrawals.
The withdrawals stated in charge 2 were proved by the entries contained in the BoQ statements that were admitted into evidence.
The ASIC historical extract for Laniere dated 22 November 2010 recorded that Mr Kevin Chong was appointed a director on 1 March 2010 and, following the resignation of Hoe Kong Chi on the following day, 2 March 2010, was the sole director. Laniere had 100 ordinary shares as issued share capital, all of which were held beneficially by Hoe Kong Chi. Mr Chong did not own any shares.
As previously stated, two affidavits by Mr Chong were in evidence. In an affidavit of 9 December 2010, which was exhibited to Mr Thompson’s affidavit of 19 December 2010, Mr Chong stated:
Laniere Holdings Pty Ltd
I refer to paragraph 2 and exhibit (k) of the Thompson Affidavit and say that Laniere Holdings Pty Ltd was established for the purposes of conducting a restaurant business with Mr Hoe Kong Chi as a co director and shareholder. When the Company applied for a liquor permit, it was ascertained that the shareholder must be an Australian resident. As Mr Chi did not qualify, the shares were then transferred to me and this is referred to in paragraph 2 (a) of my Affidavit sworn the 19th November, 2010 and filed herein.
However, in an affidavit sworn 7 May 2013, Mr Chong gave different evidence stating:
I refer to paragraph 3 of my Affidavit sworn the 9th December, 2010 and say that it was incorrect to say that I was a shareholder of Laniere Holdings Pty Ltd. I am a director of Laniere Holdings Pty Ltd. I had intended to depose that the directorship was transferred to me to enable the Company to obtain a liquor licence. I do not own, nor have I ever owned the shares in Laniere Holdings Pty Ltd.
He also swore that:
Item 10- Although as a director of Laniere Holdings Pty Ltd I signed various cash withdrawals from the Laniere Holdings Pty Ltd bank account, and these withdrawals were made in the ordinary and proper course of the business of Laniere Holdings Pty Ltd including the payment of business expenses bona fide and properly incurred.
Mr Chong also stated:
It is my understanding and belief that I have at all times complied with the Orders of Sifris J on 9th November, 2010 and [Judd] J on 6th December, 2010 and that I have not knowingly failed to comply with the Orders.
The plaintiffs’ submissions
The plaintiffs relied on the definition of ‘asset’ contained in the freezing order, which was:
Any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the assets in accordance with your direct or indirect instructions).
They submitted that the Laniere account, including the credit facility attached to it, was Mr Chong’s asset because he had power to dispose of and deal with it as if it was his own. There was no evidence that the Laniere transactions were transactions in the ordinary course of business.
Mr Chong’s submissions
Mr Chong submitted that the second charge could not succeed because he was not the beneficial owner of the shares in Laniere. He had no interest in them. He was only a director of Laniere and had to operate the bank account for the benefit of the company.
Mr Chong’s second affidavit corrected the incorrect statement in his first affidavit that he owned the shares. He did not own them.
Mr Chong submitted that the freezing order should be construed strictly and that any ambiguity in it should be construed against the plaintiffs. The purpose of the order was to prevent the diminution in the value of his assets. The order was not breached if the debt liability had not been increased.
Conclusion on charge 2
I am not satisfied that the plaintiffs have established that Mr Chong had a shareholding in Laniere or that the account was his asset. He could not deal with it as if any credit balance of the account or, any credit facility attached to the account, was his. It must often happen that a person has authority to operate the bank account of a business, or of another person, in circumstances where the account is not his or her asset.
The evidence does not establish that Mr Chong had power, directly or indirectly, to dispose of or deal with the Laniere account as if it were his own. Nor did he have the legal capacity to give direct or indirect instructions to a person who held or controlled the account. Any amount in the Laniere account was not an asset of Mr Chong within the definition of ‘assets’ contained in the freezing order.
At most, Mr Chong was a director of Laniere and an authorised signatory of the account. Based on the ASIC records, I find he was not a shareholder. I have taken into account that the accuracy of the ASIC records depends on the accuracy of the information provided to it. But, the onus of proving the contempt lies on the plaintiffs. In view of the ASIC record and the explanation that Mr Chong provided in his second affidavit, I am not satisfied beyond reasonable doubt that he did own shares in Laniere.
Even if that conclusion is not correct, the Laniere charge could not succeed for an additional reason. The Laniere cheque account showed the balance of the account as at 23 December 2011 as $219,027.00 debit and at 15 May 2012, which was the end of the period to which the charges related, the amount was $217,518.00 debit. So, the indebtedness of the account decreased over the period.
Transactions that increase the indebtedness of a bank account or credit facility do not breach the standard form of a freezing order. Neuberger J explained why this was so in Cantor Index Ltd v Lister[19] in the following terms:
I see the force of that submission as a matter of good sense and practicality. However, I do not think that it is right, in light of the words of paragraphs 1(1) and (2) of the order. They provide that the defendant should not ‘dispose of, deal with or diminish the value of any of his assets’. For a debtor to increase his indebtedness by borrowing from an existing creditor or even to create an indebtedness by borrowing from a new creditor or, at least where the creditor is not secured on any of the debtor’s assets, does not to my mind, as a matter of ordinary language, involve disposing of or dealing with or diminishing the value of any of the debtor’s assets. I accept that it results in a diminution of the debtor’s net asset position, but that is not what paragraphs 1(1) and (2) of the Freezing Order refer to.
[19][2002] C.P. Rep 25,9. See also JSC BTA Bank v Ablyazov [2012] EWHC 1819 (Comm); Deputy Commissioner of Taxation v Hickey [1999] FCA 259 [32]; Steven Gee QC, Commercial Injunctions (Sweet & Maxwell, 5th ed, 2004) 554; P Biscoe, Freezing and Search Orders (LexisNexis, 2008) 225.
That reasoning is applicable in the present circumstances.
I consider that the plaintiffs have not proved charge 2.
The third charge
The third charge was that $5,500.00 had been withdrawn from a National Australia Bank (NAB) account, being the KS Chong NAB Classic Banking Account (‘the classic banking account’), in three separate withdrawals: $3,000.00 on 23 September 2011 by net bank transfer, $1,500.00 on 30 September 2011 and $1,000.00 on 30 September 2011, both apparently by cheque drawn on the account.
Mr Chong submitted that the plaintiffs had not established that the funds in the NAB account belonged to him. He also contended that the Court should infer that the moneys withdrawn were used for ordinary living expenses. The account balance had not altered as a result of the withdrawals, as at 10 September 2011 it had a credit balance of $80.57 and, after the three withdrawals on 30 September 2011, it had a credit balance of $80.58.
The plaintiffs disputed this submission and relied on the NAB account statements to prove the withdrawals. They submitted that the fact that Mr Chong, or someone else, deposited funds into the account before the cheques were written, was of no consequence in determining whether the freezing order was breached by the cheque withdrawals.
Conclusion on charge 3
The withdrawals from the NAB account that form the basis of charge 3 were established from the bank statements that were in evidence.
I do not accept the submissions made on behalf of Mr Chong in respect of the third charge. They treat the freezing order as freezing the net balance of the account taken at relevant periods. That is not the effect of the order. Three withdrawals totalling $5,500.00 occurred when the freezing order prohibited withdrawals. The fact that deposits replenished the account does not alter the legal consequence of the withdrawals as being breaches of the freezing order.
Mr Chong was the sole signatory of the NAB account. The Court is entitled to treat the amounts in that account in his name as Mr Chong’s property in the absence of evidence to the contrary. There was no such evidence. Nor was there any evidence that anyone other than Mr Chong was able to access the NAB account to conduct internet transfers.
I am satisfied beyond reasonable doubt that on 23 September 2011, Mr Chong withdrew the amount of $3,000.00 from National Australia Bank account 460724800 and on 30 September 2011, he withdrew from that account the amounts of $1,500.00 and $1,000.00. His conduct was intentional. By the withdrawals, he committed contempts of court.
Discretion to dismiss the contempt charges
Mr Chong submitted that the court had a discretion whether or not to find that a contempt had occurred, even if the contempt was otherwise proved, particularly where there were no aggravating circumstances. This was recognized by the Victorian Court of Appeal in the following passage:
Such a discretionary outcome is more likely where the court concludes the contempt to be of a technical nature as, for example, where the act or omission may be described as casual, accidental or unintentional. [20]
[20]Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd [2014] VSCA 261 [142].
Mr Chong submitted that the conduct relied on as constituting the contempt had to be calculated to interfere with the course of justice and that, in this case, there was no interference with the course of justice. Nearly every transaction that was relied on as an impugned withdrawal had an offsetting credit. A number of the transactions were funded by relatives and family members. There was no diminution in his total assets. The conduct was unintentional and involved small amounts. The breaches were of a technical nature. He only withdrew 20 per cent of the possible living expenses totalling $110,000.00 that he could have withdrawn. Accordingly, his conduct was not calculated to interfere with the course of justice, and at most, the charges should be dismissed in the exercise of the court’s discretion.
I do not accept that submission. Mr Chong’s conduct in the case of charges 1 and 3 breached the freezing order. I am satisfied on the evidence set out above that his conduct was intentional. His conduct in breaching the freezing order interfered with the administration of justice.[21] He did not establish that the conduct fell with an exception to the freezing order.
[21]Ibid [138].
Conclusion
I find that the plaintiffs have proved beyond reasonable doubt the following charges of contempt of court contained in their amended summons dated 24 March 2015:
that Kevin Seng Yee Chong withdrew the following amounts in breach of the freezing order:
a. $81,375.17 from the Bank of Queensland Ltd Kevin Seng Chong Cash Management Account (BSB 124 001 Acc 2022 0296) in twenty–two separate withdrawals made between 26 November 2010 and 1 July 2011 as particularised in the document entitled amended Paragraph 4 (a)(i) of the Contempt Summons initialled by the Judge and placed on the Court file;
b. $5,500.00 from the National Australia Bank Ltd AB KS Chong Classic Banking Account (BSB 083 893 Acc 46072 4800) in three separate withdrawals, one in the amount of $3000.00 on 23 September 2011, another in the amount of $1,500.00 on 30 September 2011, and the other in the amount of $1,000.00 on 30 September 2011.
I find that the plaintiffs have not proved charge 2 beyond reasonable doubt.
I will relist the matter to hear submissions about the orders that I should make, including any penalties that I should impose on Mr Chong, as a consequence of the contempts of court that I have found proved.
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