Circuit Finance Australia v Sobbi

[2010] NSWSC 789

CITATION:	Circuit Finance Australia v Sobbi & Anor [2010] NSWSC 789
HEARING DATE(S):	14 July 2010
JUDGMENT DATE :	21 July 2010
JURISDICTION:
JUDGMENT OF:	Ball J
DECISION:	1. Finding of contempt against first defendant. 2. Parties to be heard in relation to appropriate sanction. 3. Application for contempt against second defendant dismissed. 4. No order in relation to costs of second defendant.
CATCHWORDS:	CONTEMPT - Breach of undertaking - whether first defendant's conduct was wilful - whether second defendant was capable of complying with order
LEGISLATION CITED:	Uniform Civil Procedures Rules
CATEGORY:	Procedural and other rulings
CASES CITED:	Anderson v Hassett [2007] NSWSC 1310 Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 Australian Prudential Regulation Authority v Siminton (No 7) [2007] FCA 1069 Australasian Meat Industries Employees’ Union v Mudginberri Station Pty Limited (1986) 161 CLR 98 Biba Ltd v Stratford Investments Ltd [1973] Ch 281 Matthews v ASIC [2009] NSWCA 155 Metcash Trading Ltd v Bunn (No 5) [2009] FCA 16 Microsoft Corporation v Marks (No 1) (1996) 69 FCR 117 Spindler v Balog (1957) 76 WN (NSW) 391 Trade Practices Commission v CG Smith Pty Ltd (1978) 30 FCR 368 Witham v Holloway (1995) 183 CLR 525
PARTIES:	Circuit Finance Australia Limited (Receivers & Managers Appointed) (In Liquidation) (Plaintiff) David Sobbi (First Defendant) Arezoo Chahili (Second Defendant)
FILE NUMBER(S):	SC 2010/66184
COUNSEL:	Mr T Morahan (Plaintiff) Mr L Robison (Plaintiff) In Person (First Defendant) Mr M Rollinsno (Second Defendant)
SOLICITORS:	Jade Lawyers (Plaintiff) In Person (First Defendant) In Person (Second Defendant)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BALL J

21 July 2010

2010/66184 CIRCUIT FINANCE AUSTRALIA LTD v DAVID SOBBI & ANOR

JUDGMENT

1 This is an application that the first defendant (Mr Sobbi), who represented himself, and the second defendant (Ms Chahili), who is Mr Sobbi’s estranged wife, be punished for contempt for failing to comply with an undertaking given to the court by them, through their legal representative, on 14 April 2010.

2 Since 2006, the defendants have carried on a wedding hire car business. Since it was set up, the business has been managed by Mr Sobbi. Ms Chahili has not worked in it.

3 In connection with that business, on 10 March 2008, the defendants entered into a lease agreement with the plaintiff (now in liquidation) for the lease of a 2007 Chrysler 300C 13 seater limousine. The defendants defaulted in making the payments under that lease and, on 16 February 2010, the plaintiff gave notice of its termination.

4 On 15 March 2010, the plaintiff commenced proceedings for possession of the motor vehicle. On 16 March 2010, Nicholas J ordered that the defendants deliver up the vehicle. On 23 March 2010, by consent, the date for delivery up of the vehicle was suspended until 14 April 2010.

5 On 14 April 2010, the parties reached a settlement. Under the terms of that settlement, the defendants were to pay the plaintiff the sum of $195,000 by 5.00 pm on Wednesday, 12 May 2010. If they did, the proceedings were to be dismissed with no order as to costs. If they did not, the defendants undertook to the court that:

“they will deliver to the plaintiff’s agent Pickles Auctions located at 36-40 Harper Street, Belmore NSW (phone number: 9704 6666), the Vehicle described in the schedule below, the subject of these proceedings by 5.00 pm on Friday, 14 May 2010.”

The schedule clearly identified the vehicle in question. The agreement and undertaking were noted by the court.

6 From the time that proceedings were commenced before Nicholas J until the time of the settlement agreement reached on 14 April 2010, Ms Chahili was in Dubai. While there, she was contacted by Mr Alan Sobbi, Mr Sobbi’s cousin, in relation to the court proceedings and the solicitor who represented Mr Sobbi throughout the proceedings also represented her. It appears, however, that she knew little about the proceedings except that, at some stage, she was told that they were next before the court on 19 May 2010.

7 The defendants did not pay the amount of $195,000 on 12 May 2010 and did not deliver the motor vehicle to Pickles Auction by 14 May 2010.

8 On 16 May 2010, the solicitor for the plaintiff wrote to the solicitor for the defendants giving notice that she was instructed to file an application for contempt. In response, on 17 May 2010, the defendants made an application to vary the consent orders made on 14 April 2010 and sought to be discharged from their undertaking on proffering an undertaking to deliver the vehicle to Pickles Auction by 5.00 pm on Monday, 31 May 2010 if they did not make the payment of $195,000 by 28 May 2010. Two points were made in support of that application. First, Mr Sobbi said that he had been advised that National Australia Bank was reviewing an application to refinance the loan provided by the plaintiff and, if that application was approved, Mr Sobbi said that he expected to be able to drawdown on the loan by 28 May 2010. Second, Mr Sobbi maintained that the plaintiff was frustrating his ability to refinance the loan because it would not provide him with a letter in an appropriate form stating a payout figure which could be provided to a prospective financier. A payout letter was provided by the plaintiff, but, according to Mr Sobbi (on advice from finance brokers), that letter was unsatisfactory because it made it clear that the payout figure was as a result of a settlement. White J refused to vary the orders made on 14 April 2010 and, in particular, refused to release the defendants from their undertaking. In reaching that conclusion, his Honour stated that the defendants had no reasonable basis to assume that a letter setting out a payout figure in any particular form would be provided; and that a letter in the form sought by Mr Sobbi would have been misleading.

9 On 21 May 2010, the plaintiff filed the current motion for contempt. That motion was served on the second defendant on 25 May 2010. On 11 June 2010, Registrar Atkinson made an order for substituted service of the motion for contempt in relation to Mr Sobbi. In the meantime, on 9 June 2010, the vehicle was returned to the plaintiff.

10 Although this is an application that the defendants be punished for civil contempt, not criminal contempt, it is clear that the charge must be proved beyond reasonable doubt: Witham v Holloway (1995) 183 CLR 525. Where the contempt consists of a failure to comply with an order of the court, it must be demonstrated that the contempt was wilful and not merely casual, accidental or unintentional: Australasian Meat Industries Employees’ Union v Mudginberri Station Pty Limited (1986) 161 CLR 98. However, it is not necessary for the applicant to prove that the contemnor intended to breach an order of the court: see Anderson v Hassett [2007] NSWSC 1310; Australasian Meat Industries Employees’ Union v Mudginberri Station Pty Limited (1986) 161 CLR 98 at 111; Matthews v ASIC [2009] NSWCA 155 at [16] per Tobias JA. Nor is it necessary to prove that the contemnor was aware that his or her conduct constituted a breach of the orders: Microsoft Corporation v Marks (No 1) (1996) 69 FCR 117 at 143 per Lindgren J; Metcash Trading Ltd v Bunn (No 5) [2009] FCA 16 at [9] per Finn J; Matthews v ASIC [2009] NSWCA 155 at [16] per Tobias JA. The order alleged to be breached must be clear and unambiguous: Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 at 515-6 per Owen J; Metcash Trading Ltd v Bunn(No 5) [2009] FCA 16 at [9] per Finn J. It must also be capable of being complied with: Australian Prudential Regulation Authority v Siminton(No 7) [2007] FCA 1069 at [40]; Matthews v ASIC [2009] NSWCA 155 at [16] per Tobias JA; Metcash Trading Ltd v Bunn(No 5) [2009] FCA 16 at [9] per Finn J. The same principles apply where the obligation arises from an undertaking given to the court rather than an order of the court: Trade Practices Commission v CG Smith Pty Ltd(1978) 30 FCR 368 at 375; Spindler v Balog (1957) 76 WN (NSW) 391; Biba Ltd v Stratford Investments Ltd [1973] Ch 281. Finally, the relevant application must be served personally on the contemnor. Service in accordance with an order for substituted service satisfies this requirement: Anderson v Hassett [2007] NSWSC 1310.

Case against Mr Sobbi

11 I am satisfied that the plaintiff has established that Mr Sobbi was guilty of contempt when he failed to deliver the motor vehicle to Pickles Auctions by 5.00 pm on Friday, 14 May 2010.

12 Mr Sobbi was served with the motion for contempt and, of course, he appeared and represented himself at the hearing.

13 The undertaking that he gave was clear and he clearly failed to comply with it. His failure to comply with it could not be described as merely casual, accidental or unintentional. On the contrary, Mr Sobbi was conscious of the undertaking and made an application to White J to be released from it. Despite the decision of his Honour, Mr Sobbi consciously and deliberately chose not to comply with the undertaking he had given. The only explanation Mr Sobbi could give for not doing so was that he was trying very hard to find alternative financing and his efforts to do so were hampered by the plaintiff’s failure to provide him with a payout figure in the form that he requested. These are the same arguments that Mr Sobbi had put before White J in support of an application to be released from the undertaking and which his Honour rejected. Mr Sobbi must have understood following White J’s decision that the reasons he gave did not provide a justification for failing to comply with the undertaking. It was only in the face of the contempt application that Mr Sobbi finally returned the vehicle.

14 There should be recorded a finding that Mr Sobbi is in contempt. I will hear the parties in relation to an appropriate sanction.

The case against Ms Chahili

15 Mr Rollinson who appeared for Ms Chahili submitted that the case for contempt had not been made out against her for two reasons.

16 First, Mr Rollinson submitted that the plaintiff had not established beyond reasonable doubt that Ms Chahili knew of the undertaking that she had given and that consequently her failure to comply with it could not be described as a deliberate failure. In support of that submission, Mr Rollinson pointed out that Ms Chahili was in Dubai until 18 April 2010 and it does not appear that she was aware of the terms of settlement filed with the court on 14 April 2010 until she was served on 25 May 2010 with the application for contempt. Mr Rollinson concedes that Ms Chahili had expressly or impliedly consented to her husband instructing solicitors to act on behalf of both of them. He also concedes that the court has power to punish a person who fails to comply with an undertaking even if a copy of the undertaking is not served on the person, although he points out that the court cannot commit a person for failing to comply with a court order unless a sealed copy of the order is served on the person: see UCPR r 40.7. However, Mr Rollinson submitted that it was necessary to establish actual knowledge on the part of Ms Chahili before she could be guilty of a contempt. I do not accept that submission. In my opinion, Ms Chahili was bound by the undertaking that she gave to the court. She is not relieved from the consequences of giving that undertaking because she permitted someone else to give that undertaking on her behalf and did not make enquiries to find out what had been done on her behalf. I do not think that that conduct could be described as merely casual, accidental or unintentional. It was a wilful failure to find out what had been done on her behalf. In substance, the position is no different from cases where the contemnor is not aware that his or her conduct constituted a breach of the order: see above at [10]. Were it otherwise, the practice by which the court accepts undertakings given by legal practitioners on behalf of their clients would be unworkable.

17 Secondly, Mr Rollinson submits that Ms Chahili is not in contempt because it was not within her power to comply with the undertaking. Ms Chahili gave affidavit evidence that she did not know where the vehicle was. She said that she believed she last saw it on or about 1 December 2009 at her home address and that her husband drove it away when he moved out. She said that she did not have keys to it. Ms Chahili was not cross-examined on that evidence. Having regard to that evidence, I am not prepared to find beyond reasonable doubt that Ms Chahili knew where the vehicle was at the time it was to be delivered to Pickles Auctions in accordance with the undertaking or that she was physically capable of doing so even if she did know of its whereabouts.

18 Mr Morahan submitted that it appeared that Ms Chahili had done nothing to try to comply with the undertaking. For example, there was no evidence to suggest that Ms Chahili had contacted her husband with a view to asking or to persuading him to return the vehicle. However, in my opinion, that is not sufficient to establish that Ms Chahili was capable of complying with the order. She was estranged from her husband and there is no evidence to suggest that she was in a position to persuade him to do something which he was unwilling to do himself. In those circumstances, I am not satisfied beyond reasonable doubt that Ms Chahili was in a position to comply with the order. Consequently, the application for contempt so far as it concerns her ought to be dismissed.

19 That leaves the question of Ms Chahili’s costs. Normally, of course, costs follow the event: UCPR r 42.1. However, in this case, I think it is more appropriate for me to make no order in relation to costs. Although Ms Chahili has ultimately been successful, she gave the undertaking and, on her own evidence, took no steps to comply with it. I do not think that it is appropriate that she should recover her costs in those circumstances.

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