GEMI 169 Pty Ltd v Suria Global (L) Pty Ltd (No 4)

[2024] NSWSC 951

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

GEMI 169 Pty Ltd v Suria Global (L) Pty Ltd (No 5) [2024] NSWSC 951

Hearing dates:

1 & 2 August 2024

Decision date:

05 August 2024

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Charges 2, 3 and 5 dismissed

Catchwords:

CONTEMPT – civil contempt – breach of orders – construction of court orders – where plaintiffs seek orders that the third and fourth defendants be found guilty of contempt of court for non-compliance with court orders – where third and fourth defendants make a no case application for dismissal of certain charges – whether the terms of the court orders, made by consent by the duty judge, were clear, unambiguous and capable of compliance

Cases Cited:

Blacktown City Council v Wilkie (No 15) (2016) 219 LGERA 1; [2016] NSWLEC 98

Davies v Beyond Building Systems Pty Ltd [2009] NSWSC 1282

Director of Public Prosecutions (NSW) v Elskaf [2012] NSWSC 21

Eshow v Zaia [2020] NSWCA 10

Huang v Liao [2022] NSWSC 347

Kirkpatrick v Kotis [2004] NSWSC 1265

Momcilovic v The Queen (2011) 245 CLR; [2011] HCA 34

Mosman Municipal Council v Kelly (No 3) [2009] NSWLEC 92

NHB Enterprises Pty Ltd v Corry (No 7) [2021] NSWSC 741

Novelly v Tamqia Pty Ltd [2024] NSWCA 167

Thunder Studios Inc (California) v Kazal [2016] FCA 1598

Category:

Procedural rulings

Parties:

GEMI 169 Pty Ltd (First Plaintiff/Applicant)
GI 214 Pty Ltd (Second Plaintiff/Applicant)
F & L Violi Pty Ltd (Third Defendant/First Respondent)
Frank Paul Violi (Fourth Defendant/Second Respondent)

Representation:

Counsel:
H W Somerville / D Meyerowitz-Katz (Plaintiffs/Applicants)
S M Golledge SC / D Edney (Third and Fourth Defendants/First and Second Respondents)

Solicitors:
Summer Lawyers (Plaintiffs/Applicants)
Aqua Law (Third and Fourth Defendants/First and Second Respondents)

File Number(s):

2022/181916

JUDGMENT

1. The plaintiffs, who I will call the “Lenders”, advanced an amount in excess of $22 million to the first defendant, who I will call the “Borrower”. The Borrower is now in liquidation.

2. Part of the security obtained by the Lenders from the Borrower was a guarantee from the third defendant, F & L Violi Pty Ltd (“FLV”), and what appeared to be mortgages over properties owned by FLV in Strathfield and Griffith (the “Strathfield Property” and the “Griffith Property”).

3. Those mortgages were purportedly signed on behalf of FLV by its sole director and shareholder, the fourth defendant, Mr Frank Violi.

4. FLV and Mr Violi contend that the signature on the mortgages purporting to be that of Mr Violi is not, in truth, Mr Violi’s signature.

5. These are matters yet to be determined.

6. On 11 June 2022, the Lenders appointed receivers (the “Receivers”) to the assets of FLV.

7. On 6 July 2022, FLV filed a notice of motion seeking to remove the Receivers.

8. The matter came before Slattery J in the Duty List on 15 July 2022.

9. Discussions took place between the parties and, ultimately, after hours on 15 July 2022, orders were made by consent having the effect that the Receivers be removed and that FLV sell the Strathfield Property and manage the shopping centre at the Griffith Property in a particular manner.

10. The Lenders contend that FLV and Mr Violi have not complied with certain of those orders and, by notice of motion filed on 1 May 2024, seek an order that FLV and Mr Violi be found guilty of contempt of Court for the reasons set forth in a Statement of Charge, to which I will return.

Principles

11. The Lenders allege a “civil contempt”.

12. The Lenders must establish that:

1. an order was made by a court;

2. the terms of the order were clear, unambiguous and capable of compliance;

3. the alleged contemnor had knowledge of the terms of the order; and

4. the alleged contemnor wilfully breached the terms of the order. ^[1]

   1. For example, see Huang v Liao [2022] NSWSC 347 at [31] (Black J).

13. Further:

1. it is sufficient to prove that an act or omission was deliberate, in the sense of not being casual, accidental, or unintentional, but not necessary to prove that the alleged contemnor actually intended to disobey the Court’s order; ^[2] and

2. it is not necessary to prove that the contemnor understood the terms of the order, because the recipient of an order has a positive obligation to try and understand and obey it, and wilful blindness is no defence. ^[3]

   2. Ibid at [32].

   3. Ibid at [33]-[40].

14. Notwithstanding the fact that the Lenders allege a civil rather than a criminal contempt, they must establish these matters beyond reasonable doubt. ^[4]

    4. Novelly v Tamqia Pty Ltd [2024] NSWCA 167 at [25] (Gleeson JA, Meagher JA agreeing), [69] (Kirk JA); cf Eshow v Zaia [2020] NSWCA 10 at [24]-[25] (White JA); cf NHB Enterprises Pty Ltd v Corry (No 7) [2021] NSWSC 741 at [2], [196] (Bell P, as the Chief Justice then was).

15. At the conclusion of the Lenders’ evidence, Mr Golledge SC, who appeared with Mr Edney for FLV and Mr Violi, submitted that those parties had no case to answer in relation to Charges 2, 3 and 5 and applied for dismissal of those charges.

16. There is no dispute as to my ability to deal with the application. It is agreed that I should deal with that application prior to dealing with Charge 1.

Charge 2

17. Charge 2 is in the following terms:

“[FLV] is guilty of contempt of this Court for failing to comply with order 9(d) of the orders made by the Honourable Justice Slattery on 15 July 2022 under the heading ‘Short Minutes of Order – Retirement of Receivers’, in that [FLV] failed to serve on the plaintiffs an appropriate insurance policy in relation to the Strathfield Property, to apply until the sale of that property was complete, including by failing to procure or maintain any such policy so that it might be served on [Lenders].”

18. Charge 2 is directed to order 9(d) made on 15 July 2022.

19. The form of the orders made on 15 July 2022 is that orders 1 to 4 dealt with the retirement of the Receivers. The remaining orders, orders 5 to 9, all appear following the chapeau:

“The Court further orders that [FLV]:”

20. Taking into account that chapeau, order 9(d) was in these terms:

“The Court further orders that [FLV]:

…

9. serve on [the Lenders] by no later than 29 July 2022:

…

d an appropriate insurance policy to apply until the sale [of the Strathfield Property] is complete.”

21. It is common ground that FLV did not serve any insurance policy on the Lenders by 29 July 2022 and thus did not comply with this order.

22. The Lenders must establish, in order to make out a civil contempt, that the terms of the order were capable of compliance; ^[5] that is, that it was possible that FLV serve on the Lenders such a policy by no later than 29 July 2022. The Lenders must prove this beyond reasonable doubt.

    5. See [12(b)] above.

23. Mr Somerville, who appeared with Mr Meyerowitz-Katz for the Lenders emphasised that the 15 July 2022 orders were made by consent and, according to a letter sent by FLV’s then solicitor to Slattery J’s Associate on 15 July 2022, were “as proposed” by FLV and Mr Violi.

24. Mr Somerville submitted that it followed from these matters that FLV and Mr Violi had, by the very making of the order, admitted that order 9(d) was capable of performance by them.

25. I do not accept that submission. It may be that it should be inferred from the fact that the order was made by consent and was evidently in the terms proposed by FLV and Mr Violi, that they both hoped and expected that FLV could and would comply with it. But I cannot see how their consent to the order could itself constitute an admission of the kind suggested.

26. Mr Somerville also drew my attention to a letter sent by those solicitors to the solicitors for the Lenders on 29 July 2022 to which they attached a Dropbox link to other documents called for by order 9 and said:

“Copies of Insurance policies for both the Griffith and Strathfield Property will also be provided shortly.”

27. Mr Somerville submitted that I should infer from this that FLV’s solicitors were conveying that an appropriate policy for the Strathfield property was in existence and was able to be provided. I do not read this passage of the letter that way. It was, at the most, expressing some level of confidence that such a policy was able to be provided “shortly”. The letter was sent after the close of business on 29 July 2022 and thus conveyed to the Lenders that FLV had not complied with order 9(d) which, as I have said, required service on the Lenders of the relevant policy “no later than 29 July 2022”. If any inference was to be drawn from the terms of this letter, it would be that FLV had been unable to procure the issue of the requisite policy.

28. Mr Somerville also drew my attention to the fact that, on 25 October 2023, his instructing solicitor sent to FLV’s solicitors a copy of an Industrial Special Risks Insurance Policy underwritten by QBE Insurance (Australia) Limited that the Receivers had procured in relation to the Strathfield property for the period 11 June 2022 to 15 July 2022. The policy is dated 6 April 2023. There is no evidence before me as to the circumstances in which this policy was issued, nor explanation why it was that the policy was issued, evidently retrospectively, long after the receivership had concluded. In the circumstances, I cannot see what light the fact that the policy was ultimately issued throws on what ability FLV had between 15 and 29 July 2022 to itself cause such a policy to be issued.

29. An issue arises as to the proper construction of order 9(d). The issue concerns the effect of the concluding words “to apply until the sale is complete”.

30. The question is whether those concluding words:

1. do no more than govern the nature of the policy to be served by no later than 29 July 2022 and require such policy to be for a term continuing until the sale of the Strathfield Property was complete, or

2. also impose on FLV, assuming it served a policy within the requisite time, an ongoing obligation to ensure it was, or continued to be, for such a term.

31. The words of Charge 2 assume the correctness of the second of these possible constructions, as the inclusionary words at the end of the charge make clear.

32. However, I see the first of these two possible constructions of the order as being the more natural reading of the order, such that there could only be one breach of order 9(d), namely non-service of a policy by 29 July 2022, and that once, as happened, FLV had failed to comply with that order, there was one single irremediable breach of the order. ^[6]

    6. Cf Mosman Municipal Council v Kelly (No 3) [2009] NSWLEC 92 at [70] (Biscoe J).

33. The awkward wording of the order, perhaps explicable by reason of the orders being drafted on the run in the context of an urgent application before the Duty Judge, creates at the very least an ambiguity as to its meaning and intended effect such as to warrant extreme caution being exercised before coming to a conclusion that the party in default is in contempt.

34. In any event, I need not resolve any ambiguity in the wording of the order, as FLV did not serve a policy on the Lenders by 29 July 2022 and cannot be held to be in contempt of the order unless I can be satisfied beyond reasonable doubt that it could have done so.

35. Mr Meyerowitz-Katz, who appeared to make further submissions on 2 August 2024, drew my attention to authority to the effect that the determination of a no case submission is “based upon all of the prosecution’s evidence, if accepted, and … taken at its highest and strongest … even if it is tenuous, inherently weak or vague.”^[7]

    7. Director of Public Prosecutions (NSW) v Elskaf [2012] NSWSC 21 at [47] (Garling J) and the authorities referred to therein.

36. Mr Meyerowitz-Katz also drew my attention to the observations of Brereton J, as the Commissioner then was, in Davies v Beyond Building Systems Pty Ltd ^[8] that in a case where an alleged contemnor alleges that it was impossible to comply with the relevant order “there will ordinarily be some evidentiary onus on the respondent, at least to raise the issue and adduce evidence on it”. ^[9] His Honour’s observations have since been cited with approval. ^[10]

    8. [2009] NSWSC 1282.

    9. At [30].

    10. See, for example, Blacktown City Council v Wilkie (No 15) (2016) 219 LGERA 1; [2016] NSWLEC 98 at [216]-[218], [231] (Pepper J); Thunder Studios Inc (California) v Kazal [2016] FCA 1598 at [86] (Rares J).

37. Unlike the case before Brereton J, order 9(d) did not impose on FLV an obligation to carry out a task that it was in its power unilaterally to achieve. ^[11] The order obliged FLV to “serve” a policy but, in order to do so, it was obliged to procure the issue of a policy, a task that was not within its sole power.

    11. In Davies v Beyond Building Systems Pty Ltd (supra), the order required the alleged contemnor to reinstate the plaintiff’s access to certain financial records; similarly in Thunder Studios Inc (California) v Kazal (supra), the order required the alleged contemnor not to publish a video.

38. Assuming that FLV did, nonetheless, have the evidentiary onus to which Brereton J referred, such onus was capable of being discharged by cross-examination of witnesses called for the party alleging the contempt. ^[12]

    12. See, for example, Momcilovic v The Queen (2011) 245 CLR 1; [2011] HCA 34 at [665] (Bell J, as the Chief Justice then was).

39. In that regard, Mr Golledge cross-examined the solicitor with carriage of the matter on behalf of the Lenders, and the Lenders’ sole witness on this application, Mr John Buhagiar, in relation to the following passage of a letter Mr Buhagiar sent the solicitor for FLV and Mr Violi on 30 November 2023:

“We also note that the Strathfield property still remains uninsured, despite your client being ordered on 15 July 2022 to serve on our clients ‘an appropriate insurance policy to apply until the sale is complete’. Your client has failed to do so despite our numerous follow-ups, and despite that fact that the order was made some 16 months ago. This is unacceptable.

The securing of the Strathfield property and the insurance policy for the same go hand-in-hand. This is because, in our experience, and due to the fact that we have taken steps on behalf of our clients to obtain insurance quotes for the Strathfield property (due to your client’s failure to do so), insurers require that large, vacant commercial buildings are properly secured, and have adequate security measures in place, which usually include as a minimum that the site is locked up and not easily accessible by outsiders (which the property in its current state doesn’t satisfy), and regular security patrols. Given that we are required to inform any insurer that the property has been broken into several times and damage inflicted, as advised by Colliers, the security measures will likely be more stringent.” (Emphasis in original.)

40. Mr Buhagiar gave this evidence:

“Q. And the statement in the second sentence that commences, ‘This is because’, did that statement reflect experience that you had had in attempts to obtain insurance for large commercial buildings that were vacant?

A. I’m not sure.

HIS HONOUR

Q. What was the nature of that experience?

A. I recall at that point in time I had spoken to an insurance broker to try and assist Mayweathers, who are the lawyers of Mr Violi at the time to obtain an insurance quote for the Strathfield property. And I had passed on the details of that insurance broker to Mayweathers, which is probably somewhere in the Court Book, and that’s what was happening at this point in time. I was trying to assist in obtaining insurance for the Strathfield property, and my recollection is that it wasn’t as difficult to obtain as Mr Violi’s solicitors were saying it was.

Q. So, the experience to which you referred was experience in relation to the Strathfield property?

A. Specifically, yes.

GOLLEDGE

Q. So you had a conversation with a broker in relation to the Strathfield property?

A. I did.

Q. And are the statements you make in that paragraph 3 of that email, based upon what you were told by the broker or your experience generally?

A. It was a mixture of both. I don’t specifically remember the exact conversation with the broker, but it’s usual that - from my experience, it is usual that security is raised when an insurance policy is being taken out.

HIS HONOUR

Q. What is the experience you are talking about? Is it experience in relation to this broker and this property or some other experience?

A. A mixture of both.

Q. Well, what is the experience that is not with the broker you refer to and in relation to Strathfield?

A. Sorry, your Honour?

Q. What other experience are you referring to?

A. Well, in my day-to-day work we deal with insurance brokers and insurance policies and sometimes they will raise security as being a requirement that they might need in order to make the policy.

GOLLEDGE

Q. And had you come across that in previous actions by you as a solicitor in dealing with insurance brokers?

A. Yes, from time to time.

Q. And was that experience that you had had as far back as July 2022?

A. Yes.

Q. In that experience, did you ever come across a circumstance where the insurer volunteered to put in place themselves the security regime rather than require it from the insured; or was it always that it was a precondition by the insurer that the insured had to get that in place as part of the requirements for the policy?

A. It varied depending on the nature of the building.”

41. Thus, Mr Buhagiar’s experience was that, as at November 2023 and also as at July 2022, insurers of a vacant commercial building, such as the Strathfield Property, would require “adequate security measures” to be in place, including “regular security patrols”, suggesting that the procuring of such insurance may not be straightforward, even if, as Mr Buhagiar said, “it wasn’t as difficult to obtain as Mr Violi’s solicitors were saying it was”.

42. If FLV and Mr Violi had the evidentiary onus of which Brereton J spoke, it was discharged by this evidence, adduced in cross-examination of the Lenders’ only witness.

43. This is not a case of a party being shown to have failed to use its best endeavours to comply with an order, or “throw[ing] up its hands and mak[ing] no effort to comply”. ^[13]

    13. Cf Davies v Beyond Building Systems Pty Ltd (supra) at [19] .

44. Nor is it a case of “tenuous, inherently weak or vague” evidence. ^[14]

    14. See [35] above.

45. There is simply no evidence, beyond that given by Mr Buhagiar, about the matter.

46. For the Lenders to establish that this one breach constituted a contempt of court, they would need to prove, beyond reasonable doubt, that the order was capable of compliance, that is that FLV could have procured the issue of a policy so as to enable it to serve same on the Lenders by no later than 29 July 2022.

47. There is no evidence before me that this was so.

48. Charge 2 is dismissed.

Charge 5

49. Charge 5 is in the following terms:

“[Mr Violi] is guilty of contempt of this Court for causing and procuring [FLV] to fail to comply with order 9(d) of the orders made by the Honourable Justice Slattery on 15 July 2022 under the heading ‘Short Minutes of Order – Retirement of Receivers’, in that [Mr Violi], as the sole director and the relevant controlling mind of [FLV], failed and refused to cause [FLV] to serve on the plaintiffs an appropriate insurance policy in relation to the Strathfield Property, to apply until the sale of that property was complete, including by failing and refusing to cause [FLV] to procure or maintain any such policy so that it might be served on the [Lenders], with knowledge that by failing and refusing to do so was causing [FLV] to breach the Court’s orders.”

50. Leaving aside the complications which arise from the fact that the subject of this charge, order 9(d), is directed to FLV and not to Mr Violi himself, like Charge 2, it could only be made out if the Lenders had proved beyond reasonable doubt that order 9(d) was capable of compliance.

50. They have not, and Charge 5 must be dismissed on the same basis as Charge 2.

Charge 3

52. Charge 3 is directed to Mr Violi and is in the following terms:

“[Mr Violi] is guilty of contempt of the Court for failing to comply with orders 7(a)-(d) of the orders made by the Honourable Justice Slattery on 15 July 2022 under the heading ‘Short Minutes of Order – Retirement of Receivers’, in that [Mr Violi] failed to ensure that all rent received in relation to the Griffith Property was paid into an interest bearing controlled money account in the name of Polczynski Robinson and held in such account pending the determination of these proceedings, agreement of the parties, or further order of the Court.”

53. As I have said, orders 5 to 9, all appear following the chapeau:

“The Court further orders that [FLV]:”

54. Order 7, when read with that chapeau, was in these terms:

“The Court further orders that [FLV]:

…

7. manage the shopping centre at 10-12 Yambil Street, Griffith NSW 2680, being the land described in Folio 101/1115198 (the Griffith Property) as follows:

a. all rent received in relation to the Griffith Property (Rent Received) to be paid into a second interest bearing controlled money account (the Second IB Account) in the name of Polczynski Robinson;

b. [Mr Violi] to take all reasonable steps to collect rent and ensure that when paid it is paid into the Second IB Account;

c. [Mr Violi] to be entitled to withdraw Rent Received from the Second IB Account to pay for all expenses and outgoings for, or related to, the operation of the Griffith Property, including, but not limited to, any expenses incurred by Griffith Central Management Pty Ltd As Trustee For The Griffith Central Management Trust and The Italian Fresh Mercato Pty Limited as trustee for The Italian Fresh Mercato Unit Trust (the IGA Supermarket); and

d. the balance of funds in the Second IB Account to be held pending either

1. determination of these proceedings including any appeal; or

2. agreement of the parties; or

3. any further order of the Court.

e. [Mr Violi] ensure that the first and second plaintiffs, or their legal representatives, are kept informed of the management and operation of the Griffith Property including by the provision of monthly management accounts and directing and authorising all agents and professional representatives engaged in the management to provide details of the operation of the centre as reasonably required to the first and second plaintiffs, or their legal representatives.

f. [Mr Violi] to take all reasonable steps to renew leases or locate new lessees in the event of any vacancies at the Griffith Property.” (Emphasis in original.)

55. The opening words of Charge 3 refer to orders 7(a) to (d). However, as particularised after the words “in that”, it is clear that the Charge is in fact directed to order 7(b).

56. The whole of order 7 appears under the chapeau to which I have referred. The chapeau is expressed to govern the entirety of each of the following orders, including order 7.

57. As can be seen, within order 7 there is a further chapeau:

“manage the shopping centre at [the Griffith Property] as follows.”

58. This internal chapeau is expressed to govern each of sub-paragraphs (a) to (f) of order 7.

59. Thus reading order 7 in the light of the external and internal chapeaus, it is in terms directed to FLV, and not to Mr Violi.

60. However, the opening words of sub-clause (b), and also sub-clauses (c), (e) and (f), refer to Mr Violi.

61. In those circumstances, Mr Somerville and Mr Meyerowitz-Katz submitted that order 7 was “clearly intended to be binding upon both FLV and Mr Violi”.

62. But that is not what the order says.

63. Accepting that it follows from the fact that the orders were made by consent that the Court may have regard to matters of context and surrounding circumstances such as would be available to construe a commercial contract,^[15] I cannot see how order 7 can be read so as to impose any obligation on Mr Violi himself.

    15. See, for example, Kirkpatrick v Kotis [2004] NSWSC 1265 at [39] (Campbell J) and the authorities cited therein.

64. To do so would be to read the overarching chapeau to orders 5 to 9, and to order 7 in particular, as if it read “the Court further orders that [FLV] and [Mr Violi]” rather than, as it does read, without any reference to Mr Violi, “the Court further orders that [FLV]”.

65. The wording is a little awkward, but order 7, and order 7(b) in particular, can be construed as imposing an obligation on FLV, by its sole director Mr Violi, to manage the shopping centre at the Griffith Property in the way set out in the order. Alternatively, the order can be construed as imposing an obligation on FLV to cause Mr Violi to carry out the tasks in the relevant subparagraphs.

66. If that is wrong then, as Mr Golledge and Mr Edney submitted, the awkward wording of the order “creates an ambiguity in the meaning and intended effect of the paragraph, such as to render it an unsuitable basis on which to bring a charge of contempt against Mr Violi alleging a direct breach by him of the Court’s orders”.

67. Charge 3 must also be dismissed.

**********

Endnotes

Amendments

07 August 2024 - [6] Date corrected.

07 August 2024 - Case title corrected

Decision last updated: 07 August 2024