Kong Hwa Pty Ltd v Chih

[2020] VCC 1842

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

EXPEDITED LIST

Case No. CI-17-01454

KONG HWA PTY LTD (ACN 007 397 453)	Plaintiff
V
FRANK TZU-HAO CHIH	Defendant

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JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	1 September 2020
DATE OF RULING:	8 December 2020
CASE MAY BE CITED AS:	Kong Hwa Pty Ltd v Chih
MEDIUM NEUTRAL CITATION:	[2020] VCC 1842

REASONS FOR RULING
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Subject:CONTEMPT OF COURT

Catchwords:            Civil contempt – breach of court orders restraining the defendant from accessing the plaintiff’s bank accounts and requiring him to return the plaintiff’s documents in his possession and destroy any copies

Legislation Cited:     County Court Civil Procedure Rules 2018 (Vic)

Cases Cited:Legal Services Board v Forster (No 2) [2012] VSC 633; Marubeni Equipment Finance (Oceania) Pty Ltd v Harris [2018] VCC 267; Australian Competition & Consumer Commission v INFO4PC.com Pty Ltd [2002] FCA 949; Fortune Holding Group Pty Ltd v Zhang (No.2) [2017] VSC 738; Deputy Commissioner of Taxation v Gashi (No 2) [2011] VSC 351; Morgan v The State of Victoria [2008] VSCA 267; 22 VR 237; NCR Australia v Credit Connection [2005] NSWSC 1118

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms C Jones	Kenna Teasdale Lawyers
For the Defendant	Mr D J Farrands SC	Slater and Gordon

HER HONOUR:

1       By summons dated 11 August 2020, the plaintiff seeks to have the defendant punished for contempt of court. The application is made under Rules 66.05 and 75.05 of the County Court Civil Procedure Rules 2018 (the Rules).

2       The plaintiff relies upon the affidavits of Chooi Beh, a director of the plaintiff, sworn 28 July, 31 August and 1 September 2020.

3       The defendant relies upon his affidavits affirmed on 31 August and 1 September 2020.

4       The contempt relates to alleged breaches by the defendant of orders made by his Honour Judge Carmody dated 30 May 2017 (the orders). 

5       The relevant parts of the orders are as follows:

“1.       Unless the defendant is appointed a director and/or officer of Kong Hwa Pty Ltd and such appointment is registered with the Australian Securities and Investment Commission he is restrained from:

……….

(f)        Accessing the bank accounts and online taxation portal of Kong Hwa Pty Ltd. 

3.        If at any stage the defendant comes into possession of documents properly belonging to Kong Hwa, he must (so long as he is not a director or officer of Kong Hwa at that time) within 2 working days provide those documents to Kong Hwa and delete, dispose of or destroy the copy or copies of those documents in his possession and confirm in writing to the plaintiff that he has so destroyed them.”

6       The defendant has not been a director or officer of the plaintiff since 10 February 2017.

7       The plaintiff claims the defendant breached paragraph 1(f) of the orders by:

(a)accessing the bank account of the plaintiff on 48 separate occasions between 11 June 2017 and 5 June 2020; and

(b)downloading bank statements from the bank account of the plaintiff on seven separate occasions between 16 September 2018 and 5 June 2020.

8       Additionally, the plaintiff claims the defendant breached paragraph 3 of the orders by failing to provide the bank statements he had downloaded to the plaintiff and/or delete, dispose of or destroy any copies of the statements in his possession.

Background

9       The plaintiff conducts a large commercial laundry business in Preston.  The sole shareholder of the plaintiff is Ms Li Ping Qiu.  Between 1999 and 2011, Ms Qiu and the defendant were domestic partners and had two children together.  After they separated, a property settlement was reached whereby it was agreed Ms Qiu would buy the plaintiff’s business. Ms Qiu subsequently paid a sum in excess of $4m to the defendant in accordance with the property settlement. This sum included consideration for the purchase of the plaintiff’s business.

10      The defendant transferred 51 per cent of his shares in the plaintiff to Ms Qiu on 7 February 2012.  He transferred the remaining 49 per cent of his shares in the plaintiff to Ms Qiu on 15 January 2014.

11      In July 2016, a proceeding was commenced in the Family Court of Australia between the defendant and his wife, Ms Siu Chu Chih. Ms Qiu was subsequently drawn into those proceedings as a second respondent.  The family law proceeding is still on foot, with one of the issues in dispute relating to the ownership of the plaintiff.

12      On 10 February 2017, the defendant was removed as a director of the plaintiff.

13      On 7 April 2017, the plaintiff commenced this proceeding against the defendant, seeking an injunction restraining him from, amongst other things, contacting the Australian Taxation Office, contacting customers of the business including Qantas, and from accessing the bank accounts of the plaintiff.

14      On 31 May 2017, Judge Carmody made the orders by consent.

15      On 6 September 2019, the defendant annexed a copy of the orders to an affidavit sworn by him in the Family Court proceeding.

16      On 5 June 2020, the defendant’s family lawyers, Jano Family Law, wrote to the plaintiff’s lawyers confirming the defendant had accessed the bank account of the plaintiff, being bank account number 083-376 181288479 held at the National Australia Bank (NAB), and attached a copy of a bank statement from that account.

17      On 9 June 2020, the plaintiff’s lawyers wrote to the defendant’s lawyers seeking confirmation of how the defendant came into possession of the plaintiff’s bank statement, requesting that he comply with the orders and provide a proper explanation as to why he had breached the orders, failing which an application for contempt of court would be commenced.

18      On 10 June 2020, the defendant’s lawyers wrote to the plaintiff’s lawyers stating, amongst other things, that the defendant had always sought to comply with the court orders, that it was not unreasonable for him to forget about the orders, and that any alleged failure to comply was inadvertent and had been remedied.

19      On 7 August 2020, the defendant sent an email to the plaintiff’s lawyers which stated:

“Please accept this email as second confirmation that the NAB bank records referred in the proposed summons has been delete, dispose of [sic] or destroy the copy or copies in my possession on the 9th June 2020. The first confirmation is contained in my lawyer Jano Family Law letter dated 10 June 2020 to your office.”

20      On 5 August 2020, the plaintiff’s lawyers were copied into an email attaching a letter from the defendant’s family lawyers, Jano Family Law, dated 5 August 2020.  The defendant’s lawyers served a notice to admit, for the purposes of the Family Court proceedings, that a copy of the plaintiff’s bank statement attached to the letter was genuine. The bank statement which was attached spanned a period from 7 March to 4 June 2020. This letter was later sent to the Family Court on 7 August 2020 by Jano Family Law.

21      On 11 August 2020, the plaintiff commenced this application by summons seeking to have the defendant dealt with for contempt.

22      The plaintiff’s case is that the defendant has persistently breached the orders between 2017 and 2020. After the summons was filed, the NAB confirmed that the defendant had accessed the plaintiff’s bank account in response to a request for information made by the plaintiff’s lawyers.

23      Between 11 June 2017 (12 days after the orders were made) and 5 June 2020, the defendant accessed the bank account of the plaintiff, being the NAB bank account number 083-376 181288479, by viewing the bank account on 48 separate occasions.[1]  The occasions were:

[1]See paragraph 9 of the Beh affidavit of 31 August 2020 and Exhibit CB-2.

(a) 6 times in 2017;

(b) 5 times in 2018;

(c) 4 times in 2019;

(d) 33 times in 2020.

24      The NAB records also reveal the defendant downloaded statements from the NAB bank account on seven separate occasions between 16 September 2018 and 3 June 2020.[2]

[2]Ibid at paragraph 10.

Applicable principles relating to contempt

25      The parties were agreed as to the relevant principles to be applied.  It is well settled that the failure by a party to comply with a court order constitutes contempt of court.[3] The purpose of imposing punishment for wilful disobedience to the court is to discipline the offender and vindicate the authority of the court.  The relevant standard is the criminal standard: namely, the facts must be proved beyond a reasonable doubt.

[3]Legal Services Board v Forster (No 2) [2012] VSC 633 at [43]; Marubeni Equipment Finance (Oceania) Pty Ltd v Harris [2018] VCC 267 at [19].

26      It is not necessary to prove any subjective intent to deliberately disobey an order of the court, provided the person is aware of the order and intentionally undertakes an act constituting a breach.  Deliberate defiance or contumacious disregard of the order is relevant to the determination of the appropriate sanction.[4]

[4]Australian Competition & Consumer Commission v INFO4PC.com Pty Ltd [2002] FCA 949 at [10]; Marubeni Equipment Finance (Oceania) Pty Ltd v Harris (op cit) at [12].

27      There are five elements that need to be established,[5] namely:

(a)that an 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 (or failure to serve was excused in the circumstances, or service was dispensed with pursuant to the Rules of the Court);

(d)that the defendant had knowledge of the terms of the orders; and

(e)that the defendant breached the terms of the orders.

[5]Fortune Holding Group Pty Ltd v Zhang (No.2) [2017] VSC 738 at [33].

Plaintiff’s contentions

28      The plaintiff contends that each of the five elements are satisfied, the first being that an order was made by the court, namely the orders by Judge Carmody on 30 May 2017.  It said that the orders are clear.  The order was made by consent and it is not in dispute that the defendant was aware of the nature of the order.  The defendant acknowledged in paragraph 11 of his affidavit dated 31 August 2020 that he had agreed to the orders.

29      As at the hearing date of this application, the defendant had accessed the bank account of the plaintiff on no less than 55 occasions and had failed to provide copies of the statements he downloaded and delete or destroy copies of those statements.  Therefore, the plaintiff contends the defendant has breached the terms of the orders.

30      The plaintiff notes it is unnecessary to show that the defendant had an intention to disobey. However, if the breach was casual, accidental, or unintentional, as opposed to deliberate and voluntary, although it would prima facie give rise to liability, the court may decline to exercise the contempt jurisdiction or otherwise take this factor into account in determining the appropriate penalty to be imposed.[6]

[6]Deputy Commissioner of Taxation v Gashi (No 2) [2011] VSC 351 at [23].

31      The plaintiff argues the breaches by the defendant are deliberate and with an intention to disobey.  It should not be accepted that the defendant merely forgot about the orders.  The plaintiff submitted his deliberate and intentional breach is clear from:

(a)breaching the orders on 11 June 2017, only 12 days after the orders were made;

(b)annexing a copy of the orders to an affidavit filed by him in proceedings in the Family Court on 6 September 2019 (thereby demonstrating that he recalled the orders in 2019);

(c)accessing the bank account of the plaintiff on 55 separate occasions; and

(d)having failed to disclose in his affidavit dated 31 August 2020 some 54 of the occasions on which he had accessed the bank account.

32      The plaintiff submits that it has proved beyond reasonable doubt that the defendant has committed a prima facie contempt, given he:

(a)had knowledge of the orders; and

(b)accessed the plaintiff’s bank account and failed to destroy copies of the plaintiff’s bank account statement in breach of the order.

33      It said that the contempt is a direct disobedience to the authority of the court and falls within the second of the categories of civil contempt identified by the Court of Appeal in Morgan v The State of Victoria.[7] The second category as outlined in that decision is defined as:

“(b)      Disobedience to a judgment or order requiring a person to do any act other than the payment of money, or to abstain from doing anything or breach of undertaking to the same effect.”

[7][2008] VSCA 267 at [110].

34      The plaintiff argued it was not a trivial breach. An explanation was sought and then an undertaking was given which in turn was breached. The plaintiff argued there was a wilful disobedience of the order for which the defendant should be found guilty of contempt.

35      The plaintiff also seeks its costs on an indemnity basis, being the usual order for costs in such cases.[8]

[8]NCR Australia v Credit Connection [2005] NSWSC 1118 at [102].

Defendant’s contentions

36      The defendant submitted his affidavits should be accepted on their face as they were not challenged by way of cross-examination.  The summons only referred to a breach arising from the first Beh affidavit dated 28 July 2020. There had been no attempt to amend the summons and the application should be confined to its terms. The defendant has filed material dealing with the further allegations.

37      The defendant contends that if there was any accessing by him, then it was inadvertent and/or he had forgotten about the orders. This is in keeping with the defendant giving the accessed material to his solicitors on 5 June 2020 for the purpose of giving it to the plaintiff’s solicitors, which later occurred. The defendant relayed the account information to his solicitor in the Family Court proceeding because of concerns about dissipation. The defendant thereby notified the plaintiff of the events which are now said to found the alleged contempt. As counsel for the defendant put it at the hearing, the defendant “kicked a home goal” by notifying the plaintiff’s solicitors.

38      Prior to the issue of the plaintiff’s summons on 11 August 2020, the defendant provided written undertakings that he would not access the bank account further. It was said that should have been the end of the matter.  The defendant had also deposed that he had instructed the NAB to delink the account so he can no longer access the account. In his affidavit affirmed on 31 August 2020, the defendant gave an undertaking to the court that he would not do so.

39      In these circumstances, the defendant submits that the contempt application need not have been made. It was not an application by way of remedy of last resort, as it must be.[9]

[9]Morgan v Victoria (2008) 22 VR 237 at 145, together with the other cases referred to at footnote 10 of the defendant’s written submissions.

40      Further, the defendant contended that the application was brought for another reason, namely, to put pressure on the defendant in relation to the Family Court dispute.

41      The defendant argued there was ambiguity in the term used in the order arsing form the use of the word “accessing”.  It was suggested this could mean either looking at and/or making a transaction on the relevant account.

42      It was said the breach was inadvertent and this should be accepted because the defendant readily volunteered the information which led to the contempt application.  In those circumstances, the court should not be satisfied beyond reasonable doubt that the access by the defendant was done in deliberate breach of the orders. Being inadvertent, the breach should be seen as venial and not amounting to a contempt of court.

Defendant’s application to vary the orders

43      The defendant made an application at the oral hearing to vary the orders. The defendant said the undertakings proffered by him in his affidavit were subject to an application to vary the orders so as to permit access to the bank account but only if the Family Court permits such access for the purposes of the Family Court dispute. A draft of the proposed order was contained in Exhibit “FC-4” to the defendant’s affidavit dated 31 August 2020.

44      In response, the plaintiff submitted there was no need for the variation order sought as the statements could be subpoenaed in the Family Court proceedings, if necessary. I am not persuaded that it is necessary to vary the order as is sought by the defendant. If the defendant wishes to review the plaintiff’s documents such as bank statements for the purpose of defending the Family Court proceeding, then he can subpoena them in that proceeding. Such a course would not amount to a breach of the orders. Additionally, I do not consider the variation order sought should be made in the terms sought as it would require an order of this court to be subject to an order of another court being made, which could lead to uncertainty in terms of enforcement.

Analysis

45      It was not necessary for the plaintiff to amend its summons as contended for by the defendant. The nature of the breach of the orders was identified in paragraph 2 of the summons. The summons when filed relied upon the matters set out in Mr Beh’s first affidavit sworn 28 July 2020. By the time the matter came on for hearing, further evidence of the breaches was identified following the receipt of the NAB response. The defendant was able to and did respond in his answering affidavit to the matters raised in the second Beh affidavit.

46      The defendant’s affidavit dated 31 August 2020 gave the impression that he had accessed the account on only one occasion in May or June 2020. As the NAB records reveal, the defendant accessed the account on 48 occasions. The first access occurred on 11 June 2017, very shortly after the orders were made. The statements were downloaded on 7 separate occasions, and the defendant has given no explanation as to why this occurred. On 7 August 2020, the defendant sent an email saying he had deleted or disposed of the bank records in his possession on 9 June 2020. Despite this, his lawyers attached a copy bank statement to their letter dated 5 August 2020, which runs counter to the defendant’s assertion that he had already deleted or disposed of such documents.

47      I disagree that the word “access” is ambiguous in the way the defendant describes. Paragraph 1(f) prohibited the defendant from accessing the bank accounts as well as the online taxation portal of the plaintiff. I consider it is sufficiently clear that access means viewing the bank account, which in the days of modern banking involves access by way of online banking. I do not agree the clause could be extended to mean making transactions on the account thereby by introducing some supposed ambiguity. As the plaintiff’s counsel noted, the defendant did not depose as to what he thought “access” meant. The plaintiff argued that words were patently clear and not ambiguous. I agree. I reject the defendant’s submission on this point.

48      I was not also persuaded that there was any merit in the submission put by the defendant that the contempt application was brought for some ulterior purpose to place pressure upon the defendant in the family law proceeding. In the absence of any evidence on this point, it was merely conjecture on the defendant’s part.

49      The defendant was aware of the orders to which he had consented. The orders were clear and unambiguous. The fact that the defendant persistently accessed the bank account on many occasions and over a period of years belies his assertion that his conduct was inadvertent or unintentional. The defendant repeatedly accessed the NAB bank account and retained bank statements in breach of the orders. I am not satisfied the breaches on his part were trivial or venial. In my view, the defendant’s breach of the orders has been clearly established to the requisite standard.

Conclusion

50      I find that the plaintiff has proved beyond reasonable doubt that the defendant has committed a prima facie contempt given:

(a)      the defendant had knowledge of the orders; and

(b)      breached the orders by accessing the plaintiff’s bank account on multiple occasions and failed to delete or destroy the plaintiff’s bank statements in his possession.

51      I will list the matter again on a date to be agreed upon at which time the court will hear submissions as to the appropriate form of orders to be made, including whether a conviction should be recorded, penalty and costs.

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Certificate

I certify that these 12 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 8 December 2020.

Dated: 8 December 2020

Associate to Her Honour Judge A Ryan