Kong Hwa Pty Ltd v Chih (No 2)
[2021] VCC 341
•31 March 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
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: | 15 February 2021 | |
DATE OF RULING: | 31 March 2021 | |
CASE MAY BE CITED AS: | Kong Hwa Pty Ltd v Chih (No 2) | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 341 | |
RULING
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Subject:CONTEMPT OF COURT
Catchwords: CONTEMPT OF COURT– breach of court order – whether defiant and contumacious breach – applicable principles for determination of penalty – discretion to decline exercise of contempt jurisdiction
Legislation Cited: County Court Civil Procedure Rules 2018 (Vic)
Cases Cited:Kong Hwa Pty Ltd v Chih [2020] VCC 1842; Witham v Holloway (1995) 183 CLR 525; Louis Vuitton Malletier SA v Design Elegance Pty Ltd (2006) 149 FCR 494; [2006] FCA 83; Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201; CMFEU v Grocon Constructors (Victoria) Pty Ltd (2014) 47 VR 527; R v Witt [2016] VSC 142; Australian Competition and Consumer Commission v Halkalia Pty Ltd (No 3) [2007] FCA 1905; Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; ACP v Morgan (1965) 112 CLR 483; Huang v Zhi [2018] VCC 529; Infa-Secure Pty Ltd v Crocker (No 2) [2016] FCA 202; Deputy Commissioner of Taxation v Gashi (No 3) [2011] VSC 448; National Australia Bank v Juric (No 2) [2001] VSC 398; Fortune Holding Group Pty Ltd v Zhang (No 3) [2018] VSC 22
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C Jones | Kenna Teasdale Lawyers |
| For the Defendant | Mr R Edney | Aptum Legal |
HER HONOUR:
1On 8 December 2020, I gave reasons for ruling[1] (“the reasons”) regarding the plaintiff’s application to have the defendant punished for contempt. The application was made under Rules 66.05 and 75.05 of the County Court Civil Procedure Rules 2018. This ruling assumes familiarity with the terms adopted in the reasons.
[1] Kong Hwa Pty Ltd v Chih [2020] VCC 1842
2I found the plaintiff had proved beyond reasonable doubt that the defendant had committed a prima facie contempt given the defendant:
(a) had knowledge of the orders;
(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.
3The matter was listed for hearing on 15 February 2021 to hear submissions on whether a conviction should be recorded, penalty and costs. Both parties filed written submissions dated 12 February 2021. Counsel also made oral submissions at the hearing on 15 February 2021.
4A further affidavit from the defendant was filed dated 13 February 2021. The affidavit referred to the submissions filed on his behalf. The defendant deposed he had no prior convictions for contempt, be it criminal or civil. He is currently 67 years of age. The defendant has lived a productive life and was a commercial laundry business owner between 1990 and 2021. He now works casually as an Uber driver. The defendant also deposed that he owes banks and lawyers approximately $2.5 million.
Defendant’s contentions
5The defendant’s principal submission was that it was not possible for the court to make a finding beyond reasonable doubt that the defendant’s conduct involved a deliberate defiance or contumacious disregard of the orders, given the evidence before the court.
6In support of that submission, the defendant relied on four matters, namely:
(i)the defendant’s affidavits provided an explanation that his breach of the orders was accidental or inadvertent. Regard should be had to the whole of the evidence of the acts and the conduct of the defendant;
(ii)the whole of the evidence would include the voluntary disclosure of the breach of the orders by the defendant to the plaintiff’s solicitors. It was said this was inconsistent with a defendant who has consciously and deliberately defied court orders;
(iii) the disclosure by the defendant was more consistent with the hypothesis of innocent or inadvertent breach: he had forgotten or was unaware of the precise nature of his obligation and much more consistent with inadvertence or accident;
(iv)the acts of the defendant following the alerting of his legal representatives by the legal representatives of the plaintiff that there was a potential breach of the orders were again inconsistent with a defendant, who acted in deliberate defiance and contumacious disregard of the orders.
7The defendant referred to the distinction between civil and criminal contempt as explained by Brennan, Deane, Toohey and Gordon JJ in Witham v Holloway,[2] where the Court said:
“In general terms, the distinction between civil and criminal contempt is that a civil contempt involves disobedience to a court order or breach of an undertaking in civil proceedings, whereas a criminal contempt is committed either when there is a contempt in the face of the court or there is an interference with the course of justice. However, disobedience or breach of an undertaking amounts to a criminal contempt if it involves deliberate defiance or, as it is sometimes said, if it is contumacious.” [10]
[2](1995) 183 CLR 525
8Accordingly, it was submitted the court should find that the defendant acted without deliberate defiance or in contumacious disregard of the court’s orders and find that the breaches were inadvertent. If the court was not able to form a view on the evidence, then this would not meet the requisite standard. On this basis, the contempt finding, while having been made out according to the reasons, was a “technical” finding of contempt.
Contentions as to penalty
9The defendant referred to the decision of Merkel J in Louis Vuitton Malletier SA v Design Elegance Pty Ltd.[3] Merkel J set out the types of considerations that were germane to the assessment of the penalty for contempt,[4] namely:
[3] (2006) 149 FCR 494
[4]Ibid at 501-502
· the contemnor’s personal circumstances;
· nature and circumstances of the contempt;
· the effect of the contempt on the administration of justice;
· the contemnor’s culpability;
· the need to deter the contemnor and others from repeating the contempt;
· the absence or presence of a prior conviction for contempt;
· the contemnor’s financial means;
· whether the contemnor has demonstrated genuine contrition and made a full and ample apology;
· whether the conduct falls within the most serious category of criminal contempt cases such as to warrant a term of imprisonment;
· whether or not imprisonment is a “last resort” in the circumstances of the case.
10Applying those propositions, the defendant has no prior convictions, whether it be criminal or civil, for contempt. Reference was made to his previous work history, his age, and that he now works casually as an Uber driver. It was noted that the defendant owes banks and lawyers approximately $2.5 million. It was also submitted that the nature of the contempt does not fall into the more serious category for this type of civil contempt.
11The acts of the defendant have not had any substantially deleterious effects on the administration of justice. The remedial steps taken by the defendant following the disclosure of the breach of the court orders was wholly consistent with contrition, remorse and acceptance of responsibility.
12Specific deterrence would have little work to do in this case given the immediate steps taken by the defendant to prevent the possibility of any recurrence of a breach of the orders. It is impossible for the defendant to further access the bank records. The court could be confident, given the response by the defendant when notified of the potential breach and having to endure a contempt hearing, that any recurrence is highly unlikely.
13The circumstances that led to the bringing of the contempt charge were not consistent with the bringing of such a charge as a measure of last resort given the ameliorative steps taken by the defendant.
14Consequently, the defendant submitted the ends of justice are appropriately served by finding the charge proven but otherwise dismissing the proceeding.[5]
[5] At the hearing, counsel for the defendant departed from paragraph 37 of his written submissions that an undertaking to be of good behaviour would be appropriate and accepted instead that a fine could be imposed as sought by the plaintiff if the court were minded to do so.
Plaintiff’s contentions
15The plaintiff submitted the defendant should be convicted of the charge of contempt of which he is prima facie guilty and punished by way of a significant fine. The defendant’s breaches were not inadvertent or unintentional but were defiant and contumacious.
16As Gillard J observed in Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd,[6] it is open to the court to decline to convict where contempt has been established and thereby dismiss the proceeding:
“If the court was of the view that the charge was trivial or minor and lacked substance, or was casual or inadvertent and unintentional …” [50]
[6][2003] VSC 201, Gillard J at 50
17In CMFEU v Grocon Constructors (Victoria) Pty Ltd,[7] the Court of Appeal (Ashley, Redlich and Weinberg JJA) made the following observations:
“If contempt proceedings are brought in respect of breach of a court order, their object is most often to coerce the recalcitrant party into compliance, and not to punish the party for that breach. Notwithstanding the fact that such conduct is usually described as ‘civil contempt’, the offending party may be imprisoned or fined as an incentive to comply with court orders.” [136]
[7](2014) 47 VR 527
18In R v Witt (No 2),[8] J Forrest J identified the following as relevant considerations in sentencing for contempt:
(a) the nature and circumstances of the contempt (including the objective seriousness of the contempt);
(b) the effect of the contempt on the administration of justice;
(c) the contemnor’s culpability as judged by his or her state of mind and intention at the time of the contempt;
(d) general and specific deterrence;
(e) the previous good character of the contemnor (including the absence or presence of a prior conviction for contempt);
(f) the contemnor’s personal circumstances and financial means;
(g) whether the contemnor has exhibited contrition and made an apology; and
(h) denunciation of the contempt; and
(i) the passage of time since the occurrence of the contempt.
[8][2016] VSC 142 at 93
19This list is not exhaustive and the court may have regard to other factors it considers relevant.[9] It was noted in Kazal v Thunder Studios Inc (California):[10]
“The focus remains on the core themes of the objective seriousness of the conduct and, in particular, its effect on the administration of justice, subjective factors such as the contemnor’s culpability, antecedents and attitude, including in particular any apology or other palpable sign of contrition, the capacity to pay a fine, and imprisonment being a last resort. Deterrence remains a dominant theme, both specific and general. Even denunciation and punishment can be seen as bolstering deterrence. That is especially so when the conduct entails contemplation and the opportunity to reflect and desist.” [103]
[9]Australian Competition and Consumer Commission v Halkalia Pty Ltd (No 3) [2007] FCA 1905 at 140-143 (Tracey J)
[10][2017] FCAFC 111
20The plaintiff submitted that civil contempt is punished in order to facilitate enforcement of the original order, while criminal contempt exists to punish offenders for their deliberate defiance of the court’s authority.[11] A civil contempt may be converted into a criminal contempt if this element of deliberate defiance or contumacious attitude is found to be present.
[11]ACP v Morgan (1965) 112 CLR 483 at 499 and Witham v Holloway (1995) 183 CLR 525 at 530
21The difference between civil and criminal contempt, however, has been described as illusory, and civil contempt will often carry with it an element of punishment.[12]
[12]Ibid at 530
22The plaintiff submits the defendant’s breaches of the orders were not trivial, inadvertent or unintentional. The breaches on his part were deliberate and intentional and constituted direct disobedience to the authority of the court. Accordingly, the breaches were therefore, defiant and contumacious.
23The plaintiff said the defendant had failed to provide any real explanation as to why he had persistently breached the orders nor explained what was said to be misleading evidence about the number of occasions he accessed the bank account and downloaded bank statements.
24Additionally, the plaintiff referred to the fact that the defendant had failed to offer any apology to the plaintiff or the court.
25In light of all these matters, it was submitted that a conviction should be entered in respect of the contempt which would be necessary to vindicate the court’s authority.
26The plaintiff submitted there should be a significant fine imposed because:
(a) of the deliberate and persistent breaches of the orders and the contumacious nature of the contempt;
(b) the breaches of the orders having been committed as part of an ongoing conflict between the defendant and the plaintiff;
(c) the defendant having made no attempt to explain his persistent breaches of the orders or indeed what was described as misleading evidence;
(d) the defendant’s failure to accept that the breaches of the court orders occurred and apologise for those breaches;
(e) the defendant has not accepted responsibility or expressed contrition for his egregious breaches of the orders;
(f) the public interest in having the orders made by the court complied with; and
(g) the need to deter and denounce similar conduct in future, particularly in view of the importance of orders of the court to be effective.
Costs of the application
27The plaintiff noted that where the contempt has been established, the court will ordinarily order that the contemnor pay costs on an indemnity basis.[13]
[13]Infa-Secure Pty Ltd v Crocker (No 2) [2016] FCA 202 at 44; Deputy Commissioner of Taxation v Gashi (No 3) [2011] VSC 448 at 20 (Dixon J); National Australia Bank v Juric (No 2) [2001] VSC 398 at 67
28The plaintiff referred to a decision of Gillard J in National Australia Bank v Juric (No 2),[14] where his Honour found that only when special circumstances are shown that costs should be paid on any other basis than that of solicitor/client (that is, indemnity), because a litigant must come to court to enforce an order which has been breached by contempt or have a person dealt with for contempt should not be out of pocket.
[14][2001] VSC 398 at 70
29The plaintiff submitted there were no special circumstances here which would justify a departure from the usual rule that costs should be ordered on an indemnity basis.
30The defendant argued each party should bear its own costs. It was said that such an application should only be brought as a measure of last resort. The plaintiff here could gain nothing from the application since it had achieved everything it could as soon as the bank prevented access. That prevention occurred prior to the issue of the contempt application, and the application was not directed at preventing access. It was submitted the proceeding should not have been brought in the first place.
Consideration
31It is well known that a court has a discretion not to convict and punish a defendant notwithstanding a prima facie finding of contempt.[15]
[15] Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201
32The statements made by the Court of Appeal in CFMEU v Grocon Constructors (Victoria) Pty Ltd[16] are apposite:
“If contempt proceedings are brought in respect of breach of a court order, their object is most often to coerce the recalcitrant party into compliance, and not to punish the party for that breach. Notwithstanding the fact that such conduct is usually described as ‘civil contempt’, the offending party may be imprisoned or fined as an incentive to comply with court orders.
...
It is not in doubt that, in relation to breach of a court order, a finding of contempt can be made whether the breach was technical, wilful or contumacious. It is sufficient to establish that the acts of an alleged contemnor were intentional and were calculated (in the sense of ‘likely’) to interfere with the course of justice. It is unnecessary to establish a specific intention to breach the order of the court or to interfere with the proper administration of justice.
...
[16] (2014) 47 VR 527
The public interest requires that any disobedience more than casual, accidental or unintentional must at least be regarded as wilful. Thus, a deliberate act or omission which is in breach of an injunctive order or an undertaking, will ordinarily constitute wilful disobedience unless the alleged contemnor is able to show, by way of exculpation, that the default was casual, accidental or unintentional.
The intention with which the act was done will, of course, be highly relevant in determining what penalty (if any) is to be imposed by the court. However, liability for contempt is ‘strict’ in the sense that all that needs to be proved is knowledge of the order, and the subsequent conduct of the party bound by that order which is prohibited.
There is a discretionary character to the jurisdiction which enables a court to decline to exercise the contempt jurisdiction at all even though the court may be satisfied that the contempt has been established. 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. The authorities have rarely regarded such contempts as deserving of punishment by fine or committal.”[17]
[17] Fortune Holding Group Pty Ltd v Zhang (No 3) [2018] VSC 22
33In my earlier reasons, I was satisfied the defendant had knowledge of the orders which he had breached on multiple occasions by accessing the bank account and downloading bank statements. Ordinarily, such action would constitute wilful disobedience unless the contemnor is able to show by way of exculpation that the default was casual, accidental or unintentional. As noted by the Court of Appeal above, the court may decline to exercise the contempt jurisdiction even though it is satisfied the contempt has been established. This is more likely to occur when the court is satisfied that the act or omission may be described as casual, accidental or unintentional.
34The defendant points to the affidavit material filed and submits this demonstrates that it cannot be proved beyond reasonable doubt that the defendant’s acts were done in deliberate disregard of the orders or that such conduct was contumacious. The reason for this is the explanation by the defendant that he had forgotten about the order and that his breaches were thus unintentional and inadvertent.
35Even though I am satisfied that a prima facie contempt was established, I decline to exercise the contempt jurisdiction. In the absence of any evidence to contradict the defendant’s sworn statements, I am not able to be satisfied beyond a reasonable doubt, that his actions were done with deliberate disregard or in a contumacious manner. It should also be borne in mind that great caution should be exercised before punishing for contempt.[18]
[18] Huang v Zhi [2018] VCC 529 at [22]
36I am prepared to give the defendant the benefit of the doubt albeit noting that the affidavit material which was filed on his behalf was less than fulsome, and failed to deal with the repeated accessing of the account subsequently identified by the NAB.
37On the aspect of penalty, the most recent affidavit filed by the defendant was sparse and lacking in detail. The defendant did not give any explanation for his conduct and more importantly, did not apologise to the court or show any contrition. As for his financial means, whilst he would appear to be on limited income and has substantial debts, the plaintiff noted that there was no material put regarding his asset position. It could be inferred on the plaintiff’s case the defendant was likely to have some assets given he had received a sum of more than $4 million following his property settlement with Ms Qiu. I consider the plaintiff’s criticisms of the inadequacy of this affidavit has some force.
38In respect of deterrence, the defendant did change the arrangements regarding access to the bank accounts such that he would not be able to breach the order again once it was brought to his attention. The defendant has no prior convictions for contempt. I also take into account that the defendant will be required to pay the plaintiff’s costs on an indemnity basis which is discussed below.
39It is the usual practice in contempt proceedings for costs to be ordered against a contemnor on an indemnity basis.[19] I was informed by the plaintiff’s counsel at the oral hearing on 15 February that the indemnity costs sought were $20,842.50, including disbursements.
[19] Gashi (No 3) [2011] VSC 488 at [20]
40In my view, the defendant should pay the plaintiff’s costs of the application, including any reserved costs, on an indemnity basis. The plaintiff was entitled to bring the application to have the defendant dealt with for contempt. To that end, the contempt was proven and although I have declined to record a conviction for the reasons stated, this demonstrates the application had some merit. I will not fix the costs as is sought by the plaintiff. I consider it more appropriate that those costs be taxed by the Costs Court which has the relevant expertise and will be in a better position to ascertain whether the costs claimed by the plaintiff are reasonable and should be allowed.
Conclusion
41In all the circumstances, I consider the contempt by the defendant to be on the lower end of the scale. In the absence of persuasive evidence that the breach was contumacious or made in deliberate disregard and there being evidence to the contrary, I will not record a conviction although I am satisfied the contempt was proven. The plaintiff argued that a substantial fine should be imposed but having regard to my earlier findings, I have determined not to impose a fine. However, the defendant will bear the costs of the application which is a not inconsiderable burden.
42I will make the following orders:
(1) The charge of contempt alleged in paragraph 2 of the plaintiff’s summons filed 11 August 2020 is proven.
(2)In respect of the finding stated in paragraph 1 above, a conviction shall not be recorded.
(3)The defendant pay the plaintiff’s costs of and incidental to the plaintiff’s summons filed 11 August 2020, including any reserved costs, on an indemnity basis to be taxed in default of agreement.
(4)The plaintiff’s summons is otherwise dismissed.
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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 31 March 2021.
Dated: 31 March 2021
Associate to Her Honour Judge A Ryan
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