Wexford Pty Ltd v Praveen Meckraj Doolub & Ors

[2008] NSWSC 952

CITATION:	Wexford Pty Ltd v Praveen Meckraj Doolub & Ors [2008] NSWSC 952
HEARING DATE(S):	9/09/08, 10/09/08, 11/09/08
JUDGMENT DATE :	15 September 2008
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Motion to be relisted for further submissions.
CATCHWORDS:	Civil contempt - Breach of Mareva Injunction - Payments out of solicitors trust account - Criminal standard of proof - Differences in procedure still exist between civil and criminal contempt proceedings - Characterisation of civil and criminal contempt - Ambiguity in Court orders to be interpreted in favour of defendants - Money paid into solicitors trust account by third parties becomes an asset of the defendants - Unconditional gift - Quistclose or purpose trust not established - Mental element involved in contempt - Breach must be deliberate and not casual, accidental or unintentional
LEGISLATION CITED:	Legal Profession Regulation 2005 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 65 ALR 683 Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2008] NSWSC 908 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 Fairclough v Manchester Ship Canal Co [1897] WN 7; 41 SJ 225 Hearne v Street [2008] HCA 36 Markisic v Commonwealth of Australia [2007] NSWCA 92 Witham v Holloway (1995) 183 CLR 525
PARTIES:	Wexford Pty Ltd (Plaintiff) Praveen Meckraj Doolub (First Defendant) Niteen Meckraj Doolub (Second Defendant)
FILE NUMBER(S):	SC 50010/07
COUNSEL:	Mr R Newlinds SC, Ms A Horvath (Plaintiff) Mr A Street SC, Mr D Villa (First and Second Defendants)
SOLICITORS:	Jackson Lalic Lawyers (Plaintiff) Middlletons (First and Second Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Monday 15 September 2008

50010/07 Wexford Pty Ltd v Praveen Meckraj Doolub & Ors

JUDGMENT

The proceedings

1 The underlying proceedings involve a $700,000 loan claimed to have been advanced by the plaintiff to the first defendant [Mr Praveen Doolub] on 8 December 2006. The loan was apparently to be repaid by 8 February 2007. The plaintiff claims that the monies were not repaid. The plaintiff commenced proceedings against, inter alia, the first and second defendant [Mr Niteen Doolub] in March 2007. The defendants are brothers.

The asset preservation orders

2 Mareva asset preservation orders were made against the first and second defendants on 9 and 15 March 2007.

3 The orders made on 15 March 2007 inter alia restrained the first and second defendants from removing moneys from various bank accounts or from dealing with any money held in a solicitor's trust account.

4 Paragraph 1.4(b) of the 15 March 2007 orders was in the following terms:

Until further order the first and second defendant be restrained from removing or causing or permitting to be removed from the State of New South Wales or any place whatsoever or sell, charge, mortgage or otherwise deal with or dispose of, or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of their assets, whether solely or jointly owned, or any interest in those assets whether legal or beneficial including, but without affect the generality of the foregoing:

(b) any moneys held in any solicitor’s trust account;

5 Paragraph 1.6 of those orders read:

Provided that nothing in sub-paragraphs 1.3, 1.4 or 1.5 shall operate to prevent the first and second defendants from carrying out the following activities:

(a) paying reasonable legal expenses on any legal matter and legal expenses of defending this matter up to $50,000.00.

6 On 10 September 2007 following ancillary orders for disclosure affidavits, each of Niteen and Praveen Doolub swore affidavits in respect of their assets in which they each deposed to having less than $5000 in assets. They swore further affidavits on 19 February 2008 which did not alter the sum of the evidence as to their assets.

7 Judgment for $2,139,660 was entered against Praveen Doolub on 29 February 2008. No part of the Judgment has been satisfied. On 26 June 2008 Praveen Doolub was made bankrupt on his own petition.

The notices of motion

8 By the plaintiff’s amended notice of motion it seeks a number of orders including a declaration that the defendants are guilty of contempt of court. The particular orders sought include the following:

i. A declaration that the first and second defendants are guilty of contempt of Court in that they failed to comply with paragraphs 1.4 & 1.6 of the order made on 15 March 2007 … in that the first and second defendants:


(a) knowingly authorised more than $50 000.00 in payments out of solicitors trust accounts; or

(b) knowingly allowed more than $50 000.00 in payments out of solicitors trust accounts.

ii. An order that the first and second defendants be punished or otherwise dealt with for such contempt of Court.

9 The statement of charge was in the following terms:

Statement of Charge

It is alleged that from 30 May 2007 the first and second defendants are guilty of contempt of this Court in that from that date they

knowingly authorised payments out of Middletons’ Trust Account held in the name of the first and second defendant.

10 The particulars:

i. recited the 15 March orders;

ii. alleged that between 14 March 2007 and 8 July 2008, $167,305.29 was deposited into Middletons’ Trust Account Ledger opened in the name of the first and second defendants;

iii. recited correspondence passing between the first and second defendants and their solicitors across the period from 30 April 2007 up to 30 May 2008 [generally enclosing invoices for the solicitors fees]["the subject invoices"];

iv. identified the particular dates when, following its having forwarded such invoices, Middletons had withdrawn sums from the trust account held in the name of the first and second defendants.

The second defendant's notice of motion

11 On 10 July 2008 the plaintiff was served with a motion seeking an order nunc pro tunc that the amount of $50,000 be altered to $300,000, or in the alternative, authorising the payment of legal expenses to Middletons from funds supplied by Mr Jonathan Chow, Mr Neil Cato and Mr Song Young. Together with the motion were affidavits sworn that day by Mr Brendan Wyhoon a partner of Middletons and Mr Niteen Doolub. The notice of motion was amended on 11 August 2008 to seek inter alia following orders:

i. An Order nunc pro tunc that Order 1.6(a) entered on 15 March 2007 be varied by deleting the words “up to $50,000”.

ii. In the alternative to paragraph 4, an order nunc pro tunc , that Order 1.6(a) entered on 15 March 2007 be varied by deleting the words “up to $50,000” and inserting the words “up to $300,000”.

iii. In the alternative to paragraphs 4 and 5, Orders:


(a) authorising the payment of legal expenses from time to time owing to Middletons lawyers in the period 15 March 2007 to 10 July 2008 in this matter from funds supplied by Jonathon Chow, and Neil Cato and Song Young paid into the trust account of Middletons lawyers in the name of Niteen Meckraj Doolub; and

(b) an order varying 1.6(a) entered on 15 March 2007 by deleting the words “up to $50,000” and in the alternative, and adding the words ‘up to $300,000”.

iv. Alternatively, an order that the second defendant’s solicitors pay such amount as the court may order into the trust account from which the funds were transferred, to thereafter be held and applied as the court may direct by further order.

12 At the commencement of the hearing the court determined that:

i. the plaintiff’s notice of motion should first be heard in relation to liability [tranche 1];

ii. that if liability was established a further hearing to determine what, if any, penalty should be imposed would take place [tranche 2];

iii. to defer the hearing of the defendant's notice of motion pending determination of the plaintiff’s motion [tranche 3].

13 Thereafter the parties agreed that tranches 1 and 2 should be collapsed and addressed accordingly. As I understood their further agreement, the defendants were not seeking to have argued their motion presently: transcript 228.15.

The issues

14 The principal issues at least included the following:

i. Questions concerning the defendants’ contention that the statement of charge was defective;

ii. Whether the evidence established beyond a reasonable doubt that:


(a) each of Praveen Doolub and Niteen Doolub were aware of the asset preservation order made on 15 March 2007;

(b) Niteen Doolub knew and intended that each of the subject invoices would be paid from funds held in the Middletons trust account in the name of N&P Doolub
[a sub-issue involving whether the monies transferred from the Middletons Trust Account to the office account were transferred with the client’s approval as per the Legal Profession Act 2004];

(c) Praveen Doolub knew and intended that each of the subject invoices (issued prior to 30 April 2008) would be paid from the funds in the Middletons trust account in the name of N&P Doolub;

(d) each of the subject invoices were in fact paid from funds held in Middletons trust accounts in the name of N&P Doolub; and

(e) the cap on reasonable legal costs was exceeded when Middletons withdrew $8,381.45 from a trust account in the name of P and N Doolub on 28 June 2007.

15 It is fair to observe that both parties appear to have identified as a central issue, the question of identifying whether the moneys paid into the trust account were the property of the defendants.

The principles

16 The theoretical basis for maintaining the distinction between civil and criminal contempt has not gone unchallenged in recent years. The High Court in Witham v Holloway (1995) 183 CLR 525 [per Brennan, Deane, Toohey and Gaudron JJ] found that “(t)he differences upon which the distinction between civil and criminal contempt are based are, in significant respects, illusory. They certainly do not justify the allocation of different standards of proof for civil and criminal contempt." The Court went on to find that all proceedings for contempt “must realistically be seen as criminal in nature”, and must be subject to the criminal standard of proof beyond reasonable doubt.

17 At the same time, the Court made clear that not all features of criminal proceedings will necessarily apply in proceedings for contempt. Brennan, Deane, Toohey and Gaudron JJ held that:

(T)o say that proceedings for contempt are essentially criminal in nature is not to equate them with the trial of a criminal charge. There are clear procedural differences, the most obvious being that criminal charges ordinarily involve trial by jury, whereas charges of contempt do not.

18 McHugh J, while expressing the opinion that “(t)he case for abolishing the distinction between civil and criminal contempts is a strong one”, similarly noted that “many differences in procedure still exist between civil and criminal contempt proceedings.” Thus McHugh J held that “although the principal, if not sole, object of the present proceedings was to punish the appellant, the proceedings were and remain civil and not criminal proceedings for contempt”. As civil proceedings, they were therefore subject to civil rules with respect to the right of appeal.

19 Subsequent to that case, the NSW parliament enacted legislation which restricted the right to appeal from a finding of the Court that an accused person was not guilty of a charge of criminal contempt [Supreme Court Act 1970 s101]. In explaining those amendments, the then Attorney-General noted that “(t)his provision will apply to criminal contempt matters only and it will not affect or limit the existing rights of the parties in civil contempt proceedings to an appeal” (as quoted by Kirby J, Hearne v Street [2008] HCA 36 at [14]).

20 In Hearne v Street the High Court, construing the above legislation, made clear that the distinction between civil and criminal contempt has not been abolished for all purposes. Gleeson CJ observed [at 2]:

The distinction between civil and criminal contempt is in some respects unsatisfactory, but the Supreme Court Act adopts the distinction for jurisdictional purposes, and therefore it must be applied.

21 In AztechScience Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2008] NSWSC 908 Hamilton J observed that in Hearne v Street the High Court on appeal from the New South Wales Court of Appeal:

i. declined to proceed on the basis that all contempt proceedings are criminal for all purposes;

ii. declined to pass upon whether or not two propositions [(c ) and (d)] for which Ipp J had contended in the Court of Appeal were correct.

22 In those circumstances Hamilton J determined to take the propositions for which Ipp J had contended as correctly stating the law for the purpose of determining the proceedings before his Honour. To my mind the same approach should be taken in the present proceedings.

23 In endeavouring to discern the distinction between the two ways in which contempt proceedings may be characterised, Ipp J had contended as follows:

In my opinion, the Microsoft test is apt. Nevertheless, I would, with respect, add a qualification. In applying that test in a case where the punishment is for wilful disobedience unaccompanied by defiance, due regard must be had to the fact that (as the majority in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 65 ALR 683 observed at 108) classification of the contempt proceedings is a more complex and artificial undertaking. In the latter category of case, when attempting to determine the ‘substance’ of the proceedings, due account must be taken of the following considerations:

(a) Notwithstanding that proceedings are brought by an individual to secure the benefit of an order or undertaking, the contempt that arises may be criminal.

(b) A breach of an injunctive order or an undertaking that is contumacious in the broad sense involves deliberate defiance, and a breach that is contumacious in the broad sense will be regarded as criminal.

(c) Generally, however (and I understand this to mean prima facie), a breach of an injunctive order or an undertaking that is wilful but not contumacious in the broad sense — and is not merely casual, accidental or unintentional — is regarded as a civil contempt (this being the traditional distinction between civil and criminal contempt which still has significance).

(d) The fact that the application for an order that contempt has been committed is made within the main action, and not by a stranger to the suit, would tend to show that the contempt is civil in nature.

(e) A finding of contempt that is likely to be coercive in regard to the defendant’s future conduct would tend to show that the contempt is civil in nature.

(f) A breach of an order in civil proceedings may not be a civil contempt where the circumstances are such that the breach cannot be remedied.

(g) The competency of the appeal be decided by classifying the contempt proceedings at the time they were instructed [sic].

24 To my mind whilst it is true that there may be cases in which the distinction between criminal proceedings for content and civil proceedings for contempt may overlap, the proceedings before this Court unquestionably involve an action for civil contempt. This conclusion is based on proposition (c) of Ipp J, set out above, as well as the following considerations:

25

i. A finding of contempt in the present proceedings is likely to be coercive in relation to the defendant's future conduct and hence would tend to show that the content is civil in nature.

ii. The action is brought by a party to the primary proceedings who seeks to compel the defendants to comply with an injunction of the Court which was made in those primary proceedings.

iii. The remedy sought is curative rather than punitive, as the plaintiff seeks essentially that the money the subject of the breach be repaid.

26 I proceed accordingly to treat these proceedings as concerning allegations of civil contempt. Thus, while the standard of proof to be applied is the criminal standard, procedural issues which arise, such as those concerning the admissibility of evidence, are treated as issues arising in civil, rather than criminal, proceedings.

The requirements of a finding of contempt

27 In order for the Court to find the defendants guilty of the current charge of contempt, the plaintiff bears the onus of proving a number of elements beyond a reasonable doubt including the following:

1. The existence of orders made by the Court, in sufficiently clear and unambiguous terms;

2. The fact that the defendants had notice of these orders; and

3. That the orders were knowingly breached by the defendants’ authorisation of the subject payments out of Middletons’ Trust Account Ledger opened in the defendants’ names.

The ambiguity in the Court's orders

28 By the end of the hearing both senior counsel had accepted that there was an ambiguity in paragraph 1.6 of the Court’s orders which it will be recalled had been in the following terms:

Provided that nothing in sub-paragraphs 1.3, 1.4 or 1.5 shall operate to prevent the first and second defendants from carrying out the following activities:

(a) paying reasonable legal expenses on any legal matter and legal expenses of defending this matter up to $50,000.00.

29 There are two possible ways in which this clause may be construed. On the one hand, it could be read as permitting the defendants to pay reasonable legal expenses on any legal matter and reasonable legal expenses of defending this matter, with the combined total of both types of expenses not to exceed an upper limit of $50,000. On the other hand, it could be interpreted as permitting the defendants to spend up to $50,000 in defending this matter, and in addition, to pay reasonable legal expenses on any other legal matter (without a specific upper limit).

30 The plaintiff fairly acknowledged that, in so far as an ambiguity exists, it should be interpreted in favour of the defendants.

31 The significance of clarity in the Courts orders is obvious. In terms of the current environment it is plain that the defendants were entitled to proceed upon the basis:

i. that they were permitted to pay reasonable legal expenses on any legal matter in which they may be involved otherwise than in respect of these proceedings; and

ii. that they were restrained from paying any legal expenses of defending these proceedings up to the amount of $50,000.
[cf paragraph 1.4(b) which expressly referred to moneys in any solicitors trust account].

Knowledge of the orders

32 Mr Wyhoon, the solicitor for the defendants, gave evidence that he explained to each of his clients the nature and effect of the undertakings given to the Court on 9 and 15 March 2008 [T131.46]. That evidence is accepted as reliable.

33 Mr Wyhoon’s evidence was that, at the time in question, he understood the defendants’ obligations pursuant to those orders to be in accordance with the second, less strict, construction set out above.

The alleged breach

34 The evidence clearly established that the first and second defendants’ solicitors, Middletons, had over a period of time following the making of the orders been paid an amount of $88,921.79 in excess of the $50,000 permitted in relation to this current litigation. They had also received amounts by way of their fees in relation to other legal work for the first and second defendants, there being no challenge to the reasonableness of their charges for that other work.

35 The payments with regard to defending this matter, which exceeded the $50,000 limit permitted by clause 1.6(a), were made out of the solicitor’s trust account held in the name of the defendants. The plaintiff alleged that these payments were therefore in breach of the order which restrained the defendants from “deal(ing) with or dispos(ing) of… all or any of their assets… or any interest in those assets whether legal or beneficial including… any moneys held in any solicitor’s trust account” (cf: clause 1.4 above).

36 The defendants contended that the above payments were not in breach of the Court’s orders on the basis that:

i. The money in the trust account was the property of various third parties. As a result, the defendants claimed to have no interest, whether legal or beneficial, in the funds which were paid to the solicitors in excess of the $50,000 allowed.

ii. Alternatively, they did not knowingly authorise the payment of the funds out of the trust account.

The claim that the trust account funds were not the property of the defendants

37 As already stated the defendants claimed that a significant proportion of the funds deposited into the trust account in their own names after the Mareva orders came into effect was deposited by or on behalf of various third parties. These third parties [Mr Chow, Mr Cato and Mr Song Young], were said to be friends and business associates of the defendants, and apparently sought to contribute out of friendship, and without compensation, to the legal costs being incurred. The defendants maintained that the money deposited by these third parties did not at any stage become their property. Instead, they claimed that, once paid into the trust account, these funds were held by Middletons on trust for the purpose of the payment of the defendants’ legal costs.

38 The plaintiff responded to the defendants’ case in two ways. Firstly, the plaintiff denied that the defendants were telling the truth with regards to the source of the trust account funds. The plaintiff claimed that the process by which ‘friends’ of the defendants deposited money into the trust account in the name of the defendants was an elaborate sham, in which the defendants had provided money to third parties in order to disguise the fact that they owned assets other than those disclosed to the Court.

39 Secondly, and in the alternative, the plaintiff asserted that, even if the funds were originally derived from third parties, those parties had given the money unconditionally as a gift to the defendants. The plaintiff denied that the deposit of money into the solicitor’s trust account had created a purpose trust. Rather, the plaintiff asserted that the money in the trust account was held by Middletons on trust for the defendants, and was therefore an asset to which the defendants were beneficially entitled.

The evidence

40 Following the plaintiff’s presentation of their case the defendants elected to go into evidence. In consequence a number of the defendants witnesses were cross-examined.

41 These witnesses included Mr Jonathon Chow and Mr Neil Cato, two of the three men alleged to have deposited money into the solicitor’s trust account on behalf of the defendants. The third man, Mr Song Young, failed to answer a subpoena, and was said from the bar table to be overseas. Mr Niteen Doolub and his solicitor Brendan Wyhoon, a partner at Middletons, were also cross-examined.

42 The cross-examination elicited what many might regard as an extraordinarily unusual state of affairs, if the lay witnesses are to be believed. Mr Chow and Mr Cato gave evidence that, having been approached by one or both of the defendants, they decided to provide considerable amounts of money to pay the defendants’ legal fees. Mr Cato, on the defendants’ evidence, had provided around $85,000 over the course of under a year, while Mr Chow had provided some $60,000 over 6 months.

43 Mr Chow is the director of a company, Berita Pty Ltd, of which the defendants’ mother is said to be the sole shareholder. Mr Cato’s relationship with the defendants was never specified.

44 Neither witness gave entirely satisfactory answers when questioned as to the original source of the funds which they had deposited into the trust account. Mr Cato’s evidence was as follows:

Q. Where did you get the money that you gave them from?

A. I've been collecting all areas of cash. So I have cash come to me on a regular basis. It's not an uncommon thing. I have cash payments from customers. I play poker. I enjoy the horses. I do a number of sales of company things. I did my time with regard to fixing bits and pieces of - a number of different areas. I couldn't precisely tell you any particular area as to where it has actually come from.
…
Q. And is this the position, that you're telling his Honour that there is really no records that record where this money came from because it comes in bits and pieces from various cash transactions with which you are involved?
A. Well, I deal with cash on a daily basis, as my position as a mortgage broker and that's what I do. So I have a number of investments and things that I actually deal with. Clients give me cash. I deal with cash.

Q. Where do you keep it?
A. Various places. I have got a safety deposit box. I've got cash reserves just here and there. Again, it's never a large sum at any one time as such. So it comes in, it goes out.

45 Mr Chow’s evidence was that he could not recall exactly where the money came from, but that he believed it was a gift from various members of his family. He was asked:

Q. Which particular family members are we talking about?
A. I couldn't tell you at this point.

Q. No idea?
A. It would most likely be my father.

Q. But you can't remember?
A. No.

46 Mr Chow also admitted under cross-examination that, with respect to two of the deposits which he made into the solicitor’s trust account, an identical amount was paid into his account on either the day the payment was made, or the day before. He was unable to say exactly who had provided the funds deposited into his account on those days, except to speculate again that it may have been a family member.

47 Both witnesses firmly denied, however, having received any part of the money which they contributed from the Doolubs [T164.34, T175.7].

48 The evidence is replete with an extraordinary amount of care being taken by these witnesses to place on record what they were doing. In this regard it is only necessary to extract one of the letters to indicate the genre of the correspondence passing from these witnesses to Middletons. In a letter dated 13 September 2007 from Mr Jonathan Chow addressed to Mr Brendan Wyhoon, the partner dealing with the matter, Mr Chow had written:

RE: Doolub

I wish to confirm the following matters:

1. I have placed the following amounts into Middletons’ trust account in connection with various matters being undertaken by Middletons for Niteen and/or Praveen Doolub:

(a) $20,000 on or about 14 March 2007;
(b) $10,000 on or about 23 August 2007;

2. I have provided the above trust funds from my wholly owned assets gratuitously to Niteen and Praveen. The funds are not the repayment of any debt that I owe to Niteen or Praveen (or any entities associated with them). Nor do I owe such a debt. Further, the funds are not a loan to Niteen or Praveen. I have no intention of seeking repayment of the funds from Niteen or Praveen.

49 Mr Wyhoon gave evidence that he, or someone under his supervision at Middletons, drafted this letter. His purpose was to ensure, through having Mr Chow approve such correspondence, that there was no risk that the Mareva injunction would be breached. This arrangement was, to use Mr Wyhoon’s own words, ‘engineered’ by him some time shortly after he became aware that the amount of fees paid out of the solicitor’s trust account was approaching the limit of $50,000.

50 Similarly worded letters were received from Mr Cato [BWW10].

The second defendant's evidence

51 The second defendant's evidence under cross-examination included the following:

Q. Do you have a job?
A. Not at the moment.

Q. Do you pay rent to live where you live?
A. No.

Q. Do you own that property?
A. No.

Q. Do you know who owns the property you live in?
A. Yes.

Q. Who is that?
A. A friend of mine….

Q. And do you pay that person any money to live on the property?
A. No.

Q. Is there any written agreement between you and your friend?
A. No…

Q. Do you have any other investment properties or other investments that earn you any money?
A. No.

Q. How do you live from day-to-day?
A. Friends' supports…

Q. So when you need money to buy the groceries, what do you do?
A. No, I normally just eat at my friends' place.

Q. So you go around to your friends when you are hungry, do you?
A. No, I'm staying at a friend's place at the moment, so whatever is available there…

Q. What do you do when you go out?
A. I don't really go out.

Q. You don't really go out?
A. I don't really go out to be honest.
..

Q. If you leave the house in which you live and you wander and the community and you want to buy something, where do you get the money to do that?
A. Buying what?

Q. An ice-cream?
A. Friends. I'm with friends most of the time at the moment.

Q. A newspaper?
A. No, I don't buy newspapers…

I am supported by my friend

Finding

52 Whilst I retain considerable doubt about the veracity of the evidence given by Mr Chow, Mr Cato and the second defendant, the plaintiff has not been able to prove beyond reasonable doubt that there was any arrangement between the first two defendants and those who paid money into the subject trust account to the effect of either:

i. the defendants having provided the moneys to those who paid the moneys into the trust account; or

ii. the moneys having been in truth loan funds provided to the defendants from those who paid the moneys into the trust account.

The allegation that the funds became the property of the defendants on deposit into the solicitor’s trust account

53 There is no question but that a third party may deposit money into a solicitor’s trust account held on behalf of a particular individual. The Legal Profession Regulation 2005 requires that a receipt for money paid into a solicitor’s trust account must include both “the name of the client in respect of whom the money was received” and “the name of the person from whom the money was received”, making it clear that the client and the payee need not be the same person.

54 Prima facie where funds are paid into a solicitor’s trust account in the name of a particular client they become funds held on trust by the firm for that client.

55 So much was confirmed by Mr Wyhoon under cross-examination:

Q. Could I just ask you a couple of basic questions about trust accounts? A trust account between a solicitor and a client recognises that in fact the money that is in that account is being held on trust, correct?
A. Yes.

Q. The trustee is the solicitor, yes?
A. Yes.

Q. And the beneficiary is the client?
A. Ordinarily, yes.

56 The defendants allege that the money paid into the solicitor’s trust account in the name of the defendants was not, in fact, held on trust for any particular person [whether the defendants or the third party who had deposited the money]. Rather, the defendants claim that the money was held on trust for a particular purpose, that being the payment of the defendants’ legal fees.

The evidence relating to the purpose for which the money was given to the solicitors

57 The evidence in this regard included:

Mr Cato:

Q. You were giving them money to pay legal fees?
A. Yes.

Q. Did you understand it was for a litigation matter?
A. I was informed of that, yes.

Q. Was it for any other matters or just the litigation matter?
A. There was a matter that he was in the Supreme Court. He didn't have money at the time or he had an order against him - I can't remember the name of it, manoeuvring or something--

Q. Mareva.

A. Mareva, thank you, which prevented him from having access to money, could I assist. I said, "Yes, well, I can at this particular time. How much do you need?"

Mr Chow:

Q. Do you remember what you were asked to provide that money for, was it for a particular piece of legal work or for various pieces of legal work?
A. I don't know the specifics on that one.

Q. You don't know, just whatever legal work was being done for the Doolubs?
A. Yes.

Q. Did you ask the Doolubs what they were paying lawyers for?
A. No.

The second defendant :

Q. And so in paragraphs 6, 7 and 8 of your affidavit--
A. Yes.

Q. --when you said that you did not any interest, either legal or beneficial, in the moneys that were put into the Middletons' trust account by Mr Song Young, Mr Jonathon Chow and Mr Neil Cato, are you intending to convey that you did not consider that you had any interest whatsoever in that money?
A. Yes.

Q. ..All right, well, who did you think had a legal and beneficial ownership of that money while it was in your trust account?
A. The lawyers.

Q. Well, the lawyers were paid the money when they sent a bill to you and your brother and the bill was paid, correct?
A. Yes, yes.

Q. But before the lawyers were paid for their bills the money was in the trust account?
A. Yes.

Q. Who did you understand had legal or beneficial ownership of that money at that time?
A. Middletons.

Q. It was Middletons' money, is that what you understood the position to be?
A. Yes.

Q. And how did Middletons get that money?
A. It was put in their trust account, so whatever the process takes from there.

Q. By Mr Chow, Mr Young and Mr Cato?
A. Yes.

Q. And why would those people insofar as you may have an understanding, why did they pay money to Middletons' trust account?
A. I've asked them for some help.

Q. You asked them to give you some money, did you not?
A. I've asked them to help me with the legal fees.

Q. You asked them to give you some money so you could pay your legal fees?
A. They paid the legal fees. I didn't ask them for the money. They paid the legal fees.

Q. You knew the money was going to a trust account in you and your brother's names, didn't you?
A. Yes.

Q. And you knew that that was pursuant to the arrangements which whereby the solicitors had said that they would only do legal work if there was money in the trust account?
A. From a third party.

58 Also significant are the terms of the correspondence received [and drafted] by Middletons from each of Mr Chow and Mr Cato, stating that particular deposits had been provided “gratuitously to Niteen and Praveen”. The correspondence further notes that the funds are not a loan, and that the donor does not have any intention of seeking repayment from the Doolubs [see the letter from Jonathon Chow extracted above].

Finding

59 The question of whether or not the moneys paid into Middletons’ Trust account for the purpose of meeting the first and second defendants legal expenses are to be characterised as gifts to those defendants requires a close eye being given to the facts. The finding is that the beneficial interest in those funds passed to the first and second defendants. The finding is grounded upon:

i. the circumstances surrounding the payments into the trust account;

ii. the evidence given by Mr Chow, Mr Cato and Mr Wyhoon;

iii. the correspondence between Mr Chow, Mr Cato and Middletons.

60 There is no substance in the proposition that a Quistclose trust is shown to have been established: cf Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. The correspondence to Middletons negatives any such proposition. That correspondence made clear that the funds were provided gratuitously to the defendants. The funds were not paid into any ‘special’ trust account for a defined purpose. The correspondence does not identify any and, if so what intention those who provided the funds may have had to constitute a trust for a limited purpose.

The mental element involved in a finding of contempt of court

61 In Markisic v Commonwealth of Australia and Anor [2007] NSWCA 92, Campbell JA observed as follows:

[62] Further, there is a mental element involved in contempt of court. Mudginberri concerned a contempt arising from disobedience to a court order. While the focus of the decision in that case was whether a court had power to impose a fine in consequence of a breach of a court order, reaching a conclusion on that topic involved giving consideration to what was involved in contempt of court consisting of breach of a court order.

[63] In a lengthy paragraph at 111–112, Gibbs CJ, Mason, Wilson and Deane JJ, as I read it, approved the distinction made by the English Court of Appeal in Fairclough v Manchester Ship Canal Co [1897] WN 7; 41 SJ 225 between “casual, or accidental and unintentional disobedience” and “what was required in a case where ‘it were sought to commit a private individual to prison for contempt’ or ‘to sequestrate the property’ ‘of a company’ upon the ground of disobedience”. Their Honours held that conduct that is deliberate, and in fact breaches a court order, and is not a casual or accidental or unintentional breach , counts as wilful conduct. Their Honours conclude, at 113:

… a deliberate commission or omission which is in breach of an injunctive order or an undertaking will constitute such wilful disobedience unless it be casual, accidental or unintentional.

[64] As I read their Honours, their view is that the imposition of punishment is justified for a breach of a court order only if there is wilful disobedience , in the sense of deliberate action or inaction that is not casual, accidental, or unintentional . That conclusion applies regardless of whether the contempt involved in the disobedience to the order is classified as a civil or a criminal contempt. Thus, proof that a contempt has been committed by breaching a court order involves proving enough to conclude that the action or inaction said to constitute the breach was deliberate, and not casual, accidental or unintentional. Consistently with Witham , that needs to be proved beyond reasonable doubt.

62 The defendants contend that the material breach of the freezing orders presently in focus should be characterised as casual, accidental or unintentional. That submission is rejected. It is not justified by the evidence.

63 The defendants argued that there was no ‘wilful’ breach of the court orders by the defendants because, once legal costs had been incurred in excess of $50,000, the first and second defendants had no effective capacity to prevent the money from being withdrawn from the Middletons Trust Account. It was argued that the withdrawal of funds from the account, which constituted the breach of the injunction, was not based on any specific authority from the defendants which could have been countermanded, but rather upon the authority provided by Clause 88(4) of the Legal Profession Regulation 2005.

64 This submission is rejected. However the transaction between the defendants and their solicitors is characterised, it inevitably involves the defendants taking steps to authorise the withdrawal from the solicitors trust account of amounts in breach of the court order. Looking at the whole transaction between the parties, it can be seen that the defendants authorised Middletons to withdraw funds from the account through the following steps:

i. The defendants accepted the terms of the retainer offered by Middletons on 12 March 2007, authorising and directing Middletons to “draw on [the trust account] to pay any amount due from you to us”.

ii. After the date of the Mareva injunction, the defendants continued to incur legal costs, and did not seek to end or limit the terms of the retainer.

iii. As a direct result, invoices for the work performed were sent to the defendants, and when no objection to those invoices was received, funds were deducted from the trust account.

65 The finding is that from the time at which they entered into the retainer, the defendants were aware that once they received the invoices, if they did not challenge the invoices in any way, then the monies would be removed from the trust account. A number of the invoices sent to the defendants reinforced this knowledge by including the following notification:

We give you notice that, unless you object to any of the invoices within 7 days from the date of this letter, we will draw on the trust funds held on Praveen’s behalf to pay the invoices.

66 There was no argument put that the whole of the legal fees the subject of the breach been incurred prior to the order of the Mareva injunction [nor could such an argument possibly have been made on the evidence]. In such circumstances it is misconceived to suggest that there was no authority from the defendants to withdraw the funds the subject of the breach, nor any power in the defendants to countermand such an authority.

Challenges to the Statement of Charge

67 There is no substance in the defendant's contentions that the statement of charge is defective in any respect:

[the alleged deficiencies were that the statement of charge:

· did does not allege any breach of any orders at all;

· did does not allege that the first and second defendants were aware of the orders; and

· did not allege that there were any assets of the First and Second defendants that were relevantly dealt with or disposed of.]

68 In any event, Mr Street SC expressly acknowledged that, save in one respect, any suggested deficiencies would not prejudice his client and each could be cured by the Court.

69 The contention was, however, that in some way the framing of the statement of charge [when read in the light of the particulars] was deficient where it alleged that the first and second defendants knowingly authorised payments out of Middletons’ Trust Account held in their name. There is no substance in this contention.

Decision

70 The plaintiff has established that the first and second defendants are guilty of contempt of Court as charged.

71 The declaration sought in paragraph 1 of the motion is to be made at a time when short minutes of order are brought in dealing with all of the orders which the Court determines are appropriate to be made

Other orders

72 The matter is to be relisted for the purpose of the Court taking in submissions by the parties as to the other orders which are appropriate to be made in the circumstances.

Reserved ruling on evidence

73 During the hearing the plaintiffs sought to tender the materials behind the exhibit BWW7 to the affidavit of Mr Wyhoon made on 10 July 2008. That evidence is disallowed. There was no evidence to establish that Mr Young's signature appeared upon this material nor that the document came from Mr Young. Indeed the cover page of the facsimile appears to record that the communication was from the first defendant to Mr Wyhoon. Exhibit BWW2, being the trust account statement, refers on the fourth line of the text to "Future costs and disbursements, Praveen Doolub D/Dep 15/3/07". The document includes a reference to 16 March 2003 which is the date that the moneys were cleared in the sum of $30,000. As Ms Horvath, junior counsel for the plaintiff, contended:

[T]he reference being Praveen Doolub, .. [is assumed to be D for direct, deposit] 15 March 2007. Whereas the letter in BWW 7 that [the defendants seek] to tender, dated September 2007, refers to a placement by Song Young in the Middletons trust account on 16 March 2007, not 15 March 2007, and does not identify that it may have been money that Praveen Doolub put into the account.

74 The evidence was inadmissible. The evidence was further rejected pursuant to section 135 of the Evidence Act on the ground that the probative value of the evidence was substantially outweighed by the danger that the evidence may be prejudicial to the plaintiff.

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