Yuan v Huang

[2023] NSWSC 1021

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Yuan v Huang [2023] NSWSC 1021

Hearing dates:

26 & 27 April 2023 and 5 May 2023

Date of orders:

28 August 2023

Decision date:

28 August 2023

Jurisdiction:

Equity

Before:

Richmond J

Decision:

The charges of contempt of court against the first defendant found to be proved beyond reasonable doubt: see [77].

Catchwords:

CONTEMPT — civil contempt — breach of orders — payment of monies in breach of freezing orders

CONTEMPT — civil contempt — breach of orders — misleading the court

Cases Cited:

Amalgamated Television Services Pty Ltd v Marsden [2001] NSWCA 32

ASIC v Sigalla(No 3) [2010] NSWSC 1076

Babka v Federal Commissioner of Taxation (1989) 89 ALR 373; [1989] FCA 560

Brajkovich v Federal Commissioner of Taxation (1989) 89 ALR 408; [1989] FCA 683

CCContainers Pty Ltd v Lee [2015] VSC 477

Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

Green v The Queen (1971) 126 CLR 28; [1971] HCA 55

Huang v Liao [2022] NSWSC 347

Lewis v Ogden (1984) 153 CLR 682; [1984] HCA 26

Mahaffy v Mahaffy [2013] NSWSC 245

National Australia Bank Ltd v Juric [2001] VSC 375

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

Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69

Witham v Holloway (1995) 183 CLR 525; [1995] HCA 3

Woods v Deputy Commissioner of Taxation (1999) 43 ATR 491; [1999] FCA 1589

Zhang v Shi (No 5) [2021] VSC 695

Texts Cited:

J D Heydon, Cross on Evidence (LexisNexis, 13th ed, 2021)

Category:

Principal judgment

Parties:

Jinghui Yuan (Plaintiff)
Jun Yu Huang (First Defendant)
Yanyu Li (Second Defendant)

Representation:

Counsel:
M Condon SC and H Zhao (Plaintiff)

Solicitors:
Juris Cor Legal (Plaintiff)
G Wu, LegalPoint Lawyers (First Defendant)
R Lee, Raymond Lee & Co (Second Defendant)

File Number(s):

2021/161449

Publication restriction:

Nil

JUDGMENT

1. By a Notice of Motion filed on 29 September 2022, the plaintiff seeks a declaration that the first defendant (Mr Huang) be held in contempt of Court by engaging in the conduct set out in the Statement of Charge (SOC) annexed to the Notice of Motion and that he be punished for that contempt. The charges concern alleged breaches of freezing orders made by this Court on 4 June 2021 and his intentional misleading of the Court on 30 June 2021 when those freezing orders were extended until further order, as to the true position of his assets at that time.

2. At the hearing, the plaintiff was represented by senior and junior counsel and Mr Huang was represented by a solicitor. Both parties filed and served written opening and closing submissions, as well as supplementary written submissions regarding Exhibits E and F (referred to below) after the hearing concluded.

3. The plaintiff relied on one affidavit of Ms Yu Chen and three affidavits of Ms Athena Yu, both of whom are solicitors acting for the plaintiff, and Ms Yu was cross-examined. Mr Huang relied on one affidavit made by him, and he was cross-examined. While it was apparent from Mr Huang’s cross-examination that English is not his first language, he understood English well enough not to require an interpreter and I am satisfied that his understanding of English was sufficient to enable him to understand and respond to the questions he was asked.

4. The motion has proceeded on the basis of the usual procedure on a charge of civil contempt that the Court will deal first with the question of guilt and then will conduct a separate hearing on penalty if a finding of guilt is made.

Background facts

5. These proceedings were commenced in June 2021. The plaintiff contends that in January 2021 she was induced by the defendants’ misrepresentations to pay the amount of $300,000 to bank accounts nominated by Mr Huang for the purpose of making an investment with Sunwin Investment Pty Ltd (Sunwin). Mr Huang and Ms Yanyu Li, the second defendant, were the directors of Sunwin. The subject matter of the misrepresentations was the investment capacity of Sunwin which went into liquidation on 19 April 2021 and was de-registered on 2 December 2021.

6. On 4 June 2021, Ward CJ in Eq (as her Honour then was) made freezing orders against both defendants in the form prescribed in Practice Note SC Gen 14. Those orders were extended by Parker J on 10 June 2021 (until 5:00pm on 30 June 2021) and by Kunc J on 30 June 2021 (until further order) and remain in force. Accordingly, the freezing orders were in force during the period of the alleged contempt, being 30 June 2021 to 26 October 2021.

7. Order 6 of the freezing orders made against the first defendant, Mr Huang, imposed an obligation on him not to remove from Australia or in any way dispose of, deal with, or diminish the value of any of his assets in Australia up to the unencumbered value of $300,000. That obligation was only subject to the exceptions set out in order 10. For the purposes of the resolution of this matter, it is only necessary to set out orders 6, 7, 8 and 10 which provide as follows:

FREEZING OF ASSETS

6.   (a)   You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (‘Australian assets’) up to the unencumbered value of AUD $300,000 (the Relevant Amount’).

(b)   If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.

(c)   If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia (‘ex-Australian assets’):

(i)   You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and

(ii)   You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian asserts still exceeds the Relevant Amount.

7.   For the purposes of this order:

(1)   your assets include:

(a)   all your assets, whether or not they are in your name and whether they are solely or co-owned;

(b)   any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

(c)   the following assets in particular: the property known as [XXXXX X] or, if it has been sold, the net proceeds of the sale.

(2)   the value of your assets is the value of the interest you have individually in your assets.

PROVISION OF INFORMATION

8.   Subject to paragraph 9, you must:

(a)   at or before the further hearing on the return day (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of all your assets in (sic) world wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets;

(b)   within 3 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.

…

EXCEPTIONS TO THIS ORDER

10.   This order does not prohibit you from:

(a)   paying up to $1000 a week on your ordinary living expenses;

(b)   paying any reasonable legal expenses;

(c)   dealing with or disposing of ay of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and

(d)   in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation.

8. The property referred to in order 7(1)(c) is an apartment in Gordon, a suburb of Sydney (Gordon property). It is not in dispute that the market value of the Gordon property exceeded $300,000 at all relevant times.

9. The freezing orders made against the second defendant, Ms Li, were in the same form (including order 7(1)(c)).

10. Mr Huang admits that he was served with the freezing orders on 7 June 2021. He was present in Court at the hearings before Parker J and Kunc J on 10 and 30 June 2021 respectively, at which time the orders were extended.

11. A sealed copy of the freezing orders, and the orders extending them, were served personally on Mr Huang and also sent to his email address on 7, 10 and 30 June 2021, thereby satisfying the requirement imposed by UCPR r 40.7(1).

12. It is relevant to note that on 10 June 2021, Parker J specifically directed Mr Huang (who was self-represented) to the obligations imposed upon him by the freezing orders and the consequences if he breached them (including imprisonment). The following exchange occurred between Mr Huang and Parker J (CB170–171):

Parker J:   Can I stress something Mr Huang?

Mr Huang:   Yes, your Honour.

Parker J:   The freezing orders the Court has made remain in place. You must obey them.

Mr Huang:   Yes.

Parker J:   No ifs, no buts.

Mr Huang:   Yes.

Parker J:   If you have any money –

Mr Huang:   No.

Parker J:   I know you say you have no money, but the orders must be obeyed to the extent that you do have any money, and I must make it clear that any disobedience of the orders, even for the smallest amount of money, is a very serious matter and can be punished by the Court, including by gaol. Do you understand?

Mr Huang:   Yes.

13. In this passage, Parker J refers to Mr Huang having said that he had no money. This is a reference to an earlier exchange recorded in the transcript (CB162) as follows (emphasis added):

Parker J:   The second thing is this, among the orders made by the Court on an earlier occasion were orders which required you to file an affidavit, which describes what your assets    were. You were required to tell the Court what assets you have in Australia and, I think, elsewhere. You have not filed that affidavit yet.

Mr Huang:   I don’t know how to do that.

Parker J:   You need to approach the Duty Registrar on how to go about complying with that, and they will provide you with an affidavit form.

Mr Huang:   I haven’t got any assets.

14. As indicated by this exchange, Mr Huang was told by Parker J that he needed to file an affidavit to comply with order 8 notwithstanding that he maintained that he had no assets. Parker J stood the matter over to a later date for hearing before Kunc J to determine whether the freezing orders should be extended, with Mr Huang being allowed further time to file an affidavit complying with order 8.

15. On 22 June 2021, Mr Huang filed an affidavit dated 21 June 2021 expressed to be made by him but unsigned, which stated relevantly (emphasis added):

I would like to oppose the frozen order served on me on the 4/6/21 by the plaintiff Jinghui yuan for the following reasons:

…

3. I had personally borrow more than $400000 from 15 other peoples including relative, families and friends. I had borrowed this money when the company is in financial trouble since October 2020, I had put it all in the company just to help pay wages rents and all the expense. now the company has been liquidated, but I still need to pay those peoples back slowly because this is personal loan.

4. I currently do not had any asset and owed $400000 to family and friends. I had two bank account one is with commonwealth bank there $35 in debt and the other one is with bank of Queensland it had $683 in there. Now it had been frozen I currently cannot access to those funds for my daily living expenses and cannot paying my bills, it has created a major impact on my life, now I can’t even afford to going outside, because I can’t pay for the transports, foods etc.

…

9. So I must need my commonwealth bank account no [number] also bank of Queensland account no [number] to unfrozen immediate so I can continue my progress by receive work income and pay my bills and access to my daily expense.

16. When the matter came before Kunc J on 30 June 2021, his Honour heard submissions from the plaintiff and Mr Huang (who was again self-represented) as to whether the freezing orders should be extended, and decided to extend the freezing orders against both defendants until further order. Mr Condon SC, who appeared for the plaintiff, then requested Kunc J to make an order directing Mr Huang to file an affidavit complying with order 8(a) because it had not been complied with. Kunc J raised this with Mr Huang and the following exchange occurred (CB195–196) (emphasis added):

Kunc J:   You need to file an affidavit. You need to read order 8 of the order that has been made against you. But essentially, you are required to file and affidavit, where you write down where, what your assets are in the whole world, giving their value, their location and details, including any mortgages, et cetera on them.

Mr Huang:   What do you write down. I don’t have any assets, just two bank accounts: one has got $1,638, one is -$35.

Kunc J:   Yes. Do you own any property here in Australia or in China?

Mr Huang:   No. Before … (inaudible) … a year ago, yeah, I got property, but I sold it and yeah. Not any more.

Kunc J:   And do you say that the only assets that you have, do you have a motor car?

Mr Huang:   Motor car, no.

Kunc J:   And are you living in rented premises?

Mr Huang:   Yes.

Kunc J:   And do you say that the only thing that you own effectively is the two bank accounts?

Mr Huang:   Yeah.

Kunc J:   And then you accept that you obviously seem to owe a lot of people a lot of money, is that right.

Mr Huang:   That’s right, yeah.

Kunc J:   Well, Mr Condon, I am in your hands. You have got one affidavit from the first defendant, which, I must say, I thought was actually purportedly trying to answer paragraph 8. Do you really want more from him, given he is unrepresented, and you have heard what he has had to say.

Condon:   The answer is no. Thank you your Honour.

Kunc J:   Yes, alright. Then you don’t need to worry about that aspect of it, Mr Huang …

Alleged contempts

17. The alleged contempts fall into two categories:

1. breaches of order 6(a) of the freezing orders as a result of:

1. twenty-six payments by Mr Huang between 30 June 2021 and 26 October 2021 to seven entities that engaged in the business of gambling or which operate interactive platforms for such a purpose, in the total amount of $135,000: SOC, [12]–[92];

2. payments by Mr Huang to Cuihua Luo and Anni Zhu between 2 July and 21 July 2021, in the total amount of $38,900: SOC, [93]–[102]; and

2. misleading the Court (Kunc J) on 30 June 2021 as to the correct position as to the balance of his ANZ bank account on that date: SOC, [103]–[108].

18. I will deal with each of these categories in turn.

Category 1: breach of freezing orders

Relevant principles

19. It was not in dispute that the elements which the plaintiff must prove to establish a civil contempt arising from the breach of a court order are as follows, adopting the summary by Gillard J in National Australia Bank Ltd v Juric [2001] VSC 375 at [37]:

1. the Court has made an order;

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

3. the order was served on the alleged contemnor or excused in the circumstances or service dispensed with pursuant to the rules of the Court;

4. the alleged contemnor has knowledge of the terms of the order; and

5. the alleged contemnor has breached the terms of the order.

20. In relation to the fourth element, it is sufficient that the alleged contemnor knew the substance of the prohibition in the court order or had knowledge at a level that would induce an honest, reasonable and responsible person to check the precise terms of the order: Amalgamated Television Services Pty Ltd v Marsden [2001] NSWCA 32 at [53]; Huang v Liao [2022] NSWSC 347 at [33]–[37]. Further, it is not necessary for the plaintiff to establish that the alleged contemnor understood the true meaning of the terms of the order or that he or she was aware that his or her conduct constituted a breach of the order, although the construction placed by the alleged contemnor upon the order may be relevant to the question of penalty: Huang v Liao [2022] NSWSC 347 at [40].

21. In relation to the fifth element, it is not necessary for the plaintiff to establish that the alleged contemnor intended to deliberately breach the order. Rather it is sufficient that the alleged contemnor deliberately committed an act or omitted to do some act which had the effect of breaching the order. As Black J observed in Huang v Liao [2022] NSWSC 347 at [32]:

Proof of a specific intent to disobey the Court’s order is not necessary to prove civil contempt: Australasian Meat Employees Union v Mudginberri Station Pty Ltd above at 110–114, where the Court held that a deliberate commission or omission which is in breach of an injunctive order or undertaking will constitute wilful disobedience unless it is casual, accidental or unintentional. The alleged contemnor may establish by way of exculpation that his or her default was of that character: Universal Music Australia Pty Ltd v Sharman Networks Ltd (2006) 150 FCR 110 at [15]–[18]; Anderson v Hassett [2007] NSWSC 1310 at [4]. In Markisic v Commonwealth (2007) 69 NSWLR 737; [2007] NSWCA 92, Campbell JA, giving the decision of the Court of Appeal, similarly observed (at [64])) that “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.”

22. Although proceedings for breach of a court order are a civil proceeding, each of the five elements identified in [16] needs to be proved beyond reasonable doubt: Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525 at 534; NHB Enterprises Pty Ltd v Corry (No 7) [2021] NSWSC 741 at [194]–[195].

23. As to the meaning of a reasonable doubt in this context, I have approached the matter in the same way as Delany J in Zhang v Shi (No 5) [2021] VSC 695 where his Honour said at [18], by reference to Green v The Queen [1971] HCA 55; (1971) 126 CLR 28 at 32–33:

In Green the High Court (Barwick CJ, McTiernan and Owen JJ) said this: ’A reasonable doubt is a doubt which the particular jury entertain in the circumstances’. If that is so, then, in the mind of a judge, dealing with contempt charges, a reasonable doubt is a doubt which the particular judge entertains in the circumstances. If the judge entertains such a doubt, the respondent to the charge must be given the benefit of that doubt and that charge must be dismissed.

Proper construction of the freezing orders

24. It is necessary to deal first with two submissions by Mr Huang applicable to all of the category 1 transactions in support of the contention that there had been no breach of order 6(a) of the freezing orders.

25. First, Mr Huang contended that orders 6 and 7 were ambiguous in that the Gordon property was included in the definition of “your assets”, which gave rise to uncertainty about the scope of the orders and what they required of him. It was submitted that this ambiguity in order 7 carried the real risk of misleading Mr Huang because it clearly identified his assets as including the Gordon property, and this was evident from the fact that Mr Huang had understood the definition of his assets as including the Gordon property which had a value of around $800,000.

26. A person cannot be committed for contempt of court for breach of a court order the terms of which are ambiguous because it cannot be said what it was that required compliance: Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69 at [52], [57]. However, it is necessary to distinguish between the situation where an order is ambiguous and the situation where there are difficulties in determining the meaning of the order which can be resolved by construction of the order, bearing in mind that the contemnor’s lack of understanding of the true meaning of the order does not mean that the contemnor cannot be found guilty of contempt: Pang at [53].

24. In Pang at [54]–[56], Beazley JA (with whom McColl JA and Lindgren AJA agreed) approved the following observations of Campbell J (as his Honour then was) in Kirkpatrick v Kotis (2004) 62 NSWLR 567; [2004] NSWSC 1265 at [55]:

In my view, the court approaches the question of whether the order is ambiguous with the caution appropriate to a type of litigation which could result in the defendant being punished — if an order is really not clear, it is unjust for someone to be punished for not obeying it. As well, though, the court approaches the question of whether the order is ambiguous on the basis that the recipient is expected to try to understand it and obey it. If a person taking that approach to the order could be in real doubt about what it meant, in a respect which is relevant to the particular charge of contempt which is brought, the charge will fail. This means that there will sometimes be orders which a grammatical analysis would show to contain a syntactic ambiguity, but which are nonetheless enforceable if it is the type of ambiguity that has no real risk of misleading. There will sometimes be orders which contain a term which has multiple meanings, but where that semantic ambiguity has no real risk of misleading.

28. The freezing orders take the form of a long-standing precedent (being that set out in Practice Note SC Gen 14). Order 6(a) imposes an obligation on Mr Huang not to remove from Australia or in any way dispose of, deal with, or diminish the value of any of his assets in Australia up to the unencumbered value of $300,000, subject to two qualifications.

29. The first is order 6(b) is where the unencumbered value of his Australian assets exceeds $300,000, in which case he may remove those assets from Australia, or dispose of or deal with them or diminish their value so long as the total unencumbered value of his Australian assets still exceeds $300,000.

30. The second is in order 6(c), which is where the unencumbered value of his Australian assets is less than $300,000, but he has assets outside Australia in which case the order deals with the extent to which he can dispose of those ex-Australian assets (which is not presently relevant).

31. Each of the paragraphs of order 6 directs attention to the identification of “your assets” and their “value”. Each of those terms is defined in order 7.

32. Under order 7(1), the term “your assets” is defined in inclusive terms and extends to assets in which Mr Huang has an interest less than full ownership. Order 7(2) then states the meaning of the expression “the value of your assets” which is “the value of the interest [Mr Huang] has in your assets”. This is necessary given that the restraints in order 6 are identified by reference to a monetary amount representing a particular value, in this case $300,000.

33. Hence, while the inclusive definition of “your assets” in order 7(1) includes the Gordon property as one of “your assets”, this has no relevance to the restraints in order 6 unless the value of his interest in the Gordon property is greater than nil.

34. As the plaintiff submitted, the definitions in order 7(1) and (2) need to be read together when determining if any of the restraints in order 6 have been breached. The construction advanced by Mr Huang would produce the absurd result that, where an asset failing within 7(1) is one which has a value in excess of $300,000 but Mr Huang’s interest in it is small or zero, the prohibition in order 6 would have no operation.

35. I note that on the same day the freezing orders were made against Mr Huang, orders in the same form were made against his former wife, Yanyu Li. The Gordon property is also included in the corresponding order 7(1)(c) of the freezing orders made against Ms Li. It can be inferred that the inclusion of the Gordon property in the definition of “your assets” for both Mr Huang and Ms Li was designed to ensure that each of them was restrained from dealing with the interest, if any, in which either of them still had in the property. However, where Mr Huang has no interest, the Gordon property has no relevance to the operation of order 6.

36. For these reasons, I reject the submission that orders 6 and 7 are ambiguous.

Value of Mr Huang’s assets

37. Second, Mr Huang submitted in closing submissions that the plaintiff had not discharged her burden of proving beyond reasonable doubt that the category 1(a) and (b) transactions had the result that the unencumbered value of Mr Huang’s assets fell below $300,000 because, as noted above, it was not in dispute that the value of the Gordon property at all relevant times exceeded $300,000.

38. The plaintiff submitted that this submission should be rejected for a number of reasons. First, at no stage until final closing submissions had it been suggested by Mr Huang that he had any interest in the Gordon property. Mr Condon SC said that if he had known that Mr Huang put in issue whether he had an interest in the Gordon property, the plaintiff’s case would have conducted differently (in particular, Mr Huang would have been cross-examined on that topic but was not). Second, the evidence before the Court establishes that Ms Li acquired title to the Gordon property by transfer from a third party on 30 January 2017 which is prior to the date on which she married Mr Huang. There is no evidence to suggest that he ever acquired an interest in the Gordon property before or after that date (noting here that they were divorced in February 2020). Third, Mr Huang made statements to both Parker J and Kunc J in the earlier interlocutory hearings that he had no assets apart from the two bank accounts and made a statement to the same effect in his affidavit of 21 June 2021.

39. Further, in his affidavit affirmed on 27 October 2022 read in this proceeding, he made a statement to the same effect, as follows:

30.   When I made a statement before his Honour Justice Kunc on 30 June 2021, as far as I was aware, the total assets I had were $683 in by BOQ bank account. At that time, I was not aware of that the amount of $8,000 had been transferred to my ANZ bank account from the second defendant. Therefore, I have no knowledge of the total amount in my ANZ bank account. I did not intend to make any false or misleading statements before the Court.

40. I accept the plaintiff’s submission. In particular, the statements made by Mr Huang referred to above are admissions by Mr Huang that he had no interest in the Gordon property. Further, whether he had an interest in the Gordon property at the time the category 1(a) and (b) transactions occurred was a matter on which only he could give direct evidence, and his failure to do so means, at the very least, that no inferences can be drawn in his favour on that topic: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418–419. For these reasons, I am satisfied that while the Gordon property is included in “your assets” for the purposes of order 6, the value of his interest is nil and accordingly it has no relevance to the application of order 6 to the category 1(a) and (b) transactions.

Mr Huang’s knowledge of the terms of the freezing orders

41. In closing submissions it was not submitted by Mr Huang that he did not have knowledge of the terms of the freezing orders. I am satisfied beyond reasonable doubt that he did know the substance of the prohibition contained in orders 6, 7 and 10, as indicated both by his affidavit of 27 October 2022 (paragraphs 7-8) and his evidence in cross-examination (T121.19-46).

Category 1(a): 26 payments for gambling

42. During the relevant period, Mr Huang made 26 payments to entities engaged in gambling, being Ladbrokes, Neds, Playup, Unibet, Bet365, Sportsbet and Pointsbet. He admits all these payments were made and asserts that they were “arbitrage” investments.

43. In closing submissions, Mr Huang relied upon order 10(c), contending that all the transactions were payments in the ordinary and proper course of his business of arbitrage investments. Mr Huang’s evidence as to the nature of the arbitrage he was engaged in was opaque, but in essence it appeared to be that he would make two bets on the same event (usually a sporting event) and asserted that this enabled him to generate a small profit on each bet (T134.14).

44. Mr Huang bears the onus of establishing that any of the exclusions in order 10 applies: ASIC v Sigalla (No 3) [2010] NSWSC 1076 at [46]–[47]; CC Containers Pty Ltd v Lee [2015] VSC 477 at [42]–[43]. I am not satisfied that Mr Huang was conducting a business in relation to the so-called arbitrage investments during the relevant period for the following reasons.

45. There is a well-recognised distinction between gambling and the conduct of a business: see eg. Brajkovich v Federal Commissioner of Taxation [1989] FCA 683; (1989) 89 ALR 408 at 414. However, there is no reason in principle why gambling activities cannot constitute a business if the gambling activity satisfies the requirements for characterisation as a business. This was recognised by Hill J in Babka v Federal Commissioner of Taxation [1989] FCA 560; (1989) 89 ALR 373 where his Honour said at 380:

In ordinary usage we recognise the possibility of mere punting being a business when we speak of the “professional punter” meaning thereby one of whom it could be said that placing bets is his vocation and I am inclined, particularly with the growth of modern technology such as computers, to think that there may be cases today, even if there were not at the time when Rowlatt J decided Graham v Green, where the activity of betting has become so organised, systematic and businesslike and is carried on with such dedication to potential profit that the man in the street would recognise that activity to be a business. That being so, I propose to proceed on the assumption that mere punting may constitute a business although the intrusion of chance into the activity as a predominant ingredient at least in the outcome of the race itself does suggest to me that it will be a rare case where a court will conclude that the activity is a business. However, it is not necessary for me in the present case to reach a final conclusion on the matter any more than it was in Evans for in my opinion even if the activities of betting are inherently capable in some circumstances of constituting a business the facts of the present case do not reveal the applicant to be carrying on any business at all.

46. In Woods v Deputy Commissioner of Taxation (1999) 43 ATR 491; [1999] FCA 1589, Sackville J made the following observations on what must be established in order for a particular activity to be properly regarded as constituting a business:

[34]   The question of whether a particular activity constitutes a business depends upon an assessment of the relevant facts and involves matters of fact and degree: Evans v Federal Commissioner of Taxation (1989) 89 ATC 4540 (Hill J), at 4554-4555. No one factor is decisive and many elements may have to be considered: Ferguson v Federal Commissioner of Taxation (1979) 79 ATC 4261 (FC), at 4264, per Bowen CJ and Franki J. It is to be borne in mind, however, when weighing the relevant factors, that there is usually a distinction between the pursuit of a pastime, even if the pursuit is vigorous, and the carrying on of a business: Martin v Federal Commissioner of Taxation (1953) 90 CLR 470, at 479, per curiam.

[35]  The factors relevant to assessing whether a taxpayer was carrying on a business at a particular time include the following:

(i)   Whether the activities were undertaken as a commercial enterprise for the purpose of making a profit: Hope v The Council of the City of Bathurst (1980) 144 CLR 1, at 8-9, per Mason J; Thomas v Federal Commissioner of Taxation (1972) 72 ATC 4094 (HC), at 4099, per Walsh J ("commercial purpose or character"). But it is not necessary that there was an immediate purpose of profit-making in a particular year: Ferguson, at 4264, per Bowen CJ and Franki J. A business may, for example, be conducted in a limited way as preparatory to or in preparation for a larger scale business: Ferguson, at 4269, per Fisher J; Federal Commissioner of Taxation v Walker (1985) 16 ATR 331 (S Ct Qld/Ryan J), at 334.

(ii)   Whether the activities were engaged in on a continuous and repetitive basis: Hope, at 9, per Mason J. But even isolated transactions may be part of a business if, for example, they can be seen as the beginning of a larger scale undertaking: Ferguson, at 4264.

(iii)   Whether the activities were carried on in a business-like manner: Ferguson, at 4264; Martin, at 479 ("systematic and organized"). It will therefore be relevant to inquire whether the taxpayer kept adequate books and records and employed a systematic approach to the conduct of the undertaking.

(iv)   Whether ordinary commercial principles were applied to the conduct of the undertaking, characteristic of the line of business of which the undertaking is said to have formed part: Evans, at 4555.

(v)   Whether the scale and volume of the undertaking (including the amount of capital employed) were substantial, especially where the question is whether the taxpayer was conducting a business or was engaging in a hobby or recreational activity: Ferguson, at 4265; Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 196 (Evatt J), at 206-207.

There may be overlap among the various factors and not all criteria will necessarily suggest the same result.

47. The problem for Mr Huang in the present case is that he has advanced no evidence (beyond mere assertion) to show that, by application of the established criteria set out above, he was conducting a business in relation to his gambling activities.

48. Further, his affidavits of 18 February and 27 October 2022 stated that his occupation was “unemployed”. Mr Huang gave the following evidence on this topic in cross examination (T111–112):

Q.   I'm going to press you. If you thought that you were engaged in arbitrage, you would have said that when you came to describe in this affidavit [being that dated 18 February 2022] what your occupation was, can I suggest that to you?

A.    I say how can I be an investor.

Q.    You would have said you were an investor, is that right?

A.    Yeah.

Q.    The reason you didn't say that you were an investor when you came to swear this affidavit in February 2022, is because you knew that you were not an investor?

A.    Not sure what you talking now? You know I didn't get any legal advice. I didn't have legal representative and now you come back a few year ago, what I say a few year ago and try to go backward, forward and trap me. And I fall into this trap since first day beginning.

Q.    You knew, when you made this affidavit in February 2022 that you were meant to tell the truth about your occupation, didn't you? Didn't you?

A.    What occupation, I have many different job, different life.

Q.    I'm going to ask you the question and ask you to answer it directly. When you came to make this affidavit in February 2022, you understood that you had to give a truthful answer to the issue of what your occupation was?

A.    At that time I was unemployed. What can I say?

49. Earlier, Mr Huang had accepted that he was still gambling in February 2022 T111.11). I accept the plaintiff’s submission that had he truly thought he was engaged in a business (as an arbitrage investor) at that time, he would have said so in his affidavits (as he accepted in the passage set out in the previous paragraph). When that was put to him, he asserted that he had not got any legal advice, which I cannot accept as an explanation because he had retained his present solicitor by February 2022.

50. For the above reasons, in my opinion, Mr Huang has not discharged his onus of establishing that any of the category 1(a) transactions were excluded by order 10(c), and no other exclusion in order 10 was relied on.

Category 1(b): payments to Ms Luo and Ms Zhu

51. Mr Huang made payments totalling $38,900 between 2 and 21 July 2021 to Ms Luo and Ms Zhu. He did not deny making the payments but asserted that they were made on account of repayment of a loan provided to him by Ms Luo. Mr Huang bears the onus of proof of demonstrating that the asserted justification for the payments falls within one of the exclusions in order 10.

52. The first problem with Mr Huang’s contention is that loan repayments do not come within any of the exclusions in order 10, except potentially order 10(d). That exclusion would apply if the payments constituted the discharge of obligations bona fide and properly incurred under a contract predating the making of the freezing orders, provided that Mr Huang gave written notice of the particulars of the obligation pursuant to order 10(d) before making the payment. He did not do so.

53. A second problem with Mr Huang’s contention is that the evidence before the Court does not establish that the payments to Ms Luo or Ms Zhu were repayments of a loan. The alleged lender, Ms Luo was not called to give evidence, despite making an affidavit. No explanation was given for her absence and a Jones v Dunkel inference can be drawn that her evidence would not have assisted Mr Huang’s case. It was open for Mr Huang to compel Ms Luo’s attendance by subpoena, particularly when what she had to say had been set out in the affidavit she had previously sworn, which had been served on the plaintiff: J D Heydon, Cross on Evidence (LexisNexis, 13^th ed, 2021) at [1215].

54. There was no evidence before the Court as to the amount or terms of the alleged loan. Mr Huang’s evidence on this topic was unreliable. He said in cross-examination that the rate of interest was roughly 7% per month, but it is not possible to identify — by reference to the date of the alleged loans — any transaction that represents payment of interest at that rate. Mr Huang pointed to the payment on 27 July 2021 of $3,340, but this sum is greater than what would be payable on any loan monies that were then advanced ($30,000 as per the bank statement in CB 272) at the rate asserted (T79.13–80.38). Further, he could not recall, initially, exactly when the first loan was advanced by Ms Luo (T79.3). He initially contended that Ms Luo lent $10,000 - $15,000 between October 2020 and June/July 2021 (T81.35) but that later changed to mid July 2021 (T82–83).

55. Ultimately, there was no evidence to support the proposition that there was a loan (or an obligation on Ms Luo to make a loan) before the freezing orders were made on 4 June 2021 and hence none of the exclusions in order 10 are made out.

56. For the above reasons Mr Huang has not discharged his onus of establishing that the category 1(b) transactions were excluded by order 10.

Conclusion on Category 1

57. I am satisfied beyond reasonable doubt that each of the matters set out at [19] above has been established for each of the payments the subject of the category 1(a) and (b) transactions.

Category 2: Misleading the Court on 30 June 2021

58. There will be a contempt of court where words used, or conduct engaged in, in the face of the Court or in the course of proceedings, are such as would interfere, or tend to interfere, with the course of justice: Lewis v Ogden [1984] HCA 26; (1984) 153 CLR 682 at 688. An intentional misleading of the Court is conduct which may interfere with the administration of justice because the effective administration of justice relies on litigants telling the truth to the Court as to what has happened of relevance to the proceedings before the Court: Mahaffy v Mahaffy [2013] NSWSC 245 at [130].

59. [103]–[108] of the SOC (omitting the particulars) are as follows:

[103]   On 30 June 2021, during the hearing before Kunc J, the First Defendant was asked by the Court as to the position of his assets and liabilities.

[104]   The First Defendant said to the Court that as of 30 June 2021 the only assets he owned were two bank accounts with balances of $683 and -$35.

[105]   The First Defendant’s statement to the Court set out in the previous paragraph was false, as he did not disclose his account held with the ANZ (being Account XXX), which had a balance of at least $8,034.97 on 30 June 2021.

[106]   The First Defendant knew that his statement to the Court on 30 June 2021, as set out in [104] above was false and intended the Court and the Plaintiff/Applicant be misled.

[107]   In the premises, the First Defendant deliberately or recklessly misled the Court as to the true position of his assets on 30 June 2021.

[108]   In the alternative to the preceding paragraph, the First Defendant engaged in conduct that attempted to mislead the Court as to the true position of his assets on 30 June 2021, with knowledge of the falsity of the statement made by him with respect to such a matter.

60. This charge in each of the alternative forms set out at [107] and [108], is capable of constituting a contempt of court.

61. The relevant part of the transcript of the hearing before Kunc J on 30 June 2021 is set out at [16] above. The evidence establishes, and it was not in dispute, that: (1) at the time Mr Huang responded to Kunc J’s questions, he held an account with the ANZ Bank which he had opened on 23 June 2021 and which at the start of 30 June had a balance of at least $8,034.97 following a deposit made to the account on 29 June 2021 of $8,000; (2) he made a cash deposit of a further $2,750 to the account on 30 June 2021 at the Campsie branch of the ANZ Bank (which Mr Huang said was made using funds given to him by his aunt after the hearing before Kunc J); and (3) during the course of 30 June 2021 (which Mr Huang said was after the hearing before Kunc J) he withdrew $500 from the ANZ Bank at 242 Pitt Street, Sydney and made a transfer of $10,000 to his account at Ladbrokes for the purpose of betting.

62. Initially Mr Huang’s evidence in cross-examination was that in responding to Kunc J’s questions he was merely restating what he had said in his unsigned affidavit of 21 June 2021 set out at [15] above (T93.29–96.18), which was apparently true at the time he prepared it. I accept the plaintiff’s submission that even accepting that Mr Huang is not fluent in English, it would have been obvious to him that Kunc J was speaking of the position as at the time of the hearing on 30 June 2021. It is apparent from the transcript that Kunc J was plainly talking about the need to file a fresh affidavit to comply with Order 8 of the freezing orders made on 4 June 2021 because the unsigned affidavit of 21 June 2021 did not comply with Order 8 (CB 194) and the focus of his Honour’s enquiries was the position at that time. This is evident from his question as to whether Mr Huang was saying that the only thing he effectively owned was the 2 bank accounts. Mr Huang was, consistently with that, speaking in the present tense and did not qualify his answers by reference to his earlier affidavit. Both the words used and the context (including the foreshadowed further affidavit as to assets) would have left Mr Huang in no doubt that his Honour was speaking about the position on that day.

63. Mr Huang denied that he did not tell Kunc J of this bank account because he wanted to use it for his betting activities (T98.27). Mr Huang was cross-examined on this at length, during the course of which he gave the following evidence in answer to questions from me (T102.35):

Q.    Can I go back to something you said to me a bit earlier. You said in your evidence that you did not mention the ANZ bank account, for which we have the statement at page 271, to his Honour on 30 June because you wanted a bank account to which your job seeker payments could be made?

A.    That's right.

Q.    And you needed that account to be one that wasn't subject to a freezing order?

A.    That's right, I needed to living, to receive the Centrelink payments.

Q.    That's the reason why you didn't tell his Honour on 30 June when he asked you those questions about your assets, you didn't mention the ANZ account because of the reason you just stated?

A.    Yeah, because no money in there, your Honour. There is only $35. As Centrelink is zero.

Q.    Go to page 271, and money did come in on 28 June?

A.    That's the Centrelink payment.

Q.    So you received the Centrelink payment and you took out 650?

A.    Yes.

Q.    But there was still $34 in the account?

A.    That's still the Centrelink money.

Q.    That's right, but I'm just trying to clarify with you that the reason you didn't mention to his Honour that, yes, I have a third bank account your Honour, it is with the ANZ, the reason you didn't tell him that is that you wanted to have an account that wouldn't be subject to a freezing order so that you could receive, at the very least, Jobseeker payments?

A.    That's exactly right, that's more my point.

64. In my opinion it is clear from this evidence that Mr Huang deliberately refrained from mentioning his ANZ account to Kunc J because he wanted to prevent it from being included in the freezing orders. I am satisfied beyond reasonable doubt that Mr Huang knew there was money standing to the credit of this account when he responded to Kunc J’s questions.

65. There is a dispute as to whether Mr Huang knew at the time he responded to Kunc J’s questions during the morning of 30 June 2021 that the amount standing to the credit of the ANZ account included the deposit of $8,000 which had been made on 29 June 2021 or whether he only became aware of this later on 30 June 2021.

66. There were a number of significant inconsistencies in Mr Huang’s evidence on this topic. The first area of inconsistency is that Mr Huang stated in paragraphs 25 and 26 of his affidavit of 27 October 2022 that his mother had a conversation on 25 June 2021 with Ms Li (the second defendant) about his mother borrowing the amount of $8,000 from Ms Li to enable his mother to meet her medical expenses, and that his mother asked him for his bank account details because his mother did not have “any bank accounts”.

67. That evidence was false in two respects. First, there is no evidence that any part of the amount of $8,000 was used for the purpose of paying the medical costs of Mr Huang’s mother. The only reasonable inference from the evidence in the ANZ bank statement (CB 271) is that he used that amount for the purpose of his gambling given that the amount of $10,000 was transferred to his Ladbroke’s account on 30 June 2021 leaving the balance of the ANZ account at $284.97 at the end of that day. Given the proximity between its receipt and disbursement, I infer that this was the purpose for which he received it.

68. Second, the evidence was false because, to his knowledge, his mother had an account with the Bank of China in Chinatown, into which her fortnightly pension was received. Mr Huang gave the following evidence on this topic in cross-examination (T89):

Q.    When you said in the first sentence of paragraph 26 that she did not have any bank accounts, you knew that evidence was false?

A.    That's right, yeah, lost her bank book. Can't find the bank book and she asked me for a bank account.

Q.    You knew that your mother had a bank account because that was the bank account her Centrelink payments went to?

A.    That's right.

Q.    And when you said she didn't have any bank accounts, you knew that evidence to be false, didn't you?

A.    He asked me, he said tell me you don't have a bank account. He don't know which bank account.

Q.    I think we may be at cross purposes. What I'm suggesting to you is that when you swore or affirmed this affidavit, you knew that in June 2021 your mother had a bank account?

A.    That's what he tell me later after that.

Q.    Sir, how long had your mother been getting Centrelink payments for?

A.    Couple of years.

Q.    You were very close to your mother, weren't you?

A.    Yes.

Q.    In a couple of years before June 2021, you must have known she had an Australian bank account?

A.    Yeah, in Bank of China. That's what they tell me, I don't have a bank account, only the bank book. She had a bank book.

Q.    What I'm suggesting to you is that when you said what you said in paragraph 26, you were lying?

A.    That's what she tell me.

69. The second area of inconsistency is that Mr Huang stated in paragraph 26 of his affidavit of 27 October 2022 that his mother did not tell him when the amount of $8,000 would be transferred to his ANZ Bank account. However, he said in cross-examination that she told him that it would be transferred to his ANZ Bank account “between one to two weeks” (T101.2). I infer that this change was designed to assist his case that he did not know when responding to Kunc J’s questions on 30 June 2021 that the amount had already been received.

70. These inconsistencies in Mr Huang’s evidence regarding the circumstances surrounding the transfer of the amount of $8,000 to his ANZ Bank account indicate that his denial that he knew that the transfer had been made at the time he responded to Kunc J’s questions on 30 June 2021 is unreliable. I accept the plaintiff’s submission that when regard is had to the contemporaneous records of the events which occurred on 29 and 30 June 2021, it is likely that Mr Huang did have this knowledge at the time he responded to the questions asked by Kunc J at the hearing on 30 June 2021. In particular:

1. On 29 June 2021 Mr Huang did not have any money in his Ladbrokes account. He accepted in cross-examination he knew on 29 June 2021 that was the case (T127.17–128.3).

2. On 30 June 2021 at 12:35pm (which is about an hour after the hearing before Kunc J had concluded at 11:26am), Mr Huang engaged in the first transaction of the day using his Ladbrokes account (which was cancelled for lack of funds). Within the space of an hour and 11 minutes (between 12:35pm and 1:46pm), he had undertaken another three transactions on the Ladbrokes account. The three further transactions occurred within 17 minutes (between 1:29pm and 1:46pm), with the first two being rejected and the last approved (due to the deposit of $10,000). Mr. Huang then placed his first bet of 30 June 2021 at 1:48pm (being a soccer match between Turkey and Uruguay).

3. The clear inference to be drawn from that timeline is that, despite Mr Huang’s denials, he knew on 30 June 2021 that he had $8,000 in his ANZ bank account for the purposes of it being transferred to his Ladbrokes account to undertake gambling transactions. It is implausible that Mr Huang (who on his own evidence is an experienced and frequent gambler) would have undertaken those transactions on his Ladbrokes account had he known there were no funds available to do so. The fact that he effected three transactions in quick succession between 1:29pm and 1:46pm strongly suggests that he knew funds (being $10,000 of which the $8,000 formed a substantial part) were or would shortly be available for him to place gambling bets.

4. Mr Huang had undertaken the first transaction on his Ladbrokes account on 30 June 2021 (at 12:35pm), only 69 minutes after the conclusion of the hearing before Kunc J on that day (11:26am). The inference to be drawn from that is he knew he had $8,000 available in his ANZ account when Kunc J asked him about his assets. Such a conclusion is also consistent with the bank statement recording the $8,000 having been deposited to that account on 29 June 2021.

71. In addition, I take into account that I found Mr Huang to be an unsatisfactory witness. In addition to the inconsistencies in his evidence referred to above, he frequently provided non-responsive answers to questions in his cross-examination (eg. T137) and was an argumentative witness prone to making speeches (eg. T134) when asked questions which irritated him.

72. Ultimately nothing turns on whether Mr Huang knew when he responded to Kunc J’s questions that the deposit of $8,000 had been made to his ANZ Bank account. I am satisfied beyond reasonable doubt that, at the very least, he knew at that time that the amount of $8,000 would be transferred to the account in the very near future and intended to use that account for gambling purposes, because the gambling transactions, or arbitrage investments as he described them in his evidence, were the way he proposed to make a living and he did not disclose the ANZ account to Kunc J in order to avoid that account also being frozen (T109.35 and 114.29).

73. For these reasons I am satisfied beyond reasonable doubt that Mr Huang misled Kunc J on 30 June 2021 as to the assets he owned on that date in the manner identified in the SOC at [103]–[107] and accordingly that charge is made out.

Exhibits E and F

74. On the second day of hearing, an exchange took place between me and Mr Huang as follows (T125):

Q:    Can I just check if Mr Huang has any other notes in front of him or other materials apart from the Court book?

A:    No, I just want to read the note to you, your Honour, what happened exactly this matter.

Q:    Can I just be clear, what do you have with you there apart from the Court book?

A:    No, nothing. Just that note. I try to submit to you, I read it to you so you can fully understand what the situation.

75. This exchange occurred after it became apparent that Mr Huang had in the witness box some handwritten notes he had prepared, which Mr Condon called for and became Exhibit E. On the third day of the hearing, Mr Huang admitted in cross-examination that he had a folder with him in the witness box on the earlier occasion as well as Exhibit E, and this folder became Exhibit F. He gave an explanation in re-examination for his failure to mention that he had the white folder with him when he answered my questions recorded above, including in the following exchange between me and Mr Huang (T178):

Q:    What was your understanding of my question that I asked you?

A:    My understanding, I just having this piece of paper, this separate from the folders. I did not look at any other paper or folders. I mean to use. So except that paper, I tried to use to do the submissions.

76. Mr Huang’s response is not entirely clear, reflecting his poor English, but I understand his evidence to be that he did not look at the material in the white folder during the course of giving his evidence because the white folder was being used by him for the purposes of his submissions in the matter and he understood my questions to be directed to whether there was any other material in the witness box which he was referring to in giving his evidence apart from Exhibit E. On balance, I accept his explanation and that he was not deliberately intending to mislead the Court.

Conclusion

77. For the above reasons I am satisfied beyond reasonable doubt that each of the charges in the SOC has been made out. I will invite the parties to bring in short minutes setting out the form of the declaratory relief to reflect this decision and will set the matter down for a directions hearing to establish a timetable for the hearing on penalty and for the determination of costs of the motion.

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Amendments

15 December 2023 - correction of typographical error in [64]

Decision last updated: 15 December 2023