Zhao v AST Investments Pty Ltd (No 2) - [2019] SASC 174

Supreme Court of South Australia
(Civil)
ZHAO & ORS v AST INVESTMENTS PTY LTD & ORS (NO 2)
[2019] SASC 174
Judgment of The Honourable Justice Doyle (ex tempore)
2 October 2019
COURTS AND JUDGES - CONTEMPT - PARTICULAR CONTEMPTS - DISOBEDIENCE OF ORDERS OF COURT - RULES OF COURT
The plaintiffs made an application seeking orders under r 303 of the Supreme Court Civil Rules 2006 (SA) that the Registrar formulate a written charge against the third defendant in respect of two alleged breaches of freezing orders.
The third defendant contends that the plaintiffs failed to comply with the requirement to seal, endorse and personally serve the freezing orders under r 225, and that the failure to comply stands in the way of the proposed proceedings for contempt. The plaintiffs sought orders under r 117 granting them dispensation from the requirements of r 225.
Held (per Doyle J):
1. The plaintiffs are provided with retrospective and prospective dispensation from the requirements of r 225.
Supreme Court Civil Rules 2006 (SA) r 117, r 225, r 260, r 303, referred to.
Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129; Sun Newspapers Pty Ltd v Brisbane TV Ltd (1989) 92 ALR 535; Australian Securities Commission v MacLeod (1993) 40 FCR 155; Proceedings for an Alleged Contempt of Court by Animal Liberation (SA) Inc [2002] SASC 71; von Doussa v Owens (No 2) (1982) 30 SASR 391; Butler v Coram (1987) 134 LSJS 168; Clifford v Middleton [1974] VR 737; Primelife Corporation Ltd v Newpark Pty Ltd [2003] VSC 106, considered.

ZHAO & ORS v AST INVESTMENTS PTY LTD & ORS (NO 2)
[2019] SASC 174
Civil

DOYLE J (ex tempore): The background to these proceedings is set out in the pleadings and in previous interlocutory decisions that I have made, and need not be repeated in any detail.
At a very general level, the proceedings involve allegations that the second and third defendants, Mr Du and Mr Ong, with the involvement of the other defendants to varying extents and in varying ways, fraudulently misappropriated funds advanced to them by the plaintiffs in relation to the purchase of three Adelaide properties.
In April 2018, at an early stage in the proceedings, Judge Bochner made freezing and restraining orders (the freezing orders).
In late 2018, I conducted various hearings which culminated in me making a suite of orders on 6 November 2018 in which I ordered that there be a general stay of the proceedings, essentially so as to ensure that Mr Du’s and Mr Ong’s privilege against self-incrimination was protected pending determination of the criminal proceedings in relation to their alleged misappropriations. However, in order to ensure that there was some protection of the interests of the plaintiffs during the period of the stay, the stay was made conditional upon not only the continuation of the freezing orders, as amended and updated by me in various respects, but also subject to various further conditions.
In the period since I made these orders, I have made several amendments to the freezing orders, and have also made a number of ancillary orders.
During that period, a number of issues have arisen in relation to the compliance of the defendants, particularly Mr Ong, with the freezing orders. These have culminated in an application by the plaintiffs dated 12 September 2019 seeking orders under r 303 of the Supreme Court Civil Rules 2006 (SA) that the Registrar formulate a written charge for contempt against Mr Ong in respect of two alleged breaches of the freezing orders. The alleged breaches are said to have occurred relatively recently and hence at a time when an amended version of the freezing orders was in effect.
In the course of the parties making some submissions as to whether or not this application should be granted, a preliminary issue has arisen. It arises from Mr Ong’s contention that the plaintiffs’ failure to comply with r 225 potentially stands in the way of a finding of contempt, and hence militates against the utility or appropriateness of granting the plaintiffs’ application.
In response to this issue being raised by Mr Ong, the plaintiffs have sought orders under r 117, granting them dispensation from the requirements of r 225. The plaintiffs seek the dispensation both retrospectively in relation to the orders the subject of the proposed summons for contempt, and prospectively in respect of future orders to be made in these proceedings more generally.
Rule 225 provides:
225—Judgment requiring compliance with positive or negative requirements
(1)     A judgment requiring a person to do, or to refrain from doing, an act must have endorsed on it a warning, in a form approved by the Court or the Registrar, of the possible consequences of failure to comply with the judgment.
(2)     A judgment requiring a person to do, or refrain from doing, an act may specify a time within which compliance is required and, if it does not do so, the Court may, on application by a party in whose favour the judgment was given, specify a time within which compliance is required.
(3)     A judgment requiring a person to do, or to refrain from doing, an act must be served personally on the person or, if that person is a company, on a director or executive officer of the company.
It is accepted that the plaintiffs did not comply with r 225 in respect of the relevant orders. In particular, it is accepted that the freezing orders were a “judgment requiring a person to do, or to refrain from doing, an act”, and that the versions of the freezing orders said to have been breached were not sealed with an endorsement of the type required by r 225(1), and were not personally served as required by r 225(3).
The first point to note is that while submissions have not been made to me in any detail on this issue, it is not clear to me that a failure to comply with r 225 would necessarily stand in the way of a finding of contempt. It seems to me that while a failure to comply with r 225 might operate as a prima facie restraint upon some forms of an enforcement of an order (for example through committal, attachment or sequestration), this does not necessarily extend to precluding a finding of contempt through proceedings issued pursuant to the mechanism provided for in r 303 of the Supreme Court Civil Rules. There is support for this view in the reasons of the Full Court of the Federal Court in Siminton v Australian Prudential Regulation Authority.[1]Such an approach would be consistent with my understanding that, at least at common law, knowledge of the content and import of the relevant orders is ordinarily sufficient foundation for a finding of contempt.[2]
[1] Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129 at [67]-[69], and the authorities referred to therein.
[2] Sun Newspapers Pty Ltd v Brisbane TV Ltd (1989) 92 ALR 535 at 538; although see the apparent confinement of this view to cases involving non-parties in Australian Securities Commission v MacLeod (1993) 40 FCR 155 at 162-163.
I note in this respect the terms of r 260. That rule requires the service of a judgment upon a person against whom it is to be enforced. It further provides that there must be personal service before the Court will issue a warrant of attachment for contempt of the judgment, or take any other action for contempt. But this is subject to the express proviso “unless satisfied that the judgment has actually come to the person’s attention”. This suggests that under the Supreme Court Civil Rules, the restraint upon contempt proceedings is ultimately one of notice of the orders rather than the formalities associated with sealing and personal service.
But the point is not free from doubt, and indeed in Proceedings for an Alleged Contempt of Court by Animal Liberation (SA) Inc (the Animal Liberation case),[3] Doyle CJ appears to have proceeded on the basis that the restraint upon enforcement flowing from non-compliance with an earlier equivalent of r 225 extended to enforcement through contempt proceedings. For this reason, I consider it appropriate to accede to the plaintiffs’ request that I address their application for dispensation from compliance with r 225.
[3] Proceedings for an Alleged Contempt of Court by Animal Liberation (SA) Inc [2002] SASC 71 at [23].
In my view, the Court has a discretion to provide the dispensation sought, including retrospectively. That discretion exists under r 117. Subrule 117(1) provides that the Court “may make any order it considers necessary for the proper conduct of a proceeding or otherwise in the interests of justice”, and subrule 117(2)(a) makes it plain that this includes making an order dispensing with compliance with a rule. The issue in the present case is whether it would be in the interests of justice to grant the plaintiffs the dispensation sought.
While it was a decision under an earlier version of the Supreme Court Civil Rules, the existence of the Court’s discretion to either enforce orders despite non-compliance with r 225, or to dispense with compliance with this rule, was confirmed in the Animal Liberation case.[4]Authority for the existence of this discretion, and guidance as to its exercise, also exists in von Doussa v Owens (No 2),[5] and Butler v Coram.[6]
[4]    The Animal Liberation case [2002] SASC 71 at [26].
[5]    von Doussa v Owens (No 2) (1982) 30 SASR 391 at 397-399, 401-402.
[6]    Butler v Coram (1987) 134 LSJS 168 at 177-178.
Given the potentially serious consequences of a finding of contempt, I accept that the Court should proceed with circumspection in the present context, and not lightly conclude that the interests of justice favour an order dispensing with compliance. I bear in mind in this respect the cautionary notes in decisions such as Clifford v Middleton[7], Primelife Corporation Ltd v Newpark Pty Ltd[8] and Siminton v Australian Prudential Regulation Authority.[9]
[7]    Clifford v Middleton [1974] VR 737 at 741-742.
[8]    Primelife Corporation Ltd v Newpark Pty Ltd [2003] VSC 106 at [31].
[9]    Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129 at [75]-[78].
However, those cases are distinguishable from the present case. The present case is more akin to the circumstances of the cases I have mentioned where the Court either did, or indicated a preparedness to, grant the dispensation sought, namely the Animal Liberation case, von Doussa v Owens (No 2) and Butler v Coram.
In the present case, it is significant that the form of the freezing orders made by Judge Bochner in April 2018 were sealed and served upon Mr Ong through his solicitors. And the sealed form of the orders served in this way carried the endorsement required by r 225(1).
As mentioned, the freezing orders have since been amended in various ways over the course of a number of hearings before me. These subsequent varied forms of the orders have not been formally sealed or personally served. However, on each occasion the varied orders have been made in Court, entered in the Court’s record of outcome, and signed by me. Further, Mr Ong has been represented by solicitors and counsel throughout the course of these proceedings, and has been represented in Court on each occasion that the terms of the freezing orders have been considered or varied. Mr Ong was also present in the body of the Court on some of these occasions. There has been significant correspondence with Mr Ong’s solicitors about the freezing orders, and Mr Ong has also sworn several affidavits in relation to issues arising as to the terms of, and compliance with, the freezing orders.
In the circumstances, I do not think it can be suggested – and it has not been suggested – that Mr Ong was not aware of the existence, content and import of the freezing orders as varied over time. To the contrary, given the context to which I have adverted, I consider that I can comfortably infer that Mr Ong had notice of the relevant orders, and had some appreciation of the potential consequences (namely proceedings for contempt) that might flow from any non-compliance with them.
In resisting the dispensation sought by the plaintiffs, counsel for Mr Ong relied upon not only the cautious approach that the authorities suggest should be taken, but also considerations such as the purpose and utility of the foreshadowed contempt proceedings, and their potential overlap with the substantive issues at stake in these proceedings. To the extent these considerations have merit, they are matters that in my view can be addressed when I come to consider the merits of the plaintiffs’ application under r 303. Similarly, to the extent that there might be issues about Mr Ong’s precise understanding of the orders, or the seriousness of the alleged contempts, these are also matters to be addressed on a later occasion.
I accept that an alternative approach might have been to only address the issue of dispensation from compliance with r 225 upon determination of the application under r 303, or indeed upon the hearing of any contempt proceedings. However, in my view, there is utility in the present case in acceding to the plaintiffs’ request that I deal with this issue first. Further, I am satisfied that the relatively unique circumstances of this case that I have outlined make it an appropriate case to not only grant the dispensation sought, but also to do so now.
For these reasons, I propose to make orders providing the plaintiffs with both the retrospective and prospective dispensation sought.