GEMI 169 Pty Ltd v Suria Global (L) Pty Ltd (No 6)

1. [1]

   The background to this matter is set out in my judgment of 5 August 2024. [1]

2. [2]

   To repeat, the plaintiffs, who I will call the “Lenders”, advanced an amount in excess of $22 million to the first defendant, who I will call the “Borrower”. The Borrower is now in liquidation.

3. [3]

   Part of the security obtained by the Lenders from the Borrower was a guarantee from the third defendant, F & L Violi Pty Ltd (“FLV”), and what appeared to be mortgages over properties owned by FLV in Strathfield and Griffith (the “Strathfield Property” and the “Griffith Property”).

4. [4]

   Those mortgages were purportedly signed on behalf of FLV by its sole director and shareholder, the fourth defendant, Mr Frank Violi.

5. [5]

   FLV and Mr Violi contend that the signature on the mortgages purporting to be that of Mr Violi is not, in truth, Mr Violi’s signature.

6. [6]

   These are matters yet to be determined.

7. [7]

   On 11 June 2022, the Lenders appointed receivers (the “Receivers”) to the assets of FLV.

8. [8]

   On 6 July 2022, FLV filed a notice of motion seeking to remove the Receivers.

9. [9]

   The matter came before Slattery J in the Duty List on 15 July 2022.

10. [10]

    Discussions took place between the parties and, ultimately, after hours on 15 July 2022, orders were made by consent having the effect that the Receivers be removed and that FLV sell the Strathfield Property and manage the shopping centre at the Griffith Property in a particular manner.

11. [11]

    The Lenders contend that FLV and Mr Violi have not complied with certain of those orders and, by notice of motion filed on 1 May 2024, seek an order that FLV and Mr Violi be found guilty of contempt of Court for the reasons set forth in a Statement of Charge.

12. [12]

    There are five charges in the Statement of Charge.

13. [13]

    Charge 4 is not pressed.

14. [14]

    I have found that FLV and Mr Violi have no case to answer in relation to Charges 2, 3 and 5. [2]

15. [15]

    What remains for consideration is Charge 1, which is in the following terms:

16. [16]

    Charge 1 is expressed to be directed to orders 7(a) to (d) made on 15 July 2022.

17. [17]

    Taking into account the chapeau to orders 5 to 9, referred to at [53] of my 5 August 2024 judgment, orders 7(a) to (d) are in the following terms:

18. [18]

    In substance, Charge 1 is directed to order 7(a), namely the obligation to pay rent from the Griffith Property into the controlled monies account. As can be seen, order 7(c) permitted Mr Violi to pay from the rent paid into that account the described expenses.

19. [19]

    Contrary to the terms of the words in Charge 1 from “and held in such account”, there was no obligation in order 7 to hold “all rent” in such an account pending determination of these proceedings. The effect of order 7(d) was that “the balance of the funds”, that is after payment of the expenses referred to in order 7(c), was to be so held.

Principles

1. [20]

   The Lenders allege a “civil contempt”.

2. [21]

   The Lenders must establish that:

3. [22]

   Further:

4. [23]

   Notwithstanding the fact that the Lenders allege a civil rather than a criminal contempt, they must establish these matters beyond reasonable doubt. [6]

FLV did not comply with order 7(a)

1. [24]

   FLV did not comply with order 7(a). No controlled money account of the kind specified in the order was established.

2. [25]

   There is no dispute that this was a deliberate omission in breach of order 7(a) in that it was neither casual, accidental or unintentional. [7]

3. [26]

   Mr Golledge SC, who appeared with Mr Edney for FLV, submitted that, nonetheless, FLV was not in contempt of order 7(a) because it did not have the requisite knowledge of the terms of the order. [8]

FLV’s knowledge of the terms of the order

1. [27]

   There was no dispute before me that, as Mr Violi is the sole director of FLV, his knowledge should be attributed to FLV.

2. [28]

   Mr Violi summarised his position in relation to order 7(a) as follows:

3. [29]

   There is no suggestion in the evidence that there was any such surplus.

4. [30]

   Mr Violi received a number of emails from the solicitor acting for FLV in relation to FLV’s application to remove the Receivers in the period up to and following 15 July 2022. He gave unchallenged evidence that he did not see or read them.

5. [31]

   He also deposed:

6. [32]

   Order 7(a) required that the rent from the Griffith Property be paid into a controlled money account in the name of Polczynski Robinson. As I have said, no such account was established.

7. [33]

   As to that, Mr Violi deposed:

8. [34]

   None of this evidence was challenged.

9. [35]

   Mr Violi referred to emails he received from FLV’s former solicitor, Mr Richard Lyne, then a director of Polczynski Robinson.

10. [36]

    I now turn to those emails.

11. [37]

    On 6 July 2022, the day that FLV filed its motion seeking to remove the Receivers, Mr Lyne sent Mr Violi and Mr Peter Jess, FLV’s accountant, an email attaching a draft notice of motion and the then current version of Mr Lyne’s affidavit in support of that motion.

12. [38]

    Mr Lyne stated:

13. [39]

    A proposed undertaking was then set out that included:

14. [40]

    The email continued:

15. [41]

    As I have said, Mr Violi said that he did not see or read this email. That evidence was not challenged. I accept it.

16. [42]

    The following day, 7 July 2022, Mr Lyne sent a further email to Mr Violi and Mr Jess, which said:

17. [43]

    The email attached Mr Lyne’s affidavit affirmed 6 July 2022.

18. [44]

    That affidavit included an undertaking in the terms that Mr Lyne had attached to his email to Mr Violi on 6 July 2022.

19. [45]

    Thus, this part of Mr Lyne’s affidavit read:

20. [46]

    Mr Lyne had sought Mr Violi’s instructions to “put forward such an undertaking to the Court” by his email to Mr Violi on 6 July 2022.

21. [47]

    In the opening sentence of his 7 July 2022 email, Mr Lyne referred to “our recent discussions” and stated that the notice of motion to remove the Receivers had been issued “in accordance with” those discussions.

22. [48]

    I infer from this, and think it more likely than not, that Mr Lyne had had some discussion with either Mr Violi or Mr Jess that led Mr Lyne to formulate the terms of the undertaking that, in his affidavit, he stated were the subject of his instructions.

23. [49]

    Mr Violi’s evidence about this was:

24. [50]

    Mr Violi said that he understood that the “regime” in relation to the Griffith Property’s rent was as he deposed in the passage I have set out at [31] above, namely that only any surplus of rent over expenses was to be paid into the controlled monies account.

25. [51]

    None of this evidence was challenged.

26. [52]

    I think it more likely than not that the conversations in which Mr Violi participated were directly with Mr Lyne, rather than with Ms Panazzolo, with her passing on anything she may have discussed with Mr Lyne.

27. [53]

    However, for the reasons I set out below concerning Mr Lyne’s 19 July 2022 email, I am not able to be satisfied beyond a reasonable doubt about this matter, nor that Mr Violi actually gave Mr Lyne instructions to give an undertaking in the terms set out at [39] above.

28. [54]

    On 14 July 2022, the day before the relevant orders were made, Mr Lyne sent a further email, this time to Mr Violi alone, but still copying in Mr Jess, attaching draft submissions prepared by counsel then appearing for FLV and a “Draft Short Minute of Order and Undertaking that is to be given by [FLV]”.

29. [55]

    The draft undertaking was in the form as that previously sent to Mr Violi.

30. [56]

    The draft submissions from counsel included:

31. [57]

    Mr Violi did not see or read the email or its attachments.

32. [58]

    Counsel’s submissions, in the passage I have emphasised, accurately summarised the net effect of order 7, namely that once the rent was paid into the controlled monies account, Mr Violi could cause expenses to be paid from it. They did not purport to be a summary of order 7(a) itself.

33. [59]

    I have mentioned that the relevant orders, including orders 7 and 8, were made after hours on 15 July 2022 by Slattery J sitting as Duty Judge.

34. [60]

    At 5:26 pm on 15 July 2022, Mr Lyne sent an email to Slattery J’s Associate:

35. [61]

    Some 40 minutes later, at 6.07 pm, Mr Lyne sent Mr Violi an email:

36. [62]

    The orders that Mr Lyne described as being those “that will be made by the Court”, and a copy of which was attached to the email, were in the same form and included order 7(a) which was in the same terms as the documents attached to Mr Lyne’s earlier emails.

37. [63]

    Mr Violi did not see or read this email.

38. [64]

    On 19 July 2022, Mr Lyne sent a further email to Mr Violi and Mr Jess commencing:

39. [65]

    The email attached a copy of the Orders, including order 7(a) as made, and stated:

40. [66]

    In relation to the Griffith Property, Mr Lyne stated that one of the steps that FLV was obliged to take in relation to the Griffith Property was to ensure that FLV:

41. [67]

    This summary of the orders was not correct.

42. [68]

    The effect of the order was that FLV was to pay all rent from the Griffith Property into the account and that relevant expenses could be paid from those monies after their deposit into that account.

43. [69]

    What Mr Lyne wrote in this email was Mr Violi’s understanding of the effect of the order.

44. [70]

    Thus, Mr Violi deposed:

45. [71]

    I am satisfied that Mr Violi did not read any of the emails sent to him by Mr Lyne, and thus did not read the terms of order 7.

46. [72]

    I accept Mr Violi’s evidence that he relied on what he heard directly from Mr Lyne or indirectly through Ms Panazzolo as to the effect of the orders. I think it more likely that he heard directly from Mr Lyne, rather than indirectly through Ms Panazzolo, but this makes no difference to my overall conclusions.

47. [73]

    I think it likely that what Mr Lyne stated orally to Mr Violi as the effect of order 7(a) was what My Lyne wrote in his 19 July 2022 email, and that this explains why Mr Violi had the understanding of the order to which he has deposed.

48. [74]

    More to the point, I am not persuaded beyond a reasonable doubt that Mr Violi knew the true effect of the order.

49. [75]

    Mr Violi could have checked the precise terms of the order by reading its terms in the documents attached to Mr Lyne’s 15 and 19 July 2022 emails and could have seen, by reading the documents attached to Mr Lyne’s earlier emails, that those terms had been proposed by his legal advisers.

50. [76]

    However, I accept as reasonable the explanation given by Mr Violi as to why he did not do this: namely that he did not think his reading of the orders could be better than the explanation he received from FLV’s lawyers. [12] I am not satisfied beyond a reasonable doubt that it was unreasonable of Mr Violi not to doubt his solicitor’s explanation of the terms of the order and not to check for himself the precise terms of the order.

51. [77]

    Overall, I am not persuaded beyond a reasonable doubt that Mr Violi actually knew, or should reasonably have known, the terms of order 7(a).

52. [78]

    Mr Somerville, who appeared with Mr Meyerowitz-Katz for the Lenders, submitted that whatever may have been Mr Violi’s knowledge of the orders, FLV’s solicitor, Mr Lyne, must be taken to have known of their true effect and that his knowledge should be attributed to FLV. [13]

53. [79]

    I do not accept that submission. Proceedings for contempt, including civil contempt, are criminal in nature and just as there is no room for the imposition of vicarious liability in that context, [14] there is also no room for the attribution to the alleged contemnor of knowledge of an agent. After all, “at the core of the notion of criminal responsibility is the requirement of mens rea” [15] and although, as I have said, it is not necessary to show that an alleged contemnor intentionally or contumaciously intended to breach the order in question, it must be that person’s knowledge that must be established.

54. [80]

    In any event, bearing in mind Mr Lyne’s erroneous summary of the effect of order 7(a) in his 19 July 2022 email, it is by no means clear to me what Mr Lyne’s actual state of knowledge was.

Conclusion

1. [81]

   Charge 1 is dismissed.

2. [82]

   The parties should bring in short minutes to give effect to these reasons and my reasons of 5 August 2024.

3. [83]

   I will hear the parties as to costs.

4. [84]

   If there is a dispute as to costs, the parties should agree on a timetable for short written submissions. I shall deal with that matter on the papers.