New South Wales Supreme Court CITATION : ASIC v Sigalla (No. 3) [2010] NSWSC 1076 HEARING DATE(S) : 1, 2, 3, 17 & 18 June; 20 & 22 July; 27 August; and 2, 3 and 7 September 2010 JUDGMENT DATE : 8 September 2010 JURISDICTION : Equity JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 8 September 2010 DECISION : Refer to paras 60-61 of judgment. CATCHWORDS : CORPORATIONS – where defendant charged with contempt in respect of orders made under s 1323 of Corporations Act 2001 (Cth) in the nature of Mareva orders – where defendant submits that no case to answer – whether plaintiff's evidence taken at its highest capable of establishing charges beyond reasonable doubt – construction of orders – onus on defendant to establish reliance on proviso to orders – whether relevant ambiguity in orders restraining removal from Australia and dealing with assets – whether use of credit card constituted "dealing" with asset – whether defendant in contempt for failing to produce bank statements if not in physical custody of statements LEGISLATION CITED : Corporations Act 2001 (Cth) CATEGORY : Procedural and other rulings ASIC v Sigalla (No. 2) [2010] NSWSC 792 ASIC v Sigalla [2010] NSWSC 606 CASES CITED : American Express International Inc v Commissioner of State Revenue [2004] VSCA 193; (2004) 10 VR 145 Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567 Vines v Djordjevitch (1955) 91 CLR 512 PARTIES : Plaintiff: Australian Securities and Investments Commission Defendant: Andrew Sigalla FILE NUMBER(S) : SC 2009/290316 COUNSEL : Plaintiff: D R Stack Defendant: C Botsman SOLICITORS : Plaintiff: Conrad Gray Solicitor Defendant: n/a IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WHITE J Wednesday, 8 September 2010 2009/290316 Australian Securities and Investments Commission v Andrew Sigalla (No. 3) JUDGMENT 1 HIS HONOUR: The defendant, Mr Sigalla, has submitted there is no case to answer in respect of charges of contempt brought by ASIC, save in respect of the charges in paragraphs 41 and 42 of the further amended interlocutory process. The charges in respect of which the no case to answer submission is made fall into five categories. 2 First is the charge in paragraph 1 of the further amended interlocutory process concerning the alleged contravention of orders of 26 August, 31 August and 3 September 2009 in connection with the transfer of a sum of $300,000 from Mr Sigalla's account with KAS Bank NV in the Netherlands to a bank account held by Moon Corporation Pty Ltd ("Moon Corporation") with the National Australia Bank. 3 The second category concerns charges in connection with alleged payments by Mr Sigalla to the TAB, namely charges in paragraphs 8-13 of the further amended interlocutory process. 4 Counsel for ASIC accepts that in consequence of the rejection of evidence in ASIC v Sigalla (No. 2) [2010] NSWSC 792 there is no evidence capable of establishing those charges beyond reasonable doubt, and those charges will be dismissed. 5 The third category concerns what may be generally called credit card charges, namely those in paragraphs 2-6, 14-30 and 42A-42C of the further amended interlocutory process. 6 The fourth category concerns the charge in paragraph 31 of the further amended interlocutory process concerning a payment of $52,500 stated to be for the purpose of paying Mr Sigalla's children's school fees. 7 The final and fifth category concerns charges in paragraphs 33-40 of the further amended interlocutory process concerning failure to produce bank statements. 8 I have concluded that there is a case to answer in respect of the charges in paragraph 1, paragraph 31 and paragraphs 33-40 of the further amended interlocutory process. 9 For the reasons which I will give, I uphold the no case to answer submission in respect of the credit card charges. 10 The first charge was originally framed as follows: " 1. An order that the First Defendant, Andrew Sigalla, be found guilty of Contempt of this Court in that: (a) in breach of order 2 of the Orders made by the Honourable Justice Bergin, Chief Judge in Equity, on 26 August 2009, (b) in breach of order 2 of the Orders made by the Honourable Justice Barrett, on 31 August 2009, and (c) in breach of order 2 of the Orders made by the Honourable Justice Barrett on 3 September 2009, between about 26 August 2009 and 4 September 2009, Mr Sigalla caused the sum of $300,000 to be transferred from his bank account with KAS Bank, account number [xxxxxxxxx], to a bank account held by Moon Corporation Pty Ltd, with the National Australia Bank, account number [yyyyyyyyy] . " 11 By its amended interlocutory process dated 26 February 2010 ASIC amended that statement of charge to read as follows: " 1. An order that the First Defendant, Andrew Sigalla, be found guilty of Contempt of this Court in that: (a) in breach of order 7 of the Orders made by the Honourable Justice Bergin, Chief Judge in Equity, on 26 August 2009, (b) in breach of order 1 of the Orders made by the Honourable Justice Barrett, on 31 August 2009, and (c) in breach of order 2 of the Orders made by the Honourable Justice Barrett on 3 September 2009, between about 26 August 2009 and 4 September 2009, Andrew Sigalla, having made a request, caused the sum of $300,000 to be transferred from his bank account with KAS Bank, account number [xxxxxxxxx], to a bank account held by Moon Corporation Pty Ltd, with the National Australia Bank, account number [yyyyyyyyy] . Andrew Sigalla took no steps to prevent the transfer on or about 4 September 2009 . " 12 For present purposes there is no material difference to the terms of the orders of 26 August, 31 August and 3 September 2009. 13 The order of 26 August 2009 stated: " 7. Up to 5pm on 31 st August 2009, each of the Defendants is restrained (by themselves, their directors, officers, partners, agents, employees or others acting on their behalf or instructions) from: (a) removing, or causing or permitting to be removed from the State of New South Wales and from Australia all or any of their assets; and (b) from selling, charging, mortgaging or otherwise dealing with [or] disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of their assets whether located within Australia or outside Australia, PROVIDED that this Order: (c) shall not prevent each of the Defendants from paying their reasonable ordinary living and operating expenses; (d) shall not prevent each of the Defendants from paying legal costs reasonably incurred in these proceedings; and (e) shall not prevent any bank, building society or financial institution from exercising any right of set-off which it may have in respect of a facility afforded by it to any of the Defendants prior to the date of this Order. " 14 Mr Botsman, who appears for Mr Sigalla, submitted that the prohibition was against the removal of assets from New South Wales and Australia and also the selling, charging, mortgaging or otherwise dealing with or disposing of such assets. He submitted that the restraint was only breached if there were a relevant dealing with assets falling within paragraph (b) of assets caught by the removal restraint in paragraph (a). Hence, he submitted that if the assets were outside Australia at the time of the dealing within paragraph (b), then the dealing could not breach a restraint. He submitted that this was the effect of the use of the conjunction "and" between paragraphs (a) and (b). 15 I do not accept that submission and I do not think that there is any relevant ambiguity in that order. In my view, it is clear that the order both restrained the defendants from removing assets from Australia and restrained them from selling, charging, mortgaging or otherwise dealing with or disposing of the assets whether in Australia or elsewhere. That this is so is clear from the words "whether located within Australia or outside of Australia" in paragraph (b). If paragraph (b) only applied to assets which had been removed from Australia, then there could be no asset located within Australia that could be the subject of the restraint. 16 In like manner, the proviso in paragraph (c) that the order did not prevent the defendants from paying their "reasonable ordinary living and operating expenses" would not mean that the defendants would have to show that an expenditure was for an expense which could be characterised as both a living and an operating expense. Rather the proviso would permit payment of reasonable ordinary living expenses and reasonable ordinary operating expenses. 17 Mr Botsman also relied upon the amendment to the form of the charge by which it is said that the restraints were breached by Mr Sigalla's having made a request for the transfer of moneys and subsequently having taken no steps to prevent the transfer occurring. He submitted that there was an ambiguity in the order that was not resolved by any extrinsic evidence as to whether the order required Mr Sigalla to prevent transfers from occurring. 18 I do not accept that the order is ambiguous and cannot be enforced in its restraint on dealings with assets because part of the way in which ASIC alleges Mr Sigalla dealt with the moneys in question was by not preventing the KAS Bank from acting on his request before that bank transferred moneys from his account to an account of Moon Corporation with the National Australia Bank. I do not accept that the order is ambiguous because it did not specifically require the defendant to take steps to prevent a third party from acting on a request allegedly made by the defendant to transfer assets. 19 Understandably, counsel did not submit that the making of a request for a transfer of assets and the failure to withdraw such a request could not be a dealing. Mr Botsman did not submit that the evidence was not capable of proving beyond reasonable doubt that Mr Sigalla did make a request for the transfer of monies and failed to prevent that request being acted on and thereby dealt with an asset, being the $300,000 in his account with the KAS Bank. That is to say, the submission was based upon alleged ambiguities in the order rather than upon any asserted insufficiency of evidence to establish the matters alleged in the charge. 20 I do not consider that the order is relevantly ambiguous. 21 I turn to the third category of charges, namely those concerned with payments by credit cards. 22 The submissions on this question, to an extent, repeated but also developed the submissions made for Mr Sigalla on the application to strike out these charges, which I dealt with on 2 June 2010 (ASIC v Sigalla [2010] NSWSC 606). I there concluded that it was arguable that the orders would be infringed by the payment for services by credit card as alleged by ASIC. I refused to strike out the counts because I held that for Mr Sigalla to be entitled to that relief he would need to demonstrate that there was no arguable construction of the orders which might not be confirmed by extrinsic evidence that he was prohibited from using his credit cards for services which were not ordinary living expenses. 23 Mr Botsman submitted that now that ASIC has led all of the evidence in support of its case, it can be seen that there is no extrinsic evidence that confirms that payment by credit card was a dealing by Mr Sigalla with his assets in breach of the orders. He submitted that such use of a credit card would not be a breach. But in any event, Mr Sigalla could not be found guilty of contempt by making payments by credit cards because the orders were ambiguous. 24 In my view it is not only arguable but it is the better view that the contractual rights that Mr Sigalla has as a credit card holder against the credit card providers which enables him to commit the card providers to a liability to merchants for goods or services provided is a chose in action which is an "asset" of Mr Sigalla's. That is consistent with the wide definition of "property" in the Corporations Act 2001 (Cth). The relevant orders were made pursuant to s 1323 of the Corporations Act. Under that section the court may, if conditions for the exercise of the power are established, appoint a receiver to the property of a person. The restraining orders were made as a lesser form of relief. There is no reason to think that the reference to "assets" in the orders should be any narrower than the concept of "property", as that word is used in the Corporations Act. 25 On the strike out application I observed (at paragraph [22]) that at that time counsel for Mr Sigalla had not submitted that the words "or otherwise dealing with" in the phrase "selling, charging, mortgaging or otherwise dealing with or disposing of" required that a third party acquire a proprietary interest in the asset. 26 On this application that submission was, in substance, made by Mr Botsman. He submitted that only a transaction amounting to an alienation of part or whole of the defendant's interest in the asset would fall within the expression "or otherwise dealing with". He submitted that those words should be read ejusdem generis with mortgaging, charging, selling or disposing of an asset. 27 When the order is read as a whole I substantially agree with that submission. In my view, the prohibition is in respect of transactions by which a proprietary interest, or in the case of a chattel, a proprietary or possessory interest, is transferred to or created in a third party. 28 In my view the exercise of a contractual right against the credit card provider is not a dealing with the chose in action within the meaning of the restraint. 29 The analogy can be drawn with a motor vehicle. The restraint would preclude the defendant from selling, encumbering or parting with the possession of the motor vehicle, but not, I think, from using it, even if the use of a chattel can be regarded in some contexts as a dealing. 30 In the same way, the exercise of the contractual right is not, I think, a dealing with the asset. 31 Mr Stack, for ASIC, also submitted, as he had on the application for a no case to answer, that the use of a credit card entails a loan by the card provider to Mr Sigalla and a disposition of the loan proceeds by him to the merchant. 32 If that were correct then there would be, within the meaning of the order, a dealing with or disposition of an asset. But as noted at para [30] of my reasons of 2 June 2010, that argument is inconsistent with authority (American Express International Inc v Commissioner of State Revenue [2004] VSCA 193; (2004) 10 VR 145 at [19]). 33 In any event, the orders are ambiguous in what is denoted by the prohibition on dealings with an asset. 34 While some people might think that by using a credit card they are spending money in the same way as if they spent cash, and are thereby dealing with their assets, a person attempting to understand and obey the orders could reasonably consider that by paying for goods or services by credit card he or she was doing no more than incurring a liability to make a payment in the future to the credit card provider. 35 In Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567, Campbell J (as his Honour then was) said (at [55]): " ... 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. " 36 In my view this is such a case. A person, subject to the orders and attempting to obey them could consider that making payments to discharge the credit card debt would be a dealing with assets which would be prohibited by the order unless protected by the provisos, but the actual incurring of liability on the cards would not be so regarded. 37 As previously noted, ASIC has not charged Mr Sigalla with breaches of the orders by making payments to the credit card providers. No application was made to amend the interlocutory process in that respect. 38 It is for these reasons that I consider that there is no case to answer in respect of the charges in paragraphs 2-6, 14-30 and 42(a)-42(c) of the further amended interlocutory process. 39 The next charge in question is the charge in paragraph 31 of the further amended interlocutory process concerning the payment of Mr Sigalla's children's school fees. 40 ASIC charges that: " 31. An order that the First Defendant, Andrew Sigalla, be found guilty of Contempt of this Court in that, in breach of order 2 of the Orders made by the Honourable Justice Barrett on 3 September 2009, Andrew Sigalla on 9 September 2009 caused the sum of $52,500 to be paid from his bank account with St George Bank, Australia, account number [xxxxxxxxx] , to his bank account with JP Morgan Chase Bank, in the United States of America, account number [yyyyyyyyy] , for the sole purpose of paying $52,500 (' the Fees ') to the Convent of the Sacred Heart, New York, for his children's school education in circumstances where Andrew Sigalla was aware the Fees had been paid before 9 September 2009. " 41 It is clear (and I do not understand it to be disputed) that on 9 September 2009 Mr Sigalla did cause the sum of $52,500 to be paid from his bank account with St George Bank to his bank account with JP Morgan Chase Bank in the United States. 42 In any event, there is evidence adduced by ASIC which is capable of establishing those payments beyond reasonable doubt in the form of bank records with the St George Bank. 43 Mr Botsman submitted that all that was alleged by the charge was the transfer of money from Australia and there was no charge and no evidence of a dealing with or disposing of the funds in a way prohibited by paragraph (b) of the orders. 44 For the reasons I have previously given, I do not accept that construction of the orders. Unless the payment is within one of the provisos, there would be a breach of paragraph (a) of the restraints. 45 If it were also necessary to show that the assets removed from Australia were also dealt with or disposed of, then there is evidence of drawings from the JP Morgan Chase Bank account reducing the balance of that account to $181.09. That evidence would be capable of establishing a contravention of paragraph (b) as well as paragraph (a) of the orders if they were required to be read conjunctively. 46 The onus of establishing that the transfer of funds was for the payment of reasonable ordinary living expenses or reasonable ordinary operating expenses is on Mr Sigalla (Vines v Djordjevitch (1955) 91 CLR 512 at 519-520). Provisos (c) and (d) to the orders express an "exculpation justification, excuse, grounds of defeasance, or exclusion which assumes the existence of the general or primary grounds from which the liability arises, but denies the liability in a particular case by reason of additional or special facts". 47 In those circumstances the burden of proof is on the party seeking to rely upon the additional special matter. 48 That burden being on the defendant, on the balance of probabilities, it follows that there is a case to answer. In any event, if the onus lies on ASIC to establish beyond a reasonable doubt that the transaction is not within proviso (c), I consider that, taking the evidence of ASIC at its highest and excluding contrary evidence, there is evidence capable of establishing that. 49 There is some evidence that the purpose of the transfer was to reimburse Mr Sigalla's father-in-law, Mr Caplice, for a debt owed to him for his having advanced money to pay school fees (affidavit of Andrew Sigalla sworn 4 November 2009, para 72). There is evidence from which it could be found that the obligation to reimburse Mr Caplice did not arise because Mr Sigalla had already paid the school fees. This could be so because there is evidence that Mr Sigalla had himself drawn a cheque for US$31,833.58 for school fees, which cheque was paid on 26 August 2009, and because there is evidence that Mr Caplice transferred $52,500 to ZMS Investments Pty Limited on 20 August 2009. Accordingly, I consider there is a case to answer in respect of the charge in paragraph 31 of the further amended interlocutory process. 50 The remaining category concerns alleged contraventions of order 6(d) made on 30 November 2009, order 7(d) made on that day, and order 7 made on that date as varied on 16 December 2009. 51 Order 6 of 30 November 2009 was in the following terms: " 6. Orders that by 4.00 pm on Friday 4 December 2009, the Sigalla Defendants are to provide to ASIC a copy of statements for the following accounts for the period from 26 August 2009 to 30 November 2009: (a) St George Bank account no. [xxxxxxxxxx] ; (b) American Express card numbered [xxxx-yyyyyy-zzzzz] ; (c) St George Gold Visa cared numbered [xxxx-yyyy-xxxx-yyyy] ; and (d) all other accounts utilised by the First Defendant. " 52 Order 7 provided: " 7. Orders that the Sigalla Defendants no later than the 15 th of each month commencing on 15 January 2010, are to provide to ASIC statements for the following accounts for the period from 1 December 2009 to 28 February 2010: (a) St George Bank account no. [xxxxxxxxxx] ; (b) American Express card numbered [xxxx-yyyyyy-zzzzz] ; (c) St George Gold Visa card numbered [xxxx-yyyy-xxxx-yyyy] ; and (d) all other accounts utilised by the First Defendant. " 53 Orders had been earlier made on 16 September 2009 requiring Mr Sigalla and BZI Pty Limited to provide to ASIC by 23 October 2009 bank statements in respect of, amongst others, all accounts with JP Morgan Chase Bank. In my view, orders 6 and 7 of 30 November 2009 were absolute in their terms. That is to say, they were not confined to requiring only the production of documents that were then, or might from time to time be, in Mr Sigalla's physical custody or possession. I do not consider that they were even confined as is, for example, a subpoena, to requiring production of documents within his possession, custody or power. Having said that, Mr Sigalla would not be in contempt of the order to provide statements for all accounts "utilised" by him if that obligation was one he could not comply with. The onus lies on ASIC to adduce evidence capable of proving beyond a reasonable doubt that the orders could be complied with. Those orders could be complied with if it were possible for Mr Sigalla to obtain documents either by request to the financial institution concerned, or if the documents had been sent to his address in New York, by request to his family in New York. 54 The orders are alleged to have been breached by the non-production, insufficient production, or late production of statements of account of Mr Sigalla's bank account with JP Morgan Chase Bank, of his credit card account with HSBC, of his Wizard MasterCard credit card account, and of his JP Morgan Chase Bank credit card account. 55 So far as Mr Sigalla's bank account with JP Morgan Chase Bank is concerned, the subject of charges in paragraphs 33 and 40 of the further amended interlocutory process, there is evidence capable of establishing beyond a reasonable doubt that Mr Sigalla could have complied with the orders. Given the nature of this application and the fact that, no doubt, submissions will be made on these matters in final address and evidence may be called in relation to them, I do not propose to set out that evidence in detail. But there is correspondence from Mr Sigalla's solicitor at the time, Mr Ward, including correspondence of 20 October, 3 November, 6 November, 19 November, 4 December and 9 December 2009, and 21 January 2010 from which such an inference can be drawn. This includes evidence that Mr Sigalla had access to bank statements by direct downloading of documents through online access. 56 So far as statements concerning the HSBC credit card is concerned, Mr Sigalla deposed in his affidavit of 4 December 2009 that he had no online access to that account and that statements were mailed to his New York address. Nonetheless, the inference is capable of being drawn that Mr Sigalla had the capacity to obtain statements for that credit card account by asking his family to send them to him by mail or fax or email, or by requesting HSBC to send them to him. There is evidence that no statements were produced until 5 February 2010, and that was in response to a letter written by ASIC only two days previously. One of the statements produced, namely, the statement from the period from 16 November to 14 December 2009, includes a handwritten record of a payment on 8 January 2010. An inference could be drawn that Mr Sigalla had the statements in his physical custody by 8 January 2010. However, for the reasons I have given, I do not think it necessary for ASIC to demonstrate beyond a reasonable doubt that Mr Sigalla had physical custody of statements by the time compliance with the orders was called for. 57 So far as the charges in paragraphs 35 and 38 of the further amended interlocutory process concerning the Wizard credit card are concerned, Mr Sigalla stated in his affidavit of 4 December 2009 that he did not have the latest statement for that account which was mailed to his New York address. There is evidence that statements for that account were not provided until 5 February 2010. The statements produced are addressed to Mr Sigalla to an address in Vaucluse in Sydney, and include handwritten notes of payments on 27 October, 18 November and 27 December 2009. That evidence is capable of establishing beyond a reasonable doubt that Mr Sigalla had possession of such statements, or in any event was able to obtain them. 58 Finally, the charges in paragraphs 36, 39 and 40 of the further amended interlocutory process concern alleged failures to produce bank statements for Mr Sigalla's JP Morgan Chase Bank credit card. These statements were not referred to in Mr Sigalla's affidavit of 4 December 2009. That is the subject of the charge in paragraph 41 of the further amended interlocutory process. 59 There is evidence that ASIC obtained, through the United States Securities and Exchange Commission from JP Morgan Chase Bank, the statements for that credit card for the period from 10 July 2009 to 9 November 2009. The credit card statements are addressed to Mr Sigalla at his address in New York and require payments of minimum balances. It can be inferred that the statements were sent. The statements themselves show use of the card in Australia at times when other evidence establishes Mr Sigalla's presence here, as well as use of the card in New York. The statements also include a notation that the account can be managed online. An internet address is given. The evidence is capable of establishing beyond reasonable doubt that Mr Sigalla was able to comply with the orders that he provide ASIC with copies of the statements for that account even though there is no evidence that Mr Sigalla at relevant times had the statements in his physical possession to be handed over. 60 For these reasons, I consider there is a case to answer in respect of the charges in paragraphs 33-40 of the further amended interlocutory process. 61 Subject to hearing from counsel on one matter, I propose to dismiss the charges in respect of which I have found there is no case to answer. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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