Supreme Court New South Wales Medium Neutral Citation: NHB Enterprises Pty Ltd v Corry [2019] NSWSC 1659 Hearing dates: 26 November 2019 Date of orders: 26 November 2019 Decision date: 26 November 2019 Jurisdiction: Equity Before: Parker J Decision: See [39] Catchwords: PRACTICE AND PROCEDURE – settlement agreement contained release of claims made in proceedings – party alleged to have subsequently breached orders subject of settlement agreement – whether parties can prevent bringing of contempt proceedings by settlement agreement – whether contempt proceedings amount to a breach of settlement agreement and may be restrained by injunction – whether Supreme Court Act (1970) NSW, s 61 appropriate basis for application. Legislation Cited: Supreme Court Act (1970) NSW, s 61 Supreme Court Rules 1970 (NSW), Part 55, Division 3 Cases Cited: Attorney General v Times Newspapers Limited [1974] AC 273; [1973] 3 All ER 54 Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd [2016] FCA 1441 Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 Louis Vuitton Malletier SA v Design Elegance Pty Ltd [2006] FCA 83 Witham v Holloway (1995) 183 CLR 525; [1995] HCA 3 Category: Procedural and other rulings Parties: Rimon Ghaly (Applicant/Fifth Defendant) NHB Enterprises Pty Ltd (First Respondent/First Plaintiff) Finn Pharmaceuticals Pty Ltd (Second Respondent/Second Plaintiffs) Representation: Counsel: EAJ Hyde (Applicant/Fifth Defendant) S Dawson SC/T Senior (First and Second Respondents/First and Second Plaintiffs) Solicitors: HWL Ebsworth (Applicant/Fifth Defendant) Hall & Wilcox (First and Second Respondents/First and Second Plaintiffs) File Number(s): 2019/54125 Publication restriction: Nil Judgment – EX TEMPORE Revised and reissued 29 November 2019 1. This is an interlocutory application in contempt proceedings which have been commenced in the Court. The present applicant, Mr Rimon Ghaly, is the third respondent in the contempt proceedings, in this application, he seeks to have the proceedings against him stayed. 2. The contempt alleged against Mr Ghaly is breach of orders made in earlier proceedings in the Court. Those orders were made in April 2018. They were made by consent, pursuant to a settlement agreement to resolve the earlier proceedings, which had been commenced in 2017. Mr Ghaly was the seventh defendant in those proceedings. The orders required him, together with others, to deliver up certain information and to refrain from making use of certain information, which was confidential to the plaintiffs. 3. After the orders were made, the plaintiffs claimed that the orders, or some of them, were being disobeyed by the defendants. The plaintiffs commenced fresh proceedings in May 2019. Mr Ghaly was named as the fifth defendant. A mediation took place, which resulted in a further settlement as between the plaintiffs and four of the defendants in the 2019 proceedings, including Mr Ghaly. The settlement involved the payment of a sum of money by the defendants and the making of fresh orders concerning the confidential material. 4. After the settlement had been effected, or, at least, the sum of money in question had been paid, the plaintiffs instituted the present contempt proceedings. They have been brought under the Supreme Court Rules 1970 (NSW), Part 55, Division 3, by way of notice of motion in the 2019 proceedings, supported by a statement of charge (see r 7). The claim against Mr Ghaly is that he breached his obligations under the April 2018 orders. 5. There is a further issue raised in the contempt proceedings concerning a search order which was made when the 2019 proceedings were commenced. The plaintiffs claim that there were actions taken in an attempt to frustrate the operation of those orders. Although it was alleged that Mr Ghaly was involved, perhaps unwittingly, in those actions, no contempt claim is made against him in that regard. The claim is confined to allegations of breach of the earlier orders of April 2018. 6. As already noted, Mr Ghaly is the third respondent in the contempt proceedings. The other two respondents are Alexander Stephen Corry and Boriana Corry. Mr Corry was the first defendant in the 2017 proceedings and also in the 2019 proceedings. The settlement in the 2019 proceedings, to which I have referred, does not include the claims made against him. Mrs Corry, who is Mr Corry's wife, was not a party to the 2017 and 2019 proceedings. Contempt is alleged against her as a third party concerning the 2018 orders, or the search orders, or both. 7. The proceedings have been tentatively allocated a hearing date covering two days in April next year. I was informed that it has not yet been decided whether the hearing in April, if it takes place, will be a hearing as to all issues, or as to liability only. A further complicating factor is that, apparently, Mrs Corry is seeking Legal Aid. 8. The basis of the current application by Mr Ghaly to stay the proceedings against him is that, as a result of a release in the settlement agreement concerning the 2019 proceedings, the claim for contempt against him is no longer maintainable. Mr Ghaly relies on cl 15 of the settlement agreement, which provides: The parties mutually release and discharge each other from all claims made in the 2019 Proceedings made in the statement of claim and in the first cross-claim filed on 30 May 2019. 1. Mr Ghaly's contention is that the reference to release and discharge from "all claims", includes the claims made against him in the contempt proceedings. 2. In support of this contention, counsel for Mr Ghaly referred to part of the background to the settlement agreement. The 2019 proceedings sought damages and, also, a declaration that the defendants, including Mr Ghaly, had breached the terms of the settlement agreement concerning the 2017 proceedings, but it also sought a declaration that the defendants, including Mr Ghaly, had breached the April 2018 orders themselves. 3. Counsel also referred to events at the mediation which preceded the settlement. The plaintiffs' position paper was in evidence before me on this application. The position paper contained repeated allegations that the defendants were in breach, not only of the terms of the settlement agreement, but of the consent orders themselves. The final paragraph stated: Any settlement of these proceedings will need to ensure that there does not need to be a third chapter in the disputes between the parties. The Plaintiffs come to the mediation, in good faith, on the basis that it is an opportunity to achieve that. 1. There was also evidence before me on this application that: (1) counsel representing the plaintiffs at the mediation stated in opening that Mr Ghaly breached the search order and the breach of that order constituted a "criminal act" by him; and (2) one of the reasons that Mr Ghaly agreed to the settlement was that he did not want to become involved in any criminal proceedings. Mr Ghaly said in his affidavit that he understood that the reference to the "criminal act" was a reference to a contempt charge for breach of the Court orders. 2. Counsel submitted that the purpose of the settlement was, clearly, to bring an end to all litigation between the parties concerning the confidential information, and this included any criminal proceedings. Counsel submitted that the bringing of the proceedings was a breach of contract and Mr Ghaly was entitled to an injunction restraining the plaintiffs from prosecuting the proceedings. 3. The present application was made under the Supreme Court Act (1970) NSW, s 61. That section provides: Defence or stay instead of injunction (1) The Court shall not restrain by injunction any proceedings pending in the Court. (2) Every matter of equity on which an injunction against the prosecution of proceedings in the Court might formerly have been obtained, whether on terms or conditions or not, may be relied on by way of defence in the proceedings. (3) Where any person, whether a party to proceedings in the Court or not: (a) would formerly have been entitled to apply to the Court to restrain the prosecution of the proceedings, or (b) is entitled to enforce by attachment or otherwise any judgment or order in contravention of which the proceedings are taken, the Court may, on application by the person, stay the proceedings either generally or to such extent as the Court thinks fit. (4) This section does not affect the powers of the Court to stay proceedings otherwise than pursuant to this section. 1. Counsel for Mr Ghaly submitted that it was open to the plaintiffs to waive any non-compliance with the April 2018 orders. Counsel referred to the following statement by Lord Diplock in Attorney General v Times Newspapers Limited [1974] AC 273 at 307: One may leave aside for the purposes of the present appeal the mere disobedience by a party to a civil action of a specific order of the court made on him in that action. This is classified as a "civil contempt." The order is made at the request and for the sole benefit of the other party to the civil action. There is an element of public policy in punishing civil contempt, since the administration of justice would be undermined if the order of any court of law could be disregarded with impunity; but no sufficient public interest is served by punishing the offender if the only person for whose benefit the order was made chooses not to insist on its enforcement. 1. Even at the time that Lord Diplock spoke, however, the distinction between civil contempt, on the one hand, and criminal contempt, on the other, was breaking down. The course of authority was traced by Merkel J in Louis Vuitton Malletier SA v Design Elegance Pty Ltd [2006] FCA 83 (at [33] ff). As his Honour pointed out, the distinction between the two types of contempt was, if not eliminated, then blurred for practical purposes by the subsequent decision of the High Court in Witham v Holloway (1995) 183 CLR 525. In that case, in discussing the notion that the purpose, or object of criminal contempt proceedings is punitive and of civil proceedings is remedial, or coercive, the Court said (at 533): It should at once be noted that the purpose of the proceedings is not the same as the purpose or object of the individual bringing the proceedings and it is well recognised that, notwithstanding that proceedings are brought by an individual to secure the benefit of an order or undertaking, a "penal or disciplinary jurisdiction" may also be called into play. It has been held that the "penal or disciplinary" jurisdiction may be exercised even when the parties have settled their differences and do not wish to proceed further. Thus, in Canadian Transport v Alsbury, Sidney Smith JA rejected the submission that settlement precluded further proceedings saying: Are we to be told that after a party has defined a court, the court can still do nothing because the other party is willing to swallow the contempt? Nothing short of the clearest authority would convince me that that is the law; and there is no such authority and no such law. 1. In Louis Vuitton itself, Merkel J accepted that, where breach of a court order gives rise to both private claims for relief and claims for contempt, then the private claims, at least, may be compromised. But his Honour considered that there was a residual doubt as to whether the contempt claims could be. In this regard, his Honour raised the possibility that such a settlement might be unenforceable as contrary to public policy (see [40]-[43]). 2. In Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd [2016] FCA 1441, Perram J made it clear that the parties' agreement not to pursue contempt proceedings did not deprive the Court of power to deal with the contempt once it had been brought to the Court's attention. 3. In the end, I did not understand counsel for Mr Ghaly to dispute the proposition that no settlement of the 2019 proceedings could prevent the Court from acting on contempt by Mr Ghaly, if established. But, as I understood it, counsel maintained that it was possible for the plaintiffs to make a valid agreement not to pursue contempt proceedings themselves and that, in the context, this is what they had agreed to do. 4. Clause 15 of the 2019 settlement agreement (see above at [8]) does not contain an express promise by the plaintiffs not to pursue criminal proceedings against Mr Ghaly for breach of the April 2018 orders. Mr Ghaly's argument involves establishing that, as a matter of construction, this is what cl 15 means. I think there are a number of hurdles which must be overcome in order to reach that conclusion. 5. The first of these is that, as I have already described, it is not possible for parties by agreement among themselves to prevent one of them from being proceeded against for contempt by the Court. Clause 15 uses the language of release and discharge. The plaintiffs never had power to release or to discharge Mr Ghaly from the allegation of contempt in any final way; only the Court could do that. There is a real question about whether the language of cl 15 is apt to include proceedings for contempt at all. 6. Secondly, it would be going too far to say that the purpose of the settlement agreement was to bring an end, not only to the 2019 proceedings between the parties to the settlement, but to any future proceedings concerning the subject matter. The terms of settlement contained clauses which required Mr Ghaly and the other defendants to deliver up and not to use confidential information. The terms also provided that the parties would take steps to have the Court make orders to that effect. 7. Clearly, the release and discharge in cl 15 cannot have been understood as a release and discharge of the equivalent obligations imposed by the April 2018 orders, which were the subject of the 2019 proceedings; that would make nonsense of the settlement. What this means is that cl 15 must be read down, at least, to accommodate the possibility of further action to enforce the obligations imposed by the settlement. 8. The third obstacle concerns the matrix of fact. Counsel for the plaintiffs submitted that, in the context, the reference in the opening statement to criminal action was clearly confined to possible contempt proceedings concerning the search order and no such proceedings have been pursued. 9. Whether that is so or not, I do not think the position is as clear as counsel for the plaintiffs would have it. There is certainly room to argue that the conduct of the parties at the settlement, and in particular statements by the plaintiffs in their position paper, blurred the distinction between non-compliance with the orders and non-compliance with the previous terms of settlement. That is a point in Mr Ghaly's favour and it is a point which supports the construction for which he contends, but what it underlines is that the interpretation of cl 15 is contestable and arguably requires reference to evidence of all of the surrounding circumstances. 10. On an application such as this, I have not received all of the evidence concerning all relevant or potentially relevant surrounding circumstances and I have not received full submissions on the question of interpretation that arises, but the uncertainties on this application go further. 11. Counsel for the plaintiffs referred me to the High Court decision in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112. In that case, the High Court discussed the principles which apply in equity to the enforcement of a release. The High Court made it clear that in some circumstances the party having the benefit of a release ("the releasee") will be restrained by equity from setting up the general words of the release as applicable to some particular liability which the party giving the release ("the releasor") seeks to enforce against the releasee at law; that is, even if as a matter of construction the release applies, there may still be some equitable defence. 12. It is not necessary to discuss all of the circumstances in which equity would restrain a releasee from relying on the release in this way. It is enough to say that reliance on the equitable principles may require the court to go into the facts surrounding the release and even the subjective intentions of the releasor at the time the release was given. 13. Thus, for instance, it is said that the release will always be confined to particular claims which the releasor has in mind, and will not apply to a claim of which the releasor is unaware. In the present case, counsel for the plaintiffs have expressly invoked that principle. This means that the Court cannot fully determine whether the release, even assuming that it applies as a matter of construction, is actually enforceable against the plaintiffs. 14. A further obstacle, to which I have already referred, is the possibility that even if cl 15 applies, it is unenforceable as a matter of public policy. Again, counsel for the plaintiffs specifically invoked this principle, making it clear that he did not accept on his clients' behalf that even if cl 15 applied in terms it could be enforced to bar the proceedings. 15. For all of these reasons, Mr Ghaly's contention raises disputed issues of construction of law and, at least potentially, of fact. These are issues which in my view cannot (or at least should not) be dealt with in a summary way on an application such as the present. 16. I should add that I have some doubt as to whether Supreme Court Act, s 61 (see above at [14]) is applicable at all. That section was intended to replace the old common injunction procedure whereby a court of equity, should it consider that the bringing of proceedings at law involved an unconscientious exercise of the rights of the party bringing the proceedings, would grant an injunction against the further prosecution of the proceedings. Typically, a common injunction would be granted in civil proceedings, and counsel for Mr Ghaly was unable to refer me to any authority in which it had extended to proceedings of a criminal, or quasi-criminal nature, such as contempt proceedings. 17. Arguably, also, where the party against whom the proceedings are being brought would have a defence which would otherwise result in the grant of a common injunction, the proper remedy is to rely on that by way of defence to the proceedings under s 61(2) rather than by seeking a stay under s 61(3). 18. Furthermore, s 61(3) is applicable, it does not follow that the Court should, or must deal with the stay in a summary way. A defence under sub-section (2) would ordinarily be dealt with as part of the final hearing of the proceedings and in my view if a stay is sought by a party under sub-section (3), the same procedure would usually be followed. At least, it is clear that the Court cannot be compelled to deal with an application under s 61(3) in a summary way. 19. It is easy to sympathise with the frustration which Mr Ghaly must feel, especially in the light of the statements that were made at the mediation to which I have referred. On the face of it, there could be a substantial advantage to Mr Ghaly if the question of construction raised by his application could be dealt with in advance of the hearing, which is currently scheduled for April and involves other parties. But for reasons I have given, that could only be achieved by co-operation on the part of the plaintiffs, and the plaintiffs are not prepared to cooperate. 20. If Mr Ghaly sustained his contention concerning the release, that would be a reasonable basis for the Court to decline to punish any contempt he may have committed. The Court might also refuse to award the plaintiffs any costs of the contempt proceedings, or even award costs of the contempt proceedings against them. And, even if, strictly speaking, the release in cl 15 does not apply to the present proceedings, then the circumstances of the release might well be a reason why the Court would take that approach in any event. 21. Nothing I say in this judgment should encourage the plaintiffs in any belief that the Court will necessarily look favourably on attempts by them to reagitate allegations of breach which they have settled in good faith and for which they have received a sum of money. But the conclusion I have reached is that I cannot, in the face of the plaintiffs' opposition, deal in a summary way with the arguments that are raised by Mr Ghaly. 22. I should add that in the course of argument I asked counsel for Mr Ghaly whether he contended that the alleged breach of contract on the part of the plaintiffs would sound in damages. He said he would have to give the matter some consideration. It does seem to me that if Mr Ghaly is correct in his contention that the plaintiff has, for valuable consideration, released its claims against him, including any contempt claims (by which I mean that it has agreed not itself to bring any such claims), then the costs of defending the contempt proceedings might be recoverable as damages. It would be open to Mr Ghaly to consider whether he wishes to bring that claim against the plaintiffs. If he does I see no reason why directions could not be made so as to include it in the hearing which is currently scheduled for April, but that is all a matter for further consideration of Mr Ghaly's legal advisors and does not affect the outcome of this application, which I consider I must refuse. 23. The orders of the Court are: 1. Order that the fifth defendant's Notice of Motion filed on 30 August 2019 as amended be dismissed. 2. Order that the fifth defendant pay the plaintiff's costs of the Notice of Motion. 3. Vacate the listing before the Registrar on 10 December 2019. ********** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 December 2019