Federal Court of Australia

Guoao Holding Group Co Ltd v Xue (Sentencing) [2024] FCA 1503

ORDERS

THE COURT ORDERS THAT:

1.    The first respondent, Lijuan Xue, is sentenced on the convictions for criminal contempt of court expressed in orders 5 and 6(a) on 25 March 2024 and for civil contempt expressed in order 6(b) on 25 March 2024, taken together, to three months’ imprisonment wholly suspended on condition that she pay the costs of the second applicant within 28 days of being notified of the determination of their sum failing which a warrant for the committal of the first respondent to prison issue on the application of the second applicant.

2.    The first respondent pay the second applicant’s costs of the proceeding on an indemnity basis.

3.    The quantification of the second applicant’s costs on a lump sum basis be referred to a Registrar of the Court, not being any Registrar giving instructions as the second applicant in the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    On 25 March 2024, I found the first respondent, Ms Lijuan Xue, guilty of criminal contempt of the Court for breaching order 5 of freezing orders made on 31 August 2022 (and subsequently amended) by engaging in the conduct referred to in charge 1 of the second further amended statement of charge, namely making transfers from her account to an account in the name of the third respondent, her mother, on 14 September 2022 in the sum of $798,687.65.

2    I also found Ms Xue guilty of criminal contempt of the Court for breaching order 9(a) of the freezing orders by engaging in conduct referred to in charge 2 of the statement of charge, namely paying for ordinary living expenses in the period 14 September 2022 to 21 December 2022 in the sum of $59,303 in excess of what was allowed by the freezing orders. Although charge 2 was not split into charges 2(a) and 2(b), I will refer to that as charge 2(a).

3    She was also found to be in civil contempt of the Court for breaching order 9(d) of the freezing orders by engaging in conduct referred to in charge 2 of the statement of charge, namely dealing with or disposing of assets in the period 14 September 2022 to 21 December 2022 in the sum of $245,433.65 without giving the required notice. I will refer to that as charge 2(b).

4    My reasons for those findings are published as Guoao Holding Group Co Ltd v Xue (Contempt) [2024] FCA 278 (liability reasons). Ms Xue filed an appeal against the orders but later discontinued the appeal in circumstances I will shortly come to explain.

5    The freezing orders were made in support of an anticipated judgment against Ms Xue enforcing an arbitral award made in the People’s Republic of China. Subsequently, judgment was entered against Ms Xue in favour of the award creditor and first applicant in the proceeding, Guoao Holding Group Co Ltd. The judgment sum was more that RMB200 million, ie more than $44 million. See Guoao Holding Group Co Ltd v Xue (No 2) [2022] FCA 1584.

6    These are my reasons on sentence for the two criminal convictions, being the principal ones, and for the civil conviction.

7    What has occurred between 25 March 2024 and now is relevant and requires to be broadly sketched.

Events after the liability judgment

8    The hearing on penalty and costs was initially listed for 20 June 2024.

9    On 8 May 2024, Ms Xue filed an affidavit affirmed by her dealing with matters relevant to penalty. Those matters included statements of apology and remorse by her to the Court and to Guoao for her contempts and statements to the effect that her teenage son lives with her in Sydney where he attends a public school and in the event that she was to receive a custodial sentence there would be no one to look after him. She also explained that her Chinese lawyers were in the process of negotiating a final resolution of her dispute with Guoao in China.

10    On 9 May 2024, written submissions were filed on behalf of Ms Xue for the hearing on penalty. Those submissions, with reference to Ms Xue’s 8 May 2024 affidavit, included the submission that a custodial sentence would not be appropriate because of the impact that it would have on Ms Xue’s son who has no family in Australia who could look after him if his mother were imprisoned.

11    On 14 June 2024, Ms Xue filed an affidavit affirmed by her solicitor, Caroline Brown. The affidavit said that Ms Brown had been instructed to withdraw Ms Xue’s affidavit of 8 May 2024, and in particular to withdraw the assertions of fact that her son still lives and studies in Australia and that there is no one in Australia who could look after him if she were to receive a custodial sentence. Ms Brown stated that she was instructed by Ms Xue that her son left Australia on or about 11 August 2023 and is not attending school in Australia. No explanation was given as to how it had come about that Ms Xue’s affidavit of 8 May 2024 was false in these respects.

12    On 19 June 2024, the parties sought an adjournment by consent of the penalty hearing listed for the following day. That was said to be to enable Ms Xue to put on further evidence regarding recent payment of amounts in satisfaction of the Chinese arbitral award.

13    On 20 June 2024, when the matter was called for the penalty hearing, senior counsel for Ms Xue explained that the parties had reached a settlement agreement which involved paying the arbitral debt in instalments with the final payment due on or before 20 September 2024. It was said that it was proposed that once all the payments had been made, Ms Xue would seek to put on further evidence and make submissions to the Court in support of her having purged the contempt. Orders were made by consent adjourning the penalty hearing to 30 September 2024. For reasons not presently relevant, the hearing was subsequently relisted for 23 October 2024.

14    There was indeed a settlement agreement pursuant to which the whole of the debt to Guoao was paid, including in part by way of set-off of a debt that Guoao owed to a company owned or controlled by Ms Xue’s mother and the release of funds frozen pursuant to orders of Chinese courts. As a consequence, and pursuant to the settlement agreement, the freezing orders were discharged by consent on 27 June 2024, the similar orders in the Chinese courts were also discharged, Ms Xue withdrew her appeal against the contempt judgment and Guoao withdrew its submissions on penalty. Guoao has not thereafter participated in the proceeding.

15    Because Guoao would no longer be advancing any submissions on penalty, I made orders with Ms Xue’s consent that the Registrar of the Court be joined as the second applicant in the proceeding to take over the prosecution of the statement of charge of contempt. The penalty hearing was relisted for 18 December 2024 in order to accommodate those developments.

16    On 4 October 2024, Ms Xue filed an affidavit affirmed by her. As explained in the next paragraph, that affidavit was not read on the hearing on penalty.

17    In the lead-up to the hearing on penalty, the Registrar’s solicitors communicated to Ms Xue’s solicitors their intention of cross-examining Ms Xue at the hearing on the circumstances surrounding the making of the false statements in her 8 May 2024 affidavit and the subsequent withdrawal of those statements. Ms Xue’s solicitors replied saying that Ms Xue was not in the country, would not attend the penalty hearing and would not be available for cross-examination. With reference to r 29.09(3) of the Federal Court Rules 2011 (Cth), Ms Xue did not read any of her affidavits on the hearing on penalty, including her affidavit of 4 October 2024. Her 8 May 2024 affidavit and the affidavit of Ms Brown were tendered by the Registrar. Her 4 October 2024 affidavit was not adduced in evidence at all although it may be inferred that it had been intended to be read to convey apologies and contrition.

18    Ms Xue did not apply to adjourn the penalty hearing, nor did she offer any explanation for why she was not present for the hearing. Evidence of a decision of the Administrative Appeals Tribunal on 26 June 2024 affirming a decision of a delegate of the relevant Minister to refuse her application for a Business Skills (Permanent) visa was tendered on her behalf. Senior counsel for Ms Xue advised that Ms Xue no longer lives in Australia, having returned to China. There was no evidence to suggest that Ms Xue was in some way prevented from attending the hearing and no application was made for her to give evidence by audiovisual link.

Purging of contempt

19    Although the written submissions of counsel on behalf of Ms Xue foreshadowed an application by her to purge her contempt, that application was not pressed in the hearing because of her absence and hence inability to give evidence and the absence of any evidence by her of apology or contrition. The Registrar, however, accepts that Ms Xue has paid the complete debt to Guoao and Guoao’s costs in an agreed sum amounting to about $930,000. I will return to those and other mitigating factors.

Principles governing penalty

20    There was no dispute between the parties with regard to the applicable principles governing penalty. I have considered the parties’ submissions on those principles, and the authorities that they refer to. No purpose is served in setting those out in any detail.

21    As I observed in my liability reasons (at [39]), the underlying rationale for the exercise of the contempt power is that it is necessary to uphold and protect the effective administration of justice; although the primary purpose in committing a respondent who disobeys an injunction is to enforce the injunction for the benefit of the applicant, another purpose is to protect the effective administration of justice by demonstrating that the court’s orders will be enforced: Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd [1986] HCA 46; 161 CLR 98 at 107. Contempt proceedings are essentially protective in nature as to the judicial function and the role of the courts, even if they also serve to vindicate private interests and rights; contempt proceedings are therefore to be viewed as essential in facilitating the proper functioning of courts: Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; 256 FCR 90 at [97] per Besanko, Wigney and Bromwich JJ.

22    A “useful list of considerations … although not exhaustive” endorsed in Kazal at [101]-[102], citing Matthews v Australian Securities and Investments Commission [2009] NSWCA 155 at [129] per Tobias JA, includes the following:

(1)    the seriousness of the contempt proved;

(2)    the contemnor’s culpability;

(3)    the reason or motive for the contempt;

(4)    whether the contemnor has received, or sought to receive, a benefit or gain from the contempt;

(5)    whether there has been any expression of genuine contrition by the contemnor;

(6)    the character and antecedents of the contemnor;

(7)    the contemnor’s personal circumstances;

(8)    the need for deterrence of the contemnor and others of like mind from similar disobedience; and

(9)    the need for denunciation of contemptuous conduct.

23    With reference to that non-exhaustive list of factors, it was explained in Kazal at [103] that “[t]he focus remains on the core themes of the objective seriousness of the conduct and, in particular, its effect on the administration of justice, subjective factors such as the contemnor’s culpability, antecedents and attitude, including in particular any apology or other palpable sign of contrition, the capacity to pay a fine, and imprisonment being a last resort. Deterrence remains a dominant theme, both specific and general. Even denunciation and punishment can be seen as bolstering deterrence.” The Court went on to say the following (at [104]):

It follows from the foregoing that it is essential to the due administration of justice that contempt of court, and in particular serious contempt of court, remains relatively rare. Vigilance is required to help ensure contempt remains a rare problem. Whenever there is a real need for deterrence, be it specific or general, that will always be a vitally important consideration in determining the appropriate penalty.

24    The power of the Court to punish contempts of its powers and authority is conferred by s 31 of the Federal Court of Australia Act 1976 (Cth). The range of penalties available to the Court to punish for contempt include committal to prison, imposition of a fine, sequestration of the assets of the contemnor, and to suspend on condition any sentence of imprisonment. See Hughes v Australian Competition and Consumer Commission [2004] FCAFC 319; 247 FCR 277 at [52]-[56]. A period of imprisonment is to be regarded as a last resort: Vaysman v Deckers Outdoor Corporation Inc [2011] FCAFC 17; 276 ALR 596 at [54].

Consideration of the various factors

The seriousness of the contempt

25    I accept the submission by the Registrar that the contempts are serious. Indeed, Ms Xue does not really contest that. In respect of charge 1, the two transfers making up most of the sum improperly dealt with were made after Ms Xue spoke with her attorney. As I found in the liability reasons (at [89]), before she made those transfers Ms Xue knew that steps were likely being taken by Guoao to freeze her assets in Australia and it was in the light of that knowledge that she immediately made the transfers. “She had a specific intention to disobey the court order, which evidences a conscious defiance of the Court’s authority” (at [93]).

26    In respect of charge 2(a), the contempt is particularly serious having in mind that the conduct involved the making of several transfers and payments over a period of more than three months, the conduct occurred during a period in which Ms Xue was aware of the orders and had access to legal advice and that some of the expenses, in particular her son’s private school fees, were irresponsible in light of the very substantial debt owed by Ms Xue. The civil contempt in charge 2(b) is obviously by its nature less serious. In view of the seriousness of the criminal contempts it plays little role in my reasoning on sentence.

27    Against the conclusion that the contempts taken together are serious, there are some mitigating factors which I take account of. The first is that although the transfer of nearly $800,000 into Ms Xue’s mother’s account was aimed at defeating the freezing orders, Ms Xue did not thereafter transfer that money further and beyond the reach of the Court. Rather, the money was held in the mother’s account and the fact of its existence as an asset of Ms Xue was later revealed by her to Guoao’s solicitors as part of her required asset disclosure, although she did not identify that it was being held in an account that was not frozen.

28    Secondly, transfers were made from that account to top-up the unrestricted account pursuant to the arrangement that was made to allow authorised payments without undue administrative burden (see the liability reasons at [22]). That is to say, there is something of an overlap between charge 1 and charge 2 in that they both concern the same pool of money – the overpayments that are the subject of charge 2(a) and the unauthorised payments that were the subject of charge 2(b) were in effect made from the sum of money that is the subject of charge 1.

29    Thirdly, as highlighted by senior counsel for Ms Xue, on the day after the unlawful transfer of the nearly $800,000 (ie 15 September 2022), Ms Xue tried to retransfer that sum back from her mother’s account to a frozen account in her own name. That attempt failed, apparently because by then the account in her own name was frozen in such a way that the bank not only blocked transfers from the account but also to the account. Then, the following day (ie 16 September 2022), Ms Xue’s solicitors wrote to the bank asking for the re-transfer to be made. The bank replied several days later (ie 21 September 2022) explaining that the re-transfer did not appear to be contemplated by the freezing orders and that the bank required amended orders that expressly permitted the transfer. It is not explained what happened thereafter, save that the then balance of the original sum was re-transferred on 1 December 2022 after the payments that are the subject of charge 2 had been made.

30    In the result, the contempts remain serious contempts that on the analysis thus far are deserving of significant sanction, but they are not especially grievous.

The contemnor’s culpability and state of mind

31    As identified on behalf of the Registrar, findings about Ms Xue’s state of mind were made in the liability reasons. In respect of charge 1, Ms Xue was wilfully blind to the restrictions imposed by the freezing orders and had a specific intention to disobey the freezing orders such that her conduct was contumacious (at [93]). In respect of charge 2(a), Ms Xue was wilfully blind to whether her expenditure was allowed under the orders – in that sense she had actual knowledge that it was not allowed, and she intended to disobey the freezing orders such that her conduct was contumacious (at [108]-[109]).

The reason or motive for the contempt

32    Ms Xue’s explanation for the conduct that is the subject of charge 1 was, in effect, that she feared that she would be unable to meet her living expenses or to support her mother and son. In that regard, with reference to the liability reasons, Ms Xue said that she was “extremely scared” of what would happen if she had no funds which she needed to continue to maintain “a normal life for [her] family” (at [19]) and that she was “frightened” as to what would happen if she did not have access to any money (at [87]).

33    I accept, as submitted on her behalf, that those reasons for her conduct are not that she breached the freezing orders in order to defeat Guoao’s judgment, or prospective judgment, but rather to meet her human needs.

34    However, in respect of the conduct that is the subject of charge 2(a), as explained in the liability reasons, Ms Xue breached the limits allowed by the freezing orders on her living expenses with the result that she was “living luxuriously at the expense of Guoao” (at [109]). As it turns out, that was not ultimately at the expense of Guoao because the whole debt was eventually paid, but the expenditure was at the expense of Guoao’s security at the time of the conduct.

Whether the contemnor has received, or sought to receive, a benefit or gain from the contempt

35    Because the debt was eventually paid, Ms Xue did not receive an ultimate benefit or gain from the contempt in the form of lessening what she had to pay to Guoao or by defeating any part of her debt to Guoao. However, she received the benefit of the contempt at the time. Indeed, as explained, the conduct in breach of the freezing orders was engaged in in order to benefit from it. Senior counsel for Ms Xue points out that the money that was the subject of the relevant conduct that was ultimately lost in the sense that it was spent other than to repay the debt, was spent on living expenses for herself, her mother and her son including school fees and on repaying loans secured against properties such that the payments were likely neutral in relation to Guoao’s security (liability reasons [138]). Of course, I accept that, but that has to be understood as being in order to live to a luxurious standard.

Whether there has been any expression of genuine contrition by the contemnor

36    As already explained, there is no evidence from Ms Xue herself of any apology or contrition. Senior counsel on her behalf points to her recorded apologies and expressions of contrition in her 8 May 2024 affidavit that was tendered by the Registrar. However, those statements cannot be taken as genuine expressions of apology and contrition. That is for two reasons. First, they were not given in evidence by her with the result that she could not be cross-examined on them. Secondly, they were given in the context of an exculpatory affidavit much of which later turned out to be false.

37    In the absence of any explanation as to how the false affidavit came to be affirmed, the most reasonable and probable inference is that the false statements were made deliberately in order to try to avoid a custodial sentence. That reflects very poorly on Ms Xue and completely undermines her expressions of apology and contrition. Her failure to be present at the hearing and to be prepared to be cross-examined also serves to undermine the submissions by her senior counsel on her behalf that she respects the authority of the Court. The fact that she ultimately paid the debt may be more because of her fear of imprisonment that any innate respect for the Court’s authority.

38    In the circumstances, there is no meaningful expression of genuine contrition or apology by Ms Xue.

The character and antecedents of the contemnor

39    There is no evidence to suggest that Ms Xue has previously been convicted of contempt, or indeed any other relevant offence.

The contemnor’s personal circumstances

40    There is no evidence of Ms Xue’s personal circumstances that might mitigate any penalty. There is evidence that she previously owned property in Australia as discussed in relation to loan repayments for properties in North Ryde, Bellevue Hill and Zetland in the liability reasons at [116], [123], [128] and [132], but it is not known whether she still owns those properties. Her ability to discharge her substantial debt to Guoao would suggest that she remains a person of means. I am satisfied that Ms Xue is likely to be able to pay the Registrar’s costs, counsel for the Registrar having given an indication of the modest sum that those are likely to be.

The need for deterrence and for denunciation of contemptuous conduct

41    From one perspective, considerations of specific deterrence loom large. As explained, there is no expression of apology or contrition and there is no explanation of the circumstances giving rise to her false affidavit. Also, although almost immediate efforts were made to re-transfer the sum of nearly $800,000 which is the subject of charge 1, those efforts were then apparently abandoned which enabled the numerous payments over a period of three months that are the subject of charge 2 which were made in breach of the freezing orders. From another perspective, Ms Xue no longer lives in Australia and presently has no permanent right to reside in Australia so the risk of her being subject to orders of an Australian court in the future is probably remote.

42    As recognised in Kazal at [104], contempt of court remains relatively rare but it is nevertheless a problem and vigilance must be maintained. Freezing orders are made for the purpose of preventing the frustration or inhibition of the Court’s process (see r 7.32 of the Rules). Thus, breach of freezing orders strikes at the essence of the administration of justice. See Pisano v Dandris (No 4) [2015] NSWSC 1689 at [31]-[32] per McDougall J.

Other factors

43    Whether considered in relation to the seriousness of the contempt or separately, it is obviously of substantial significance that Ms Xue has arranged for her debt to Guoao to be completely satisfied, she has paid Guoao’s costs, she has withdrawn her appeal against her convictions for contempt and she has tendered to pay the Registrar’s costs on an indemnity basis. All those matters stand substantially to her credit and must be taken into account accordingly.

Synthesis

44    Taking all those matters into account, I am satisfied that the appropriate sentence in this case which expresses both specific and general deterrence, gives significant credit to the matters identified in [43] above and recognises the absence of contrition and apology is a custodial sentence of three months’ imprisonment wholly suspended on condition that Ms Xue pays the Registrar’s costs within 28 days of being notified of the quantification of their amount. In the latter regard, senior counsel for Ms Xue accepts that it is appropriate for the Registrar’s costs to be assessed on a lump sum basis on the indemnity scale by a Registrar of the Court who is not any Registrar giving instructions as the second applicant in this proceeding. A custodial sentence suspended on condition that the Registrar’s costs are paid is likely to have the effect of ensuring that those costs are indeed paid. Suspension of the sentence recognises that actual imprisonment is a measure of last resort.

45    Suspension of the sentence in that form, ie subject to compliance with a once-off condition as opposed to a continuous condition such as not to breach the Court’s orders, does not offend against the principle discussed in Hughes at [56] that suspension of a sentence of imprisonment should not be for an indefinite period.

Associate:

Dated:    20 December 2024