Amro v Hady-Ali - [2014] SADC 102

District Court of South Australia
(Civil: Application)
AMRO v HADY-ALI
[2014] SADC 102
Judgment of His Honour Judge Beazley (ex tempore)
5 June 2014
PROCEDURE - CONTEMPT, ATTACHMENT AND SEQUESTRATION
Injunction restraining the defendant from increasing the amount secured by mortgage over real property the subject of the within civil proceedings - whether the defendant has been guilty of contempt by so increasing the debt under the mortgage - application by the plaintiff for an order that a Registrar's Summons for Contempt be issued - defendant, through his counsel, admits a breach of the Injunction - whether breach contumacious - whether Injunction served personally upon the defendant - whether defendant aware of the warning as to the consequences of a breach written in hand on the order for Injunction.
HELD: The court is satisfied that there are reasonable grounds to suspect that the defendant is in contempt of the court for having breached the terms of an Injunction restraining the defendant from increasing the sum owing under a mortgage beyond the sum of $20,000.00. The court orders pursuant to Rule 6 DCR 304 that:
1. The Registrar do formulate a written charge containing reasonable details of the alleged contempt as identified in the within Reasons.
2. That a Registrar's Summons for Contempt be issued against the defendant in respect of the identified breach.
3. That the trial of the principal proceedings be adjourned sine die to await the outcome of the Registrar's Summons.
4. Liberty to apply on short notice.
5. That the costs of and incidental to the application for the issue of a Registrar's Summary and the costs of the adjournment of the principal proceedings be reserved until further order.
District Court Act 1991 (SA) s 48; District Court Rules 2006 6 DCR 66; 6 DCR 67; 6 DCR 117(2); 6 DCR 225; 6 DCR 246; 6 DCR 260(2);6 DCR 303 and 304 , referred to.
Mane Market Pty Ltd v Temple [1998] SASC S 6986; Von Doussa v Owens (No2) (1982) 30 SASR 391; D & H Investments Pty Ltd v Wagner [2008] SASC 233; Leaway v Newcastle City Council (No2) [2005] NSWSC 826; Singh v Kaur Bal (No3) [2012] WASC 243; Eastern Trust Co v McKenzie, Mann & Co Ltd [1915] AC 750 at 760; Australian Consolidated Press v Morgan (1965) 112 CLR 483 at 515-16; Witham v Holloway (1995) 183 CLR 525; Australian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98; Wilson v Bates (1838) 40 ER 901; Marchant v Dunlop (1927) 44 WN (NSW) 108; Gordon v Gordon (1904) P 163, considered.

AMRO v HADY-ALI
[2014] SADC 102
Introduction

By Application dated 5 June 2014, in the principal proceedings, Kamel Amro (‘the plaintiff’) alleges that Ammar Hady-Ali (‘the defendant’) has acted in Contempt of Court by breaching the terms of an injunction ordered by this court on 7 February 2013.
The plaintiff seeks orders that the defendant ‘be charged with contempt’. In order to understand the basis of the application it is necessary to briefly set out some of the background facts which do not appear to be in dispute.
Background
In the principal proceedings, which had been commenced on 14 December 2012, the plaintiff had sought orders against the defendant in the nature of declaratory and injunctive relief with respect to his alleged rights pursuant to the terms of an oral joint venture arrangement allegedly entered into between them in 2008.
That joint venture arrangement involved the purchase of two allotments of land at Seaton.
The first allotment, at View Avenue, (‘the View Avenue property’), was purchased, on or about 15 January 2008, for the sum of $538,000.00. The purchase was principally funded a loan of $511,100.00, which sum was secured by mortgage, to a financier to whom I shall refer as ‘P T Group’.
The second allotment at Ruby Avenue, (‘the Ruby Avenue property’), was purchased on 2 March 2008, for the sum of $485,000.00. That purchase was principally funded by a loan in the sum of approximately $435,000.00, which sum was secured by mortgage, to another financier, to whom I shall refer as ‘The A Group’.
The arrangement between the plaintiff and the defendant was both complex and somewhat unusual. I do not propose to detail some of the evidence of the plaintiff given in the trial of the principal proceedings, which might reflect poorly upon the parties.
Neither party wished to have the respective properties registered in their names.
They resolved that the properties be registered in the name of a ‘friend’ to whom I shall refer as ‘T’.
‘T’ was the named mortgagor in respect of each mortgage, thereby becoming liable to pay the instalments to each mortgagee. In fact he had no equitable interest in the respective properties.
On 21 November 2008 ‘T’ executed an Enduring Power of Attorney appointing the defendant to be his sole attorney.
On any view ‘T’ was trustee for the parties, and was, and is, entitled to be indemnified by the plaintiff and the defendant for such instalments paid by him (if any) and any losses (if any) sustained by him under the respective mortgages.
The plaintiff and defendant had envisaged that they would pay the instalments to the respective mortgagees. They assumed that the respective properties would be quickly subdivided and developed. Their respective intention was that as each subdivided allotment was sold, the proceeds would be employed to develop the next allotment for sale.
It was assumed that ultimately there may be one or two allotments, after the payment of the mortgages, which would represent their profit on the venture.
They elected to develop the Ruby Avenue property first.
Various pressures including delays in council approval and other financial problems caused the relationships between the plaintiff, the defendant and ‘T’ to break down.
The first allotment was developed and sold without difficulty.
The mortgagor of the Ruby Avenue property however demanded a greater payment from the sale proceeds on the first allotment. This led to a shortfall with respect to the second Ruby Avenue allotment. Ultimately however it was sold.
In dispute in the trial of the principal proceedings is whether the parties had reached agreement for the joint venture arrangement to be terminated, and for the defendant to retain the final Ruby Avenue allotment, because of the plaintiff’s impecuniosity. In any event the mortgage to the ‘The A Group’, over the Ruby Avenue property was paid out by the defendant.
The final Ruby Avenue allotment was transferred by ‘T’ to the defendant. The plaintiff asserts that the final Ruby Avenue allotment was only encumbered to the sum of approximately $30,000.00.
Eventually the defendant sold that allotment and retained the proceeds.
By June 2012 the mortgage over the View Avenue property had grown from $511,100.00 to $535,000.00. ‘P T Group’, as mortgagee in possession, sold that property at auction, for the sum of $401,000.00 to the defendant. This left a shortfall of approximately $170,000.00 owing by ‘T’ as mortgagor to ‘P T Group’.
As at the date of trial, that original mortgagee has not sought to recover the shortfall from ‘T’. It appears however that no release has been given to him. The defendant’s purchase of the View Avenue property was financed by mortgage from the Westpac Bank.
The defendant proceeded to develop the View Avenue property into three allotments. He then entered into contracts for the sale of two of those allotments which were due for settlement on 8 February 2013.
Prior to the date fixed for settlement, the plaintiff placed a caveat over the whole of the land at View Avenue. By various court orders the time for the removal of the caveat was extended. On 7 February 2013, the parties reached agreement that the two contracted allotments be permitted to proceed to settlement with the proceeds being paid to the Westpac Bank.
The plaintiff consented to the orders on the basis that the caveat remain in place with respect to the remaining allotment, and that an injunction be granted restraining the defendant from increasing the debt due to the Westpac Bank beyond the $20,000.00 estimated as owing under the mortgage.
This was to ensure sufficient equity in the land the subject of the principal proceedings.
On 7 February 2013 his Honour Judge Lovell relevantly ordered:
3. That the defendant be restrained from increasing the amount secured by the existing mortgage over the land in Certificate of Title Register Book Volume 6101 Folio 215 above the amount of TWENTY THOUSAND DOLLARS ($20,000.00) or otherwise encumbering or dealing with the said land.
The order contained a handwritten endorsement as follows:
If you the abovenamed Defendant AMMAR HADY-ALI, do not comply with this order, you may be liable to be imprisoned or otherwise dealt with for Contempt of Court.
The Trial of the Principal Proceedings
On 2 June 2014 the subject trial commenced before me.
The defendant’s counsel, in the presence of the defendant, had intimated at the start of the trial:
There’s one further housekeeping matter that needs to be resolved. The remaining property at View Avenue is vacant land and most of it is tied up by mortgage, so the parties have agreed there will be an order that the land be sold and the proceeds be paid into court. I wonder if at some stage we can deal with that.[1]
[1] T. p 5.
The plaintiff opened his case and gave oral evidence. His evidence was completed on 3 June 2014.
When the trial re-commenced on 4 June 2014 the defendant’s counsel intimated, on behalf of his client, the following:
I am sorry, this is a bit of a bombshell, unfortunately. Yesterday afternoon after court I had a discussion with my client about the state of the equity in the property. I have been telling my friend that the equity is about $60,000.00 and he was telling me that seemed too small. It appears that what’s happened is that the defendant has drawn down on the mortgage associated with the land and the amount of the draw down is something in the order of $140,000.00 and that those monies have gone back to Iraq. So, this, as I understand it is in breach of the injunction ordered by Judge Lovell.
The defendant’s counsel also intimated that the defendant would assert that that his admitted breach of the terms of the injunction was not contumacious but had been performed by him under duress. Implicitly he submitted that the defendant had continued to pay monies to ‘T’ pursuant to his genuine belief that ‘T’ should be properly indemnified; and the defendant had paid considerably more than the plaintiff so as to enable the respective properties to be developed and sold. Accordingly the defendant had a genuine belief that no money was owing to the plaintiff.
Plaintiff’s Application
The application by the plaintiff was made pursuant to 6 DCR 302 and 303 of the Rules of Court. Pursuant to those Rules a court may order, inter alia, that the Registrar of the Court do formulate a written charge containing reasonable details of the alleged contempt, and direct the issue of a Registrar’s Summons to the defendant.
A contempt is defined in 6 DCR 4.35 of the Rules of Court to include ‘deliberate non-compliance with a judgment or order of the Court’.
The plaintiff’s application was supported by an Affidavit sworn by the plaintiff’s solicitor Mr Reynolds.
Mr Reynolds deposed that when the subject injunction was made on 7 February 2013 the defendant was represented by counsel, and, that indeed the defendant was present in court when the order was made. At that time it was common ground that the amount secured by the existing mortgage over the land the subject of the within proceedings was approximately $20,000.00.[2] The defendant was present as he had sought the removal of the plaintiff’s caveat to enable the settlement on two of the units to go ahead. Mr Reynolds had informed the court that the plaintiff’s consent ‘depended upon the equity in the remaining property … as that property may have zero equity and the caveat be completely worthless.’[3]
[2] Transcript 7/2/13 at p 6.
[3] Transcript 5/2/13 at p 4.
I repeat that the defendant, through his counsel, admits the breach of the terms of the injunction granted by his Honour Judge Lovell but denies that he has acted in contempt of the order. He submits that the contempt in the circumstances was neither a deliberate breach nor one that could otherwise be treated as contumacious.
The principles of Law
It is trite that a court maintains a discretion to punish, as a contempt, a breach of injunction, but that such a discretion ought only be exercised if the following conditions are satisfied:
1.   The terms of the injunction are clear and unambiguous.
2.   The alleged contemnor has had proper notice of the terms of the injunction and;
3.   The breach is proved beyond reasonable doubt.[4]
[4]    Witham v Holloway (1995) 183 CLR 525, Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 112 and Mane Market Pty Ltd v Temple [1998] SASC S 6986.
The initial question is what is the role of the court at this preliminary stage.
I respectfully adopt the dicta of Debelle, J in Mane Market Pty Ltd v Temple:[5]
When determining whether a Registrar Summons should issue, the court is exercising a screening function somewhat similar to that exercised by a Magistrate in committal proceedings in respect of a criminal offence. To make an order that a Registrar Summons should issue, the court must be satisfied that there is sufficient evidence which, if accepted, would prove the contempt. When determining whether there is sufficient evidence, it must be remembered that there is no longer any distinction between civil and criminal contempts. All contempts shoud be punished as if they are quasi-criminal in character… it is not appropriate at this stage to determine whether the breach is contumacious. There are two reasons for that conclusion. The first is that it is necessary for the court to determine no more than whether there is sufficient evidence which, if accepted, would prove the contempt. Secondly, the plaintiffs have given notice that they seek to cross-examine the defendant. There is a real dispute whether the defendant’s breach was inadvertent. The plaintiffs assert that the sale of the defendant’s interest in the trust was a deliberate act made with full knowledge and despite the terms of the injunction. It is not possible, therefore, to determine the issue until the relevant evidence has been led and contested. Finally, wilful disobedience of an order may constitute contumacious conduct and thus constitute a contempt. Evidence will be necessary to determine whether this was a wilful breach.
[5] (1998) SASC S 6986 at [5].
The defendant’s counsel referred to the form of order made by his Honour Judge Lovell on 7 February 2013.
He did not suggest that the form of order made by his Honour was in any way ambiguous or unclear. He did however submit that because the form of order of his Honour contained a handwritten endorsement by way of warning for the contempt, by implication the warning was not mentioned when the order was made by the Judge.
He submitted therefore that there is no direct evidence that the injunction with the endorsement containing a clear warning as to the consequences of breaching the order was ever served upon the defendant.
Rules of Court
Rule 6 DCR 225(1) provides that a judgment (which is defined to include an order by way of injunctive relief) 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. The Rule also prescribed that the order for injunction must be served personally upon the person the subject of the injunction.
Rule 6 DCR 66(1)(d) also prescribes that any order by way of injunction must be served personally.
Rule 6 DCR 67(1)(c) defines personal service as including a case wherein ‘a solicitor accepts service of the document on behalf of the person to be served (whether the solicitor is served personally with the document or not) and issues an acknowledgement to that effect’. That definition also includes a case where it is established; in some other way, that the document and its contents have come to the attention of the person to be served.
Rule 6 DCR 260(2) provides that the order need not be served personally but if it is not served personally, the court will not issue a warrant to attach a person for contempt of the order has take any other action against a person for contempt unless satisfied that the judgment has actually come to the person’s attention.
Rule 6 DCR 117(2) provides that the court may dispense with compliance with a Rule of Court.
Discussion
I approach this matter exercising the screening function to which I have previously referred.
In the subject case there can be no doubt that the terms of the injunction were clear and unambiguous. There is no doubt that the defendant must have been aware that he was restrained from increasing the amount secured by the existing mortgage over the subject land above the amount of $20,000.00.
There can be no doubt on the admissions made on his behalf by his counsel that the breach in this case will be proved beyond reasonable doubt, in that the defendant has admitted drawing down the further sum of $140,000.00 on that mortgage as security over the subject land. Further there can be no doubt on the admissions made by him that the defendant is unable to purge his contempt in that he is unable to repay the sum of $140,000.00 or any part thereof.
The next matter is whether it has been established on the evidence that the defendant had proper notice of the terms of the injunction.
There is no evidence before me, at least at this stage, as to whether the sealed copy of the injunction was served upon the defendant or upon the defendant’s then solicitor in circumstances which might fall within Rule 6 DCR 67(1) and (2) of the Rules of Court. That can only be in the knowledge of the defendant and his solicitors from time to time. Counsel for the plaintiff implicitly submitted that the court could assume that the defendant’s solicitors would have forwarded a copy of the order to him.
I will not speculate on those matters. Upon the evidence deposed to in the Affidavit of the plaintiff’s solicitor, the defendant was present in court when the order for injunction was made. I therefore accept for the purpose of the screening function that there is evidence to the effect that the defendant was aware that he was restrained from increasing the amount secured by the mortgage above the amount of $20,000.00.
I accept that there is some doubt as to whether the defendant was made aware of the warning which was incorporated in handwriting upon the formal order. He may not have been made aware, at least while present in court, as to the nature of that warning.
In Von Doussa v Owens (No2)[6] a mandatory injunction ordered by the Full Court of the Supreme Court did not include the warning required by the then Rules of Court. Compounding that oversight, the order was not served personally upon the defendant in that case. Notwithstanding those matters the Full Court, in the unusual circumstances of that case, held that because the contemnor was present in court when the order was made, he would be taken to have knowledge of the terms of the injunction. The Court accordingly exercised its power to dispense with compliance of those respective Rules and proceeded to punish the defendant.
[6] (1982) 30 SASR 367 at 390.
The issues which are left are whether the defendant deliberately or contumaciously breached the terms of that injunction.

It is not appropriate for the matter to be determined at this stage. It must be determined upon such evidence as is tendered on the hearing of any contempt proceedings.
Conclusion
While I cannot be satisfied, on the state of the evidence at this stage, whether the warning required by 6 DCR 225 was brought to the attention of the defendant, I am satisfied that he was aware of the specific term of the injunction that he must not increase the mortgage above the expressed sum of $20,000.00 and that notwithstanding the terms of the injunction, he proceeded to draw down the additional sum of $140,000.00.
It will be for a court hearing the contempt proceedings to determine whether the defendant was in fact served with the order or whether compliance with the Rules ought be dispensed with pursuant to Rule 6 DCR 117(2) in the circumstances.
I am satisfied pursuant to Rule 6 DCR 303(4) that there are reasonable grounds to suspect the accused of the identified contempt. In light of the admitted breach by the defendant it is, in my opinion, proper to grant the plaintiff’s application that the defendant has by drawing down a further sum of $140,000.00 upon the mortgage secured over the subject land acted in breach of the terms of the injunction ordered by his Honour Judge Lovell on 7 February 2013 and that a Registrar’s Summons for Contempt ought be issued.
Rule 6 DCR 303(7) provides that where the relief sought by an applicant is in substance remedial or coercive, rather than punitive, it may grant permission to the plaintiff to issue a summons requiring the accused to appear before the Court for the matter to be dealt with in that manner. In the subject case it appears abundantly clear that the defendant will not be in a position to repay any of the $140,000.00 and that the relief sought by the plaintiff is punitive in nature.
In light of the evidence given by the plaintiff in the trial I infer that he had issued the proceedings and facilitated the removal of the caveat, because there would be sufficient equity in the subject land to cover his claim for a share in the property and his legal costs. He has accordingly incurred legal costs and would, in the ordinary event have continued to do so.
The admitted breach by the defendant has resulted in the equity in the subject land being reduced to approximately $60,000.00. There is no suggestion that the defendant has other assets, at least in his name, that can be attached. Further there remains the risk that ‘T’ may seek indemnity from the parties, if the original mortgagee of the View Avenue property seeks to recover from him the shortfall.
In all the circumstances I direct the Registrar to formulate a written charge containing reasonable details of the alleged contempt as indicated herein and thereafter direct the Registrar to issue a Summons requiring the accused to appear before the court at a nominated place and time to answer the charge pursuant to Rule 6 DCR 303.
The adjournment of the trial of the principal proceedings
The trial was adjourned to enable the plaintiff to make the within application pursuant to Rule 6 DCR 303. The question which remains is whether the trial ought proceed or alternatively whether it is preferable to adjourn the trial to await the outcome of the prosecution of the Summons for Contempt.
While it is well settled that a party who remains in contempt cannot make an application in the same court until he has purged his contempt,[7] it is also trite that notwithstanding that the defendant may be guilty of contempt, he is entitled to prosecute his defence to the action brought by the plaintiff.[8]
[7] Hadkinson v Hadkinson (1952) P 285; Short v Short (1973) 7 SASR 1; Foster v Australian Competition and Consumer Commission (2014) FCA 240; QFS Australia Pty Ltd v Bailey (1999) SAFC 427 and Leaway Pty Ltd v Newcastle City Council (No 2) [2005] 220 ALR 757.
[8] Wilson v Bates (1838) 40 ER 901 and Hadkinson v Hadkinson (1952) P 285 at 290.
The fact remains that the breach by the defendant has placed the plaintiff in a position where he could not reasonably elect whether to proceed with the claim until the question of contempt has been determined. Ultimately counsel for the defendant did not seek to resist an order that the trial be adjourned sine die to await the outcome of the Registrar’s Summons for Contempt.
Formal orders
1.   The court being satisfied upon an application made by the plaintiff pursuant to Rule 6 DCR 303(4) that there are reasonable grounds to suspect the defendant of the identified contempt of the order for injunction made by his Honour Judge Lovell on 7 February 2013, does hereby require, and direct:
1.1The Registrar to formulate a written charge containing reasonable details of the alleged contempt as detailed in the Reasons of the court and;
1.2The Registrar to issue a Summons requiring the accused to appear before the court at a nominated time and place to answer the charge.
2.   That the trial of the within action be adjourned sine die to await the outcome of the Registrar’s Summons for Contempt.
3.   That the question of costs of and incidental to the application by the plaintiff for a Registrar’s Summons to Issue and of the costs of the adjournment be reserved until further order.
4.   Liberty to both parties to apply on short notice to have the matter brought back before the court.