Beckwith and Demarco
[2014] FCCA 184
•10 February 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BECKWITH & DEMARCO | [2014] FCCA 184 |
| Catchwords: FAMILY LAW – Application for contempt – application more properly characterised as contravention proceedings – respondent husband ordered to prepare and file taxation returns outstanding over many years – husband has failed to prepare returns as ordered – is the husband in contempt of court’s order – matters to be considered – husband asserts he is unable to complete returns and lacks funds to commission an accountant to complete returns on his behalf – has husband intentionally failed to comply with order or made no reasonable attempt to do so – reasonable excuse – matters to be considered. |
| Legislation: Family Law Act 1975, ss.70NAE; 112A; 112AB; 112AC; 112 AP Evidence Act 1995, s.140 |
| Ibbotson & Wincen (1994) FLC 92-496 Witham v Holloway (1995) CLR 525 Kelly & Kobelnek [1998] FamCA 296 Taikato & R (1996) 186 CLR 454 Northern Territory of Australia v GPAO (1999) FLC 92-838 |
| Applicant: | MS BECKWITH |
| Respondent: | MR DEMARCO |
| File Number: | ADC 1816 of 2011 |
| Judgment of: | Judge Brown |
| Hearing date: | 5 November 2013 |
| Date of Last Submission: | 5 November 2013 |
| Delivered at: | Adelaide |
| Delivered on: | 10 February 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Morgan |
| Solicitors for the Applicant: | Morgan Ward |
| Counsel for the Respondent: | In person |
ORDERS
The application for contempt filed on 16 September 2013 is dismissed and there be no order as to costs.
The substantive proceedings are listed for directions on 24 March 2014 at 9:30am.
IT IS NOTED that publication of this judgment under the pseudonym Beckwith & Demarco is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 1816 of 2011
| MS BECKWITH |
Applicant
And
| MR DEMARCO |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment relate to an application for contempt, which was filed on 16 September 2013. The applicant in the contempt proceedings is Ms Beckwith. The person allegedly in contempt of the court’s order is Mr Demarco.
On 19 May 2011, the applicant commenced proceedings in the court, against Mr Demarco, seeking orders to alter some of the parties’ proprietorial interests, following the end of the de facto relationship between them. It is an understatement to say that the process of the proceedings has been far from smooth.
Ms Beckwith has recently turned sixty years of age. She has a longstanding history of bowel cancer. She currently has other health issues including migraine; arthritis; gastric reflux and chronic fatigue syndrome. As a result of her health problems, she receives a disability pension. She has no savings, or access to assets of significant value.
Mr Demarco is sixty-eight years of age. Until recently, he was a self-employed (occupation omitted).
It is Mr Demarco’s position that he too suffers poor health. He asserts that he suffers from depression; anxiety and hypertension. In addition, a suspected diagnosis of Type 2 diabetes has also been made in respect of him. He is currently unemployed and in receipt of social security payments.
Both parties have been previously married and have adult children from their earlier marriages. They began to live together in October 2000 when Ms Beckwith moved into Mr Demarco’s home situated at Property M. They finally separated in September of 2010.
The parties have never been married and have no children together. However, there is no dispute between them that the court has jurisdiction to make a declaration pursuant to section 90RD of the Family Law Act 1975, that a de facto relationship existed between them at a time after the commencement of the Commonwealth Powers (De Facto Relationship) Act (2009) South Australia.
Accordingly, both Ms Beckwith and Mr Demarco accept that the court has jurisdiction to make orders altering their proprietorial interests following the end of the relationship between them pursuant to the provisions of section 90SM of the Act. The major area of dispute between the parties concerns the extent and value of property to which section 90SM may apply.
Mr Demarco owns the following properties:
·The parties’ former home located at Property M;
·A shack located at Property P2;
·A commercial property at Property P1, which is leased to a (businesses omitted). The property is registered in the name of (omitted) Pty Ltd, of which Mr Demarco is the sole shareholder and director.
·Two vacant blocks at Property A.
Mr Demarco concedes that these properties have significant worth. In August of 2011, he estimated their value to be $1.7 million.[1] They are however, each encumbered by mortgage in favour of (omitted) Bank. In October of 2012, Mr Demarco calculated his indebtedness to the bank to be $776,133.62.[2]
[1] See Mr Demarco’s statement of financial circumstances filed 9 August 2011
[2] See affidavit of Mr Demarco filed 23 October 2012 at paragraph 19
In addition, Mr Demarco asserts that he owes significant sums to other entities, particularly the Australian Taxation Office. Again, in October of 2012, he calculated his level of debt (other than in respect of outstanding tax) to be $151,154.19.[3]
[3] Ibid at paragraph 24
In her application initiating these proceedings, Ms Beckwith seeks the transfer to her of the Property M property. In addition, she seeks a split from Mr Demarco’s accrued superannuation in a sum to be determined by the court.
She also seeks an award of ongoing spousal maintenance. More recently, she seeks that she receives from Mr Demarco a sum to the value of twenty-five per cent of the “net assets of the parties as determined by this Honourable Court.”[4]
[4] See affidavit of Ms Beckwith filed 9 October 2012 at paragraph 77
Mr Demarco responded to Ms Beckwith’s application on 9 August 2011. In an affidavit filed in support, Mr Demarco deposed as follows:
“I have not had a Tax Return prepared for myself or the company (omitted) Pty Ltd for a period of about 10 years. There is personal tax which will be owing together with GST and other amounts. I also have debts in respect of land tax, Council rates and credit cards. I have four credit cards with a total of about $19,700.00 owing.”[5]
[5] See affidavit of Mr Demarco filed 9 August 2011 at paragraph 24
The uncertainty about Mr Demarco’s taxation situation (and his liability for tax) appears to have informed his formal response to Ms Beckwith’s application. He proposed as follows:
“Pending the respondent determining his taxation liability the applicant be paid such sum as may be determined by this Honourable Court.”
The issue of Mr Demarco’s outstanding taxation returns and the potential liabilities arising from them has been a vexed issue between the parties in these proceedings. The failure of Mr Demarco to prepare his taxation returns from the financial year ending 30 June 2007 onwards forms the basis of the contempt application currently before the court.
The procedural history of the matter is as follows:
·Ms Beckwith’s application came before the court for the first time on 27 June 2011.
·On that day Mr Demarco was ordered to file his answering material within 21 days.
·In addition the parties were referred to a financial mediation conference with a registrar of the court on 1 September 2011.
·Mr Demarco filed his answering material on 9 August 2011.
·The financial mediation conference scheduled for 1 September 2011, did not assist the parties to reach agreement.
·The registrar convening the conference however recommended that a further conference might be useful if the parties requested it.
·On 15 September 2011, at the request of the parties they were referred to a further financial mediation conference which was scheduled to take place on 7 February 2012.
·The parties attended the conference as scheduled but it did not proceed. The Registrar’s note indicates that “conference unable to proceed due to bank repossessing service station; noting no value of Property M; asset pool not defined.”
·On 5 March 2012, Mr Demarco was directed to provide further discovery.
·At the joint request of the parties’ solicitors they were referred to a third financial mediation conference. However, Mr Demarco did not attend this conference although his solicitor did.
·On 6 June 2012, the court made comprehensive orders requiring the parties to obtain valuations of the former family home; the shack at Property P2; and the commercial properties located at Property P1.
·At the time of these orders the parties agreed that the vacant land at Property A was on the market for sale.
·The parties were to share equally in the cost of the valuation of the former family home and the shack at Property P2.
·Mr Demarco was to obtain a valuation of the commercial property at Property P1 at his expense.
·On 18 July 2012, I fixed the parties respective applications for final hearing, on 25 & 26 October 2012. The trial was listed before Federal Magistrate Kelly (as she then was). The trial did not proceed. It was vacated on the joint application of the parties.
·On 25 October 2012, the parties successfully asked the court to make the following orders and notations:
“UPON NOTING THAT the respondent has lodged an application for planning approval in relation to the proposed subdivision of the Property P property.
BY CONSENT IT IS ORDERED:
1. That the trial listed for 25 October 2012 be vacated.
2. That the matter be listed for trial before Federal Magistrate Brown on 21 and 22 May 2013 at 10.00am.
3. That the matter be listed for directions on 27 March 2013 at 9.30am.
4. That the respondent do all things necessary to ensure his outstanding personal taxation returns are lodged as follows:-
(a) the first three returns by 2 November 2012;
(b) the next four returns by 24 December 2012;
(c) the balance returns by 28 February 2013.
5. That the respondent do provide to the applicant copies of all of the above taxation returns together with copies of all assessments and correspondence to and from the Australian Taxation Office in relation to those returns within 14 days of the same.
6. That the respondent do provide the applicant with 24 hours notice of any proposed contracts, subdivision or encumbrance (other than in the ordinary course of business in relation to an encumbrance) in relation to real property owned by the respondent or (omitted) Pty Ltd.
7. That the question of the issue of the parties costs of and incidental to today be reserved to trial.”
It is these orders and other orders which have been made consequentially upon them which Ms Beckwith asserts Mr Demarco has contumaciously disobeyed. They relate to the filing of Mr Demarco’s tax returns. His position is that he has done his best to complete the necessary returns but is hamstrung in this regard, by poor health and lack of expertise.
The parties each filed an extensive affidavit in anticipation of the aborted trial scheduled for October 2012. It would appear to be the mutually accepted underpinning of each of the parties’ positions at the time, that the matter could not proceed further until it was relatively clear what was the actual pool of assets available to be divided between them.
This pool is almost exclusively comprised of property controlled by Mr Demarco but is limited by his various outstanding liabilities, particularly his taxation debts which remain inchoate until such time as he completes the necessary returns or presumably, the ATO takes action against him to recoup the tax owed to it. It seems improbable that the ATO has infinite stores of patience.
In this respect in his trial affidavit, Mr Demarco deposed as follows:
“I have not lodged a taxation return for approximately 13 years. I engaged a bookkeeper to enable me to finalise my taxation commitments. The compilation of the necessary financial records have been forwarded to my accountant Mr G to enable completion of the necessary taxation returns. Mr G has provided me with an estimate of amounts due to the Australian Taxation Office.
I found that compiling and presenting the necessary taxation information somewhat difficult as I operated my business from home and was uncertain as to how to allocate some expenses to the business. As a consequence my taxation affairs got behind and I found it difficult to commence work and bring my taxation affairs up to date. My taxation affairs got further and further behind to the point where they are now. I realised that I need to bring up to date my taxation affairs and have undertaken the necessary work to do so. I previously made an arrangement with the taxation office to make instalment payments per month but calculation of GST only complicated the matter further. Those arrangements have ceased and fallen into arrears. I am now being pressed by the Australian Taxation Office to file the outstanding returns.”[6]
[6] See affidavit of Mr Demarco filed 23 October 2012 at paragraph 22-23
Mr Demarco’s accountant, Mr G has estimated the amount of tax outstanding to the Australian Taxation Office to be as follows: [7]
[7] See annexure D12 to the affidavit of Mr Demarco filed 23 October 2012
Estimate of Tax Payable $276,339.43 Estimate of General interest charges on unpaid tax $228,933.19 Estimate of Net GST Payable $65,167.64 Estimate of General interest charges on GST $53,320.76 Failure to lodge penalties – income tax returns $6,600.00 Failure to lodge penalties – activity statements $37,400.00 Total $667,761.02
If this calculation is accurate, Mr Demarco is in a parlous financial situation. His only available option being to liquidate as much of his property as is possible or possibly seek some accommodation with his creditors through bankruptcy. It is his position that the Property P1 commercial properties will secure a greater sale price if planning approval is obtained for them to be sub-divided.
The case returned to court on 27 March 2013. At that stage it was Mr Demarco’s position that he had completed tax returns for the years ending 30 June 2001, 2002 and 2003. It was further his position that issues relating to the sub-division of the Property P1 commercial properties remained outstanding.
On 18 December 2012, Mr Demarco’s former solicitors provided a copy of an income tax account for Mr Demarco as at 5 December 2012. This account arose as a consequence of the lodgement of the three returns outlined above. They resulted in an assessment including interest of $138,447.49.
This was the background to the court making the following orders on 27 March 2013:
“1. The respondent husband provide to the wife’s solicitors copies of his tax returns and assessments for the years ending 30 June 2001, 30 June 2002 and 30 June 2003 within seven (7) days of today’s date.
2. The respondent husband provide to the wife’s solicitors copies of his tax returns said to be lodged on his behalf for the years ending 30 June 2004, 30 June 2005, 30 June 2006 and 30 June 2007 within fourteen (14) days of today’s date.
3. The respondent husband file his remaining outstanding taxation returns up to the year ended 30 June 2012 by no later than 9 May 2013.
4. The respondent husband authorise his Planning Agent and advisors to release to the wife’s solicitors details of all documents which have been lodged for all planning approval in relation to the property at Property P1.”
In these circumstances, the parties through their respective solicitors, agreed there was no utility in the trial scheduled for May proceeding. The matter returned to court for mention only on 21 May 2013. At that stage, Mr Demarco had not completed his tax returns for the years ending 30 June 2004 onwards. Accordingly, he was in breach of order 3 of the orders of 27 March 2013.
On 21 May 2013, with the uneasy acquiescence of Ms Beckwith’s solicitor, the time in which Mr Demarco was to comply with this order was extended to 24 July 2013. The matter was further adjourned until 30 August 2013.
The situation, vis-à-vis the tax returns, remained unchanged on 20 August 2013 and following a further adjournment, so it was on 17 September 2013. The only significant change of circumstance having occurred was that Mr Demarco’s solicitor had withdrawn from the proceedings.
On 16 September 2013, Ms Beckwith brought an application for contempt. The application was supported by an affidavit of her solicitor, David Morgan filed concurrently with the application. The application contained the following particulars of contempt:
“A. 2nd November 2012
The respondent failed to “do all things necessary to ensure his outstanding personal tax returns are lodged and as to the first 3 returns by 2 November 2012” in breach of paragraph 4(a) of the Order made by consent on 25th August 2012.
B. 24th December 2012
The respondent failed to all things necessary to “do all things necessary to ensure the next four tax returns were filed by 24th December 2012” in breach of paragraph 4(b) of the Order made by consent on 25th October 2012.
C. 28th February 2013
The respondent failed to all things necessary to “do all things necessary to ensure the balance of the returns were filed by 28th February 2013” in breach of the Order of 25th October 2012.
D. 4th April 2013
The respondent failed to do all things necessary to provide to the wife’s solicitors copies of the tax returns and assessments for the years ended 30th June 2001, 30th June 2002 and 30th June 2003 within 7 days of 27th March 2003 and contrary to paragraph 1 of the Order of 27th March 2013.
E. 11th April 2013
The respondent failed to do all things necessary to provide to the wife’s solicitors copies of tax returns to be lodged on his behalf for the years ended 30th June 2004, 30th June 2005, 30th June 2006 and 30th June 2007 on or before 11th April 2013 contrary to paragraph 2 of the Order of 27th March 2013.
F. 10th May 2013
The respondent failed to do all things necessary to file the outstanding tax returns up to the year ended 30th June 2012 by no later than 9th May 2013 and in breach of paragraph 3 of the Order of 27th March 2013.
G. 24th July 2013
The respondent failed to file his tax returns pursuant to paragraph 1 of the Orders made on 21st May 2013 extending the time for filing until 24th July 2013.
H. 10th September 2013
The respondent failed to file his tax returns contrary to paragraph 1 of the Order of 20th August 2013 extending the time for compliance with the Order of 27th March until 10th September 2013.”
The proceedings
The conduct of the proceedings is governed by Division 1 of Part XIIIA of the Family Law Act 1975 and Part 25B of the Federal Circuit Court Rules.
Although the application is termed an application for contempt, it is my view that it is more correctly characterised as a contravention proceeding. In particular, I am satisfied that section 112AP of the Act does not apply.
The section (section 112AP) applies to various species of contempt of court which do not of themselves constitute a contravention of an order of court but includes alleged contumacious behaviour which amounts to a “flagrant challenge to the authority of the court”.
In my view, Mr Demarco’s conduct does not constitute a “flagrant challenge to the authority of the court”. Rather the allegations against him at their most serious, are that he has contravened various orders of the court in respect of the provision of his tax returns without having a reasonable excuse to do so. As such, the allegations fall outside the remit of section 112AP.
I reach this conclusion as a consequence of having considered what was said by the Full Court of the Family Court in Ibbotson & Wincen,[8] where it was said that the use of the term ''flagrant challenge'' in the context of the authority of the court is
“…intended to underline the exceptional or striking nature of the contravention in question and thus to differentiate it from what might be described as the general run of breaches which are intended to be dealt with under s. 112AD.”
[8] Ibbotson & Wincen (1994) FLC 92-496 at 81,162
The Full Court also pointed out in the case that repeated breaches of an order are not necessarily a prerequisite to establish such a flagrant challenge, but may more readily attract the application of section 112AP.
In my assessment at their most serious, Mr Demarco’s actions are to be considered general run of the mill breaches which are amenable to being dealt with under section 112AB of the Act.
Although clearly he has breached a number of orders, I do not think his conduct can be regarded as being wilful disobedience of such a magnitude that if not responded to vigorously, it would bring the operation of justice into disrepute. They are not a flagrant challenge to the court which cannot go unanswered.
Rather, Mr Demarco’s non-compliance has been with several orders which have re-stated the same obligation. There is one process of contravention, not a series of individualised contempts. Essentially, I do not consider that his continued disobedience has had the effect of intensifying any contemptuous behaviour on his part.
Pursuant to Rule 25B.04, the court on such a contravention application, must:
·Inform the respondent of the allegations;
·Ask the respondent whether he wishes to admit or deny the allegation;
·Hear any evidence supporting the allegation;
·Ask the respondent to state his response to the allegation;
·Hear any evidence from the respondent concerned;
·Determine the proceedings.
Ms Beckwith was represented by her solicitor, Mr Morgan during the proceedings. The respondent was self-represented. As a consequence of this, Mr Demarco was clearly uncomfortable at being in court and unsure what to do in the conduct of his case.
From discussion with him, it was clear that he had received the application and Mr Morgan’s affidavit. In addition, he had been present in court on past occasions when orders were made in respect of the preparation of his tax returns. As such, I am satisfied that Mr Demarco is aware that he is required by the court to complete his taxation returns.
However, after discussion with him it was my conclusion that notwithstanding his understanding of the requirement to complete the various tax returns in question, his position was that he had a reasonable excuse for not doing so. It was on this basis that the hearing proceeded.
The only evidence in support of the application was the affidavit of Mr Morgan, which set out the procedural history of the matter and the fact that Mr Demarco’s taxation returns had not been completed as directed. There is no controversy about the contents of Mr Morgan’s affidavit and Mr Demarco elected not to cross-examine him.
Thereafter, Mr Demarco gave evidence on his own behalf and was cross-examined by Mr Morgan. Mr Demarco had elected not to file any answering affidavit material.
The evidence of Mr Demarco
Mr Demarco’s evidence was brief. He presented as a highly distressed individual who was not particularly well organised. He was however courteous to all concerned and was able to understand the questions put to him and answer them coherently.
Mr Morgan’s submission regarding Mr Demarco is that he is a fairly sophisticated person who has feigned his emotional distress and incompetence to secure a personal advantage for himself in these proceedings.
Essentially, Mr Morgan contends that Mr Demarco is intent on frustrating these proceedings so that his client will either give up or the court will have no other alternative than to conclude that any asset pool potentially available to be divided between the parties, will be a negative one because of the mountain of inchoate debt owing by Mr Demarco to the Australian Taxation Office and (omitted) Bank.
From Mr Morgan’s perspective, he is suspicious that once the proceedings have been concluded, Mr Demarco will be able to complete his taxation returns with alacrity; enter into some compromise with the ATO regarding the outstanding tax; obtain the necessary change of planning in respect of the Property A land; and as a consequence of these actions, transform what appears to be a negative asset pool into a positive one to his great advantage and the significant disadvantage of his client.
In my assessment, Mr Demarco did not present as such a financial machiaveli. Rather, he seemed to me to be a shambling ruin of a man. I appreciate that looks can be deceptive but I did not disbelieve Mr Demarco’s evidence or consider him to be such a cunning or deceptive person that he could over a number of months adopt the guise of a financial bumbler in order to trick the court and deprive Ms Beckwith of her proper entitlements.
The effect of Mr Demarco's evidence was simple. He had lost his job on 1 October 2013. His health was compromised. He was currently in receipt of unemployment benefits in the sum of $407.00 per fortnight. He had a sum of $900.00 in the bank. He owed the (omitted) Bank a sum of approximately $900,000.00.
In Mr Demarco’s own terminology, the issue of his outstanding tax returns was “driving him insane” because he found it close to impossible to reconcile his records in order to complete the necessary returns himself.
The effect of his evidence was that he had gone as far as he was able in gathering documents for his various returns but needed the assistance of an expert accountant to complete the actual returns. However, he had no funds to pay such an accountant and his previous accountant who had undertaken the first set of returns, was unwilling to assist him further without payment.
Essentially, the effect of Mr Demarco’s evidence was that he was incapable himself of completing the various tax returns and could not afford to pay a professional to do it for him. In addition, he knew of no white knight who would be prepared to assist him in this regard. As such, he was at a loss to know what to do next and was emotionally at his wits end because of the situation.
There are currently eight returns outstanding. Mr Demarco’s evidence is that it will cost a minimum of $140.00 per return. Accordingly, he requires a minimum sum of $1,120.00 to complete the returns. I acknowledge that in the general scheme of things, this cannot be regarded as a huge amount of money.
It is Mr Demarco’s evidence that all the items of real property which are registered in his name are on the market but he believes (omitted) Bank will retain any moneys achieved by such sales to satisfy the debts owed to it by him.
Mr Demarco has no proposals as to how the current impasse can be broken. He believes that he owes tax in excess of $660,000.00. In his words, so far as the taxation returns are concerned: “I’ve gone as far as I can.”
Similarly, Mr Morgan on behalf of Ms Beckwith, can offer no solution to the problem other than that Mr Demarco complete his tax returns. In particular, no offer of financial support is forthcoming to pay the accountant concerned or other suggestion to get around the issue of determining how much the ATO is likely to be owed by Mr Demarco. Essentially, Mr Morgan’s position is that the matter cannot go forward.
The legal principles applicable
Section 112AB provides a definition of the circumstances where a person is taken to have contravened an order. The relevant provision reads as follows:
“A person shall be taken for the purposes of this Part to have contravened an order under this Act if, and only if:
(a) where the person is bound by the order – he or she has:
(i) intentionally failed to comply with the order; or
(ii) made no reasonable attempt to comply with the order; or
The expression order under this Act is defined in section 112A. Amongst other things, it means “an order (however described) made by the court under this Act (other than a parenting order).”
I am satisfied that the orders made by the court in respect of Mr Demarco completing his taxation returns, fall within this definition. I am also satisfied that Mr Demarco is the sole person bound by these various orders. The obligation was placed upon him alone to complete his taxation returns within the timeframe specified by the court.
The essential area of inquiry for the court therefore is whether Mr Demarco has intentionally failed to comply with the orders or made no reasonable attempt to comply with them.
As previously indicated, it is Mr Demarco’s position that he has done the best he can to complete the various taxation returns but can go no further without assistance. It is his position that, given his circumstances, he has made a reasonable attempt to comply with the orders in question.
His stance in the proceedings engages section 112AC which defines the expression reasonable excuse for contravening an order. The section reads as follows:
“The circumstances in which a person may be taken to have had, for the purposes of this Part, a reasonable excuse for contravening an order under this Act include, but are not limited to, the circumstances set out in subsection (2).
(2) A person (in this subsection called the respondent ) shall be taken to have had a reasonable excuse for contravening an order under this Act if:
(a) the respondent contravened the order because, or substantially because, he or she did not, at the time of the contravention, understand the obligations imposed by the order on the person who was bound by it; and
(b) the court is satisfied that the respondent ought to be excused in respect of the contravention.”
There is no question that Mr Demarco did not understand the nature of his obligation to prepare his various tax returns. Accordingly, the focus of these proceedings is on whether Mr Demarco had an objectively reasonable excuse for contravening the court’s orders and it is satisfied that he ought to be so excused.
The standard of proof applicable
As these proceedings cannot be regarded as being criminal proceedings, the standard of proof applicable is that which is prescribed by section 140 of the Evidence Act 1995, namely proof on the balance of probability. However, the degree of satisfaction varies according to the gravity of the fact or facts to be proved by the person alleging the contravention concerned.
In particular, I am satisfied that Mr Demarco’s conduct cannot be regarded, even at its potentially most serious, as being a criminal contempt. In Witham v Holloway[9] Brennan, Deane, Toohey & Gaudron JJ of the High Court said as follows:
“In general terms, the distinction between civil and criminal contempt is that a civil contempt involves disobedience to a court order or breach of an undertaking in civil proceedings, whereas a criminal contempt is committed when either there is a contempt in the face of the court or there is an interference with the course of justice.”
[9] See Witham v Holloway (1995) CLR 525 at 530
In my view, Mr Demarco’s behaviour if it is to be sanctioned, should be sanctioned as a civil contempt as it involves a disobedience to the court’s order that he file his necessary taxation returns. Clearly, he has not behaved contemptuously in the face of the court in any way and I do not regard his actions as being calculated to interfere with the course of justice and so potentially leaving him open to the imposition of some form of condign punishment.
Has Mr Demarco intentionally failed to comply with court orders
On balance, I do not consider that the evidence available to me indicates that Mr Demarco has intentionally failed to comply with the order that he file his various taxation returns. I reach this conclusion because, with the assistance of his previous accountant, he was able to file a number of taxation returns which have apparently crystallised a significant taxation debt for which he is liable.
On balance, I reject the submission that he is disingenuously failing to complete his tax returns in order to derive advantage for himself in these proceedings. Rather, I accept his evidence that he would far prefer to have been able to complete the returns but has been unable to do so within the timeframe allotted.
Is there an absence of a reasonable attempt to comply with the court order
By its use of the word reasonable in section 112AB(a)(ii), the legislature has indicated that a failure to attempt to comply with an order must be reasonable when judged by reference to an objective standard.
It is I think, Mr Morgan’s submission that it is axiomatic Mr Demarco’s personal attempts to complete his taxation returns have been so ineffectual as to amount to a failure to attempt to comply with the operative order in objective terms. Essentially, a person in Mr Demarco’s position could have made a better fist of completing his tax returns.
I accept Mr Demarco’s evidence that his financial affairs are in chaos and this chaos is longstanding. No doubt the only person to whom fault can be ascribed for this parlous situation is Mr Demarco himself.
However, the object of these proceedings is not to apportion responsibility for the financial imbroglio arising from Mr Demarco’s many years of self-employment and his failure to pay proper attention to his taxation affairs. Rather, its focus is on what attempts Mr Demarco has made to put his taxation affairs in order as he was ordered to do by the court.
In this context, I consider that a reasonable person with similar attributes to Mr Demarco would be daunted and overwhelmed by the magnitude of the task of completing eight years of taxation returns without professional assistance. I do not consider that Mr Demarco’s incompetence in this regard is feigned or is objectively unreasonable.
Is there a reasonable excuse
The expression “reasonable excuse” is not defined within the Family Law Act 1975 other than in section 70NAE (in the context of contraventions of orders relating to children) and section 112AC. The words therefore must be given their ordinary English meaning.
Again, by the use of the word “reasonable”, the legislation requires that the explanation given by a person for contravening an order must be reasonable when judged by reference to an objective standard.
In Kelly & Kobelnek[10] Hannon J expressed the test as follows:
“In my opinion the respondent, in order to exculpate herself from the contravention must establish that she has or had a reasonable excuse according to an objective test namely, whether a reasonable person in the position of the mother would consider on reasonable grounds that she had a reasonable excuse for the contravention.”
[10] Kelly & Kobelnek [1998] FamCA 296 at page 3-4
Defences founded upon a reasonable excuse pose difficulty for the court because they depend upon the court making a value judgment in many cases because the circumstances in which the defence will be raised are likely to be myriad.
In the context of the application of the defence of “reasonable excuse” provided in a criminal statute, the High Court said as follows:
“… the reality is that when legislatures enact defences such as "reasonable excuse" they effectively give, and intend to give, to the courts the power to determine the content of such defences. Defences in this form are categories of indeterminate reference that have no content until a court makes its decision. They effectively require the courts to prescribe the relevant rule of conduct after the fact of its occurrence.”[11]
[11] Taikato & R (1996) 186 CLR 454 at 466
In Northern Territory of Australia v GPAO[12] Gleeson CJ and Gummow J held that, for the purpose of Part XIIIA, a reasonable excuse includes but is not limited to the matters specified in section 112AC. It is therefore erroneous to assume that because a respondent cannot find something specifically in the section to support a defence of reasonable excuse, no such defence exists, in the circumstances of the case concerned.
[12] See Northern Territory of Australia v GPAO (1999) FLC 92-838 at 85,759-60
In all the circumstances of this case, I am satisfied that the explanation Mr Demarco provides for not completing the taxation returns in question, namely he could not complete them himself and lacks the funds to obtain the services of a professional person to complete them on his behalf, is an objectively reasonable excuse, in all the circumstances of this case.
Accordingly, I have come to the conclusion that the contempt/ contravention application should be dismissed. Given that Mr Demarco was self-represented, it is not appropriate that any order for costs be made.
In reaching this conclusion, I appreciate that the parties are no further forward in resolving the impasse between them which turns on the lack of clarity regarding what is the precise sum Mr Demarco owes the ATO and what are the consequences of this in respect of any calculation of the parties’ pool of assets. This is regrettable and I can appreciate the frustration which the decision will engender for Ms Beckwith.
However, it is my view that the application was fundamentally misconceived. If Ms Beckwith had been successful in her application, it would have been necessary for the court to consider an appropriate sanction to penalise Mr Demarco’s conduct. This exercise of itself, would not necessarily have resulted in him completing his tax returns, given that it is my finding that he is currently unable to complete this task himself.
Accordingly, the result of an adverse finding against Mr Demarco would not necessarily have achieved the object which Ms Beckwith seeks. Rather, it may have resulted in the ostensible level of Mr Demarco’s contempt of the court’s orders being intensified.
In my view at this juncture, the only way forward is to fix the substantive proceedings for final hearing. It is frequently the case that the court is confronted in property proceedings with cases where one party asserts that the other has made incomplete or deceptive discovery.
The consequence of such incomplete discovery is that the court is authorised to adopt a broad brush approach to the division of any relevant property in favour of the party who is the victim of the other’s non-disclosure.
I will fix a date for further directions in the matter at which stage I anticipate that a further date for trial will be fixed. At the trial, the court will have to grapple with the evidence as is available to it.
Mr Demarco would be foolish to think that this judgment absolves him from responsibility to comply with the orders made by the court to complete his various taxation returns.
Those orders remain extant and it is his responsibility to complete them as ordered and in accordance with his statutorily imposed duty. Rather, these reasons are directed to the applicability of a contravention application to the circumstances arising.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding ninety-two (92) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 10 February 2014
Key Legal Topics
Areas of Law
-
Civil Procedure
Legal Concepts
-
Costs
-
Stay of Proceedings
0
3
3