Bellerive Homes Pty Ltd v FW Projects Pty Ltd

[2019] NSWSC 193

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2019] NSWSC 193
Hearing dates:	3 and 4 December 2018
Decision date:	06 March 2019
Jurisdiction:	Common Law
Before:	N Adams J
Decision:	(1) The notice of motion filed on 21 August 2018 is dismissed.  (2) The plaintiff is to pay the defendant’s costs on the ordinary basis.
Catchwords:	CONTEMPT – civil contempt – where parties entered into design and construction contract – where application made under the Building and Construction Industry Security of Payment Act 1999 (NSW) for adjudication of contractual dispute – where adjudication was that plaintiff entitled to judgment for $1,110,063.83 – where adjudication certificate filed as judgment for a debt pursuant to s 25(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) – where adjudicated sum unsatisfied – where plaintiff seeks defendant be punished for contempt by declaration, sequestration order, fine or other orders – where defendant made no case submission – whether prima facie case respondents guilty of contempt – May v O’ Sullivan (1955) 92 CLR 654; [1995] HCA 38 – whether failure to pay a judgment debt is capable of constituting civil contempt – whether relevant distinction between a judgment debt and other order to pay money CIVIL PROCEDURE – civil contempt – where adjudication certificate filed as a judgment for a debt pursuant to s 25(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) – where judgment given file number – where contempt proceedings commenced by notice of motion – whether proceedings should have commenced by way of summons – Supreme Court Rules 1970 (NSW), Part 55, rule 6(2) – Civil Procedure Act 2005 (NSW), s 63, 133(2)
Legislation Cited:	Absconding Debtors Act 1978 (NT) Arrest on Mesne Process Act 1902 (NSW), ss 4, 5, 6 Building and Construction Industry Security of Payment Act 1999 (NSW), Div 2, Pt 3, s 25(1) Civil Proceedings Act 2011 (Qld), s 100 Civil Procedure Act 2005 (NSW), ss 3, 63, 90, 107, 130, 131, 133 Court Procedure Rules 2006 (ACT), rr 2001, 2500 Corporations Act 2001 (Cth), ss 459G, 459H, 459J Criminal Procedure Act 1986 (NSW), Part 1, Sch 3 Debtors Act 1869 (UK), s 5 Enforcement of Judgments Act 1991 (SA) s 5(7) Evidence Act 1995 (NSW), ss 81, 82, 87 Home Building Act 1989 (NSW), s 18B Imprisonment for Debt Abolition Act 1846 (NSW), ss 2, 3 Imprisonment of Fraudulent Debtors Act 1958 (Vic) Judgment Creditors’ Remedies Act 1901 (NSW), ss 19, 20 Judgment Debt Recovery Act 1984 (Vic), s 19 Restraint of Debtors Act 1984 (WA) Supreme Court Act 1970 (NSW), ss 16, 96 Supreme Court Amendment Act 1972 (NSW), s 3(d) Supreme Court Rules 1970 (NSW), Pt 55, rr 6, 11.6 Uniform Civil Procedure Rules 2005 (NSW), rr 36.11, 37.3, 39, 40.6
Cases Cited:	Advan Investments Pty Ltd v Gleeson Motor Sales Pty Ltd [2003] VSC 201 Australian Competition and Consumer Commission v Hercules Iron Pty Ltd [2008] FCA 1182 Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483; [1965] HCA 21 Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98; [1986] HCA 46 Barton v Walker [1979] 2 NSWLR 740 Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2018] NSWSC 1435 Blacktown City Council v Wilkie and Others (No 15) [2016] NSWLEC 98; (2016) 219 LGERA 1 Carter v Roberts [1903] 2 Ch 312 Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd [2014] VSCA 261; (2014) 47 VR 527 Director of Public Prosecutions (NSW) v Elskaf [2012] NSWSC 21 D B Mahaffy & Associates v Mahaffy [2015] NSWSC 66 Fairclough v Manchester Ship Canal Co [1897] WN 7; (1897) 41 Sol Jo 225 Gilbert v Endean (1878) 9 Ch D 259 Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 Hulbert v Cathcart [1894] 1 QB 244 Hurd v Zomojo Pty Ltd [2015] FCAFC 148 Ingram v Ingram [1927] VLR 335 In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167 Johnston v Nationwide News Pty Ltd (2005) 62 NSWLR 309; [2005] NSWCA 17 Kazal v Thunder Studios Inc (California) [2017] FCA 111 Lade & Co Pty Ltd v Black [2006] 2 Qd R 531 Mahaffy v Mahaffy [2013] NSWSC 245 Mahaffy v Mahaffy [2018] NSWCA 42 Markisic v Commonwealth of Australia [2007] NSWCA 92 May v O’ Sullivan (1955) 92 CLR 654; [1995] HCA 38 Morgan v State Of Victoria (2008) 22 VR 237; [2008] VSCA 267 Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69 Papantoniou v Stonewall Hotel Pty Ltd (2018) 19 BPR 38; [2018] NSWCA 85 Re Group Pty Ltd v Kazal [2017] FCA 1084 Reliance Financial Services Pty Ltd v Allyma Express Holdings Pty Ltd (No 2) [2018] NSWSC 1776 Ronowska v Kus (No 2) [2012] NSWSC 817 Salter v Director of Public Prosecutions (2009) 75 NSWLR 392; [2009] NSWCA 357 Siminton v Australian Prudential Regulation Authority (2008) 168 FCR 140; [2008] FCAFC 89 SRG Civil Pty Ltd v Brolton Group Pty Ltd [2018] NSWSC 618 Weissensteiner v R (1993) 178 CLR 217 Witham v Holloway (1995) 183 CLR 525; [1995] HCA 3 Wyszynski v Bill [2005] NSWSC 110 Wyszenko v Wyszenko [2012] NSWSC 732
Texts Cited:	Arlidge, Eady & Smith on Contempt (5th ed, 2017, Sweet & Maxwell) Barnett and Harder, Remedies in Australian Private Law (2014, Cambridge University Press) Miller on Contempt of Court (4th ed, 2017, Oxford University Press) NSW Law Reform Commission, First Report on Supreme Court Procedure (Report No 7) Ritchie’s Uniform Civil Procedure NSW (looseleaf, LexisNexis) Williams, Civil Procedure in Victoria (looseleaf, LexisNexis)
Category:	Principal judgment
Parties:	Bellerive Homes Pty Ltd (Plaintiff) FW Projects Pty Ltd (Defendant)
Representation:	Counsel: A Leopold SC with D A Hughes (Plaintiff) F Corsaro SC with M J Connor (Defendant)   Solicitors: DLA Piper (Plaintiff) Mills Oakley (Defendant)
File Number(s):	2018/156528
Publication restriction:	Nil

Judgment

1. By notice of motion filed on 21 August 2008 the plaintiff, Bellerive Homes Pty Limited (Bellerive) seeks, inter alia, a declaration that FW Projects Limited atf the Freshwater Development Trust (FW Projects) (the first respondent) is guilty of contempt of the Supreme Court of New South Wales in that in disobedience of the judgment of the court entered on 18 May 2018 FW Projects failed to pay to Bellerive the amount of $1,166,550.71. An order is also sought that FW Projects be punished for such contempt by a sequestration order, a fine or any such punishment as the court sees fit.

2. Christopher Peter Rose (the second respondent) and Stuart Allen Fowler (the third respondent) are the sole directors of FW Projects. Declarations are also sought that each of them is guilty of contempt of the Supreme Court of New South Wales in that in disobedience of the same order each of them did fail to cause FW Projects to pay to Bellerive the judgment sum or, alternatively, to take all available steps or all reasonable steps to cause it to do so. Orders are also sought that each of Mr Rose and Mr Fowler be punished for such contempt by way of imprisonment, a fine or any other such punishment as the court may see fit.

The hearing

3. The motion came on for hearing before me on 3 December 2018 and concluded on 4 December 2018. Mr A Leopold SC appeared with Mr D A Hughes for Bellerive and Mr F Corsaro SC appeared with Mr M J Connor for the three respondents.

4. Bellerive read three affidavits: the affidavit of the Amelia Heather Kelly sworn 21 August 2018, the affidavit of Martin Folkes sworn 21 August 2018 and the affidavit of Felipe Gomez Meneses sworn 21 August 2018. It relied on the exhibit “AHK-1” to the affidavit of Ms Kelly, ASIC Current & Historical Company Extract for Bellerive Homes Pty Ltd (extracted on 20 July 2018) and FWP Nominees Pty Ltd (extracted on 2 December 2018), and the Commonwealth Bank documents in relation to Quasar Commercial. Exhibit “AHK-1” to the affidavit of Ms Kelly included a large number of documents including the following: ASIC current and historical extracts for Bellerive and FW Projects and personal current and historical search for the second and third respondents; a copy of the Judgment/Order dated 18 May 2018; and correspondence including a copy of a letter from the Bellerive solicitor addressed to the FW Projects solicitor dated 29 May 2018 enclosing a copy of the Judgment/Order (other correspondence is referred to in more detail below).

5. At the close of Bellerive’s case the three respondents made a no case submission: May v O’ Sullivan (1955) 92 CLR 654; [1995] HCA 38. I reserved my decision at that time as to whether there was a prima facie case that the three respondents were guilty of civil contempt as charged.

The evidence

6. Most of the facts relied upon by Bellerive were not in dispute. Unless I indicate otherwise, the summary of the evidence below was accepted by the respondents.

7. On 1 November 2016, Bellerive, as contractor, entered into a “Design and Construction Contract” (“D&C Contract”) with FW Projects, as principal, concerning the design and construction of a mixed retail and residential development in Freshwater. As at the date of completion, disputes had arisen between Bellerive and FW Projects as to the proper construction of the contract in relation to various matters and an application was made under Division 2 of Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOP Act”) for adjudication of the dispute by an independent adjudicator.

8. On 1 May 2018, the adjudicator held that Bellerive was entitled to payment from FW Projects within 15 days of the determination, being 16 May 2018. The amount due was $1,110,063.83.

9. On 18 May 2018 Bellerive filed an adjudication certificate in this Court under s 25(1) the SOP Act which is in these terms:

“(1)  An adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly.

(2)  An adjudication certificate cannot be filed under this section unless it is accompanied by an affidavit by the claimant stating that the whole or any part of the adjudicated amount has not been paid at the time the certificate is filed.

(3)  If the affidavit indicates that part of the adjudicated amount has been paid, the judgment is for the unpaid part of that amount only.

(4)  If the respondent commences proceedings to have the judgment set aside, the respondent:

(a)  is not, in those proceedings, entitled:

(i)  to bring any cross-claim against the claimant, or

(ii)  to raise any defence in relation to matters arising under the construction contract, or

(iii)  to challenge the adjudicator’s determination, and

(b)  is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings.”

(Emphasis added.)

10. As a result of filing the adjudication certificate, a judgment was issued in these terms:

“TERMS OF JUDGMENT/ORDER

Judgment:

FW Projects Pty Limited asf [sic] the Freshwater Development Trust,

First Defendant

is to pay

Bellerive Homes Pty Ltd, First Plaintiff the sum of

Claim amount: $1166366.71

Interest claimed: $0.00

Filing fees: $184.00

Service fees: $0.00

Solicitors fees: $0.00

Other costs: $0.00

TOTAL: $1166550.71”

11. The judgment debt was given a “case number” of 2018/156528. On the same day that the adjudication certificate was filed in this court, Bellerive also commenced proceedings in the Technology and Construction List of the Equity Division of this Court seeking an order that FW Projects immediately release, return and deliver up to it one of two NAB guarantees provided to FW Projects in the amount of $389,750 under the D&C Contract.

12. On 29 May 2018, Bellerive wrote to FW Projects enclosing a copy of the judgment debt. That same day Bellerive obtained a garnishee order over FW Projects’ property and on 15 June 2018 it obtained a charging order over the project. Both of these used the proceedings number 2018/156528.

13. On 15 June 2018, FW Projects commenced proceedings in the Technology and Construction List of the Equity Division of this Court claiming, inter alia, that Bellerive owes it $569,250 in liquidated damages, that Bellerive was only entitled to $114,060.66 for works carried out (less a deduction or set-off for the cost of rectifying those works), that Bellerive had breached a number of statutory warranties implied under s 18B of the Home Building Act 1989 (NSW) and damages and costs.

14. Between 25 July 2018 and 2 August 2018 Bellerive’s solicitor wrote a number of letters and forwarded them by email as follows:

1. On 25 July 2018 to FW Projects addressed to all three respondents enclosing a copy of the Judgment/Order. Although there is no penalty notice on the judgment debt, the letter included a “penalty notice” in its body in these terms:

“TO: FW PROJECTS PTY LIMITED, STUART FOWLER AND CHRISTOPHER ROSE

IF YOU:

(A) FAIL TO SATISFY THE JUDGMENT (IN THE CASE OF FW PROJECTS PTY LIMITED); OR

(B) FAIL TO TAKE ALL REASONABLE STEPS TO CAUSE THE JUDGMENT TO BE SATISFIED (IN THE CASE OF MR FOWLER AND MR ROSE),

YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT (SUCH AS A FINE).”

2. On 27 July 2018 to the second respondent (Mr Rose) attaching copies of the judgment and the letter dated 25 July 2018 (with the penalty notice on it). A copy of a “Read” receipt for the email dated the same day was before the court.

3. On 27 July 2018 to the third respondent (Mr Fowler) attaching copies of the Judgment and the letter dated 25 July 2018 (with the penalty notice on it) with a copy of a “Read” receipt for the email dated the same day.

4. On 2 August 2018 to FW Projects’ solicitor attaching a notice of change of solicitor and copies of the letter dated 25 July 2018 (with the penalty notice on it) and the Judgment/Order.

15. On 3 August 2018, FW Projects filed a notice of motion seeking an order staying the judgment issued on 18 May 2018 requiring it to pay to Bellerive the amount of $1,166,550.71. The motion used proceedings number 2018/156528.

16. By notice of motion filed on 21 August 2018 Bellerive commenced the current proceedings against FW Projects and its directors for contempt of court for non-payment of the 18 May 2018 judgment debt. The motion used proceedings number 2018/156528.

17. On 4 September 2018, Bellerive obtained a writ of levy over the building which was the subject of the project which gives rise to the current dispute. The writ identifies proceedings number 2018/156528.

18. On 17 and 18 September 2018, FW Projects’ motion seeking a stay of the judgment debt came on for hearing before me. I subsequently dismissed that stay application on 24 September 2018 and made an order that FW Projects pay Bellerive’s reasonable costs of the motion: Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2018] NSWSC 1435. As at the date of the judgment, the amount outstanding had not been paid nor had any payment of the outstanding amount been paid into Court.

19. Bellerive relied upon the financial records for FW Projects and identified a number of payments made by FW Projects to other companies at a time the judgment debt was owing to Bellerive. Some of those payments were as follows:

1. In June 2018: to third parties $97,000 and $4000 (“loan repayment Fwp”) and to creditors $387,750 (Bakers Delight) and $101,501.27 (Mills Oakley).

2. In July 2018: to third parties $400 and $17,000 for “loan repayment Fwp”, $2637.80 to Stratachoice, $100,000 for “000018”, $70,000 for “Loan repayment Freshwater”, $18,735.50 two times for “Legals for Fwp”, $1302.75 for electricity, $924 to Pine property Services Pty Ltd (for marketing costs and campaign in relation to Albert Street Shop), $51,500 for “Loan repayment Fwp” and $1,650 for “Freshwater” and to creditors $8,250 to Contract Constructions Pty Ltd, $1,900 to Meadow Real Estate Pty Ltd and $416,370.50 to Ray Ross Pty Ltd, First National.

3. In August 2018: to third parties $3,960 to Mills Oakley, $15,000 for “consultation Fwp”, $12,000 for “consultation Fwp” and $517 for “Certifier’s strata” and to creditors $2,496.58 to Colin Biggers & Paisley, $5,500 to First Quadrant properties Pty Ltd and $1,100 to Meadow Real Estate Pty Ltd.

20. Bellerive also relied upon a declaration as to solvency signed by both of the directors of the company in September 2018 certifying that FW Projects was solvent as at 30 June 2018.

21. In addition to the declaration of solvency and the financial records referred to above, Mr Leopold also sought leave to rely upon an affidavit sworn by the solicitor for FW Projects, Mr Damien Ward, during the proceedings in the corporations list to set aside the statutory demand. He relied upon the relevant principles as set out in Papantoniou v Stonewall Hotel Pty Ltd (2018) 19 BPR 38; [2018] NSWCA 85 as to the discretionary exercise to be undertaken when seeking to grant leave for an affidavit in one proceeding to be used in separate proceedings.

22. There was only one paragraph of the affidavit sought to be relied upon, paragraph 9(i), and it was in these terms:

“The debt the subject of the statutory demand is disputed in that;

I am informed and believe by Chris Rose, a Director of the Plaintiff, that the claim by the Plaintiff in the Technology and Construction List proceedings will exceed $1,500,000 in damages and that the Plaintiff is solvent.”

23. Mr Leopold submitted that the evidence was relevant as to the question of solvency of FW Projects which is in turn relevant to the question of capacity to pay. He relied upon s 82(a) of the Evidence Act1995 (NSW).

24. Section 81(1) of the Evidence Act provides that the hearsay rule and the opinion rule do not apply to evidence of an “admission”. Section 82 of the Evidence Act, which is headed “Exclusion of evidence of admissions that is not first-hand” provides that s 81 does not prevent the application of the hearsay rule to evidence of an “admission” unless:

“(a)  it is given by a person who saw, heard or otherwise perceived the admission being made, or

(b)  it is a document in which the admission is made.”

25. Mr Leopold accepted that what Mr Rose told Mr Ward was second-hand hearsay and not admissible but that Mr Ward’s belief was admissible as an admission binding on FW Projects. Reliance was placed on paragraph 2 of Mr Ward’s affidavit (which stated that he had the authority to make the affidavit) and s 87(1) of the Evidence Act. Section 87(1) relevantly provides that for the purpose of determining whether a previous representation made by a person is also taken to be an “admission” by a party, the court is to admit the representation if it is reasonably open to find that:

“(a)  when the representation was made, the person had authority to make statements on behalf of the party in relation to the matter with respect to which the representation was made, or

(b)  when the representation was made, the person was an employee of the party, or had authority otherwise to act for the party, and the representation related to a matter within the scope of the person’s employment or authority, or…”

26. Mr Corsaro objected to leave being granted for the relevant paragraph in the affidavit to be relied upon on the basis that it was second-hand hearsay and could not in any event amount to an “admission” in relation to FW Projects.

27. I ruled at the time that I did not propose to permit Bellerive to rely upon paragraph 9(i) of the affidavit of Mr Ward sworn on 21 June 2018 as an admission against interest of FW Projects. The evidence was second-hand hearsay and s 87(1) of the Evidence Act could not overcome the fact that Mr Ward’s opinion or belief could not be an “admission” made on behalf of FW Projects. Although it is to be accepted that, as the solicitor for FW Projects, Mr Ward had authority to swear the affidavit on behalf of his client, his “belief” based on what he had been told does not amount to an admission. Although he held that state of mind as the agent of the company it was not an admission by the respondents that FW Projects was in fact solvent at that time.

26. In addition to the above evidence, it was accepted during submissions that although Bellerive had served a statutory demand on FW Projects, it had since been withdrawn.

27. It was also accepted that the writ of levy on property obtained by Bellerive had not as yet been executed.

Amendments to the statements of charge

30. During the hearing Bellerive sought to amend the statements of charge in five respects. The first amendment was to include the words “since 18 May 2018” to paragraphs 6 and 26. The second amendment was to paragraph 13 by inserting new subparagraph (b), the third amendment was to correct a typographical error in paragraph 27 by describing the third respondent instead of the second, the fourth amendment was to insert words “the third respondent knew that at all material times after 18 May 2018” and the fifth amendment was to insert particulars to paragraphs 6, 16 and 26 in Schedule 1.

31. The purpose of the amendments was to enable Bellerive to rely upon the payments made to other creditors both before and after 21 August to show the contempt was continuing and had not been purged.

32. Mr Leopold submitted that the statement of charge could not have been amended earlier because FW Projects did not advise them until 28 November 2018 that the respondents would argue that anything after 21 August 2018 was irrelevant to the charges. Mr Leopold submitted that because it is a continuing contempt leave was sought also to rely on payments and evidence after 21 August and that the only substantial change was to annex a schedule showing payments both before and after 21 August.

33. Mr Leopold submitted that the contempt was established by 21 August 2018 because there are evidentiary admissions that FW Projects was solvent and because money was paid to other entities rather than satisfy the judgment of the Court. He submitted that the contempt that was charged on 21 August 2018 was a contempt that continues to this day and that the contempt proceedings were commenced at the time when the payment was not paid made and there was a capacity to do that. Payments made after 21 August 2018 were added because a number of them continued after that date.

34. Mr Leopold submitted that the second and third respondents were joined not because they are bound by the orders but because they are obstructing the course of justice or interfering with the processes of the court by failing to take reasonable steps to ensure that the orders are fulfilled and in the way they conducted themselves. He submitted that by 21 August 2018 there had been contempt because FW Projects had available financial means to fund the judgment amount and deliberately chose not to do so. The directors were able to make arrangements with related companies to pay others but chose not to make those arrangements to pay the plaintiff. The insertion of the words “since 18 May 2018” was sought because the failure to pay commenced when the judgment was given but that it was not necessary to do that because “at all material times” had to be since 18 May 2018.

35. Objection was made to these amendments. Mr Corsaro submitted that the basis of the statement of charge was and remains deficient on the basis that it was not served on the second and the third respondents and that the proposed amended date 18 May 2018 pre-dates the date the charge was brought. Mr Corsaro submitted that the respondents were prejudiced by the amendments as if they had known that the case against them was going to be an ongoing contempt from 18 May the respondents may have presented evidence. A further objection to the amendments was that the charge must fail on technical grounds as the contempt was stated to be as at the date of the charge not that it was an ongoing contempt.

36. I granted Bellerive leave to make some of the amendments sought but did not allow it to rely upon any payments after 21 August 2018 to establish the contempt itself (although that material could be relevant to penalty). No adjournment application was made a behalf of FW Projects as a result of the amendments.

37. Following the amendments the statement of charge read as follows:

“Defendant / first respondent

1   The defendant I first respondent (hereafter, the first respondent) is charged with contempt of the Supreme Court of New South Wales by failing to comply with the Court's orders.

2    On 18 May 2018, the Court gave and entered a judgment (Order) requiring the first respondent to pay the plaintiff the sum of $1,166,550.71 (Judgment Sum).

3    The Order was served on the first respondent on 25 July 2018 by personal delivery at the company's registered office.

4    Accordingly, the first respondent had knowledge of the terms of the Order.

5    The first respondent has not paid the plaintiff the Judgment Sum, and has failed to comply with the terms of the Order.

6    That failure was deliberate and voluntary, in that at all material times, since 18 May 2018, the first respondent had the available financial means to fund the payment of the Judgment Sum and satisfy the terms of the Order.

                                               Particulars

The particulars appear in Schedule 1 of this Amended Statement of Charge

7    Accordingly the first respondent has committed a civil contempt.

8   Further and in the alternative, the failure of the first respondent to comply with the Order was contumacious, in that it had had the available financial means to fund the payment of the Order, but wilfully elected not to comply with the Order, and therefore acted in defiance of the authority of the Court. Accordingly, the contempt committed by the first respondent was a criminal contempt and should be punished as such.

Second respondent

9    The second respondent is charged with contempt of the Supreme Court of New South Wales for causing the first respondent to fail to comply with the Court's orders.

10    On 18 May 2018, the Court gave and entered the Order, requiring the first respondent to pay the plaintiff the Judgment Sum.

11    The second respondent is a director of the first respondent (and has been since well before the date of the Order).

12   The Order was personally served on the second respondent on 30 July 2018.

13   The second respondent has been aware of the terms of the Order since 29 May 2018.

                                               Particulars

a)   a letter enclosing the Order sent to the first respondent's solicitor, Mr Damian Ward of Mills Oakley, dated 29 May 2018;

b)    personal service of the Order at the first respondent's registered office (Bedford CA, Level 16, 101 Miller Street North Sydney) on 25 July 2018;

c)   personal service of the Order on the first respondent's solicitor on 25 July 2018;

d)   an email attaching the Order to the first respondent's solicitor (sent to [email protected]), dated 25 July 2018;

e)   a letter enclosing the Order addressed to the second respondent left at his place of residence, dated 25 July 2018;

f)    an email attaching the Order to the second respondent (sent to [email protected]), dated 27 July 2018; and

g)   personal service of the Order on the second respondent on 30 July 2018 at his place of residence.

14   The first respondent has not paid the plaintiff the Judgment Sum, and has failed to comply with the terms of the Order.

15   The second respondent has not caused the company to pay the Judgment Sum, or alternatively to take all available steps, or alternatively all reasonable steps, to cause it to do so.

16   The second respondent’s failure to take all reasonable steps to cause the first respondent to comply with the terms of the Order, or alternatively to take all available steps to cause it to do so, was deliberate and voluntary in that, at all material times since 18 May 2018, the first respondent had the available financial means to fund the payment of the Judgment Sum and satisfy the terms of the Order.

                                                 Particulars

The particulars appear in Schedule 1 of this Amended Statement of Charge

17   Accordingly the second respondent committed a civil contempt.

18   Further and in the alternative, the failure of the second respondent to cause the first respondent to comply with the Order, or alternatively to take all available steps, or alternatively all reasonable steps, to cause it to do so, was contumacious (in that that failure was in defiance of the authority of the Court), in that the second respondent knew that first respondent had the available financial means to fund the payment of the Judgment Sum, and accordingly, the contempt committed by him was a criminal contempt and should be punished as such.

Third respondent

19   The third respondent is charged with contempt of the Supreme Court of New South Wales for causing the first respondent to fail to comply with the Court's orders.

20   On 18 May 2018, the Court gave and entered the Order, requiring the first respondent to pay the plaintiff the Judgment Sum.

21   The third respondent is a director of the first respondent (and has been since well before the date of the Order).

22   The Order was personally served on the third respondent on 14 August 2018.

23   The third respondent has been aware of the terms of the Order since 29 May 2018.

                                        Particulars

The third respondent's awareness is to be inferred from the following:

a)   the plaintiff repeats the particulars at paragraph 13a) to 13d) above;

b)   an email to the third respondent attaching the Order (sent to [email protected]), dated 27 July 2018; and

c)   personal service of the Order on the third respondent on 14 August 2018.

24   The first respondent has not paid the plaintiff the Judgment Sum, and has failed to comply with the terms of the Order.

25   The third respondent has not caused the company to pay the Judgment Sum, or alternatively to take all available steps, or alternatively all reasonable steps, to cause it to do so.

26   The third respondent's failure to take all reasonable steps to cause the first respondent to comply with the terms of the Order, or alternatively to take all available steps to cause it to do so, was deliberate and voluntary in that, at all material times since 18 May 2018, the first respondent had the available financial means to fund the payment of the Judgment Sum and satisfy the terms of the Order.

                                     Particulars

The particulars appear in Schedule 1 of this Amended Statement of Charge

27   Accordingly the third respondent committed a civil contempt.

28   Further and in the alternative, the failure of the third respondent to cause the first respondent to comply with the Order, or alternatively to take all available steps, or alternatively all reasonable steps, to cause it to do so, was contumacious (in that that failure was in defiance of the authority of the Court), in that the third respondent knew that at all material times after 18 May 2018 the first respondent had the available financial means to fund the payment of the Judgment Sum, and accordingly, the contempt committed by him was a criminal contempt and should be punished as such.

     Schedule 1 – Particulars to paragaraph 6, 16 and 26

1.   On or about 4 September 2018 the second and third respondents signed a declaration of solvency in respect of the first respondent, which formed part of thefirst respondent's financial statements for the 2018 financial year;

2.   From shortly after 18 May 2018 the first respondent made payments in substantial sums to third parties who were neither judgment creditors of the first respondent nor secured creditors of the first respondent whilst refraining from satisfying any part of the Judgment Sum and continued to do so at all material times after 18 May 2018 being:

(a)   payment of $97,000 on 20 June 2018 from account number 73-334-2497, with the narration ‘Loan repayment Fwp’ (TB 2 tab 39 p 460);

(b)   payment of $4,000 on 26 June 2018 from account number 73-334-2497, with the narration ‘loan repayment Fwp’ (TB 2 tab 39 p 460);

(c)   payment of $400 on 16 July 2018 from account number 73-334-2497, with the narration ‘loan repayment Fwp’ (TB 2 tab 39 p 461);

(d)   payment of $17,000 on 16 July 2018 from account number 73-334-2497, with the narration 'loan repayment Fwp' (TB 2 tab 39 p 461);

(e)   payment of $2,637.80 on 16 July 2018 from account number 73-334-2497, with the narration ‘strata’ (TB 2 tab 39 p 461) in payment of invoice dated 4 July 2018 from Strata Choice Ptv Ltd (TB 3 tab 119 p 680);

(f)   payment of $100,000 on 16 July 2018 from account number 73-334-2497, with the narration ‘000018’ (TB 2 tab 39 p 461);

(g)   payment of $70,000 on 17 July 2018 from account number 73-334-2497, with the narration ‘Loan repayment Freshwater’ (TB 2 tab 39 p 461);

(h)   payment of $18,735.50 on 18 July 2018 from account number 73-334-2497, with the narration ‘Legals for Fwp’ (TB tab 39 p 462);

(i)    payment of $18,735.50 on 19 July 2018 from account number 73-334-2497, with the narration ‘Legals for Fwp’ (TB 2 tab 39 p 462);

(j)    payment of $1,302.75 on 20 July 2018 from account number 73-334-2497, with the narration ‘energy’ (TB 2 tab 39 p 462);

(k)    payment of $924 on 26 July 2018 to Pine Property Services Ptv Ltd (TB 3 tab 122 p 683);

(I)    payment of $51,500 on 31 July 2018 from account number 73-334-2497, with the narration ‘loan repayment Fwp’ (TB 2 tab 39 p 462);

(m)    payment of $1,650 on 31 July 2018 from account number 73-334-2497, with the narration ‘Freshwater’ (TB 2 tab 39 p 462);

(n)    payment on 3 August 2018 of $3,960 to Mills Oakley (TB 3 tab 121 p 682);

(o)    payment of $15,000 on 7 August 2018 from account number 73-334-2497, with the narration ‘consultant Fwp’ (TB 2 tab 39 p 462);

(p)    payment of $12,000 on 24 August 2018 from account number 73-334-2497, with the narration ‘consultant Fwp (TB 2 tab 39 p 462)’;

(q)   payment of $517 on 24 August 2018 from account number 73-334-2497, with the narration ‘Certifiers strata’ (TB tab 39 p 462) in payment of invoice dated 22 August

(r)   disallowed

(s)   the following payments made to creditors in June 2018, as evidenced by the Aged Payables record for July 2018 at TB 2 tab 61 p 556:

(i)   $387,750 to Bakers Delight;

(ii)   $101,501.27 to Mills Oakley;

(t)   the following payments made to creditors in July 2018, as evidenced by the Aged Payables record for August 2018 at TB 2 tab 62 p 557:

(i)   $8,250 to Contact Constructions Ptv Limited;

(ii)   $1,900 to Meadow Real Estate Ptv Limited;

(iii)   $416,370.50 to Ray Ross Ptv Ltd, First National;

(u)   the following payments made to creditors in August 2018, as evidenced by the Aged Payables record for September 2018 at TB 2 tab 63 p 558:

(i)   disallowed

(ii)   $2,496.58 to Colin Biggers & Paisley;

(iii)   $5,500 to First Quadrant Properties Ptv Limited in payment of invoice dated 1 August 2018 (TB 3 p 131 p 694);

(iv)   $1,100 to Meadow real Estate Ptv Limited;

(v)   disallowed

(v)   disallowed

3.   On 3 August 2018 the first respondent applied for a stay of the Order.”

The elements to be proved beyond reasonable doubt

38. There was no dispute as to the matters which needed to be established beyond reasonable doubt to establish a civil contempt based on a failure to comply with a court order. Perram J set out the relevant elements to be established in Re Group Pty Ltd v Kazal [2017] FCA 1084 (“Re Group”) at [73]. Before doing so his Honour noted that the purpose of the law of civil contempt is to compel obedience rather than punish disobedience, which, by contrast, is the domain of criminal contempt. Both types of contempt must be proved beyond reasonable doubt. His Honour cited (at [74]) the decision in Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 at [133] per Hayne, Heydon and Crennan JJ as authority for these general principles. His Honour went on to summarise the elements to be proved beyond reasonable doubt for a civil contempt as follows:

“In a case of civil contempt, the Plaintiff must prove that:

(i) an order was made by a court;

(ii) the order was sufficiently clear such that one can be sure beyond reasonable doubt that the order was not complied with;

(iii) the order was served on the alleged contemnor or that service was for some reason dispensed with under some lawful order;

(iv) the alleged contemnor had knowledge of the terms of the order;

(v) the alleged contemnor breached the order; and

(vi) the alleged contemnor took a deliberate step which, even if not intended to, breached the order. What is necessary is not that the alleged contemnor intended to breach the order but rather that the order was breached and that the action constituting the breach was intended. Hence, casual, accidental or unintentional acts which breach an order are excluded.”

39. In relation to elements (i)–(v) his Honour relied upon Advan Investments Pty Ltd v Gleeson Motor Sales Pty Ltd [2003] VSC 201 at [31]–[32] per Gillard J. In relation to element (v) his Honour relied upon Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 (“AMIEU v v Mudginberri”) at 106–107. As to 4 his Honour relied on Kazal v Thunder Studios Inc (California) [2017] FCA 111 at [105] per Besanko, Wigney and Bromwich JJ and also Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd [2014] VSCA 261; (2014) 47 VR 527 (“Grocon”) at [299].

40. I shall consider some of these decisions and the principles to be derived from them in more detail later in these reasons.

The plaintiff’s case

41. Bellerive relied upon the following evidence in order to establish the elements identified in the statements of charge beyond reasonable doubt.

That an order was made by a court

42. The adjudication certificate had been filed under s 25 of the SOP Act and the judgment debt was enforceable by virtue of the operation of that provision.

The order was sufficiently clear

43. It was submitted that the terms of the judgment debt (extracted above at [10]) were sufficiently clear and the payment was due immediately due to the operation and purpose of the SOP Act.

The order was served on each of the respondents

44. FW was first served with the judgment under cover of the letter on 29 May 2018.

45. Mr Rose was personally served with the judgment and cover letter by a process server on 14 August 2018.

46. Mr Fowler was personally served with the judgment and cover letter by a process server on 30 July 2018.

Each of the respondents had knowledge of the terms of the order

47. It was submitted that given that each of the defendants was formally served with the judgment, being a judgment of the Supreme Court of NSW, it is inconceivable that they did not take the time to acquaint themselves with the terms of the judgment, particularly given how succinctly the order was expressed.

48. It was submitted that in relation to Mr Rose and Mr Fowler, the question as to whether each of them acquainted themselves with the terms of the Judgment is a matter peculiarly within the knowledge of each of them. It follows, it was submitted, that the inference can be safely be drawn that each of them did in fact do so absent any evidence from each of them denying that he had so acquainted himself: Weissensteiner v R (1993) 178 CLR 217 at [64].

Each of the respondents breached the order

49. There was no dispute that the full amount of the judgment debt (including interest) remains unpaid. The first respondent is in breach for not paying the debt and the first and second respondents are guilty for not causing the first respondent to pay the debt.

Each of the respondents took a deliberate step to breach the order

50. It was submitted that there was an intentional and deliberate breach of the order in circumstances where it could not have been “casual, accidental or unintentional”: AMIEU v Mudginberri at 113.

51. The evidence in support of this element included the declaration as to solvency signed by both of the directors of the company in September 2018 certifying that FW Projects was solvent as at 30 June 2018 (although this pre-dated the commencement of the contempt proceedings on 21 August 2018) and the evidence of various payments to third parties and other creditors. It was submitted this is not a case of inability to pay but, rather, a decision has been made by FW Projects not to pay the judgment debt and by it directors not to cause FW Projects to pay it.

No case submissions by the respondents

52. At the end of the plaintiff’s case Mr Corsaro SC made a no case submission in relation to all three of the respondents. He relied upon seven matters as being fatal to Bellerive’s case for contempt.

53. First, it was submitted that the proceedings had been commenced by an incorrect initiating process. The Supreme Court Rules 1970 (NSW) (“SCR”) Part 55, rule 6 provides that if no proceedings are on foot the proceeding are to be commenced by way of summons rather than notice of motion. It was accepted that when the adjudication certificate was filed and became a judgment debt it was given a proceedings number by the Supreme Court Registry. It was further conceded that the stay proceedings used that same proceedings number. Despite this, it was submitted that there were no current proceedings in this matter in relation to the judgment debt.

54. Second, it was submitted that, as a matter of general principle, there cannot be a contempt for failure to pay a judgment debt as opposed to an order to pay money. A judgment debtor who does not satisfy a judgment debt that is not the product of a court order, cannot be liable for contempt because the underlying rationale for the law of contempt is wilful disobedience of an order rather than failure to meet a finding of indebtedness.

55. Third, it was submitted that a judgment debt is not an “order” of the court in any event. Reliance was placed on the statutory language of s 25(1) of the SOP Act which entitles a claimant to file an adjudication certificate as a judgment for a debt in any Court of competent jurisdiction. The SOP Act should be construed on the basis that Parliament chose to use the word “judgment” in recognition that only a Court that can make an “order” to a party or person to do something or refrain from doing something. There is no statutory basis for that judgment to be converted into a mandatory order that has to be paid. It merely gives rise to enforcement options.

56. The respondents relied upon a number of provisions of the Civil Procedure Act2005 (NSW) (“CPA”) and the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) in support of a submission that the words “judgment” and “order” have different meanings. For example, s 90 of the CPA requires the Court to “give such judgment or make such order as the nature of the case requires”. It was submitted that the legislature chose the word “or” as a disjunction, to clearly separate judgments from orders and that s 90 of the CPA differentiates between the genesis of judgments and orders, in that judgments are given and orders are made.

57. It was submitted that the distinction between judgments and orders is further reflected in the use of very specific expression of those terms throughout the legislation governing civil procedure in NSW. For example, r 36.15 of the UCPR states:

“A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.”

(Emphasis added.)

58. The respondents accepted that, under s 3 of the CPA, orders for the payment of money fall within the definition of “judgment” but submitted that Bellerive had deliberately used the terms interchangeably which is a fundamental misconception that has affected Bellerive’s whole approach to the present application.

59. It was submitted that the Court would find that not all judgments are orders for the payment of money, not all orders for the payment of money are judgments, and not all orders for the payment of money arise due to a judgment for a debt. An order for the payment of money may be made as a result of a judgment for damages, restitution and breaches of fiduciary duties; none of which are a judgment for debt, as described in s 25 of the SOP Act. Further, the words “In this Act …” must have some work to do. Those words make it clear that the definition of “judgment” under the CPA does not apply to the term “judgment” as used in the SOP Act.

60. It was submitted that Bellerive’s reliance on In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167 (“Douglas Aerospace”) and Mahaffy v Mahaffy [2013] NSWSC 245 (“Mahaffy”) do not assist given the facts of those cases.

61. It was submitted that the only common element between the facts of the Mahaffy cases and the present case is that a fixed sum is concerned. That is simply not enough to convict the respondents, particularly having regard to the dearth of authority to suggest they can be in contempt for failure to pay a judgment for debt.

62. Fourth, it was submitted that there are enforcement steps available in relation to enforcement of a judgment debt. A contempt proceeding is a remedy of last resort. There was no evidence that Bellerive had exhausted all other available opportunities to enforce the debt. There was evidence that a number of enforcement steps had been taken by the applicant pursuant to s 106 of the CPA and the UCPR since the judgment was made on 18 May 2018. A garnishee order was made on 29 May 2018; a charging order was made on 15 June 2018; a writ for the levy of property was issued on 4 September 2018.

63. Fifth, it was submitted that the terms of the charges were defective insofar as the references to an “ability to fund” is concerned. There is a difference between having cash and having the ability to borrow the relevant amount. It was noted that by reference to the financial records of FW Projects any funds coming in were immediately paid out. There can be no positive duty to find the cash.

64. Sixth, it was submitted that the order had no dates to pay and thus it could not be said that there was certainty in relation to it. In Wyszynski v Bill [2005] NSWSC 110 at [45], White J held that if no time is specified in an order for doing an act, it is not enforceable until that time is specified. His Honour followed two cases cited in Ritchie’s Uniform Civil Procedure NSW (looseleaf, LexisNexis), which states the proposition as follows:

“An omission to fix the time does not make the order ineffectual, but until it is fixed by a subsequent order, the order is unenforceable: Gilbert v Endean (1878) 9 Ch D 259 at 266; Carter v Roberts [1903] 2 Ch 312.”

65. If the judgment is construed as an order, no time has been set for the compliance with that order and, accordingly, it is not yet enforceable.

66. It was submitted that given that there was no judgment on the stay application until 24 September 2018 the respondents could not have been in contempt of the judgment until around 24 October 2018 at the earliest (being one month after the amount was confirmed as being payable). Thus, commencing contempt proceedings on 21 August 2018 was premature as there was no certificate of solvency at that time.

67. Finally, it was submitted that the prosecution in relation to Mr Rose and Mr Fowler was flawed. The second respondent and the third respondent are not in breach of any order of the Court and, in any event, have no personal liability to meet the judgment sum. The second and third respondents relied upon Payne JA’s observations in Mahaffy v Mahaffy [2018] NSWCA 42 (“Mahaffy CA”) (with whom Emmett AJA agreed) that there is no obligation on directors to find the money out of their own resources. Reliance was also placed on Payne JA’s observations at [254] that if a plaintiff’s case establishing wilfulness is circumstantial and reliant upon intermediate facts, these facts need to be established beyond reasonable doubt. The evidence that money was going in and being paid out of FW Projects’ accounts does not mean that it was money that was necessarily available to pay the judgment debt.

68. Even if a decision had been made to pay other debtors rather than the judgment debt the judgment debt was not a secured debt and thus there was no legal basis for priority to be given to it.

Submissions of Bellerive

69. Mr Leopold SC responded to the no case application as follows.

70. First, as to the complaint that the proceedings had been commenced by notice of motion rather than summons reliance was placed on SCR Part 55, rule 6(2). Furthermore it was submitted that when FW Projects commenced the proceedings for a stay of the judgment it did so with the same proceedings number that was created when the adjudication certificate was filed. FW Projects accepted that there were proceedings on foot at that stage and now appears to have changed its position.

71. As for the submission that there has never been any finding of civil contempt for failure to pay the judgment debt, it was submitted that that is because it is an expensive way of enforcement and there are other enforcement avenues appropriate. Just because it has not been done does not mean that it is not open to be done.

72. Mr Leopold traced the history of the CPA and its previous legislation in support of his submission that civil contempt remains as an enforcement option in relation to a money judgment to this day.

73. It was submitted that s 131 of the CPA clearly retains the ability to make a finding of civil contempt in relation to a money debt. Although Garling J in Mahaffey noted that debtors’ prisons were no longer used by 1879, his Honour noted that a person could still be dealt with for contempt for a wilful failure to pay debt.

74. As for proving that the non-payment was “wilful” it was submitted that for the entire period from 18 May 2018 to 3 August 2018 the respondents did nothing to set aside or stay the judgment. Accordingly, the failure to satisfy the Judgment up until then was plainly voluntary rather than accidental.

75. Bellerive pointed to the procedural history of the stay application to suggest that there was no urgency with which it was pursued. It was submitted that the mere filing of the stay application does nothing to negate the conclusion that FW Projects deliberately did not pay the judgment debt. The solvency of FW Projects was such that it should have been satisfied immediately. The failure to pay was not casual or accidental as the circumstances of the stay application make clear.

76. As for the complaint that a judgment debt is not in order, it was submitted that Mr Corsaro’s definition of a judgment as being a “pronouncement of an entitlement” was wrong and had been “made up” by Mr Corsaro. It was noted that the definition of judgment in s 3 of the CPA includes an order and that a judgment is an order to pay.

77. As to the complaint that the terms of the charge were defective in that the charge refers to “an ability to fund”, it was submitted that the relevant test is “has the means to pay” which is the same thing.

78. Although it was conceded that there was no date provided as to when payment was due, Bellerive relied on a number of authorities for the proposition that the judgment was immediately payable and enforceable, including Douglas Aerospace which concerned a judgment which was the result of the filing of an adjudication certificate.

79. It was submitted that the amount in the judgment debt was immediately enforceable from 18 May 2018 and FW Projects became responsible for taking all possible steps to comply with it. It was further submitted that Mr Rose and Mr Fowler were each responsible for taking all possible steps to cause FW Projects to comply with the judgment. It was submitted that the amount was paid forthwith given the terms of s 25 of the SOP Act. Reference was also made to s 23 of the SOP Act as to the legislative purpose of the Act as being that the amount be immediately payable.

80. Finally, as for the liability of Mr Rose and Mr Fowler, Mr Leopold submitted that he was not suggesting that the directors should have paid personally. Rather it was submitted that as directors if they were aware that the company had come into funds it was their duty to pay off the court debt. It was submitted that it does not matter how the funds were made available in circumstances where a deliberate decision had been made to pay other creditors rather than the judgement debt.

81. As for the complaint that the prosecution had not identified the specific acts of each of the second and third respondents who were being charged separately, it was submitted that as they were the only two directors they either agreed or there was a deadlock; and if there was a deadlock there was a requirement for them to seek to wind up the company. There is no evidence that winding up proceedings were commenced, hence it can be safely inferred that there was no deadlock. Furthermore both Mr Rose and Mr Fowler signed the statement of accounts together.

82. Overall, in relation to the no case submission, it was submitted that the declaration of solvency is highly relevant. The evidentiary onus shifts to the opponents to show it was not wilful. It was submitted that the fact of the stay being refused is relevant to the state of mind of the directors.

Consideration

83. Bellerive seeks declarations that the three respondents are in contempt of the court arising out of a judgment debt following the filing of an adjudication certificate under s 25 of the SOP Act. It contends that FW Projects is in contempt for not paying it immediately after it was entered as a judgment debt in this court and that Mr Rose and Mr Fowler are in contempt of court for failing to cause FW Projects to pay the amount of the judgment debt.

84. As for the distinction between a civil and a criminal contempt, in Witham v Holloway (1995) 183 CLR 525; [1995] HCA 3, Brennan, Deane, Toohey and Gaudron JJ described it as follows at 530 (footnotes omitted):

“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 either when there is a contempt in the face of the court or there is an interference with the course of justice. However, disobedience or breach of an undertaking amounts to a criminal contempt if it involves deliberate defiance, or as it is sometimes said, if it is contumacious.”

85. Their Honours went on to state, at 531, that the basis of the distinction lies in the difference between a civil contempt which is remedial or coercive, and a criminal contempt which is concerned with the public interest, vindicating judicial authority or maintaining the integrity of judicial process. Despite this distinction, all contempt proceedings, whether brought for civil or criminal contempt, are criminal in nature, and all charges must be proved beyond reasonable doubt.

86. A civil contempt can be “converted” to a criminal contempt but only after a finding of civil contempt has been made. The parties accepted that the question of whether the conduct, if proven, was contumacious and amounts to a criminal rather than a civil contempt is a matter that does not fall for consideration unless and until the civil contempt is established beyond reasonable doubt.

87. At the close of Bellerive’s case the respondents made a “no case” submission that there was no prima facie case for each of them to answer. The relevant principles in relation to establishing that there is no prima facie case are well established. In May v O’ Sullivan, the High Court (Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ) stated the following:

“When, at the close of the case for the prosecution, a submission is made that there is ‘no case to answer’, the question to be decided is not whether on the evidence as it stands the defendant ought to be convicted, but whether on the evidence as it stands he could lawfully be convicted. This is really a question of law”.

88. The question I am to determine is whether each of the respondents could lawfully be convicted on the evidence as it currently stands; the question is not whether every element of the offence is established beyond reasonable doubt. To put it another way, I am to determine whether there is evidence capable of proving each of the elements of the contempt beyond reasonable doubt. If I am satisfied that there is no case to answer, then the proceedings must be dismissed;

89. In Director of Public Prosecutions (NSW) v Elskaf [2012] NSWSC 21 Garling J summarised the relevant authorities, albeit in the context of a summary prosecution in the Local Court, in this way at [47]:

“The legal principles applicable by the Magistrate at the conclusion of the evidence called by the prosecution in a summary proceeding are well known, but is worthwhile restating them in a succinct way

(a) at the end of the prosecution evidence, it is open to a defendant to make a ‘no case’ submission, which is determined by the Court as a matter of law: Cox v Salt (1994) 12 WAR 12 at 14; Amalgamated Television Services Pty Ltd v Marsden [2001] NSWCA 32; 122 A Crim R 166 at [48]-[50] per Ipp AJA (Powell and Giles JJA agreeing);

(b)the standard of proof to be applied in a no case submission is proof beyond a reasonable doubt: R v Murphy (1985) 4 NSWLR 42 at 69B;

(c) the question to be determined is whether on the evidence, the defendant could be lawfully convicted of the offence charged: May v O’Sullivan [1955] HCA 38; 92 CLR 654 at 658; R v Serratore [1999] NSWCCA 377; (1999) 48 NSWLR 101 at [127] per Dunford J (Greg James J agreeing);

(d) the determination of a no case submission is based upon all of the prosecution's evidence, if accepted, and

(i) taken at its highest and strongest: DPP v Lee [2006] NSWSC 270 at [31]; Wunderwald at [28];

(ii) even if it is tenuous, inherently weak or vague: Doney v The Queen [1990] HCA 51; 171 CLR 207 at 214-5;

(iii) unless the evidence is inherently incredible: Haw Tua Tau v Public Prosecutor [1982] 1 AC 136 at 151; and

(iv) unless the evidence is manifestly self-contradictory or the product of a disorderly mind: R v Bilick (1984) 36 SASR 321 at 337; Cox at 15; Marsden at [50].

(e) a no case submission should not be rejected even if the prosecution case is a weak one, because the finding that there is a prima facie case, calls upon the defendant to make answer to that case. There is no reason why a weakness in the prosecution case may not be eked out by something in the case for the defence: Zanetti v Hill [1962] HCA 62; 108 CLR 433 at 442-443 per Kitto J; Wunderwald at [26];

(f) a no case submission is to be kept distinct from any subsequent decision involving a question of fact, namely whether to accept the evidence of the prosecution witnesses or any of them, beyond a reasonable doubt. This distinction is no empty formality: DPP v Lee at [32].”

90. Before turning to consider whether the evidence relied upon by Bellerive is capable as a matter of law of establishing the contempt beyond reasonable doubt, I will address the threshold objection raised by the respondents that the proceedings are flawed as they were not properly commenced.

91. Part 55, rule 6 of the SCR provides that:

“(1)  Where contempt is committed in connection with proceedings in the Court, an application for punishment for the contempt must be made by motion on notice in the proceedings, but, if separate proceedings for punishment of the contempt are commenced, the proceedings so commenced may be continued unless the Court otherwise orders.

(2)  Where contempt is committed, but not in connection with proceedings in the Court, proceedings for punishment of the contempt must be commenced by summons, but, if an application for punishment of the contempt is made by motion on notice in any proceedings, the application may be heard and disposed of in the latter proceedings, unless the Court otherwise orders.”

92. Bellerive commenced the proceedings by way of notice of motion. The respondents contend the proceedings should have been commenced by way of summons as the alleged contempt did not arise “in connection with proceedings in the Court”.

93. When the judgment debt was entered it was given a proceedings number: 2018/156528. Section 133(1) of the CPA provides that: “A judgment or order of the court may not be enforced until it has been entered in accordance with the uniform rules.” Section 133(2) provides that this applies not only to any judgment, order, determination or decree of a court but also to “any adjudication or award of a person having authority to make an adjudication or award.”

92. The relevant uniform rule referred to in s 133(1) is UCPR r 36.11, which is headed “Entry of judgments and orders”. Rule 36.11(1) provides that “Any judgment or order of the court is to be entered” and r 36.11(2) provides that “Unless the court orders otherwise, a judgment or order is taken to be entered when it is recorded in the court’s computerised court record system”. Rule 36.11(3) provides that “In this rule, a reference to a judgment or order of the court includes a reference to any judgment, order, determination, decree, adjudication or award that has been filed or registered in the court, or of which a certificate has been filed or registered in the court”, as referred to in s 133(2) of the CPA.

93. When a judgment or order of this court is entered, it already has a proceedings number. When a judgment, order, determination or decree of any other court or a relevant adjudication or award is filed and registered in this court, it must be given a proceedings number. Thus when FW Projects sought a stay of the judgment debt it used the proceedings number given to the matter when the certificate was filed in this Court under the SOP Act. The stay was commenced by way of notice of motion. When filing the notice of motion seeking these declarations for contempt Bellerive used the same proceedings number, being 2018/156528.

94. I am unable to accept the respondents’ argument that the fact that Bellerive commenced these proceedings by way of a notice of motion is “fatal” to its success. Although it is to be accepted that there were never any proceedings in this Court nor any operative judicial act in this Court, the provision of a case number to the enforceable judgment means that it becomes a judgment in this Court and enforceable accordingly. The alleged contempts all are “connected with” the judgment debt with the relevant proceedings number thus it was appropriate to commence by way of notice of motion rather than a summons.

95. Even if I am wrong about whether the proceedings should have been brought by way of summons rather than notice of motion, I would have granted Bellerive leave under s 63 of the CPA for a summons to be filed retrospectively nunc pro tunc. Section 63 provides, inter alia, that where there is a failure to comply with the CPA or the UCPR including as to form, the Court may exercise its powers to allow amendments and to make orders dealing with the proceedings generally.

96. I turn then to consider whether Bellerive has produced evidence such that, taken at its highest, it is capable of establishing a civil contempt against each of the respondents beyond reasonable doubt.

97. I am satisfied that the evidence is capable of establishing that there is a judgment debt dated 18 May 2018 which was subsequently served on the respondents. There is also evidence capable of establishing that the company and its directors were aware of the debt and the amount owed. The evidence discloses that each of Mr Rose and Mr Fowler is, and has since 28 September 2012 been, a director of FW Projects. There are no other directors. Mr Rose is and has since 28 September 2012 also been the sole secretary. Accordingly, between them, Mr Rose and Mr Fowler are, and have at all material times been, solely responsible for the management of the affairs of FW Projects. It was common ground that, as at the date of the hearing, no monies had been paid to Bellerive. There is also evidence capable of establishing that as at 30 June 2018 FW Projects was solvent, although that evidence was not available in admissible form at the time these contempt proceedings were commenced.

98. Bellerive contended that satisfaction of the above matters was sufficient for declarations to be made that all three respondents are in contempt of court by breaching the Court’s orders. I do not agree. These proceedings raise for consideration two important questions which do not appear to ever have been considered before. First, does the power of the court to punish for contempt for breaching a court order extend to non-payment of a judgment debt given the alternate enforcement options available under the UCPR and the CPA? Secondly, if the answer to the first question is yes, does it make any difference if the judgment debt arose from the filing of a certificate where there was never any operative judicial act?

99. In order to answer these questions, it is necessary to trace the history of how the courts in NSW have enforced the non-payment of money debts (as opposed to other breaches of court orders) and reconcile the availability of those enforcement procedures with the relevant principles governing civil contempt generally.

Enforcement procedures generally

102. As the authors of Miller on Contempt of Court (4th ed, 2017, Oxford University Press) note at 452, the law has long treated disobedience of an order requiring payment of a sum of money differently from disobedience of all other orders. This difference reflects the fact that contempt as a remedy of enforcement (as opposed to other forms of contempt) has its genesis in equity. In Arlidge, Eady & Smith on Contempt (5th ed, 2017, Sweet & Maxwell) at 1-47, the authors write that, at the end of the seventeenth century, one particular aspect of the Court of Chancery’s jurisdiction was clear:

“… namely the power to deal summarily with what we now call civil contempts. The common law courts in general offered litigants the remedy of damages with distress as the ultimate sanction. The Court of Chancery, however, was ready to compel obedience to its orders and decrees, and indeed its general process, by imprisonment. Those who disobeyed were brought before the court by writ of attachment and were regarded as contemnors.”

103. In Morgan v State Of Victoria (2008) 22 VR 237; [2008] VSCA 267, Nettle and Ashley JJA (Pagone AJA agreeing) at [93] cited Williams, Civil Procedure in Victoria (looseleaf, LexisNexis), which traces the history of judgments for the payment of money as follows at [66.02.10]:

“A common law judgment for the payment of money was stated in the form of a ‘recovery’ by the plaintiff. The judgment was that the plaintiff ‘recovered against the defendant’ $100,000. The judgment did not, in terms, impose an obligation upon the defendant to do something. Therefore, unlike a decree in equity, which consisted of a command addressed to the defendant, a common law judgment could not be enforced by the processes of contempt, the writ of attachment and the writ of sequestration. Nor was there jurisdiction to later fix a time for compliance in order to render the defendant liable to be dealt with for contempt in the event of disobedience: Hulbert v Cathcart [1894] 1 QB 244. A common law judgment for the recovery of money was enforced by the writ of fieri facias, which authorised the sheriff to levy on the property of the defendant for the judgment amount and costs.”

104. Their Honours went on to state at [113]:

“[113] … under the former rules a common law judgment was in form other than a command to pay and did not specify a date for payment, and it was not open to obtain a subsequent order limiting time for payment. Contrastingly, in equity, judgments were in the form of a command to pay and, although they did not always specify a date for payment, it was open to obtain a subsequent order limiting time in which to pay.”

105. In Hulbert v Cathcart [1894] 1 QB 244, the plaintiffs had recovered judgment in an action against the defendant in a fixed amount. They obtained an order from the Master at Chambers that the defendant was to pay the amount within 10 days or be liable to have a writ of sequestration issued against her property. On appeal Wills J noted the argument before the Court was thus: because the Court of Chancery before the Judicature Acts had power to make an order for the payment of money (which could later lead to a writ of sequestration), an order for such a writ could now be made in the Queen’s Bench Division of the High Court and a judgment in the common law courts could be made to develop in the same way. His Honour went on to respond to this argument as follows:

“I do not think so. The form of decree in a Chancery suit is that the unsuccessful party shall pay a certain sum of money; and we are told now that judges in the Chancery Division are in the habit of supplementing that decree by an order fixing the time within which the payment is to be made. I do not stop to inquire whether a judge has the power to do so, except whether it was by inadvertence that the decree failed to fix such time. Assuming, however, that such an order can be made, how is it possible to apply to the common law action? In such an action the judgement is that the party do recover so much; that is, of course, in any way that he can. How can a master or judge have power to fix a time within which he shall recover it? The judgement is not an order to pay money; and for a master to order that the unsuccessful party shall pay the sum recovered within a certain time is totally to alter the nature of the remedy.”

106. As at the date of the above decision, the Imprisonment forDebt Abolition Act 1846 (NSW) had already abolished debtors’ prisons in NSW. It was relevantly in these terms:

“2. And be it enacted That no person shall be arrested on final process issuing out of any Court of Requests unless the Commissioner thereof shall be satisfied by affidavit that the defendant fraudulently conceals money goods or valuable securities from his judgment creditor or that the defendant is about to leave the Colony without satisfying the judgment or that he has any income salary or other means whereby in the opinion of the Commissioner he can pay such judgment or is about to remove any of his property out of the jurisdiction of the said Court.

3. And be it enacted That except as hereinafter provided no person shall be arrested on any writ of capias ad satisfaciendum issuing out of the Supreme Court Provided always that if any Judge of the said Supreme Court shall be satisfied by affidavit that the defendant fraudulently conceals money goods or valuable securities from his judgment creditor or that the defendant is about to leave the Colony without satisfying the judgment the said Judge shall order such writ to issue and the defendant may be arrested on such writ anything hereinbefore contained notwithstanding Provided also that nothing in this section contained shall extend to any writ of ca. sa. issued in any action for breach of promise of marriage libel slander seduction criminal conversation with the plaintiff's wife or any malicious injury.”

107. The writ of capias ad satisfaciendum was a writ issued by a court to bring a debtor to court. Thus from 1846 there was no power to arrest or imprison a person for failing to pay his or her debts save in specified circumstances. In fact New South Wales abolished debtors’ prisons before England did. It was not until 1869 that England abolished imprisonment of debtors: s 4 of the Debtors Act 1869 (UK). Despite this, s 5 of the Debtors Act still provided for imprisonment, subject to a number of restrictions, where a person had the means to pay and refused or neglected to do so. The relevant part of s 5 was as follows:

“5. Subject to the provisions herein-after mentioned, and to the prescribed rules, any court may commit to prison for a term not exceeding six weeks, or until payment of the sum due, any person who makes default in payment of any debt or instalment of any debt due from him in pursuance of any order or judgment of that or any other competent court.

Provided—

…

(2.) That such jurisdiction shall only be exercised where it is proved to the satisfaction of the court that the person making default either has or has had since the date of the order or judgment the means to pay the sum in respect of which he has made default, and has refused or neglected, or refuses or neglects, to pay the same.”

108. Thus the law in NSW in relation to debtors’ prisons differed to that in England from as early as 1846. The remedies available to enforce debts in the common law jurisdiction included the writ of fieri facias, which was a direct order to seize the judgment debtor’s goods.

109. The Imprisonment forDebt Abolition Act was followed by the Judgment Creditors’ Remedies Act 1901 (NSW) which provided for enforcement remedies for creditors. As with the previous Act, Part IV of the Judgment Creditors’ Remedies Act (as made) provided that:

“Execution against the person.

19. Except as hereinafter provided no person shall be arrested on any writ of capias ad satisfaciendum issuing out of the Supreme Court.

20. If a Judge of the said Court is satisfied by affidavit that the defendant—

(a) fraudulently conceals money, goods, or valuable securities from his judgment creditor, or

(b) is about to leave New South Wales without satisfying the judgment,

the said Judge shall order such writ to issue, and the defendant may be arrested on such writ.”

110. In the following year the Arrest on Mesne Process Act 1902 (NSW) was enacted. Arrest on mesne process was a process which allowed an alleged debtor to be imprisoned to prevent them leaving the jurisdiction. Even as far back as 1902 there were a number of statutory preconditions before such an arrest could be made and even then the process only applied in cases of flight. Sections 4 to 6 provided as follows:

“4. No person shall be arrested upon mesne process in any civil action in any court except in the cases and in the manner hereinafter provided.

5. In any action in the Court in which the defendant, under the law in force before the passing of the Act third Victoria number fifteen, would have been liable to arrest, whether upon the order of a Judge, or without such order, if a Judge is satisfied by affidavit disclosing the facts constituting the ground of the plaintiff's claim, or by evidence on oath before such Judge,—

(a) that the plaintiff has prima, facie a good cause of action in respect of his claim against the defendant, and if such Judge is also satisfied by the affidavit of the plaintiff or some other person—

(b) that such cause of action is to the amount of twenty pounds or upwards, or that the plaintiff has sustained damage to that amount; and

(c) that any defendant is about to remove or is making preparations to remove out of the jurisdiction of the Court; and

(d) that such action will be defeated unless such defendant is forthwith apprehended; and

(e) that the application is made within a reasonable time after the fact of the defendant's intention so to remove came to the knowledge of the plaintiff or might have become known to him by reasonable diligence on his part, such Judge may by a special order direct that such defendant shall be held to bail for such sum as such Judge thinks fit, not exceeding the amount of the debt or damages.

6. (1) Thereupon the plaintiff, within the time expressed in such order but not afterwards, may sue out one or more writ or writs of capias against such defendant.”

111. Thus, prior to the enactment of the Supreme Court Act 1970 (NSW) (“SCA”) in 1970, a debtor could not be arrested for failing to pay a debt unless there was evidence of fraud or flight. On the other hand, a writ of attachment was an available remedy in equity for a civil contempt of breaching an order. The use of the writs of attachment and sequestration in equity was described by Windeyer J as follows in Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 at 498–499; [1965] HCA 21:

“Originally sequestration was the final weapon in the Chancery Court's armoury, used – when attachment, proclamation of attachment and commission of rebellion had been unavailing – to compel a recalcitrant defendant to appear and answer the plaintiff’s bill. The old procedure for contempts of mesne process was substantially altered by the Chancery Contempts Act, 1830. But committal and sequestration continue to-day as means of enforcing compliance with the decrees of a court of equity. They are used primarily to compel obedience rather than to punish disobedience; for equity acts in personam, and historically the purpose of the processes of the Court of Chancery was to rectify and reform the conscience of the wrongdoer. The jurisdiction was, to use Professor Ashburner’s phrase, “a cathartic jurisdiction”: Ashburner on Equity, 2nd ed. (1933) p. 38. When contempt lies in disobedience of a court's order to do something, the contemnor may be imprisoned, until by doing what was ordered he purges his contempt. When contempt lies in disobedience of an injunction not to do something, the contemnor is ordinarily permitted to purge his contempt by an apology to the court, making reparation for the damage done by the forbidden act and paying the costs as between solicitor and client: see the article ‘Contempt of Court’ in the Encyclopaedia of the Laws of England. I do not suggest that a person who contumaciously disobeys a decree may not in some cases be, sentenced to remain in custody for a fixed term by way of expiation. There are instances of that in the reports; and see s. 93 of the Equity Act, 1901-1957 (N.S.W.). Nevertheless the processes that an equity court uses to enforce its orders are primarily coercive or remedial rather than punitive. In the absence of express statutory authority they do not, I think, include the essentially penal sanction of a fine.”

112. In its 1969 report on Supreme Court Procedure (Report No 7), commenting to the Attorney General on the draft bill, the NSW Law Reform Commission (“LRC”) noted that both attachment of the person for enforcement of an order and arrest on mesne process were to be abolished and noted that under the SCA the “power to imprison is limited to cases where contempt of Court is involved”. The LRC went on to note that:

“Imprisonment for debt is the survival of an archaic procedure and we think that it has no place in a modern system. The abolition is achieved by sections 10 and 98 of the Bill.”

113. The above history would suggest that proceeding against a judgment debtor for civil contempt was not available to enforce the payment of a debt arising in the common law jurisdiction of the Court prior to the enactment of the SCA. This follows from the fact that the remedy arose from the equitable jurisdiction, whereas common law debts were not an order to do something and were enforced by other means.

114. The SCA abolished arrest on mesne process and also the writ of capias ad respondendum, which was a writ issued by a court to bring the defendant, having failed to appear, to answer a civil action against him. Section 10 of the SCA was in these terms:

“Notwithstanding section sixty-nine of this Act, no person shall be arrested under the jurisdiction of the Court formerly exercised by writ of capias ad respondendum or by writ of ne exeat, or otherwise on mesne process.”

115. Section 16(1) of the SCA provided:

“Subject to the rules, and unless the Court otherwise orders, this Act does not apply to, and the repeals and amendments made by this Act do not affect, nice any proceedings commenced in the Court before the commencement of this Act.”

116. Section 16(3)(b) of the SCA provided:

“any person held in custody on the date of commencement of this Act under any attachment or committal (otherwise than for contempt of court) or under any writ of capias ad respondendum or writ of ne exeat or otherwise on mesne process shall, unless there is other lawful warrant for holding him in custody, be discharged from custody on the date of commencement of this Act.”

117. Section 16 was amended by the Supreme Court Amendment Act 1972 (NSW) where, in s 3(d), the words “mesne process” were replaced by “mesne process or under any writ of capias ad satisfaciendum” (the section was again amended in 1994 to replace the gender-specific language).

118. The reference to persons still being held in custody “under any attachment or committal (otherwise than for contempt of court)” could only be a reference to a person who had been imprisoned for either fraud or potential flight under s 20 of the Judgment Creditors’ Remedies Act 1901. The distinction drawn between persons held in custody under any attachment or committal for contempt of court and those held in custody under any attachment or committal per se is a recognition that a writ of attachment was at that time a discretionary remedy available in equity for a civil contempt. This is consistent with s 96 of the SCA, which provided that although a judgment was not enforceable against a person by any process for attachment or committal, the section “does not affect the power of the Court to commit for contempt of Court”.

143. By way of contrast, there is no need to fix a date for the payment of a judgment debt as it is enforceable immediately.

144. Finally, the availability of alternate enforcement procedures for the payment of a judgment debt (as opposed to breaches of court orders such as injunctions or undertakings) poses considerable difficulties given that the Court’s determination as to whether a particular contempt is contumacious or not does not arise until after a finding of civil contempt has been made. As the Victorian Court of Appeal observed in Grocon at [277], the “general practice” in civil contempt proceedings is “… of dealing with an allegation of contumacy at the penalty phase of the contempt proceeding, that is, after a finding of contempt has been made”. The Court went on to note that if contumacy is established, then “what begins as a possible civil contempt may become converted into a criminal contempt by a finding, at the penalty stage, that the conduct was contumacious”: at [279].

145. In the present matter Bellerive seeks orders, inter alia, that the first respondent be fined and that the second and third respondents be imprisoned. The court would only impose such punishments once a finding that any civil contempt was serious enough to be “converted” into a criminal contempt. If the court were not satisfied that a breach was contumacious then the available relief extends no further than that available for enforcement of a judgment debt under the CPA and the UCPR.

146. Thus, the availability of longstanding alternate enforcement procedures for enforcing a judgment debt argue strongly against the remedy of a declaration of contempt being available for failure to pay such a debt. As Barnett and Harder note in relation to the “enforcement of money remedies” (at 452), “the general trend of the law has been to move away from enforcement against the person of the defendant towards enforcement against property”.

The Mahaffy litigation

151. Although it was common ground that the parties could find no case in which a finding of civil contempt had ever been made for non-payment of a judgment debt, Bellerive placed significant reliance on the decisions of Garling J and subsequently the Court of Appeal (Simpson JA, Payne JA and Emmett AJA) in the contempt proceedings arising out of the Mahaffy litigation. Those decisions concerned multiples breaches, some of which related to a failure to comply with costs orders made during ongoing litigation. This would seem to be the only case in NSW in which a person has been found in contempt of court for failure to pay a money debt, albeit an interlocutory costs order in long-running civil litigation.

152. In Mahaffy, Garling J was required to determine a notice of motion seeking summary dismissal of contempt proceedings brought in relation to numerous charges, some of which were interlocutory costs orders. There had been acrimonious litigation between two brothers in the District Court, Jeffrey and David Mahaffy (I shall refer to these men as David and Jeffrey for ease of reference and no disrespect is intended). During the civil proceedings David was ordered to do a number of things and pay a number of costs orders at various stages throughout the litigation. Jeffrey subsequently brought proceedings for contempt against David for his “failure to comply with orders and directions of the District Court and the Supreme Court”.

153. Justice Garling summarised David’s primary submission as follows:

“[41] He submitted that the making of an order for the payment of money, which would ordinarily result in the entry of a money judgment by a court, created nothing more than a right to enforce that order or judgment for the payment of monies by one party against another … As part of this submission, he noted that the relevant legislation provided a variety of remedies for the enforcement of a judgment debt, such as by a garnishee order, or else by registration of the judgment against land by way of an appropriate writ.”

154. It was further submitted that debtors’ prisons had been abolished, and the effect of the orders sought by Jeffery was to reinstate the regime of committing judgment debtors to prison for a failure to pay a debt.

155. Justice Garling relied upon a number of English decisions in support of the proposition that you could still be imprisoned in NSW for failing to pay a money debt even after the abolition of debtors prisons at [46]–[50]. After noting that the Debtors Act 1869 abolished debtors prisons, his Honour went on to state:

“[46] … Section 5 of the Debtors Act stated that a court could commit a debtor to prison in respect of a sum of money ordered by a court to be paid, providing that a court was satisfied:

‘... that the person making default either has or has had since the date of the order or judgment, the means to pay the sum in respect of which he had made default, and has refused or neglected, or refuses or neglects, to pay the same.’

[47]   Although the English jurisprudence on the application of the Debtors Act did not always speak with one voice, ultimately it seems clear that a court could commit a person to prison for contempt for failure to pay a costs order. Three cases are of assistance.

[48]   In 1888, the Court of Appeal held in Bates v Bates (1888) 14 P.D. 17, that failure to lodge security for costs following an order of the Court in accordance with the usual practice in divorce cases, could amount to a proper basis for the imprisonment of the respondent because what happened was a contempt of Court.

[49]   In 1902, Vaughan Williams LJ (with whom Romer and Stirling LJJ) agreed, said in In Re Edgecombe, Ex Parte Edgecombe [1902] 2 KB 403, when speaking of the effect of the Debtors Act that:

‘It is obvious that s 5 is just as much an exception from the general prohibition of imprisonment for debt in s 4. ... it is a section which deals with the power of the Court to commit a debtor to prison for non-payment of a judgment debt; ... it is perfectly plain that [the order] can only be made when there is a contumacious debtor who has the means, or has had the means, to pay the debt, and his conduct is in the nature of contempt. This imprisonment ... is a punishment for the contempt and the suffering of that imprisonment in no way discharges the debt.’

[50]   In 1921, in Leavis v Leavis [1921] P 299, Hill J dismissed an application for a stay on the issue of a writ of attachment issued for non-compliance with an order to give security for legal costs and alimony. In so doing, he held that non-compliance with such an order could constitute a contempt of Court.”

156. His Honour noted at [51] that “it has been a matter of long history in New South Wales, that contemnors alleged to be guilty of ‘contempt in civil process’ can be detained in prison” but went on to state at [55] that there had been no cases that his Honour could find dealing with a finding of contempt for failure to pay a money debt.

157. Despite not being able to locate any relevant NSW decisions, his Honour identified two decisions which were said to support the contention that persons in NSW could still be imprisoned for non-payment of a money order. The first of these was a decision of the Full Court of the Federal Court in Siminton v Australian Prudential Regulation Authority (2008) 168 FCR 140; [2008] FCAFC 89 (“Siminton v APRA”) to set aside a term of imprisonment for a deliberate failure to pay a fine of $50,000. The second decision was Ingram v Ingram [1927] VLR 335, which involved a deliberate failure to pay child support. His Honour then referred to some United States decisions before concluding at [65]:

“It is clear from the authorities to which I have earlier referred with respect to the law of contempt, that a wilful disobedience of a court order constitutes a contempt. It does not seem to me to matter whether the court order is for a party to do something such as executing a document, or participating in an identified part of the court process, or whether it is an order that the party pay money. The fact is that, so long as the order is valid, then a wilful disobedience of it may constitute a contempt.”

158. As for the argument that there are already enforcement provisions in the CPA and UCPR to enforce a money debt, Garling J noted the following at [81]–[84]

“It is a sufficient answer to this submission, at this stage of the proceedings, to note that the terms of s 106(1) of the Civil Procedure Act provides a discretion to the Court with respect to enforcement of a judgment debt, and the terms of the section do not suggest by the words used that it intends to provide a code which limits the steps of enforcement to those provided and thereby prevents a finding of contempt of Court. If that was the intention of the legislature, then express words would be needed.

It is also necessary to note the terms of s 131 of the Civil Procedure Act. It is as follows:

‘131. Committal for contempt

Nothing in this Act or the Uniform Rules limits or otherwise affects the power of the court to attach or commit a person for contempt.’

This section is to be found in Part 8 of the Civil Procedure Act, which is the Part which contains all of the provisions for the enforcement of judgments and orders. Contrary to the submissions of counsel for David, this section tells against the proposition that the provision of s 106(1) of the Civil Procedure Act, precludes a finding of contempt.

Accordingly, I am not satisfied that counsel for David has made good his arguments that the money order charges are invalid, or that it is not open to a court to proceed to deal with an allegation of contempt where the subject matter is the non-payment of a monetary order.”

159. David was subsequently convicted of some of the offences by Schmidt J in D B Mahaffy & Associates v Mahaffy [2015] NSWSC 66. Schmidt J found David guilty of 8 out of the 13 counts itemised in the further amended statement of charge. Four of those counts relied upon failures to pay costs orders. One of those counts (count 1) was a costs order against David Mahaffy Pty Ltd, which was a company of which he was the sole director and shareholder.

160. Schmidt J subsequently sentenced David to a term of imprisonment: D B Mahaffy & Associates v Mahaffy [2015] NSWSC 1959. In doing so her Honour referred to the observations of White J in Wyszenko v Wyszenko at [22] and the observations in Morgan v State of Victoria I have referred to above to the effect that contempt proceedings ought not to be commenced for failure to pay a money debt unless other avenues are unavailable. Her Honour went on at [103] to observe:

“This, however is an unusual case, where contempt charges have been successfully pursued, after other methods of achieving justice failed. In the result, it must be accepted that a fine or some other non-custodial sentence is not an appropriate penalty in this case, given the seriousness of the contempts Mr David Mahaffy has committed, when considered together with his lack of contrition for that contempt and the course he continues to pursue. It is apparent that no other sentence is capable of deterring him.”

161. Consistent with the principles in Principal Registrar of the Supreme Court of NSW v Jando (2001) 53 NSWLR 527; [2001] NSWSC 969; at [38] - [45]), her Honour sentenced David Mahaffy under the Crimes (Sentencing Procedure) Act 1999 (NSW) and imposed an aggregate sentence of 10 months imprisonment. The indicative sentences were as follows: four months for count 1; three months for count 5; four months for count 8; and two months for count 9.

162. David Mahaffy appealed against all convictions to the Court of Appeal. The Court allowed the appeal in relation to three of the four findings of contempt for failure to pay costs orders. The principal decision was written by Simpson JA. Payne JA and Emmett AJA agreed with her Honour’s findings in relation to all counts except count 1. Their Honours’ reasons can be summarised as follows.

Simpson JA

163. As for count 1 (the order against DBMA), her Honour referred (at [121]–[124]) to the line of authority specifically referable to the obligation of a director of a company, aware of an order of a court, to take reasonable steps to ensure compliance with the order. Her Honour cited, inter alia, Hurd v Zomojo Pty Ltd [2015] FCAFC 148, in which Besanko and Gilmour JJ said:

“93 A person, other than a person to whom the order is directed, may be found guilty of contempt in connection with a contravention of the order … In addition, a third party may be guilty of contempt if they know of the order and aid and abet the respondent in contravening it or otherwise do an act that obstructs or frustrates the object of the order … In certain cases, the liability of the third party is direct and not as an accessory …” [Internal citations omitted.]

164. Justice Simpson noted that David was the sole shareholder and director of DBMA, which was ordered to pay costs to Jeffrey ordered in the District Court. Her Honour held that if the appellant’s company could be held in contempt for failure to comply with the costs order, then it followed that the appellant could also be held in contempt. One difficulty in that approach, her Honour noted (at [126]):

“… is that no time was fixed by which payment was required to be made. That raises a question: at what point could it be said that either DBMA or the appellant was in contempt of the order? The primary judge (reasonably in my opinion) took into account the course of conduct of the appellant in repeatedly making unsuccessful applications to vacate or stay execution of the orders, as evidence of his determination not to comply with the orders.”

165. Her Honour held (at [127]) that it is reasonable to pinpoint one month after the final refusal of leave to appeal from the costs orders as a point at which David’s non-compliance was established.

166. Her Honour dismissed the appeal against the conviction on count 1. In her Honour’s view, David’s failure to pay the respondent’s costs, even though those costs were ordered against the company and not him personally, constituted contempt. Her Honour allowed the appeal in relation to counts 5 and 8 as she was satisfied they were not costs orders. It is not necessary to consider those matters further.

167. Count 9 arose out of an order, against both DBMA and David, for the payment to Jeffrey of $1100 representing expenses incurred in relation to a failed application for an injunction restraining the sale of certain property: at [144]. Two grounds of appeal were advanced in relation to the conviction. First, David disputed that he had the “means and practical ability” to comply with the order. Secondly, he submitted that the relatively small amount in issue meant that failure to pay was “insufficiently serious” to require punishment: at [147]. Simpson JA rejected the first argument at [149] and did not address the second argument. Despite this, at [131]–[132], her Honour addressed David’s submission in relation to count 1 that it was error to treat the act of contempt as sufficiently serious to warrant punishment, where some other method of doing justice was available. Her Honour held in relation to that count: “[t]he primary judge was entitled to take into account, in assessing the seriousness of each instance of contempt, the whole of the appellant’s conduct.”

Payne JA’s reasons

168. Justice Payne agreed with Simpson JA’s findings as to the money counts 5, 8 and 9 but disagreed with her Honour in relation to count 1. Payne JA agreed with Simpson JA that the appeal against count 9 should be dismissed and that the appropriate indicative sentence on that count was 2 months: at [272].

169. His Honour noted that to establish the charge of contempt by failing to comply with the order to pay costs it must be shown that the conduct of the alleged contemnor was a deliberate breach of that order: AMIEU v Mudginberri. His Honour held (at [253]):

“In the absence of an express admission or express acknowledgment of facts which demonstrate such deliberate conduct, the conclusions reached by the primary judge had to be arrived at by a process of inference. A feature of drawing inferences as a basis for ultimate fact-finding is that those inferences may be rebutted, or there may be other evidence which qualifies or inhibits the inference-drawing process: see Kazal v Thunder Studios Inc (California) [2017] FCAFC 111 at [67]. That is especially so when conclusions indispensable to guilt are required to be reached in proceedings with penal consequences, such as in this case.”

170. Whether or not the company was able to pay Jeffrey was, in his Honour’s view, “a fact indispensable to a finding of guilt”: at [254]. Although an inference may properly be drawn from the evidence and the absence of rebutting evidence, his Honour held it does not follow that impecuniosity is a “defence” to a claim that a director of a company deliberately caused the company to fail to pay a costs order. The onus of proving that a director of a company deliberately caused the company to fail to pay a costs order remains on the prosecutor at all times: at [255].

Emmett AJA’s reasons

171. Acting Justice Emmett agreed with Payne JA and made some additional observations in relation to count 1, principally (at [292]) where his Honour observed that, “[t]here is a distinction between the case where the director of a company that could comply with an order to make a payment takes steps to ensure that the company does not or cannot comply, and the case where the director simply fails to take steps to ensure or procure that the company complies with the order.” His Honour agreed with Payne JA that, it was by no means clear that the company could have complied with the costs order.

Conclusions regarding the Mahaffy decision

172. Ultimately, the Court of Appeal confirmed David Mahaffy’s conviction and imprisonment for contempt on one count of not paying a costs order of $1100. It was accepted that a term of imprisonment was appropriate given his overall conduct and the other breaches of court orders.

173. The judgments of the Court in Mahaffy do not disclose any consideration of whether it is appropriate to bring proceedings for contempt for non-payment of a money order. The question the Court of Appeal was asked to consider in Mahaffy was very different to that which I am required to determine. It was not invited to consider whether parties who fail to pay a judgment debt can be punished for contempt. The Court of Appeal was not taken to, and did not consider, whether s 106 of the CPA and rr 40.2 and 40.6 of the UCPR are a code for the enforcement of judgments for the payment of money in NSW as the issue did not arise.

174. Although the decision of the Court of Appeal stands as precedent where a person was held to be in contempt of court for failing to pay a costs order, I am not satisfied that the decision in Mahaffy CA determines the question of whether the same can be said for a person who fails to pay a judgment debt.

175. As for the decision of Garling J in Mahaffy, the only observation I wish to make pertains to his Honour’s identification of two decisions which supported his conclusion that persons in NSW could still be imprisoned for non-payment of a money order: Siminton v APRA and Ingramv Ingram. I do not consider those decisions to support the contention that a NSW court could punish a judgment debtor for failing to pay a judgment debt.

176. In Siminton v APRA, the Court (Spender ACJ, Lander and Buchanan JJ) held that the failure to pay a fine cannot be said to be wilful in the requisite sense if use of the only identifiable funds which are said to be available would constitute a contempt of other orders of the Court. The failure to pay a court-imposed fine is in a very different category to a failure to pay a judgment debt. The fine was imposed as a punishment in the first place.

177. The second case relied upon by Garling J was Ingram v Ingram. That was a Victorian case with very different court rules not applicable in NSW. As I have stated above, each State and Territory has different enforcement procedures in their legislation and court rules making comparisons regarding the payment of money debts between jurisdictions somewhat difficult.

172. Overall, the decision of the Court of Appeal in Mahaffy is the only case I have been able to find where a litigant who failed to pay a costs order has been dealt with for contempt of court.

Is there evidence capable of establishing a breach of an order by the respondents?

179. The law of civil contempt is concerned with breaches of orders of the court. One of the specific arguments relied upon by the respondents was that, when the adjudication certificate was filed in this Court, it became a registered document but was not an “order”. Although reliance was placed on the fact that the judgment is headed “Judgment/order”, I am satisfied that nothing turns on that given that is how judgments are published by the Registry once entered. The question remains, however, as to the status of a judgment debt created following the filing of a certificate under s 25 of the SOP Act. Some assistance in this respect can be gained from the decisions which have considered the meaning of the words “judgment” and “order” for the purposes of appeal provisions.

180. In Johnston v Nationwide News Pty Ltd (2005) 62 NSWLR 309; [2005] NSWCA 17 Spigelman CJ observed at [29]:

“The issue of whether or not a decision or ruling by a Court is a judgment or order, for purposes of appeal provisions, has arisen in many different contexts. The general thrust of the case law on the matter is that there must be an operative judicial act.”

181. And at [30]:

“Perhaps the most convenient statement of the relevant distinction is found by King CJ in Legal Practitioners Complaints Committee v A Practitioner (1987) 46 SASR 126, at 127 where the Chief Justice said:

‘A judgment or order is a judicial act which decides the question or one of the questions which is raised for decision in the particular proceedings then before the court or judge. The question decided may be the substantive question or one of the substantive questions raised in the action; or it may be the question or one of the questions raised in interlocutory proceedings taken in the course of the progress of the action. Judgments and orders on the one hand are to be distinguished from incidental rulings given in the course of hearing and determining such questions. Examples of such incidental rulings are those which relate to adjournments, the time and place of hearing, admissibility of evidence and the exclusion or otherwise of witnesses from the hearing, as well as decisions upon submissions as to matters of fact law or procedure made during the course of a hearing.’”

182. Chief Justice Spigelman further considered this question in Salter v Director of Public Prosecutions (2009) 75 NSWLR 392; [2009] NSWCA 357 (“Salter v DPP”), where his Honour referred at [11] to the observations of Samuels JA in Barton v Walker [1979] 2 NSWLR 740 where his Honour observed at 747D:

“The word ‘order’ … is … a word familiar enough to lawyers commonly found in the collocation ‘judgment or order’. The distinction between these two notions is reasonably clear, but the cases discriminating between them do not cast light on the precise meaning of ‘order’ itself.”

183. Chief Justice Spigelman went on at [13] in Salter v DPP to observe that “[t]he word ‘order’ is narrower in scope than the word ‘judgment’, although they may substantially overlap in a particular statutory framework”.

184. It seems to me that the question of whether civil contempt can be brought for a breach of a judgment debt (as opposed to an order to pay money) depends on whether it was a judgment debt which followed an operative judicial act.

185. The judgment against FW Projects was entered pursuant to the operation of s 25(1) of the SOP Act. Unlike judgments entered following a decision of this or another court, it was not preceded by any operative judicial act. Section 133(2) of the CPA allows that under other legislation “any adjudication or award of a person having authority to make an adjudication or award” can be registered as a judgment. UCPR r 36.11(3) provides that, for the purposes of judgments being entered, a reference to a judgment or order of the court “includes a reference to any judgment, order, determination, decree, adjudication or award that has been filed or registered in the court, or of which a certificate has been filed or registered in the court” as referred to in s 133(2) of the CPA.

186. Bellerive argued that there was an additional duty imposed on a judgment debtor arising from the operation of s 25(1) of the SOP Act to pay the debt immediately. It is to be accepted that the underlying rationale of the scheme created by the SOP Act is “Pay now, argue later,” but that policy aim is achieved by the party who is owed the money being able to file the certificate and have it entered as a judgment which can then be enforced immediately under the CPA and UCPR as if the party had been successful in litigation. This is the benefit conferred under s 25(1) of the SOP Act. It does not create some additional duty on the part of the judgment debtor to those ordinarily imposed on a judgment debtor. If that had been the intention of Parliament then clear statutory language would have been required.

187. I am thus satisfied that there was no operative judicial act which gave rise to the judgment debt in this matter.

Conclusion: is there a prima facie case against each of the appellants?

188. I am not satisfied that there is a prima facie case against the respondents for contempt of court on two bases.

189. First, in order to be in breach of a court order such that the court’s authority needs to be vindicated there needs to be an order or operative judicial act that was breached. There was no such order in this case.

190. Second, even if the judgment debt had been created following an operative judicial act, such as a costs order, I would not have granted the orders sought by Bellerive in any event on the basis that there are other enforcement options that have not been exhausted. This is consistent with the principles I have referred to above.

191. I was informed during the hearing that Bellerive had issued a statutory demand against FW Projects who had subsequently sought to have it set aside based on the offsetting claim of the proceedings in the Technology and Construction List. I was informed that that matter had “settled” due to the different statutory test to be applied when seeking to issue a statutory demand.

192. In Douglas Aerospace, a decision relied upon by Bellerive to establish that the judgment debt was immediately payable, Brereton J (as his Honour then was) considered the issue of whether a dispute over an amount in a certificate registered in court under s 25(1) of the SOP Act could give rise to a “genuine” dispute for the purposes of s 459H(1)(a) of the Corporations Act 2001 (Cth).

193. In Douglas Aerospace the plaintiff applied pursuant to ss 459G, 459H and 459J of the Corporations Act for an order setting aside a creditor’s statutory demand served on it by the defendant on the basis, inter alia, there was a genuine dispute it had an offsetting claim. As Brereton J noted at [45], there was a significant issue as to whether “genuine disputes” and “offsetting claims” can be raised in respect of a judgment debt arising upon the filing of an adjudication certificate under the SOP Act. His Honour held (at [103]) that while there was no “genuine dispute” (within the terms of s 459H(1)(a)) as to the existence or amount of the judgment debt that founded the demand, there was an offsetting claim for the purposes of s 459H(1)(b).

194. His Honour noted that although a plaintiff could not seek an order setting aside a statutory demand by making an allegation which merely impugns the judgment debt without any offsetting claim (at [102]), the plaintiff would have an offsetting claim to the extent that it had a genuine cross-claim for damages, or restitution of moneys paid: at [40], [102].

195. I can only assume that the statutory demand was not pursued further by Bellerive on the basis that FW Projects would be able to satisfy the Corporations List judge that the pending litigation brought by FW Projects in the Technology and Construction List is an available set off within the meaning of s 459H(1)(b) of the Corporations Act.

196. It seems to me that if Bellerive is not able to pursue the winding up of FW Projects because the latter could establish a genuine offsetting claim, then it would not be appropriate for a court to find that same company to be in contempt of court for not paying the same debt.

197. Nor would the situation be any different if a judgment debtor has the capacity to pay but relies upon the judgment creditor to take steps to enforce the debt. Considerable time was spent during the hearing of this matter tracing the payments in and out of FW Projects’ accounts to establish that FW Projects was solvent but choosing to pay other debts. The difficulty with this argument is that if a person has the capacity to pay and does not pay promptly after the judgment is entered, the judgment creditor is not precluded from enforcing the debt.

198. I am satisfied that civil contempt proceedings should not be commenced by a party for non-payment of an order to pay money where some other method of achieving payment is available. This is consistent with the observations of White J in Wyszenko v Wyszenko and the Victorian Court of Appeal in Morgan v State of Victoria. The decision in Mahaffy was an unusual case and did not arise solely from a failure to pay a money order.

199. The situation could be different if there was evidence that a judgment debtor had taken deliberate efforts to obstruct recovery of the debt that made it impossible for the judgment creditor to pursue any other enforcement avenues. In such a serious case it would always be open to a judgment creditor to refer the matter to the Prothonotary for consideration of commencing criminal contempt proceedings under SCR Part 55 r 11.6 which is in these terms:

“(6)  Subject to the rules and to any Act, where, pursuant to a power conferred by or under an Act, a court or other body or person refers or reports a matter to the Court with a view to the Court dealing with a possible contempt of the court, body or person, the registrar shall:

(a)  take advice from the Crown Solicitor as to whether the registrar should take proceedings for contempt in respect of the matter,

(b)  unless the Court otherwise orders, act in accordance with the advice, and

(c)  inform the Attorney-General of the matter.”

200. The Attorney General also retains the power to bring proceedings for contempt on referral by any individual. Clause 1 of Part 1 of Schedule 3 to the Criminal Procedure Act 1986 (NSW) provides that:

“1   Institution of contempt proceedings

(1)  Proceedings for contempt of court may be instituted in the Supreme Court in the name of the “State of New South Wales” by:

(a)  the Attorney General, or

(b)  the Solicitor General or Crown Advocate acting under a delegation from the Attorney General.

(2)  Nothing in subclause (1) prevents contempt of court being dealt with in any other manner, and in particular nothing in that subclause prevents proceedings for contempt of court from being instituted in any other manner.”

201. For my part, I consider that some doubt arises as to whether the court’s contempt power could ever extend to non-payment of a judgment debt even if the debt did follow an operative judicial act. The history of how the courts have dealt with breaches of a money order, as opposed to breaches of all other court orders, suggests that such a course is not available. This issue was not directly addressed by the Court of Appeal in Mahaffy CA and it is not a matter on which I am required to make any final determination.

Conclusion

202. In reaching the conclusion that I have I do not intend to convey any endorsement of the respondents’ behaviour in stalling the payment of the debt. The evidence before me is capable of establishing that payment of the debt is being deferred pending the resolution of the parties’ litigation in the Technology and Construction List. It is to be accepted that the respondent’s conduct is on the face of it inconsistent with the policy underpinning the scheme established under the SOP Act. But this lack of enthusiasm on the part of FW Projects to pay the judgment debt in a timely fashion does not mean that the debt is unable of being unsatisfied and interest is accruing on the debt in the interim.

203. The Plaintiff has been unsuccessful. I can see no basis from departing from the general rule that costs follow the event.

Orders

204. I make the following orders:

1. The notice of motion filed on 21 August 2018 is dismissed.

2. The plaintiff is to pay the defendant’s costs on the ordinary basis.

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Amendments

07 March 2019 - [111] “or” instead of “of”

[112] “were to be” instead of “was to”

[140] “the significance of”deleted; “is” instead of “are”

[192] “considered” instead of “consider”

[198] “decision” instead of “decisions”

[199] “be” before “open” inserted