Fauna Holdings Pty Ltd & McGillivray & Ors & Mitchell

[2000] FamCA 313

[2000] FamCA 313

FAMILY LAW ACT 1975

IN THE FULL COURT  
OF THE FAMILY COURT OF AUSTRALIA                  Appeal Nos WA9, 10, 11 of 1999
AT SYDNEY  Appeal No WA27 of 1998
  File No PT 2040 of 1995

BETWEEN:

FAUNA HOLDINGS PTY LTD
BRIAN JOHN McGILLIVRAY
JAN LORENE McGILLIVRAY
KRISTEN JAMES McGILLIVRAY

Appellants
- and -

PAMELA KAY MITCHELL
Cross-Appellant

REASONS FOR JUDGMENT OF THE FULL COURT

CORAM:  NICHOLSON CJ, KAY & WARNICK JJ
DATE OF HEARING:  31 January and 1 February 2000
DATE OF JUDGMENT:                  11 April 2000

APPEARANCES:  Dr Dickey of Counsel, instructed by Marks Healy Sands, Barristers & Solicitors, Level 26, 2 The Esplanade, Perth, WA 6000, appeared on behalf of the firstnamed Appellant.

Mr Errington of Counsel, instructed by Holden Barlow, Barristers & Solicitors, Level 9, 16 St George's Terrace, Perth, WA 6000, appeared on behalf of the second, third and fourthnamed Appellants.

Mr Hooper of Counsel, instructed by Anderson Josland, Barristers & Solicitors, Level 9, 26 St George's Terrace, Perth, WA 6000, appeared on behalf of the Cross-Appellant.

McGILLIVRAY and Ors v MITCHELL

Coram:  Nicholson CJ, Kay and Warnick JJ
Dates of appeal:     31 January and 1 February 2000
Date of judgment:  11 April 2000

CONTEMPT- contravention of orders -flagrant challenge- -whether a breach of an order need be committed contumaciously-validity of injunctions to preserve assets pending proceedings which may have been rendered unsustainable by passing of the Family Court of Western Australia (Orders of Registrars) Act

COURTS AND JUDGES-Judges-Disqualification for perceived bias based on comments made during interlocutory rulings

Blueseas Investments Pty Ltd was incorporated on 30 June 1997, with the directors being Jan McGillivray, (H’s present wife) and Kristen McGillivray (H’s son by a previous marriage).  The directors owned the four issued shares in the company equally.

Fauna Holdings Pty Ltd was incorporated in 1987, with H appointed director from the date of incorporation until his resignation on 7 March 1997.  Jan and Kristen were appointed directors from 7 March 1997.  There were four issued shares in Fauna, with Blueseas owning two and the remaining two owned by Acheron Holdings, a company controlled by H.  Fauna had been involved in a number of profitable property developments. 

Fauna is the trustee of a discretionary trust known as the “Preservation Trust”.  The specified beneficiaries are H, his children, Jan and her children.  H was the appointor of the trust but resigned from that position in September 1997.  Jan claimed that she loaned to Fauna (as trustee of the Preservation Trust) $150,000, claiming that these monies were sourced from a property settlement from a previous marriage.

BRIEF CHRONOLOGY

• H and W married in 1978 and divorced in May 1995

1995

• 24 May 1995 – H’s Form 12A application filed

• 26 May 1995 – Consent orders made by a Registrar in chambers FCWA – H to pay W $225,000 by 1 July 1998 – H paid in full by end of August 1995

1996

• 13 November 1996 – W brought proceedings under s79A to set aside the consent orders – W sought to retain the original $250,000 and claimed an additional $1m, saying that H or entities controlled by him received $3.5m in a share sale – matter adjourned until 21 March 1997

• 21 November 1996 – Injunctions made against Fauna, restraining it from dealing with its property except in the ordinary course of its business

1997

• 13 February 1997 – Full Court handed down Horne (1997) FLC 92-734 - orders made by Registrars FCWA invalid– 1995 consent orders invalid - H's form 12A remained undealt with.

• 21 March 1997 – Relying on Horne, W amended her Form 7 application to seek fresh property orders - in the alternative she still sought orders under ss 79A and 44(3) – W filed a Form 8 seeking injunctions

• 25 March 1997, various consent orders were made permitting Fauna to borrow monies and to make progress payments on a development project until July 1997, to Jan and Kristen.   Fauna was restrained from dealing with its property without giving written notice to W's solicitors.  Furthermore, H was restrained from exercising his rights as appointor of the Preservation Trust and McGillivray Family Trust.  He was also inter alia restrained from dealing with his interest in any property except to meet reasonable living expenses and legal fees.

• 8 September 1997 – Tolcon J heard Fauna’s Form 8 application – parts of W’s application seeking orders under ss 79A and 44(3) struck out – only substantive proceeding remaining was W’s Form 7 of 21 March 1997 seeking s79 orders– H’s Form 12A application of 24 May 1995 technically still pending -Tolcon J restrained Fauna as trustee of Preservation Trust from expending funds, dealing with property, borrowing monies or conducting business without giving W’s solicitors 21 days notice – at least some of the orders made by consent

• 17 October 1997 – Family Court of Western Australian (Orders of Registrars) Act 1997 (WA) and reciprocal Commonwealth legislation came into operation with the effect that the parties would have the same rights and liabilities as per the original consent orders

• Between 17 and 27 October 1997 - Fauna entered into a series of transactions paying sums of $548,520 to Raysun Investments Ltd, $400,000 to Acheron Holdings Pty Ltd and $150,000 to J, and increasing a loan facility with the Commonwealth Bank

• After 17 October 1997 –H sold a boat for $200,000 using $150,000 thereof to make the Fauna payment and applying some of the remainder to legal fees and living expenses

• 20 November 1997 – Solicitors for Fauna wrote to solicitors for W saying they regarded W’s Form 7 filed 21 March 1997 and all orders made on it, ie including the September orders, to be invalid

• 1 December 1997 – W filed amended Form 7 reinstating s 79A application and seeking orders to set aside transactions under s 85 – Form 48 contravention applications filed by W alleging breaches of injunctions by H, Jan, Kristen and Fauna

1998

• March 1998 – Martin J became Judge Manager (Tolcon J and Holden CJ having already disqualified themselves)

• 25 March 1998 – Form 47 contempt applications filed by W

• 4 June 1998 – Martin J determined that the September 1997 injunctions were valid

• 5, 6 & 7 August 1998 – Commencement of contravention and contempt proceedings before Martin J – adjourned to November

• 21 September 1998 – Kristen and Jan filed Form 8 application on bias issue

• 16 October 1998 – Martin J declined to disqualify herself for bias

• 30 October 1998 – Notice of Appeal filed re orders of 16 October 1998

• 2, 3 & 4 November 1998 – continuation of contravention and contempt proceedings

1999

• 13, 14 & 15 January 1999 – continuation of contravention and contempt proceedings

• 2, 8 & 16 June 1999 – Judgments delivered in contravention and contempt proceedings and orders made including costs orders

Martin J found H, Jan and Kristen and Fauna to be in contempt of Court, having contravened the orders of 8 September 1997 involving a flagrant challenge to the authority of the Court.  She also found the lesser charges of contravention proven. Her Honour sentenced Jan and Kristen to a term of three months imprisonment, and H to four months imprisonment.  Fauna was ordered to pay a fine of $20,000. H's sentence also reflected her Honour's findings that he had breached the injunctions by selling his boat.

H, Jan and Kristen and Fauna were also ordered to pay all costs incurred by W in the proceedings of 8 and 16 June 1999.  W was ordered to pay the respondents’ costs of the hearings on 5-7 August 1998 which had been adjourned because she amended her applications.

On appeal
The appellants contended that:

-The trial Judge erred in holding that the orders of 8 September 1997 were valid and enforceable. 

-The trial Judge erred in finding that the appellants did not hold a reasonable belief that the orders made by Tolcon J were invalid.

-S112(AB) provides that you can only contravene if you intentionally fail to comply with the order - the requisite intent is to breach the order not do the act which amounts to the breach.

-It was not the appellants’ intent to flagrantly breach the orders as they had believed the orders to be invalid.

-The trial Judge erred in not disqualifying herself from hearing the matter based on findings made and comments expressed during interlocutory hearings. 

-W cross-appealed seeking to reduce her liability for the costs ordered to be paid for the hearings on 5-7 August.

Held, (per curiam) in dismissing the appeal and cross-appeal

Validity of the injunctions in light of the remedial legislation

• The Family Court of Western Australia clearly had jurisdiction to hear and determine W’s property application and to make orders preserving the property pending the hearing and determination of that application.  Although H may have had a perfect defence to the application after the implementation of the Family Court of Western Australia (Orders of Registrars) Act, namely that the property case had already been decided, this did not affect the validity of the injunctions.

Intent

• S 112AB(1)(b) says no more than that a contravention of an order shall have occurred if a person intentionally does an act which amounts to a contravention of the order; the act must be intentional rather than casual or accidental. The 1987 Australian Law Reform Commission report No 35 Contempt formed the genesis of the 1989 amendment of the section.  The Report does not indicate that the amendments were intended to radically alter the common law position that in civil contempts it is not necessary to establish that the conduct was contumacious. (English (1986) FLC 91-729).

• The natural appellants were convicted because they intentionally prevented Fauna from complying with the injunction because they intentionally authorised the transactions in breach of the injunction and put them into effect without giving the requisite notice. There is nothing in s 112AB (1)(b)(ii) to indicate that it is necessary to show that those who aid and abet the contravention of the order must do so contumaciously.

• The trial Judge’s view that the issue of flagrancy was to be determined having regard to the nature of the breaches rather than the intent behind them was correct and consistent with the authorities. (Hay (1998) FLC 92-819; Rutherford (1999) FLC 92-866.)

• Even if there is reason to doubt the authorities, it is clear that the trial Judge was satisfied that each of the appellants acted in blatant disregard of the orders.  Her Honour was correct in relying upon the fact that no mention was made of the transactions at at least two hearings which took place between the dispositions and transfers and the November 1997 letter.   The appellant’s silence in this regard confirmed her Honour’s findings that there existed no real belief by the appellant’s that their actions were legitimate.

Reasonable belief that the orders were invalid

• Nothing in Tolcon J’s earlier comments could reasonably have led any of the appellants to believe that the interlocutory injunctions ceased to have effect on the passing of the remedial legislation.  It is apparent from his Honour’s comments that he in fact intended to protect W’s position vis-à-vis the potential dissipation of assets pending the hearing of her application.

Bias

• The trial Judge’s comments were unexceptional and could not lead a properly informed bystander to reasonably believe that her Honour was in any way biased against the appellants.  The trial Judge made comments based upon the material then before her Honour and in response to submissions.  Her Honour’s remarks did not amount to any findings of fact in dispute nor as to any findings of credit.

• The trial Judge’s findings which she had already made on interlocutory proceedings on a lesser standard of proof could not have created a reasonable basis for her to have disqualified herself from hearing the proceedings.  The findings of her Honour merely illustrate that on the material before her in the interlocutory proceedings, she was appropriately satisfied of the prima facie existence of facts which justified the granting of the orders she subsequently made in those proceedings.

Penalty

• The breaches by the appellants were serious and flagrant, which may have resulted in gravely damaging W’s claims.  It was serious attack upon the authority of the court, and the penalties ordered by the trial Judge were within a permissible range.

W’s cross-appeal

• Although W may feel aggrieved by being required to pay the entirety of the costs thrown away when there may have well been matters attended to on those days which subsequently led to a shortening of the balance of the hearing relating to the charges, the matter was clearly within the discretion of the trial Judge.

Appeal dismissed
Written submissions as to the costs of the appeal and cross-appeal invited
Reportable

1. The proceedings before us concern appeals by Brian McGillivray, Jan McGillivray, Kristen McGillivray and Fauna Holdings Pty Ltd against certain convictions for contempt, the sentence imposed and the costs orders made against them, and a cross-appeal by Pamela Mitchell against the order that she pay the whole of the costs of the hearing on 5-7 August 1998.

1. On 2 June 1999 Martin J found as follows:

"(A).the respondents, JAN LORENE McGILLIVRAY and KRISTEN JAMES McGILLIVRAY and FAUNA HOLDINGS PTY LTD are in contempt of Court, having contravened paragraph 3 of the order of 8 September 1997, as set out in paragraphs 1 to 4 of the amended Form 48 applications filed by the wife, the said contraventions involving a flagrant challenge to the authority of the Court.

(B).The husband BRIAN JOHN McGILLIVRAY is in contempt of Court, having contravened paragraph 3 of the order of 8 September 1997, as set out in paragraphs 2 and 4 of the amended Form 48 applications filed by the wife, the said contraventions involving a flagrant challenge to the authority of the Court."

1. On 16 June 1999 her Honour made the following relevant orders:

"8.JAN LORENE MCGILLIVRAY and KRISTEN JAMES MCGILLIVRAY each be sentenced to a term of three months imprisonment.

9.BRIAN JOHN MCGILLIVRAY be sentenced to a term of four months imprisonment.

10.Warrants of commitment issue in the usual form to give effect to these orders.

11.FAUNA HOLDINGS PTY LTD pay a fine of $20,000 within 5 months from the date hereof.

12.In relation to the proceedings in which judgment was delivered on 8^th June 1999, BRIAN JOHN MCGILLIVRAY, JAN LORENE MCGILLIVRAY, KRISTEN JAMES MCGILLIVRAY and FAUNA HOLDINGS PTY LTD do, jointly and severally, pay all costs incurred by PAMELA KAY MITCHELL in these proceedings except insofar as they have been unreasonably incurred, to be taxed if not agreed and with the total costs not to exceed the amount payable pursuant to the scale of fees under the Family Law Rules plus 50%, so that subject to the above provisions, PAMELA KAY MITCHELL be completely indemnified by BRIAN JOHN MCGILLIVRAY, JAN LORENE MCGILLIVRAY, KRISTEN JAMES MCGILLIVRAY and FAUNA HOLDINGS PTY LTD for her costs.

13.The wife pay the respondents’ costs of the hearings on 5-7 August 1998, at scale, to be set off against the respondents’ costs pursuant to paragraph 12 hereof.

14.In relation to the proceedings in which judgment was delivered on 16^th June 1999, BRIAN JOHN MCGILLIVRAY pay all costs incurred by PAMELA KAY MITCHELL in the proceedings, except insofar as they have been unreasonably incurred, to be taxed if not agreed, and with the total costs not to exceed the amount payable pursuant to the scale of fees under the Family Law Rules plus 50%.

15.The wife pay the costs of BRIAN JOHN MCGILLIVRAY in relation to the application in relation to the guarantee dismissed on 16^th June 1999, and any costs thrown away in relation to paragraphs 2 and 3 of the applications not proceeded with, at scale, to be set off against the respondents’ costs pursuant to paragraph 14 hereof.

..."

Background

1. Brian McGillivray and Pamela Mitchell were formerly husband and wife.  They were married in March 1978 and separated in March 1994.  Although their marriage was dissolved by a decree which became absolute in June 1995 it is convenient to refer to them as "the husband" and "the wife".

1. Kristen McGillivray is a son of the husband by a prior marriage.  Jan McGillivray is the present wife of the husband.  (It is convenient to refer to them as "Kristen" and "Jan").

1. Fauna Holdings Pty Ltd is the trustee of a discretionary trust known as "the Preservation Trust".  (It is convenient to refer to the company as "Fauna").  It is common ground that the Preservation Trust has been operated by and for the benefit of the husband.

1. Following the breakdown of the marriage between the husband and the wife there were proceedings between them in the Family Court of Western Australia brought by the husband on a Form 12A application filed in May 1995 which resulted in consent orders being made by a Registrar in chambers on 24 May 1995.  Those orders provided inter alia that the husband was to pay the wife $225,000 in instalments by 1 July 1998.  In fact, that money was paid by August 1995.

1. On 13 November 1996 the wife filed a fresh application in the Family Court of Western Australia ("FCWA") seeking to set aside the earlier property orders pursuant to s 79A of the Family Law Act 1975 and seeking that in addition to the money she had already received the husband pay to her a further $1,000,000.

1. Much of the significant background to the appeal before us can be found in the reported decision of Blueseas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856. There their Honours (coram Nicholson CJ, Lindenmayer and O'Ryan JJ) said at 86,122-4:

"8.      Following the decision of the Full Court of Family Court in Horne and Horne (1997) FLC 92-734, it became clear that the orders of 26 May 1995 were invalid. Accordingly in March 1997 the wife amended her application to seek fresh property orders and subsequently further amended the application to take into account subsequent events, including the commencement of the Family Court of Western Australia (Orders of Registrars) Act 1997 (Cth). The wife thus had on foot proceedings pursuant to the provisions of both ss 79 and 79A of the Family Law Act.

Relevant Corporate Structures

9.        Fauna Holdings Pty Ltd. 

Fauna Holdings Pty Ltd ('Fauna') was incorporated on 19 September 1987 and the husband was appointed a director of it on that day and was subsequently appointed secretary of the company on 10 May 1990.  On 11 August 1995 the husband’s son by a previous marriage, Kristen McGillivray, was appointed a director of Fauna.  On 16 June 1996 the husband and Jan McGillivray married. On the following day Jan McGillivray was appointed a director of Fauna.  There are four issued shares in Fauna, two of which are now owned by Blueseas Investments Pty Ltd and two by Acheron Holdings Pty Ltd which is a company that, it is common ground, is controlled by the husband.  Up until 27 October 1997 the two shares now owned by Blueseas were owned by G.H. and N.D. Hodgson Engineering Pty Ltd, a company associated with a former business colleague of the husband, Guy Hodgson.  On 7 March 1997 the husband resigned as a director of Fauna and its present directors are Jan McGillivray and Kristen McGillivray.  Fauna is the trustee of the Preservation Trust.

10.      The Preservation Trust. 

This is a discretionary trust controlled by the husband. The trustee of the trust is Fauna. The specified beneficiaries are the husband’s children, the children of Jan McGillivray, the husband and Jan McGillivray.  The husband was originally the appointor of the trust but resigned from that position in September 1997.

11.      Blueseas Investments Pty Ltd. 

This company was incorporated on 30 June 1997.  On 4 July 1997 Jan McGillivray and Kristen McGillivray were appointed directors of Blueseas.  There are four issued shares in Blueseas, two owned by Jan McGillivray and two by Kristen McGillivray.

12.      The JLM Family Trust. 

This is a discretionary trust controlled by Jan McGillivray who is the guardian and appointor of the trust.  The specified beneficiaries are Jan McGillivray and her children, and Blueseas is the trustee of the trust.

Relevant background

13.      The matters that led to the institution of further proceedings by the wife were summarised by her Honour, and the following is a paraphrase of that summary.

14.      At the time the property orders were made in May 1995, the husband controlled shares in a company known as First Dynasty Mines.  The shares were held in escrow until March 1996.  From May 1996 onwards, the shares were sold and the husband, or entities controlled by him, received at least $3.5m. 

15.      It appears that the husband claims that these monies are not now available to him for various reasons and in that context, there have been extensive proceedings between the wife and the husband and various entities against which the wife has sought orders to preserve any property which might be brought into account.

16.      Jan McGillivray claims that on 26 July 1996 she loaned to Fauna (as trustee of the Preservation Trust) the sum of $150,000, these monies being sourced, according to her, from a property settlement consequent upon the breakdown of her previous marriage.  It seems that these funds were initially used by her to purchase land at Mt Lawley and further monies were borrowed to construct a residence on the land and the property was ultimately sold at a profit.

17.      In May 1996 Fauna bought a property in Bayview Terrace, Mosman Park, for $865,000 cash and on 13 September 1996 it purchased another property at 37 Hensman Road, South Perth, for $200,000.  The latter property was subdivided and units constructed.

18.      On 25 March 1997 various consent orders were made which permitted Fauna to borrow up to $500,000 secured over the assets in South Perth and Mosman Park.  Fauna was permitted to make progress payments on the Hensman Road development, pay fees, costs, etc. incidental to the construction and monthly development fees of $5000 until July 1997, to Jan and Kristen McGillivray. 

19.      Fauna was restrained by injunction from spending or borrowing any monies or transferring, encumbering or dealing with its property without giving five clear working days’ notice in writing to the wife's solicitors, and had to keep the wife’s solicitors informed of its financial position and progress on the marketing and sale of the units.  In addition, the husband was restrained by injunction from exercising his rights as appointor of the Preservation Trust and McGillivray Family Trust.  He was also, inter alia, restrained from transferring, encumbering or in any way dealing with his interest in any property save as required to meet reasonable living expenses and legal fees.

20.      On 28 July 1997 a consent order was made that Fauna pay the proceeds of sale of the first of the units in South Perth to the Commonwealth Bank to reduce the mortgage secured against the Mosman Park property.  The South Perth development fees of $92,426 were paid to Jan and Kristen McGillivray in equal amounts.  The orders of 25 March 1997 were varied to enable this to occur and to allow the balance to be used for the Mosman Park property.

21.      On 8 September 1997 Tolcon J made orders by consent that the interlocutory orders made against Fauna Holdings be discharged, apart from a requirement to give the wife’s solicitors notice if there was to be a change in directors.

22.      Fauna, as trustee for the Preservation Trust, which was described as 'the husband’s trust', was restrained by injunction from expending any of its funds, save for expenses incurred to date, transferring, encumbering, further encumbering, or otherwise dealing with any property registered in its name, borrowing any monies or any further monies or repaying any loans and conducting any business, without first giving the solicitors for the wife not less than twenty-one days’ clear notice in writing setting out full details of any proposed transaction.  Associated orders were made that are not particularly material for present purposes.

23.      Following the passage of the Family Court of Western Australia (Orders of Registrars) Act 1997 (Cth) on 17 October 1997, Fauna drew funds from its loan account and over the next two weeks entered into a number of transactions by which it paid in excess of $1m to third parties. Her Honour commented that these transactions were prima facie in breach of the injunction and appear to have been approved by Jan and Kristen McGillivray as the cheques were signed by them. The husband also entered into various transactions which are the subject of separate applications. At that time Fauna paid the sum of $150,000 to Jan McGillivray which, she says, was the money that she had previously invested in the company.

24. It appears that these actions were attempted to be justified upon the basis that the orders made in relation to the s 79 proceedings were not valid once the original order for settlement of property had been validated by the passage of the above mentioned legislation. The wife’s solicitors were not informed of the payments made by Fauna until 20 November 1997."

1. On 21 November 1996, after the wife had issued her initial application to set aside the earlier consent orders, an ex parte order was made by Tolcon J (Order 4) which provided until further order of the Court, and without leave of the Court:

"(a)the husband be restrained and an injunction is hereby granted restraining him from transferring, encumbering or in any way dealing with his interest in any property;

(b)Fauna Holdings Pty Ltd be restrained and an injunction is hereby granted restraining it from transferring, encumbering or in any way dealing with any of its property except in the ordinary course of business;..."

Although we were not informed as to what occurred upon the return of that ex parte injunction, it was asserted without contradiction that that order remained in force at all times relevant to these proceedings (save that the wife asserted that its effect had been curtailed by subsequent orders).

1. In further interlocutory proceedings on 25 March 1997 an order was made by Tolcon J which read as follows:

"9.      Until further order of the Court:

(a)the husband be restrained and an injunction is hereby granted restraining him from transferring, encumbering or in any way dealing with his interests in any property save as required to meet reasonable living expenses and otherwise in payment of legal fees as and when they become due and payable;..."

1. There were further proceedings before Tolcon J on 4, 5 and 8 September 1997.  The husband, the wife, Fauna, Jan, and Kristen were all represented at that hearing.

1. Amongst the orders made on 8 September 1997 by Tolcon J were the consent discharge of several orders made on 25 March 1997 but significantly Order 9 of those orders concerning the restraints on the husband dealing with his assets was not discharged.  His Honour further ordered:

"3.By consent, the husband's trust [Fauna Holdings Pty Ltd as trustee for the Preservation Trust] be restrained and an injunction is hereby granted restraining the trust from: -

(a)expending any of its funds save for expenses incurred to date;

(b)transferring, encumbering, further encumbering or otherwise dealing with any property registered in its name;

(c)borrowing any monies or any further monies or repaying any loans; and

(d)conducting any business

without first giving the solicitors for the wife not less that 21 days clear notice in writing setting out full details of any proposed transactions in respect of sub-paragraphs 3(a), 3(b), 3(c), and 3(d) hereof.

...

14.In relation to the amended application of the wife filed on 24 March 1997: -

(a)paragraphs 2 and 3 of the application be struck out; and

(b)the husband file an amended response by close of business on 12 September 1997."

1. The orders that the wife had sought in her amended application, which was extant as at 8 September 1997, were as follows:

"1.Any procedural provisions of the Rules which would prevent the wife withdrawing the Consent Orders in the Form 12A pursuant to which orders were made on 25 May 1995 and proceeding with an application for property settlement on this Form 7 be dispensed with;

2.Further or alternatively, pursuant to Section 79A of the Family Law Act the orders for property settlement made on 25 May 1995 be set aside;

3.Further or alternatively, pursuant to Section 44(3) of the Family Law Act 1975 the wife have leave to institute proceedings for property settlement out of time;

4.Any interest that the husband may have in the monies paid to the wife pursuant to the order made on 25 May 1995 be transferred to the wife;

5.The Husband pay to the Wife the sum of $1,000,000.00 or such other sum as the Court may consider appropriate after the production by the husband and examination by the wife of all relevant financial documents in the husband's possession, power or control;  and

6.The husband pay the wife's costs of these proceedings."

1. The effect of Order 14 of the orders made on 8 September 1997 was to strike out the claims pursuant to s 79A and s 43(3) of the Family Law Act.  The claims in paragraphs 4 and 5 remained unaffected by the orders of 8 September 1997.

1. On 17 October 1997 the Family Court of Western Australia (Orders of Registrars) Act 1997 ["ORA"] came into operation, the purported effect of the Act being to give the parties the same rights and liabilities as the original consent order for the settlement of property that had been made by the Registrar in May 1995.

1. On 20 November 1997 the solicitors for Fauna wrote to the solicitors for the wife saying:

“We believe that it is proper that we inform you that upon the commencement of the Family Court (Orders of Registrars) Act 1997 (Cth.) on 17 October 1997, the directors of our client, Fauna Holdings Pty Ltd, regarded your client’s Form 7 application initiating proceedings and all orders subsequently made upon that application to be invalid and of no effect.

We note that Tolcon J. subsequently came to a similar conclusion in his Reasons for Judgment delivered on 30 October 1997.

We understand that Tolcon J. revised his opinion in this regard in his Reasons for Judgment delivered on 11 November 1997.  In light of this, we believe it appropriate that we now inform you of our client’s earlier conclusion on the validity of orders made pursuant to the wife’s application initiating proceedings.

As a consequence of the view of the directors of Fauna Holdings Pty Limited, the following transactions were conducted by our client:

1.20 October 1997 Raysun Investments Limited were paid the sum of $548,520.00 by our client.  This payment arose as a consequence of the demand made on 17 October 1997 upon our client by Raysun Investments Limited.

2.On 20 October 1997 Jan McGillivray was paid the sum of $150,000.00 being money previously lent by Jan McGillivray to our client.

3.On 27 October 1997 Acheron Holdings Pty Ltd was repaid the sum of $400,000.00 previously lent by it to Fauna Holdings Pty Ltd.

4.On 27 October 1997 two shares in the capital of Fauna Holdings Pty Ltd held by GH & ND Hodgson Engineering Pty Ltd were transferred to Blueseas Investments Pty Limited.

All of the above were transactions which were proper and commercial in their terms.  In particular, the payments of money represent a normal repayment by our client to creditors who had previously advanced money to our client.

The purpose of this letter is to inform you of the present position.”

(It is convenient to refer to this document as "the November letter").

1. There is no challenge before us to the finding by Martin J that the directors of Fauna as at 20 October 1997 and 27 October 1997 were Jan and Kristen.

1. On 1 December 1997 the wife filed an amended application (Form 7) reinstating her s 79A application and seeking orders to set aside transactions pursuant to s 85 of the Family Law Act.  She also filed applications (Form 48) asserting that Fauna, Jan and Kristen had each contravened the orders made on 8 September 1997 by reason of the conduct disclosed in the letter of 20 November 1997. 

1. On 20 February 1998 she filed an application (Form 48) asserting that the husband had contravened orders of the Court being the injunctions made on 25 March 1997 and 8 September 1997.

1. On 25 March 1998 the wife filed applications (Form 47) against the husband, Fauna, Kristen and Jan asserting that each of them had acted in contempt of the Family Court of Western Australian by reason of their actions as disclosed in the letter of 20 November 1997.

Ruling on Validity of 8 September Orders

1. Following the filing of the contravention applications alleging breaches of the injunctions granted 8 September 1997, Martin J determined, as a preliminary issue, a question as to whether the orders of 8 September 1997 were valid and enforceable at the time of the alleged breaches, namely October 1997.  In a judgment delivered 4 June 1998 her Honour determined that paragraph 3 of the Order of 8 September 1997 remained in force at the time of the alleged breaches during October 1997. 

1. Her Honour summarised the arguments of the respondents to the contravention applications as follows:

"RESPONDENTS’ CASE

I do not propose to canvass in full the well researched and extensive arguments of counsel for the parties and, in particular, their responses. Briefly, the basis of the submissions on behalf of the respondents was that since the Family Court of Western Australia (Orders of Registrars) Act 1997 (ORA) validated the previous orders for property settlement, that any orders made on the wife’s Section 79 application, were invalid and of no effect, the Section 79A application having been struck out on the day the orders were made.

It was submitted that an interlocutory order no longer has effect when the related substantive proceedings come to an end, the pending proceedings having been (sic) ceased as a result of the substantive proceedings which supported it being unable to be proceeded with as a result of the commencement of the ORA.  Therefore, the injunctions contained in paragraph 3 of the orders of 8 September 1997 could only properly have been made in support of the orders sought in paragraph 5 of the amended application seeking payment of the sum of $1,000,000, as this was the only remaining application for an order for the transfer of property to the wife, and therefore the only justification for an order preserving property pro tem.  The relief sought in paragraph 5 could not have been granted by the Family Court of Western Australia after 17 October 1997, as the Family Court of Western Australia then ceased to have the power to make an order for property settlement, the original consent property orders made on 26 May 1995, being in full force and effect.  Any dispute between the husband and wife for alteration of property interests thus became res judicata.  The proceedings instituted by the wife for property relief accordingly became nugatory, so paragraph 3 of the interlocutory orders of 8 September also became nugatory and ceased to have effect.

In an alternative, but related, argument, the respondent claimed that upon the commencement of the ORA, the jurisdictional authority for the provisions in paragraph 3 of the orders of 8 September ceased, with the result that these provisions ceased to have effect for want of jurisdiction. The injunctions were of an interlocutory nature made under Section 114(3) of the Family Law Act 1975 in support of the wife’s property claim under Part VIII of the Act and this jurisdiction must fall within Section 4(1((f) [sic] of the definition of 'matrimonial cause' in the Act, the relevant portion of which provides:-

'Any other proceedings ........  in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb) are deemed to be a matrimonial cause.'

Proceedings instituted by the wife of the kind referred to in paragraph (ca) (property proceedings between the parties to a marriage) ceased so far as she had sought orders for relief under Section 79A by the order of 8 September, and as far as she had sought orders for alteration of property interests, upon commencement of the ORA. Therefore, on 17 October 1997, there ceased to be 'any other proceedings .... in relation to concurrent, pending or completed proceedings of a kind referred to in any paragraphs of (a) to (eb)' upon which paragraph (f) could depend. It follows that on 17 October 1997, there was no continuing jurisdictional foundation for the injunctions in paragraph 3 of the order made on 8 September. Even though sufficient power existed at the time when the orders were made, there is still a necessity for there to be a continuing jurisdictional foundation, as jurisdiction is not the same as power. If a court’s authority to make a particular kind of order ceases at any time, any order of the kind made by the court must, without more, cease to have effect. Any authorities to the contrary, all concern orders made by a superior court of record or a court of general jurisdiction, in respect of which courts there is a presumption of jurisdiction with the result that an order is presumed to be within jurisdiction unless and until it is set aside for want of jurisdiction. However, the Family Court of Western Australia is only a court of record and a court of limited jurisdiction. It is for the party asserting that the inferior court has jurisdiction to establish this. In addition, the Full Court of the Family Court of Australia has said, in contempt proceedings under Section 112AP, if the validity of an order is challenged on jurisdictional grounds, the order should be treated as having been made in excess of jurisdiction (Re N and F and F and Department of Human Services (unreported) delivered 24 September 1997)."

1. It is convenient to now set out the relevant provisions of the Family Court of Western Australia (Orders of Registrars) Act 1997 to better understand the arguments put forward on behalf of the wife and the conclusions reached by the trial Judge on the preliminary issues:

“5.       Rights and liabilities declared in certain cases

(1)      The rights and liabilities of all persons are, by force of this Act, declared to be, and always to have been, the same as if each ineffective order had been an order made by the Family Court of Western Australia in the exercise of its federal family jurisdiction in or in relation to the proceedings for the order.

...

6.        Effect of declared rights and liabilities

(1)     A right or liability conferred, imposed or affected by section 5:

(a)      is exercisable or enforceable; and

(b)      is to be regarded as always having been exercisable or enforceable;

as if it were a right or liability conferred, imposed or affected by an order made by the Family Court of Western Australia, in the exercise of its federal family jurisdiction, in or in relation to the proceedings for the order.

...

(3)     In this section:

enforceable includes able to be dealt with by proceedings under Division 2 of Part XIIIA of the Family Law Act 1975 relating to a contravention of an order.

...

8. Section 5 regarded as having ceased to have effect in certain cases

(1)      If:

(a)      before the commencement of this Act, a court, in the exercise of its federal family jurisdiction, made an order (the new order) on the basis that an ineffective order of the kind referred to in subsection 4(2) was or might be invalid; and

(b)      the new order replaced the ineffective order (see subsection (2));

section 5 is to be regarded as having ceased to have effect in respect of the ineffective order when the new order took effect.

(2)      For the purposes of subsection (1), the new order replaced the ineffective order if the new order:

(a)conferred or imposed rights or liabilities similar to or different from those purportedly conferred or imposed by the ineffective order; or

(b)affected rights or liabilities in the same way as they were purportedly affected by the ineffective order or in a different way.  

...”

1. Martin J dealt with the wife's arguments as follows:

   "In response, for the wife it was submitted that the orders made in May 1995 are, and always have been, invalid (Horne and Horne (1997) FLC 92-734) and the ORA Act creates new statutory rights and liabilities that can be exercised and enforced as if they were orders, the original orders themselves not becoming enforceable.  Therefore, res judicata does not apply, nor the doctrine of merger in judgment. 

   Further, as a matter of statutory interpretation, the coming into effect of the ORA does not mean that the Family Court of Western Australia ceased to have power to grant the orders sought by the wife in the application filed 24 March 1997, including the order for property settlement sought in paragraph 5.  The orders of 8 September and the orders made 25 March 1997 replaced the orders of May 1995, within the meaning and contemplation of Section 8 of the ORA, and therefore Section 5 of the ORA does not apply to the orders of May 1995. Hence, the ORA does not give the original orders any force or effect and the Section 79 proceedings, if that is how they are to be characterised, clearly remained alive beyond 17 October 1997, being the date of commencement of the ORA.

   In any event, a litigant cannot presume that the Family Court of Western Australia does not have jurisdiction to deal with a matter and then choose to ignore its orders.  Further, provision is made in the Family Law Rules for a respondent who wishes to contest the jurisdiction of the Family Court to bring his objections to the notice of the Court and, in this instance, the respondents made no attempt to challenge the jurisdiction of the Court before embarking upon the actions, the subject of the contravention applications.  The issue of res judicata does not apply automatically and must be raised at the proper time, being the first available opportunity so that an opponent is not taken by surprise.

   The respondents’ actions denied the wife any opportunity to put forward submissions regarding the ongoing effect of the 8 September orders, the effect of the ORA and the Court’s jurisdiction generally.  Even where jurisdiction is later found to be lacking, the interim injunction would have been effective 'in a practical rather than a legal sense' in that the party to whom it is directed '...... could have disregarded it only at his peril' (the position being analogous to that referred to by Wilson and Dawson JJ in Re Ross-Jones; ex parte Green [1984) FLC 91-555 at 79,494-5). The position in the present case is even stronger than that described in that case because appropriate injunctive relief had already been granted by the Court at a time when it undoubtedly had jurisdiction to do so, and the alleged removal of its jurisdiction was itself highly questionable. There is no question that in the course of the proceedings prior to 17 October 1997, it was conceded that, once the ORA came into operation, the proceedings would 'revert' to Section 79A proceedings.

   The respondents’ alternative argument was also misconceived because there were at all relevant times proceedings on foot, being the subject of the wife’s amended application filed 21 March 1997."

2. She concluded that neither the orders of 25 March 1997 nor the orders of 8 September 1997 "replaced the ineffective order" within the meaning of s 8 of the ORA.  Her Honour said at page 12 of her judgment delivered 4 June 1998:

"...the Explanatory Memorandum in relation to the Bill, the reference to this clause says as follows:-

'Clause 8 covers a situation where, before the commencement of the Bill, a court has already overcome any invalidity of an ineffective order by making identical or similar orders, or registering a new parenting plan, in substitution for the ineffective order.  This may have occurred where a person went back to a court after learning of the decision in Horne and Horne specifically to obtain a valid order or parenting plan.  Where a court has made such a new order or registered a new plan, no new statutory rights and liabilities will be created by this Bill as these would be unnecessary and confusing.'

By no stretch of the imagination could the Court, in this case, have been regarded as having overcome any invalidity by making identical or similar orders.  The orders made on 8 September 1997 are interlocutory in nature and do not purport in any way to replace or affect the ineffective orders for settlement of property.  In those circumstances, I have determined that it would be contrary to the intention of the legislature to regard Section 8 as being applicable to the orders in question."

1. Her Honour concluded at page 14 of the judgment:

   "As was conceded by the respondents, there is no question that the Court had jurisdiction to make the orders on 8 September 1997. While I accept that there is no presumption of jurisdiction applicable to the Family Court of Western Australia, as being an inferior court of limited jurisdiction, that is not the issue here, as there is no question that the orders were properly made within jurisdiction, and indeed, were made by consent. The fact that a subsequent event, a change in legislation intended to correct jurisdictional problems directly affecting these parties, meant that the wife’s then substantive proceedings could no longer succeed, does not mean that there were, at that time, immediately no substantive proceedings between the parties, and no orders in force made prior to the change in legislation pursuant to Section 114(3) of the Family Law Act 1975.

   It follows from this, that I accept that there are proceedings constituting a 'matrimonial cause', and, in any event, it may well be the other ongoing subsidiary proceedings were sufficient to base jurisdiction. 

   I have concluded that there is a distinction between the ability to enforce an order made without jurisdiction, and the validity of an order made within jurisdiction which, at a later date, could not properly have been made as a result of an event which affects the right of a party to pursue the substantive claim on which the interlocutory relief was based.  For example, while I accept that it would be a defence to an enforcement application that the order breached could not properly have been made in the first place (as in In the Marriage of Vodeniciotis [1979] FLC 90-617), I do not accept that the present situation is directly analogous, as in this instance, the order remained valid and enforceable until varied or discharged.

   I have therefore determined that paragraph 3 of the order of 8 September 1997, remained in force at the time of the alleged breaches during October 1997."

2. On 8 July 1998, following her ruling of 4 June 1998, her Honour heard further interlocutory proceedings involving the husband and the wife and Blueseas Investments Pty Ltd.  She identified the issues for determination at that hearing as:

1.      Whether the Court has jurisdiction to grant an injunction against Blueseas Investments Pty Ltd.

2.      If it does have jurisdiction, whether the Court should exercise its discretion to grant such an injunction, and, if so, on what terms.

Her Honour concluded that she had the necessary jurisdiction and that:

"...it was appropriate to grant an injunction restraining Blueseas Investments Pty Ltd from transferring, encumbering, further encumbering or otherwise dealing with any property registered in its name and from borrowing any monies or any further monies or repaying any loans, without first giving solicitors for the wife not less that 21 days clear notice in writing, setting details of any proposed transactions."

1. At the same hearing on 8 July 1998 her Honour heard an application by the wife to which the husband, Jan, Kristen and Fauna were respondents, wherein the wife sought the sale of some real estate held by Fauna so as to avoid equity in the property being eroded by non-payment of mortgage instalments.  That application was rejected in a judgment delivered 8 September 1998.

The Bias Application

1. On 14 October 1998 Jan and Kristen made an application to her Honour that she be disqualified from the further hearing of the contravention and contempt applications filed by the wife insofar as they related to them.  The husband made an oral application that Martin J be disqualified from hearing any further matters at all, which application was supported by Jan and Kristen.  Fauna supported the application insofar as it sought disqualification from the contempt and contravention proceedings.

1. As the failure by Martin J to accede to the bias application was a matter strenuously pursued before us by counsel for the husband, Jan and Kristen, it is necessary to include several portions of her Honour's judgment on the issue:

   "For the applicants, Jan and Kristen McGillivray, it was submitted that, since I was appointed judge manager of these proceedings in March 1998, I have had to hear many applications in the proceedings and made decisions, which more often than not have been adverse to the applicants.  In their affidavit dated 30 September 1998, they said:-

   'In hearing the proceedings just referred to, Justice Martin has read numerous affidavits and has heard many submissions by counsel representing all parties.  Many of these affidavits and submissions concern matters and issues which will be relevant to the determination of the Form 47 and Form 48 proceedings.  Justice Martin has accordingly acquired detailed knowledge of the background facts, circumstances and issues which are relevant to the Form 47 and Form 48 proceedings.

   We are deeply concerned that Justice Martin will use her knowledge of background facts and circumstances in determining the Form 47 and Form 48 proceedings, even though evidence of such facts and circumstances may not be presented in evidence at these proceedings.  We are not asserting that Justice Martin will intentionally do so.  We are, however, very apprehensive that she may do so notwithstanding her best intentions to the contrary.

   ...

   The reason why we wish to ensure that the Form 47 and Form 48 proceedings are heard and determined according to the most rigorous procedures is not simply that these proceedings are quasi criminal in nature, but that on a previous occasion in Court, Justice Martin has remarked that if we are found guilty, the resulting penalty could be imprisonment.

   Further, and with the greatest respect to Justice Martin, in light of the many decisions that she has given in these general proceedings against us and our associated entities, Fauna Holdings Pty Ltd (as trustee of the Preservation Trust) and Blueseas Investments Pty Ltd (as trustee of the J.L.M. Family Trust), we reluctantly say that we lack confidence in her as the Judge of the Form 47 and Form 48 proceedings.  We have been assured by our legal advisers of Justice Martin’s complete integrity, and that she will determine these proceedings as impartially as she can.  However, we cannot put out of our mind that fact that to date most of her decisions have gone against us and our entities and that some statements that she has made in reasons for judgment have been, in our estimation, critical of us.'

   In his submission, counsel for the applicants referred to a number of findings of fact perceived to be contrary to the interests of the applicants which, it was considered, may be relevant to the contempt and contravention proceedings.

   For the husband, it was submitted that no objection was raised at the last hearing when the contravention applications were adjourned, but since then, I have made two substantive decisions, comments in which imply some criticism of, at least, Jan McGillivray and, by implication, the husband. Of particular concern (and these are not exhaustive), was a reference at p.17 of the judgment of 13 August 1998, in relation to a submission from the husband’s counsel in relation to Section 43 of the Family Law Act and the effect of the proceedings upon the husband’s present marriage to Jan McGillivray:-(emphasis added)

   'Apart from the fact that other cases referring to this issue have an entirely different factual base and the last subparagraph of Section 43 relates to counselling, the problem with this submission is that Jan McGillivray has not been dragged into these proceedings because she is the husband’s present wife, but because she was actively involved in the transactions which are being challenged.'

   and then at p.18:-

   'Since there is pending an application by the wife to set aside the transaction by which Fauna Holdings Pty Ltd paid to Jan McGillivray the sum of $150,000, which was lent by her to Blueseas Investments, in circumstances in which Jan McGillivray was actively involved and which are prima facie such as to raise concerns that the husband, or associated entities, were attempting to divest themselves of property, I am satisfied that it is necessary and appropriate to take steps to secure the preservation of this sum, pending determination of the Section 85 application.'

   At p.19:-

   'Having regard to Jan McGillivray’s possible exposure in relation to, for example, the contempt applications and costs, I accept that her total investment in the property should be secured.'

   This was said to be of concern because no mention of possible exposure to an order for costs was made on behalf of the wife.

   In relation to my decision of 8 September 1998, the particular portions of concern were at p.12:-

   'On the material before me, which I appreciate is very limited, it would seem that it is likely the Commonwealth Bank, in advancing these funds, was not informed of the full story.'

   and at p.13 in reference to whether the husband should be required to make mortgage payments owing by Fauna:-

   'The husband says that partly because of orders made in these proceedings, and other problems, for example, with the Luxembourg investment, that he is not in a position to pay and is “living off borrowed funds”.  The whole issue smacks of rearranging the deck chairs on the Titanic, but the wife’s point is obviously that the husband would then probably have to produce funds from overseas to maintain the equity in the property in Australia.'

   It should be mentioned that the wife was not successful in obtaining the orders sought on that application.

   For the husband, it was submitted that if there is a reasonable apprehension of bias in relation to the Form 47 and Form 48 applications, then it would not be proper for me to hear further disputed matters in relation to the proceedings, as the same problems would apply.  If it was simply a matter of procedural issues arising, this would not be such a problem, but substantive determinations have been, and will be, required before the matter eventually proceeds to trial.

   ...

   Their submission was based on an assertion that the parties’ were entitled to entertain a reasonable apprehension that I may not bring an impartial and unprejudiced mind to the resolution of the proceedings.

   For Fauna Holdings Pty Ltd, the principal submission was that I should not hear the Form 47 and Form 48 applications because as judge manager, I have heard many applications in the proceedings and become aware of many relevant facts and am therefore unable to bring a fresh mind to these applications, which are of a serious nature and could result in imprisonment if the respondents were found guilty.

   For the wife, it was submitted that the findings challenged as being of concern are contained in the affidavit material of either Jan or Kristen McGillivray or the husband and should therefore not be a cause for complaint.  It is essential to look at the circumstances in their entirety, and of relevance in this regard, is the fact that the Form 47 and Form 48 applications are part heard, in that I have already made a determination on the preliminary issue of the validity of the orders, admittedly contrary to the various applicants.

   ...

   As mentioned during the course of argument, I regard all the findings made by me as being in either the applicants’ affidavit material or in the past referred to as undisputed, and while I accept it is possible that this may not be the case in every instance, I was not referred to any reference where this was so.

   ...

   In addition, I do not accept any reliance on the statements made as able to cause a reasonable apprehension of bias.  Although I accept that a few of the comments made in the judgments referred to could be construed as critical of the applicants, I do not accept, in all the circumstances that the applicants could reasonably construe the comments as meaning that I am biased against them.

   ...

   The fact that I, and other Judges of this Court, have expressed disquiet about the actions taken in late October 1997, the occurrence of which is not denied, does not mean that the contempt or contravention applications have been, in any way, prejudged, and only one side of this story has yet been revealed.  Having regard to the extensive affidavit material relied on by the applicants, any trial Judge would have an enormous amount of material before him or her at the commencement of the proceedings, in any event.  I do not accept that, to fairly hear and determine contempt and contravention applications, one’s mind must be a clean slate.  In a case such as this, extensive background material will be required for the judicial officer to have any comprehension of the issues.

   It is accepted that the practical problems of availability of Judges, which is very real in this matter, is not a relevant consideration in making my determination, nor is the fact that I have made more decisions adverse to the present applicants in substantial matters than to the wife, although I would have thought that on procedural issues, the honours are fairly even.  Likewise, the fact I have determined the preliminary issue contrary to the applicants is irrelevant.  However, it is a fact of life, even though it is accepted that it is undesirable for a judge manager to hear substantive trials in matters in which they have been responsible for management, in this instance, where there are simply not enough undisqualified Judges remaining to have separate Judges deal with file management, the contempt and contravention proceedings, and the substantive trial, a solution must be found.

   I also regard it of significance that the matter is part heard before me, and I have already made a decision on the preliminary issue of validity of the order after a reasonably extensive hearing.  This in itself required some consideration of the background circumstances, and it is an additional concern that it is said this issue would have to be reconsidered by any other Judge hearing the application.

   I have therefore determined that I am not prepared to disqualify myself from hearing the contempt and contravention applications and it follows that I will remain judge manager, at least, for the time being.  The applications will therefore be dismissed."

The Contempt Judgments

1. The contempt and contravention proceedings concerning the matters disclosed in the November letter were commenced before her Honour on 5 August 1998, but were adjourned on 7 August 1998 after her Honour had heard argument on application by the wife to amend her claims in the proceedings.  They were then heard over three days in November 1998 and three days in January 1999.  Judgment was delivered on 2 June 1999.

1. Her Honour identified the proceedings before her as follows:

   "The proceedings for determination are four Form 48 applications (Contravention of Order), filed 1 December 1997, which alleged, in summary, that:-

   1.Fauna Holdings Pty Ltd in contravention of paragraph 3 of orders of the Family Court of Western Australia dated 8 September 1997:-

   (i)        paid the sum of $548,520 to Raysun Investments Ltd;

   (ii)       paid the sum of $400,000 to Acheron Holdings Pty Ltd;

   (iii)      paid the sum of $150,000 to Jan Lorene McGillivray.

   2.The husband’s wife, Jan Lorene McGillivray, as a director of Fauna Holdings Pty Ltd, is in breach of the same orders by reason of the same payments.

   3.The husband’s son, Kristen James McGillivray, as a director of Fauna Holdings Pty Ltd is in breach of the same orders by reason of the same payments.

   4.The husband, as appointor of the Preservation Trust of which Fauna Holdings Pty Ltd is the trustee, is in breach of the same orders by reason of the same payments.

   ...

   On 25 March 1998, the wife had also filed Form 47 applications against each respondent which, having referred to the detail of alleged contraventions in the Form 48 applications, asserted that whether or not the orders made on 25 March 1997 (which were of significance in relation to a further application regarding the husband’s sale of a boat which is being dealt with in a separate decision), and 8 September 1997, were valid, or remained in effect at the time of the transactions in October 1997, the actions of the respondents constituted contempt of Court...

   At the continuation of the trial on 5 August 1998, the wife sought leave to amend her applications, which leave was eventually granted, but the proceedings were then adjourned to November 1998.

   The amended Form 48 applications were in the following terms:-

   J L & K J McGillivray

   (The only difference in the amended Form 48 applications in relation to these respondents being “and by receiving the said payment” in paragraph 3 of the application of Jan Lorene McGillivray.)

   '1.The Respondent is a director of Fauna Holdings Pty Ltd.  On or about 20 October 1997 Fauna Holdings Pty Ltd paid the sum of $548,520.00 or thereabouts to Raysun Investments Ltd (without first giving the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so), which payment was purportedly in repayment of a loan, thereby contravening the provisions of paragraph 3 of the Order referred to in B above.  By authorising, permitting, facilitating or approving the said payment, the Respondent intentionally prevented compliance with the Order by Fauna Holdings Pty Ltd or, alternatively, aided or abetted the said contravention by Fauna Holdings Pty Ltd.

   2.The Respondent is a director of Fauna Holdings Pty Ltd.  On or about 27 October 1997 Fauna Holdings Pty Ltd paid the sum of $400,000.00 or thereabouts to Acheron Holdings Pty Ltd or alternatively to the account of Rushwood Gore, Solicitors (without first giving the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so), which payment was purportedly in repayment of a loan, thereby contravening the provisions of paragraph 3 of the Order referred to in B above.  By authorising, permitting, facilitating or approving the said payment, the Respondent intentionally prevented compliance with the Order by Fauna Holdings Pty Ltd or, alternatively aided or abetted the said contravention by Fauna Holdings Pty Ltd.

   3.The Respondent is a director of Fauna Holdings Pty Ltd.  On or about 20 October 1997 Fauna Holdings Pty Ltd paid the sum of $150,000.00 to Jan Lorene McGillivray (without first giving the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so), which payment was purportedly in repayment of a loan, thereby contravening the provisions of paragraph 3 of the Order referred to in B above.  By authorising, permitting, facilitating or approving the said payment, and by receiving the said payment, the Respondent intentionally prevented compliance with the Order by Fauna Holdings Pty Ltd, or alternatively aided or abetted the said contravention by Fauna Holdings Pty Ltd.

   4.Further, in making or in order to make the said payments referred to in 1, 2 and 3 above, Fauna Holdings Pty Ltd, inter alia:

   (a)increased its Capital Equity facility with the Commonwealth Bank of Australia from $500,000.00 to $900,000.00 (which original Capital Equity facility - stamped to secure an amount of $500,000.00 - was already secured by a mortgage registered 25 April 1997 over the property situated at 32 Bay View Terrace, Mosman Park);

   (b)utilised or drew down on the original Capital Equity facility and on the increased facility; and

   (c)agreed to the mortgage to the said Bank (registered 25 April 1997 over the property situated at 32 Bay View Terrace, Mosman Park) being upstamped to secure the said increased facility;

   thereby (and without first giving the solicitors for the wife not less than 21 days clear notice of its intention so to do);

   i          expending its funds; and/or

   iifurther encumbering property registered in its name (being the property situated at 32 Bay View Terrace, Mosman Park) and/or;

   iii        borrowing moneys or further moneys; and/or

   iv        conducting business;

   and thus contravening the provisions of paragraph 3 of the order referred to in B above.  By authorising, permitting, facilitating or approving the said actions or transactions, and by personally guaranteeing the said increase in the said Capital Equity facility, the Respondent intentionally prevented compliance with the order by Fauna Holdings Pty Ltd or, alternately, aided or abetted the said contravention by Fauna Holdings Pty Ltd.'

   Fauna Holdings Pty Ltd

   '1.On or about 20 October 1997 the Respondent paid the sum of $548,520.00 or thereabouts to Raysun Investments Ltd (without first giving the solicitors for the wife not less than 21 days clear notice in writing of the intention to do so), which payment was purportedly in repayment of a loan, thereby contravening the provisions of paragraph 3 of the Order referred to in B above.  In making the said payment to Raysun Investments Ltd the respondent intentionally failed to comply with the provisions of the Order referred to in paragraph B above.

   2.On or about 27 October 1997 the Respondent paid the sum of $400,000.00 or thereabouts to Acheron Holdings Pty Ltd or alternatively to the account of Rushwood Gore, Solicitors, (without first giving the solicitors for the wife not less than 21 days clear notice in writing of the intention to do so), which payment was purportedly in repayment of a loan, thereby contravening the provisions of paragraph 3 of the order referred to in B above.  In making the said payment the Respondent intentionally failed to comply with the provisions of the Order referred to in paragraph B above.

   3.On or about 20 October 1997 the Respondent paid the sum of $150,000.00 or thereabouts to Jan Lorene McGillivray (without first giving the solicitors for the wife not less than 21 days clear notice in writing of the intention to do so), which payment was purportedly in repayment of a loan, thereby contravening the provisions of paragraph 3 of the order referred to in B above.  In making the said payment to Jan Lorene McGillivray the Respondent intentionally failed to comply with the provisions of the Order referred to in paragraph B above.

   4.Further, in making or in order to make the said payments referred to in 1, 2 and 3 above, Fauna Holdings Pty Ltd, inter alia:-

   (a)increased its Capital Equity facility with the Commonwealth Bank of Australia from $500,000.00 to $900,000.00 (which original Capital Equity facility - stamped to secure an amount of $500,000.00 - was already secured by a mortgage registered 25 April 1997 over the property situated at 32 Bay View Terrace, Mosman Park);

   (b)utilised or drew down on the original Capital Equity facility and on the increased facility; and

   (c)agreed to the mortgage to the said Bank (registered 25 April 1997 over the property situated at 32 Bay View Terrace, Mosman Park) being upstamped to secure the said increased facility,

   thereby (and without first giving the solicitors for the wife not less than 21 days clear notice of its intention to do so);

   i.expending its funds; and/or

   ii.further encumbering property registered in its name (being the property situated at 32 Bay View Terrace, Mosman Park); and/or

   iii.borrowing moneys or further moneys, and/or

   iv.conducting business,

   and thus contravening the provisions of paragraph 3 of the order referred to in B above.  In carrying out the said actions or transactions, the Respondent intentionally failed to comply with the provisions of the order referred to in B above.'

   B J McGillivray

   '1.The Respondent is (or, alternatively, until on or about 27 September 1997 was) the appointor of the Preservation Trust, of which Fauna Holdings Pty Ltd is the trustee.  The Respondent is and at all material times has been in control of Fauna Holdings Pty Ltd.  Alternatively, the Respondent could have exercised control over Fauna Holdings Pty Ltd had he so wished.  On or about 20 October 1997 Fauna Holdings Pty Ltd paid the sum of $548,520.00 (or thereabouts) to Raysun Investments Ltd (without first giving the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so), thereby contravening the provisions of paragraph 3 of the Order referred to in B above.  By authorising, permitting, facilitating or approving the said payment, the Respondent intentionally prevented compliance with the order by Fauna Holdings Pty Ltd, or alternatively aided or abetted the contravention by Fauna Holdings Pty Ltd.

   2.The Respondent is (or, alternatively, until on or about 27 September 1997 was) the appointor of the Preservation Trust, of which Fauna Holdings Pty Ltd is the trustee.  The Respondent is and at all material times has been in control of Fauna Holdings Pty Ltd.  Alternatively, the Respondent could have exercised control over Fauna Holdings Pty Ltd had he so wished.  On or about 27 October 1997 Fauna Holdings Pty Ltd paid the sum of $400,000.00 (or thereabouts) to Acheron Holdings Pty Ltd or, alternatively, to the account of Rushwood Gore, Solicitors (without first giving the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so), thereby contravening the provisions of paragraph 3 of the Order referred to in B above.  By authorising, permitting, facilitating or approving the said payment, the Respondent intentionally prevented compliance with the order by Fauna Holdings Pty Ltd, or alternatively aided or abetted the contravention by Fauna Holdings Pty Ltd.

   3.The Respondent is (or alternatively, until on or about 27 September 1997 was) the appointor of the Preservation Trust, of which Fauna Holdings Pty Ltd is the trustee.  The Respondent is and at all material times has been in control of Fauna Holdings Pty Ltd.  Alternatively, the Respondent could have exercised control over Fauna Holdings Pty Ltd had he so wished.  On or about 20 October 1997 Fauna Holdings Pty Ltd paid the sum of $150,000.00 (or thereabouts) to Jan Lorene McGillivray (without first giving the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so), thereby contravening the provisions of paragraph 3 of the Order referred to in B above.  By authorising, permitting, facilitating or approving the said payment, the Respondent intentionally prevented compliance with the order by Fauna Holdings Pty Ltd, or alternatively aided or abetted the contravention by Fauna Holdings Pty Ltd.

   4.Further, in making or in order to make the said payments referred to in 1, 2 and 3 above, Fauna Holdings Pty Ltd, inter alia:

   (a)increased its Capital Equity facility with the Commonwealth Bank of Australia from $500,000.00 to $900,000.00 (which original Capital Equity facility - stamped to secure an amount of $500,000.00 - was already secured by a mortgage registered 25 April 1997 over the property situated at 32 Bay View Terrace, Mosman Park);

   (b)utilised or drew down on the original Capital Equity facility and on the increased facility; and

   (c)agreed to the mortgage to the said Bank (registered 25 April 1997 over the property situated at 32 Bay View Terrace, Mosman Park) being upstamped to secure the said increased facility,

   thereby (and without first giving the solicitors for the wife not less than 21 days clear notice of its intention so to do):

   i.expending its funds; and/or

   ii.further encumbering property registered in its  name (being the property situated at 32 Bay View Terrace, Mosman Park; and/or

   iii.borrowing moneys or further moneys; and/or

   iv.conducting business,

   in contravention of paragraph 3 of the order referred to in B above.  By authorising, permitting, facilitating or approving the said actions or transactions, and by personally guaranteeing the said increase in the said Capital Equity facility, the Respondent intentionally prevented compliance with the order by Fauna Holdings Pty Ltd or, alternatively, aided or abetted the said contravention by Fauna Holdings Pty Ltd.'

   As to the Form 47 applications, the only amendments were to change the reference to the Form 48 applications at the commencement, to 'as amended' and add in the following paragraph 4.4.

   'involved a flagrant challenge to the authority of the Court'.”

1. Her Honour then set out the background to the proceedings and those portions of ss 112AB, 112AC, 112AD and 112AP of the Family Law Act 1975 that she determined were relevant to the proceedings before her. She determined that in accordance with the decision of the Full Court in Ibbotson and Wincen (1994) FLC 92-496 it was appropriate to hear the contempt and contravention applications together. She would first decide whether the respondents' conduct amounted to a flagrant challenge to the authority of the Court, and if not she would then consider "the lesser charges".

1. The proceedings before her Honour involved determining the culpability, if any, of each of four defendants in respect of each of a series of transactions. The key findings of her Honour were:

"JAN McGILLIVRAY

A        Payment to Raysun Investments Ltd

It was common ground that at all material times, Jan McGillivray was a director of Fauna Holdings.

...It is, in fact, common cause that Fauna Holdings, as trustee of the Trust, consented to orders in terms of paragraph 3 of the September orders, and under Section 129(3) of the Corporations Law, one is entitled to assume that counsel was acting under instructions from the company.

...

I have no doubt Jan McGillivray knew of the terms, meaning and effect of the orders before the transactions occurred for the reasons referred to.

It was then asserted on or about 20 October 1997 Jan McGillivray, authorised, permitted, facilitated or approved a payment by Fauna Holdings Pty Ltd in the sum of $548,520 (or thereabouts) to Raysun Investments Ltd without giving to the solicitors to the wife not less than 21 days clear notice in writing of its intention to do so.

...On the evidence, I have no doubt that the payment was made by Fauna to Raysun.  I accept the evidence of the wife’s solicitor that no notice was provided of the payment.  There was no suggestion to the contrary.

As to whether she authorised, permitted, facilitated or approved the payment, Jan was, at all material times, a director of Fauna and, in fact, signed the cheque in question.

...I accept that since Jan McGillivray was a director of Fauna Holdings who signed the cheque and was a guarantor for the loan, that she did authorise, permit, facilitate and approve this transaction and therefore intentionally prevented compliance with the order of 8 September 1997.

B        Payment to Acheron Holdings Pty Ltd

The particulars largely relied on the same evidence, firstly, that Jan was at all material times, a director of Fauna - this was common cause.  Secondly, she knew of the terms, meaning and effect of the 8 September 1997 order.  I accept this assertion for the reasons already referred to. 

...To establish that the payment was made, reliance was again placed on the letter from Deacons Graham and James to the wife’s solicitors dated 20 November 1997 (clause 3), paragraph 28 of Jan McGillivray’s affidavit dated 22 February 1998 (exhibit 53), and the copy of the cheque.  Again, I accept the evidence of the wife’s solicitor that she did not receive any notice of the payment as required by the order of 8 September 1997.  There was no suggestion to the contrary.

...

In summary, it is therefore asserted that, since Jan was a director of Fauna Holdings, who consented to personally guarantee the increased facility required by the Commonwealth Bank before the Bank would agree to advance the further sum of $400,000, and signed the cheque, that she must have authorised, permitted, facilitated or approved of a transaction by Fauna Holdings for the amount of $400,000 to be paid to Acheron Holdings Pty Ltd, or alternatively, to Rushwood Gore, Solicitors, or alternatively, she aided or abetted the contravention by Fauna of the order.  In fact, there is no question that the cheque was paid to Rushwood Gore.

I have no doubt that this is the case for the reasons alleged by the wife, and that Jan, in this regard, therefore intentionally prevented compliance with the order of 8 September 1997. 

C        Payment of the sum of $150,000 to Jan McGillivray

Again, reliance was placed on the fact that Jan is and has been, at all material times, a director of Fauna Holdings Pty Ltd, and that she, at all material times, knew of the terms, meaning and effect of the 8 September 1997 order.  I accept that this is the case for the same reasons as previously referred to. 

It was asserted that, on or about 20 October 1997, Jan authorised, permitted, facilitated or approved a payment by Fauna Holdings in the sum of $150,000 (or thereabouts) to herself, without giving to the wife’s solicitors not less than 21 days clear notice in writing of her intention to do so... I accept that there is no doubt that the payment was made. 

I also accept the evidence of the wife’s solicitor that no notice was received of the payment as required by the order of 8 September 1997.  There was no suggestion to the contrary.

...

In summary, it was said that as she, as a director of Fauna Holdings, must have authorised, permitted, facilitated or approved the transaction, paying the sum of $150,000 to herself, as her consent to personally guarantee the increased facility was required by the Commonwealth Bank before the Bank would agree to advance the further $400,000, and she signed the cheque in question.  The payment was made to her before the Bank agreed to the increased facility, but I have no doubt that she signed the cheque, and has admitted that the monies were paid to her.  Therefore, I have no doubt that, in this regard, she intentionally prevented compliance with the order.

D        Effect of payments on loan.

The wife asserted that in making the payments of $548,520, $400,000 and $150,000 already referred to, Fauna Holdings was required to, and did, increase its Capital Equity facility with the Commonwealth Bank from $500,000 to $900,000, utilised the facility in order to make the payments and agreed to the upstamping of the mortgage over the land thereby expending its funds and/or further encumbering property registered in its name and/or borrowing monies and/or conducting business in contravention of the 8 September 1997 order. 

I accept that there can be no doubt, relying on the evidence already referred to, that Jan McGillivray by authorising, permitting, facilitating or approving the payments referred to, including by consenting to the additional loan and providing a personal guarantee, intentionally prevented compliance with the order, including further encumbering the property registered in its name.

KRISTEN McGILLIVRAY

A        Payment to Raysun Investments Ltd

There can be no doubt that Kristen is, and has, at material times, been a director of Fauna Holdings Pty Ltd - this was common ground.

...

I have no doubt that Kristen knew of the terms, meaning and effect of the 8 September 1997 order at the time this, and the other transactions between 20 and 27 October 1997, were effected.

It was then asserted on or about 20 October 1997, Kristen authorised, permitted, facilitated or approved a payment by Fauna Holdings in the sum of $548,520 (or thereabouts) to Raysun Investments Ltd without giving to the solicitors for the wife not less than 21 clear days notice in writing of its intention to do so.

...I have no doubt that the payment was made.  I also accept that the wife’s solicitor did not receive any notice of the payment as required by the order of 8 September 1996.

...

...I have no doubt that as one of the two directors of Fauna Holdings at the time, actively involved in the business and provider of a guarantee, that Kristen must, at the very least, have aided or abetted the contravention by Fauna Holdings of the order.

B        Payment to Acheron Holdings Pty Ltd

Firstly, the wife again asserted that Kristen is and has, at all material times, been a director of Fauna Holdings Pty Ltd - this is common cause.  It was alleged that at all material times the respondent knew of the terms, meaning and effect of the 8 September 1997 order.  I accept that this was the case for the reasons already referred to.

It was then asserted that on or about 27 October 1997, Kristen authorised, permitted, facilitated or approved a payment by Fauna Holdings in the sum of $400,000 (or thereabouts) to Acheron Holdings Pty Ltd or, alternatively, to Rushwood Gore, Solicitors, without giving to the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so. ...As previously mentioned, in relation to Jan, I have no doubt that the transaction occurred.  I also accept that the wife’s solicitor did not receive any notice of the payment as required by the 8 September order.

...I have no doubt that he must have authorised, permitted, facilitated or approved of the transaction by Fauna Holdings ...

C        Payment of sum of $150,000 to Jan McGillivray

Again, reference was made to Kristen being, at all material times, a director of Fauna Holdings and knowing the terms, meaning and effect of the 8 September 1997 order.  Once more, I accept that this was the case, for the reasons already referred to. 

...I accept that the wife’s solicitor did not receive any notice of the payment as required by the 8 September 1997 order, and it was not suggested otherwise.

...I accept that this payment occurred before the additional facility was approved and the extent of the guarantee increased.  I have no doubt that Kristen, at the least, aided and abetted the contravention of the order by Fauna Holdings...

D        Effect of payments on loan.

...

I have no doubt that Kristen did, thereby intentionally prevent compliance with the order by Fauna Holdings by consenting to the additional loan, thereby increasing Fauna Holdings’ debt, providing a personal guarantee, and also causing the property registered in its name to be further encumbered.

FAUNA HOLDINGS PTY LTD

The wife relied on the particulars of contravention and evidence in support as asserted against Jan and Kristen McGillivray who, it is not in dispute, were at all material times the only directors of Fauna. 

I have found that both of the two directors of the company either intentionally prevented compliance with the order by the “person” who is bound by it, that is, Fauna Holdings, or aided or abetted a contravention by Fauna Holdings.  It therefore follows that, for the same reasons, I am certain that Fauna Holdings has contravened the order in making the payments referred to in each application, and increasing the sum owing with respect to the loan facility.  The order was made with the consent of Fauna Holdings, no notice was given by Fauna Holdings, the transactions were conducted on Fauna Holdings’ accounts by a duly appointed director of the company, and the loan facility of the company and the extent of the encumbrance was increased by both directors.

BRIAN McGILLIVRAY

...

A        Payment to Raysun Investments  Ltd

The wife asserted that on or about 20 October 1997, the husband was the appointor of the Preservation Trust as the Trust Deed (exhibit 55),...

...

...I consider it probable that the husband had resigned as appointor by the time these transactions took place, this being his evidence.

In the alternative, it was asserted, in any event, and whether or not he was the appointor of the Trust, the respondent was at all material times in control of Fauna Holdings...

Although I accept that the husband was involved in the actions of Fauna Holdings, for the reasons referred to above, I do not accept that, beyond doubt, he was necessarily in control of the company in the sense that he directed all the decisions, although he was without doubt a significant voice and probably was the controller.

It was then asserted that at all material times the husband knew the terms, meaning, and effect of the order of 8 September 1997. ...I have no doubt..., that the husband did agree to paragraph 3 of the order being made.  Even if he did not, he certainly knew its terms, meaning and effect, and did not oppose it being made.

It was further maintained that on or about 20 October 1997, the husband authorised, permitted, facilitated or approved the payment by Fauna Holdings of the sum of $548,520 or thereabouts to Raysun Investments Ltd without giving to the solicitors for the wife not less than 21 days clear notice in writing of its intention to do so.

...

...I accept that the payment to Raysun Investments must have preceded the meeting with Greg Hancock... Although, for the reasons referred to, including that he was guarantor for the existing facility, I accept it is probable that the husband must have known that a sum of such magnitude was to be paid to Raysun Investments, I am not prepared to find, beyond reasonable doubt, that the husband contravened the order as alleged and the Form 48 application against the husband and the related Form 47 application will be dismissed.

B        Payment to Acheron Holdings Pty Ltd

...

I have no doubt that the husband, by guaranteeing the increased loan facility, the provision of his guarantee being critical to the Bank’s preparedness to advance the funds, and the fact that the funds were provided to a company which I am certain is in his control, Acheron Pty Ltd, meant that the husband, at the least, aided or abetted the contravention of the order by Fauna Holdings.

C        Payment of the sum of $150,000 to Jan McGillivray

...

...Although I consider it probable that the husband knew of this transaction, on the evidence adduced I am not prepared to find, beyond reasonable doubt, that he contravened the order of 8 September 1997.  I will therefore be dismissing the Form 48 and the related Form 47 applications.

D        Effect of payments on loan.          

...I have no doubt that the husband, in consenting to the increased exposure through the guarantee, which was critical to the Bank agreeing to lending the sums concerned, aided or abetted the contravention of the order by Fauna Holdings."

Defences Raised at Trial

1. Her Honour then turned to the defences raised, accepting that it was appropriate that the case be proven beyond reasonable doubt.  She noted that "credibility was not an issue in the proceedings as the respondents had chosen not to give any evidence."

1. She then dealt first with an argument that the order of 21 November 1996 restraining Fauna from dealing with its property "except in the ordinary course of business" was a complete answer to the assertion arising out the matters disclosed in the November 1997 letter.  It was asserted that the evidence either demonstrated that the payments were in the ordinary course of Fauna's business, and as such were permitted by the injunction of 21 November 1996, or alternatively there was sufficient confusion about the extent to which the first injunction remained in force notwithstanding the more restricted terms of the second injunction, so that the Court could not possibly be convinced beyond reasonable doubt that any of the defendants had the necessary intent to act in contempt of the court (see R and I Bank of Western Australia Ltd and Anchorage Investments (1993) 10 WAR 59).

1. Her Honour dealt with those submissions in the following manner:

   ”As to the effect of any reliance on the order of November 1996, I consider it most unlikely that, at the time the transactions occurred, any of the respondents were relying on the fact that the actions may have been permissible pursuant to those orders, which does seem clear, were still valid in October 1997.  If this had been the case, the letter of 20 November 1997, would have been in different terms as referred to at length by counsel for the wife in his submissions, including in relation to the overall circumstances in September/October 1997.

   The problem with the respondents' cases is this regard, is that I have determined that they cannot rely on any compliance with the order of November 1996, as I do not accept that the transactions were in 'the ordinary course of business' of Fauna Holdings.  The evidence is that Fauna Holdings’ business had been, to that time, that of an investment company engaged in residential property development, and although there was evidence that the Bank was prepared to countenance an extension of their activities, this does not mean at the time the transactions were entered into, for the reasons outlined by the wife’s counsel, they were in Fauna Holdings’ 'ordinary course of business'.

   There is no doubt that whereas some debt repayment of a smaller amount could have been accepted as part of the 'undistinguished common flow of business', particularly if it was, for example, repayment of loans on sale of a newly developed property, these transactions were of such magnitude, being unrelated to any property development, or previous business activity, that they were most certainly unusual for Fauna Holdings.  I have concluded that the transactions were not in Fauna Holdings’ 'ordinary course of business', and that therefore, the respondents were not entitled to rely on the ex parte order of November 1996, to support their actions."

2. The contempt applications asserted, in the alternative to alleging a flagrant breach of the orders, that each of the defendants had acted in a manner which manifested a disrespect for the Court and its processes and amounted to serious misbehaviour on their part and interfered with, or tended to interfere with, the administration of justice. 

1. In her reasons for judgment her Honour indicated that the wife had stated at the outset that the contempt applications were brought in the alternative in case she determined the order of 8 September 1997 was invalid. As that order was considered to be valid her Honour regarded the application in the alternative, brought under the provisions of s 112AP(1)(a), as not applicable.

1. Her Honour then turned to consideration of s 112AP(1)(b) claims and said:

   "For Section 112AP(1)(b) to apply, the actions of the respondents must constitute a contravention of an order under the Act and involve a flagrant challenge to the authority of the Court. The amended Form 47 application of the applicant referred to this, but did not specifically state that the wife was relying on Section 112AP(1)(b), in that the actions constituted a contravention of an order under the Act. However, the case was argued on the basis that it was open to me to find that if the respondents had contravened the order, then if I also found that the contravention involved a flagrant challenge to the authority of the Court, I could find the respondents in contempt of Court, there being aggravating circumstances in this case."

2. She specifically referred to the Full Court's decision in Ibbotson and Wincen (supra) at 81,162 where the Court examined what it was that constituted a "flagrant challenge to the authority of the Court" and where their Honours said:

"...The use of the term 'flagrant challenge' to the authority of the Court is intended to underline the exceptional or striking nature of the contravention in question and thus to differentiate it from what might be described as the general run of breaches which are intended to be dealt with under s. 112AD.

In the ultimate, it is a question of fact and degree whether the stringent terms of the section are satisfied, bearing in mind, as was pointed in (sic) Basic and Newman (1992) FLC 92-297 that it is usually more appropriate to use s.112AD."

1. Her Honour agreed with the observations of Mullane J in Basic and Newman that contempt procedure should be used sparingly.  She then said:

   "Recently, in Hay v Hay (1998) FLC 92-819, the Full Court held that in order to establish a contempt for the purposes of Section 112AP(1)(b), it is unnecessary to establish that there has been a deliberate intention on the part of the respondents to breach the relevant court order. It did not accept the contention that the introduction of the concept of 'a flagrant challenge to the authority of the court' in Section 112AP(1)(b) had changed the previously existing law, as stated in English and English (1986) FLC 91-729, that in civil contempts it is not necessary to establish that the conduct was contumacious (that is, the act or omission was done with a deliberate intention to breach or disregard the Court order in question).

   ...

   I have no doubt that the evidence establishes that the transactions of late October 1997 occurred and that each of the respondents, Fauna Holdings and Jan, Kristen and Brian McGillivray, in respect of two of the allegations, knowing of the order, acted in contravention of the consent order of 8 September 1997, by failing to give 21 days notice to the wife’s solicitors of the transactions, the subject of the applications which then took place, although Brian and Kristen McGillivray, in some respects at the least, contravened the orders by aiding and abetting the contravention by Fauna Holdings.

   The issue then is whether the respondents have flagrantly challenged the authority of the Court if they contravened an order when they knew there was, at least, an argument that it was invalid.  It was submitted that their attitude was supported by Tolcon J’s determination as at 30 October 1997, that the wife’s substantive application was no longer in existence as a result of the Family Court (Orders of Registrars Act) 1997, and that therefore, the husband could not be ordered to file documentation in these proceedings. 

   There is also the issue whether the respondents can be in contempt if they acted in accord with the order of November 1996 or believed they were acting in accord with the order of November 1996.  Although I accept that there is a possibility that their conduct was not contumacious in the sense that there was an intent to blatantly disregard the court order without explanation, it is clear that a party can be in contempt of Court nonetheless.  A deliberate commission or omission in breach of an injunctive order constitutes wilful disobedience unless it is casual, accidental or unintentional (Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] 161 CLR 98). There is also the consideration that the respondents, if they genuinely had a belief that the orders were invalid, were, according to my determination, clearly wrong.

   ...

   There can be no doubt that the contravention in this case is serious, flying in the face, as it does, of a consent order made only weeks before, having regard to the large sums involved, and the transactions in the context of the proceedings.  These are well described in the wife’s Form 47 application.  I have therefore determined that the contraventions are of an exceptional or striking nature, and that they constituted a flagrant challenge to the authority of the Court.

   In Pelechowski v The Registrar, Court of Appeal (supra), Kirby J, in his dissenting judgment (since the majority had found the injunction made outside jurisdiction), said in his strong comments on the result:-

   'Yet consider the unjust result which follows.  An order of a Judge of the District Court of New South Wales, never set aside, is solemnly made and stands on the public record speaking to the appellant (who understands it), to the judgment creditor who secured it and to the community.  The order was designed to prevent misconduct of the precise kind which the appellant quickly effected.  He defied the court order.  He wholly defeated the interests of a litigant who had invoked court process and who trusted the court to uphold his rights, not only in theory but in practicality as well.  The power given to the trial judge by Parliament is seriously confined.  This Court allows a person, guilty of deliberately flouting a court order and defying another citizen’s established civil rights, to walk away unpunished, laughing at justice.  It is not a shining moment for the authority and effectiveness of judicial orders in Australia.'

   Had I found otherwise in these proceedings, having regard to the actions of the respondents and their response to these applications, I would have had to make comments of a similar nature.

   SECTION 112AD APPLICATIONS

   Having determined that the respondents are each in contempt of Court in some respects, it is not essential to consider the applications pursuant to Section 112 AD.  However, I propose to do so, in the event I am wrong in relation to the contempt applications

   Meaning of without reasonable excuse

   Pursuant to Section 112AD(1), there is an issue as to whether the respondents have 'without reasonable excuse' contravened an order under this Act. I would again refer to the provisions of Section 112AC (at p. 16 supra).

   ...

   The standard for determining a reasonable excuse is that of the reasonable man or woman on the street and not on the value judgment of the reasonable lawyer or Judge (Pascoe v Nominal Defendant (Qld) (No 2) [1964] QdR 373). Section 112AC does not, in any way, limit the variety of excuses that can be regarded as reasonable, so the belief of a party can constitute a reasonable excuse in appropriate circumstances.

   In relation to this issue, it is obvious that a 'reasonable excuse' must be that of a reasonable person, and not what a respondent subjectively believes is a reasonable excuse, or what Judges may accept themselves, as being a reasonable excuse, having regard to the circumstances and the legal position. In the present case, the respondents, Fauna Holdings and Jan and Kristen McGillivray, consented to the orders of 8 September 1997, which have been held to be valid, and remained valid and effective after 17 October 1997. No notice was given as required by the orders of the intended transactions, nor was any application made for clarification of the respondents’ obligations after the Family Court of Western Australia (Orders of Registrars) Act 1997 came into operation.

   I have already determined that all the respondents have contravened the order of 8 September 1997, having regard to Sections 112AD(1) and 112AC(2). I am sure that the respondents, at the time of the contravention, understood their obligations pursuant to the order, but may have considered they had an excuse in that they may at the time have thought that the order was not valid. Even had they not understood, in all the circumstances of the case, I am not satisfied that any respondent ought to be excused in respect of the contraventions for the reasons referred to in the last paragraph. If they were in any doubt as to their obligations, the matter could have been readily clarified by the Court. It is of considerable concern that there were hearings in this Court on two occasions, between the conducting of the transactions and the sending of the letter of 20 November 1997, and no mention was made of the fact that the transactions had taken place. Any mention by Tolcon J, on 30 October, that could have supported the assertions of the respondents, occurred well after the transactions and his previous comment in March 1997, I do not accept, in any way, supported the respondents’ position.

   As to whether the respondents had a reasonable excuse based on the existence of the order of November 1996, as previously mentioned, I do not accept that the respondents’ actions in October 1997 were, at that time, based on any belief, reasonable or otherwise, that their action was justified by any compliance with the previous order.  It may be possible that if this constitutes a 'reasonable excuse' now, it would have constituted a reasonable excuse at that time, even if the respondents, Fauna Holdings, Jan and Kristen McGillivray, did not, at the time, base their actions on the order being applicable.  However, I have determined that the respondents’ actions were not in accord with the order of November 1996, as not being 'in the ordinary course of business' of Fauna Holdings, and the fact remains that, in the circumstances then extant, where there was some contradiction between a previous order and a recent consent order, the respondents should have sought clarification of the situation, rather than unilaterally entering into transactions blatantly in breach of the latter order, which was valid and to which they consented.

   I have therefore concluded that none of the respondents had a reasonable excuse for contravening the order, and that therefore, since I have found that the orders have been contravened, then they have all contravened the order of 8 September 1997, without reasonable excuse, save for the husband in relation to two of the applications previously referred to."

1. His Honour then stood the matter down for discussion between the parties.  On its resumption there was further discussion and his Honour said to Mr Chaney (appearing on behalf of the wife):

"...There is no earthly possibility of me resolving any of these applications today.  To present it in any detail would only be a - - you would need at least a full day.  I made that clear 2 weeks ago and that was before I was - - or whenever it was, it was before I was aware of the implications of the Horne decision.  I indicated that - - that if you wish to proceed with your amended application I would grant the necessary leave and that in itself would then found jurisdiction and enable the various restraining orders and the like to be put in place, because I think all of the orders that I've made may well fall as a result of the Horne decision at this time.

Your application would not be dealt with but I would be surprised if you were to get to the stage where I'd make final orders on your amended application before the - - before legislation's put in place, which would bring you back to where you are today."

1. Subsequently, in further discussion, Mr Harrison (for Fauna) seeking the removal of a caveat said:

"Your Honour, I can't leave these chambers without - - this court without getting orders for the removal of the caveat.  That is the problem in which we are place.

HIS HONOUR:        Well, you have another very serious problems (sic).  If what Mr Williams would say, that at least a million goes into the McGillivray Trust then the best part of 860,000 then goes across to Fauna Holdings on the 20th of May 1996, on the one hand, and then a fist full of money goes in via Hong Kong, I can assure you that I will be putting into place sufficient safeguards to protect the wife."

1. The other comments of Tolcon J relied upon by Dr Dickey as demonstrating that the parties may well have held a reasonable belief as to the invalidity of the orders were comments made by his Honour in discussion on 8 September 1997 before the granting of the injunctions restraining Fauna dealings without giving 21 days notice (Appeal Book 503):

"HIS HONOUR:       Mr Walters [counsel for the wife], let me say this to you, that in all probability you will receive some favourable orders with respect to these procedural matters - - I think I flagged them to Dr Dickey - - but I can tell you now that I'm going to strike out those parts of your client's application that at this time are not relevant;  that's with respect to 79A.  I don't know how far the legislation is down the track.  You will in all probability get some order for costs today.  It doesn't help to resolve the matter and we may find ourselves shortly going back to square one."

1. The final remark relied upon was also made by Tolcon J on 8 September 1997 where immediately prior to the adjournment his Honour said:

"I suppose ultimately it comes out of this:  You have got to act on instructions and Mr Culshaw has got to act on instructions and after receiving advice the two people that have to make the decision are the husband and the wife and the tragedy of this case is the Horne decision and let's assume that that legislation goes through, then we go back to square one and we then argue 79A."

1. Assuming for the purposes of argument that it was a necessary prerequisite for the respondent to this appeal to have negated any possible defences that may have been reasonably raised by the appellants in the proceedings before the trial Judge, we are of view that the remarks of Tolcon J could not have led any of the appellants to reasonably believe that they could ignore the injunctions made in March 1997 (insofar as they affect the husband) and in September 1997. 

1. His Honour's remarks clearly indicate that his Honour was concerned with ensuring that the parties did not incur massive costs which might be wasted in light of expected remedial legislation. In our view, his Honour clearly indicated that any further steps in respect of the application to reopen the invalid orders via s 79A or to seek leave to bring in fresh proceedings out of time under s 43(3) would be rendered nugatory in that before any such proceedings could be completed the remedial legislation would have been passed. His Honour, in our view, in the passages cited above, made it clear that he intended that the wife's position vis-a-vis the potential dissipation of assets, would be protected as far as possible pending the hearing of her application. Nothing in his Honour's comments could reasonably have led any of the appellants to hold the view that those interlocutory injunctions would cease to have effect on the passing of the remedial legislation. As his Honour said on 25 March 1997 at Appeal Book 530 "I will put into place appropriate restraining orders to protect the wife". Then, at Appeal Book 535, "I can assure you that I will be putting into place sufficient safeguards to protect the wife". In the circumstances there was nothing said by Tolcon J which could have reasonably led the appellants to assume that the injunctions would be of no force or effect upon the passing of the remedial legislation.

Subjective Belief of Reasonable Excuse

1. Her Honour's finding at Appeal Book 189 was:

"...that the respondents, at the time of the contravention, understood their obligations pursuant to the order, but may have considered they had an excuse in that they may at the time have thought that the order was not valid."

1. Her Honour then went on to indicate that even if they did consider they had such an excuse that ought not excuse them in respect of the contraventions.  "If they were in any doubt as to their obligations, the matter could have been readily clarified by the Court".  It was submitted on behalf of the appellants that the use by her Honour of the phrase "I am not satisfied that any respondent ought to be excused in respect of the contraventions" amounted to an impermissible importation of a subjective test.  It was submitted that the test of whether a reasonable excuse existed was an objective test (see Pascoe v Nominal Defendant (Qld) (No.2) [1964] QdR 373 at 378; and, Taikato v R (1996) 70 ALJR 960 at 966). In our view the expression used by the trial Judge did not amount to her Honour impermissibly importing into the discussion a subjective test. Her Honour was merely articulating that the facts as established to her did not amount to a defence to the actions.

Ordinary Course of Business

1. Her Honour then went on to reject any suggestion that the existence of the orders of November 1996 and the dealing by Fauna said to be in the ordinary course of business could reasonably have led any of the appellants to hold the belief that their actions, clearly in breach of the orders of September 1997, were somehow lawful.  Whilst Dr Dickey's written summary of argument canvassed at some length the issue of whether the transactions could be said to be within the ordinary course of business, this matter was not pressed before us in oral argument.  Nothing has been submitted to us which would demonstrate the trial Judge was wrong in reaching the conclusion that any such transactions were not "in the ordinary course of business" of Fauna.  We think her Honour was quite correct when she said at Appeal Book 190:

"...the fact remains that, in the circumstances then extant, where there was some contradiction between a previous order and a recent consent order, the respondents should have sought clarification of the situation, rather than unilaterally entering into transactions blatantly in breach of the latter order, which was valid and to which they consented."

Validity of the Injunctions in light of ORA

1. It is convenient to now turn to the remaining two issues argued on behalf of the appellants, namely the essential validity of the orders of the 8 September and whether or not the trial Judge should have disqualified herself for apparent bias.  It is then convenient to deal with the cross-appeal on the issue of costs.

1. Dr Dickey sought to advance no further submissions in respect of the validity issue beyond those which he had put in writing before the trial Judge.  They were extensively dealt with in her Honour’s reasons for judgment above and it is unnecessary for us to repeat them.  Dr Dickey was unable to point to any specific error in the reasons for judgment delivered by the trial Judge.  He merely asserted that she was wrong in her interpretation of the effect of the orders and that his submissions should have been acceded to.

1. It is clear that at the time the injunctions were granted in November, March and September that there was pending before the Court an application by the wife for an order that the husband pay to her $1,000,000.

1. The Family Court of Western Australia clearly has jurisdiction under the Family Law Act to determine disputes between parties relating to their property.  There are procedural requirements relating to such disputes, including time limits within which proceedings may be commenced without leave of the court first had and obtained (s 44(3)), as well as defences which may lead to the application being dismissed, (such as the defence of res judicata, namely that the issue has already been decided).  There is no doubt that the Court has a power to ensure the preservation of any assets the subject matter of the application pending the determination of procedural or jurisdictional aspects.  (Sieling (1979) FLC 90-627, Re LSH; Ex Parte RTF & Anor (1987) FLC 91-843)

1. On 8 September 1997, before Tolcon J, the wife's amended application for substantive relief sought:

• in paragraph 1 the dispensation of any procedural provisions which would preclude the wife from withdrawing her consent to the orders which were made on 25 May 1995;

• in paragraph 2 an application under s 79A set aside the consent orders made in May 1995

• in paragraph 3 leave under s 44(3) to institute proceedings for property settlement out of time;

• in paragraph 4 an order which would enable the wife to retain the money she had already been paid under the orders of 25 May 1995; in paragraph 5 an order for the payment of a further $1mill or such other sum as the Court may consider appropriate;  and,

• in paragraph 6 costs.

1. Because it was abundantly clear that the initial consent orders were invalid, his Honour struck out the claims under paragraphs 2 and 3 as being inappropriate in the circumstances. The s 79A claim fell because there was no valid s 79 order to set aside. The s 44(3) claim was seen to be unnecessary as the husband’s original property application was thought to have revived when the orders made under it were held to be of no effect. Her Honour said about this point (Appeal Book 131):

"There was no suggestion that leave was required for that application [filed 13 November 1996] to be instituted, and, presumably, this was because if the consent orders were invalid, the husband's application filed 24 May 1995 was technically still pending."

1. The wife's cross-application, whilst somewhat belated, was not in those circumstances affected by the prohibitions in s 44(3). (Anger (1982) FLC 91-248; (1981) 8 Fam LR 333; Good (1982) FLC 91-249;(1981) 8 Fam LR 354). No submissions were put to us challenging the correctness of the views expressed by both Tolcon J and her Honour on this issue.

1. In our view, the Court was clearly seized with jurisdiction to hear and determine the wife's property application and clearly seized with jurisdiction to make orders for the preservation of property pending the hearing and determination of that application.  The fact that the husband may have had a perfect answer to the application after the implementation of the ORA did not, in our view, in any way affect the validity of the injunctions granted either in November 1996, in March 1997 and in September 1997.  In those circumstances, we see no error in the manner in which the trial Judge dealt with this issue.

The Appeals by the Husband, Jan and Kristen

1. The amended Notice of Appeal filed on behalf of Jan and Kristen on 22 November 1999 contained 19 grounds.  In the hearing before us Mr Errington of counsel on behalf of Jan, Kristen and the husband, abandoned grounds 2, 3, 4, 5, 16 and 17.  The remaining grounds can be categorised as follows:

• That the trial Judge should have disqualified herself on the basis that she was ostensibly biased (Ground 1).

• That the true breach of the September injunctions was the failure to give the 21 days notice and that Jan and Kristen were not responsible for that failure (Grounds 6 and 7).

• The September 1997 injunction was no longer valid (Ground 8).

• That in light of the remarks of Tolcon J as to the potential invalidity of the orders, the finding beyond reasonable doubt that the breaches constituted a flagrant challenge to the authority of the court was not open (Grounds 9 and 10).

• Having found that it was possible that the appellants' conduct was not intended to blatantly disregard the September order, the finding that there had been a flagrant challenge to the authority of the court or a contravention of the September orders without reasonable excuse was not open (Ground 11).

• That her Honour should have found that the dealings by Fauna were in the ordinary course of business and were consistent with the orders of 21 November 1996 and therefore provided a defence to the breach of the orders of September 1997 (Grounds 12 and 13).

• That her Honour inappropriately imposed a subjective test upon the parties as to whether they had a reasonable excuse (Ground 14).

• That it was not necessary for the parties to return to the court for clarification of their position in light of conflict between the orders of November 1996 and September 1997 (Ground 15).

• The imposition of a sentence of imprisonment was an error of discretion.

1. In the amended Notice of Appeal filed on behalf of the husband there were similar Grounds of Appeal.  The only additional ground related to the breach of the March injunction, it being asserted:

"The trial judge erred in fact in finding that the sale of the boat by the appellant husband was not required to meeting reasonable living expenses or the payment of legal fees as and when they became payable.  This finding was against the weight of the evidence."

1. In dealing with Dr Dickey's arguments we have already dealt with all of the matters raised in the Notice of Appeal of the husband, Kristen and Jan except for:

• the issue of bias,

• the issue as to the finding with respect to the husband's disposition of the boat, and

• the appropriateness of the sentence imposed. 

We propose now to deal with those matters.

Bias

1. Mr Errington referred to Livesy v. NSW Bar Association (1983) 151 CLR 288 at 293; Vakauta v. Kelly (1989) 167 CLR 568; Galea v. Galea (1990) 19 NSWLR 263 at 277 - 278 (Kirby A.C.J.); Laws v. Australian Broadcasting Tribunal (1990) 170 CLR 70 in particular at 102 (Gaudron and McHugh J.J.); and Kennedy v. Cahill (1995) FLC 92-605 at 82,034 - 82,037 as establishing the appropriate principles. He said that in the latter case the Full Court of the Family Court of Australia (at page 82,035) summarised the principles as:

"The gravamen of the decision of the Courts in all of the above cases is that a reasonable apprehension of bias exists if in all the circumstances the parties or the public might entertain a reasonable apprehension that the Judge might not bring an impartial and unprejudiced mind to the resolution of the question before him or her."

1. He also referred us to the Full Court's adoption of these principles in Johnson (Cor Ellis, Kay and Dessau JJ, unreported 31 March 1999).  Whilst Johnson's case is the subject of a grant of Special Leave by the High Court on the issue as to the proper application of the bias principles, Mr Errington submitted it was a useful repository of the relevant cases.  There the Full Court said:

"The statement under attack was made by his Honour on 19 March 1997.  He said:

'Well, let me go back to what I said at the very beginning - - is that I will rely, principally, on witnesses other than the parties in this matter - and documents - to determine where the truth lies; and any other documents that are available to assist me in that regard, I'll' [sic] be grateful to receive. I'm not vacating my earlier order; and I am adjourning.'

...

In respect of the governing law, Mr Udorovic referred the court to Watson’s case (supra) which stands for the proposition that prohibition lies against the person to whom it may be directed if in all the circumstances the parties or the public might reasonably suspect that the person was not unprejudiced or impartial. He cited inter alia the following apposite passage from the judgment of Barwick CJ and Gibbs, Stephen and Mason JJ in Watson’s case (supra) to the trial Judge and also to this Court:

'It was said that there was no bias because the judge had formed an equal distrust of both parties. The formation of a preconceived opinion that neither party is worthy of belief, amounts to bias in the sense in which that word is used in a number of authorities already cited. To form such an opinion is to predetermine one of the issues in the case and may operate unfairly against one party, even though both are discredited. A prejudice against the credit of both parties, will not necessarily damage both parties equally. It will prove more damaging to that party who wishes to establish a fact by means of his or her own unsupported evidence. A party who believes, on reasonable grounds, that the judge has decided in advance to disbelieve her evidence, cannot have confidence in the result of the proceedings. Even if the judge has decided to reject the evidence of her adversary as well.' (at CLR 265 emphasis added)

...

Toohey J (with whose judgment Brennan, Deane and Gaudron JJ agreed generally) said in Vakauta v Kelly (supra) at 587:

'For counsel to invite the judge to withdraw from the case may be quite premature, particularly if the judge acknowledges the apparent bias in what has been said and thereafter takes steps to dispel that apprehension.  But, as Dawson J. noted in Re J.R.L.; Ex Parte C.J.L. [(1986) 161 C.L.R. 342 at p. 372], suspicion of bias based on preconceptions existing independently of the case “may well be ineradicable”. In that situation there will be no option but to ask the judge to disqualify himself. In any event objection must be taken: see Re McCrory; Ex parte Rivett [(1895) 21 V.L.R., at 6.].  It was not taken in the present case.'

...

In formulating the standard of the reasonable observer, Mason J in Re JRL; Ex parte CJL (1986) 161 CLR 342, 352 cautioned that it is undesirable for judges to be over sensitive to applications for disqualification and must carefully considering the merits of the application:

'Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.'

In Livesey (supra) at 299, Mason, Murphy, Brennan, Deane and Dawson JJ said:

'The reasonable observer is to be presumed to approach the matter on the basis that ordinarily a judge will so act as to ensure both the appearance and the substance of fairness and impartiality.  But the reasonable observer is not presumed to reject the possibility of pre judgment or bias; nor is the reasonable observer presumed to have any personal knowledge of the character or ability of the members of the relevant court.'

In Vakauta v Kelly,(supra) Toohey J said:

'I accept the observation of McHugh JA in the instant case that “in the case of a professional judge whose training, tradition and oath or affirmation require him to discard the irrelevant, the immaterial and the prejudicial, a conclusion that there  is a reasonable apprehension that he is biased should not be drawn lightly”.  In effect, that is what this Court said in Livesey.  And it is true, as Clarke JA pointed out, that it is a “reasonable apprehension” with which the court is concerned.  And, if it adds anything, it is such an apprehension in “a fair-minded observer”.  Livesey.  But, in this regard, the public perception of the judiciary is not advanced by attributing to the reasonable or fair-minded observer a knowledge of the law and an awareness of the judicial process that ordinary experience suggests not be the case.' (emphasis added at 584-5)

In a similar vein, Brennan, Deane and Gaudron JJ remarked in Vakauta’s case:

'In the passage in his judgment in Watson to which we have referred, Jacobs J. pointed to the undoubted fact that “it is confidence in his own integrity which supports [a judge] not only in his judgment but in all his words and conduct.”  Knowledge of his or her own integrity can sometimes lead a judge to fail to appreciate that particular comments made in the course of a trial may wrongly convey to one or other of the parties to the litigation or to a lay observer an impression of bias.' (at 571-2).

In Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70, 87-8 Mason CJ and Brennan J elaborated the description of the hypothetical observer with the words “fair minded” and said that:

'we must attribute to him or her knowledge of the actual circumstances of the case.  ...  it would not be proper to attribute to the fair minded observer the understanding that a lawyer would have' (emphasis added).

Gaudron and McHugh JJ described the observer in the following terms:

'A reasonable by-stander does not entertain a reasonable fear that a decision-maker will bring an unfair or prejudiced mind to an inquiry merely because he has formed a conclusion about an issue involved in the inquiry:  ...  When suspected prejudgment of an issue is relied upon to ground the disqualification of a decision-maker, what must be firmly established is a reasonable fear that the decision-maker’s mind is so prejudiced in favour of a conclusion already formed that he or she will not alter that conclusion irrespective of the evidence or arguments presented to him or her.' (at 100)."

1. Having taken us to the relevant authorities, Mr Errington then focussed on what he submitted were the offending passages in Her Honour's remarks made in earlier judgments.  Although most of these are referred to in her Honour's judgment at paragraph 32 above it is convenient to restate them here.  On 13 August 1998 her Honour held at page 7 of her judgment (emphasis added):

"On 17 October 1997 the Family Court of Western Australia (Orders of Registrars) Act came into force. Fauna Holdings drew down funds from its loan account and, prima facie, in breach of the injunction of 8 September 1997, over the next two weeks, entered into a number of transactions by which it paid in excess of $1,000,000.00 to third parties. There is little doubt that Jan and Kristen McGillivray, as Directors of Fauna, approved the payments as they signed the cheques. The husband also entered into various transactions. These are the subject of the Form 47 and Form 48 applications."

1. At page 17 of the judgment, her Honour held:

"... Jan McGillivray has not been dragged into these proceedings because she is the husband's present wife, but because she was actively involved in the transactions which are being challenged. As aptly put by Counsel for the wife:

'If the injunctions which applied against Fauna, and which had been consented to by Jan McGillivray and Kris McGillivray as Directors of Fauna, had remained in effect, if the property had remained restrained as it was, we would never have to worry about Blueseas at all. Nobody would be chasing Jan McGillivray or putting pressure on her marriage or anything else, but she must take responsibility now and in due course, for the events which then occurred, and those events showed that she was an integral part of the decisions that were made as a director and even to the point that she signed a cheque, she was completely involved in all the steps that occurred then and it is no good to come back here now complaining about it.'"

1. Again within the same judgment, her Honour held:

"Since there is pending an application by the wife to set aside the transaction by which Fauna Holdings Pty Limited paid to Jan McGillivray the sum of $150,000.00, which was lent by her to Blueseas Investments, in circumstances in which Jan McGillivray was actively involved and which are prima facie such as to raise concerns that the husband, or associated entities, were attempting to divest themselves of property, I am satisfied that it is necessary and appropriate to take steps to secure the preservation of this sum, pending determination of the Section 85 application."

1. In the judgment of 8 September 1998 her Honour said:

"In October 1997, contrary to the injunctions, large sums of money were paid by Fauna Holdings to third parties, in which it is alleged the husband is involved."

1. In the same judgment her Honour held:

"On the material before me, which I appreciate is very limited, it would seem it is likely that the Commonwealth Bank, in advancing those funds, was not informed of the full story."

1. Mr Errington submitted that to any intelligent lay observer these clear findings by her Honour amount to a pre-judging of the very issues at stake.  Namely:

·Jan McGillivray approved all of the payments;

·Kristen McGillivray approved all of the payments;

·the husband entered into these transactions;

·the payment of $150,000.00 by Jan McGillivray to herself was prima facie in breach of the September order,

·Jan McGillivray was actively involved in the transactions being challenged;

·the payments by Fauna to third parties were contrary to the injunctions;

·the parties misled the Commonwealth Bank.

1. The remarks her Honour made on 13 August 1998 were made in the course of proceedings seeking injunctions against Blueseas Investment Pty Ltd and in the course of proceedings brought by Jan to seek the discharge of an injunction restraining her from dealing with the $150,000 which had been paid to her by Fauna on 20 October 1997.  The remarks were made on the strength of the material that was then before her Honour and in response to submissions that were being made to her.  They did not amount to any findings of fact in respect of contested issues nor any findings as to the credit of the parties.

1. The untested evidence that was before her Honour in August of 1998 could clearly have justified her Honour in making each of the conclusions she did (save for the conclusion that Kristen signed the cheques).  The adoption of the submissions of Mr Walters that Jan was "completely involved in all the steps that occurred then and it is no good to come back here now complaining about it" has to be seen in the context in which it was adopted, namely a submission that Jan's involvement in the proceedings was an accidental one which was achieved by reason of her status as the wife of Brian McGillivray and not because she was in any way an active participant.  Given that the evidence was that she had signed the cheques and had received the benefit of a large payment of monies, that finding was clearly open to her Honour at the time.

1. Seen in the context in which they were uttered, in our view it cannot be said that the comments made by the trial Judge in the earlier proceedings could lead a properly informed bystander to entertain a reasonable fear that the trial Judge would approach the task of determining whether or not there had been a contempt of court or an unlawful non-compliance with the orders of the court with a mind so prejudiced that she could not allow a fair trial of the issues to take place.  There could not, in our view, be anything raised that would indicate that the Judge was in any way partial.  The findings which she had already made on interlocutory proceedings on a lesser standard of proof, it could not, in our view, be said to have created a reasonable basis for her to have disqualified herself from hearing the proceedings, and certainly would not be such that the Court would interfere in her decision to continue on with the proceedings.

1. In our view, the remarks of 8 September 1998 were unexceptional.

1. As to the specific complaints raised by Mr Errington, the findings of the trial Judge do no more than show that on the material then before her in the interlocutory proceedings she was appropriately satisfied of the prima facie existence of facts which justified the granting of the orders she made in those proceedings.  They ought not inevitably or reasonably lead an intelligent lay observer to hold the view that the trial Judge had prejudged the issues which were to be the subject matter of the enforcement proceedings in accordance with the requisite standard of proof and given that the findings were made without having had the opportunity to hear both sides of the story.

Disposing of the Boat

1. The contempt and contravention charges alleged that the husband had improperly disposed of the boat, not the proceeds of the sale of the boat.  It was argued that providing the husband could show he spent any of the money on legal fees or living expenses, he could do what he liked with the balance of the proceeds of sale.  The injunction restrained the husband from disposing of any asset unless such disposition was reasonably required to enable the payment of legal fees or living expenses.  Her Honour found that none of the monies were demonstrated as being required for legal fees or living expenses.  As this finding was clearly open to her Honour on the evidence before her Honour, we need not deal with the issue of whether the disposition of the balance of the proceeds of sale beyond those that might have been shown to have been properly spent, could lead to a contempt or contravention finding on the charges as brought.

Penalty

1. As to penalty, we would agree with the reasons given by her Honour that these were a series of serious and flagrant breaches of Court orders in circumstances which may have had an effect of seriously damaging the claim of the wife.  In any event, it was a serious attack upon the authority of the court, and the penalties were, in our view well within a permissible range.

1. In Rutherford, (supra) the Full Court dealt with submissions that the term of imprisonment imposed in that case was excessive in the following manner.

"In support of his contention, in ground 5, that the sentence imposed by his Honour was “excessively severe”, Mr Broun, whilst acknowledging all the limitations upon the power of an appellate court to interfere with an exercise of discretion by the trial Judge (House v The King (1936) 55 CLR 499 at 504-5), relied upon the following statement by Jordan CJ, speaking of the approach to be adopted by the Court of Criminal Appeal to the issue of severity of sentence, in R v. Geddes (1936) 36 SR (NSW) 554 at 556:

'If no wrong principle has been applied, the position is somewhat analogous to that which arises when, in a case in which no definite measure of damages exists, it is contended, before a Court of Appeal, that damages awarded by the Jury are inadequate or excessive.  It has been said that, in such a case, the rough rule is that the verdict should be set aside if the Court cannot find any reasonable proportion between the amount awarded and the loss sustained.  The analogy is not exact;  but I think that a Court of Criminal Appeal should intervene if the sentence appears to be out of reasonable proportion to the circumstances of the crime, having regard to the facts proved in evidence at the trial;  but before the Court is satisfied that such an absence of due proportion exists, it should make the fullest allowance for the consideration that the trial judge has had an advantage denied to it, namely, that he has seen the witnesses and, therefore, that he has had an opportunity of forming impressions which no perusal of the cold print can afford.

...

In our view, the trial Judge in this case considered all relevant factors, both aggravating and mitigating, and took into account all relevant sentencing options, in coming to the conclusion that a term of three months imprisonment was the appropriate punishment for the husband’s contempt.  Notwithstanding the submissions in support of ground 5 of the appeal and those in support of ground 1 of the cross-appeal, we are not satisfied that that sentence is either “excessively severe” or “manifestly excessive”, or that his Honour otherwise erred in any way in the exercise of his discretion in imposing that sentence.  Having regard to his Honour’s findings, we think that the sentence probably falls at or very near the bottom of the range of available sentencing options in this case, but nevertheless it is within the range of a reasonable exercise of the wide discretion vested in the trial Judge.  Accordingly, both the appeal and cross-appeal against the severity (or lenience) of the sentence must fail.'"

1. The remarks in Rutherford are entirely apposite in this case.  The various sentences imposed upon the husband, Jan and Kristen are clearly well within the range of sentencing options available.  Nothing has been put to us that would make it appropriate for us to interfere with them.

Cross-Appeal

1. By way of cross-appeal the wife sought an order reducing her liability for the costs thrown away by the adjournment granted in August after she sought to change the nature of the application she was bringing to the Court.  Whilst we understand that the wife may feel aggrieved by having to pay the entirety of the costs thrown away when there may have well been matters attended to on those days which subsequently led to a shortening of the balance of the hearing relating to the charges, in our view the matter was clearly within the discretion of the trial Judge and nothing has been demonstrated to us which would make it appropriate for us to interfere with her exercise of the discretion.

Cost of the Appeals

1. We would invite written submissions as to the costs of these appeals and will make directions accordingly.

Orders

1. That the appeals and the cross-appeal herein be dismissed.

1. That the wife be at liberty to file and serve written submissions as to costs of these appeals and the cross-appeal within twenty-one (21) days of this date.

1. That the appellants be at liberty to file and serve written submissions in answer thereto within fourteen (14) days thereafter.

1. That the wife be at liberty to file and serve written submissions in reply thereto within a further seven (7) days.

1. That the time for payment of the fine referred to in Order 11 of the orders made by Martin J on 16 June 1999 be increased to one month from the date of this judgment.

...