Jingyi & Chao (No 2)
[2023] FedCFamC1F 700
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Jingyi & Chao (No 2) [2023] FedCFamC1F 700
File number: SYC 3653 of 2021 Judgment of: AUSTIN J Date of judgment: 22 August 2023 Catchwords: FAMILY LAW – PROPERTY – Contempt – Where the wife alleged the husband wilfully breached several sets of interim orders – Where the wife prosecuted 15 separate counts – Where 10 counts related to interim property orders previously made restraining a corporation by injunction from dealing with numerous parcels of real estate and the proceeds realised on the sales of such property – Where the husband is a director of the third respondent – Where the husband was not personally bound by the injunctions – Where it would have been an abuse of process for the wife to prosecute the husband on these counts as pleaded – Where interim property orders were previously made restraining all respondents by injunction from encumbering five parcels of real property – Where the third respondent corporation executed a mortgage with a third party which was secured by caveat over one of the subject properties – Where the wife conceded there was no evidence to prove the husband executed the mortgage on behalf of the third respondent – Where previous interim property orders directed the husband to provide the wife with a loan account statement for one property and documents pertinent to the sale of another property – Where the wife conceded the husband had partly complied with the order, even though belatedly – Where the wife failed to prove the breach amounted to a wilful and flagrant challenge to the Court’s authority – Where the husband was previously ordered to pay the wife’s costs in a fixed sum – Where a costs order was made in the husband’s favour against the wife by the Supreme Court of NSW – Where the husband does not want to pay the wife money which he only then has to recover from her – Where this count is defective in form and lacks substance – Applicant-Contempt dismissed – Costs reserved. Legislation: Family Law Act 1975 (Cth) Pt VIII, s 112AP
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68, 69
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 10.09 and r 11.71
Cases cited: Aon Risk Services Aust Ltd v ANU (2009) 239 CLR 175; [2009] HCA 27
Baker v Paul [2013] NSWCA 426
Carlson & Carlson [2020] FamCA 108
Chamberlain v The Queen (No.2) (1984) 153 CLR 521; [1984] HCA 7
Inghams Enterprises Pty Ltd & Anor v Timania Pty Ltd & Anor (2005) 221 ALR 823; [2005] FCAFC 155
Jorgensen v Fair Work Ombudsman (2019) 371 ALR 426; [2019] FCAFC 113
Lahoud v Lahoud [2012] NSWSC 284
Mahaffy v Mahaffy (2018) 97 NSWLR 119; [2018] NSWCA 42
Shepherd v The Queen (1990) 170 CLR 573; [1990] HCA 56
Sigalla v TZ Ltd [2011] NSWCA 334
Division: Division 1 First Instance Number of paragraphs: 67 Date of hearing: 16 August 2023 Place: Sydney Counsel for the Applicant: Mr Reynolds Solicitor for the Applicant: JC Legal Practice Counsel for the Respondent: Mr Condon (SC) Solicitor for the Respondent: Juris Cor Legal ORDERS
SYC 3653 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS JINGYI
Applicant
AND: MR CHAO
Respondent
ORDER MADE BY:
AUSTIN J
DATE OF ORDER:
22 AUGUST 2023
THE COURT ORDERED ON 16 AUGUST 2023:
1.Counts 1, 3, 4, 5, 6, 7, 8, 9, 10 and 11 within the Application–Contempt filed on 21 June 2023 are dismissed.
BY CONSENT, THE COURT ORDERED ON 16 AUGUST 2023:
2.Count 12 within the Application–Contempt filed on 21 June 2023 is dismissed.
THE COURT ORDERS ON 22 AUGUST 2023:
1.The residual counts (Counts 2, 13, 14 and 15) within the Application-Contempt filed on 21 June 2023 are dismissed.
2.Costs are reserved for 28 days.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Jingyi & Chao has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
AUSTIN J:
By an Application-Contempt filed on 21 June 2023, the wife prosecutes the husband for his alleged contempt of court by the alleged wilful breach of interim orders made in financial proceedings between the parties under Pt VIII of the Family Law Act 1975 (Cth) (“the Act”).
The Application is dismissed, albeit for different reasons. Some counts were defective and were dismissed following demurrer, the husband had no case to answer on one count at the conclusion of the prosecution case, another count was withdrawn during final submissions, and the remainder are not proven beyond reasonable doubt.
Legal principles
The contempt application was brought pursuant to s 112AP(1)(b) of the Act.
In Carlson & Carlson [2020] FamCA 108, the legal principles which apply to such forms of alleged contempt were summarised as follows:
9.Any finding of contempt is reserved for those cases in which all other legitimate methods of enforcement have been exhausted and the subject conduct amounts to a challenge to the administration of justice rather than merely the enforcement of private rights (Cummings and Cummings (1976) FLC 90-100 at 75,460; Sahari and Sahari (1976) FLC 90-086 at 75,407 and 75,410; Ibbotson and Wincen (1994) FLC 92-496 (“Ibbotson and Wincen”) at 81,162).
10.To constitute a flagrant challenge to the Court’s authority, the breach of orders must be wilful, though not necessarily contumacious (Fauna Holdings Pty Ltd and Mitchell (No 2) (2000) FLC 93-053 at [64]; Hay & Hay (1998) FLC 92- 819) and the conduct must be exceptional, striking, or repeated in nature (Ibbotson & Wincen at 81,162). Whether the subject conduct can be characterised in that way is said to be neither solely a finding of fact nor solely the exercise of discretion (Kendling and Kendling (Contempt) (2008) FLC 93-384 at 82,890-82,892).
11.It is well accepted that the onus of proof rests with the [applicant] to prove beyond reasonable doubt all elements of the contempt allegations, including the husband’s knowledge of both the terms and the meaning of the breached order (Witham v Holloway (1995) 183 CLR 525; Tate and Tate (2002) FLC 93-107 (“Tate and Tate”); Mead & Mead (2007) FLC 93-327 (“Mead & Mead”); Oakley & Millar [2019] FamCAFC 12 (“Oakley & Millar”) at [30]).
Those principles are presently applicable, about which there was no contest.
The counts, the evidence and the hearing
The wife prosecuted 15 separate counts of contempt against the husband, which concern several different sets of orders.
The husband successfully demurred to some counts (Counts 1, 3, 4, 5, 6, 7, 8, 9, 10 and 11) before the hearing commenced. Those counts were dismissed as it would have been an abuse of process for the wife to prosecute the husband with them (r 10.09(1)(c) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”)).
In respect of those counts not dismissed at the outset as being an abuse of process, the hearing proceeded in accordance with the procedure prescribed by r 11.71(6) of the Rules.
The evidence upon which the wife relied to prove the remaining counts comprised:
(a)paragraphs [2], [4], [5]–[14] and [17]–[22] of, together with all annexures to, her affidavit filed on 21 June 2023 (though objections were successfully taken to all or parts of paragraphs [6], [32], [33] and [40]);
(b)her affidavit filed on 15 August 2023, including annexures thereto;
(c)transcript of 5 April 2023 concerning the conduct of the underlying proceedings under Pt VIII of the Act (Exhibit 1); and
(d)paragraphs [1], [2], [8]–[11] and [25] of the affidavit filed by the husband in the Pt VIII proceedings (Exhibit 2), tendered as admissions without objection.
The wife was not required for cross-examination.
At the close of the prosecution case, the husband successfully submitted there was no case to answer on another count (Count 12) as no prima facie case was established (r 11.71(7)(a)). The wife agreed the count should be dismissed for lack of evidence to sustain it, in which event it was dismissed.
The husband did not give evidence, but did adduce several documents in evidence in his defence, comprising:
(a)a corporate search (Exhibit 3);
(b)a bundle of correspondence relevant to Count 13 (Exhibit 4); and
(c)a third party debt notice relevant to Count 13 (Exhibit 5).
During final submissions, the wife withdrew another count (Count 14), but no order was made to formally dismiss it at the time. The dismissal order is made now.
The remaining counts (Counts 2, 13 and 15) are now dismissed because they cannot be proven beyond reasonable doubt.
The following reasons explain those outcomes.
Orders made 20 April 2022 (Counts 1, 3, 4, 5, 6, 7, 8, 9, 10 and 11)
Multiple parties are joined to the financial cause being contested under Pt VIII of the Act. Besides the spouses, the other parties are the husband’s parents (the second and fourth respondents) and C Pty Ltd (the third respondent).
On 20 April 2022, two separate sets of orders were made between the parties by a judge of the Federal Circuit and Family Court of Australia (Division 2) – one set in open court and the second set in chambers with the parties’ consent. These counts concern only the first set made in open court.
Although the subject orders were made by the Federal Circuit and Family Court of Australia (Division 2), the underlying proceedings were later transferred to the Federal Circuit and Family Court of Australia (Division 1) on 15 December 2022. Any contempt of the orders proven to have occurred since this Court has been seized of the proceedings can be taken to be a contempt of this Court. All these counts allege acts of contempt after 15 December 2022.
Without reciting the orders made in April 2022, they comprise a series of mandatory and restrictive injunctions binding only the third respondent in respect of its dealing with numerous parcels of real estate and the proceeds realised on the sales of such property.
The orders also purport to bind the third respondent’s “servants and agents”, but that does not widen the ambit of the injunctions because a corporation can only act via its servants and agents. Such terminology only puts the servants and agents on notice that they “may be in trouble” if they knowingly assist the third respondent to breach the injunctions (Sigalla v TZ Ltd [2011] NSWCA 334 at [13]).
While the husband was and still is a director of the third respondent, the orders were not made so as to bind him personally. As a party to the underlying proceedings, he was not required by the orders to do, or abstain from doing, anything at all.
Nevertheless, the husband is prosecuted for contempt because, as all of these counts uniformly allege, on certain prescribed dates:
The [husband] withdrew [specified sums of money] from [his lawyer’s] trust account in deliberate breach of orders made on 20 April 2022
(As per the original)
As pleaded, that charge within each of these counts is defective.
The husband was not personally bound by the injunctions made on 20 April 2022 and, if his flagrant challenge to the Court’s authority was to be alleged and established, then the counts had to be pleaded differently. The demurrer to these counts was not an esoteric artifice. Being quasi-criminal proceedings, it is well accepted that precision in the formulation of the charges of contempt is critical (Inghams Enterprises Pty Ltd & Anor v Timania Pty Ltd & Anor (2005) 221 ALR 823 at [34]).
Based upon authority emanating from other superior jurisdictions, the wife had several options.
The first option was to allege the husband acted in contempt by assisting the third respondent to breach the order and thereby obstructed the process of the court and interfered with the administration of justice, as distinct from merely alleging breaches of the court order himself, which distinction is said to be “vital” (Sigalla v TZ Ltd at [13]-[17]; Baker v Paul [2013] NSWCA 426 at [17]–[19]).
The second option was to allege the husband acted in contempt by knowingly aiding, abetting, counselling, or procuring the third respondent’s breach of the order so as to obstruct the course of justice (Jorgensen v Fair Work Ombudsman (2019) 371 ALR 426 at [11]–[15]).
The third option was to allege the husband acted in contempt by wilfully failing, in his capacity as a director of the third respondent, to take all reasonable steps to ensure the third respondent complied with the injunctions by which it was bound (Mahaffy v Mahaffy (2018) 97 NSWLR 119 at [116]–[124]).
As pleaded, the counts bear no resemblance to charges of contempt formulated in any of those alternate ways.
Faced with the husband’s submissions to that effect, the wife sought an adjournment of the hearing so she could reformulate the defective counts, but the husband opposed the adjournment and it was refused.
Reformulation of these multiple counts would mean the evidence needed to prove the new and different elements of the reformulated charges might need to be substantially revised, thereby changing the complexion of the case. The wife was not prepared to submit to an order requiring her to pay the husband’s costs thrown away by the adjournment, suggesting instead that the question of costs be reserved. But costs orders are not always a panacea for prejudice (Aon Risk Services Aust Ltd v ANU (2009) 239 CLR 175 at 213–214) and the wife’s resistance to any costs order was the harbinger of another time-consuming dispute over liability for and the assessment of costs in relation to an aborted hearing. Moreover, it must be remembered these contempt proceedings overlay the substantive financial dispute under Pt VIII of the Act and letting the contempt proceedings assume priority is inconsistent with the statutory imperative to ensure the quick, inexpensive and efficient disposition of litigation (ss 67, 68 and 69 of the Federal Circuit and Family Court of Australia Act 2021 (Cth)). It was the wife’s contempt application and she should reasonably be expected to be ready to prosecute it.
Counts 1, 3, 4, 5, 6, 7, 8, 9, 10 and 11 were defective and were dismissed.
Orders made 11 November 2022 (Count 12)
On 7 October 2022, an injunction was made against all respondents to the proceedings under Pt VIII of the Act, restraining them from encumbering (by mortgage or further charge) five designated parcels of real property.
More orders later made on 11 November 2022 extended the injunction indefinitely, but subject to the observance of two conditions: first, the wife giving an undertaking as to damages; and secondly, the respondents giving the wife seven business days’ notice of their intention to further encumber any of the subject properties.
On 23 February 2023, the third respondent, as the sole registered proprietor of one of the subject properties, executed a mortgage with a third party which was secured by caveat registered over the property. The mortgage was executed by the second and fourth respondents on behalf of the third respondent.
The following evidence was given by the wife in relation to this count:
33.I say [the husband] has breached the 7 October 2022 Injunctions by arranging, participating and otherwise aiding and abetting in the obtaining of the further mortgages on [certain real properties].
(As per the original)
The wife was impelled to concede such evidence was incorrect and there was no evidence to prove the husband had executed the mortgage on behalf of the third respondent. Consequently, she conceded the count must be dismissed, so it was.
Orders made 11 November 2022 (Count 2)
On 7 October 2022, an injunction was made against the husband in these terms:
1.Upon the Wife giving to the Court the usual undertaking as to the damages and strictly without admissions on the part of the Respondents, by consent the Court orders by way of injunction and pursuant to section 114 of the Family Law Act 1975 (Cth), the Respondents are not to, between the making of these orders and 5:00PM on 11 November 2022:
…
b.Enter into fresh personal guarantees except upon giving 4 business days’ notice in writing to the Applicant Wife; and …
(As per the original)
Then, on 11 November 2022, more orders were made in these terms to extend the operation of the injunction:
2.By consent, and pending further order, order 1 of the orders made on 7 October 2022 is amended in that in subparagraphs (a), (b), and (c), references to “4 business days” and “3 business days” where appearing are replaced with “7 business days”.
3.Order 1 of the orders made on 7 October 2022 is continued on the basis of the usual undertaking as to damages by the [Wife], and on a without admissions basis against each of the Respondents until further order.
Relevantly, the combined effect of the orders was to restrain the husband from entering into any personal guarantee, but subject to observance of two conditions: first, the wife giving an undertaking as to damages; and secondly, the husband giving the wife seven business days’ notice of his intention to give a personal guarantee.
By way of a deed of loan dated 22 December 2022, the husband gave a guarantee for the third respondent’s performance of a loan advanced to it by a third party. The wife deposed she had no knowledge of the guarantee until she discovered it, on or about 4 April 2023, when she inspected documents produced to the court under subpoena. Acceptance of that unchallenged evidence necessarily means the husband’s grant of the guarantee to the third party was in breach of the injunction by which he was bound.
However, there was no proof of the wife giving any undertaking as to damages, upon which the operable effect of the injunction indispensably depended. The absence of such evidence was not mere oversight. She had to concede she did not file any such undertaking to support the injunctions made in October 2022 and extended in November 2022. She did give undertakings at other times in relation to other issues (in June 2022 and May 2023), but not so as to underpin the injunctions made in October 2022 and November 2022.
The wife submitted the orders should instead be favourably interpreted to mean she gave an oral undertaking in court on one or other of the dates upon which the injunctions were made, but that would be pure speculation. It is neither a valid objective interpretation of the orders nor an available inference from the evidence. This count is dismissed.
Orders made 9 March 2023 (Counts 14 and 15)
The court made the following orders on 8 March 2023 (as amended on 9 March 2023):
5.That following the settlement for the sale of Lot 4, the Respondents shall provide the [wife] with a copy of the most updated loan account statement for the Lot 5 Facility, and all the documents pertinent to the settlement of Lot 4 within 3 business days.
…
12.That within 3 business days from the date of these orders, the [Husband] is to provide to the [wife] with all the details, transactions, correspondence, trust account ledger of $95,920.00 being the selling commission of Lot 1, [address] noting such fund was previously withheld in [the husband and respondents solicitors] Trust account.
Count 15 alleges the husband’s breach of Order 5. The count is pleaded as follows:
15.That the [husband] fails to provide the [wife] with a copy of the most updated loan account statement for the Lot 5 Facility, and all the documents pertinent to the settlement of Lot 4 within 3 business days (being 28 April 2023 in deliberation breach of orders made on 9 March 2023.
(As per the original)
Order 5 required the husband to provide the wife, within three days, with two things: first, the most updated loan account statement for the Lot 5 facility; and secondly, all the documents pertinent to the settlement of Lot 4.
Count 15 alleges the breach of Order 5 occurred on 4 May 2023, yet the alleged facts do not coincide with the count.
On 26 April 2023, and again on 16 May 2023, the wife’s lawyers wrote to the husband’s lawyers asking them to comply with Order 5.
The only evidence adduced by the wife to prove the husband’s contemptuous breach of Order 5, by his act or omission on 4 May 2023, after a successful evidentiary objection was taken by the respondent, was this:
40.On 17 May 2023, I received an email from [the husband’s] solicitor … Annexure [MJ15], is a copy of their response together with the purported disclosure documents.
(As per the original)
On 17 May 2023, the husband’s lawyers replied to the wife’s lawyers enquiries, providing copies of the settlement adjustment sheet in respect of Lot 4. The husband’s lawyers also advised they had requested the updated loan account statement for Lot 5 from a third party and would provide it as soon as it was received. Therefore, the wife conceded the husband had partly complied with the obligation, even though belatedly. Save as to lateness, the alleged default only relates to the loan account statement for Lot 5.
The husband certainly did not comply with Order 15 within the prescribed time frame of three days, but there was no specific default on 4 May 2023 as the count alleges, almost two months after the order was made. The husband’s partial compliance with the order within a reasonable time makes it difficult for the wife to sustain a charge of the husband’s contempt by reason of flagrant challenge to the Court’s authority.
No evidence was adduced by either party about what, if anything, happened after the husband’s solicitors letter of 17 May 2023.
The wife submitted the absence of evidence about the husband furnishing her with the loan account statement for Lot 5 at some point after 17 May 2023 should lead to an inference that it was not provided. But even if that is correct, which the husband did not concede, the evidence demonstrates the husband indicated his willingness to fully comply with the order by procuring the loan account statement for Lot 5 from a third party described as “S Finance”.
Evidently, the husband did not possess the document and needed to acquire it from elsewhere. Even if he has not since successfully done so, it need not be because he flagrantly challenges the Court’s authority by refusing to do so. He might have valiantly tried and failed. It is for the wife as prosecutor to exclude any reasonable hypothesise which is consistent with innocence (Shepherd v The Queen (1990) 170 CLR 573 at 580–581; Chamberlain v The Queen (No.2) (1984) 153 CLR 521 at 536). She did not do so. The best she could potentially do is prove only that the husband has not yet provided her with a copy of the Lot 5 loan account statement. But if she wants it, the husband told her from whom it can be subpoenaed.
Even assuming the husband’s failure to fully comply with the orders made on 8 March 2023 (as amended on 9 March 2023), the wife failed to prove the breach amounted to a wilful and flagrant challenge to the Court’s authority. Count 15 is dismissed.
Count 14 alleges the husband’s breach of Order 12, but it was withdrawn by the wife during final submissions. It too is dismissed.
Orders made 5 April 2023 (Count 13)
On 5 April 2023, this order was made:
5.The [husband] is to pay the [wife’s] costs in the fixed sum of $26,400 (including GST) within 28 days of these orders.
Count 13 alleges the husband’s failure to pay such costs to the wife in satisfaction of the order was deliberate and contemptuous.
It is alleged that the breach occurred on 6 April 2023, but that cannot be correct. The order only required the husband to pay the sum to the wife within 28 days, which gave him until 4 May 2023 to comply. The count is therefore defective for that reason alone.
Nonetheless, on 3 July 2023, the wife was ordered to pay costs of $15,000 to the respondents in the Pt VIII proceedings. With the parties’ consent, it was expressly noted when that order was made that the wife’s liability for $15,000 should be set-off against the husband’s liability to her for $26,400, the net result of which is that the husband only now owes the wife $11,400. Even though the wife filed her contempt application some weeks before the order and the notation were made on 3 July 2023, she still persisted in prosecuting this count in August 2023 after becoming aware of their existence.
Other facts are also relevant to this count.
The husband enjoys another costs order against the wife, made in his favour by the Supreme Court of NSW in 2021. The husband assesses his costs at around $32,000, though the wife disputes the quantum. The order has not yet been assessed by the Supreme Court. Nonetheless, the wife’s unquantified liability to the husband is established. He wrote to her on 4 May 2023 seeking to also set-off that order against the costs order made in her favour in this Court on 5 April 2023, but she does not apparently agree.
The husband asserts there is precedent for him being able to set-off the Supreme Court costs order in his favour, even though not yet assessed, with the costs order made against him in this Court (Lahoud v Lahoud [2012] NSWSC 284 at [72]–[74] and [82]), but it is not necessary to consider, let alone decide, the issue. The husband’s failure to pay the wife the net amount of $11,400 is not proven to be a flagrant challenge to the Court’s authority in circumstances where she undeniably owes him a substantial sum for costs under the Supreme Court order and he does not want to pay her money which he only then has to recover from her.
There is nothing to stop the wife from enforcing the costs order of 5 April 2023 against the husband in this Court, though such enforcement action may re-enliven the debate over his prospective entitlement to set-off against it the Supreme Court costs order, but simple enforcement proceedings are quite different from contempt proceedings.
Count 13 is defective in form, but lacking in substance in any event. It is dismissed.
Disposition
The Application-Contempt filed on 21 June 2023 is dismissed.
Costs of the contempt proceedings are reserved for 28 days.
I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Austin. Associate:
Dated: 22 August 2023
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