Kendling and Kendling and Anor (No. 2)
[2008] FamCA 351
•21 May 2008
FAMILY COURT OF AUSTRALIA
| KENDLING & KENDLING AND ANOR (NO. 2) | [2008] FamCA 351 |
| FAMILY LAW – CONTEMPT – sentencing – seriousness of offence – purging – husband’s health |
| Family Law Act 1975 s 112AP |
| DAA v DAI (2005) FLC 93-215 PDM & JEM (2006) FLC 93-291 Australian Meat Industry Employees Union v Minchinbury Station Pty Ltd (1986) 66 ALR 557 Tate v Tate (No. 3) (2002) FLC 93-107 Australian Securities & Investment Commission v Michalik 52 ACSR115 LGM & CAM (Contempt) (No 2) (2008) FLC 93-355 Rutherford and the Marshal of the Family Court of Australia (1999) FLC 92-866 Harris v Harris [2002] 1 All ER185 S & S (Unreported, 22 July 1996) (per Fogarty, Baker & Rowlands) N & N (Unreported 7 May 1993) (Coleman J) |
| APPLICANT: | Mrs Kendling |
| RESPONDENT: | Mr Kendling |
| 2nd RESPONDENT: | B Ltd |
| FILE NUMBER: | SYF | 2903 | of | 2003 |
| DATE DELIVERED: | 21 May 2008 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 23 April 2008 & 16 May 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Richardson SC & Mr Beaumont |
| SOLICITOR FOR THE APPLICANT: | Michael Conley Lawyers |
By court order the names of counsel and solicitor for the respondents have been suppressed
ORDERS
By consent, the husband and B Ltd pay the wife’s costs of these proceedings, commenced by the wife’s application filed 26 February 2008, on an indemnity basis, as agreed or assessed.
In respect of the contempt of orders of 27 September 2007, committed by the husband, the husband is to be committed to prison to be held in prison, for a period of four (4) months, such sentence to commence immediately.
In respect of the contempt of the orders of 4 July 2007, the husband is to be committed to prison, to be held in prison for a period of two (2) months, such sentence to commence immediately.
The two terms of imprisonment are to be served concurrently.
A warrant of commitment reflecting the order of this Court issue forthwith.
The husband can apply for a reduction of the period referred to in Order 2 from four (4) months to three (3) months and a reduction in the period referred to in Order 3 from two (2) months to one (1) month in the event that the husband pays or causes to be paid to the solicitors for the wife an amount of $133,000.00, which sum shall be held by them upon the terms referred to in Order 8.
In respect of the contempt of orders of 27 September 2007 committed by B Ltd, no penalty is imposed.
In the event that the husband pays or causes to be paid to the wife’s solicitors the sum referred to in Order 6.2, the solicitors for the wife will invest those funds in a controlled moneys account and the solicitors for the wife and the parties are restrained from further dealing with those funds unless there is written agreement between the parties or further court order.
I note the intention of placing the monies in the controlled moneys account, referred to in Order 8, is to secure payment to the wife of her costs pursuant to Order 1.
The husband have liberty to apply on 48 hours notice, pursuant to the provisions of s.112AP(7) Family Law Act for the partial reduction in his sentences as referred to in Order 6.
There be a further listing before me on 4 July 2008 at 10am for the purposes of giving Solicitor A, Solicitor B, Counsel C and Counsel D for the husband an opportunity to make submissions as to why I should not send my findings to the Office of the Legal Services Commissioner for consideration as to whether or not disciplinary action should be taken against all or any of them.
Any affidavit evidence upon which Solicitor A, Solicitor B, Counsel C or Counsel D for the husband wish to rely for the purposes of their submissions on 4 July 2008 is to be filed in the Sydney Registry by 4pm 19 June 2008.
IT IS NOTED that publication of this judgment under the pseudonym Kendling & Kendling and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 2903 of 2003
| Mrs Kendling |
Applicant
And
| Mr Kendling |
Respondent
And
| B Ltd |
2nd Respondent
REASONS FOR JUDGMENT
INTRODUCTION
I have found that two charges of contempt have been established beyond reasonable doubt against the husband and one charge of contempt has been established beyond reasonable doubt against the company B Ltd.
The prosecution charges that the husband and B Ltd knowingly contravened orders of this Court, which were both simple in their terms and narrow in their operation. The prosecution further charges that the contraventions were exceptional and striking in their nature. On 12 March 2008 I found a prima facie case both against the husband and B Ltd in relation to each of the charges. On 31 March 2008 I found that the charges have been established beyond reasonable doubt. On 15 April 2008 I delivered my reasons for those findings.
On 31 March 2008 I made the following findings:
1.I found the husband guilty of a contempt of this court which involves a flagrant challenge to the authority of the court, in that, on or about 9 February 2008, he deliberately caused, or deliberately assisted in causing, [B Ltd] to breach Order 9 of the orders made 27 September 2007 to lend and advance to the husband a sum of money in the amount of at least $1.1 million.
2.I found that the husband is guilty of a contempt of this Court which involves a flagrant challenge to the authority of the Court, in that he, in or about 9 February 2008, granted to [B] Ltd, a mortgage or charge over 10% of his shareholding in [B] Ltd, in deliberate breach of Order 1 of the Orders made by Cohen J on 4 July 2007.
3.I found [B] Ltd to be guilty of a contempt of this Court which involves a flagrant challenge to the authority of the Court, in that [B] Ltd, on or about 9 February 2008, lent and advanced to the husband, a sum of money in the amount of at least $1.1 million in deliberate breach of Order 9 of the orders made 27 September 2007.
These reasons for sentencing should be read in conjunction with the reasons for findings delivered on 15 April 2008.
My conclusion that the charges are established is founded on two alternate reasons.
First I found that the husband and B Ltd were guilty of the charges beyond reasonable doubt, even if I accept the explanation that has been given by the husband and B Ltd.
In the alternative, if I was wrong and the explanation offered by the husband and B Ltd means that no flagrant breach of orders has occurred, then I did not, on balance, accept the explanation that has been offered by the husband and B Ltd.
PENALTIES SOUGHT AT THE SENTENCING HEARING
The prosecution
The wife submitted:
8.1.That an appropriate total sentence against the husband in relation to the two findings of contempt made against him would be in the range of a minimum total of 14 months and a maximum of two years.
8.2.While given that separate sentences could be imposed of up to two years each and made fully cumulative, a sentence of more than two years in total would be too severe.
8.3.It was submitted that twelve months for the contempt of the order of 27 September 2007 and four months for the order of July 2007 with two months of each to be severed concurrently was an appropriate sentence.
The available penalties against the company are sequestration or fine or both (s.112AP(5) Family Law Act 1975 (“FLA”)). The wife submits that neither sequestration of the company or fining the company will advance the cause which the injunctions that have been breached were aimed at protecting. Counsel for the wife inferred that a fine would prejudice the wife’s future claim under s.79 FLA as it would reduce the assets available for distribution. The prosecution is inviting me to make no order against B Ltd for the contempt for which the company has been convicted in circumstances where the person who controls the corporate mind of B Ltd is otherwise dealt with for his part in aiding and abetting the company’s contempt.
The husband
Counsel for the husband asks me to either:-
10.1.make an order for unconditional release; or
10.2.order that the husband enter a bond to be of good behaviour.
DOCUMENTS RELIED UPON
By the commencement of the “sentencing hearing” on 23 April 2008, the husband had not filed any additional sworn evidence relevant to the question of sentence. The husband sought to rely upon three testimonials and a letter from Dr L dated 16 April 2008. These were admitted as exhibits without objection on the basis that they had the status of unsworn statements only.
On 16 May 2008 the husband sought to rely upon an affidavit sworn by himself on 1 May 2008 and an affidavit sworn by Dr H sworn 1 May 2008. I gave him leave to do so. Part of the affidavit filed by the husband was in reply to the matters asked in cross examination, part of it was material that should have been filed by 18 April.
The information provided by Dr L and Dr H is about the husband’s medical status and I will discuss it in more detail below.
With leave, the husband filed a further affidavit today about the payment of outstanding interest.
SECTIONS 112AP(4) AND (6) FLA
Section 112AP(4) provides:-
(4)Where a natural person is in contempt, the court may punish the contempt by committal to prison or fine or both.
(5)Where a corporation is in contempt, the Court may punish the contempt by sequestration or fine or both.
(6)The court may make an order for:
(a) punishment on terms;
(b) suspension of punishment; or
(c) the giving of security for good behaviour.
(7)where a person is committed to prison for a term for contempt, the court may order the person’s discharge before the expiry of that term.
Subsection (7) provides for either a total discharge of the sentence or a partial discharge of the sentence.
SENTENCING PRINCIPLES
In DAA v DAI (2005) FLC 93-215 (paragraphs 67 – 71) the Full Court discussed some general sentencing principles which include the following:-
17.1.S.112AP does not refer to the imposition of a sentence but punishment.
17.2.General sentencing principles that apply on a court exercising criminal jurisdiction do not apply to matters under s.112AP.
17.3.A finding of guilt of a contempt is not to be equated to a conviction of a criminal offence.
17.4.The purposes of criminal law are necessarily different for the purposes of the law of contempt and although the conduct in question may be identical each branch of the law may regard its nature and gravity quite differently.
At paragraph 85, the Full Court summarised “factors relevant” when dealing with contempts under s.112AP. They include the following:-
18.1.The procedure is a summary one, conducted in accordance with the Rules and the guidelines for the conduct of a criminal trial do not apply.
18.2.If a custodial sentence is to be imposed, transparency in the sentence imposed will be afforded in an appropriate case if general criminal law sentencing procedures are adopted including imposing sentence for each offence to be served either cumulatively or concurrently, but such procedure is not mandatory.
18.3.State and Federal sentencing laws have no application.
18.4.In imposing penalty the reference to relevant factors to be considered provides a useful framework, but ultimately the penalty should be structured having regard to the individual facts of a particular case.
In this case I intend to impose a separate sentence for each breach and in the event that sentences of imprisonment are imposed upon the husband, consider whether or not those sentences should be cumulative or wholly or partly concurrent.
There are two concepts which guide what sentence should be imposed for a contempt of court. The first is a concept of coercion. The second is the concept of punishment.
Conduct involving non compliance with a court order may be of a much more serious nature for the purpose of law of the contempt than it is for the purposes of the criminal law and visa versa.
In PDM & JEM (2006) FLC 93-291 (at paragraph 60), the Full Court referred to Australian Meat Industry Employees Union v Minchinbury Station Pty Ltd (1986) 66 ALR 557 and quoted with approval the statement:
“Although the primary purpose in committing a defendant who disobeys an injunction is to enforce the injunction for the benefit of the plaintiff another purpose is to protect the effective administration of justice by demonstrating the court’s orders will be enforced.”
At paragraph 49 in DAI & DAA the Full Court quoted from Tate v Tate (No. 3) (2002) FLC 93-107 at paragraph 57. This passage set out at paragraph 33 of the wife’s written submissions, emphasises the need for individual and general deterrence and retribution for a party’s failure to comply with an order. The Full Court there made it clear that retribution is called for because it is essential for the proper working of the court system that court orders are obeyed. This underpins the whole system of dispute resolution by litigation and makes sure that “in the final analysis a citizen has the right to approach a court to determine a dispute”. The Full Court in DAA & DAI (at paragraph 64) made it clear that in that case they were dealing, as we are in this case, with proceedings which are clearly punitive.
I do not agree with the submission made by counsel for the husband that in this jurisdiction “the law of contempt is remedial. The law of contempt is not punitive”.
What is the standard of proof on facts going to sentencing?
If, on a sentencing hearing, the prosecution wishes to rely on some alleged, but disputed, factual circumstance as aggravating the offence, the ordinary rule is that the onus lies on the prosecution to establish beyond reasonable doubt the existence of that circumstance (see Anderson & The Queen (1993) 177 CLR 520 at paragraph 15).
MATTERS CONSIDERED
The effect on the proceedings
The husband has now secured the repayment to B Ltd of the amount of $1,506,000. The effect on the proceedings would be limited to any interest that had been lost on that money by B Ltd between 9 February 2008 and 28 April 2008. In an affidavit of the husband filed in Court today, the husband says and I accept the outstanding interest on the $1,506,000 in the agreed sum of $35,000 has been repaid to B Ltd. I deal below with the question of the wife’s unpaid legal costs in these proceeding.
In relation to the overall property matter, the husband agreed that at an early point in the proceedings Mr Lynch, the solicitor who then appeared for him, told the court that the overall assets of the husband were worth approximately $40 million and that the husband’s position was that the wife would be entitled to an adjustment in her favour of 20% of those assets. That adjustment included the transfer of property in R which is worth about $4,500,000 with a mortgage of $1,500,000 (a net of $3,000,000). The husband was asked how he would raise the $1.5 million to discharge the mortgage and the balance amount that was needed of $3.5 million. The husband said eventually he would sell shares in B Ltd to get the money.
I am told by counsel for the husband that the final hearing which will deal with the competing applications by the husband and wife in respect of alteration of property has been set down to commence on 11 August 2008.
Public interest
The contempt was not committed in the context of a proceeding alleging conduct that is seriously prejudicial to the public interest. It is still, of course, of importance that the sentence have regard to the principles of general deterrence.
Motive
The husband’s expressed motive saw him putting his own commercial interests and the commercial interests of B Ltd (his alter ego) in priority to his and his company’s obligation to obey a court order.
I wish to make it clear that I do not take into account what, on the balance of probabilities, I have found to be the husband’s real motivation. I have found, on balance, his real motivation to be to make it impossible or at least as difficult as possible for the wife to be able to enforce the order made on 25 January 2008 by O’Ryan J that the husband pay to the wife a further amount of $1 million by way of interim costs. However, this has not been proved beyond reasonable doubt.
The prosecution, throughout the hearing (including the sentencing hearing), bears an onus of proof beyond reasonable doubt. In those circumstances my consideration of sentence will proceed strictly on the findings that I have delivered on 15 April 2008. That is, based on findings that the husband has aided and abetted the breaching of orders because of commercial motivation or alternatively without offering any acceptable explanation.
The husband sought to obtain a gain from the transaction in that a debt which he allegedly owed his daughter was discharged by his payment of the sum of $1,506,000. The husband consequently benefited by that amount. It is true he incurred a new debt but to a company which he controlled.
Contrition
I have commented about whether or not the husband’s previous expression of contrition was genuine in my Reasons for Findings dated 28 March 2008. The relevant paragraphs of those Reasons are paragraphs 39 to 65 (matters going to the husband’s credit) and paragraphs 129 to 135 (matters going to the husband’s apology).
In his most recent affidavit sworn 1 May 2008 the husband states at paragraph 17, “again, I say it was never my intention to breach an Order of this Court, and I apologise profusely for this”. In discussion with me, counsel for the husband said that this sentence was “an unfortunate use of language and that the husband’s intention was to profusely apologise”.
When I invited counsel for the husband to concede on behalf of the husband that he had intended to do what he was convicted of doing, counsel for the husband paused and then said that he thought “the appropriate conclusion is that your Honour hadn’t [sic] found that he did intend to commit these particular contempts and he has apologies”. I had some difficulty in understanding the meaning of that statement.
Counsel went on to say that the husband had in fact shown his contrition by his behaviour in paying back the principle sum taken, notwithstanding what words he used when attempting to apologise.
I am of the view that the statement made by the husband at paragraph 17 of his affidavit sworn 1 May 2008 is not unintentional. It is consistent with the oral evidence that he gave that he did not know what he was doing was wrong. He gave that evidence orally on two occasions on 28 March 2008 (see my Reasons for Judgment dated 15 April 2008 at paragraph 43). I found that those denials were incompatible with the matters which I set out at paragraph 44 of my Reasons for Judgment delivered 15 April 2008.
I am surprised in those circumstances that paragraph 17 is worded in the way it is, if it is actually meant to be an apology.
Dr H describes the husband as almost irrationally argumentative, provocative and in denial to some degree. I take into account Dr H’s evidence generally when weighing the fact that the husband to date has failed to acknowledge his intentional breach of the order.
Given that the husband at no stage conceded that he had done anything wrong, it is difficult to accept any contrition that he now expresses.There was no early plea. The charges were contested very vigorously.
Purging
The husband has filed an affidavit sworn 1 May 2008. I am satisfied on the basis of the evidence in that affidavit that an amount of $1,506,500 has been repaid into the bank account of B Ltd. This is sufficient to cover the repayment of the initial amount transferred out in the sum of $1,506,267. It makes no allowance for interest lost on those funds between 9 February 2008 and the present time.
Counsel for the husband on a number of occasions during submissions referred to the fact that the husband had effected a 100% purging. I do not agree with that as at the conclusion of the hearing. There are two outstanding matters. The interest, in the agreed sum of $35,000, has now been paid. There is still the outstanding of the payment of the wife’s indemnity costs.
Reparation to the wife for the cost of these proceedings
The wife has not yet been compensated for the costs of having to prosecute these proceedings. At paragraph 16 of his affidavit sworn 1 May 2008 the husband stated that he will not resist an order of the Court that both B Ltd and he pay the costs of the wife in these contempt proceedings as agreed or as assessed. It is agreed that the payment for costs will be paid on an indemnity basis. I have been invited to make an order in those terms and I will do so.
There is still no agreement as to the amount. The husband has not indicated how he intends to pay fees which the wife estimates to be in the approximate sum of $133,000.00. Counsel for the husband says that the husband cannot be penalised for not offering any money for the costs of these proceedings because he is currently under an injunction and he can’t borrow from the company to pay the wife’s costs. Counsel for the husband said, without correction from Counsel for the wife, that in the wife’s second interim costs application before O’Ryan J the wife indicated that she would consent to the husband borrowing from the company in order to pay her the $1,000,000. Counsel for the husband submitted that the same order should be sought by the wife in these proceedings and that this would immediately remedy the indemnity costs issue. However, that approach misses the point. The wife has incurred the costs of prosecuting these proceedings because of the husband’s contempt. It is a matter for the husband as to whether or not he can organise the necessary funds to effect that part of the purging of his contempt which comprises the repayment to the wife of her indemnity costs. It might be that the wife will consent to the course proposed yet, there may be reasons why she would not.
The husband has demonstrated a capacity to receive funds, particularly from his daughter. T Pty Ltd, the company allegedly controlled by his daughter, owes B Ltd an amount of about $45 million.
Counsel for the husband rightly made the point that the husband is entitled to an assessment of the indemnity costs. However, it is in my view, appropriate to require the husband to deposit with the solicitors for the wife the amount that the wife’s solicitors estimate are the indemnity costs for these proceedings; namely an amount of $133,000. I make no comment as to whether or not that is an appropriate amount; that will be a matter for future agreement or assessment.
Counsel for the husband submitted that I would have no reason to believe that the husband having got the $1.5 million back, couldn’t get back another $35,000 to satisfy the interest lost on the monies taken over the last 79 days. I have been given evidence today that that payment has now been made. A similar logic can be applied to the payment of $113,000.
THE HUSBAND’S CHARACTER AND ANTECEDENCE
During his oral evidence in the sentencing hearing on 23 April 2008 the husband said he has always had the highest regard for authority, what he did was out of character, he was not in the habit of acting contrary to the law, nor in the habit of acting disrespectfully. He also said that he had disclosed all matters regarding his personal history relevant to the sentencing hearing.
The husband’s criminal record
Exhibit Y is a document setting out the husband’s criminal record. It is as follows:-
Charge Court Name Court Date
Date Charge Station Sentence
Status Offence
28/09/2005 … Local Court 17/03/2006
… *Non-Fingerprinted*
Drive with low range PCA
21/06/1966 … Petty Sessions 24/06/1966
…
*Fingerprinted*Fail to keep proper books
and accounts of companyAdmitted to bail self and surety $2000 for his appearance at Melbourne PS on 250766
09/09/1989 … Local Court 08/11/1989
… *Fingerprinted*
Drive whilst lic cancelledRecog s556A self $200 GB 12 months recog entered Mr … (M/F 179961)
In relation to the offence in 1966 the husband agreed that he had been extradited from New South Wales to Victoria in relation to a prosecution under the Companies Act for which he was convicted. The husband said this was a minor offence in his view, attracting a $200 fine in 1966. The actual offence according to the husband was committed in 1958 or 1960. He said he was in charge of a company and that he had resigned from the company and had not got the accountant to sign the books. He said when the company went bankrupt he wasn’t there but he got the blame for it. He said his failure to appear in the Victorian Courts was because he was in New Guinea and then he resided in New South Wales and didn’t know anything about the charges.
The husband was confused in relation to the PCA offence. He denied that he was charged in September 2005 and convicted in March 2006 with a low range PCA offence. Even when shown his criminal record he still maintained that he had not been convicted because he had a gold licence and had had it for some years. The husband was of the view that he had been convicted of what he described as a “DUI” in 1989. Given my lack of confidence in the husband’s oral evidence in other areas, I prefer the written record produced by the authority charged with keeping criminal records (Exhibit Y). The husband’s confusion is consistent with observations made by Dr H.
Given the husband is a man of 75 years of age his criminal record, whilst not totally unblemished, is one that weighs significantly in his favour in these proceedings.
TESTIMONIALS
There are three testimonials (Exhibit W). The essence of the testimonials was that what the husband had been convicted of were acts which were “totally out of character” and I accept that is the opinion of those who have given the testimonials.
The husband hadn’t actually spoken to any of the persons providing the testimonials. He hadn’t seen Mr HR for about a year; he hadn’t seen Mr BS for about a year and he hadn’t seen Mr AL since about July 2007.
Evidence about whether what the husband did was “totally out of character”
Counsel for the husband agreed that it was implicit in him being able to tender testimonials asserting that the contempt of which the husband was convicted was totally out of character, that the wife have the opportunity to cross examine the husband, for the purposes of testing whether or not he was a law abiding citizen and whether or not he had due regard to the authority of the court. That cross examination significantly expanded the length of time to complete the sentencing hearing.
The husband was cross examined about a large number of matters. Some of the matters the husband concedes. Some of the matters are established by documents that have been tendered.
In respect of those matters, where a finding of beyond reasonable doubt is possible, those matters are submitted by the wife as factual circumstances which aggravate the offence.
Other matters, in respect of which a finding can only be made on the balance of probabilities against the husband, go to the issue of whether or not I can accept statements made in his three testimonials that the matters for which he has been convicted are totally out of character.
There were matters put to the husband which I cannot find against him even on the balance of probabilities and if I don’t mention them one can assume that they fall into that category.
There were many parts of the husband’s evidence during the sentencing hearing that impacted adversely upon his credit.
In submissions, counsel for the husband adopted the approach of not addressing any of these matters. He contented himself with simply saying:-
“We accept, without reservation, that there are parts of [the husband’s] evidence that is [sic] unsatisfactory.”
Counsel for the husband went on to say that the husband was not being dishonest and that the unsatisfactory and unreliable nature of the husband’s evidence was explained by those matters set out in Dr H’s report. I find, however, on the balance of probabilities that much of the husband unsatisfactory evidence is also dishonest.
The 1995 letter to the Magistrate
I am satisfied beyond reasonable doubt that in 1995 the husband wrote a letter dated 11 September 1995 (5 days after his marriage to the wife) which was designed to mislead a court which was dealing with a criminal matter involving the wife. Exhibit Z is a copy of the letter in which the husband refers to the wife by her maiden name, not Kendling, gives a character reference and also suggests that the wife be dealt with by way of community service order to be served at B Facility. The husband does not disclose in the letter that he is married to the defendant or that he is the proprietor of B Facility.
The husband claimed in cross examination that he used the wife’s maiden name throughout the letter because that was his wife’s surname when she was charged with PCA on 25 May 1995. I find that that explanation is disingenuous. I find, beyond reasonable doubt, the lack of disclosure to the Magistrate in the husband’s letter of the relationship that existed between he and the defendant and the fact that he was the proprietor of B Facility was a manipulation of court process by the husband. A disclosure of the relationship would have significantly reduced the weight the Magistrate would have placed on the document as a character reference and the husband, in my view, would have known that that was so at the time he wrote the letter.
In addition, the following passage in Exhibit Z contains an untruth:-
“She will be moving to the central coast at the end of September....”
During cross examination the husband admitted that the wife was already living on the central coast with the husband and they were living together as husband and wife at the time the letter was written.
Of course, it is probable that the wife was complicit in this deception and the irony that she is the prosecutor in this case is not lost on me. That is one of the complications referred to by Finn J in LGM & CAM (contempt) (No 2) (2008) FLC 93-355 at paragraph 145 (see quote below). However, that complication does not affect the fact that the husband’s behaviour does not support the notion that the offence with which the husband has been charged is “totally out of character”.
Further possible breaches by the husband of Order 9 made 27 September 2007
Order 9 of 27 September 2007 injuncts B Ltd from lending or advancing money to or for the benefit of any person.
During these proceedings there was some time spent examining what monies B Ltd paid in legal costs for the husband. I gave a certificate in relation to some of this cross examination as answers could have indicated that the husband had aided and abetted B Ltd in further breaching Order 9 of 27 September 2007.
The husband agreed that between 3 September 2007 and 15 April 2008 B Ltd paid, by way of legal costs, both for itself and the husband in the sum of $772,750. It was established in cross examination that $133,700 of that amount had been paid by B Ltd prior to the order of 27 September 2007 being made. The balance of $659,000 had been paid after the order had been made. Some of it had been paid for B Ltd own legal fees but some had been paid by B Ltd for the husband’s legal fees.
In the husband’s affidavit sworn 1 May 2008, the husband admits that between 27 September 2007 and the current time, B Ltd have paid on the husband’s behalf by way of legal fees to Firm AB, Counsel C, Counsel D and A Givnay an amount which on my calculation totals $276,355.
17.10.2007
Firm AB
$65,000.00
20.11.2007
Firm AB
37,225.87
23.11.2007
Counsel C
29,480.00
7.12.2007
A Givnay
26,840.00
19.12.2007
Firm AB
15,000.00
24.12.2007
Firm AB
45,170.00
26.2.2008
Firm AB
10,200.00
26.2.2008
Counsel D
16,610.00
26.2.2008
Firm AB
5,074.30
27.2.2008
Counsel C
3,855.75
7.3.2008
Firm AB
6,000.00
10.3.2008
Counsel D
15,900.00
$276,355.92
The husband gave evidence that the director’s fees paid to him by B Ltd on an annual basis were $240,000 gross. It was put to him that during the period from September 2007 to April 2008 (a period of a little over 7 months) his director’s fees would have only been somewhere a bit over $120,000.
Senior Counsel for the wife went through the exercise of examining the cash flow statements provided by the husband. The amounts taken by him by way of director’s fees were identified. They are set out in exhibit EE. The list was as follows:
Transcript page
Date of Director’s Fees payment to [the husband]
Amount
Page 58 29/09/2007 $10,000 Page 58 07/10/2007 $1,900 Page 58 06/10/2007 $10,000 Page 58 08/11/2007 $30,000 Page 58 05/11/2007 $10,000 Page 58 ??/12/2007 $10,000 Page 58 ??/12/2007 $18,000 Page 58 ??/12/2007 $2,000 Page 58 ??/01/2008* $30,000 Page 58 28/02/2008 $10,000 Page 59 ??/02/2008 $10,000 Page 59 19/03/2008 $15,000 Page 59 06/03/2008 $20,000 Total $176,900 * = The husband during cross examination agreed that this had been incorrectly recorded as “2007” but was correctly “2008”.
Based on this information, the husband has been paid all his director’s fees for the relevant period and consequently the director’s fees could not, on the balance of probabilities, provide the source of the funds with which B Ltd has paid the husband’s legal fees.
I raised whether or not it was possible that monies received by the husband were a repayment of his loan account as opposed to B Ltd lending fresh monies to the husband. The husband agreed however that the company accounts showed there was a debit in his loan account as at 30 June 2007 of $3,202,776 and that as at 30 September 2007 that debit loan account stood at $3,206,066. On the accounts, the husband owed the company money, not the other way around.
The process by which the husband’s legal costs were paid
The husband, at one point in the evidence, said that it was B Ltd’s employees working in its administration section that drew the cheques to pay legal fees from B Ltd. He again asserted (inconsistent with my findings in the reasons of findings in relation to the conviction and offence) that there were three directors of B Ltd and he didn’t control them. However, the husband later conceded that whilst there had been a couple of transfers, most of the payments were made by cheque and that he had signed the cheques. Exhibit CC is a group of cheques which are each in the husband’s handwriting and signed by the husband. This evidence tends to give a different impression to the one the husband sought to give in evidence and the one he gave to Dr H. The impression the husband sought to give in evidence and to Dr H was that he was not strong in terms of back office tasks, but is much more at the front end, doing deals, seeing the big picture and selling. Dr H opined that detail was not for him; instead it is left for others to deal with whilst he is out designing and structuring a bigger deal. The writing of the cheques in Exhibit CC points in the opposite direction.
I find that the husband, in paragraphs 9 to 15 of the husband’s affidavit of 1 May 2008, has attempted to rewrite history to attempt to claim he had entitlements in B Ltd which would have allowed B Ltd to write the cheques to his legal fees notwithstanding the injunction order.
The affidavit, by annexing the letter from C Partners dated 30 April 2008, attempts to assert that the husband has accumulated entitlements over the last four years of $1,043,268.46 by way of unclaimed salary, holiday pay and annual leave.
The husband told me in the witness box that for at least the last four years he has had in his mind that he had this asset or financial resource available to him from the company.
Prior inconsistent statements about claim money is owed by B Ltd to the husband
The husband during cross examination was taken through various documents contained in the folder which is Exhibit QQ.
The aim of the cross examination was to explore the accuracy of the husband’s assertion that for about four years he knew that the company owed him substantial unpaid monies by way of accrued unpaid salary, holiday pay and long service leave in the approximate sum of $1,042,000.
Tab 2 of Exhibit QQ is the husband’s financial statement sworn 6 April 2006. It is prepared by his former solicitors. Part I (Property owned by you) and Part L (Financial resources) make no assertion that the company owes the husband any money whatsoever by way of unpaid salary, holiday pay or long service leave.
Tab 3 contains a letter written by the husband to the Child Support Agency in May 2006 setting out particulars in relation to his financial circumstances. There is no indication in that document of the alleged asset that the husband now asserts he knew about for a period of four years.
Tab 6 is an affidavit sworn by the husband on 20 March 2007. At paragraph 11 of that affidavit the husband sets out what he asserts then to be his current assets. The husband says that he had 40,505,000 ordinary shares in B Ltd “yet to be quantified”. The husband has a 100 percent of the value of shares in B Ltd. Nowhere in that table in his affidavit does the husband make the assertion that he had an asset, being monies owed to him by B Ltd.
Under the paragraph setting out his assets in his sworn affidavit on 20 March 2007 the husband says:-
“12. Other than as set out above, I have no other assets or liabilities other than ongoing monthly accounts.”
Paragraph 32 of the husband’s affidavit sworn 20 March 2007 is in the following terms:-
“32. Exhibited to me at the time of swearing my affidavit and marked ‘JK16’ is a copy of my income tax return for the year ended 30 June 2006. I currently receive no income from [B] Limited but continue to have the use of the motor vehicle provided to me subject to payment of fuel and tyres.”
At tab 10 there is an affidavit sworn by the husband on 13 December 2007. This was an affidavit prepared and settled by Solicitor A. At paragraph 3 the affidavit refers to the affidavit that I have already spoken about which is contained under tab 6. This affidavit seeks to rely on that former affidavit.
In tab 12 there is an affidavit sworn by the husband on 19 February 2008. In that affidavit the husband asserts that he has no source from which he can raise any funds to pay the second interim costs order of $1 million made by O’Ryan J on 25 January 2008. The husband in this affidavit does not say that he had monies owed to him by B Limited upon which he could draw. If that were true, paragraphs 2 and 7 of his affidavit sworn 19 February 2008 would be misleading.
At tab 13 there is the Amended Notice of Appeal filed by the husband on 7 March 2008. Ground 14 of that Amended Notice of Appeal is in the following terms:-
“His Honour erred by failing to determine that the husband in all the circumstances and based on evidence admitted before his Honour had no means to fund a payment of a further interim costs order as sought by the wife.”
That ground of appeal would be untrue and misleading if in fact the husband had the ability to call upon B Ltd to pay him outstanding salary and emoluments.
At a meeting of directors of B Ltd on 2 April 2007 a resolution was taken in relation to compensation to the husband “for his contribution to the company”. The amount paid to him was $150,000 for a nine month period. The meeting also dealt with the issue of the husband’s future employment from 2 April 2007 onwards. The meeting resolved that the husband be offered a remuneration package of $240,000 per [sic] year payable in equal monthly proportions plus the use of the company car with all expenses paid to commence 1 July 2007. This payment was made on the basis that the husband give his undivided attention to the company and in particular when his personal affairs had been resolved. At the time of this meeting the wife’s property application had been filed and the application for the payment of the wife’s interim costs was a live issue. There is no indication that any other sums are owed by the company to the husband.
At tab 17 are the financial reports of B Ltd for the year ended 30 June 2007 and financial statements prepared by B Ltd to 30 September 2007. The provision (at note 10) for annual and sick leave for all employees of the company is $42,568. That amount has been paid by 30 September 2007. These entries on the financial statements are inconsistent with the current assertion of an amount of over $1 million being owed by B Ltd to the husband.
The husband accepted that he had taken on average two weeks annual leave in Australia and that over a 25 year period he had spent about 8.4 weeks of the year overseas. There was no indication as to how much of that was on company business. I was comfortably satisfied however that its unlikely that there are any holiday entitlements that the husband hasn’t taken.
Conclusion about the husband having B Ltd pay his own legal fees after 27 September 2007
The husband was unable to adequately explain whether or not he was giving false evidence in his sworn financial statements and other sworn affidavits or whether or not he was giving false oral evidence to me. He was unable to appreciate that one or the other had to be the case. I am satisfied on the balance of probabilities that what is contained in paragraphs 9 to 15 of his affidavit sworn 1 May 2008 is a recent invention aimed at setting up a defence to possible further contempt charges against him (and possibly also against those who have advised him and received monies as a result of payments made by the company after 27 September 2008. I find on the balance of probabilities that what is in paragraphs 9 to 15 of the husband’s affidavit of 1 May 2008 is a cynical way of attempting to circumvent the intent of the orders of 27 September 2007. Again this is not a matter I take into account to exacerbate the penalty that the husband receives. However, it is a matter that goes to the weight that I attach to the testimonials.
THE RECEIPT BY THE HUSBAND’S LEGAL REPRESENTATIVES OF MONIES FROM B LTD AFTER 27 SEPTEMBER 2007
Exhibit CC are photocopies of cheques written by the husband on the account of B Ltd at Westpac. The cheques are written to Counsel D, Counsel C, Firm AB (the cheque of 15 February 2008 is written to Solicitor B) and Mr Givnay.
Mr Givnay was the counsel involved in the parenting matter. I have no information at all that would indicate that Mr Givnay was aware of order 9 of 27 September 2007.
Significant amounts of money are involved. All of the payments in Exhibit CC are after 27 September 2007.
On the information I currently have, it seems Counsel D, Solicitor A, Solicitor B and Counsel C have received payments from B Ltd after 27 September 2007 for the payment of legal work that they have done for the husband. These lawyers acted for the husband when orders were made on 29 September 2007 after a contested hearing. Order 9 was simple in its terms and narrow in its operation. It injuncted B Ltd from lending or advancing any monies to or for the benefit of any person. The lawyers have received from B Ltd $276,355 for the husband’s legal fees since 27 September 2007. The husband on 1 May 2008 asserted in an affidavit drawn by Solicitor A, witnessed by Solicitor B and presented by Counsel D and Counsel C, that B Ltd owes the husband statutory entitlements not covered by Order 9. I have found, on balance, that is not credible and a recent invention.
There will be a further listing before me on 4 July 2008 at 10am for the purposes of giving Solicitor A, Solicitor B, Counsel C and Counsel D an opportunity to make submissions as to why I shouldn’t send my findings to the Office of the Legal Services Commissioner for consideration as to whether or not disciplinary action should be taken against them.
OTHER MATTERS
I have already in the judgment given at the liability stage summarised findings of credit made against the husband. Those findings are as follows:
101.1.The husband falsely claimed that:-
101.1.1.He did not recall whether he voted or not at the meeting of B Ltd by which it was resolved to lend him $1.506 million on or about 9 February 2008 (Judgment at paragraph 41);
101.1.2.He went to that meeting thinking it might be possible that the other directors might say “no” to him receiving the loan (Judgment at paragraphs 40 and 41);
101.1.3.He could not recall that the orders of 27 September 2007 took place after the $30 million was lent by B Ltd to T Pty Ltd notwithstanding the assurance, that B Ltd gave through its solicitors to the wife that it would remain in the company’s bank account (Judgment at paragraphs 61-63).
101.2.The husband falsely denied that:
101.2.1.He knew that he and B Ltd were acting contrary to orders of O’Ryan J on 27 September 2007 in having B Ltd lend and pay over the $1.506 million (Judgment at paragraphs 42 – 45);
101.2.2.The balance of the monies paid to Penelope Kendling over the $1.4 million (or $1.430 million) were by way of charges of capitalised interest (Judgement at paragraphs 46 – 51);
101.2.3.He was unaware of the loan agreement between Penelope Kendling and T Pty Ltd (Judgment at paragraphs 52 – 57);
101.2.4.His inability to pay the wife the $1 million pursuant to the orders of O’Ryan J dated 25 January 2008 was partly due to the payment by B Ltd through him to Penelope Kendling of $1,506 million (judgment at paragraphs 58 – 60).
False evidence to Cronin J
Before Cronin J on 18 July 2007 the husband was asked in cross examination about driving a particular prestige vehicle. He said he did not drive that prestige vehicle. Before me he asserted that that evidence was true.
After further cross examination the husband was offered a certificate under s.128. When giving evidence with the protection of that certificate and responding to a question as to whether or not he was driving a prestige motor vehicle prior to the hearing before Cronin J, the husband said that he had leased the motor vehicle from T Pty Ltd. I find, on balance, that the evidence given by the husband to Cronin J and to me about driving that vehicle was untrue.
On balance, I find that the husband falsely denied that he was the source of the instructions to Mr Wenden, which caused Mr Wenden to write his letter of 13 August 2007 about how the proceeds of sale would be dealt with (Transcript 23 April 2008 p60 line 33): falsified by the letter from Mr Z included in Exhibit FF (Transcript 23 April 2008 p73 line 25 – page 74 line 20).
I have found on balance that the husband caused B Ltd to mislead the wife as to how the amount of $30 million from the sale proceeds of the retirement village would be dealt with and transferred to T Pty Ltd without informing the wife.
On balance I find that the husband knew and falsely denied that T Pty Ltd got the money to pay the $750,000 in interest on 28 March 2008 from the $940,000 that he had been paid that same day by B Ltd.
Non compliance with procedural orders
The lack of compliance with procedural orders is conceded by the husband in his affidavit sworn 20 February 2008 and that of Solicitor A also sworn 20 February 2008 (wife’s tender bundle).
The husband uses as an excuse as to his non disclosure of the payment from B Ltd to T Pty Ltd totalling $1.704 million ($770,000 on 19 March 2008 and $934,000 on 28 March 2008) the fact that these proceedings were still unconcluded. The husband was convicted before 10am on 31 March 2008. I cannot, on balance, accept the husband’s explanation as to why he failed to comply with an order to make disclosure.
I find on balance the husband also falsely claimed that another reason why the February/March cash flows that he was required to provide to the wife did not disclose the payment of $1.7 million is because they came from a capital account as an implausible explanation.
I find on balance that the husband has displayed a history of indifference to procedural court orders in relation to the filing of material and that he has been tardy in complying with orders to serve accurate monthly cash flow statements of B Ltd.
I find on balance that the husband has entered into secret arrangements to pay T Pty Ltd $1.7 million and has participated in a charade in suggesting to the court that T Pty Ltd had ample capacity to meet its interest obligations to B Ltd on the debt of $45 million (Transcript 23 April 2008 p65 line 1 – p68 line 30).
The husband’s request that Mr Z destroy documents
The husband during cross examination said that it was only because of a fairly surprising turn of events that a refinancing was done in the way it was done at the end of August 2007. Later in the cross examination however Counsel was to establish on balance that the husband asked his lawyers or Mr Z to destroy the records that would indicate that this deal was something that had been foreshadowed months before. It was shortly after that evidence came to light that I had to adjourn for a short time because the husband had to compose himself.
As the settlement of a loan that T Pty Ltd had approached there were major difficulties with Member’s Equity refinancing it. The husband conceded that if the wife hadn’t got the insurance that she got in the letter written to Mr Conley by Mr Z, then she would have taken him to court (the implication being that his intention to move money from B Ltd to T Pty Ltd in order to settle the loan would then be frustrated. He disputed this. The killer letter signed by someone on the husband’s behalf on 31 July is exhibit HH. The minutes of the resolution to move the funds is exhibit GG – minutes dated 27 August and there is a bank statement Exhibit II that shows the movement of the money.
All of the matters that I have found on the balance of probabilities fortify the proposition that, contrary to the unsworn testimonials, the husband is a man who has little regard for the authority of the court. In respect of those matters where I have found beyond reasonable doubt those matters can be relied upon as in some degree aggravating the offence.
THE HUSBAND’S PHYSICAL AND MENTAL HEALTH
Dr L has been the husband general practitioner for 20 years. Exhibit V is a medical certificate by Dr L dated 16 April 2008, tendered by consent as an unsworn but unchallenged statement, in relation to the husband’s health.
Dr L’s report is in the following terms:-
“My name is [Mr L], I am a registered Medical practitioner in the State of NSW. I have read the Court Orders and understand the charges made against [the husband].
[The husband] has been a patient of mine for some 20 years. His past medical history is as follows:-
He has had osteoarthritis of his left knee and has had corrective surgery on the knee. The surgery was quite complex and involgved grafts of cartilage to the knee. Despite this surgery, [the husband] continues to experience pain with his knee which has worsened in the last year or so. In the last year or so his mobility has been impaired by recurrent pain involving the knee.
He also experiences recurrent low back pain. [The husband] has tried maintaining good mobility but a combination of his age and his low back pain are beginning to take their toll. [The husband] is also suffering from considerable stress and some depression. This has arisen from troubles revolving around his divorce.
In terms of treatment of the above conditions – [the husband] requires intermittent use of analgesics and anti-inflammatory medications. He has so far declined to consider the use of anti-depressants.
[The husband] has managed with his orthopaedic problems by intermittent gentle exercise and rest accompanied with medications as stated above.
The conditions mentioned may well be exacerbated by an absence of facilities to rest and gently exercise when appropriate. I have no doubt that his depressive state would be considerably worsened by imprisonment.
[The husband] is a 75 year old man. He has maintained a high degree of intellectual activity all his life. Despite this, the normal toll of age is beginning to show. This 75 year old is entering a period of deteriorating fragility. Any exacerbation of his conditions are likely to be permanent and have long term effects on him which may contribute not just to incapacity but to shorten his life span.”
Counsel for the husband says that Dr L’s opinion expressed in the last sentence of his report is a matter of common sense. That is, the imprisonment of a 75 year old man is going to led to the exacerbation of physical symptoms and his mental status.
In relation to the last part of Dr L’s evidence, Counsel for the wife submits, and I accept, that it is unclear what is being asserted and what is being asserted is speculative. There is no specificity as to the effect of any particular length of sentence nor does it say what conditions of imprisonment might create a situation where the husband’s lifespan might be shortened.
Clearly it is common sense that anybody, and more particularly a man of the husband’s age, is facing a daunting prospect if sent to prison.
I do not draw the inference that light exercise and rest are unavailable in prison.
Dr L’s opinion about the husband’s current depression is to be contrasted by the diagnosis of Dr H, psychiatrist, who found that the husband clearly did not have any Axis 1 diagnosis such as depression but concluded his report by saying that imprisonment “and the enforced separation from his children would only compound the inevitable depression”.
Between 29 April and 30 April the husband saw Dr H on two occasions for prolonged psychiatric interviews. Dr H was not called to elaborate on his report or to be cross examined on it.
Dr H was clear that the husband did not have any Axis 1 diagnosis such as depression or anxiety.
In summary, Dr H found that the husband had a certain personality style which was pervasive with some impairment of his memory.
Dr H also developed a hypothesis, not a diagnosis, that it may well be that the husband has an underlying organic personality disorder.
Dr H observed that he had not performed detailed dynamic brain studies such as a dynamic MRI and several blood flow studies. No adjournment of the sentencing hearing was sought by the husband.
Dr H had also not carried out the type of psychological testing that would be done by a competent psychologist in order to obtain a more valid and reliable diagnosis of memory impairment.
He described the husband as being dogmatic, forthright and confronting and clearly having a ponderous argumentative style. Dr H opined that that style was being invalided to a great extent by a clearly fading memory.
However, in the circumstances of this case, a clearly failing memory is not of great relevance in circumstances where the husband has conducted this case on the basis that he had knowledge of the orders that had been made at the time that they were breached.
Dr H’s assessment of the husband’s memory impairment is restricted to him having carried out three exercises with the husband (detailed at pages 8 and 9 of his report) which led him to conclude that the husband’s short term memory was very poor.
Dr H was of the opinion that, given that were was no history of stroke on physical examination the husband did not have any significant signs of peripheral vascular disease and that there was no history of Alzheimer dementia in the family, that the explanation for fading memory loss was somewhat unclear.
Apart from memory loss, Dr H also opined that there may be an element of reduced impulse control and impaired judgment. This was because the husband, in the interviews with Dr H, displayed behaviour which Dr H described as almost irrationally argumentative, provocative and in denial to some degree. This, together with the observations of impaired memory, led Dr H to opine that the husband might be suffering from organic personality change. He commented that this may be just a reflection of the husband’s age.
Dr H reports that the husband cried at the thought of not being able to see his children if he was sent to gaol and consequently the doctor concludes that the husband would suffer grievously on an emotional level if that happened. Dr H also said that the husband’s liable mood was also something that was seen in an organic personality change.
In his concluding remarks on page 12 and 13, Dr H reaffirmed that he did not think the husband was clinically depressed. He had significant deficits of his memory and possibly a cause of his underlying personalty structure.
Dr H concluded by saying incarceration would clearly devastate him mood wise and the enforced separation from his children would only compound the inevitable depression.
Counsel for the wife submitted that Dr H’s evidence was replete with statements that don’t come near to establishing anything other than the husband has a very poor short term memory. He categorises the rest of the material as speculative.
It is not clear to me what Dr H is talking about when he uses the word “depression” in the second last paragraph of page 13. Dr H says the husband does not have at the moment any Axis 1 diagnosis, such as depression. It is not clear to me that Dr H is actually saying that he would develop a clinical depression as a result of being sent to gaol. I interpret that sentence to mean that he would feel depressed being in gaol and away from his children.
Dr L says the husband is suffering from stress and depression arising from these proceedings. It is not unusual for people involved in litigation in this Court to feel depressed. That however is not a diagnosis of clinical depression.
Counsel for the wife conceded that the evidence in relation to the husband’s health was a relevant factor when considering what reduction should be made to a sentence of imprisonment that would otherwise be called for.
I have taken into account the fact that despite the husband looking a far younger man, he is 75 years of age. Notwithstanding that he presents as a tough “big picture” person, he is an old man with memory deficits and possibly underlying organic personality change. This is an important matter which significantly mitigates the sentence that the husband is to receive.
COMPARABLE DECISIONS
In PDM & JEM (2006) FLC 93-291 the Full Court at paragraph 34 said:-
We note that sentencing for contempt involves a consideration of individual circumstances of the particular case and we agree with the comments of Palmer J in Australian Securities & Investment Commission v Michalik (super) at paragraph 49 that:-
“review of the punishment in other cases is of little assistance as each case really depends upon the court’s assessment of the relevant facts.”
The Full Court in DAA & DAI made similar comments at paragraph 94.
Finn J in LGM & CAM (Contempt) (No 2) (2008) FLC 93-355 at paragraphs 144 and 145 opined:-
145.The decision as to whether a term of imprisonment is an appropriate punishment for the contravention of an order made under the Act where the contravention has been found (as it was in this case) to involve a flagrant challenge to the authority of the court, and then the further decision as to the appropriate length of the term of imprisonment are, in my view, particularly difficult decisions on which minds are likely to vary greatly. This is because, given the relatively few cases that have arisen over the life of the Act and the fact (recognised by the Chief Justice and Warnick J) that each case turns much on its own facts, no sentencing guidelines have been developed (unlike in the criminal law area).
145.Furthermore, such cases are complicated, to say the least, by the fact that the person in the position of prosecutor (who can, and did in this case, make submissions on penalty) is not an independent public authority, but rather the other party to a failed marriage, or similar relationship, whose motives may well go beyond issues of principle such as the upholding of the dignity of courts and court orders. The discretion in relation to penalty for the contravention of court orders must therefore be exercised with great care.
Whilst I am mindful of the Full Court’s endorsement of Palmer J’s caveat, I have been asked by counsel for the husband to consider and compare decisions which were set out in the following table:
Authority
Position re purging at sentence
If incarcerated for how long and did the Defendant have the care of children?
Hay & Hay [1998] FamCA 95
n/a
Full Court overturned 6 months imprisonment: no deliberate intention to breach, no significant detriment to the wife
DAI & DAA [2005] FamCA 88
No
18 months. Unknown if children involved
Ibbotson and Wincen (1994) FLC 92-496
n/a
12 months. The husband had retained a child overseas in breach of an order of the court
Williams and Williams (1003) FLC 92-339
Unknown re money count
Full Court: Ellis, Baker and Purvis JJ overturned 8 week sentence. Children involved.
Fauna Holdings Pty Ltd & McGillivray & Ors & Mitchell [2000] FamCA 313
No
Full Court: three months, children involved
Tate & Tate [2002] FamCA 356
Unknown re money count
Full Court overturned 12 months
PDM & JEM [2006] FamCA 1182
No
Full Court upheld undefined term. No children involved.
Rutherford & the Marshall of The Family Court of Australia [1999] FamCA 1299
No
Full Court upheld 3 months term. No children involved
LGM & CAM
No
Full Court upheld 6 months. Children involved
I apprehend the purpose of the table is to demonstrate that cases where parties have been sent to imprisonment are cases where a party has not been coerced into purging their contempt. There is also reference in the table as to whether or not children are involved or not. The final entry on the husband’s table says of LGM & CAM “children involved” is a reference to a case (see LGM & CAM discussed below) where a mother went to prison for six months notwithstanding the fact that she had sole parenting responsibilities for a disabled child.
Rutherford and the Marshal of the Family Court of Australia (1999) FLC 92-866 (per Lindenmayer, Finn and Holden JJ)
Counsel for the husband opened his submissions by referring to Rutherford’s case. Counsel for the husband submitted that because Mr Rutherford told the Court that he had gambled away $400,000 Mr Rutherford received a sentence of three month imprisonment. Counsel for the husband asserted that because the husband in this case had paid the principle of $1,506,000 back, this case must be considered to be in the low to middle range of seriousness in respect of contempt. Counsel for the husband sought to compare the three months imprisonment that Mr Rutherford received with Counsel’s application that the husband be released unconditionally or on a bond to be of good behaviour.
I note, however, that the contempt charge in Rutherford was heard after the result of the final property settlement was known. By the time that Chisholm J dealt with the husband for contempt, he knew that the payment back of the money by the husband was not of any consequence so far as the wife was concerned. Even when the $400,000 was notionally added back into the husband’s assets the husband was not required under s.79 of the Family Law Act to pay any further monies back to the wife. It was of no real relevance in Rutherford whether purging had taken place, the husband was sentenced based upon the seriousness of the contempt.
Harris v Harris [2002] 1 All ER185
Counsel for the husband quoted Harris’ case as authority for the proposition that once Mr Harris has purged his contempt he was released from gaol forthwith. That submission suffers from the fact that Mr Harris had already spent a reasonable part of the fixed term that he was ordered to spend in gaol and had on two previous occasions made applications to be released which were unsuccessful. This was not a case where purging could be said to have led to a situation where there was an unconditional release of the full sentence Mr Harris received.
LGM & CAM [2005] Fam CA 417 (per Cohen J) confirmed in LGM & CAM (Contempt) (No 2) (2008) FLC 93,355 (per Bryant CJ, Finn & Warwick JJ)
In that case the wife was convicted of a contempt involving about $300,000 and then a second contempt (treated by the trial judge as a second offence) involving an amount of $144,000. The wife had a disabled child and the trial judge commented that the sentence would have been longer, apart from this fact and what the trial judge referred to as some partial purging by her. The wife was sentenced for four months in relation to the first count and four months in relation to the second count. Two months of each sentence were to be served concurrently. The overall effect was a six month period of imprisonment for the wife.
DAA & DAI (2005) FLC 93-215 (per Kay, Holden & Boland JJ)
The husband moved $180,000 to Switzerland. This represented almost the entire net proceeds of the sale of the matrimonial home in the sum of $233,000. The trial judge made a coercive order of 18 months imprisonment but allowed the husband to apply for a reduction in the sentence in the event that the monies came back from Switzerland. Before the Full Court the husband argued that 18 months was excessive and that 12 months would have been more in line with authorities. The Full Court rejected that proposition.
Other decisions not mentioned in the husband’s list of comparable decisions are:
M [2005] FCWA 51 (Penny J) confirmed in PDM & JEM (2006) FLC 93-291 (per Kay, Holden & Boland JJ)
In this case the husband’s borrowing significantly reduced the asset pool. The trial judge found that the husband had failed to provide an address for service and in relation to that non compliance the husband was sentenced to three months imprisonment. The husband had also entered into a loan agreement using property as security when restrained from disposing of it or encumbering it. As a coercive order to attempt to recover the funds he was sentenced to an indefinite period to be released upon a further order being made by the court. In the end the husband did not pay the money back and stayed in gaol for two years before being released.
S & S (Unreported, 22 July 1996) (per Fogarty, Baker & Rowlands)
This was a matter dealt with under s.112AD FLA. The husband against orders sold a property for approximately $200,000 which counsel for the husband informed the trial judge had been lost by the time of the hearing. The husband was given a number of opportunities to purge his contempt but the court was finally told that the husband was not in a position to purge his contempt. The court found that only a sentence of imprisonment was adequate. The husband was sentenced to six months imprisonment for the sale of the property and two months imprisonment for two other breaches, with those sentences to be served concurrently. The Full Court dismissed an appeal against that sentence.
N & N (Unreported 7 May 1993) (Coleman J)
This case is referred to in the Full Court’s decision of DAA & DAI at paragraph 92. It was a case dealt with under s.112AD FLA. Coleman J, the trial judge, imposed a custodial sentence of nine months for a husband who breached an order to pay the wife $26,000. At the time the consent orders were made the husband had $82,000 but had spent the majority of that sum paying for services provided by a massage parlour.
The trial judge found the husband to be a man of good character, that what he had done was completely out of character and that he had no criminal record. The trial judge noted in mitigation that the husband had pleaded guilty to the charge and “did not put up a sham or spurious defence in excuse for his actions”. His Honour indicated that but for this consideration he would have sentenced him to 12 months instead of 9 months.
Effect upon the husband’s children
Counsel for the husband submitted that I should take into account as “circumstances which are highly exceptional” the fact that the husband’s two youngest children, David born in September 1996 (aged 11) and Marc born in January 1999 (aged 9) spend time with him each alternative weekend from Thursdays upon conclusion of school until the following Monday morning at the commencement of school and each alternate Wednesday from the conclusion of school until 8pm, along with half the school holidays. The children also spend time with their father on Father’s Day and each of their birthdays and the husband’s birthday. Otherwise the orders provide that the children live with their mother. Under the orders the wife has been given sole responsibility for making decisions in relation to the children concerning education and health (see Orders made by Cronin J on 21 December 2007 (Exhibit NN tab 1)).
Counsel for the husband submitted that the fact that the children will not be able to see their father in a normal way if he is in prison (and may need to go to a correctional facility if they aren’t seeing him at all whilst he is in prison) is a circumstance which is highly exceptional as that expression is used in Regina v Edwards (1998) NSWSC 1000.
As the Court of Appeal in that case however makes clear:-
“There is nothing unusual about a situation in which the sentencing of an offender to a term of imprisonment would impose hardship upon some other person….it may be taken that sending a person to prison will more often than not cause hardship, sometimes serious hardship, and sometimes extreme hardship, to another person. It requires no imagination to understand why this is so. Sentencing judges and magistrates are routinely obliged, in the course of their duties, to sentence offenders who may be breadwinners of families, carers, paid or unpaid, of the disabled, parents of children, protectors of persons who are weak or vulnerable, employers upon whom workers depend for their livelihood, and many others, in a variety of circumstances [sic] bound to result in hardship to third parties if such an offender is sentenced to a term of full time imprisonment.…..The real difficulty about a case such as the present, and many other cases in which imprisonment of an offender causes hardship to a third party, is to identify a ground upon which they can properly and relevantly be regarded as exceptional; regrettably causing hardship to third parties by imprisonment of an offender is only too common.”
The Court of Appeal in Regina v Edwards and subsequent authorities adopt the comments made by Wells J in Reg v Worth (1976) 14 SACR 291 at 295-296. There his Honour expressed the test as:-
‘Hardship likely to be caused by a sentence of imprisonment under consideration ought to be taken into account where the circumstances are highly exceptional, where it would be, in effect, inhuman to refuse to do so.” (His Honour gave as an example a circumstance where it had been demonstrated to the satisfaction of the court that to send a man to prison would, without much doubt, drive his wife to suicide)
Whilst the position of the respondent’s children are a mitigating factor, their circumstances are not, in my view, highly exceptional. As mentioned elsewhere, in LGM & CAM (Contempt) (No 2) (2008) FLC 93-355 the wife was sentenced to six months imprisonment despite having the sole responsibility for the day to day care of a disabled child of the parties.
The husband submits that he is very concerned as to the effect on his children if he goes to gaol. The children will be with their mother but Counsel for the husband submits that the children will either not see him at all or see him “behind bars” at a gaol.
BREACH 1 - is the husband aiding and abetting B Ltd to transfer monies
I consider a contempt involving the transfer of $1,506,000 in the circumstances of this case as a serious offence.
I have concluded that the husband knew what he was doing when he committed the contempt.
I am unsure as to whether or not the husband knew the consequences to himself of what he proposed to do. He was legally represented at all times and sought legal advice, although I have been given no information as to what that advice was. His cavalier disregard of court orders indicates that he had, at least, reckless disregard for the consequences in a way which leads to the impression that he thought the court would not do anything about the breach.
Breach of an interim order vs final order
Counsel for the husband on more than one occasion during submissions seemed to draw a distinction between breach of an interim order and breach of a final order seemingly on the basis that a breach of an interim order was to be treated less seriously. In ASIC v Michalik 52 ACSR115, Palmer J said at paragraph 31:
“It makes no difference, in my view, that the injunctions disobeyed were interlocutory, not final. Every injunction is to be treated with equal seriousness. It is not for any party to the court’s process to decide for himself or herself which injunctions must be obeyed and which may be ignored, which are important, and which are not so important.”
Consideration of alternatives to imprisonment
In considering alternatives, whilst having regard to all matters discussed, I consider the more weighty matters to be:-
166.1.The seriousness of the offence;
166.2.The extent to which the husband has now purged his contempt;
166.3.The husband’s health.
Unconditional release
Counsel for the husband said that the husband would be deterred from further contraventions because:-
167.1.He has a conviction against his name by a judge sitting in a Federal Court;
167.2.He has to pay the costs of the proceedings to the wife on an indemnity basis.
Counsel for the husband asked the court to accept that it would be inconceivable that the husband would offend again after what he had been through. The behaviour of the husband as otherwise described in these reasons does not allow me to conclude that it would be inconceivable for the husband to offend again. Notwithstanding the mitigating factors in this case, an unconditional release is not warranted.
Fine
I find that a fine did not satisfy the requirements of providing a general deterrence or specific deterrence to a husband who has substantial wealth and has the ability to move and control that wealth and call upon the person to whom he has moved that wealth for substantial financial assistance. A man in the husband’s situation can simply gamble on a wife not prosecuting an action and at the worst if she did, can at the final hour, purge his contempt by getting the money back on the basis that he would then simply face a fine. If that behaviour was not discouraged then persons of significant wealth would simply, as a commercial tactic, commit contempt of orders without risking anything more than some financial penalty if that person lost the gamble.
A further recognisance
It is submitted that the husband has complied with his bond on two occasions and therefore I should be confident that placing him on a recognisance to be of good behaviour and to not further breach orders would be an adequate sanction. Even if it were found it might be said that a recognisance might act as a specific deterrent to the husband re-offending I am less than convinced that a recognisance would act as a general deterrent and given the seriousness of the offence, I do not consider a recognisance to be an adequate sentence.
Punishment on terms
The Full Court in Rutherfordv Marshal of the Family Court of Australia (1999) FLC 92-866 said that the trial judge was not in error in holding the Community Service Orders Act 1979 (NSW) was not available in contempt matters.
In any event, the administrative arrangements between the Commonwealth and the State of New South Wales are such that I do not have available to me the sentencing options of periodic detention or home detention.
Imposing a punishment on such terms is therefore not an option for me.
Suspended sentence
I could impose a suspended sentence, stopping short of immediate full time custody.
Waller LJ in Harris v Harris [2002] 1 All ER185 at page 191 pointed out that (in the context of there being a two year limit in the UK on imprisonment for contempt) there is little difference between an order for unconditional release, similar to that sought by the husband in this case, and a suspended sentence. As Waller LJ points out:-
If a person on a suspended sentence commits a further breach of orders, the court will in assessing the sentence, take account of the fact that by his previous promises of good behaviour he was released….the court is likely to start from the position that he should at least serve that unserved part plus some further period of the contempts committed in breach of those promises….the court which had to deal with any further breaches of the order (presuming those breaches occurred in the period of suspension) would have to give effect to (the previous order). It would then impose a further sentence for the further contempt again…. I am not sure that I see any real difference between the two exercises. The exercise which a court would have to do if (the condemnor) were to break the promises he has given not to breach the orders in the future will in practical terms be the same whether the remainder of his prison sentence is suspended or whether he is unconditionally released with the warning of the consequences which will follow if he commits further contempts.
The question is whether or not the imposition of a suspended sentence in this case is a sufficient demonstration for the purposes of general deterrence so that others are very conscious that they cannot knowingly breach court orders. I find that a suspended sentence, in the circumstances of this case, would be an insufficient penalty given the serious nature of the offence.
Imprisonment
Whilst I have regard to the comparable decisions referred to above, the result in this case depends upon an assessment of its own facts.
The sentence imposed in this matter must have regard to the seriousness of the offence and the punishment that is required to deter the husband and others of like mind from similar disobedience of the orders of the Court.
As Coleman J said in N & N one reason for imprisonment is to leave the husband and others in no doubt that the orders of the Court are to be obeyed and that those who choose not to will suffer the consequences.
In addition, the sentence should be sufficient to express the Court’s denunciation of the contempt.
Imprisonment is, of course, a last option but in the circumstances of this case, given the amount of money involved in the offence, a sentence of imprisonment is called for.
BREACH 2
All the comments that I have made in relation to the first breach apply to the second breach.
The charges against the husband that have been found beyond reasonable doubt are based on a common substratum of facts. The second breach involves an amount of $107,000. Had it not been for the second breach the first breach would have involved an amount which was $107,000 less. The fact that the husband has been convicted of a breach in relation to aiding and abetting in the payment of $1,506,000 in important ways incorporates into it the offence that constituted the second breach.
Should the sentences be served concurrently or partially concurrently?
Counsel for the wife concedes that an order should be made that the sentences of imprisonment should be partly served concurrently rather than cumulatively.
Counsel for the wife argues that some of the sentences however should not be served cumulatively and argues that while the encumbering of the shares in B Ltd occurred in the course of the transaction by which B Ltd lent the money to the husband, nevertheless two different orders were breached with two different (albeit related) purposes and two different histories.
It is submitted by the wife that the order made by Cohen J restraining the encumbering by the husband of his shares in B Ltd (save presently for irrelevant exceptions) arose as a consequence of the husband’s threat to sell or encumber his shares in B Ltd.
By contrast, the orders restraining B Ltd from lending any further monies arose as I found in my Judgement of 15 April 2008, from circumstances where, contrary to assurances from its solicitors, B Ltd lent T Pty Ltd $30 million (see my earlier Judgment of 15 April 2008 at paragraphs 20 – 22).
Accordingly, the wife submits that it would not be an inappropriate exercise of sentencing discretion to make the custodial sentences wholly concurrently and they should have at least in part a cumulative element.
I do not accept the argument that because the orders breached came from two different histories and had two different purposes, that the orders for imprisonment should, in part, not be concurrent.
The term of imprisonment for the second breach can be served concurrently with the term for the first breach.
Conclusion about term of imprisonment
Count 1 – the first breach calls for the imposition of a penalty of imprisonment of four months.
Count 2 – The second breach calls for the imposition of a penalty of imprisonment of two months.
Reduction if the husband lodges security for the wife’s indemnity costs
In the event that the husband does pay or cause to be paid to the solicitors for the wife the amount of $133,000, then the orders will be structured so that he can seek that the date that he would otherwise conclude his period in prison (as specified in my orders) be reduced by a period of one month.
No order against the company
Count 3 – As already mentioned, s.112AP(5) provides that where a corporation is in contempt, the court may punish the contempt by sequestration or fine or both.
Given the purposes of the original orders that have been breached is to protect the wife’s position, I accept that neither a fine nor sequestration of the company is appropriate. In making that decision I take into account the costs order that has been consented to, the fact that the husband controls the company and that he is being personally punished. For those reasons, I accept the request by the wife not to punish the company under s.112AP(5) FLA.
I certify that the preceding one hundred and ninety-five (195) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts
Associate:
Date: 21 May 2008
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
Legal Concepts
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Costs
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Sentencing
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Penalty
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Remedies
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Res Judicata