Mason & Mason (No 2)
[2023] FedCFamC1F 72
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Mason & Mason (No 2) [2023] FedCFamC1F 72
File number: SYC 6981 of 2021 Judgment of: BRASCH J Date of judgment: 20 February 2023 Catchwords: FAMILY LAW – CONTEMPT – Where three charges prosecuted by wife – Where prima facie case not established on two of the three charges – Where one charge proceeded to further hearing – Where husband encumbered a property in contravention of an order – Where Division 7A loan obligations were due – Where husband borrowed money and secured property to have funds available to meet that joint obligation - Whether a flagrant challenge to the authority of the Court – Where husband’s acts were in the general run of contraventions - Where charge of Contempt not made out beyond reasonable doubt – Where charge dismissed
FAMILY LAW - COSTS – Orders made for written submissions on costs – Where parties agree costs be determined on those submissions in Chambers
Legislation: Family Law Act1975 (Cth) ss, 112AA, 112AB, 112AD, 112AP(1)(b)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 11.71, 11.71(7), 11.71(7)(b)(i) 11.71(7)(b)(ii), 12.13(3)(b)
Cases cited: Bande and Cade (2011) 45 Fam LR 376; [2011] FamCAFC 93
DAI & DAA (2005) FLC 93-215; [2005] FamCA 88
Ganem & Ganem (No.2) [2013] FamCA 257
Ibbotson and Wincen (1994) FLC 92 – 496; [1994] FamCA 103
Kendling&Kendling (2008) FLC 93-384; [2008] FamCAFC 154
LGM & CAM (2006) FLC 93-267; [2006] FamCA 435
LGM v CAM (Contempt) (No 2) (2008) FLC 93-355; [2008] FamCAFC 1
Mason & Mason [2023] FedCFamC1F 18
Division: Division 1 First Instance Number of paragraphs: 69 Date of hearing: 14 February 2023 Place: Sydney Counsel for the Applicant: Mr Dura Solicitor for the Applicant: Barkus Doolan Winning Counsel for the Respondent: Mr North SC Solicitor for the Respondent: Lander & Rogers ORDERS
SYC 6981 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MASON
Applicant
AND: MR MASON
Respondent
order made by:
BRASCH J
DATE OF ORDER:
20 FEBRUARY 2023
THE COURT ORDERS THAT:
1.Charge Two, as contained within the Amended Application - Contempt filed 25 November 2022, be dismissed.
2.Any party wishing to agitate for costs do so by filing and serving written submissions within 28 days of the date of this order.
3.The other party is to file and serve written submissions in reply 28 days after the service of any written submissions provided for in Order 2 above.
4.The need to file an Application in a Proceeding with respect to costs is dispensed with.
5.The parties are agreed the issue of costs be determined in Chambers.
THE COURT NOTES THAT:
A.In the event either party files written submissions, the parties are to email a copy to chambers (via …@…) copied to the other parties.
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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
BRASCH J:
On 25 November 2022, the wife filed an Amended Application – Contempt, which contained three Charges. It was the wife’s case that the husband had contravened orders under the Act and it involved a flagrant challenge to the authority of the Court; see s 112AP(1)(b) of the Family Law Act1975 (“the Act”).
On 20 January 2023, I heard the wife’s Amended Application - Contempt and dismissed two of the three Charges (Charge One and Three) for not establishing a prima facie case. I refer to my reasons in that regard; Mason & Mason [2023] FedCFamC1F 18 (“the prima facie Reasons”). A date was then found for the further hearing on Charge Two. That hearing came before me on 14 February 2023.
These are my ex tempore reasons. I have, corrected the transcript for grammatical errors and to make my spoken works more amenable to reading.
Background
The scant information I had about the parties’ backgrounds is contained within the prima facie Reasons. I will not repeat that again here, save to observe the parties are involved in agricultural and financial enterprises.
Legal Principles
The following is taken from the prima facie Reasons at [2]:
The “order under the Act” was an interim order made by consent on 14 October 2021. The Consent Order reveals both parties were represented by expert family law firms along with Senior Counsel for the wife, and Queens Counsel for the husband (as it was at that time). The Order also reveals the parties were with their respective Counsel. The firms that represented the parties on the making of the 14 October 2021 Order remain on the record.
The prima facie Reasons set out ss 112AP, 112AA and 112AB of the Act. I will not repeat those extracts again, suffice to say the parties were in agreement that the Order of 14 October 2021 was an order to which s 112AP applied.
I extract the following from the prima facie Reasons at [14]-[15]:
14.Section 112AP has been called a complete and self-contained code; see DAI & DAA (2005) FLC 93-215 at 79,582:
47. In Rutherford v Marshal of the Family Court of Australia [1999] FamCA 1299; (1999) FLC 92-866 at 86,241, the Full Court described s 122AP, then Part of Division 3 of Part XIIIA after the 1988 amendments, “a complete code for dealing with contempts of the Court”. The Full Court affirmed the decision in Schwarzkopff (supra), noting that contempt under the Act does not constitute “an offence against any laws of the Commonwealth”. The Court accepted a submission that s 112AP, as it then was, constituted a self contained code, and general sentencing legislation, whether State or Federal, had no application
15.It was common ground that the following principles apply, which were usefully summarised by Aldridge J in Ganem & Ganem (No.2) [2013] FamCA 257 (approved by the Full Court in Oakley & Millar [2019] FamCAFC 12):
10.Contempt pursuant to section 112AP is a criminal proceeding and accordingly each element of each charge must be proven beyond reasonable doubt. (In the Marriage of Tate [2002] FamCA 356; (2002) 29 Fam LR 195; (2002) FLC 93-107)
11.Contempt under section 112AP has four elements each of which must be proven beyond a reasonable doubt. The first three involve the acts and intentions of the respondent. The fourth is a finding to be made by the trial judge. These four elements are:
•The respondent knew the terms of the orders. (LGM & CAM [2006] FamCA 435; (2006) FLC 93-267 at 80, 536)
•The respondent deliberately did an act. The act must be wilful and deliberate as opposed to accidental or inadvertent. (In the Marriage of English (1986) FLC 91- 729 at 75, 294)
•The act must be intentional. This is not to say that the respondent must intend that the act was in breach of the order, which would make the respondent’s actions contumacious, but the respondent must have intend to do the act which is alleged to be the contempt. In the Marriage of English, above.
•The act must involve a flagrant challenge to the authority of the court. In Bande and Cade [2011] FamCAFC 93; 45 FamLR 376 at 39 the Full Court said:
The concept of a “flagrant challenge” involves conduct of an exceptional, striking or repeated nature. In Ibbotson and Wincen [1994] FamCA 103; (1965) 18 Fam LR 164; (1994) FLC 92 – 496 the Full Court held (at Fam LR 175; FLR 81, 162): “the use of the term “flagrant challenge” ... is intended to underline the exceptional or striking nature of the contravention in question and thus to differentiate it from what might be described as a general run of breaches which are intended to be dealt with under section 112AD ... it is a question of fact and degree whether the stringent terms of the section are satisfied ...
With respect to the first of the dot points above, I will not repeat what I said in the prima facie Reasons about LGM & CAM (2006) FLC 93-267, the successful challenge in the High Court of Australia and the remitter to a differently constituted Full Court which is reported as LGM v CAM (Contempt) (No 2) (2008) FLC 93-355.
Procedure
It must be borne in mind, as both parties agreed in January 2023, that the onus is on the applicant wife to prove beyond reasonable doubt each contempt as alleged. As said in the prima facie Reasons at [19(c)]:
As recently said by the Full Court in Zamir & Zamir [2022] FedCFamC1A 193 at [35], “The husband (as it also was there) had to prove nothing. The wife has to prove his contempt beyond reasonable doubt ...”;
The procedure required r 11.71 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) was followed for the hearing in January 2023 up to r 11.71(7). I dismissed the Application-Contravention with respect to Charges One and Three.
Thus, with respect to the further hearing of Charge Two, the rules relevantly provide:
11.71 Contempt applications
…
(7) After hearing evidence in support of the allegation, the court may:
(a) if the court decides there is no prima facie case—dismiss the application; or
(b) if the court decides there is a prima facie case:
(i) invite the person to state the person’s defence to the allegation; and
(ii) after hearing any defence, determine the charge.
Note:If a maintenance order is complied with before an Application—Contempt is heard by the court, the failure to comply with the order that led to the Application—Contempt being filed does not constitute a contempt of court (see subsection 112AP(1A) of the Family Law Act).
(8) If the court finds the charge proved, the court may make an order for the punishment of the person.
Note:Part XIIIB of the Family Law Act sets out the punishment the court may impose on a person found to be in contempt of court.
The parties asked that I determine the Charge (r 11.71(7)(b)(ii)), and then they would make written submissions on sentence (if relevant), and costs. I acceded to that approach.
Material
I have already listed the material upon which the wife relied in the prime face Reasons.
Pursuant to r 11.71(7)(b)(i), I invited the husband to state his defence to the allegation that was Charge Two. Mr North of Senior Counsel handed up an affidavit of the father. I gave Mr Dura time to read it prior to cross-examination taking place. Objections were determined at the time of hearing.
Six exhibits came before me over the two separate days of hearings.
The hearing of Charge Two
Charge Two is as follows:
On 28 June 2022 the respondent [Mr Mason] obtained a loan in the sum of $500,000 being NAB […] Loan account number […54], and provided the property known as '[F Property]' at [G Street, H Region], as security for the loan, in deliberate breach of the injunction contained in Order 3.1 of the Orders made on 14 October 2021.
I repeat this from the prima facie Reasons at [45]:
Page 138 of the wife’s annexures, shows the NAB Facility limit of $500,000; page 140 shows the property known as [F Property] was used as security for the facility; and, page 143 shows the date of 28 June being when the husband signed his acceptance of the bank’s offer of finance. ...
Order 3.1 provided:
3. Until further order and save as otherwise provided herein, each party be and hereby is restrained by themselves, their servants and agents from causing, permitting or abiding:
3.1.Any encumbrance or further encumbrance, or any increase in any liability secured by any existing encumbrance, upon any real property registered in the names of the parties or either of them or any proprietary limited company of which they or either of them are directors or shareholders, including but not limited to the real property located at [L Street, Suburb D] (“[Suburb D] property”), [F Property] and [K Region] properties and [M Street, Suburb N] ("[Suburb N] property") including by increasing the balance presently owed on any facility secured thereby unless otherwise provided for in these orders; and
(Emphasis added)
The gist of the husband’s affidavit was to:
(a)put the husband’s knowledge of the order in issue;
(b)set out the steps he took to ensure funds were available to meet the parties’ Division 7A loan repayments, which were due by 30 June 2022; and
(c)set out the stressors he considered he was under, financially, by his health (much of which was successfully objected to and I will not regard) and from the wife to ensure the Division 7A repayments were made, along with the financial consequences that would flow to the parties (as he and the wife made clear) if the repayments were not made thereby triggering a deemed dividend.
In summarising the husband’s position, I have not lost sight of the wife’s case, which I have already referred to in the prima facie Reasons, or that it is for her to establish the Charge beyond reasonable doubt. Those prima facie Reasons ought be read in conjunction with these Reasons.
The father was cross-examined and then his case was closed. I refer to his evidence as relevant, in the discussion below. I take the same approach to the wife’s evidence, the parties’ oral submissions and Mr North of Senior Counsel’s written submissions (Exhibit 6).
Discussion
The respondent knew the terms of the orders
In his affidavit, the father put into issue whether he knew the terms of the orders. He deposed to a stressful day with lots of drafts being circulated. He felt flustered and under pressure. He also raised that his Kings Counsel was in Melbourne, his solicitor appeared electronically from elsewhere, and he was on the farm. If any or all of those were sufficient to demonstrate a party did not know the terms of the orders, then most orders would be rendered futile. That said, it is for the wife to prove beyond reasonable doubt that the husband knew the terms of the orders.
In cross-examination it was put to the father that when he signed the loan agreement on 28 June 2022, he knew the orders were in place. He replied: he did not consider them; gave them no thought; and, they had “gone out of my mind because of duress”. Whilst the onus is on the wife to establish the husband knew the terms of the orders (and I deal with that below), I observe that if “forgetting” an order was sufficient, then orders would again be rendered meaningless.
I am satisfied beyond reasonable doubt that the father knew the terms of Order 3 and 3.1. The wife has discharged the onus and on the relevant standard. I reach that conclusion on the accumulation of the following matters agreed to by the husband in cross-examination:
(a)He had received the wife’s 28 September 2021 application for orders prior to the hearing on 14 October 2021;
(b)He filed a response also seeking interlocutory orders and some in the form of restraints;
(c)He knew what an injunction was;
(d)He sought orders restraining the wife’s ability to encumber matrimonial assets;
(e)On the day of the hearing, being 14 October 2021, various drafts of proposed consent orders were circulated;
(f)The orders ultimately addressed the husband’s various concerns to regulate and protect the assets;
(g)The orders placed restrictions on what he could do financially;
(h)The orders contained mutual restraints on dealing with real property;
(i)The order included the F Property;
(j)He understood the concept of ‘encumber’ and that a loan was an encumbrance; and
(k)After the orders were made he conducted his affairs pursuant to the orders until June 2022.
I was also told by counsel for the wife that the husband signed the consent order, without demur. I accept that to be so and add that to the list of matters which comfortably persuade me beyond reasonable doubt that the husband knew of the orders.
The respondent deliberately did an act
There was no suggestion that the husband’s acts were accidental or inadvertent. He sought the loan, he offered up the property and he signed the loan acceptance.
There is no doubt whatsoever that the husband deliberately obtained a loan in the sum of $500,000 being NAB Loan account number …54, and provided the property known as ‘F Property’ at G Street, H Region, as security for the loan. The wife alleged it was so, and the husband conceded that. Indeed, the documents attached to the wife’s affidavit speak for themselves.
I am therefore satisfied beyond reasonable doubt that the husband deliberately obtained the loan secured against ‘F Property’, which was the subject of a restraint in order 3.1 of the 14 October 2021 Order.
The act must be intentional
For the same reasons given under the previous sub-heading, it is beyond a reasonable doubt that the husband intended to do the acts, which constituted the contravention of the order. I am satisfied beyond reasonable doubt.
The act must involve a flagrant challenge to the authority of the Court.
Boiled down, this matter’s essence is whether the husband’s contravention of the order was a flagrant challenge to the authority of the Court.
Both parties laboured a very similar chronology but from different perspectives. The wife used the chronology to demonstrate that: the husband encumbering ‘F Property’ property contrary to orders; withholding that information from the wife; not making an application to vary the order; not disclosing the loan documents until 14 and 21 July 2022; and, continuing to draw on the loan, all constituted a flagrant challenge to the authority of the Court.
The husband used the chronology to challenge that very notion of flagrancy, and proof beyond a reasonable doubt.
In March 2022, the parties began discussing tax planning and tax arrangements for their enterprise, including the need to service the Division 7A loans by 30 June 2022. The wife is a finance professional and performed, amongst other things, the journal entries for the inter-entity loans.
In June 2022, the husband entered into a contract to sell some produce (Husbands affidavit filed 14 February 2023, paragraph 29), but proceeds would not be paid until July 2022.
On 3 June 2022, at least on the evidence before me, the husband was first advised of the quantum involved in servicing the parties Division 7A obligations. In that letter from the wife’s solicitors she advised:
We otherwise are instructed that in terms of the [Mason Group] Tax Position for FYE2021, our client confirmed with [Ms P] yesterday that Scenario 2 was her preferred option as it delivered the least tax for the [Mason Group] for FYE2021. Please confirm that this will be the agreed tax position without delay, as our client is increasingly concerned that your client is not engaging in good faith in terms of the progression of such matters. An urgent agreement also needs to be reached as to the minimum loan repayments required and source of funds to meet those loans. We are instructed that this is the position:
1) [Mason Partnership] pay [Q Company] $716,987.97.
2) [Q Company] pay [C Pty Ltd] $434,195.04.
3) [Mason Partnership] pay [C Pty Ltd] $99,660.62
Until this matter is resolved, our client does not accept that your client can proceed without careful tax planning, and without consultation with our client, as it is only going to compromise the parties economically. Please ensure the above is attended tot without delay so that the parties have a clear pathway as to the tax that is payable and can make appropriate provision to meet tax ongoing.
In the event your client takes steps that has the effect of depleting the pool by virtue of ineffective tax planning, our client will hold your client responsible for such loss. It is not her preference, as she is focused on attending mediation, but these unilateral steps concern her greatly.
(Husband’s affidavit filed 14 February 2023, p.13)
On 7 June 2022, the husband advised the wife via her solicitors:
With regards to payment of tax for the [Mason Group] for FY21, we note that our client agrees with Scenario 2 and has confirmed same […]. Payments as set out in your letter are due and payable by 8 June 2022.
To keep the farm afloat, our client has had no option but to transfer funds from his personal [E Bank] account (enclosed herein) to meet the necessary expenses of the farm. To suggest that our client is not considering tax planning ignores the immediate costs that arise in the day-to-day operation of the farm. You will note in the Farm Cashflow Budget for FY22 (enclosed herein), that some expenses must be met from savings.
(Wife’s affidavit filed 28 October 2022, p.31)
On the same date of 7 June 2022, the husband secured a product contract but the payment would not be made until July 2022 (Husband’s affidavit filed 14 February 2023, paragraph 27).
On a date unknown, the husband was advised that should the Division 7A loans not be met, the deemed dividend would be in the vicinity of $1.2 million (Husband’s affidavit filed 14 February 2023, paragraph 33).
On or about 9 June 2022, the husband commenced the process of applying for funds from NAB (Wife’s affidavit filed 28 October 2022, p.111). He did not tell the wife.
On 9 June 2022, the husband received $429,358.03 from the sale of produce. He transferred these funds to the farm account on 23 and 24 June 2022. He did not tell the wife he held the funds in his personal account for this short period of time. It remained the husband’s concern that the wife might access those funds, as she had done when she removed $475,000 from a joint account to an account of her own in 2021 (see Order 5 of the 14 October 2021 Orders).
On 16 June 2022, the wife proposed:
In order to meet the minimum loan repayments of [Mason Partnership] to [Q Company] our client proposes:
1)She will apply her FYE21 Distribution from the [Q Company] of $173,390 to meet in part the Minimum Loan Repayments of the [Mason Group];
2) The balance which is about $543,598 is to then be sourced from funds controlled by your client – namely:
a. [R Finance]; and
b.the [produce] Proceeds of which our client owns half the proceeds as a partner or [Mason Partnership] and has incurred half the debt drawn down on the Farm LOC# […] to plant the crop.
(Wife’s affidavit filed 28 October 2022, p.38)
On 23 June 2022, the wife emailed the husband
READ the proposal letter we sent to your lawyers and agree please I know what I am doing after 30 years it would seem not many understand it all especially you included.
Ask [Mr S] if I helped him and or look
at what we built together if you don’t or can’t acknowledge my incredible contribution to our wealth building as an in-house [finance professional].
Sadly nothing is good enough for you so at least stop wasting my time and our money and do what is required per court orders and per my proposal which is very well thought out!
...
I don’t make idyll threats! My lawyers are instructed to start proceedings in court on 29/6/22 should [produce] funds not be deposited per my proposal in time for me to make the inter/entity loan repayments by 30/6/22.
The tax consequences of not doing so are deemed dividends.Ask [Ms P] to calculate the tax consequences for the [Mason Group] entities.
We would have to sell [K Region] to fund the tax as it would have resulted from farm [product] funds not deposited by you per court orders.
We have the [product] funds but you won’t have deposited them on time! Not my problem nor will I wear the cost of the consequences from bad planning and even worse contempt of court orders yet again by you!
(Husband’s affidavit filed 14 February 2023, p.127)
On 23 June 2022, the NAB started a submission for the husband’s application for finance (Wife’s affidavit filed 28 October 2022, p.113). Again, he did not advise the wife of this.
On 24 June 2022, the husband advised the wife by his solicitor’s letter that:
We refer to your email received this morning at 9.29am and are instructed as follows with regards to the minimum repayments of the Division 7A Loans.
Our client acknowledges that your client will contribute the sum of $173,000.
The proceeds for sale of sorghum to date is $429,358.03. That amount has been transferred to the [Mason Partnership] Farm account. Our client anticipates those funds will clear in the account by Monday, 27 June. Of those funds, our client will contribute the sum of $400,000 to the Division 7A loan repayments, with the balance of funds to be retained for operating expenses.
Our client will contribute the balance of $214,000 to meet the required repayments.
(Wife’s affidavit filed 28 October 2022, p.41)
On 24 June 2022, the husband received the loan offer from NAB, which was to be secured against the P Property. He did not tell the wife, then, nor any time prior to 30 June 2022. Perhaps he should have, but a failure to disclose is not pleaded as a Charge or particular of Charge Two. Rather, the wife said this non-disclosure went to flagrancy.
On the same date, 24 June 2022, the husband emailed the wife explaining the contracts, pay dates and why he could only process so much product; see Husband’s affidavit filed 14 February 2023, p.131. The wife responded by email:
All your moves are tricky and dishonest you no longer know what the truth is and havent for a very long time it would seem.
You will pay a very high price for your lies and deception of not just me there is now a very long list you are accountable to.
I no longer believe a word you say.
…
If you are withholding farm funds you are in direct violation of the court orders.
Read them very carefully.
You are also in breach of our partnership terms as you are acting outside the normal course of business if you are withholding funds and will be bought to account in a court of law!
Stop being tricky and a bodgy [Mason] Brother and deposit required funds and meet the requests of my proposal.
You will receive only one more letter from
my lawyer today after which if you don’t comply court proceedings will commence.
…
(Husband’s affidavit filed 14 February 2023, p.130)
On 28 June 2022, the wife’s solicitors also wrote:
We made a sensible proposal to address all tax issues for FY 2022 on 16 June 2022. To date your client has not addressed the entirety of the proposal. If it is not accepted there is a real risk that the Division 7A loans will not be paid and from a tax perspective all parties worse off. Your client needs to undo the [Mason Bros] Transactions to avoid adverse tax consequences and respond to our proposal in terms of the farm issues moving forward.
We require a response to our proposal 16 June 2022 (in full) today.
Our client requires the balance of the $215,000 to be paid into the account today, noting the [produce] payment has hit the account. Our client will use her UPE. Our client needs to ensure her equity is maintained and not further diluted.
As to the [produce] funds, we are instructed to raise with you a very serious contempt by your client. It has come to our client’s attention that your client instructed [T Company] to pay the funds to his personal bank account. See attached copy of the Invoice. He also had the invoice sent to his personal email as opposed to the farm account (a clear breach of Order 2.5).
Our client reserves her right to bring contempt proceedings, as our client views your client’s conduct as a flagrant disregard to the court orders.
(Wife’s affidavit filed 28 October 2022, p.43)
On the same date, 28 June 2022, the wife emailed the husband asking about the difference in produce sale proceeds actually received, as opposed to her calculations. The husband emailed, explaining it was GST. He also asked if she, the wife, wanted $400,000 transferred to a specific account (Husband’s affidavit filed 14 February 2023, p.137-138). The wife replied:
You have run out of chances you know what you have to do and have not done it nor agreed to my proposal after numerous requests.
My patience and tolerance for your lies and deceit has run out. You have committed fraud against me your partner in the [Mason Partnership] and that is a criminal offence.
You will be receiving a letter via my lawyer. From now on this all has to stop and I am stopping it now.
I won’t be in business with a fraudulent partner. There is no point and there is absolutely no benefit to me in continuing this any furthur.
[Ms Mason]
(Husband’s affidavit filed 14 February 2023, p.135-136)
Two further emails were exchanged then at 2.21 pm the husband sent to the wife:
$400,000 has gone into [Mason Partnership] account. I am waiting for $214,000 to come through, I will have access to these funds and will transfer them to [Mason Partnership] account tomorrow. Save your money on legal fees. I have you breaking court ruling on preventing me from carrying on the normal practice of farm operations. Where are your cash funds?????
(Husband’s affidavit filed 14 February 2023, p.134)
The wife replied at 3.10 pm:
Where have you stopped normal operations on the farm you were borrowing more than you could repay and the debts were in my name as a partner abd I had not agreed to the debts nor were you allowed to encumber further per court orders and yet you did.
You will be receiving a letter from my lawyers and it and proposal of 16 June 22 needs to be agreed to by COB today.
Agree to the proposal by COB in full no haggling lotherwise I am done the courts can take over instead because you are a complete lier and fraudster !
Only a judge can deal with you it seems and the consequences will be whatever they are.
No doubt [Ms B] is egging you on she enjoys court so much going back multiple times to court?
Maybe she is the one who is benefitting here have you considered that as a master manipulator you are being played as well at your own game ?
It’s not a game I play
[Ms Mason]
(As per original)
(Husband’s affidavit filed 14 February 2023, p.133-134)
At 4.55 pm the husband wrote:
Just focus on the Div7 loan transfers please.
[Mr Mason]
(Husband’s affidavit filed 14 February 2023, p.133)
The email chain ends with the wife’s reply at 5.00 pm:
The entire proposal needs to be addressed!
(Husband’s affidavit filed 14 February 2023, p.133)
On 28 June 2022, the husband signed the loan offer, which secured P Property contrary to the orders. Mr North SC submitted that the husband had avoided dire financial consequences being visited upon both parties should the Division 7A loan obligations not be met and a dividend be deemed in default.
Again, the husband did not advise the wife of this at the time. A failure to disclose is not pleaded as a Charge or a particular within this Charge. Again though, it is said to go to the flagrancy.
The loan was disclosed in a bundle of documents on 14 July 2022 and the subject of correspondence from the husband on 21 July 2022.
The wife complains that in August and September 2022, the husband continued to draw on the NAB loan despite her protestations to the contrary. The wife said this further demonstrated flagrancy.
The husband proposed to exclude the NAB loan from the parties’ balance sheet and assume that debt personally and indemnify the wife. The husband’s proposal is not one I take into account; it will be a matter for the trial judge to consider this transaction. However, I do not accept that a contravention can simply be ignored, defended or excused by excluding the impugned liability from the balance sheet. I again accept, as I did in the prima facie reasons, the wife's submissions that the lack of adverse consequence for the wife was not the test by which flagrancy is viewed. As I did in the prime facie reasons, I again refer to Kendling&Kendling (2008) FLC 93-384 at [194].
Flagrancy
A flagrant challenge to the court’s authority is conduct that is exceptional, striking or of a repeated nature. The requirements of s 112AP are described as stringent. Contempt under s 112AP is not for the general run of breaches, which ought be considered under s 112AD of the Act (Ganem, supra; Bande and Cade (2011) 45 Fam LR 376; Ibbotson and Wincen (1994) FLC 92-496).
I accept Mr North of Senior Counsel’s concise submissions about the law with respect to flagrancy (Exhibit 6). Mr Dura (appropriately) took no issue with the recitation. I also refer to my earlier prima facie Reasons with respect to the concept of flagrancy.
I will however highlight that the challenge need not be a challenge directed to the court, but a flagrant challenge to the authority of the court.
Finally, I again observe that it is necessary for the wife to establish beyond reasonable doubt that the husband’s challenge to the authority of the Court was conspicuous, offensive, glaring, notorious or scandalous, that is, a flagrant challenge to the Court’s authority.
Disposition
There is no doubt that the husband contravened order 3.1 of the 14 October 2021 Order. That is established by the wife beyond reasonable doubt. That the husband’s acts were deliberate and intentional are also found beyond reasonable doubt.
The central issue is whether it is beyond reasonable doubt that the husband encumbering a property constitutes a flagrant challenge to the authority of the court. I do not consider there to be anything striking or exceptional in the husband encumbering the property to have the funds available, if needed, to meet the parties’ shared tax obligations.
Both parties were plainly feeling the stresses of meeting the Division 7A payments. The wife was clear she would provide her UPE of $173,390 and the husband was to fund the balance of about $543,598. She was also clear that any losses to the parties if the Division 7A repayments were not made, were losses she would seek to sheet home to him solely.
The husband should have told the wife of his plans to borrow. However, his non-disclosure is not a Charge nor is it pleaded as a particular of Charge Two. Further, I do not consider his lack of disclosure about the borrowing at the time, adds to the flagrancy as the wife contends – it is the wife who must prove beyond reasonable doubt that the contravention of order 3.1 involves a flagrant challenge to the authority of the court. The requirements of s 112AP are stringent.
I also do not consider it realistic to submit that the husband’s failure to apply to the court adds to the flagrancy as the wife contends. Again, what I must consider is whether the contravention of order 3.1 involves a flagrant challenge to the authority of the court. Further, I simply cannot be satisfied (and nor did the wife contend) that had the husband made an Application in a Proceeding to vary the Court orders, and after allowing the wife time to file material in response, that the matter could have been reached prior to 30 June 2022.
In the circumstances, I do not consider that the husband’s contravention of order 3.1 was a flagrant challenge to the authority of the court, as that concept has been explained. The husband’s conduct in securing funds to in the circumstances he did was neither exceptional nor striking. It was not repeated.
Rather, the husband’s contravention falls within the general run of breaches to which s 112AD applies.
Hence, I am not satisfied beyond a reasonable doubt that the contravention was a flagrant challenge to the authority of the court.
Charge Two will be dismissed.
Costs
Mr North SC and Mr Dura agreed that whatever the outcome of the Charge they were content to make written submissions on sentencing (if relevant) and costs.
I will thus make orders for written submissions on costs. No one suggested a timeframe. I will therefore follow the timeframe in the Rules r 12.13(3)(b) which provides for 28 days, albeit dispense with the need for an Application in a Proceeding.
I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice Brasch. Associate:
Dated: 20 February 2023
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