Medlow & Medlow

[2017] FamCAFC 159

FAMILY COURT OF AUSTRALIA

MEDLOW & MEDLOW [2017] FamCAFC 159

FAMILY LAW – APPEAL – Contempt – Appeal against dismissal of contempt application – Deliberate breaches of asset-preservation orders and injunctions alleged – Approach to prima facie case considered – Ambiguity – Obligation to construe the orders – Need to construe orders does not foreclose contempt – Where the orders contain typographical errors – An order which requires determination of a fact by a court is not self-executing – Denial of procedural fairness – Test for flagrant challenge to the authority of the court discussed – Admission of evidence in contempt proceedings – Appeal allowed – Contempt application remitted for rehearing.

FAMILY LAW – APPEAL – APPLICATION IN AN APPEAL – Application to adduce further evidence – Where the appeal is allowed and it is not necessary to consider application – Application in an Appeal dismissed.

FAMILY LAW – APPEAL – COSTS – Where the appellant has been wholly successful – Respondent to pay costs.

Family Law Act 1975 (Cth) ss 112AP(1)(b), 117
Family Law Rules 2004 (Cth) r 21.02

Abduramanoski v Abduramanoska (2005) FLC 93-215
Athens and Anor v Randwick City Council (2005) 64 NSWLR 58
Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483
Cluny & Skinner [2017] FamCA 255
Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375
Ganem & Ganem [2013] FamCA 256
Iberian Trust Ltd v Founders Trust and Investment Co Ltd [1932] 2 KB 87
Ibbotson and Wincen (1994) FLC 92-496
Kioa v West (1985) 159 CLR 550
Kirkpatrick v Kotis (2004) 62 NSWLR 567
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
May v O’Sullivan (1955) 92 CLR 654
National Companies and Securities Commission v The News Corporation Ltd (1984) 156 CLR 296
Redwing Ltd v Redwing Forest Products Ltd (1947) 177 LT 387
Universal Music Australia Pty Ltd v Sharman Networks Ltd (2006) 150 FCR 110

APPELLANT: Ms Medlow

RESPONDENT: Mr Medlow

FILE NUMBER: SYC 7742 of 2010

APPEAL NUMBER: EA 96 of 2016

DATE DELIVERED: 15 August 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Thackray, Ainslie-Wallace & Ryan JJ

HEARING DATE: 19 June 2017

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 26 May 2016

LOWER COURT MNC: [2016] FamCA 411

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr McHugh SC with Ms Bathurst

SOLICITOR FOR THE APPELLANT: Barkus Doolan

COUNSEL FOR THE RESPONDENT: Mr Sansom SC

SOLICITOR FOR THE RESPONDENT: Watts McCray

Orders

1. The appeal be allowed.

2. Order 1 made by the Honourable Justice Rees on 26 May 2016 be set aside.

3. The Application in an Appeal filed on 5 June 2017 be dismissed.

4. The proceedings be remitted for rehearing by a judge of the Family Court of Australia other than the Honourable Justice Rees.

5. The respondent pay the appellant’s costs of and incidental to the appeal as agreed or assessed within 28 days of agreement or assessment whichever applies.

6. Pursuant to r 19.50 of the Family Law Rules 2004 (Cth) it is certified that it was reasonable for the appellant and the respondent to engage senior counsel on the appeal.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Medlow & Medlow has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 96 of 2016
File Number: SYC 7742 of 2010

Ms Medlow

Appellant

And

Me Medlow

Respondent

REASONS FOR JUDGMENT

Introduction

1. By Amended Notice of Appeal filed on 24 November 2016, Ms Medlow (“the wife”) appeals against the dismissal of an application for contempt she brought against her former husband, Mr Medlow (“the husband”). The wife’s contempt application was filed on 29 September 2015 pursuant to s 112AP(1)(b) of the Family Law Act 1975 (Cth) (“the Act”). In essence, the wife asserts five instances of contempt of asset preservation orders made in the context of proceedings for the settlement of property and other financial orders. It is alleged that on four occasions the husband paid sums in breach of orders and by the fifth count that he dealt with property contrary to orders.

2. At [30] of her reasons, the primary judge identified the five charges against the husband as follows:

   1. That on 8 October 2014 he paid the sum of $59,932.40 to American Express in deliberate breach of the injunction made on 11 September 2014.

   2. That on 11 December 2014 he paid the sum of $65,669.50 to American Express in deliberate breach of the injunction made on 11 September 2014.

   3. That on 24 November 2014 he paid the sum of $53,017.55 to Harris & Company in deliberate breach of the injunction made on 11 September 2014.

   4. That on 16 April 2014 he paid the sum of $16,678.24 to Harris & Company in deliberate breach of the injunction made on 11 September 2014.

   5. That on 23 February 2011 he encumbered and or charged and or dealt with an interest in real property in deliberate breach of the injunction made on 14 January 2011.

3. The reference in count four to 16 April 2014 should be to 16 April 2015.  It is accepted that nothing turns on the error. 

4. The husband denied being in contempt and on 26 May 2016 Rees J determined that in relation to each count the wife failed to establish a prima facie case.   

5. Seven grounds of appeal were advanced (ground 8 was withdrawn) and in broad terms they challenge the approach taken to the construction of the orders, raise questions of procedural fairness and the test to be applied to a “flagrant challenge” contempt.  As we will shortly explain the appeal must succeed.  On a proper construction of the orders the obligations and restrictions imposed were clear and unambiguous.  The primary judge erred in finding they were not and, as to the fifth count, applied the wrong test for a “flagrant challenge” to the authority of the court.    

The need to construe the orders does not foreclose contempt

1. Consistent with May v O’Sullivan (1955) 92 CLR 654 the primary judge considered whether the evidence established that, in relation to each count, the husband could be convicted. In order to answer that question her Honour relied on Iberian Trust Ltd v Founders Trust and Investment Co Ltd [1932] 2 KB 87 as support for the proposition that “if the court is to punish anyone for not carrying out its order the order must in unambiguous terms direct what is to be done”. Unless this is done a respondent:

   … cannot be committed for contempt on the ground that upon one of two possible constructions of an undertaking being given he has broken his undertaking.  For the purpose of relief of this character … the undertaking must be clear and the breach must be clear beyond all question.

   (Per Jenkins J in Redwing Ltd v Redwing Forest Products Ltd (1947) 177 LT 387 cited at [26] of the reasons).

2. By ground 1 it is argued that although the primary judge was correct to consider whether the terms of the orders were clear and unambiguous, the authorities which postdate those that were applied establish that potential ambiguity is not necessarily a bar to contempt proceedings.  Her Honour proceeded on the basis it was. 

3. Ground 2 challenges the interpretation of the terms attaching to a stay order that we will recite later.

4. The proposition advanced by the wife in support of ground 1 is unarguably correct since the law in Australia is as identified in Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 per Barwick CJ at 492:

   The appellant submitted that unless the language of the undertaking was unambiguous and certain, it should not be enforced by contempt proceedings: and sought support for the submission in Redwing Ltd. v Redwing Forest Products Ltd. and Iberian Trust Ltd. v Founders Trust and Investment Co.  In my opinion, these authorities do not support this conclusion.  If the order or undertaking is so expressed as to be meaningless, there is of course nothing which can be enforced.  But, if it bears a meaning which the Court is satisfied is one which ought fairly to have been in the contemplation of the person to whom the order was directed or who gave the undertaking as a possible meaning, the fact that that meaning results from a process of construction and involves a choice of possible meanings does not, in my opinion, preclude the Court from enforcing the order or undertaking in the sense which the Court assigns to it.  If the Court is satisfied that the party said to be in contempt bona fide believed himself bound only by a construction which the Court thinks to be erroneous, it may for that reason, in its discretion, refuse to make an order or, if it makes an order, refuse to make an order for costs against that party.  But, even in such a case, the enforcement of the plaintiff’s rights must not be left out of account.  A party who has bona fide acted on an erroneous view of an order or undertaking may, according to the circumstances, none the less be justly adjudged guilty of contempt in procedure.  In my opinion, this is equally so where, because of its terms or circumstances, the order or undertaking requires construction in order to determine its meaning and remove ambiguities patent or latent.

   (Footnotes omitted)

5. The same point was made by the Full Court of the Federal Court of Australia in Universal Music Australia Pty Ltd v Sharman Networks Ltd (2006) 150 FCR 110 per Branson J at [38] (Lindgren J substantially agreeing and Finkelstein J agreeing):

   Assuming the above contention to raise an issue as to the proper construction of order 4, the authorities discussed above reveal that an injunction is not rendered invalid, or incapable of founding a charge of contempt, merely because it leaves a respondent with room to wonder whether future conduct falls within it. At least where the true construction of the order is one which ought fairly to have been in the contemplation of the person to whom the order was directed … the Court which entertains the charge of contempt will be required to determine that construction. Of course, it may be highly relevant to the question of punishment that a respondent failed to comply with the order because he, she or it placed a construction on the order that was not its true construction.

6. As to this point see also Ganem & Ganem [2013] FamCA 256 per Aldridge J and Cluny & Skinner [2017] FamCA 255 per Kent J.

7. The first four counts of contempt relate to orders of 11 September 2014 (“the September orders”).  However, orders of 18 July 2014 (“the July orders”) must also be considered as they provide important context for the interpretation of the September orders. 

8. Relevantly, the July orders provide:

   (1)Orders and notations are made in terms of paragraphs 2, 4, 5 & 6 of the Application in a Case filed by the husband on 30 June 2014, as follows:

   2.         The court NOTES:

   2.1That on 10 June 2014 the property situated at and known as [B Street, Suburb C] was sold for the amount of $37,000,000, with settlement of the sale of this property expected to occur on 9 September 2014.

   2.2That the Husband intends to procure from [Medlow Pty Ltd] and/or nominee of the directors of [Medlow Pty Ltd] a loan in the amount of $1,250,000, on the basis of interest being charged at a rate of 7.5% per annum ("the loan");

   2.3That the loan is proposed on the basis of the principal plus interest being discharged from the proceeds of the sale of the property situated at and known as [B Street, Suburb C]; upon settlement;

   2.4That the loan is intended to be applied in the manner and for the purposes provided for in the Orders made by Justice Loughnan dated 8 April 2014, pending settlement of the sale of the [B Street, Suburb C] property.

   4That the Husband and Wife shall do all acts and things and sign all documents to ensure that the sum of $1,250,000 from the loan is paid into the trust account of Watts McCray Lawyers and such funds shall be invested in a controlled monies investment account for that purpose until applied in accordance with these Orders ("The Trust Monies").

   5Unless otherwise agreed in writing by the Husband and Wife, the Trust monies shall be applied in accordance with paragraph 5 of the Orders dated 8 April 2014.

   6That upon settlement of the sale of [the B Street, Suburb C property], on or about 9 September 2014, the proceeds of the sale of the [B Street, Suburb C] property be paid and/or applied in the following manner and priority:

   6.1The amount required to discharge the loan secured by the second mortgage referred to in order 3 herein provided to the Husband by [Medlow Pty Ltd] and/or nominee of the directors of [Medlow Pty Ltd];

   6.2All costs and expenses of the sale including legal costs and disbursements for the conveyance, agents' commission, and valuers' fees;

   6.3The amounts required to pay all municipal and water rates outstanding with respect to the property;

   6.4Per Paragraphs 5 and 6 of the Orders dated 8 April 2014, in the further amount of $1,650,000, which further sum is intended to represent the balance of the moneys required and anticipated in those orders dated 8 April 2014;

   6.5With the balance (of an amount of not less than $15,500,000) to be held in an interest bearing account in the names of the parties, in compliance with paragraph 1(c) of the Orders made in the Supreme Court proceedings being Case Number 2011/18119 between [Medlow Pty Ltd] and [D Pty Ltd], such funds not to be disbursed except by further Order of the court.

   (2)Notwithstanding the above orders the husband and wife shall do all things and sign all documents necessary to authorise a payment from the funds the sum of $173,188.39 to the trust account of the solicitors for the wife by way of interim costs.

   (Our emphasis)

9. By reference to the notations, it can be seen that contracts for the sale of a property jointly owned by the parties had been exchanged and settlement was scheduled for September 2014.  The orders made on 8 April 2014 established a trust fund in the amount of $2.9 million (“the trust monies”) to meet specified expenses and such “other amounts as are agreed to in writing between the Husband and the Wife” (Order 5.5).   The $1.25 million and $1.65 million sums mentioned in the July orders establish the source of the $2.9 million trust fund.  Thus the orders reflect how the sale proceeds would be dealt with and had the effect that the trust monies were to be distributed in a most circumscribed manner. 

10. As it transpired the loan anticipated by notation 2.2 of the July orders did not eventuate and to create the $2.9 million fund the orders were varied by the September orders as follows:

    (1)Pending further order, orders are made in terms of the orders sought at paragraphs 4, 5 and 6 of the Application in a Case filed 21 August 2014 as follows:

    4.That upon settlement of the sale of [the B Street, Suburb C property], and in addition to paragraph (1) 6 of the Orders dated 18 July 2014 but particularly (1) 6.4 of those Orders, the further amount of $1,250,000 be received by the Husband, such that the amount the Husband is to receive in total pursuant to those orders and these Orders is the amount of $2,900,000.

    5.That the Husband be at liberty to apply the funds to be received in accordance with paragraph 4 herein, and paragraph (1) 6.4 of the Orders dated 18 July 2014, and that for the purposes of this Order, paragraph 5.5 of the Orders dated 8 April 2014 be and is hereby varied to read as follows:

    “5.5 Such other purposes, at the Husband’s discretion.”

    6.That the Husband shall by no later than 4.00 pm on the last Friday in each calendar month, ensure that documentary evidence as to the application of the funds to be received pursuant to the Orders dated 18 July 2014, be provided to the Wife.

    (2)Unless they otherwise agree in writing the parties are to forthwith do all things and sign all documents to cause the following payments to the wife from the net proceeds of sale of the property at [B Street, Suburb C]:

    (a)$150,000 by way of interim property settlement; and

    (b)$168,000 by way of interim spousal maintenance for the accommodation of the wife in Australia.

    (3)Pending the determination of the wife’s application for leave to appeal and if leave is granted, the appeal in the Notice of Appeal EA 106/2014 filed 12 August 2014, the operation of order 1(5) herein is stayed.

    (4)Pending the determination of the wife’s application for leave to appeal and if leave is granted, the appeal in the Notice of Appeal filed 12 August 2014, the operation of order 1.6.4 of the orders made on 18 July 2014 as otherwise amended by order 1 herein, is stayed to the effect that payments from the $2,900,000 fund established thereby shall, unless the parties otherwise agree in writing, only be paid out as follows:

    (a)Forthwith to:

    (i)[P Business Advisers]  $26,175.35

    (ii)The payees identified in the table    $82,529.73

    “Lawyers Accounts Outstanding”

    in annexure I to the affidavit of

    the husband filed

    3 September 2014

    (iii)The payees identified in the table    $1,040,110.00

    “Criminal Legal Fees” in

    that annexure

    (iv)The payees in accordance with        $278,954.90

    the table “[Ms Medlow] Maintenance”

    in that annexure, save for the last

    item in the table.

    (b)As and when they fall due:

    (i)under the orders of 16 March 2011 or otherwise to the payees in accordance with the table in that annexure “[Mr Medlow and Mr E and F] General Accounts” at $42,260.18 per month; and

    (ii)pursuant to the orders of 16 March 2011 to the wife for her maintenance at $81,000 per quarter but in the event that the husband is in default for 48 hours of his obligation to pay $81,000 each quarter to the wife, then forthwith on the first such default from the date of these orders, the balance of the 12 months maintenance owing from the date of this order, will fall due and will be forthwith paid to the wife by the husband.

    (c)For legal fees for the husband’s criminal proceedings on invoice, on the due date, provided that the husband shall provide the wife with a copy of the applicable invoice as soon as practicable and in any event at least 14 days before the due date.

    (5)The stays granted by these orders are conditional on the wife prosecuting her application for leave to appeal and if relevant her appeal, competently and with expedition.

    (6)The parties are at liberty to otherwise disburse the proceeds of sale of the [Suburb C] property as agreed between them in writing.

    (7)Leave is granted to the parties to apply on giving seven days notice to the Court and each other in relation to these orders.

    (Our emphasis)

11. To the extent that the primary judge sought to construe the September orders, she said:

    48. Order (1) 5. appears on its face to allow the husband to deal with the funds referred to in Order (1) 4. at his discretion. Order 5.5 made 8 April 2014, as it was first made, restrained the husband from applying funds other than “Such other amounts as are agreed to in writing between the Husband and the Wife”. The amendment made on 11 September 2014, to order 5.5 of the orders made on 8 April 2014, varied that restriction and allowed the husband to apply funds for “Such other purposes, at the Husband’s discretion”.

    49.      Order (1) 6. requires the husband to provide monthly reports.

    50. Thus Order (1) appears to allow the husband to apply the funds received in accordance with Order (1) 4. at his discretion, provided he supplies monthly reports to the wife as to the application of the funds.

    51. However, the construction of the Order does not stop there. It is necessary to continue on to Order (3) to see that the operation of Order 1(5) herein is stayed. But there is no Order 1(5). There is an Order (1) 5. Is that the Order which is stayed?

    52. Order (4) then stays the operation of Order 1.6.4 made 18 July 2014. There is no Order 1.6.4 made 18 July 2014 although there is an Order (1) 6.4. Order (4) then restricts the payments which the husband is permitted to make during the currency of the stay to the specific items listed at (4)(a), (b) and (c).

    53. Further ambiguity is created by Order (5) which specifies that the stays referred to in Orders (3) and (4) are conditional upon the wife prosecuting her applications for leave to appeal and her appeal “competently” and “with expedition”. How is the husband to determine whether the wife’s appeal is being competently prosecuted?

    54. I am not satisfied that the order made 11 September 2014 is so clear and unambiguous that its terms are readily understood. 

1. We agree with the submission of senior counsel for the wife that it was incumbent on the primary judge to answer the question she posed at [51] and, having done so, to construe the orders.  The conclusion at [54] as to the lack of clarity in the orders and the effect of that uncertainty was not available nor was the approach adopted to the stay order. 

2. It can be seen that to aid clarity the same numbering convention was adopted in the September orders as was used in the July orders.  The requirement in the July orders that the remaining trust monies be paid as the parties agreed in writing was relaxed in the September orders so that the husband could apply the balance “at [his] discretion” (on the basis that he was required to provide documentary evidence as to the application of the funds). However, this relaxation of the use of the trust monies was stayed pending determination of an application by the wife for leave to appeal (and determination of the appeal) in relation to certain orders so that the trust monies could only be disbursed in accordance with Order 4 of the September orders.  Order 4 made provision for the payment of specified amounts and otherwise as the parties agreed in writing.  The use of the word “only” in Order 4 makes this abundantly clear.    

3. As to Order 5 of the September orders, the primary judge effectively treated the order as if it could be self-executing, which construction was neither pressed by the husband nor raised by her Honour.  There can be no doubt that the order required the determination of a fact by a court before it would operate to discharge the stay.  It was therefore not self-executing.  Before us senior counsel for the husband properly conceded the point.

4. Significant weight was placed by the primary judge on minor typographical errors.  It will be recalled that at this stage her Honour was concerned with whether or not there was a prima facie case of contempt.  The question of construction should have been approached on the basis that the husband was expected to try to understand the orders.  In considering whether a party knows or plainly should know what is required by an order, the court may also have regard to the circumstances in which the order was made or the undertaking was given: Athens and Anor v Randwick City Council (2005) 64 NSWLR 58. Here the orders followed a common numbering convention and were connected in their terms.

5. The typographical errors should have been analysed using the approach adopted by Campbell J in Kirkpatrick v Kotis (2004) 62 NSWLR 567 at [55]:

   This means that there will sometimes be orders which a grammatical analysis would show to contain a syntactic ambiguity, but which are none the less enforceable if it is the type of ambiguity that has no real risk of misleading. There will sometimes be orders which contain a term which has multiple meanings, but where that semantic ambiguity has no real risk of misleading. If there were to be an order addressed to a promoter of musical groups not in any way to be involved in the advertising or promotion of a band under some particular name, the order would be enforceable notwithstanding that a “band” can sometimes be a rubber band, or a headband.

6. A common-sense reading of the orders is that “Order 1(5)” and “Order (1)5” are one and the same and “Order 1.6.4” and “Order (1) 6.4” are also one and the same.  No other interpretation is reasonably available.  There was no argument advanced below that the typographical errors had the potential to mislead the husband about the true effect of the orders.  We are satisfied they would not.

7. It follows that we agree with the construction of the orders advanced at trial by senior counsel who then appeared for the wife and senior counsel who appeared for her on the appeal.

8. Grounds 1 and 2 are made out.

9. Ground 3 was pressed only in the event that the challenge advanced by ground 2 was rejected.  As ground 2 has succeeded, we need not address ground 3 but point out that at least in theory it remained open to the husband to raise a defence of ambiguity and allied issues in relation to penalty.

Procedural fairness

1. By ground 4 it is contended that the primary judge erred in her construction and application of Order 5 of the September orders (the conditions attaching to the stay order) without any contention to that effect having been put by the husband and without her Honour having raised the issue with the wife. 

2. As we have explained, the primary judge proceeded on the basis that Order 5 could be self-executing. Her Honour went on to observe “there was no evidence which could have demonstrated that the stay was operative at the relevant times” [56] in relation to which “absent that evidence, the wife was not in a position to argue that the stay was in operation and therefore that there was a breach” [58]. There were no submissions by the husband that the wife had failed to prove the orders remained stayed or in support of the interpretation of the stay order revealed in the judgment. The procedural fairness point is that natural justice required the judge to raise this issue with the wife’s counsel.

3. As to the nature of a fair trial, in National Companies and Securities Commission v The News Corporation Ltd (1984) 156 CLR 296 at 312, Gibbs CJ explained that:

   The authorities show that natural justice does not require the inflexible application of a fixed body of rules; it requires fairness in all the circumstances, which include the nature of the jurisdiction or power exercised and the statutory provisions governing its exercise.

4. It is a fundamental principle of justice that a person is entitled to know the case against him or her and is to be given the opportunity of replying to it (Kioa v West (1985) 159 CLR 550 at 582 per Mason J). In this case, the wife was denied that opportunity. We accept that like the trial judge in Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 per Heydon, Crennan and Bell JJ at [75] “… perhaps the criticism in the judgment did not occur to the trial judge until after the plaintiff had left the box, or until after the hearing had concluded and before the judge’s reserve judgment was given”. If this is the situation that arose here the remedy was for the primary judge to either invite submissions on the point or disregard it.

5. Ground 4 is made out.

Misconstruction of the Supreme Court orders

1. The remaining grounds concern the fifth count and the husband’s consent to the entry of orders in the Supreme Court on 23 February 2011.  The wife was not a party to the Supreme Court proceedings which constituted a dispute between Medlow Pty Ltd and the husband on the one hand and parties related to a Mr G on the other hand.  As the orders entered in the Supreme Court reveal, the husband had been charged with serious criminal offences concerning Mr G.  The Supreme Court orders achieved a stay of the civil proceedings, relevantly by the Mr G parties against the husband, pending determination of the charges laid against the husband.  By the fifth count it is alleged that the husband’s consent to the Supreme Court orders was a deliberate breach of injunctions made against him on 14 January 2011.

2. Relevantly, the Supreme Court orders of 23 February 2011 provide:

   1.That these proceedings be stayed until the final hearing and determination at first instance of the [criminal charges] brought against [Mr Medlow] in relation to [Mr G] or further order on the following conditions:

   (a)that until further Order, [Mr Medlow] must not remove from Australia or in any way dispose of, deal with, or diminish the value of any of his assets in Australia (“[Mr Medlow]’s  Australian Assets”) up to the unencumbered value of AUD$15,500,000 (“the Relevant Amount”), provided that if the unencumbered value of all [Mr Medlow]’s Australian Assets exceeds the Relevant Amount, [Mr Medlow] may remove any of those assets from Australia or dispose of, or deal with them, diminish their value, so long as the total unencumbered value of [Mr Medlow]’s Australian Assets still exceeds the Relevant Amount;

   (b)that within 7 days from the date of this Order, [Mr Medlow] executes a Guarantee in the form attached to these Short Minutes of Order and provide the original of such Guarantee to the solicitors for [named person];

   (c)for the purposes of this Order:

   (i)[Mr Medlow]’s Australian Assets include all assets in which [Mr Medlow] has a vested ownership interest whether or not in the name of [Mr Medlow] and whether they are solely or co-owned (but excludes any asset of a trust where [Mr Medlow] is the discretionary object of that trust);

   (ii)The value [Mr Medlow] has in an asset, is the unencumbered value of the interest [Mr Medlow] has individually in the asset; and

   (iii)Unencumbered value means value free of mortgages, charges, liens or other encumbrances.

   (d)That [Mr Medlow] draws these Orders and the claims made in these Proceedings against the Plaintiff and [Mr Medlow], to the attention of the Family Court of Australia in the course of any application for orders (whether by consent or otherwise) affecting property of any kind in proceedings in that Court between him and his wife …

3. As to the injunction made in the proceedings between the husband and wife, by Order 1.11 of 14 January 2011 the husband was restrained as follows:

   1.That pending further Order, the husband both personally, by his attorneys, as a director of any of the Companies, in his capacity as a shareholder in any of the companies and/or in his capacity as an appointor of any of the Trusts is restrained (save for the purpose of giving effect to these Orders) from:

   …

   1.11 unless otherwise agreed in writing by husband and wife further encumbering, charging, selling, dealing with or transferring any interest in any real property including rights as a mortgagee, whether such real property be owned by the husband personally, or by any of the companies or trusts; …

4. In answer to the wife’s charge that the Supreme Court orders constituted the husband “dealing with” an interest in “real property”, the primary judge said:

   63.The terms of the order to which the husband consented, specifically, that he not remove from Australia, dispose of, deal with or diminish the value of assets to the value of $15.5 million, do not constitute the giving of any security over those assets. Nor is any potential judgment creditor given any charge or priority over the wife in respect of any claim she may make in respect of those assets.

   64. Whilst the husband’s consenting to the Supreme Court orders constitutes a “dealing” with property, giving the word its ordinary meaning, it is not a dealing which is inconsistent with the terms or intent of the orders made in the Family Court of Australia on 14 January 2011.

   65.In those circumstances, the husband’s dealing with property could not be regarded as a flagrant challenge to the authority of the Court.

5. On this basis, the primary judge found that the wife failed to establish a prima facie case and, as we mentioned at the outset, the application was dismissed.

6. By ground 5 it is contended that her Honour erred in finding that the husband’s entry into the Supreme Court orders did not constitute a dealing which is inconsistent with the terms or intent of Order 1.11 of 14 January 2011 and failed to give adequate reasons for determining that was so.  Ground 7 was argued in conjunction with ground 5 and contended that the primary judge erred by misconstruing the effect of the Supreme Court orders and her conclusions as to the effect thereof were wrong.

7. We agree with the submission of senior counsel for the wife that the clear purpose and intent of Order 1.11 of 14 January 2011 was to preserve a fund that would be readily accessible to meet the wife’s entitlements to a property settlement as determined by the Family Court.  Yet, only five weeks later in the Supreme Court the husband, as the primary judge found, dealt with the property.  It would seem that in coming to the view that this dealing was not inconsistent with the “terms or intent of the orders” the primary judge overlooked the impact that dealing had on the wife and the property available for distribution in the Family Court proceedings.  In this respect, there was evidence in the wife’s case that the only property interest of the husband that could satisfy his obligations under the Supreme Court orders (vested ownership interest) was his share of the sale proceeds.  Furthermore it will be recalled that the July orders, which give effect to the Supreme Court orders, sequestered at least $15.5 million in favour of the Supreme Court parties.  We also agree with the proposition that the Supreme Court orders prima facie postponed the wife’s entitlement to a settlement of property in relation to that sum until the Supreme Court proceedings were finalised.

8. Her Honour did not explain how she came to the view that the Supreme Court orders were not “inconsistent with the terms or intent” of Order 1.11.  In this respect, the challenge as to the adequacy of her Honour’s reasons is made good.

9. It follows that grounds 5 and 7 are established.

A flagrant challenge?

1. The challenge raised by ground 6 is that the primary judge erred by determining that the husband’s entry into the Supreme Court orders could not be regarded as a flagrant challenge to the authority of the court.

2. The primary judge’s reasons dealt with this point at [64] and [65] which have already been set out.  The use of the opening words in [65] “in those circumstances” reveals that the construction given to the words “flagrant challenge” seems to be whether the action taken in the Supreme Court was inconsistent with the purpose and intent of Order 1.11.  We have already found that her Honour’s approach to that issue was erroneous.  So too is the apparent construction given to the term “flagrant challenge”.

3. As the Full Court observed in Ibbotson and Wincen (1994) FLC 92-496 at 81,162:

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

   In the ultimate, it is a question of fact and degree whether the stringent terms of [s 112AP(1)(b)] are satisfied. 

4. In short, the primary judge was required to consider whether at a prima facie level the following evidence inter alia was sufficient to establish the “exceptional or striking nature” of the contravention in question:

   ·   Order 1.11 was made prohibiting particular steps by the husband,

   ·   Five weeks later, with legal advice and representation and with knowledge of the order,

   ·   So as to gain a material advantage,

   ·   The husband intentionally entered into orders in relation to a transaction involving at least $15.5 million.

5. The submission by senior counsel for the wife that cases such as Abduramanoski v Abduramanoska (2005) FLC 93-215 would suggest that the apparent breach of the order was of an “exceptional or striking nature” would seem to have merit, but this is not an issue we are required to determine.

6. This challenge has been made out.

Other matters

1. Ground 8 challenged the unexplained rejection of the tender by the wife at trial (as part of her case for contempt) of an affidavit by the husband sworn 1 April 2016. In the event, the wife was content to prosecute the appeal on the grounds already discussed and ground 8 was withdrawn. We therefore propose to say nothing other than to observe that we respectfully disagree if her Honour considered r 21.02 of the Family Law Rules 2004 (Cth) prevented the receipt of the affidavit, since that rule deals with the circumstances in which an application for contempt is to be commenced and does not prevent the receipt of further evidence in chief at trial: see Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375.

Conclusion and costs

1. The appeal will be allowed.  Thus, it is not necessary to consider the wife’s application to adduce further evidence in the appeal, and it will be dismissed.  The order under appeal will be set aside and the proceedings remitted for rehearing by a judge other than the primary judge.

2. In the event the appeal succeeded, the wife sought an order for costs against the husband, which he opposed.

3. Section 117 of the Act is the governing provision concerning costs. By s 117(1) each party to proceedings under the Act shall bear his or her own costs unless, in accordance with s 117(2) and the related provisions, the court is satisfied that there are circumstances that justify an order for costs. As the amounts of money referred to in our reasons would suggest, the parties are wealthy. The husband has been wholly unsuccessful in the appeal proceedings which, in this case, justifies an order for costs against him. If, as was suggested but not established, he is unable to access sufficient funds to immediately meet an order for costs that issue can be dealt with in the context of enforcement.

I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray, Ainslie-Wallace & Ryan JJ) delivered on 15 August 2017.

Associate:

Date:  15 August 2017