PARRISH & GALLEJO (No.2)
[2018] FCCA 2851
•3 August 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PARRISH & GALLEJO (No.2) | [2018] FCCA 2851 |
| Catchwords: COURTS AND JUDGES – Contempt – punishment and enforcement – punishment – order – nature of punishment – imprisonment. |
| Legislation: Family Law Act 1975 (Cth), ss.112AP, 112AP(4), 112AP(6) |
| Cases cited: Abduramanoski & Abduramanoska (2005) FLC 93-215 Witham v Holloway [1995] 183 CLR 525 |
| Applicant: | MS PARRISH |
| Respondent: | MR GALLEJO |
| File Number: | BRC 7807 of 2011 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 31 July 2018 |
| Date of Last Submission: | 31 July 2018 |
| Delivered at: | Brisbane |
| Delivered on: | 3 August 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Alexander |
| Solicitors for the Applicant: | O’Reilly & Sochacki |
| Counsel for the Respondent: | Mr Neaves |
| Solicitors for the Respondent: | Kl Legal |
ORDERS
UPON THE COURT FINDING that the respondent has, upon his own pleas of guilty, contravened the orders made under the Family Law Act 1975 on 5 April 2013 and on 18 October 2017, in that:
(a)In contravention of order 4(a) of the orders made on 5 April 2013, the respondent paid the sum of $231,807.99 to the mortgage but without the consent of the applicant, withdrew the full amount of the sale proceeds and retained same.
(b)In contravention of order 4(a) of the orders made on 5 April 2013, the respondent without the consent of the applicant, increased the mortgage by systematic withdrawal of funds from the mortgage account.
(c)In contravention of order 4(b) of the orders made on 5 April 2013, the respondent failed to make any of the 48 monthly payments.
(d)In contravention of order 4(b) of the orders made on 5 April 2013, the respondent failed to pay the balance of the mortgage remaining at the expiration of the 48 month period.
(e)In contravention of order 7(c) of the orders made on 18 October 2017, the respondent failed to provide to the applicant financial statements for the Super Fund 1 to 30 June 2017 on 11 November 2017
AND that the contraventions are a flagrant challenge to the authority of the Court.
THE COURT ORDERS THAT:
Pursuant to s.112AP(4) of the Family Law Act 1975, on each of counts 1-2 of the contempt application filed on 19 February 2018 the respondent, MR GALLEJO is sentenced to serve a term of imprisonment for a period of twelve (12) months, to be served concurrently.
Pursuant to s.112AP(4) of the Family Law Act 1975, on each of counts 3-4 of the contempt application filed on 19 February 2018 the respondent, MR GALLEJO is sentenced to serve a term of imprisonment for a period of six (6) months, to be served concurrently.
The terms of imprisonment imposed by orders 1 and 2 hereof are to be served concurrently.
Pursuant to s.112AP(4) of the Family Law Act 1975, on count 5 of the contempt application filed on 19 February 2018 the respondent, MR GALLEJO is fined the sum of $1,000 such sum to be paid within 30 days of today.
To give effect to clause 1 of this order, a Warrant of Commitment issue in the usual form.
The respondent pay the applicant’s costs of and incidental to the application for contempt filed on 19 February 2018 to be assessed on the indemnity basis.
IT IS NOTED that publication of this judgment under the pseudonym Parrish & Gallejo (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRC 7807 of 2011
| MS PARRISH |
Applicant
And
| MR GALLEJO |
Respondent
REASONS FOR JUDGMENT
On 5 April, 2013 consent orders were made for the alteration of property interests between Ms Gallejo, now Parrish, and Mr Gallejo. By this application Ms Parrish alleges that Mr Gallejo is in contempt of those orders in four respects. Further orders were made by a judge of this court on 18 October, 2017. Ms Parrish asserts that Mr Gallejo is guilty of contempt in respect of one of those orders as well.
The present application, therefore, contains five separate allegations of contempt. Mr Gallejo admits the allegations against him. These reasons are about the sanction to be imposed upon Mr Gallejo.
At the time of the 2013 consent orders the parties’ financial arrangements were not straightforward. The husband operated his own business as a (occupation omitted) through a company. The parties also operated a family trust and had their own self-managed superannuation fund. They were the joint owners of their matrimonial home.
Their matrimonial home had a value of nearly $1 million, but was subject to a mortgage to Bank A with a liability of $730,000. The trustee of the parties’ family trust also owned one real property, subject to a mortgage, as well as other real property which was owned jointly by the trustee and the husband as tenants in common in equal shares.
Order 1 of the 2013 consent orders provides:
1. That of the matrimonial pool, excluding superannuation, the wife is to receive:
(i) an unencumbered interest in the matrimonial property valued at $955,000.
(ii) Household furniture and contents valued at $45,000.
The wife was also to retain her interest in the parties’ self-managed superannuation fund which was said to be equal to a 25 per cent interest in real property jointly owned by that fund and the husband.
Order 3 of the orders required the husband to execute a transfer of his interest in the former matrimonial home to the wife, subject to the mortgage with Bank A, should she so require. She retained the sole right to occupy that property following the making of the orders. Order 3 also provided that the husband, “Will hold his interest in the property in trust for the wife pending registration of the transfer of land.”
The first four counts in the contempt application are centred on order 4 of the 2013 consent orders. That paragraph is in the following terms:
4. That to enable the wife to obtain full equity in the former matrimonial home, the existing mortgage of $730,000 with Bank A is to be discharged in the following manner:
(a) a property be sold and the husband’s 50 per cent share of the proceeds applied in reduction of the mortgage.
(b) the husband to make 48 consecutive monthly payments of $10,625 each plus interest with the first payment to be made one month of the date of these orders and consecutively monthly thereafter and, in the event of any shortfall at the expiration of 48 months, the husband shall pay the amount of shortfall to the Bank A.
Counts 1 and 2 of the contempt application relate to order 4(a) of the 2013 consent orders. The husband has entered a plea of guilty to those two counts. I find them proved beyond reasonable doubt.
For the purposes of these proceedings, the husband filed an affidavit on 31 July, 2018. In that affidavit he confirms that he knew that the intent of the orders was that he was obliged to discharge the mortgage over the former matrimonial home in order for it to become an unencumbered asset for the wife by May, 2017.
He explains that the mortgage on that property consisted of three separate lines of credit: one for $370,000; one for $240,000 and one for $150,000. Each of those lines of credit was secured by the mortgage over the property.
Mr Gallejo swears that on or about 29 July 2013, so a little more than three months after the making of the orders, he applied 50 per cent of the proceeds from the sale of the property specified in order 4(a) being the sum of $231,807.99 to the $370,000 line of credit. Thus, he did what order 4(a) required him to do.
However, Mr Gallejo swears:
11. I subsequently made a number of withdrawals from the $370,000 line of credit in breach of order 4(a) of the 2013 orders. The amounts withdrawn were applied to business-related expenses such as wages and the payment of creditors. At no stage did I apply any of the funds for my own personal use or enjoyment.
Order 7 of the 2013 consent orders provides:
7. That the husband shall not, without the consent of the wife, in respect to the former matrimonial home increase the existing mortgage liability with Bank A.
Whilst there seems to have been no express prohibition upon the husband from withdrawing on the line of credit contained within the consent orders, order 7 is apt to circumscribe the husband’s ability to redraw on that line of credit without the consent of the wife. Drawing on the line of credit, it seems to me, would increase the existing mortgage liability with the Bank A.
Mr Gallejo accepts that his actions in redrawing on the line of credit were in breach of order 4(a) of the consent orders and was plainly a breach of the spirit and intent of the orders that the wife should receive that property unencumbered.
He also accepts that order 7 was intended to prevent him from drawing on the line of credit, although that does not form a part of the contempt application.
The effect of the husband’s actions was to withdraw from the line of credit the whole of the amount he paid onto the line of credit in compliance with order 4(a) of the orders. By 6 April, 2014 and perhaps even earlier than that, he had withdrawn all of the amount that he had paid in.
Counts 3 and 4 in the contempt application relate to order 4(b) of the consent orders. The allegations which Mr Gallejo admits and which I find have been proved beyond reasonable doubt, is that he never made any of the 48 monthly payments of $10,626 to the Bank A mortgage to reduce that liability. Further, he admits that he failed to pay the balance of the mortgage remaining at the expiration of the 48 month period as required by order 4(b).
Mr Gallejo swears that when he signed the orders on 3 December 2012, it was his belief that the orders became effective from that date. He says that he transferred the sum of $146,101.09 on 4 December 2012 “towards the mortgage.” He says that on 18 December 2012 he made a payment of $45,000 to further reduce the line of credit. He says he made that payment on the understanding that the agreement that was made on 3 December 2012 was operative even though orders had not been made at that point. His case is that he would place lump sums on the mortgage as funds became available. He considered that by placing additional funds on the mortgage, he could redraw those funds when necessary to continue running his business while still decreasing the mortgage.
Mr Gallejo swears that his business started to have cash flow difficulties from around mid to late January 2013 which became more acute from approximately March 2013. By June 2013 he had fallen behind with his BAS payments and had entered into a repayment agreement with the Australian Taxation Office.
Annexed to Mr Gallejo’s affidavit is a spreadsheet of payments he says he has made towards the mortgage account, as well as the redraws from that account. The spreadsheet demonstrates that from the time the orders were made in April 2013, there were no payments to the Bank A mortgage which met Mr Gallejo’s obligations under order 4(b).
His spreadsheet demonstrates that he did make some payments, usually $350 per week from his operating company’s account, and $1000 per month to cover the interest on the mortgage from the parties’ superannuation funds account. However, those funds were often redrawn to assist Mr Gallejo’s operating company to meet its ongoing expenses.
On 31 May 2017, Ms Parrish filed an application in a case seeking orders requiring Mr Gallejo, amongst other things, to file a financial statement and provide certain documents to her in aid, it seems, of an application, or proposed application, for enforcement of the 2013 consent orders.
In the course of those proceedings on 18 October 2017, a judge of this court made orders which, amongst other things, required Mr Gallejo to provide to Ms Parrish’s solicitors, within 14 days of the orders, copies of the 2017 financial statements for the parties’ self-managed superannuation fund. However, Mr Gallejo agrees that he did not provide those statements.
Ms Parrish’s contempt application is brought pursuant to s.112AP of the Family Law Act 1975 (Cth). That section applies to contempts which
a)are not contraventions of orders of the Court or, alternatively,
b)are contraventions of orders of the Court which demonstrate a flagrant disregard for the authority of the Court.
Mr Gallejo, by his admissions of each of the counts of the contempt application, and his counsel’s submissions, accepts that the contraventions in this case were contraventions of orders of the Court which show a flagrant disregard for the authority of the Court. I approach the application on that basis.
Section 112AP(4) provides that:
Where a natural person is in contempt, the court may punish the contempt by committal to prison or fine or both.
There is also another alternative: the Court may choose to impose no sanction for the contempt if the circumstances of the case suggest that is an appropriate course.
Section 112AP(6) provides that the Court may make an order for punishment on terms, suspension of punishment, or the giving of security for good behaviour.
The general principles that guide the approach to an application for contempt are not in dispute. The authorities reveal that:
a)State and Federal sentencing laws have no application. See Abduramanoski& Abduramanoska (2005) FLC 93-215. Section 112AP of the Act provides the code for dealing with sentencing under the Act. See Myers and Myers 2006 FLC 93-291;
b)Section 112AP affords the sentencing judge a wide discretion which is to be exercised transparently and in light of the individual facts and circumstances of the case (Australian Securities and Investments Commission v Michalik (2004) 52 ACSR 115 cited with approval in Myers (above));
c)“Review of the punishments in other cases is of limited assistance as each case really depends upon the court’s assessment of the relevant facts”, see ASIC v Michalik (above);
d)“This is particularly so where, as in the case of section 112AP of the Act, there is no provision for a maximum term of imprisonment. The difficulty which confronts courts exercising criminal jurisdiction in sentencing for offences for which maximum penalties are provided is thus even greater for courts exercising a sentencing power conferred by section 112AP of the Act.” See Kendling v Kendling(Contempt) (2008) FLC 93-384.
e)“Normally, the purpose of contempt proceedings against a person for breach of such an order is to coerce them to comply with it. However, It [sic] is quite clear that another purpose of bringing proceedings for contempt against a person who has breached a non-monetary order of the court may be that of punishment. The purposes of imposing punishment would appear to reflect the need for individual and general deterrence and retribution for the party’s failure to comply with the order. Retribution is called for because it is essential to the proper working of the court system that court orders are obeyed.” see Kendling (above).
In Australian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 107, the plurality stated that the purpose of proceedings for civil contempt of an injunction was as follows:
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 that the court’s orders will be enforced.
Having regard to the authorities to which I have been directed and the facts of this case, it seems to me that the following matters are relevant:
a)Mr Gallejo’s personal circumstances;
b)the nature and the circumstances of the contempts;
c)the effect of the contempts upon the administration of justice;
d)Mr Gallejo’s culpability;
e)the need to deter Mr Gallejo from repeating the contempts;
f)the need to deter others from acting in similar contemptuous ways;
g)the absence or presence of a prior conviction for contempt; and
h)contrition, if any.
I turn to consider each of these matters. Mr Gallejo is a mature man, 52 years of age, who has worked as a (occupation omitted) since he was 16 years of age. It is suggested that he has been a contributing member of society, working and paying his taxes since departing the education system. It is suggested that he is of good character, and there are a number of character references before me, including one from his present wife. I have taken those references into account, but they are, I think, of limited value.
Mr Gallejo’s businesses have failed. Although it is not clear from the material before me, it seems that he has operated his business through more than one corporate entity. At least one of them is now in liquidation, having been placed into administration some time ago. The company seems to have been his most recent operating company.
Mr Gallejo gives evidence that in or about late 2016, and for the first half of 2017, four of his company’s debtors who, combined, owed more than $1.8 million to his company failed and those sums are unrecoverable. As a consequence he placed his company into voluntary administration and in December 2017 the company entered into a deed of company arrangement. I recently appointed receivers and managers to that company, and it has since been placed into liquidation.
Mr Gallejo has not placed any further evidence of his financial circumstances before me.
Mr Gallejo has remarried. He and his wife have now purchased a home for themselves. Ms Parrish asserts that part of the purchase price for that property can be traced into the amounts that ought to have been paid to her. Mr Gallejo denies the suggestion. I am not satisfied, on the evidence before me, of Ms Parrish’s allegations about that.
I have set out the circumstances in respect of each of the counts above. In respect of those concerning non-compliance with the 2013 orders, Mr Gallejo swears, and I accept, that from 18 December 2012, he made payments to reduce the line of credit that was security against the former matrimonial home. He placed lump sums on the mortgage as funds became available in the course of his business. He considered that by placing additional funds in the mortgage, he could withdraw funds when necessary to continue running his business while still decreasing the mortgage.
Whilst he says that he now appreciates that this approach was misguided, it is plain that, to the extent that his redraws on the mortgage facility increased the liability on the Bank A mortgage, which it would inevitably have done, he was acting in breach of the orders. Any intention on his part to repay the funds and to put his breaches right is really not to the point.
Mr Gallejo swears, and I accept, that from the time that the 2013 consent orders were finalised, he has made weekly interest payments of $1000 on the mortgage over the former matrimonial home. He has in the past tried to “negotiate a solution” with Ms Parrish, but those attempts have proved fruitless. That is not surprising. The applicant’s entitlements under the consent orders are clear.
Mr Gallejo also points out that pursuant to another provision of the 2013 consent orders, he was required to pay spousal maintenance to Ms Parrish in the sum of $1250 per week for 12 months. See order 19 of the 2013 orders. There is no contest that he made each of those payments to Ms Parrish. At the end of that payment period and at Ms Parrish’s request, he continued to pay Ms Parrish $1000 per week from December 2013 to February 2016.
He has also paid for all of the insurances and rates on the former matrimonial home despite Ms Parrish being responsible for that obligation pursuant to order 3 of the consent orders. However, the combined total of those payments were insufficient to discharge Mr Gallejo’s obligations pursuant to orders 4(a) and 4(b) of the 2013 consent orders, even if it was appropriate to set those payments off against his obligations under those orders.
Mr Gallejo swears that at all times it has been his intention not to deprive Ms Parrish of her entitlements under the 2013 orders, but to meet his obligations thereunder. But the effect of Mr Gallejo’s conduct, which is the subject of the first four counts of the contempt application, has been to deprive Ms Parrish of the unencumbered former matrimonial home to which she was entitled under those orders. On the face of those orders, that property has a significant value, and she has been deprived of an asset, at the time the orders were made, worth nearly $1 million.
Mr Gallejo’s non-compliance with the 2017 order has deprived Ms Parrish of the opportunity of fully assessing Mr Gallejo’s financial circumstances, where a full explanation of his financial circumstances is warranted.
In 1987 the Australian Law Reform Commission released its report entitled Contempt (ALRC Report 35). It has been often cited in decisions of the Full Court of the Family Court of Australia that deal with contempt. In Tate and Tate (No 3) (2003) FLC 93-138 the Full Court said:
57. Normally the purpose of the contempt proceedings against the person for breach of such an order is to coerce them to comply with it. However, it is quite clear that another purpose of bringing proceedings for contempt against a person who has breached a non-monetary order of the court may be that of punishment. The purposes of imposing punishment would appear to reflect the need for individual and general deterrence and retribution for the parties’ failure to comply with the order. Retribution is called for because it is essential on the proper working of the court system that court orders are obeyed. If they are defied or ignored, the whole system of dispute resolution by litigation breaks down. While there are other means of dispute resolution available, in the final analysis the citizen has the right to approach a court to determine a dispute, and the court has a duty to do so.
58. The majority of the Full Court, Ellis and Holden JJ in the husband’s most recent appeal delivered 13 May 2002 referred to the decision of the High Court in Witham v Holloway [1995] 183 CLR 525. In that case in the joint judgment of Brennan, Deane, Toohey & Gaudron JJ their Honours referred to the distinction between civil and criminal contempt as being that a civil contempt involves disobedience of a court order in civil proceedings, whereas a criminal contempt involves either a contempt in the face of the court or an interference with the course of justice. They qualified the distinction by saying:
“However, disobedience or breach of an undertaking amounts to a criminal contempt if it involves deliberate defiance or, as it is sometimes said, if it is contumacious.”
59. They further commented that the differences upon which the distinction between criminal and civil contempt are based are, in significant respects, illusory. In a separate judgment McHugh J expressed himself in similar terms on the issue.
60. In Australian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 66 ALR 577, the plurality said the purpose of proceedings for contempt, civil contempt, was stated as follows:
“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.”
61. The Australian Law Reform Commission (“ALRC”) in its 1987 report Contempt (Report No. 35) pointed out that it is important to recall the proceedings for disobedience contempt may serve one or both of two distinct functions: enforcement of the order and punishment of disobedience of the order. It similarly drew a distinction between situations where the primary aim is coercive as distinct from punitive. In the former case the sanction imposed is expressed only to last until the occurrence of a specified event that is within the power of the person upon whom the sanction is imposed. In the latter the punishment, if custodial, is imposed for a finite period, usually after the relevant events have occurred.
62. It should be mentioned that the ALRC in Chapters 13 and 14 of its report did draw a distinction between the considerations associated with non-compliance in family law and general civil law. We agree that there is a distinction, and in particular, that resistance to compliance with orders made in family law litigation may be particularly strong as this case exemplifies. At par 623 the Commission took the view that the purpose of punishment in family law proceedings was not so much upholding the court’s authority as an end in itself, but in fulfilling the expectations of the litigants themselves that court orders will be obeyed, and imposing sanctions if this does not occur. We agree with this which accords with the views expressed by Evatt CJ in G and G (1981) FLC 91-042 at 76,361.
63. At par 515 of the ALRC report it is pointed out that there are many cases where the primary goal is to punish the contemnor for past disobedience. It is stated that the sanctions serve similar purposes to those imposed by the criminal law, in particular deterrents, specific and general, and retribution.
64. In this case the primary aim of the proceedings is clearly punitive and it is clear from the authorities that this is an appropriate aim, at least in circumstances where there has been a flagrant defiance of court orders. In Borrie and Lowe: The Law of Contempt the following statement of principle appears:
“Blatant and aggravated contempts, particularly when repeated by a person who has clearly been warned as to the possible consequences of defying an order, will quite properly attract an immediate custodial sentence as a mark both of the gravity of the contempt and of the court’s disapproval and to deter contemnors and others who might be tempted to breach such an order.”
See also Lightfoot v Lightfoot [1989] 1 FLR 414.
65. At pars 516-7, the ALRC pointed out that in the past there had been a reluctance on the part of courts to impose punitive sanctions in the case of mere disobedience in the absence of contumacy; that is, stubborn resistance and defiance of authority. The Commission suggested that this situation has changed in recent times and that courts have increasingly imposed punitive sanctions in cases of disobedience of court orders where there was no flagrant or repeated disobedience or overt challenge to the court’s authority. While this has no direct relevance to the present case in that we are not dealing with mere disobedience of court orders, it highlights the seriousness of contumacious disregard and defiance of court orders.
66. At par 519 the Commission said in terms that might be thought to be highly relevant in the context of this case:
“On the view just outlined, the need to uphold the authority of the court, the imposition of punitive sanctions for disobedience is justifiable in terms of maintaining the effectiveness of court orders. In our society courts are the ultimate arbiters of disputes. This system of dispute resolution depends upon, amongst other things, their making orders and, if necessary, enforcing them. Given that litigation can be frustrating, time-consuming and costly, there would be no incentive at all in undertaking it if there was to be no likelihood that orders made by a court in settlement of a dispute could not be enforced. The imposition of coercive sanctions is clearly directed towards this goal. The imposition of punitive sanctions reinforces it. In circumstances where enforcement is no longer relevant, either because the order had since been complied with, or is no longer capable of being complied with, the imposition of a punitive sanction vindicates the claims of the aggrieved party, signifies the disapproval of the court, and acts both as a specific deterrent, that is to the particular contemnor, and as a general deterrent, that is to future would-be contemnors. The Commission endorses the general principle that punitive sanctions should be available in the court to the extent that they are necessary to uphold the effectiveness of court orders.”
That was a long passage from that judgment, but it encapsulates many things that are relevant in this case. Those passages were cited with approval in Abduramanoski (above).
The present proceedings are not taken by Ms Parrish to coerce Mr Gallejo into meeting his obligations under the orders. It seems to be the case, and it seems to me entirely apparent from the evidence, that he no longer has any capacity to meet the obligations under the orders. The significance of the present application for contempt is to engage the public interest in vindicating the court’s authority and to recognise that the public interest in the administration of justice requires compliance with all orders of a court, whether or not compliance also serves individual or private interests: see Witham v Holloway [1995] 183 CLR 525 at 532.
It is inappropriate to punish an offender or, in this case, the contemnor more than once for the same offending conduct. Counsel for Mr Gallejo submitted that the first four counts of the contempt application ought to be seen as a course of conduct engaged by him arising out of the same transaction or series of transactions. I accept that submission. He went further and said it was all five. I reject that submission.
Having regard to Mr Gallejo’s evidence, his failure to comply with orders 4(a) and 4(b) arise out of an approach by him to the use of the lines of credit secured by the Bank A mortgage. It is appropriate that I treat counts 1 to 4 as having occurred by reason of a course of conduct.
Whilst I need to consider the imposition of a penalty in respect of each of the counts of the contempt application, it is appropriate in this case to recognise that, in respect of the first four counts, Mr Gallejo’s conduct was part of a course of conduct and that to impose a sanction on some of those contraventions and no sanction on others or, alternatively, to impose sanctions which are concurrent such that he is not punished more than once for the same offending conduct, is appropriate.
Count 5 stands on its own, and is not part of the course of conduct which is taken up in counts 1 to 4 of the contempt applications.
The matters dealt with in counts 1 to 4 of the contempt application are serious and each warrant, in my view, a significant penalty. It is clear that Mr Gallejo deliberately contravened the orders, although he says that it was his intention to remedy the breaches in due course. But that is something of little weight, in my view. His contempt commenced immediately that he commenced making redraws upon the mortgage account soon after the deposit of the proceeds of sale that he was required to deposit to that account by order 4(a).
To the extent that Mr Gallejo suggests that the misfortunes of his company and business provide an explanation for his conduct, I reject that, because on his own evidence the failure of his four companies’ largest debtors did not occur until late 2016 or early 2017, long after his contravening conduct had commenced.
There was nothing in Mr Gallejo’s evidence to suggest that the type of “cash flow difficulties” to which he deposes following the making of the 2013 consent orders were not present when the agreement which formed the basis of the orders was made or when the orders themselves were made. That is to say, there was nothing in the evidence to suggest that there was a significant change in his financial circumstances or that of his companies between the making of the orders and his conduct.
It must have been the case when the underlying agreement was reached in December 2012 and the orders made in 2013 that Mr Gallejo knew that the only way he could discharge his obligations to the applicant was through continuing to operate his business and he must have known at that point whether he would have been able to meet his obligations under the orders.
Nowhere does Mr Gallejo express any contrition for his actions, nor does he offer an apology either to Ms Parrish or to the Court for his flagrant disregard of the 2013 consent orders.
I have taken into account that Mr Gallejo did comply with other aspects of the orders, namely the order for spousal maintenance and continued to make payments that he was not obliged to make under the order to Ms Parrish.
The imposition of no penalty for counts 1 to 4 is not appropriate. In my view, there is a significant public interest to be served by the imposition of a penalty in this case so as to underscore the importance of an order made by a court, and in particular a court exercising jurisdiction under the Family Law Act.
As the Australian Law Reform Commission report makes clear, there are particular difficulties with the perception of the authority of courts that make orders under the Family Law Act. At the time of the Law Reform Commission report, that was largely confined to the Family Court of Australia, but since then the Federal Circuit Court of Australia has been invested with jurisdiction under that Act, and makes a great many number of orders in exercise of that jurisdiction. A great many number of orders are also made by courts of summary jurisdiction pursuant to the Family Law Act.
There is, in my view, a significant public purpose to be served by the imposition of an appropriate penalty to mark the Court’s disapproval of the offending conduct and to underscore the importance of compliance with orders of the court exercising jurisdiction under the Family Law Act, whether they be consent orders or otherwise. That is to say, there is a significant aspect of general deterrence involved in the sanction to be imposed in this case. Specific deterrence is not particularly significant in this case because of the once-and-for-all nature of property adjustment orders and the lack of any prospect that Mr Gallejo will fulfil the relevant obligations under the 2013 consent orders.
I accept the submissions of counsel for the applicant that the imposition of a large fine would be of no purpose. On Mr Gallejo’s own case, his financial circumstances are now poor. The imposition of a large fine would not be appropriate. Moreover, I do not consider that the imposition of a fine, even a significant one, would be an appropriate response to the offending conduct in this case because of the effect of that conduct upon the applicant and her entitlements under the orders, and the effect upon the administration of justice generally.
In my view, the appropriate penalty to be imposed in respect of each of counts 1 to 4 in the application is a sentence of imprisonment.
In fixing the term of imprisonment, I have taken into account Mr Gallejo’s plea of guilty to each of the counts in the contempt application, and his cooperation in entering an early plea to that application. He has facilitated an early disposition of the proceedings.
He has made the payments to which I have earlier referred that he was not obliged to make under the orders. This, and his cooperative conduct, have led me to discount the penalty of imprisonment by one-third.
In my view, a sentence of imprisonment of 12 months is an appropriate response to Mr Gallejo’s conduct in respect of counts 1 and 2; such sentences to be served concurrently.
In respect of counts 3 and 4, an appropriate sentence of imprisonment is six months; such sentences to be served concurrently with each other and concurrently with the sentences under counts 1 and 2.
In respect of count 5, it is appropriate that there be a fine levied to mark the Court’s disapproval of Mr Gallejo’s non-compliance with that order. In that respect I will order a fine in the sum of $1000. I am satisfied that Mr Gallejo has the capacity to meet that fine given its relatively modest amount.
Accordingly, I find that the respondent has, on his own pleas of guilty, contravened the orders made under the Family Law Act 1975 on 5 April 2013 and on 18 October 2017 in that:
a)in contravention of order 4(a) of the orders made on 5 April 2013, the respondent paid the sum of $231,807.99 to the mortgage but, without the consent of the applicant, withdrew the full amount of the sale proceeds and retained same;
b)in contravention of order 4(a) of the orders made on 5 April 2013, the respondent, without the consent of the applicant, increased the mortgage by a systematic withdrawal of funds from the mortgage account;
c)in contravention of order 4(b) of the orders made on 5 April 2013, the respondent failed to make any of the 48 monthly payments;
d)in contravention of order 4(b) of the orders made on 5 April 2013, the respondent failed to pay the balance of the mortgage remaining at the expiration of the 48 month period;
e)in contravention of order 7 of the orders made on 18 October 2017, the respondent failed to provide to the applicant financial statements for the value of his superannuation fund to 30 June 2017 on 11 November 2017.
I find that the contraventions are a flagrant challenge to the authority of the Court.
I order that pursuant to s.112AP(4) of the Family Law Act 1975, on each of counts 1 and 2 of the contempt application filed on 19 February 2018 the respondent, Mr Gallejo, is sentenced to serve a term of imprisonment for a period of 12 months to be served concurrently with each other.
I order that pursuant to s.112AP(4) of the Family Law Act 1975, on each of counts 3 and 4 of the contempt application filed on 19 February 2018 the respondent, Mr Gallejo, is sentenced to serve a term of imprisonment for a period of six months to be served concurrently with each other.
The terms of imprisonment imposed by orders 1 and 2 hereof are to be served concurrently.
I order that pursuant to s.112AP(4) of the Family Law Act 1975 on count 5 of the contempt application filed on 19 February 2018 the respondent, Mr Gallejo, is fined the sum of $1000, such sum to be paid within 30 days of today.
To give effect to these orders, I order that a warrant of commitment issue forthwith in the usual form.
I order that the respondent pay the applicant’s costs of and incidental to the application for contempt to be assessed on the indemnity basis.
I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of Judge Jarrett.
Date: 5 October 2018
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
Legal Concepts
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Sentencing
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Costs
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Breach
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Consent
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Remedies
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