Smith v Smith

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA128/2019
[2020] NZCA 556

BETWEEN	BOYD ALLEN SMITH Appellant
AND	MACHIKO SMITH Respondent

CA129/2019
BETWEEN	BOYD ALLEN SMITH Appellant
AND	MACHIKO SMITH Respondent

Hearing:	27 August 2020
Court:	Courtney, Wylie and Muir JJ
Counsel:	J A Browne for the Appellant B Westenra for the Respondent
Judgment:	11 November 2020 at 10.30 am

JUDGMENT OF THE COURT

A The appeals are dismissed.

BThe appellant is to pay the respondent’s costs for a standard appeal on a band A basis together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Muir J)

Introduction

The appellant, Boyd Smith, appeals substantive and costs judgments of Brewer J dated 19 December 2018 and 1 March 2019 respectively.[1]
[1]Smith v Smith [2018] NZHC 3405 [Substantive decision]; and Smith v Smith [2019] NZHC 320 [Costs decision].
In his substantive judgment the Judge held that the respondent, Ms Machiko Smith, had in respect of four identified transactions acted in contempt of orders of the Family Court. He held that in respect of 30 other transactions the contempt was not established. He concluded that Mr Smith’s motivations in bringing the applications were largely punitive, that no loss had arisen as a result of Ms Smith’s actions and that the appropriate response of the Court was therefore to give her a formal warning.
In his subsequent costs judgment, the Judge ruled that these should “lie where they fall”.[2]

Background

[2]Costs decision, above n 1, at [26].

The parties separated in mid-2015 after a 26-year marriage.[3] On 18 September 2015 they promisingly resolved their relationship property claims by way of a Separation and Relationship Property Agreement (the SRP Agreement). However, relations have progressively deteriorated since. Brewer J described the parties as now “at feud”.[4]
[3]The marriage was dissolved in March 2018.
[4]Substantive decision, above n 1, at [1].
In 2018 both Mr Smith and Ms Smith filed proceedings to set aside the SRP Agreement with Mr Smith entertaining the hope he might regain ownership of the former family home which was vested in Ms Smith by the settlement.
On 23 February 2018 Mr Smith commenced his contempt proceedings in the High Court seeking orders that Ms Smith either be committed to prison or fined.[5] He alleged that she had, on multiple occasions between 27 July and 24 September 2015, breached an order obtained by him on 23 July 2015 in the Family Court which provided:
[5]At the hearing, Mr Smith did not seek committal but rather a fine (or alternatively community work) and costs.
On application made to it, the Court makes an Order:
1. Restraining the Respondent Ms Machiko Smith from disposition of:
a) any credit balance in any bank accounts in the Respondent’s, Applicant’s or the [parties’] joint names including all accounts annexed hereto; and
b)any [shareholdings] in any company and any bonds either in the Respondent’s, Applicant’s or [parties’] joint names including all accounts annexed hereto; and
c) a Rolex watch.
2.The Respondent has leave to apply to set aside or vary these orders on 5 days notice.

The transactions

At [3] of his substantive judgment Brewer J set out a schedule identifying the 34 transactions (numbered 2, 4 and 5–36) challenged in the proceedings. The total sum involved was $92,423.34. For convenience we annex the same schedule to this judgment.[6]
[6]Footnote 75 to the Schedule is our own.
In this appeal, Mr Smith challenges the Judge’s finding that transactions 5–30, 33, 35 and 36 did not constitute contempt.
Transactions 5–30 involved payments from and transactions within Kiwibank accounts established by Ms Smith after service of the restraining order and over the period 31 July 2015 to 24 September 2015. These accounts were funded by an AUD 20,000 transfer from Ms Smith’s Macquarie Bank Cash Management Account which was made on 27 July 2015, three days after service of the order.[7] The Judge found this transfer to have been made in contempt of the Family Court order.
[7]The equivalent of NZD 22,013,76 at the time.
Transactions 33, 35 and 36 occurred shortly after the date (18 September 2015) that the SRP Agreement was signed. All three were made to give effect to the settlement, a term of which was that the parties would sign a consent memorandum agreeing to discharge the restraining order. This memorandum was signed and promptly filed but discharge of the order did not occur until 25 September 2015. In the interim the transactions took place. Ms Smith deposed that this was at the insistence of her former husband. It is not in dispute the transfers were to entities now under the control of Mr Smith. He does not suggest that he suffered any loss as a result.

The High Court judgments

Substantive

In his substantive judgment the Judge identified the many responses available to a court whose orders had been breached including, in the most serious cases of deliberate disobedience, a finding of contempt.[8] Citing the established test, he said that in order to succeed, an applicant must prove beyond reasonable doubt that:[9]
(a)the terms of the order were clear and unambiguous;
(b)the contemnor had knowledge and proper notice of the terms of the order;
(c)the contemnor acted in breach of that order; and
(d)the contemnor’s conduct was deliberate in the sense that he or she deliberately acted in a manner that breached the order.
[8]Substantive decision, above n 1, at [4]–[5].
[9]At [9], citing Mike Pero (New Zealand) Ltd v Krishna [2018] NZHC 40 at [40], citing Siemer v Solicitor‑General [2010] NZSC 54, [2010] 3 NZLR 767; Solicitor-General v Krieger [2014] NZHC 172; and Zhang v King David Investments Ltd (in liq) [2016] NZHC 3018.
In respect of the challenged transactions, the Judge held:
(a)Transaction 2 — involving the purchase of a packet of cigarettes on 27 July 2015 — that this technically amounted to a contempt but was in the de minimis category (a finding not challenged on appeal).[10]
(b)Transaction 4 — involving payment from an ANZ Freedom account to an ANZ Visa account — that this was pre-set before service of the restraining order and that Ms Smith did not appreciate that allowing the direct debit to proceed involved a (literal) breach thereof. The Judge held that Ms Smith’s conduct was not therefore deliberate in the sense required and it had not been established beyond reasonable doubt that she had acted in contempt (a finding not challenged on appeal).[11]
(c)Transactions 5–30 — that although the restraining order referred to “any bank accounts” it was not in its terms clear as to whether this applied to accounts opened after the order had been made. The Judge said that for actions in breach of an order to be contemptuous the order must be clear and unambiguous and that there was more than a reasonable possibility that Ms Smith did not consider the Kiwibank accounts to be subject to the order and that she did not believe that operating them was in breach of the order. Again therefore he found that the transactions did not amount to contempt (a finding challenged on appeal).[12]
(d)Transaction 31 — involving the AUD 20,000 transfer from Ms Smith’s Macquarie account — that, although Ms Smith had booked the transaction on Tuesday 25 July 2015, prior to service of the restraining order, she had subsequently directed that the transfer occur to one of her new Kiwibank accounts rather than the ASB account initially specified and, in so doing, had acted deliberately.[13] The Judge rejected Ms Smith’s evidence that the diversion to Kiwibank was because she understood the ASB account could not be used to receive the funds after imposition of the order. He found that this evidence “owes a lot to hindsight”.[14] He noted, however, that the funds in question were taken into consideration in the SRP Agreement .[15]
(e)Transactions 32 and 34 — involving the purchase of ANZ shares which Ms Smith regarded as a good investment — that the transactions were in contempt of the Court’s orders.[16] However, the Judge also noted that the shares formed part of the relationship property pool for ultimate division and Ms Smith’s evidence that Mr Smith had agreed to the purchase in advance. In respect of Mr Smith’s contrary evidence, he said that Mr Smith’s knowledge of the various transactions which occurred during the currency of this restraining order was, in a number of respects, “vague or unreliable”.[17]
(f)Transactions 33, 35 and 36 — involving transfers of, respectively $3,597.82, $733.78 and $1,840.79 to accounts now under the control of Mr Smith — that although the transfers were in breach of the restraining order because it was still in force and unaffected by the agreement between the parties, nevertheless “it has not been proved beyond reasonable doubt that [Ms] Smith knew that notwithstanding the agreement between her and Mr Smith it would be a breach of the order for her to make the transactions”.[18] The Judge accordingly found the transfers were not in contempt of court (a finding challenged on appeal).
[10]At [20] and [38].
[11]At [21]–[22].
[12]At [24]–[27].
[13]At [28] and [30].
[14]At [30].
[15]At [31].
[16]At [33].
[17]At [34].
[18]At [36].
As to the Court’s response, the Judge held that no loss had accrued to Mr Smith as a result of any of the transactions and that his motivations in bringing the application were “largely punitive” and a “part of his feud with [Ms] Smith”.[19] He rejected the proposition that Mr Smith’s principal motivation was to ensure compliance by Ms Smith in respect of any future orders of the Family Court.[20]
[19]At [41].
[20]At [41].
Having earlier identified that the imposition of sanctions for contempt was a matter in the Court’s discretion to be exercised having regard to the extent of the contempt, the motive of the contemnor and the degree of prejudice suffered by the innocent party,[21] the Judge held that the appropriate response in this case was to give Ms Smith a formal warning. He continued:[22]
Orders of the Court are to be obeyed strictly. There can be no doubt in respect of any further orders of the Family Court that Ms Smith is aware of this. The response of a Court to breaches of further Court orders, in the light of this formal warning, would likely be significant.
[21]At [5], citing Lockwood Group Ltd v Small HC Auckland CIV-2009-4040-1019, 21 April 2010 at [68].
[22]At [42].
As to costs, the Judge said that balancing Mr Smith’s limited success against “the predominant motive for bringing the application”,[23] his provisional view was that costs should lie where they fall. He said that position would crystallise if submissions to the contrary were not filed.[24]

Costs

[23]At [43].

[24]At [43].

Predictably, neither party accepted the Court’s provisional indications as to costs and both made applications. The Judge noted that any award in Ms Smith’s favour would, in the circumstances of her having been found to be in contempt, be “curious”.[25] There is no cross-appeal from that finding.
[25]Costs decision, above n 1, at [19].
In respect of Mr Smith’s application, the Judge noted that he was partially successful in his claim but that the High Court Rules 2016 provided for the refusal or reduction of costs in cases where the issues at stake were of little significance.[26] He held:
[24] … In this case, to the extent that I found Mrs Smith to be in contempt it was at the very lower end, resulting only in a formal warning. I did not find any loss was caused to the plaintiff and considered his application for contempt primarily motivated by a personal punitive intent. Further, I do not consider the various policy concerns underpinning a finding of contempt to have been seriously engaged by Mrs Smith’s behaviour. Her behaviour appears to have been driven more by a fixation on investment returns than any desire to challenge the Court’s authority or do damage to Mr Smith.
[26]At [24].
The Judge accordingly confirmed his provisional assessment and left costs to lie where they fell.[27]

Appellant’s submissions

[27]At [26].

For Mr Smith, Mr Browne submitted that:
(a)transactions 5–30, 33, 35 and 36 each constituted contempt;
(b)the Judge’s response to those contempts which he did identify was inadequate and that the appropriate response was to have imposed a fine, part of which should have been paid to Mr Smith; and
(c)costs should have been awarded to Mr Smith on a 2B basis.
In respect of transactions 5–30 Mr Browne submitted that the terms of the restraining order were clear in that they applied to “any credit balance in any bank accounts in the Respondent’s, Applicant’s or the [parties’] joint names”. He said this included any account opened in the name of Ms Smith after service of the order. In the alternative, he submitted that the terms of the order should be “interpreted as embracing accounts opened post the order into which funds taken in breach of the order are deposited”.
In respect of transactions 33, 35 and 36, he submitted that the Judge erred by importing into the requirement that the contemnor’s conduct be deliberate, a mens rea requirement, namely knowledge of wrongfulness. He submitted that deliberate conduct can be contempt notwithstanding a lack of an intention to breach the relevant order.[28]
[28]Citing Burmester v Burmester [2018] NZHC 2352, [2018] NZAR 1540 at [12(d)]; and Qu v Zeng [2018] NZHC 1355 at [43].
As to penalty, he submitted that the civil contempt jurisdiction has two principal purposes — coercion of compliance with court orders for the benefit of a private party and service of the public interest by ensuring administration of justice is maintained.[29] He said that the Judge placed undue weight on Mr Smith’s lack of loss and supposed motivations, and was incorrect to find that the predominant motive in bringing the proceedings was punitive. He submitted that the contempts were not merely technical but substantive, that disobedience of court orders strikes at the very heart of the administration of justice and that nothing less than a fine was appropriate.
[29]Citing Law Commission Contempt in Modern New Zealand (NZLC IP36, 2014) at [7.2].
As to costs, Mr Browne cited Bowie v Weyburne for the proposition that where a contempt of court is made out, the normal course is to order the person in breach to pay costs on a solicitor and client basis but submitted that, in this case, a 2B allowance was appropriate to reflect the fact that Mr Smith had achieved partial success only.[30]

Respondent’s submissions

[30]Bowie v Weyburne [2013] NZHC 1728 at [45].

For Ms Smith, Ms Westenra submitted that the purpose of the contempt application was undoubtedly punitive or vexatious. She emphasised that it was filed almost two and a half years after the restraining order had been discharged and that Mr Smith had suffered no loss as a result of Ms Smith’s actions.
She further submitted that the Judge was correct in finding that the restraining order was not sufficiently clear and unambiguous to capture activity on the Kiwibank accounts and that, in any event, the AUD 20,000 which was used to fund them was accounted for in the SRP Agreement.
In respect of transactions 33, 35 and 36, she submitted that the Judge was again correct in finding that no contempt arose. She relied particularly on Ms Smith’s evidence that the relevant transfers occurred at Mr Smith’s insistence.
As to penalty, she relied on the recent decision of the High Court in Mike Pero (New Zealand) Ltd v Krishna for the proposition that the circumstances of the breach are critical in determining whether or not there should be a penalty, and if so, its nature.[31] She submitted that the finding of contempt was of itself significant having caused “great embarrassment/whakamā for Mrs Smith (or haji, in Japanese)”. It was not, she said, an insignificant punishment and the facts of the case came nowhere near those requiring imposition of a fine.
[31]Mike Pero (New Zealand) Ltd v Krishna, above n 9, at [60].
As to costs, Ms Westenra submitted the Judge was correct in the exercise of his discretion.

Discussion

Contempt — the framework

Contempt of court can be criminal or civil, although the conceptual distinction between the two is often not clear because it “turns on whether the contempt involves conduct that so threatens the administration of justice it requires punishment from the public point of view”.[32] Contempt is generally dealt with by a summary process.[33] As the Supreme Court observed in Siemer v Solicitor-General, such process has come to include the safeguards normally available to accused persons to protect their rights with the exception of the right to trial by jury.[34]
[32]Law Commission Reforming the Law of Contempt of Court: a Modern Statute (NZLC R140, 2017) at [5.27].
[33]Albeit that there are several degrees of summary process as explained by Gale CJ in Re Tilco Plastics Ltd v Skurjat (1966) 2 OLR 547 (HC) at 561; cited in Siemer v Solicitor-General, above n 9, at [7].
[34]Siemer v Solicitor-General, above n 9, at [7].
Like Siemer, this appeal is concerned with breaches of court orders — a branch of civil contempt committed outside of court which “tend[s] to undermine the system for administration of justice”.[35] Although we consider the case best approached as one of civil contempt,[36] the burden of proof on the appellant was nevertheless to establish the contempts beyond reasonable doubt.[37]
[35]At [5].
[36]Unlike Brewer J in the judgment under appeal.
[37]Siemer v Solicitor-General [2009] NZCA 62, [2009] 2 NZLR 556 at [62]; and Solicitor-General v Krieger, above n 9, at [24]–[26].
In order for a person to be found in contempt the Judge correctly identified four prerequisites — that the terms of the order were clear and unambiguous, that the contemnor had knowledge and notice of the terms of the order, that they acted in breach of that order, and that their conduct was deliberate in the sense that they deliberately acted in a manner that breached the order.[38]

The liability appeal

[38]Substantive decision, above n 1, at [9].

We start with Mr Smith’s claim that transactions 5–30 constituted separate contempts. We are not persuaded by this submission.
The requirement that only breaches of orders which are clear and unambiguous can constitute a contempt is of longstanding, even if some commentaries link its origins to a more literalist approach to penal statutes than is now commonplace.[39] So, in Federal Bank of the Middle East v Hadkinson the English Court of Appeal held that the words “his assets and/or funds” were not sufficiently clear to capture assets of which the respondent was not (for the purposes of the judgment assumed to be) the beneficial owner.[40]
[39]See Patricia Londono, David Eady and ATH Smith (eds) Arlidge, Eady & Smith on Contempt (5th ed, Sweet & Maxwell, London, 2017) at [12-55]. In R v Karpavicius [2002] UKPC 59, [2004] 1 NZLR 156 the Privy Council recognised in respect of penal statutes that “Nowadays an approach concentrating on the purpose of the statutory provision is generally to be preferred”: at [15].
[40]Federal Bank of the Middle East v Hadkinson [2000] 1 WLR 1695 (CA) at 1711.
In that case the High Court had held that “[b]are legal ownership is none the less a form of ownership”.[41] It accordingly found the defendant guilty of contempt. The Court of Appeal disagreed. It held that the language of the freezing order, read in context and with regard to the object of the order, naturally referred to assets and funds belonging to the defendant beneficially. As Nourse LJ put it, although legal ownership is undoubtedly a form of ownership “that does not make the assets ‘his’”.[42]
[41]At 1704.
[42]At 1714.

Significantly in the context of this case, however, the Court acknowledged that, even if its construction had been different, the High Court’s finding of contempt could not stand because the terms of the freezing order were insufficiently clear and unambiguous.[43] Mummery LJ explained the position as follows:[44]
If the court regarded the contentions on each side as reasonably arguable that conclusion would, for the reasons already explained, mean that the appeal should be allowed on the contempt issue.
[43]At 1711.
[44]At 1709.
Brewer J held that Mr Smith did not prove beyond reasonable doubt that the order clearly and unambiguously applied to future bank accounts. Although criticised by Mr Smith, we consider the Judge was correct in saying that the case did not ultimately involve “construction of a document”.[45] That is because, in a contempt context, a court is not required to make any such finding. The question is whether the contemnor’s position is sufficiently arguable that the applicant fails to discharge the burden of proof.
[45]Substantive decision, above n 1, at [26].
We consider there to be a reasonable possibility that the terms of the restraining order did not capture bank accounts established after the order was made. The question is not whether this is ultimately the correct construction — it is whether the recipient of such an order could assert as a reasonable possibility that it was the case.
Here the orders referred to “any credit balance in any bank accounts … including all accounts annexed hereto”. The inclusion of a list of accounts is an indicator that the order speaks to the current position. Adopting a purposive construction, it is also reasonably arguable that the order was designed only to capture existing credit balances, being those subject to relationship property claims. We note, as the Court of Appeal did in Federal Bank of the Middle East v Hadkinson,[46] that it was open to Mr Smith to attempt to frame his application for a restraining order in a way which clearly and unambiguously captured any future account — although there was always the risk that the Family Court would not grant an order in such terms, especially given that what was proposed did not allow even for basic living expenses, including food.
[46]Federal Bank of the Middle East Ltd v Hadkinson, above n 40, at 1710.
We add that, in circumstances where a High Court Judge recognises there being sufficient ambiguity in an order for him to conclude that the burden of proof had not been discharged, it would be a surprising result indeed for this Court to say that the construction contended for by Ms Smith was not one sufficiently arguable to preclude reasonable doubt. In this respect we consider Mr Smith’s argument hopelessly optimistic.
We reject also Mr Smith’s argument that the assessment of whether the order was sufficiently clear and unambiguous is somehow influenced by the source and status of the funds introduced to the subsequently opened accounts. Either the order was sufficiently clear and unambiguous and the burden was discharged, or it was not. The fact that the newly opened accounts were ultimately funded by a Macquarie bank account subject to the order does not of itself dispel the reasonable doubt we have identified.
We also consider Mr Smith’s endeavours to establish 25 additional and discrete contempts duplicative of the contempt alleged and established in respect of transaction 31. The mischief was extraction of (arguably) relationship assets and application for the benefit of one party to the marriage. Transaction 31 was the mechanism by which this occurred.[47] We agree with the Judge that attempts to elevate this singular contempt into multiple individual allegations speaks to improper motive. An abuse of process analysis may well have been available. We adopt, in that respect, the observations of Hamblen J in Public Joint Stock Co Vseukrainskyi Aktsionernyi Bank v Maksimov:[48]
An increasing amount of this court’s time is being taken up with contempt applications. Claimants should give careful consideration to proportionality in relation to the bringing and continuance of such proceedings. In appropriate cases respondents should give consideration to applying to strike out such applications for abuse of process. The court should be astute to detect when contempt proceedings are not being pursued for legitimate aims. Adverse costs orders may follow where claimants bring disproportionate contempt applications.
[47]Compare Qu v Zeng, above n 28, where the contemnor established a new account in his mother’s name but controlled by him and into which he deposited sums in breach of a freezing order. The Court held that Mr Zeng deliberately breached the freezing orders “by using an account in his mother’s name, but controlled by him, to hide and dispose of funds which were subject to the freezing orders”: at [55]. The Judge did not analyse the fact situation on the basis of discrete contempts arising out of payments into and out of the account. Instead he approached the matter holistically on the basis that one breach arose by use of the account to hide and dispose of frozen funds.
[48]Public Joint Stock Co Vseukrainskyi Aktsionernyi Bank v Maksimov [2014] EWHC 4370 (Comm) at [22], adopted in Mike Pero (New Zealand) Ltd v Krishna, above n 9, at [69].
Finally, in respect of transactions 5–30, we note that, even if we had concluded that they constituted separate contempts, this would not, in our view, have necessitated any penalty additional to that considered appropriate in respect of transaction 31.
Turning then to transactions 33, 35 and 36, we accept Mr Smith’s argument that the Judge’s reference to it not having been proven beyond reasonable doubt that Ms Smith “knew that notwithstanding the agreement between her and Mr Smith it would be a breach of the order for her to make the transactions”,[49] inadvertently imported a mens rea requirement into the contempt test, contrary to the authorities. As Woodhouse J observed in Qu v Zeng:[50]
[43] The requirement that the defendants’ conduct was “deliberate” does not mean that the applicant must prove that the defendant knew he or she was breaching the order. What the applicant must prove is that the act of the defendant which breached the order was an intentional act rather than, for example, an accidental act. A deliberate act in circumstances where the defendant did not know that he was breaching a Court order is likely to have a bearing on penalty, but that is a matter separate from what the applicant must prove to establish contempt.
[49]Substantive decision, above n 1, at [36].
[50]Qu v Zeng, above n 28 (footnote omitted).
Nevertheless, we consider the Judge’s ultimate conclusion in respect of transactions 33, 35 and 36 correct.
As we have indicated, the transactions occurred subsequent to execution of the SRP Agreement. Clause 6.2 of that agreement provided:
Each party will, upon signing this agreement, also sign a Memorandum of Consent in respect of the Family Court proceedings in the Whangarei Family Court, FAM 2015-088-000323, consenting to a full discharge of the Order Restraining Disposition of Relationship Property dated 23 July 2015, so that effect can be given to the terms of this agreement.
The Memorandum of Consent was signed the same day and, as we have said, promptly filed with the Family Court. However, as we have also observed, discharge of the order did not occur until several days later and with the transactions having taken place in the intervening period. Although there was disagreement between Mr and Ms Smith as to whether the transfers were made at Mr Smith’s direction, the Judge considered Mr Smith’s evidence “in a number of respects … vague or unreliable.[51] That was a finding well open on the evidence. The following exchange, which occurred under cross-examination, is illustrative:
Q… So you and Machiko had agreed that or it is your suggestion I believe that she needed to transfer — clear out all her bank accounts and deposit the bulk of the funds into the KFB Laminators account, that is how it worked isn’t it?
ANot — not exactly like that. It wasn’t agreed until after we had come to agreement. She just done it. I didn’t agree to that and I didn’t agree on any of my banks to be accessed by her. She accessed them on her own will.
[51]Substantive decision, above n 1, at [34].
Not only are there tensions between the first and last sentences of the response but, on its face, it is indicative of an agreement to transfer at the point of settlement. This must be a reference to the SRP Agreement of 18 September 2015.
In our view the Judge’s ultimate finding can be supported on two alternative bases — either by application of the de minimis principle or on the basis of an estoppel.
The de minimis principle embodies the proposition that the law is not concerned with trifles. The sums involved in the three transactions total $6,172.39. They were not of themselves trifling. But that is not determinative. The maxim requires assessment of whether a claim is, in all the circumstances of the case, so trifling that the law should regard it as of no consequence.[52]
[52]Rea v Wellington City Council [2007] NZRMA 449 (HC), (2007) 13 ELRNZ 185 at [10].
We consider that to be the case here, irrespective of the credibility problems the Judge identified with Mr Smith’s evidence. The SRP Agreement was entered into with legal advice and so certified. It required execution of the memorandum consenting to full discharge. There is no rational basis, therefore, on which a court could have declined to discharge the order. The only issue was how long it would take for the matter to be processed in the Family Court. It is not in dispute that the transfers which occurred in the interim were for Mr Smith’s benefit. This is conspicuously a case therefore where the court was being asked to exercise a penal jurisdiction in respect of an entirely technical contempt and for punitive or vexatious purposes. The courts should not be concerned thus.
Alternatively, we consider that Mr Smith could be regarded as estopped from making the allegations he does. We again reach that conclusion irrespective of whether the transactions occurred at his insistence. We do so on the basis of his execution of the SRP Agreement which committed him to immediate discharge of the restraining order.
Finally, and for completeness, we note that, even if we had considered these transactions in contempt, we would not have considered them material in terms of the penalty imposed. That conclusion in turn supports our finding in respect of the trifling nature of the breaches.

The penalty appeal

At the outset of his decision the Judge emphasised the importance of the contempt jurisdiction in maintenance of the administration of justice. He cited the Supreme Court’s observations in Siemer v Solicitor-General:[53]
[26] The objective of the summary process in contempt of court proceedings is to protect the ability of the courts to exercise their constitutional role of upholding the rule of law. Effective administration of justice under our constitution requires that the orders of the courts are obeyed unless properly challenged or set aside. Public confidence in the administration of the law, also necessary for its effective administration, requires that there is a strong expectation that those who ignore court orders are quickly brought to account. Achieving these aims is part of the objective of the law of contempt. The purpose of the summary process, whereby that law is administered by the judges without the assistance of juries, is to put the administration of the contempt law in their hands.
[53]Substantive decision, above n 1, at [5]; citing Siemer v Solicitor-General, above n 9.
His Honour’s emphasis was appropriate. As the New Zealand Law Commission said in its report Reforming the Law of Contempt of Court: A Modern Statute:[54]
It is fundamental to the administration of justice and the rule of law that court judgments and orders will be enforced against anyone who fails or refuses to comply with them. The absence of an effective and efficient enforcement regime would ultimately lead to anarchy, with unsuccessful parties simply disregarding a judgment or order against them.
[54]Law Commission Reforming the Law of Contempt of Court: a Modern Statute, above n 32, at [5.1].
When determining what, if any, penalty is appropriate following a finding of contempt, the courts undertake an assessment similar to that which occurs in a sentencing context.[55] The sanction a court chooses to impose will be informed by the extent of the contempt, the motive of the contemnor and the degree of prejudice suffered by the innocent party.[56] The sanctions available include a fine, community based sentence or imprisonment — a fine being the most common penalty for civil contempt.[57] However, a penalty is not always necessary. As van Bohemen J observed in Mike Pero (New Zealand) Ltd v Krishna:[58]
… the fact of a breach itself is not sufficient to warrant a penalty. The circumstances of the breach are critical in determining whether or not there should be a penalty and, if so, the nature of the penalty.
[55]At [5.35], citing Solicitor-General v Miss Alice [2007] 2 NZLR 783 (HC) at [88]. In Lockwood Group Ltd v Small, above n 21, at [68], the penalty jurisdiction was described as being discretionary, but as with a sentencing decision it must be informed by relevant principle and precedent.
[56]Lockwood Group Ltd v Small, above n 21, at [68].
[57]Law Commission Reforming the Law of Contempt of Court: a Modern Statute, above n 32, at [5.33].
[58]Mike Pero (New Zealand) Ltd v Krishna, above n 9, at [60].
In Young v Zhang this Court upheld a finding of a single act of contempt but reduced the penalty from $10,000 to $7,500.[59] The Court said that fines of between $10,000 and $25,000 tended to be reserved for cases involving serious and sustained breaches of injunctions.[60] In Bowie v Weyburne, a $5,000 fine was imposed for contempt in the form of a breach of an undertaking that was both deliberate and wilful.[61] In Mike Pero (New Zealand) Ltd v Krishna van Bohemen J declined to award any penalty for a technical and minor contempt, after considering a number of similar such cases.[62]
[59]Young v Zhang [2017] NZCA 622, [2018] NZAR 207.
[60]At [59].
[61]Bowie v Weyburne, above n 30, at [43].
[62]Mike Pero (New Zealand) Ltd v Krishna, above n 9, at [61]; citing Malevez v Knox [1977] 1 NZLR 463 (SC), where a director breached an undertaking while under commercial pressure; Lockwood Group Ltd v Small, above n 21, where although there was a deliberate breach of an injunction, the arbitration agreement on which it was based had been spent; and Blomfield v Slater [2015] NZHC 2239, where a fine of $500 was imposed for minor contempts in the context of defamation proceedings.
We emphasise, in this context, that the contempt is of the court not of the applicant and the court is the ultimate arbiter of what penalty it considers it appropriate to assuage the offence.
We are unpersuaded that the Judge erred in the exercise of his discretion. Focusing first on the circumstances of the breach in respect of transaction 31, we note:
(a)It is common ground that the relevant transfer was booked with Macquarie International Money Transfers (IMT) on 21 July 2015 three days prior to service of the restraining order.
(b)IMT’s standard terms and conditions stipulated that transactions are “legally binding on you as soon as we receive your electronic Instructions” (cl 4.2), that “[i]f you book a Transaction by email, the Transaction will be binding on you when we process your email” (cl 4.4) and that “[o]nce a Transaction has become legally binding you may not cancel the Transaction in any circumstances” (cl 4.6).
(c)We are satisfied therefore that Ms Smith irrevocably committed to the transaction on 21 July 2015. It is at that point that IMT would have itself committed to purchase of the relevant funds at the agreed contract rate.
(d)We accept that further steps were taken by Ms Smith after imposition of the restraining order. She fulfilled her contractual obligation by paying the required amount in Australian dollars to one of the bank accounts nominated by IMT. We regard as a mitigating factor her exposure to IMT if this had not occurred.
(e)As the Judge observed, however, she then went on to nominate a replacement account in New Zealand (for the ASB account originally specified and subsequently frozen). That was the action with which the Judge took greatest issue. He said that the diversion was specified because she “wanted the use of the funds”.[63] The Judge made a finding of contempt accordingly. But, based on Mr Smith’s approach to transactions 33, 35 and 36, we have no doubt Mr Smith would have regarded the transfer as a contempt, even if made to the ASB account.
(f)We must proceed on the premise that the transaction resulted in no loss to Mr Smith. That is because the correspondence establishes his knowledge of the transfer at the time the SRP Agreement was signed. There were also last minute alterations made to the agreement by the solicitors for Mr Smith reducing the cash sum to be paid to Ms Smith from the $385,000 specified in the penultimate draft to $353,000. The Judge’s conclusion that “the funds in question were taken into consideration in the settlement agreement signed by the parties on 18 September 2015” was, in that context, clearly correct.[64] Mr Smith himself acknowledged in cross-examination that he knew about the transfer before he signed the relationship property agreement.
[63]Substantive decision, above n 1, at [30].
[64]At [31].
As to transactions 32 and 34, the most important relevant circumstances of the breach are that they involved the acquisition of shares which were themselves part of the potential relationship property pool. As the Judge held, “there was no intent by Mrs Smith to deprive Mr Smith of relationship property”,[65] the driver for the transaction being Ms Smith’s desire to capitalise on what she thought was a good investment opportunity. Nor was any loss occasioned by her actions.
[65]At [34].
The Judge also regarded it as a reasonable possibility that Mr Smith had agreed to the purchase in advance, noting his reservations in respect of Mr Smith’s evidence to the contrary.[66]
[66]At [34].
We are satisfied, therefore, that having regard to the overall circumstances of the various breaches, the Judge was correct to find that they fell “at the very lower end”.[67]
[67]Costs decision, above n 1, at [24].
The Judge also touched on other factors which he considered relevant to penalty, including the fact that Ms Smith appeared to have “something of an obsession about the pursuit of better returns on investments through an almost compulsive use of online banking tools”[68] and the fact that Mr Smith’s motivations in bringing the application were largely punitive. We agree with this assessment of Mr Smith’s motivations. The proceedings were brought two and a half years after the events in question and were clearly a part of what the Judge described as “his feud with Mrs Smith”.[69] We would go further and describe the proceedings as bordering on the vindictive.
[68]Substantive decision, above n 1, at [40].
[69]At [41].
Like the Judge, we do not accept that the predominant motive in bringing the application was to ensure compliance with future orders of the Family Court.
As we have indicated, the Judge’s response to the identified contempts was to issue Ms Smith with a formal warning including the observation that any future transgression was likely to result in “significant” consequences for her.[70] We accept that a finding of contempt is of itself significant and we consider this significance amplified by the formal warning the Judge issued. We note also the “haji” or “great embarrassment” that Ms Smith is said to have sustained. We consider the Judge’s response well within the range of responses available to him having regard to the authorities and the circumstances we have identified.
[70]At [42].

Accordingly, we see no basis to interfere with the way in which the Judge exercised his discretion as to penalty.

The costs appeal

While all matters in relation to costs are at the discretion of the Court, that discretion is not unfettered. It is qualified by the specific rules contained in rr 14.2 to 14.10 of the High Court Rules 2016. The discretion is exercisable only in situations not contemplated by the Rules or which are not fairly recognised by them.[71]
[71]Wheeldon v Body Corporate 342525 [2016] NZHC 862 at [11].
The Judge acknowledged that Mr Smith had achieved partial success but in our view correctly identified such success as “much less significant” than in cases where partial success had nevertheless been recognised as success for cost allocation purposes.[72] Significantly, his Honour referred to r 14.7(c), providing for refusal or reduction of costs if “the issues at stake were of little significance”.[73] We likewise regard this Rule as engaged. As we have indicated, Ms Smith’s actions resulted in no loss to the appellant and his motivations in bringing the proceedings were, we are satisfied, personal and punitive. As Hamblen J emphasised in Public Joint Stock Company Vseukrainskyi Aktsionernyi Bank v Maksimov, the Court should be astute to detect when contempt proceedings are not being pursued for legitimate aims and should not hesitate to exercise its costs jurisdiction accordingly.[74]

Result

[72]Costs decision, above n 1, at [23], citing Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36; and Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379.

[73]At [24].

[74]Public Joint Stock Company Vseukrainskyi Aktsionernyi Bank v Maksimov, above n 48, at [22].

We dismiss the appeals.
The appellant is to pay the respondent’s costs for a standard appeal on a band A basis together with usual disbursements.

Solicitors:
Henderson Reeves Connell Rishworth, Whangārei
Wills Westenra Ltd, Whangārei

SCHEDULE: TRANSACTIONS MADE DURING RESTRAINING ORDER

PERIOD 24 JULY 2015 TO 25 SEPTEMBER 2015

Transaction Number	Date	Account Owner	Bank	Bank Account Number	Amount	Narration on bank statements
2	27-Jul-15	Machiko	ANZ	[REDACTED]	$21.30	Pepe’s Dairy
4	27-Jul-15	Machiko	ANZ	[REDACTED]	$200.00	DD
5	31-Jul-15	Machiko	Kiwibank	[REDACTED]	$11,153.50	Wills Westenra
6	31-Jul-15	Machiko	Kiwibank	[REDACTED]	$47.13	Akiko Sakamoto
7	31-Jul-15	Machiko	Kiwibank	[REDACTED]	$8,000.00	Transfer to M Smith – Kiwibank 01
8	4-Aug-15	Machiko	Kiwibank	[REDACTED]	$300.00	ATM withdrawal – Otaika
9	5-Aug-15	Machiko	Kiwibank	[REDACTED]	$700.00	Wills Westenra
10	5-Aug-15	Machiko	Kiwibank	[REDACTED]	$1.00	Machiko – BNZ 02
11	5-Aug-15	Machiko	Kiwibank	[REDACTED]	$50.00	Machiko – Rabobank 50
12	12-Aug-15	Machiko	Kiwibank	[REDACTED]	$906.00	Wills Westenra
13	14-Aug-15	Machiko	Kiwibank	[REDACTED]	$100.00	Withdrawal – Whangarei central
14	17-Aug-15	Machiko	Kiwibank	[REDACTED]	$200.00	Withdrawal – Onerahi
15	25-Aug-15	Machiko	Kiwibank	[REDACTED]	$210.04	POS withdrawal – Onerahi
16	30-Aug-15	Machiko	Kiwibank	[REDACTED]	$222.75	Transfer to Kiwibank – 02
17	1-Sep-15	Machiko	Kiwibank	[REDACTED]	$1.00	Machiko – BNZ 02
18	1-Sep-15	Machiko	Kiwibank	[REDACTED]	$50.00	Machiko – Rabobank 50
19	2-Sep-15	Machiko	Kiwibank	[REDACTED]	$2.40	Ezumi Whangarei
20	4-Sep-15	Machiko	Kiwibank	[REDACTED]	$254.51	Machiko – Kiwibank 02
21	11-Sep-15	Machiko	Kiwibank	[REDACTED]	$279.17	Machiko – Kiwibank 02
22	16-Sep-15	Machiko	Kiwibank	[REDACTED]	$558.48	Machiko – Kiwibank 02
23	20-Sep-15	Machiko	Kiwibank	[REDACTED]	$363.53	Machiko – Rabobank 50
24	20-Sep-15	Machiko	Kiwibank	[REDACTED]	$9,328.08	Machiko – Rabobank 50
25	22-Sep-15	Machiko	Kiwibank	[REDACTED]	$145.53	Machiko – Kiwibank 02
26	23-Sep-15	Machiko	Kiwibank	[REDACTED]	$76.12	Machiko – Kiwibank 02
27	24-Sep-15	Machiko	Kiwibank	[REDACTED]	$2,370.54	Machiko – Kiwibank 02
28	17-Aug-15	Machiko	Kiwibank	[REDACTED]	$8,002.50	Machiko – Kiwibank 02
29	11-Sep-15	Machiko	Kiwibank	[REDACTED]	$3.69	Machiko – Kiwibank 02
30	20-Sep-15	Machiko	Kiwibank	[REDACTED]	$9,328.08	Machiko – Kiwibank 00
31	27-Jul-15	Machiko	Macquarie	[REDACTED]	20,000.00 AUD $22,013.76	Transfer to 123037863 Ozforex Pty Ltd
32	7-Sep-15	Machiko	Macquarie	[REDACTED]	5,000.00 AUD $5,541.09	ANZ share purchase
33	24-Sep-15	Machiko	Macquarie	[REDACTED]	3,259.00 AUD $3,597.82	Machiko – Raboplus
34	1-Sep-15	Machiko	Macquarie	[REDACTED]	5,249.00 AUD $5,820.75	Transfer funds to Machiko CMA
35	21-Sep-15	Boyd[75]	Macquarie	[REDACTED]	649.78 AUD $733.78	BPAY to MBL – cash
36	21-Sep-15	Boyd	Macquarie	[REDACTED]	1,630.07 AUD $1,840.79	BPAY to MBL – cash
TOTAL	$92,423.34

[75]Mr Smith deposed to being illiterate and to have been reliant on Ms Smith for internet banking transactions. Ms Smith claimed that each of transactions 33, 35 and 35 were effected on Mr Smith’s instructions.

[2020] NZCA 556

11 November 2020