Smith v Smith

[2018] NZHC 3405

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2018-488-14

[2018] NZHC 3405

IN THE MATTER

of an application for contempt of court order against Machiko Smith

BETWEEN

BOYD ALLEN SMITH

Applicant

AND

MACHIKO SMITH

Respondent

Hearing:

22 November 2018

(Closing submissions filed 30 November 2018, 7 December 2018
and 14 December 2018)

Counsel:

J A Browne and P J Wilson for Applicant B Westenra and M J Wills for Respondent

Judgment:

19 December 2018

JUDGMENT OF BREWER J

This judgment was delivered by me on 19 December 2018 at 1:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Henderson Reeves Lawyers (Whangarei) for Applicant Wills Westenra Ltd (Whangarei) for Respondent

SMITH v SMITH [2018] NZHC 3405 [19 December 2018]

Introduction

[1]    Mr Smith and Mrs Smith are at feud. They were married for many years but separated in 2015. They are arguing in the Family Court about the validity of an agreement they entered into on 18 September 2015 dividing relationship property. Mr Smith now contends Mrs Smith earlier breached a Family Court restraining order in 2015. He has filed an originating application seeking orders:

(a)That the respondent, Machiko Smith, be held in contempt of Court and be committed to prison or fined as the Court thinks fit.

(b)A portion of any fine be paid to [Mr Smith].

(c)Costs on an indemnity basis.

Background

[2]    The restraining order obtained by Mr Smith in the Family Court on 23 July 2015 is in these terms:

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 party’s joint names including all accounts annexed hereto; and

b)any share holdings in any company and any bonds either in the Respondent’s, Applicant’s or party’s 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.

[3]    Mr Smith contends Mrs Smith breached the order as per the following schedule:1

1      Some items in the schedule were not pursued following the hearing before me. I have retained the original numbering for those that are.

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	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

Jurisdiction

[4]    If a Court makes an order in a civil proceeding then it must be obeyed by those subject to it. Obviously, there is a myriad of situations which can lead to a Court order being breached. Equally, there are many responses a Court might make. In minor cases, acknowledgement and apology will be sufficient redress. A Court might give a warning of consequences for repetition. In more serious cases leading to disruption of proceedings, the Court might make costs orders against the breaching party. Another response by the Court can be to stay or strike out a proceeding where the breaching party is the plaintiff, or, where it is the defendant, to prohibit the defendant from taking further steps in defence of the plaintiff’s claim.

[5]    In the most serious cases of deliberate disobedience of a Court order the Court can find the offending party in contempt of Court. This is, at common law, a criminal offence and punishments can include imprisonment and/or a fine.2 However, the imposition of a sanction is a matter for the Court’s discretion, taking into account the extent of the contempt, the motive of the contemnor and the degree of prejudice suffered by the innocent party.3

[6]    One of the purposes of the power to punish for contempt of Court in the civil jurisdiction is to uphold the rule of law. As the Supreme Court has said:4

[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 orders of the Court 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 contempt. The purpose of the summary process, whereby that law is administered by judges without the assistance of juries, is to put the administration of the contempt law in their hands.

2      Section 9 of the Crimes Act 1961 preserves specifically the common law power of a Court to punish for contempt; see also s 165(3) of the Senior Courts Act 2016.

3      Lockwood Group Ltd v Small HC Auckland CIV-2009-404-1019, 21 April 2010 at [68].

4      Siemer v Solicitor-General [2010] NZSC 54, [2010] 3 NZLR 767.

[7]    Another purpose is to coerce compliance with Court orders for the benefit of a private party.5

[8]    The High Court has inherent jurisdiction to use the common law summary jurisdiction to punish for contempt of Court, even where the contempt is in relation to an order of an “inferior Court”.6

[9]    The summary procedure to establish contempt is a criminal procedure. A summary procedure is used because of the perceived need for the Court to act quickly and effectively when its authority is challenged.7 The usual procedural safeguards apply.8    So, the onus of proving contempt in a case such as this is on the applicant.

The standard of proof is proof beyond reasonable doubt. An applicant must establish: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.

[10]   Any doubt in the interpretation of the order or otherwise must therefore be applied to the benefit of the alleged contemnor.

Mrs Smith’s defence

[11]Mrs Smith raises a number of preliminary defences.

5      Grant v Bhana [2016] NZHC 2755 at [3].

6      There is a useful discussion of the law in Meder v Official Assignee [2018] NZHC 821, [2018] NZAR 632 at [37]-[44].

7      Siemer v Solicitor-General at [6].

8      Siemer v Solicitor-General at [7].

9      See Mike Pero (New Zealand) Ltd v Krishna [2018] NZHC 40 citing Siemer v Solicitor-General; Solicitor-General v Krieger [2014] NZHC 172; Zhang v King David Investments Ltd (in liq)[2016] NZHC 3018.

[12]   First, she says that Mr Smith brought his application as part of an ongoing “campaign of harassment” against her. Mrs Smith says that Mr Smith has a vested and malicious interest in pursuing her for contempt and suggests he has brought the proceedings for an improper purpose.

[13]   Even if I were to accept that, it would not bear on the Court’s assessment as to whether the alleged contempts occurred. The matter is now before the Court.

[14]   Mrs Smith also says that Mr Smith should be estopped from bringing his application because of the settlement agreement signed by them on 18 September. Clause 10.1 of that agreement provides:

The parties acknowledge:

(a)        They agree to accept these provisions in full satisfaction and discharge of all claims by either of them whether against the other of his or her estate in respect of relationship property and separate property pursuant to the provisions of the Property (Relationships) Act 1976, or otherwise howsoever.

(b)        They consider that the provisions of this agreement are just, fair and reasonable.

(c)        They have received independent legal advice before signing this agreement and they have had explained to them the effect and implications of this agreement.

[15]   I nurse doubts as to whether the requirements of equitable estoppel could be made out on the basis of this agreement.10 Even if they were, they could not purge contempt of Court because it is a criminal offence.

[16]   In any case, my reading of cl 10.1 is that Mr and Mrs Smith agreed to settle claims relating to relationship property. An application for contempt of Court in respect of disobeying a Court order does not fall into this category. Further, Mrs Smith is currently disputing the validity of the agreement in the Family Court.

[17]   I therefore proceed to consider whether each of the alleged contempts are established.

10     See Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44].

Discussion

[18]   The schedule reproduced at [3] sets out each of the transactions initiated or undertaken by Mrs Smith. Each is alleged to be a deliberate breach of the order and therefore a separate contempt.

[19]   It is accepted by Mrs Smith that at the time each transaction took place she had proper notice of the content of the order.

Transaction 2

[20]   Mrs Smith accepts that transaction 2 (apparently the purchase of cigarettes) is a breach of the order. Technically, it amounts to a contempt.

Transaction 4

[21]   Transaction 4 is a direct debit between ANZ accounts. Mrs Smith’s evidence was she pre-set the transaction before she was served with the order so as to pay a Visa card bill. The order was served on Mrs Smith on the afternoon of Friday, 24 July 2015 and the direct debit went through on Monday, 27 July 2015.

[22]   There is no evidence Mrs Smith appreciated that allowing the direct debit to proceed was a (literal) breach of the order. Her breach of the order was therefore not deliberate. I do not find transaction 4 proved beyond reasonable doubt as a contempt.

Transactions 5-30

[23]   After Mrs Smith had been served with the order she opened accounts with Kiwibank. Her evidence was that this was done so she could operate bank accounts given the others were all subject to the restraining order. Mrs Smith does not accept that operating the accounts was in breach of the restraining order, and contends in any event that the restraining order did not apply to accounts opened after it was made.

[24]   In my view, the order is not clear as to whether it applies to future accounts. It refers only to “any bank accounts”.

[25]   Mr Smith contends that “any bank accounts” must be taken to mean what it says. Namely, the restraining order applies to all bank accounts, be they in existence at the time of the making of the order or which come into existence after the making of the restraining order.

[26]   This is not a matter of construction of a document. The inquiry is whether the order is clear and unambiguous, and, if it is, whether it was deliberately breached. In this case, the order is not clear that it applies  to future  bank accounts.  Nor does  Mrs Smith accept that it does and she denies her operating of the Kiwibank accounts breached the order. It has not been proved beyond reasonable doubt that the order clearly and unambiguously applies to future bank accounts. There is more than a reasonable possibility that Mrs 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.

[27]   I conclude that transactions 5-30 have not been proven to be breaches of the restraining order amounting to contempts of Court.

Transaction 31

[28]   Transaction 31 involved the transfer of AUD20,000 from Mrs Smith’s Macquarie account to Macquarie International Money Transfers. Mrs Smith booked this transaction on Tuesday, 21 July 2015, before the restraining order was served on Friday, 24 July 2015. She then caused the money, which was originally going to go to an ASB account covered by the order, to be instead credited to one of her new Kiwibank accounts.

[29]   Mrs Smith’s evidence was to the effect that having booked the transfer of the funds, she could not cancel the transaction. Furthermore, she says she diverted the funds from the ASB account because she understood the account could not be used to receive the funds because of the restraining order. That is why the funds went to the new Kiwibank account.

[30]   I find that Mrs Smith’s evidence in this regard owes a lot to hindsight. She had booked the transfer; then came the restraining order; Mrs Smith wanted the use of the

funds and so diverted them to a Kiwibank account. I find it proved beyond reasonable doubt that Mrs Smith knew that transferring the funds from her Macquarie bank account through Macquarie International Money Transfers to her new Kiwibank account was in breach of the restraining order. I find her in contempt of Court for this transaction.

[31]   I will bear in mind, when I come to consider the proper response of the Court, that the funds in question were taken into consideration in the settlement agreement signed by the parties on 18 September 2015.

Transactions 32 and 34

[32]   These transactions involve the purchase of ANZ shares. I am satisfied from the evidence of Mrs Smith that she considered buying the ANZ shares a good investment and that the return from the shares would be higher than the interest rates she was getting.

[33]   I find proved beyond reasonable doubt that the transactions are in breach of the order and that Mrs Smith knew that. The transactions are in contempt of the Court.

[34]   In assessing the proper response to the contempts, I will bear in mind there was no intent by Mrs Smith to deprive Mr Smith of relationship property. The shares formed part of the relationship property settlement. I will bear in mind also, and I accept as a reasonable possibility, Mrs Smith’s evidence in her affidavit of 21 June 2018 that Mr Smith agreed to the purchase in advance. Mr Smith denied that proposition but, in a number of respects, his evidence as to his knowledge of the various transactions which occurred during the currency of the restraining order is vague or unreliable.

Transactions 33, 35 and 36

[35]   Transactions 35 and 36 took place on 21 September 2015 and transaction 33 took place on 24 September 2015. The relationship property agreement was signed by the parties, as I have said, on 18 September 2015. The restraining order itself was discharged by consent later in September 2015 and the memorandum of consent for

that to happen was signed by the parties also on 18 September 2015. The funds involved were part of the relationship property settlement.

[36]   I accept the transfers were in breach of the restraining order because the restraining order was still in force and unaffected by the agreements between the parties. However, it has not been proved beyond reasonable doubt that Mrs 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. Accordingly, it has not been proved beyond reasonable doubt that transactions 33, 35 and 36 constitute contempts of Court.

The response of the Court

[37]   I have found that transactions 2, 31, 32 and 34 have been proven as contempts of Court because Mrs Smith knew the transactions were in breach of the restraining order. I now have to assess the response of the Court.

[38]   I will not take into account transaction 2. The maxim “de minimis non curat lex”11 applies, and transaction 2 is not part of an overall pattern of transactions such that it should fall within the consideration of the pattern.

[39]   Transaction 31 had been booked before Mrs Smith had notice of the restraining order. Mrs Smith allowed it to proceed and diverted the funds to one of her new Kiwibank accounts. The funds were included in the settlement agreement and there was no loss to Mr Smith. Transactions 32 and 34 involved the purchase of ANZ shares for the purpose of obtaining a better return than was obtainable on interest. Again, there was no loss to Mr Smith.

[40]   Overall, having seen Mrs Smith give evidence, it was clear to me she has something of an obsession about the pursuit of better returns on investments through an almost compulsive use of online banking tools.

11     “The Court is not concerned with trivial matters”.

[41]   I am satisfied also that Mr Smith’s motive in bringing this application is largely punitive. That is to say, it is part of his feud with Mrs Smith. I do not accept his predominant motive in bringing the application is to ensure compliance by Mrs Smith with future orders of the Family Court.

Decision

[42]   I give Mrs Smith a formal warning. 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 Mrs 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.

Costs

[43]   Balancing the limited extent of Mr Smith’s success against the predominant motive for bringing the application which I have found, my provisional decision is to order costs to lie where they fall. If I do not receive submissions to the contrary by 25 January 2019 then that will be the crystallised position.

Brewer J