THE REGISTRAR COURT OF APPEAL v PELECHOWSKI SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL HANDLEY, BEAZLEY and STEIN JJA 11 July, 5 August and 20 August 1997, 28 October 1997 [1997] NSWCA 311 CONTEMPT OF COURT — breach of injunction — notice — party in court when injunction pronounced DISTRICT COURT — jurisdiction to issue Mareva injunctions The opponent was one of two defendants to proceedings in the District Court for the recovery of moneys lent by the plaintiff. The District Court Judge found for the plaintiff on 15 April 1994 and ordered that the defendants be restrained from selling, disposing of, or encumbering land owned by them as joint tenants. The opponent was present in Court when that order was made. On 29 April 1994 the opponent and the other defendant executed a mortgage over the land the subject of the Mareva injunction. On 2 June 1995 the allegation of contempt of court was referred by Twigg DCJ to the Supreme Court. HELD: (1) The District Court has power to order Mareva injunctive relief under s46(1) of the District Court Act. Riley McKay Pty Ltd v McKay & Anor [1982] | NSWLR 264 considered. (2) The opponent understood the terms of the order which were clear and unambiguous. (3) As the opponent was in Court when the order was made, it was binding on him from the time it was made. M'Niel v Garratt (1841) Cr & Ph 98 (41 ER 427) applied. Hearn v Tennant (1807) 14 Ves Jun 137 (33 ER 473) considered. (4) The opponent was guilty of contempt of court by a wilful breach of the order in executing the mortgage. Handley JA The claimant by summons filed on 19 August 1996 initiated proceedings for contempt of court against the opponent, Karl Pelechowski. A second opponent, Penelope Stephens, was named in the summons but she may be ignored for present purposes as she was never served. The statement of charge alleged that the opponent was guilty of contempt of court in that, in or about 29 April 1994, he executed a mortgage over land at 9 Kippax Street, Erskine Park, NSW, in disobedience of an order made on 15 April 1994 by Judge Christie QC in the District Court restraining him from doing so. The following facts, alleged in the particulars of charge, were proved in the claimant's evidence and were not in dispute. In 1993 Michael Rahme commenced proceedings against the opponent and Penelope Stephens in the District Court at Penrith to recover $92,439.95 plus interest for money lent to them in 1983. They were the registered proprietors of the land known as 9 Kippax Street, Erskine Park being the land in Folio Identifier 2033/255371 (the property). The District Court proceedings were heard by Judge Christie QC on 2 February and 15 April 1994. The plaintiff was legally represented. The opponent appeared in person representing himself but not the other defendant. The evidence concluded on the second day, the parties addressed, and the Judge delivered an extemporary judgment. He found against both defendants and entered judgment against them for $105,090. He also made an order restraining the opponent and the other defendant from selling, or otherwise disposing of, encumbering or further encumbering, or otherwise dealing with, their interest in 2 UNREPORTED JUDGMENTS any way in the property, such order to continue until further order or payment of the verdict. The opponent was in court when the orders were pronounced. On 26 April 1994, whilst his Honour's orders were still in force, the opponent and the other defendant applied to the Liverpool branch of Household Financial Services Pty Ltd (the lender) for a loan. The property was already subject to a registered mortgage in favour of Advance Bank Australia Ltd, but was otherwise unencumbered. The loan application stated that the property was worth $145,000 and that $47,500 was owing under the Advance Bank mortgage. On 29 April the lender agreed to make $25,000 available on a continuing credit. The opponent and the other defendant executed a registrable second mortgage in favour of the lender, and consented to the lodgment of a caveat to protect that mortgage. They drew against their credit on 29 April and obtained cheques in favour of a number of creditors and a cheque for $21,586 payable to the opponent. These cheques exhausted their available credit. The lender's cash advance vouchers for the 5 withdrawals signed by the opponent are in evidence. In July the opponent and the other defendant increased their credit limit to $45,000, and on 11 July the opponent obtained 3 cheques totalling $19,598 payable to himself. The evidence included an affidavit sworn by the opponent on 15 September 1994 in support of a motion to set aside the judgment of Judge Christie QC. He stated in this affidavit that on 29 April 1994 he received cheques from the lender totalling $25,000, and on 9 July further cheques totalling $19,598. He also provided details of how the money had been spent. On 2 June 1995 Judge Twigg QC made an order under s203 (1) of the District Court Act 1973 referring to this Court allegations of contempt arising from the actions of the opponent and the other defendant in granting the second mortgage. Thereupon, pursuant to SCR Pt55 rll (3)(a), it became the duty of the Registrar to commence proceedings for punishment of the alleged contempt. The evidence on behalf of the claimant included an affidavit by Mr Gary Anderson, the State Manager of the lender, who proved the loan application, the mortgage, the consent to caveat and the documents evidencing the opponent's drawings. The proceedings came on for hearing on 11 July 1997 when the opponent appeared in person and sought an adjournment to obtain legal representation under the pro bono legal aid scheme administered by the Bar Association. The application was granted and the proceedings were adjourned to 5 August. On that day Mr McQuillen appeared for the opponent pursuant to the Bar Assocation scheme. The affidavit evidence for the Registrar was then read and objections were ruled on. Deborah Ens, the solicitor who acted for the plaintiff in the District Court proceedings, was called and cross-examined. She was present on 15 April 1994 when Judge Christie QC delivered his reasons for judgment and pronounced his orders. At the conclusion of her evidence the transcript of 15 April was admitted without objection. Miss Latham, the Crown Advocate, then closed her case and Mr McQuillen submitted that there was no case to answer. His three points in support of this submission were that a person can only be guilty of contempt of court by breaching a court order if that order is clear and unambiguous; the person charged with contempt must have had proper notice of its terms, and the conduct charged as a breach must not be casual. The Court ruled that there was a case to answer, and the proceedings were adjourned to 20 August. On that day the opponent gave oral evidence and was cross-examined. There was no other evidence. URJ THE REGISTRAR COURT OF APPEAL v PELECHOWSKI (Handley JA) 3 The two issues of fact which remain for decision by the Court are whether the order of Judge Christie QC was clear and unambiguous, and whether the opponent had proper notice of its terms. The plaintiff had filed a notice of motion in the District Court returnable on 15 April 1994 when the part heard trial was again before the Court. Prayer 1 of that notice of motion was as follows: "That the Defendants Karl Pelechowski and Penny Pelechowski (also known as Penelope Jane Stephens) be restrained from selling or otherwise disposing of, encumbering or further encumbering or otherwise dealing with their interest in the property situated at and known as 9 Kippax Place, Erskine Park in the State of New South Wales, pending further order of this Honourable Court". Service of the notice of motion was proved, and during the hearing on 15 April, the opponent admitted receiving the notice of motion. The following exchange then took place: "His Honour:... Mr Pelechowski, the plaintiff is seeking by notice of motion... an order that you be prevented from dealing with the property at Kippax Road. Pelechowski: Yes, I did receive a letter from the plaintiff's solicitors regarding that which I find wholly offensive. His Honour: Yes, well I don't know what was in the letter. Pelechowski: Well they seek an encumbrance over the property known as 9 Kippax Place. I have not had a chance to go through it in total and I will object to it very strongly. His Honour: You object to what? Pelechowski: They seek an encumbrance over 9 Kippax Place... I find it wholly offensive the way it was drafted. I have not had time to have it examined by a legal person". After some further discussion between the Judge and the opponent, his Honour delivered his extemporary judgment, in the course of which he said: "T then turn to a motion brought by the plaintiff... I am satisfied that that motion has been served upon the defendant, Karl Pelechowski, and I am satisfied... that the contents of that motion... have come to the knowledge of Penny Pelechowski.... I should enumerate I am asked to restrain both defendants from selling or otherwise disposing of, encumbering or further encumbering or otherwise dealing with the interest in the property known as 9 Kippax Place, Erskine Park. The evidence before me would reveal and indeed the male defendant concedes... that the particular property is owned by Karl Pelechowski and Penelope Jane Stephens as joint tenants... Having regard to the view that I have of the defendants' evidence in this matter I propose to accede to the orders sought in (the) notice of motion and I order that the defendants Karl Pelechowski and Penny Pelechowski also known as Penelope Jane Stephens be restrained from selling or otherwise disposing of, encumbering or further encumbering or otherwise dealing with their interest in any way in the property situate and known as 9 Kippax Place, Erskine Park. I order that that order shall continue until further order or payment of the verdict". The order pronounced by the Judge was in the terms sought in prayer | of the notice of motion. The following exchange then took place: "Pelechowski: I seek leave to appeal, your Honour. (His Honour): You don't need my leave to appeal... I refuse a stay of proceedings but if you lodge an appeal that will in any event give you the stay of proceedings but not in regard to the order I made regarding the property. Do you understand. 4 UNREPORTED JUDGMENTS Pelechowski: Yes, I understand, your Honour'. The order restrained the opponent and the other defendant from encumbering or further encumbering the property. Encumbrance has a technical legal meaning and a wider popular meaning. The expressions "encumbered" and "unencumbered" are in common use. The order also restrained the defendants from selling or otherwise disposing of or otherwise dealing with their interest in the property and there could be, and was, no suggestion that these parts of the order were ambiguous. The opponent in his evidence before this Court said that on 15 April 1994 he did not know "in its fuller sense" what an encumbrance was, that he had heard of the word but did not know what it meant "in the true legal sense". However he knew what a mortgage was and that it was an encumbrance. He also knew that a loan on security and an unregistered mortgage would involve dealing with the property. The District Court transcript records the opponent using "encumbrance" twice to refer to the restraining order sought by the plaintiff. The opponent used the word in its wider popular meaning but this still includes a mortgage. The opponent had more knowledge of land dealing than the average member of the public. In 1975 and 1976 he undertook a real estate course at Blacktown Technical College which, as he said, included dealing with basic legalities. In 1977 he obtained a real estate licence and for some time he was a branch manager of Freeman's Real Estate Agency. He gave the following evidence in cross-examination: "Q. So you were required to satisfy the Real Estate Institute that you understood what a mortgage was, is that right? A. That's correct. Q. And what an encumbrance was? A. There were legal terms that were part of the course, yes, and you had to - it was part of the course, yes". Although he said he did not recall using the term "encumbrance" when addressing Judge Christie QC, there is no reason to doubt the transcript, and I do not accept this part of his evidence. Indeed I do not accept his evidence that he did not then understand the meaning of "encumbrance" and "encumber". In any event he agreed that a mortgage would be a dealing and an encumbrance and this is sufficient. I am therefore satisfied that the oral order, in the terms of prayer 1| of the notice of motion, was clear and unambiguous. The other question is whether the opponent had sufficient notice of the terms of the order. A sealed copy of the order was not served before the breaches committed on 29 April and 9 July, but service was not essential. The District Court Act and Rules make no provision for the service or enforcement of restraining orders. Compare DCR Pt31 r17. Proceedings to enforce restraining orders made by the District Court must be brought in the Supreme Court pursuant to s203 of the District Court Act unless the breach occurred in the face of the court or in the hearing of the court (s199). SCR Pt42 18 requires service or notice of orders before committal or sequestration can be sought for their breach. I am not satisfied that those Supreme Court Rules apply to the enforcement, in the Supreme Court, of orders of the District Court but this does not matter because those rules codify the earlier law. The opponent was in court when the order was made by Judge Christie QC. In Hearn v Tennant (1807) 14 Ves Jun 137 (33 ER 473) Lord Eldon said: "Tf these parties by their attendance in Court were apprised, that there was an Order, that is sufficient; and I cannot attend to a distinction so thin, as that persons, standing here until the moment the Lord Chancellor is about to URJ THE REGISTRAR COURT OF APPEAL v PELECHOWSKI (Handley JA) 5 pronounce the Order, which from all, that passed, they must know will be pronounced, can by getting out of the Hall at this instant avoid all the consequences". Later in M'Niel v Garratt (1841) Cr & Ph 98 (41 ER 427) Lord Cottenham said: "Tt is the established rule of the Court, that a party who has notice of an order is bound by it from the time it is pronounced: and if he presumes to disobey it he is liable to the censure of the Court for so doing". See also United Telephone Co v Dale (1884) 25 Ch D 778 at 784-5; Hall & Co v Trigg [1897] 2 Ch 219 at 222; and Husson v Husson [1962] 1 WLR 1434. The case for the opponent was that he became shocked when he realised that the Judge was going to find against him and did not understand what was happening. He said that while in this state the Judge's words became "distant and mumbled", he did not hear the Judge pronounce the restraining order and did not believe that an injunction had been granted. This evidence finds no support in the transcript. The discussion between the Judge and the opponent about the plaintiff's notice of motion has already been referred to. His Honour's reasons for making the order, and the terms of the order, are perfectly clear. The Judge then said: "The evidence before me would reveal and indeed the male defendant concedes to me at my request, that the particular property is owned by Karl Pelechowski and Penelope Jane Stephens as joint tenants. I do not have any evidence before me as to the reference to title of the property but upon production of that evidence at the Registry the (order) that I propose to make ought include the reference to title and I authorise that evidence to be produced by affidavit". Deborah Ens heard this and extracted a title search from her file and handed it to her counsel. He informed the Judge who told counsel to show it to the opponent and the search was then tendered. The Judge's reasons continued: "The first defendant invites me to consider the copy of search now handed to me by plaintiff's counsel and invites me to find in this document that the property was purchased in 1980. I cannot for myself see that is so but I accept for the moment what the defendant says and I assume that he puts that to me on the basis that he may have misunderstood what I said and he may feel that I assert that this property at Kippax Place was the property purchased with the $50,000. I do not so assert and would not have any idea whether it was or not, nor would it be relevant to the order which I am in the middle of making...". This appears to establish that the opponent was in full possession of his faculties, able to appreciate the opportunity that production of the search created, and to take advantage of it. Following delivery of the Judge's reasons for judgment, there was a discussion between the opponent and the Judge about leave to appeal and a stay of proceedings which was recorded in the transcript. The Judge told the opponent that there would be no stay of the order regarding the property. He asked the opponent whether he understood and the opponent said he did. The opponent agreed that he made this statement, but said he did not then understand what had happened. The opponent also said that he did not know what was in the search and did not see it but assumed that it related to the property. He said that his reliance on the search was "like a stab in the dark". Even on his own evidence, the opponent realised that the Judge had made some order about the property. 6 UNREPORTED JUDGMENTS The transcript, the Judge's reasons for judgment and the evidence of Deborah Ens establish that the opponent was participating actively and astutely in the proceedings and appeared to be aware of what was happening. His uncorroborated evidence is inconsistent with the objective record and depends entirely on his credit. His evidence on this question is unbelievable and I do not believe it. I am satisfied beyond reasonable doubt that the opponent was aware of the terms of the Judge's order when he left the District Court on 15 April 1994. The claimant has therefore established that the opponent committed wilful breaches of that order. Mr McQuillen's final submission was that the opponent was not guilty of contempt of court because the Judge had no jurisdiction to make that order. Apart from statute, the District Court would have no jurisdiction to make an order in the nature of a Mareva injunction. However s46 (1) of the District Court Act, which formed part of the original Act, provided: "(1)... the Court shall, in any action, have power to grant any injunction... which the Supreme Court might have granted if the action were proceedings in the Supreme Court". Riley McKay Pty Ltd v McKay & Anor [1982] 1 NSWLR 264 established that the Supreme Court had power, derived from s23 of the Supreme Court Act and its inherent jurisdiction, to grant a Mareva inunction. Prima facie the District Court has the same power under s46(1). Mr McQuillen submitted that there was no equivalent to s23 in the District Court Act and as a so-called inferior court it did not have the same inherent jurisdiction as the Supreme Court. However, with respect, this cannot affect the express terms of s46(1). The same may be said about Mr McQuillen's reliance on the remedy against the person of the debtor conferred by s113, and the absence of any power in the District Court to enforce orders under s46. In the end, Mr McQuillen's point was that the District Court had no jurisdiction to make this order since s46 conferred a power and was not expressed to confer jurisdiction. The short answer is that s46 (1) gives the District Court power to grant Mareva injunctions in cases in which the Court has jurisdiction. The District Court had jurisdiction in this case because the defendants were resident in the State, the cause of action arose here, and the claim was within the monetary limit. The order was therefore valid. I find that the opponent is guilty of a contempt of Court and I propose the following orders: (1) Declare that on 29 April and 9 July 1994 the opponent committed wilful breaches of the injunction granted by Judge Christie QC on 15 April 1994. (2) Adjourn the proceedings to a date to be fixed to consider the question of penalty. Beazley JA I agree with Handley JA. Stein JA I agree with Handley JA. The opponent is guilty of contempt of court. (1) Declare that on 29 April and 9 July 1994 the opponent committed wilful breaches of the injunction granted by Judge Christie QC on 15 April 1994. (2) Adjourn the proceedings to a date to be fixed to consider the question of penalty. Counsel for the appellant: M Latham, Crown Advocate URJ THE REGISTRAR COURT OF APPEAL v PELECHOWSKI (Stein JA) Solicitors for the appellant: Crown Solicitor Counsel for the respondent: A J McQuillen Solicitors for the respondent: In person