REGISTRAR COURT OF APPEAL v PELECHOWSKI SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL HANDLEY, BEAZLEY and STEIN JJA 10 December 1997, 3 February 1998 [1998] NSWCA 231 CONTEMPT OF COURT — Breach of Mareva Injunction — penalty. On 28 October 1997 the Court found that the opponent was guilty of contempt of court as the result of his disobedience of a Mareva injunction granted by Judge Christie QC on 15 April 1994. The breach arose from a second mortgage granted by the opponent and his co-owner over a house property on 29 April 1994, which secured advances by the second mortgagee to the opponent and his co-owner of $25,000 and $20,000 made on 29 April and 11 July 1994. The monies advanced had been used to pay other creditors in full or to fund litigation in which the contemnor was engaged. The Court heard evidence and submissions on the question of penalty on 12 December 1997. The judgment of $105,000 in favour of the plaintiff who obtained the Mareva injunction remained wholly unsatisfied and the contemnor made no offer of payment or restitution. HELD: The contemnor was sentenced to a fixed term of imprisonment for 6 months as the minimum required to vindicate the authority of the courts and the integrity and effectiveness of injunctive orders. Handley, Beazley and Stein JJA. On 28 October 1997 the court declared that the opponent Karl Pelechowski (the contemnor) was guilty of contempt of court in that on 29 April and 9 July 1994 he committed wilful breaches of an injunction granted by Christie DCJ on 15 April 1994. The court has now had the opportunity of hearing evidence and submissions on the question of penalty. In its judgment the court found that the contemnor, who had been present at the time the order was made by the judge, understood the meaning of the injunction. Handley JA found that the opponent, contrary to his evidence before this court, was actively and astutely participating in the proceedings before Judge Christie QC and 'appeared to be aware of what was happening'. His Honour rejected Mr Pelechowski's evidence to the contrary, categorising it as 'unbelievable and I do not believe it' (p 11). Within 2 weeks of the order being made, the contemnor encumbered the property at 9 Kippax Place, Erskine Park (the subject property) of which he and Penny Stephens are the registered proprietors, to the extent of approximately $45,000. He executed a mortgage over the subject land in favour of the lender, Household Financial Services Pty Ltd (HFS). The property was already the subject of a registered mortgage to the Advance Bank. In the District Court proceedings the plaintiff, Michael Rahme, had obtained a verdict and judgment against the contemnor and Ms Stephens in the sum of $105,090. The purpose of the Mareva injunction granted by his Honour was to prevent the defendants from disposing of the principal asset available for the satisfaction of the judgment debt. What did the contemnor do with the $45,000 he obtained from HFS? According to Mr Pelechowski, apart from some personal expenses for himself and Ms Stephens, the greater part of the funds were spent on various legal proceedings that the contemnor has and continues to engage in. 2 UNREPORTED JUDGMENTS The contemnor gave evidence before the court on 10 December 1997. In essence he indicated that he was in no position, nor was he likely to be, to make any payment to the judgment creditor. Indeed, at one stage he stated that if he obtained any moneys (eg. from his workers' compensation claim or otherwise) he would use it to pursue an appeal against the judgment of Judge Christie. It is patent that the contemnor has no proposal to satisfy the judgment debt, nor indeed to make any offer of payment to Mr Rahme, however small. No affidavit has been sworn by the contemnor disclosing his financial circumstances. While he gave oral evidence of his position, we found it most unsatisfactory. Not one document was produced to verify his statements in the witness box. His evidence was internally inconsistent, often within a very short time. He was evasive and prone to prevaricate rather than give direct answers to questions. The court must confess to having great difficulty in accepting his evidence unless it is corroborated or obviously correct. It appears, however, that the contemnor is in receipt of an invalid pension and no other income. As we have noted, he is a registered proprietor of the subject premises with Ms Stephens. He indicated that the value of the property had fallen because of its state of repair. In any event, he said that it was really owned by Ms Stephens and not him. It was encumbered to the Advance Bank and the debt to the HFS incurred in breach of the Mareva injunction. Both debts were in arrears and he believed that he had no equity in the property. If it was sold, which is not contemplated, any excess would be used to fund his litigious activities. We do not accept that he is telling the whole truth about the value of the property or his interest in it. According to the contemnor he has substantial debts other than in relation to the property. These are almost exclusively legal costs incurred in various pieces of litigation in which he is engaged. According to Mr Pelechowski, he is likely to settle his workers' compensation claims. However, the proceeds will be applied to payment of legal costs he owes and in funding ongoing litigation relating, inter alia, to his dismissal from the public service. Nothing will be made available to the judgment creditor. On behalf of the contemnor, Mr McQuillan of counsel asks the court to take account of: ¢ the contemnor's age — 51 years * that the contempt interfered with private property rights only ¢ that he has no prior offences ¢ that it is most unlikely that he will offend again * that the breach arose out of a disordered state of mind and stress ¢ that the contempt was not aimed at the integrity of the justice system ¢ that the contemnor had provided genuine, repeated and fulsome apologies, and expressed contrition. Some of these submissions may be accepted, but by no means all. We reject the submission that the breach arose out of a disordered state of mind. It is contrary to the findings of the court in its judgment of 28 October 1997. The breaches of the injunction were clearly deliberate and wilful and with a knowledge and understanding of the order. As to the claim of repeated and fulsome apologies, we can find no apology for the breach until Mr Pelechowski gave evidence on 10 December 1997. This was the first time that he acknowledged the breach. While we accept the apology to the court, Mr Pelechowski did not expressly state the acts for which he was apologising, and the court harbours residual doubts about its genuineness. Even UWFEGISTRAR COURT OF APPEAL v PELECHOWSKI (Handley, Beazley and Stein JJAB if accepted, he has taken a long time to reach this point. As we have already observed, the apology has not been accompanied by any offer whatever to the judgment creditor. It seems that the substantial debt to Mr Rahme would be the last on the list of Mr Pelechowski's concerns, that is assuming that he has any concern about the judgment debt. The last submission which we have difficulty in accepting is the suggestion that the breach was not aimed at the integrity of the court or the administration of justice. The High Court in AMJEU v Mudginberri Station (1986) 161 CLR 98 at 114 made it clear that there was a 'public interest' in vindicating the authority of the court and maintaining respect for the law. The court acknowledged that the power to punish for contempt imposed 'a heavy responsibility upon a court confronted with a determined challenge to its authority' (115). There was a need for the chosen remedy to be effective because if it were not, 'serious and lasting damage [would result] to the fabric of the law' (115). Here, of course, the damage is done. The contempt cannot be remedied by obedience to the order which has already been broken by the borrowings from HFS of $45,000. Nor is Mr Pelechowski offering to make any reparation to the judgment creditor. Imposition of a fine would be a wholly inappropriate response to the wilful and deliberate flouting of the Mareva injunction, even assuming that the contemnor had the means to pay a substantial fine. The contempt must be regarded in a most serious light. We are unsure whether the contemnor fully appreciates or understands, even at this stage, the seriousness of his conduct. Indeed, it is possible that some of his evidence has been deliberately false with the intent to mislead the court. His belated apology is to be contrasted with his earlier defiance. The principles relating to punishment for contempt were exhaustively discussed by Kirby P in Registrar Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 304 at 313-316. The court applies them to the circumstances of this case. The breaches are of a most serious nature. The authority of the court can only be protected and vindicated by the imposition of a custodial sentence, indeed a not insubstantial one. We are cognizant that not all wilful and deliberate interferences with the administration of justice should attract a custodial sentence (Maniam at 315). This is obviously so. But here the court is faced with a particularly blatant and determined threat to the integrity of the civil justice system. The public is entitled to expect that a court injunction will be obeyed. If injunctions were to be disobeyed with any frequency, the civil justice system would suffer a serious loss of public confidence and credibility. This court must safeguard and vindicate the integrity and effectiveness of injunctive orders. The purposes of punishment for contempt include deterring both the contemnor and others from committing like contempts and denouncing in an emphatic way the conduct concerned. (DPP v John Fairfax & Sons Ltd (1987) 8 NSWLR 732 at 741) In determining an appropriate sentence we take into account the evidence in mitigation, including the medical evidence relating to the contemnor. The court has arrived at the conclusion that the contemnor should be sentenced to a fixed term of imprisonment of 6 months. No lesser penalty than 6 months goal will suffice to vindicate the authority of the court. The contemnor should also pay the claimant's costs of the summons on an indemnity basis. The sentence is to commence today and conclude on 3 August 1998. UNREPORTED JUDGMENTS Sentenced to a fixed term of imprisonment for 6 months Counsel for the appellant: M Latham, Crown Advocate Counsel for the respondent: A J McQuillen Solicitors for the appellant: Crown Solicitor