The relevant evidence
6It is convenient to summarise the relevant evidence before considering the reasoning of the primary judge and the issues raised by the appeal. The latter are principally directed to the primary judge's finding that Mr Paul did not know or believe that the payment of moneys from the third respondent's account with St George Bank would involve any breach of the orders made on 16 September 2010. That was because, as he understood those orders, they also continued an existing order against him which permitted the payment of living, legal and business expenses using his assets, which, as defined by those orders, included the assets of the third respondent's business.
7Before December 2009 the first appellant and first respondent carried on a business of selling media advertising via a corporate vehicle, the second respondent, formerly named Associated Media Pty Ltd (Associated Media). In December 2010 the appellants commenced proceedings against Mr Paul and the second respondent claiming that moneys received in the course of the unwinding of that business had been applied otherwise than in accordance with the terms of an agreement made on 19 December 2009.
8On 24 August 2010 solicitors acting for the appellants sought undertakings from Mr Paul that he not withdraw or deal with moneys held in three bank accounts of Associated Media with St George Bank. Following receipt of that letter, and acting at least partly on the advice of St George Bank, Mr Paul arranged on 25 August for the moneys in those three accounts to be consolidated into one account of Associated Media. On 27 August, on the appellants' application, Nicholas J made orders restraining Mr Paul and Associated Media from withdrawing money from the three accounts. Those orders were made ex parte and continued until 5.00pm on 30 August 2010. On 28 August Mr Paul received notice of them. He gave evidence that he informed the solicitor then acting for him that the three accounts had been closed and the funds transferred to a new account. That evidence was not challenged. On Sunday 29 August Mr Paul's mother died. Understandably, he maintained that at this time he was "focusing on family". On 30 August the order made on 27 August was extended by consent "until further order".
9The appellants became aware on 31 August that the three accounts had been closed. On 1 September they obtained an ex parte freezing order against Mr Paul and Associated Media. That order, made by Slattery J on the evening of that day, included the following specific orders and terms:
"3 Subject to the next paragraph, this order has effect up to and including 5:00pm on Monday, 13 September 2010 ... On the return day at 10:00am there will be a further hearing in respect of this order before the Court.
...
5 In this order:
...
'you', where there is more than one of you, includes all of you and includes you if you are a corporation;
...
if you are ordered to do or not to do something you must do it or not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.
...
FREEZING OF ASSETS
7 (a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of AUD$72,820.80....
8 For the purposes of this order,
(1) your assets include:
(a) all your assets, whether or not they are in your name and whether they are solely or co-owned;
...
(c) the following assets in particular: the property known as 9 Meehan Road, Cromer New South Wales or, if it has been sold, the net proceeds of the sale; the assets of your business Tony Paul Media Pty Limited t/as Association Media or, if any or all of the assets have been sold, the net proceeds of the sale; and any money in any and all bank accounts.
...
EXCEPTIONS TO THIS ORDER
11 This order does not prohibit you from:
(a) paying your ordinary living expenses;
(b) paying your reasonable legal expenses;
(c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and
(d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation."
10Because of the provisions of paragraphs 5, 8 and 11, the effect of these orders was not to prohibit Mr Paul from using his assets, which by the definition in order 8(c) included the assets of the business of the third respondent, to pay ordinary living expenses, reasonable legal expenses or from dealing with or disposing of those assets in the ordinary and proper course of his business.
11Mr Paul received a copy of these orders on the evening of 1 September 2010. They were extended, apparently by consent, on 13 September 2010.
12On 16 September 2010 the following orders were made by Rein J by consent:
"1. Orders that Tony Paul Media Pty Ltd ... be joined as third defendant to these proceedings.
2. Orders that the operation of the orders of Slattery J. of 1 September 2010, extended by Rein J. on 13 September 2010, be extended until further order of the Court.
3. Orders that the third defendant, by itself, its employees, servants and agents be restrained until further order of the Court, from withdrawing or otherwise dealing with the monies held standing in St. George Bank Ltd's account number XXX so as to reduce the balance of the account below the sum of $37,837.74."
13Mr Paul was not present in Court when these orders were made, nor was he provided with a copy of them at that time. His evidence before the primary judge was that, at some stage after 1 September 2010, he understood that orders were to be made that extended the previous orders and permitted him to continue to use the money in the third respondent's account to pay the expenses of the company, himself and his basic living allowances (Black 46). That understanding was based on conversations with his solicitors. He did not receive a copy of the orders made on 16 September 2010 until 19 October 2011.
14Mr Paul also gave evidence, which was not challenged, that between 22 September 2010 and 4 April 2011 he withdrew moneys from the St George bank account and paid living expenses, legal expenses and company bills and expenses. He said that he did so on the understanding that those payments were within the terms of the exception to the freezing order made on 1 September 2010 which, he understood, had been extended.
15On 9 March 2011 Mr Paul's former solicitors received and forwarded to Mr Paul a letter from the appellants' solicitors which, when referring to the orders, noted:
"The Court proceeded to make freezing Orders against the First and Second Defendants on 1 September 2010. It was then necessary for the Plaintiffs to apply for further Orders from the Court by Consent on 16 September 2010 when the Third Defendant was joined into the proceedings and the operation of the freezing Orders was extended to the third defendant". (emphasis added)
The letter continued:
"... we note that it appears from bank statements obtained from St George Bank under subpoena, that despite the existence of the Order, since the date of the Order, the Third Defendant has caused the balance of the aforesaid account to fall below the amount provided by the Order. We advise that our clients reserve their rights arising from this matter."
16The appellants rely upon this letter as fixing Mr Paul with knowledge of the terms of the orders made on 16 September 2010. The making of payments from the St George bank account of the third respondent continued for a further month until 4 April 2011.