Paccar Financial Pty Limited v Ian Menzies & Colleen Menzies

Supreme Court of NSW|2015-06-05|Before: Rothman J

Solicitors: Mills Oakley Lawyers (Plaintiff) Tully & Chiper Lawyers (First and Second Defendants) File Number(s): 2010/377702; 2015/171519; 2015/171520

Judgment

HIS HONOUR: On 4 May 2015, the Court, as presently constituted, found the first and second defendant, Ian and Colleen Menzies, guilty of contempt of court for failing to forfeit and return to the plaintiff the property (two trucks with attached trailers) specified in the Statement of Charge.
The orders breached were made on 3 June 2013: see Paccar Financial Pty Ltd v Menzies; Menzies v Paccar Financial Pty Ltd (No 5) [2013] NSWSC 772.
The Court issued reasons for judgment for contempt against the first and second defendants: Paccar Financial Pty Limited v Ian Menzies & Colleen Menzies [2015] NSWSC 501 (the verdict judgment).
On 5 June 2015, the Court heard further submissions from the parties relating to punishment, sentence and costs against the first and second defendants based upon the findings of fact in the verdict judgment.

Punishment for Contempt

Rule 13 in Part 55 of the Supreme Court Rules 1970 confers a power on the Court to impose a penalty for contempt. The rule states: "(1) Where the contemnor is not a corporation, the Court may punish contempt by committal to a correctional centre or fine or both. … (3) The Court may make an order for punishment on terms, including a suspension of punishment or a suspension of punishment in case the contemnor gives security in such manner and in such sum as the Court may approve for good behaviour and performs the terms of the security."
There are historically two types of contempt: civil and criminal contempt. Civil contempt is, in essence, breach of a court order or undertaking, while criminal contempt is conduct that obstructs the administration of justice. The distinct function that punishment of each type of contempt serves was discussed in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98. In that case, Gibbs CJ, Mason, Wilson and Deane JJ described the distinction at [106] as: "(a) enforcement of the process and orders of the court, disobedience to which has been described as 'civil contempt'; and (b) punishment of other acts which impede the administration of justice, such as obstructing proceedings in court while it is sitting or publishing comments on a pending case, which have been described as 'criminal contempt'."
Traditionally, the purpose of imposing a penalty for civil contempt was intended to be coercive rather than punitive in nature. In other words, the purpose was to enforce or remedy a right or interest of a party: Hearne v Street [2008] HCA 36; (2008) 235 CLR 125; Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd at [106].
However, a question emerges in the circumstance where the breach of the court order or undertaking, which otherwise would amount to civil contempt, is deliberate. If the conduct of the civil contempt were to involve a deliberate defiance or contumacious breach of an order or undertaking, it is considered to be criminal in nature: Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525 at 530. Additionally, in Pang v Bydand Holdings Pty Ltd [2011] NSWCA 69, Beazley JA found that contumacious, wilful and deliberate disobedience of a court order may be characterised as both civil and criminal conduct: see also Australian Consolidated Press Ltd v Morgan [1965] HCA 21; (1965) 112 CLR 483; Witham v Holloway.
Therefore, the purpose of imposing a punishment for such wilful disobedience to a court order is to discipline the offender and to vindicate the authority of the court: Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd, at [112].
Sentencing is a process of intuitive synthesis in which the sentencing judge imposes a sentence that is appropriate to the gravity of the offence that was committed and to the circumstances of the offender who committed it.
The Crimes (Sentencing Procedure) Act 1999 deals primarily with the sentencing of any offender and applies to an offender being sentenced for contempt.
As stated in s 3A of the Crimes (Sentencing Procedure) Act, in sentencing any offender one must take into account the following factors: punishment; protection of society; personal and public deterrence; retribution; and reform.
These factors often reflect conflicting goals that cannot be considered in isolation from each other. The purposes of sentencing an offender for contempt are the same as those for sentencing an offender for any other offence.
The provisions of s 21A of the Crimes (Sentencing Procedure) Act deal with the aggravating and mitigating factors of the offence.
The plaintiff relies on NCR Australia v Credit Connection [2005] NSWSC 1118 to submit that the Court has a wide range of sentences that it may impose for contempt of court, pursuant to the Crimes (Sentencing Procedure) Act. This range includes imprisonment (s 5), periodic detention (s 6), home detention (s 7), community service orders (s 8), good behaviour bonds (s 9), dismissal of the charge accompanied by either a good behaviour bond or a condition that the offender participate in an intervention programme (s 10), deferral of sentence (s 11), suspended sentence (s 12), fine (s 14), or the making of a non-association or a place restriction order (s 17A).

Nature of Contempt

In Commissioner for Fair Trading v Rixon (No 3) [2014] NSWSC 1279, Garling J described the relevant considerations applicable when determining an appropriate penalty or sentence for contempt of court.
Although they may vary in particular circumstances, these include: the nature and circumstances of the contempt; the impact or likely impact of the contempt on the administration of justice; the extent of the offender's culpability for conduct; the need to deter the offender and others from engaging in contempt; whether a finding of contempt has been previously made; contrition or remorse and an apology proffered; and the financial and personal circumstances of the offender when a fine is being sought.
I respectfully accept this statement of the relevant considerations in determining what penalty ought to be imposed in the present case.

Order for Contempt of Court

In the verdict judgment I summarised the facts at [12]-[25]. I held at [44] that: "I have no doubt that the first and second defendants understood the Orders and knew that they were required to obey them. In my view, the terms of the order are clear, unambiguous and capable of compliance by the first and second defendants. Further, it is apparent from the above correspondence, that the first and second defendants do not intend to surrender the property to the plaintiff and this refusal is deliberate. By refusing to comply, the first and second defendants are deliberately and contumeliously impeding the administration of justice."
At [45] in the verdict judgment, I concluded that the charge of contempt against the first and second defendants had been proved beyond reasonable doubt.
I also found that the wilful and contumelious disobedience of the orders, made by the Court on 13 June 2013 against the first and second defendants, is serious in nature.
To this date, the first and second defendants have not purged their significant and ongoing contempt. In these circumstances, it is unlikely that without the Court's intervention this position will change.
Repeatedly, in both their oral and written submissions, the first and second defendants claim that justice has not been served in the earlier proceedings. The defendants submit that their refusal to comply with the orders of the Court is justified by the manifest errors of law or incorrect findings of fact made by the judge at first instance. It is clear that the first and second defendants have resolutely adopted the position that they will not accept the earlier unfavourable decision against them.

Apology and Remorse

An apology letter by the first defendant was tendered in court on 27 October 2014 (Exhibit 1 on the motion). The first and second defendants have also tendered two offers of compromise. These offers have not been accepted by the plaintiff.
These letters disclose no real remorse for their conduct and a continuing defiance of the Court and its authority.

Subjective Features of the First and Second Defendants

The first and second defendants have been married for 37 years and live in the Kempsey area. The first defendant is 60 years of age and the second defendant is 55 years of age. They have five children together, all, but one, of whom live elsewhere.
Based on the evidence before the Court, the first and second defendants have a strong and caring marriage. However, their ongoing legal disputes have placed a significant strain on their relationship and, in turn, their relationship with their children.
For most of the first defendant's working life, he has been employed in earthmoving, civil construction and transport work. However, he has not worked full time since 2008 and has been receiving a Centrelink Newstart Allowance since 2012. On 14 July 2015, the first defendant enrolled in a Certificate II in Skills and Work and Training at a North Coast TAFE.
The first defendant has suffered three traumatic brain injuries and has been diagnosed with development disorder and acquired brain injury, associated with the effects of serious brain injury (pages 5 and 6 of Dr Nielssen's report dated 5 February 2015). Dr Nielssen describes that the first defendant's frontal lobe acquired brain injury has resulted in an inflexibility of thinking, abnormal obstinacy and lack of self-awareness. Additionally, according to the Corrective Services report, the injury has caused him to be unable to control or to regulate his emotion, impulses, planning and social judgment. All of these traits have reduced the first defendant's ability to understand the consequences of his actions.
I accept that the first defendant's lack of understanding of the seriousness of his contempt is likely to have been caused by his brain injuries. Furthermore, the first defendant suffers from chronic progressive renal failure (report by Associate Professor Shane Carney from the Department of Nephrology, John Hunter Hospital dated 22 July 2015). It is likely that he will require haemodialysis and a transplant in the future.
However, the first defendant's mental condition is not necessarily an ameliorating factor, when taking into account his non-compliance with the orders of the Court. It must be accepted that the court system operates to determine and protect an individual's rights and interests. Once orders of the court have issued, they must be obeyed, regardless of whether an individual considers the decision to be right or wrong.
On the other hand, the second defendant has been the principal home-maker for their family for a significant part of her life. The second defendant also receives a Newstart Allowance from Centrelink. As described by Dr Gorrell in his psychological report dated 3 August 2015, the second defendant has suffered severe depression, anxiety and high levels of stress for a number of years. The evidence of Dr Gorrell establishes that the second defendant has been, to some extent, controlled by the first defendant. The facts of these offences are a testament to the accuracy of that assessment.
The Pre-Sentence Report of Corrective Services indicated that the first and second defendants are assessed as being a low/medium risk of re-offending. The first defendant's identified criminogenic needs are education/employment, financial and attitude/orientation. The second defendant's criminogenic needs related to emotion/personal and attitude/orientation. Corrective Services accept that each defendant is suitable for a community service order. However, it was suggested that they each would not benefit from a developmental programme, as such a programme would not address their criminogenic needs.
The defendants' counsel also tendered 11 references attesting to their good character. I have taken these references into account.

Culpability of the First and Second Defendant's Contempt

The distinction in terms of relative culpability between the first and second defendant must be taken into account. I consider that the first defendant's conduct is more serious because of his wilful non-disclosure of the whereabouts of the property and, therefore, the first defendant's penalty warrants a significantly longer custodial term.
An open offer of compromise dated 22 May 2015 was tendered by the defendants in the contempt proceedings (Exhibit A). The letter contains details pertaining to an offer of settlement between the plaintiff and defendants. The letter is signed by both the first and second defendant. The terms of the letter of offer seems to suggest that, if the second defendant were minded so to do, she would be in the position to ascertain the whereabouts of the property.
As I found at [9] in the verdict judgment, the first defendant acknowledges that he understands the orders and simply refuses to comply with them.
The second defendant's affidavit sworn on 9 December 2014 states that she does not know the location of the trucks and is incapable of obtaining that requisite knowledge. The second defendant has made this statement to the Court on numerous occasions.
In an email to my Associate dated 11 August 2015, the first defendant states that "my wife has no power to deliver trucks or knows where they are. And it will be over my [sic] cold dead lifeless body that I comply with an Order that is nothing but a Miscarriage of Justice arrived at by not taking into account any of our evidence".
Furthermore, the Court received a letter from the second defendant dated 11 August 2015. The letter contains a number of assertions: "I have a great respect for the Court. Courts are there to deliver judgments that are fair with all evidence before them and tested - in our case this has not happened. I am having an extremely hard time in dealing with all of this. Not one bit of my evidence has been heard and nor has any of my husband's yet I am charged with Contempt of Court and facing gaol and or punishment. I have told the Court in person and in my Affidavits and will say this again I do not know where the Trucks are. As I have said time and time again I dislike trucks with a passion. I can not make my husband tell me where they are - no more than you or anyone can make their wife partner or husband tell you something they do not want to reveal. I can not drive a B-Double Truck. I have only a class A drivers licence - So what can I Do … I am in a no win position. I support and care for my husband. I respect the Court. But Paccar have got a lot to answer for. What is the motivation for Paccar to relentlessly keep attacking me and my family. Through various Court Hearings they talk about wanting the trucks to be returned so that they can get money back from the trucks before they become worthless. If this is the case why have they not taken up Ian's offer to Settle or payment not only in these proceedings but from day one...."
As I made clear in the verdict judgment, the second defendant's conduct amounts to wilfully shutting her eyes and she has adopted the position of the first defendant by failing to take any steps to deliver the property to the plaintiff. This still remains her position. She proffers the explanation that the first defendant has not told her the trucks' location and she could not drive them even if she did know. Yet she does not suggest that she has asked him for the location of the property.
I do not accept that the second defendant does not know, or is incapable of knowing, the whereabouts of the property. However, in the scheme of the issues that I am required to determine, it is not particularly significant on sentence. As is clear from the two offers of compromise tendered in Court, the second defendant is involved in, and a party to, the obstinate and illegal refusal to forfeit the aforesaid property, which renders the Court's order unenforceable.
The first and second defendants understand that, if they continue to disregard the orders of the Court, it is likely the Court will impose a punishment upon them both. This does not seem to be of significant concern to either of them.

Consideration

Before dealing with the sentence to be imposed on each of the defendants, it is appropriate for me to make some comment on the justification put forward for the disobedience of the Court orders, as well as the general approach that one must take in order to appreciate the need for the Court's jurisdiction to punish contempt.
The first and second defendants claim that the trucks were purchased in circumstances where there was the provision of a contract for the performance of work. In previous years, such an arrangement was often referred to as the purchase of a "truck in work".
The New South Wales legislature has provided for any unfairness associated with a contract of that kind to be the subject of consideration by the New South Wales Industrial Court under the provisions of s 106 of the Industrial Relations Act 1996, which grants the Industrial Court jurisdiction to void or vary a contract for the performance of work which is, inter alia, unfair, harsh or unconscionable.
It is suggested that the provisions of s 26(1), s 26(2)(e) and s 26(3)(a) of the Fair Work Act 2009 (Cth) have the effect of rendering inoperative the provisions of s 106 of the Industrial Relations Act. It is inappropriate and unnecessary for the Court to comment on that proposition. Whether the provisions of the Fair Work Act exclude the operation of s 106 of the Industrial Relations Act insofar as the Industrial Relations Act applies to arrangements for a sale of truck in work is a matter governed by s 109 of the Constitution and not otherwise.
Nevertheless, and regardless of the immediately preceding paragraphs, the provisions of the Fair Work Act purport to have no effect on the operation of laws relating to unfair contracts that are general in operation where those provisions are not confined either to laws relating specifically to contracts for the performance of work or to general industrial laws (as defined).
Meanwhile, the Contracts Review Act 1980 allows a court to make orders in relation to contracts, but the provision of s 6(2) of the Contracts Review Act excludes from the operation of the Contracts Review Act, a contract entered into in the course of a trade, business or profession carried on by one of the parties to the contract.
In other words, the New South Wales legislature has promulgated a scheme that, by the combination of the Industrial Relations Act and the Contracts Review Act, allows for a tribunal or court to review and vary every relevant contract that is "unfair".
Because this scheme is contained within two different statutes, one of which is general industrial legislation, the Fair Work Act purports to exclude the operation of contracts governed by the Industrial Relations Act, namely, the review of contracts entered into in the course of or for the purpose of a trade, business or profession.
Contracts entered into in the course of or for the purpose of a trade, business or profession are, if the Fair Work Act has the overriding effect described, the only relevant contracts in New South Wales that are incapable of review in a court or tribunal, and they are incapable of such review only because of an exemption promulgated by the New South Wales legislature in the Contracts Review Act. This seems anomalous.
This anomaly may have affected the capacity of the first and second defendants to have their initial contract for the purchase of a truck in work reviewed by a court or tribunal.
There is a need for the New South Wales legislature to review the exemption in s 6(2) of the Contracts Review Act in light of the result said to arise from the effect of the Fair Work Act.
None of the foregoing determines whether, in fact, the first and second defendants entered into a contract being a purchase of a "truck in work", or whether, even if they were to have entered into such a contract, the contract is, either at the time of its execution or subsequently, one that is unfair, harsh or unconscionable.
Nevertheless, the first and second defendants have exercised their rights as they have been advised or as they have desired. It is not for the Court to determine that additional statutory rights ought to have been implemented by the legislature and any such view would be irrelevant to these proceedings.
Democracy has been defined as a system of government by the people, for the people and of the people, in which everyone has equal political rights. Equal political rights refers to the norm of equal justice, a fundamental aspect of the rule of law. Democracy is, fundamentally, a system of government; it is for the legislature, the elected representatives of the electorate, to determine the laws that are promulgated.
Once promulgated, those laws must be obeyed by all persons, including the government itself. That is a fundamental aspect of the rule of law. That rule of law, and democracy as we understand it, depends upon the existence of independent courts that determine the rights and obligations of those bound by the laws, the operation of the laws and the enforcement of the laws.
In exercising its jurisdiction, a superior court of record, such as the Supreme Court of New South Wales, issues an order that is binding upon the parties before it. Even if the order or judgment be incorrect, the fundamental nature of democracy requires that the orders of the court be obeyed. The alternative is chaos. It matters not that "fairness" may be on the first and second defendants' side. It matters that an order of the Court has issued and the first and second defendants have deliberately and contumeliously defied that order. The remedy for error is appeal; not the obstinate defiance of the Court.
I have considered the range of penalties available to the Court to sentence the first and second defendant. Wilful disobedience of a court order justifies a custodial sentence: National Australia Bank Ltd v Juric (No 2) [2001] VSC 398.
The first defendant claims that his debts amount to $1 million. This claim is supported by the second defendant. I do not find that the imposition of a fine as a penalty is appropriate in the circumstances.
Further, a non-custodial sentence will, in the circumstances of these offences, be an insufficient punishment and deterrent to such behaviour. A custodial sentence that was not full-time would also be an insufficient punishment and deterrent.
The subjective features of each defendant have been taken into account. I am sympathetic to each of the defendants' physical and mental health problems. However, this does not outweigh the factors that justify a full-time custodial sentence. The traumatic injury to the first defendant and its effect on him make it more appropriate to impose a sentence that will ameliorate his inability to make rational choices based on consequences. He needs to understand, simply, that failure to return the property will involve him in being punished: R v Engert (1995) 84 A Crim R 67 at 71 (per Gleeson CJ). In this case, specific deterrence looms large, but general deterrence is not especially significant.
I find that the imposition of a custodial sentence is warranted in the circumstances because of the first and second defendants' deliberate and wilful refusal to surrender the property and purge their contempt.
For all of the above reasons, it is my view that an appropriate sentence is a sentence of imprisonment for each of the first and second defendants. Because of the nature of the offence and the duration of the term, I do not fix a non-parole period.
Lastly, it is necessary to observe that the approach I have taken is relevant only to the finding of contempt up to and including 3 November 2015. Otherwise an appropriate sentence may well have been an indeterminate sentence until the non-compliance with the Court's orders is overcome. Nevertheless, the effect of the sentence that I am about to impose is that, in the absence of compliance with the orders of the Court, that is the purging of the contempt, the defendants may well be prosecuted for further offences relating to their continuing non-compliance.
I comment, although not binding on authorities, that there seems every reason that each defendant would be classified, in the minimum security or lowest risk category within corrective services.
All of these reasons (except this paragraph and the dates of commencement of the sentence) were drafted, and sentence was to be imposed, on 3 November 2015. The defendants did not appear on that date; a bench warrant issued; and, despite the efforts of the Police, could not be effected. When it was so effected the Police granted bail. On the face of the reasons given for bail, it seems to have been affected by jurisdictional error: see s 43(3), s 43(4) and s 43(5) of the Bail Act 2013. I make no further comment.

Sentence

The first defendant is sentenced to a fixed term of imprisonment of six months, commencing 6 September 2016 and concluding 5 March 2017.
The second defendant is sentenced to a fixed term of imprisonment of two months, commencing 6 September 2016 and concluding 5 November 2016.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 September 2016

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