I understand that if your opinion differs from that of a judge, if can be frustrating and difficult to come to terms with, but that's the thing about seeking court intervention - you want THEM to make the decision for you.
At common law, I would argue the Honourable Magistrate is basing his assertion on the fact that a child has a right - by law - to know, spend time with, and be cared for by each of his or her parents, regardless of what issues or relationship status their parents may have had. By telling the kids to be afraid of their father, you are actively influencing them and alienating them away from him, which is a direct intervention on their right to have a relationship with him.
Further, the capacity of each parent to support their child's emotional needs - one of which is the need to have a secure relationship with both parents - is a secondary consideration under section 60CC of the Family Law Act 1975. Again, if you're discouraging the kids from spending time with their dad, you're not supporting their emotional needs.
As a matter of interest, and you may take of this what you will, the court has handed down dozens of decisions in the last year alone whereby one parent has been awarded sole parental responsibility because of the inability of the other parent to support the relationship between the parent and the kids. Behaviours that reflect that inability have included one parent denigrating the other, discouraging the kids from talking to or spending time with the other parent, involving them in court proceedings, withholding time, or relocating without consulting with the other parent.
It's just something to consider, in any case.