Ainscrow & Gilborne
[2021] FCCA 1182
•28 May 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Ainscrow & Gilborne [2021] FCCA 1182
File number(s): SYC 8441 of 2017 Judgment of: JUDGE MONAHAN Date of judgment: 28 May 2021 Catchwords: FAMILY LAW – property – costs – final orders – superannuation splitting – dispute over property owned by self-managed superannuation fund – delay in payment of transferable benefits – enforcement application – delay in payment not justified – whether payment in December 2020 represents compliance – issue of interest accrued during operative period – Respondent to pay shortfall – costs order in Applicant’s favour – party/party costs Legislation: Family Law Act 1975 (Cth), Part VIIIB, ss 79, 90XD, 121, 117(1), 117(2), 117(2A)
Federal Circuit Court Rules 2001, r. 21.01, 21.02
Superannuation Industry (Supervision) Regulations 1994, Part 7A
Cases cited: Arman & Arman [2009] FamCA 8
Bulow & Bulow [2019] FamCAFC 3
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
Fennessy & Gregorian [2009] FamCAFC 44; (2009) FLC 93-399
Kohan & Kohan (1993) FLC 92-340; (1992) 16 Fam LR 245
Yunghanns & Yunghanns (2000) FLC 93-029; (2000) 26 Fam LR 331
Number of paragraphs: 82 Date of hearing: 22 April 2021 Place: Sydney Solicitor for the First Applicant: Millie Whyte Solicitor Solicitor for the First Respondent: Self-represented ORDERS
SYC 8441 of 2017 BETWEEN: MS AINSCROW
ApplicantAND: MR GILBORNE
Respondent
ORDER MADE BY:
JUDGE MONAHAN
DATE OF ORDER:
28 May 2021
THE COURT ORDERS THAT:
1.Within 42 days the Respondent is to pay the Applicant:
(a)the amount of $16,935, to be paid to the Trustee of Super Fund B on behalf of the Applicant; and
(b)the amount of $7,539, to be paid to the Applicant in such method of payment as is directed in writing by the Applicant.
2.For the purposes of paragraph 1 herein, if the payments are not made by the required date, interest will accrue on the sum at the rate set by Rule 22.01 of the Federal Circuit Court Rules 2001 (Cth) from the due date until such time as the amount is paid in full.
3.All extant costs applications be otherwise dismissed.
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment under the pseudonym Ainscrow & Gilborne is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
MS AINSCROW (“the Applicant”) seeks orders against the Respondent, MR GILBORNE (“the Respondent”) that he cause the amount of $16,935.02 to be paid to the Trustee of Super Fund B on behalf of the Applicant.
The Applicant argues that the payment by the Respondent is needed to comply with the final property orders made on 4 October 2019.
The Applicant also seeks an order that the Respondent pay her costs of these enforcement proceedings.
The Respondent opposes the orders sought by the Applicant and seeks the dismissal of her enforcement application.
At the hearing of the costs application on 22 April 2021, the Applicant was represented by Mr Bourke as agent and the Respondent was self-represented.
Any statutory references I make in these reasons will be to the Family Law Act 1975 (Cth) (“the Act”), the Superannuation Industry (Supervision) Regulations 1994 (Cth) (“the SIS Regulations”) and to the Federal Circuit Court Rules 2001 (Cth) (“the FCC Rules”).
BACKGROUND
The Applicant was born in 1955 and is currently 66 years of age. The Respondent was born in 1953 and is currently 67 years of age.
The parties commenced cohabitation in approximately 1987 and separated while living under one roof in October or December 2011. The parties did not marry.
There are three adult children of the relationship, namely Ms F born in 1988 and currently 33 years of age, Ms G born in 1991 and currently 30 years of age and Ms H born in 1994 and currently 27 years of age.
On 19 December 2017, the Respondent commenced property proceedings against the Applicant. While those property proceedings were ‘out of time’, the Applicant consented to jurisdiction and the parties ultimately were able to settle their dispute with final orders made by me on 4 October 2019.
A dispute subsequently arose in relation to compliance with the superannuation splitting order in the Applicant’s favour in relation to the Respondent’s entitlement in the Gilborne Self-Managed Superannuation Fund (“Gilborne Superannuation Fund”).
The Respondent contended that the splitting order should only take effect upon the delivery of a number of artworks in the Applicant’s possession to the Respondent, the artworks being property of the Gilborne Superannuation Fund, whilst the Applicant contended that the final orders were silent on the issue of the artworks.
On 11 February 2020, the Applicant, through her solicitor, advised the Respondent that interest was now payable owing to delay in payment of the transferable benefits from the Gilborne Superannuation Fund, however the Respondent maintained that payment would not be made until the artworks were delivered.
On 25 February 2020, the Applicant ceased as a director for the Trustee Company, with her share in the company being transferred to the Respondent, and made the artworks available to the Respondent on 19 March 2020.
On 25 March 2020, the Respondent collected the artworks and shortly thereafter the Applicant contacted the Respondent requesting that payment now be made, to which the Respondent instead proposed an in specie distribution of shares, as opposed to the transfer of the specified $265,000 (owing to the poor economic climate following the COVID-19 pandemic), by way of letter from his solicitor on 30 March 2020.
Around this time, the Respondent requested that his solicitor cease to act for him and became self-represented. The Applicant’s solicitor sent a letter to the Respondent on 11 May 2020 requesting payment, and followed up on 27 May 2020 to request a response. On 1 June 2020, the Respondent advised by way of phone call that his position was as previously stated by his solicitor.
On 15 July 2020, the Applicant requested to be re-appointed as director of Trustee Company, to which the Respondent replied reiterating that his position had not changed.
On 21 August 2020, the Applicant filed an Application in a Case seeking enforcement of final orders made in relation to superannuation splitting on 4 October 2019.
On 19 October 2020, the parties agreed to orders by consent that the sum of $265,000 be paid to the trustee of Super Fund B. The Respondent made payment on 31 December 2020.
ISSUES
The issues to determine in this decision are:
·whether the payment of $265,000 made on 31 December 2020 represents compliance with the relevant final orders or whether the further sum of $16,935.02, as sought by the Applicant, is payable by the Respondent; and
·(assuming the Applicant succeeds in relation to the first issue) whether the Respondent should pay the Applicants costs of the enforcement proceedings.
EVIDENCE
The Court was asked to read the following documents:
Applicant
The Applicant provided a case outline as directed indicating that she relied on the following documents:
·Consent Orders made in Chambers on 4 October 2019;
·Application in a Case filed 21 August 2020;
·Affidavit of Millie Whyte (Applicant’s solicitor) filed 21 August 2020 and annexures;
·Affidavit of Ms Ainscrow filed 21 August 2020 and annexures;
·‘Super Fund Look up’ for Gilborne Super Fund showing compliance; and
·Company Extract for Gilborne Pty Ltd showing Respondent as sole director and shareholder.
Respondent
Although the Respondent did not provide the required case outline document, it was clear to the Court that he relied upon the following documents:
·Response to Application in a case filed 15 October 2020; and
·Affidavit of Mr Gilborne filed 15 October 2020.
LAW AND DISCUSSION
The Court will firstly consider the issue of whether the payment of $265,000 made on 31 December 2020 represents compliance with the relevant final orders or whether a further sum of t final orders or whether the further sum of $16,935.02, as sought by the Applicant, is payable by the Respondent.
The Court will then secondly consider whether a costs order should be made in these proceedings in the Applicant’s favour and against the Respondent.
I also note at this point of my reasons that the Court provided the Respondent with copies of:
·Part 7A of the SIS Regulations;
·Section 117 of the Act; and
·Schedule 1 to the FCC Rules.
The superannuation splitting order and applicable interest
Overview
The power exercisable by the Court in accordance with Part VIIIB of the Act 1975 is a power to split superannuation payments as and when a payment is made by the relevant trustee.[1] A Court exercising jurisdiction under the Act does not have the power under section 79 to make Orders that have the effect of splitting an underlying superannuation interest. That is left to Part 7A of the SIS Regulations. This was confirmed by the Full Court in Bulow & Bulow [2019] FamCAFC 3 (“Bulow”) at [19]:
19. The FLA provides, relevantly, for splitting orders to be made with respect to when splittable payments become payable – that is, when the member spouse satisfies a condition of release. The FLA does not provide for the underlying superannuation interests themselves to be split. That work is left, in the more usual course, to Part 7A of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (“SIS Regulations”). The SIS Regulations allow the creation of a new superannuation interest in the name of the non-member spouse such that their interest is separated from the interest of the member spouse within the fund. Finality in the financial relationship of the parties, as required by s 81 of the FLA, occurs through a combination of both the FLA and the SIS Regulations.
[1] See also the definition of “splittable payments” in section 90XD of the Family Law Act 1975.
When the Order is served on the relevant trustee, it gives rise to regulatory obligations on the part of a trustee of a complying superannuation fund under the SIS Regulations. These obligations are found, as noted in Bulow, in Part 7A of the SIS Regulations being “Superannuation Interests Subject to Payment Split” (“the Part 7A Obligations”). The Part 7A Obligations are:
·Firstly, to serve a payment split notice on both the member and the non-member within 28 days after the operative time (and I note that in this case, the Applicant argues that the operative time was 15 October 2019 being seven (7) business days after the final orders were made, thus the payment split notices should have been served by 12 November 2019 pursuant to Regulation 7A.02 of the SIS Regulations).[2]
·Secondly, on receipt by the relevant trustee of the election or request made by the non-member following the service of the payment split notices, the trustee must give effect to the request pursuant to rule 7A.09 of the SIS Regulations. The request by the non-member (being the Applicant in this case) was for a transfer of the transferable benefits (a defined term under Regulation 1.03 of the SIS Regulations). I note that in this case, the Applicant argues that despite the failure to comply with the Part 7A obligations, the request for the transfer of the transferable benefit was made by the non-member on 11 May 2020.[3]
·Thirdly, to calculate the amount of the transferable benefits in accordance with Regulation 1.03 of the SIS Regulations and then to transfer the transferable benefits within 30 days of the request pursuant to Regulation 7A.12(4)(a)(i) of the SIS Regulations.
[2] Applicant’s case outline paragraph 10.2.1.
[3] See paragraph 20 of the Ms Whyte’s affidavit.
Applicant’s submissions
As the Applicant stated in her case outline document, the:
10.3 … third step happens in the background. The trustee has, as a result of steps 1 and 2, dual obligations – it is bound by the Order to split payments (s.90XZD of the Family Law Act 1975) and it has the Part 7A Obligations to transfer the transferable benefits. This duality of obligations is resolved by Division 2.2 of the Family Law (Superannuation) Regulations 2001. In short, where the Trustee observes its Part 7A Obligations, any payments made to the member that would otherwise be splittable are no longer splittable payments under the terms of the Order (see r.14 of the Family Law (Superannuation) Regulations 2001).
In this case, the Applicant argues that the Respondent (now the sole director of the trustee corporation) “has not moved the trustee to observe any of its Part 7A Obligations arising as a result of the 4 October Consent Orders”.[4]
[4] Applicant’s case outline paragraph 10.4.
The Applicant asks the Court to note that “transferable benefits” is a defined term under Regulation 1.03(a) of the SIS Regulations and operates together with the definition of “adjusted base amount” also referred to in Regulation 1.03 of the SIS Regulations:
transferable benefits, in relation to a superannuation interest that is subject to a payment split and in relation to the non-member spouse in relation to that interest, means benefits that are equal to:
(a) if the payment split is a base amount payment split and an adjusted base amount applies to the non-member spouse when the benefits are transferred – the adjusted base amount less the amount of any fees payable by the non-member spouse in respect of the payment split; or
…
adjusted base amount, in relation to a non-member spouse at a particular date, means the adjusted base amount applicable to the non-member spouse at that date worked out under Division 6.1A of the Family Law (Superannuation) Regulations 2001.
The Applicant also asks the Court to note that Division 6.1A of the Family Law (Superannuation) Regulations 2001 provides as follows:
·The obligation to adjust the base amount is found in Regulation 45A of the Family Law (Superannuation) Regulations 2001.
·The period in which the adjustment occurs is the period commencing at the operative time and ending on the date that terminating action occurs (see Regulation 45B of the Family Law (Superannuation) Regulations 2001).
·Pursuant to Regulation 45D of the Family Law (Superannuation) Regulations 2001, the interest rate for the adjustment is:[5]
“the interest rate for the adjustment period is the rate determined by the Australian Government Actuary, and published in the Gazette, being a rate that is 2.5 percentage points above the percentage change in the original estimate of full-time adult ordinary time earnings for all persons in Australia, as published by the Australian Bureau of Statistics during the year ending with the February.”
·The two relevant instruments published by the Australian Government Actuary are:
oFor the financial year ending on 30 June 2020, the rate is 4.8%;[6] and
oFor the financial year ending on 30 June 2021, the rate is 5.7%.[7]
[5] See Regulation 45D(3) of the Family Law (Superannuation) Regulations 2001 for the whole year and Regulation 45D(4) for a period of less than 12 months.
[6] See Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2019.
[7] See Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2020.
The Applicant submits that the calculation of interest is at the rate of 4.8% for the period commencing on 15 October 2019 and ending on 30 June 2020 and at the rate of 5.7% for the period commencing on 1 July 2020 and ending on 30 December 2020. This, the Applicant argues, “results in a total amount of $281,935.02 with a shortfall of $16,935.02”.[8]
[8] Applicant’s case outline, paragraph 10.7.
I also note the Applicant submits:
10.8 There is an obligation to pay interest on an amount owed under the general law (see Re Traviati [2012] FCA 546, 1 June 2012 at [75] which recognises that interest charges under the Income Tax Assessment Act 1997 compensate the Commonwealth for the time value of money).
10.9 The obligation to pay interest in calculating the amount to be transferred as the transferable benefits is a statutory obligation operating though a combination of the Superannuation Industry (Supervision) Regulations 1994 and the Family Law Act 1975, as recognised in Bulow’s case.
Respondent’s submissions
In response, the Respondent seeks the dismissal of the application.
The Respondent argues that the final orders have been complied with and that the Applicant received 100% of the relevant self-managed superannuation fund.[9] The Respondent further argues that consistent with paragraph 12 of the final orders, the Applicant was to give up control of all assets of the Gilborne self-managed super fund, including the paintings that were owned by the super fund. When the Applicant refused to hand those paintings over, negotiations commenced between the parties’ legal representatives that “went on and on until March [2020], when she finally agreed to hand them over”.[10]
[9] Transcript, 22 April 2021, page 15.
[10] Transcript, 22 April 2021, page 15.
The Respondent submitted:[11]
… the Court order of 2019 said specifically to myself and to my then legal team that my ex needed to surrender 100 per cent of the assets of the self-managed super fund to me. And she did not do that. In fact, she argued that there was no art in the super fund. But she had documents which were provided to her over the last 10 years which, quote, “clearly stated what artworks were available”, and she did have those artworks. So yes. … I’m just saying that I have not tried to disadvantage her; I’ve acted in good faith. I’ve tried to do what the Court order said I needed to do. … That’s all I’m saying.
[11] Transcript, 22 April 2021, page 16.
Applicant’s reply
In anticipation of the Respondent’s argument, the Applicant provided the following submissions in paragraph 11 of her case outline document:
11. It is contended that the delay in the payment of the transferable benefits is due to the Wife’s refusal to deliver up items of artwork, which are held as an investment of the Gilborne Super Fund. The contention in relation to the artwork is without foundation for the following reasons:
11.1 The 4 October 1019 Consent Orders are silent on the artwork. The Orders do not say “pending the delivery up of the artwork, the splitting order shall take effect”. The splitting order operates according to its tenor. There are statutory obligations to be observed with time limits under Part 7A of the Superannuation Industry (Supervision) Regulations 1994:
11.1.1 The payment split notices should have been served by 12 November 2012 (r.7A.02 of the Superannuation Industry (Supervision) Regulations 1994);
11.1.2 The request by the non-member of the transfer of the transferable benefits would have to have been made within a further 28 days, by 10 December 2019 (r.7A.08 of the Superannuation Industry (Supervision) Regulations 1994); and
11.1.3 The transfer of the transferable benefits would have had to have been made within a further 30 days, by 9 January 2020 (r.7A.12(4)(a)(i) of the Superannuation Industry (Supervision) Regulations 1994).
11.1.4 If the Part 7A obligations were observed, the transfer would have had to have occurred by 9 January 2020.
11.2 Given that the Orders are silent on the artwork, the rightful position in relation to the artwork is that the directors of the trustee company should have custody of the artwork in accordance with r.13.18AA of the Superannuation Industry (Supervision) Regulations 1994. The Wife was a director at all times and properly holding the artwork (para 6 of the Ainscrow Affidavit).
11.3 The value of the artwork held by the wife was in the amount of $7,000 and is disproportionate to the amount of the transferable benefits (Annexure 2 of the Ainscrow Affidavit).
In his oral submissions for the Applicant, Mr Bourke stated:[12]
The orders do not require the transfer or deliver up, to use that term, of any other artwork. The artwork has, in our submission, your Honour, been a distraction and obfuscation in relation to the splitting order. They are two independent events. And the first event, of course, is the trustees’ obligations which we have set out in some detail in relation to the splitting order. The delivery up of investment property of the super fund is one which would happen in … the ordinary course of event when the non-member spouse then was extracted from the self-managed fund and then no longer has any trusteeship obligations and responsibilities and is then no longer a member of the superannuation fund itself.
So the delivery up of the artwork really needs to be dealt with in isolation and, as I say, there is nothing in the court orders, as I said made by consent, with representation of both, that says, “Pending the delivery of the artwork, the splitting order shall take effect”. The fact that that the artwork was raised is, in our view, a distraction from what the trustees’ real obligations were in relation to the splitting order, so we say that they are proceeding on a fundamentally flawed and mistaken view of the operation of the orders. Secondly, your Honour, and I didn’t make these points in our earlier submissions, but I did make some points about the artwork at the end of our contentions, noting that the consent orders are silent in relation to the artwork.
There is nothing in those orders and we can invite Mr Gilborne to identify where it says that, but he doesn’t. His submission related to the first part of the splitting order, but, as we say, that really relates to member entitlement, not investment property. We then set out at para 11.1 what the time obligations were and you can see there at 11.1.3, your Honour, that this all should have been done by 9 January 2020. We’ve made our reference to reg 7.8.12, sub (4)(a), subparagraph (i) which is the relevant provision which says, “This is when you give a notice to say it has all been completed”. The rights or position in relation to the artwork, of course, your Honour is a matter for trusteeship custody, so at the stage when the wife did have – and she did have custody of some of the artwork – she was a director of the super fund, your Honour, and remained a director until the artwork was delivered up.
We have made the point, not agitated this morning, that her removal as a director is also contrary to the orders and we would just observe that order 22 says that she should resign her directorship on the completion of the transfer of the transferable benefits. Now, we say that, of course, has not occurred because the interest adjustment on the adjusted base amount has not been provided, so we do not yet have a complete transfer of the transferable benefits. So even on that view of the orders, your Honour, the wife should still be a director of the trustee corporation but, nonetheless, the wife did hold the paintings and in her affidavit, your Honour, she deposes to the fact of the way she was holding them.
And, of course, artwork is a form of investment property that has come to the attention of the regulator and it now has to be held in a very precise and particular way and the wife deposes to that in her affidavit. So she was holding it properly and we say it was delivered up properly. And, finally, your Honour, the value of the artwork that she was holding is completely disproportionate to the amount of the transferable benefits, again suggesting that this is just simply a distraction from the trustees’ obligations which ought to have been observed and should have been observed by January – by 9 January 2020. Your Honour, there was some discussion between yourself and the husband in relation to his affidavit material and I have his affidavit before me and I would refer your Honour to paragraph 27 of that affidavit on page 7 … where on 27 May Millie White, the solicitor, on the record emailed the husband and he then phoned on 1 June 2020 and then he reiterated his position. Millie White says, “Why don’t you transfer the 265 and argue about the artwork later?”, and he says, “Because that is not what the court orders said should happen”, and we say well, there is perhaps what the husband was looking for, but it was actually our position – it was Millie White who actually made that observation, “Pay up now”, and he then said, “It’s because that’s what the court order – it’s not what the court ordered should happen”, but I’ve taken you through those orders, your Honour, and it is quite clear that there is no reference in the court orders to artwork at any time imperative in relation to its delivery.
But we say it was delivered up in a timely way in accordance with the non-then spouse or the – Ms Ainscrow’s obligations at a director before she was removed. We say precipitously and contrary to the orders. When her – the solicitor, Millie White, asked that he put his position in writing, he said he was hesitant to do so because he had no legal representation. We say, your Honour, that there probably is no document that was suggested and, if there were, it’s not in evidence and we would object to its late production at this point, your Honour. Our final point in reply is that none of the submissions made by the husband in this case went to the question of interest.
We set out the statutory pathway and the obligations for the payment of interest and there was no submission that was made on the part of the husband which went to whether anything in our submissions was wrong. We say everything we have put to you is in accordance with the law and ought to be accepted and there was nothing on the other side which went to the question of interest in relation to the adjustment of the base amount to complete the transfer of the transferable benefits. Your Honour, those would be my submissions in reply, save except in relation to the costs.
[12] Transcript, 22 April 2021, pages 19-20.
Findings
Let me start by stating that the Court is satisfied that the Applicant has correctly articulated the relevant legal framework.
The Court agrees that the operative time commenced 15 October 2019 and therefore there is a shortfall. The Court also agrees that the shortfall is calculated at $16,935.[13]
[13] This amount has been rounded to the nearest dollar.
The Court does not accept that the Respondent was justified in delaying payment because of the issue of the artwork.
The Court will delay a consideration of the issue of time to pay until it has had the opportunity of considering the parties’ financial circumstances.
Given the Court’s findings in relation to the application, the Court will now consider the issue of whether a costs order should be made in this case.
Whether the Court should make a costs order
Overview
Pursuant to Rule 21.02 of the FCC Rules, this Court has the power to make an order for costs at any stage in a proceeding. Generally speaking, a costs order is not intended as some form of punishment for engaging in litigation “but rather to act as a compensation for the party who has had to participate when they probably ought not to have been there”.[14]
[14] Arman & Arman [2009] FamCA 8 at [16] (per Cronin J).
In addition, in family law matters, the Court also needs to consider section 117(1) of the Act which states the principle that each party shall pay their own costs. The exception to that rule is contained in section 117(2), which relates to circumstances where the Court finds there is justification for departing from the principle. This exception is subject to the matters referred to in section 117(2A) of the Act.
Section 117(2A) of the Act states:
“In considering what order, if any, should be made under subsection (2), the Court will have regard to:
(a) The financial circumstances of each of the parties to the proceedings;
(b) Whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) The conduct of the parties to the proceedings in relation to the proceedings, including - without limiting the generality of the foregoing - the conduct of the parties in relation to the pleadings, particulars, discovery, inspection, directions to answer questions, admission of the facts, production of documents and similar matters;
(d) Whether the proceedings were necessitated by a failure of a party to the proceedings to comply with the previous orders of the Court;
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) Any such other matters as the Court considers relevant.”
Financial circumstances of each party
Both parties filed Financial Statements in the property proceedings.
In her Financial Statement filed 30 April 2019, the Applicant gives evidence that she works as a public servant earning approximately $1,638 per week. She also receives $320 per week from her superannuation. The Applicant pays $403 per week in income tax. The final orders provided for the Applicant to receive the sum of $1,277,339 from a term deposit held by the parties. In addition to the superannuation splitting order, the Applicant also retained a property at Suburb C.
In his Financial Statement filed 3 May 2019 the Respondent asserted that he received no income from his business, “Gilborne Pty Ltd” trading as The Gilborne Group. The final orders provided for the Respondent to receive the sum of $759,000 from a term deposit held by the parties. In addition to the superannuation splitting order, the Applicant also retained a property at Suburb D and the entities “The Gilborne Company, The Gilborne Business, Company E and The Gilborne Trust”.
Overall, the Court finds that the Respondent has capacity to meet a costs order.
Receipt of Legal Aid
Neither party were in receipt of Legal Aid.
Conduct of the parties
The Applicant submits that it was the Respondent who failed to comply with the relevant super splitting final orders.
The Respondent argues that he was justified in delaying compliance with the superannuation splitting because the Applicant had the possession of some paintings owned by the superannuation fund.
The Applicant argues that the Respondent’s refusal to comply with the relevant orders because the Applicant had the possession of some paintings owned by the superannuation fund was a disproportionate response.
Failure to comply with previous Court Orders
I refer to the previous arguments.
Whether a party is wholly unsuccessful
The Applicant submits that should the Court make orders for interest claimed to be paid, as sought by the Applicant, then the Respondent would be wholly unsuccessful in these proceedings.
The Respondent acknowledges making the payment $265,000 but only after the enforcement proceedings were commenced.
Offers of settlement
No evidence of any offer of settlement was tendered.
Any other matter
There are no other matters that the Court raises that have not already been commented upon in this decision.
Findings
Having considered the evidence and submissions in light of the available evidence and the relevant authorities, the Court is satisfied that a costs order should be made in the Applicant’s favour.
The Court finds accordingly.
The Court will now consider the issue of the quantum of the costs sought.
What should be the quantum of costs
Overview
Unless the Court otherwise specifies, costs are paid on a ‘party/party’ basis rather than on an ‘indemnity’ basis.
Party/party costs are costs necessarily incurred, paid at a reasonable rate. As previously stated, the FCC Rules incorporate a schedule of costs as a guide to party/party costs in family law proceedings. Party/party costs would not ordinarily cover all the legal costs incurred by a party.
Indemnity costs are ordered when the Court intends the costs order to cover all the legal costs reasonably incurred by that party. When a costs agreement is involved, the charges to be imposed on the other party are subject to the requirement of reasonableness. I note that ‘indemnity costs’ are not defined in the FCC Rules.
The authorities in family law cases are very clear that indemnity costs will only be made in exceptional circumstances. In Fennessy & Gregorian [2009] FamCAFC 44; (2009) FLC 93-399 the Full Court of the Family Court of Australia (“Fennessy”),[15] discussed the issue at length and made reference to a number of cases in which the question of indemnity costs was considered.
[15] Coleman, Boland and Thackray JJ.
Amongst their discussion was reference to their earlier decision of Kohan & Kohan (1993) FLC 92-340; (1992) 16 Fam LR 245 in which their Honours held that there is “nothing in s 117 or 123 of the f (‘the Act’) prevents the Court making an order for costs on an indemnity basis” and that:
“2.The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O 38 r 2, the provisions of O 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. Order 38 rule 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No 2); Wentworth v Rogers (No 5); Hobartville Stud v Union Insurance Co.
3.Indemnity costs orders are still an exception in this and other jurisdictions.”[16]
[16] (1993) FLC 92-340 at [2].
The judgment in Fennessy additionally referred to comments made in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 in which Sheppard J held:
“24….
4.In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course …it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo)… the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata)…”[17]
[17] (1993) 118 ALR 248 at [24].
Finally, Fennessy looked at the decision in Yunghanns & Yunghanns (2000) FLC 93-029; (2000) 26 Fam LR 331 where their Honours “acknowledged that the category of cases in which an indemnity costs order is appropriate is not closed.” In particular, their Honours considered that “it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought.”[18]
[18] (2000) FLC 93-029; (2000) 26 Fam LR 331.
Lastly, I note that Rule 21.02 of the FCC Rules allows the Court to refer the costs for assessment via Chapter 19 of the Family Law Rules 2004. That said, when party/party costs are ordered, the usual approach of this Court is to fix the amount pursuant to Schedule 1 of the FCC Rules.
Applicant’s submissions
The Applicant submits that the circumstances of this dispute warrant there being an order for indemnity costs. I note that the amount claimed is $25,214.50 made up of solicitor’s costs of $4,028.50 and Mr Bourke’s costs as agent being $21,186.00.[19]
[19] Transcript, 22 April 2021, page 5.
Respondent’s submissions
The Respondent confirmed during submissions that, in the event that the Court made a costs order in the Applicant’s favour, then he would argue that such costs be limited to a party/party assessment, and not indemnity costs.[20]
[20] Transcript, 22 April 2021, page 26.
Findings
The Court agrees with the Respondent that this is not a case where the award of indemnity costs should be paid. Consequently, the Court finds that costs should be paid on a party/party basis.
The Court also finds it appropriate for the relevant costs to be assessed pursuant to Schedule 1 of the FCC Rules.
The Court also finds that an assessment of costs, pursuant to Schedule 1 of the Rules, would produce costs of $7,539 as follows:
Item 3
21 August 2020
Lump sum $1,867
Item 13(c)
19 October 2020
Lump sum $2,241
Item 12
19 October 2020
Lump sum $1,121[21]
Item 13(b)
22 April 2021
Lump sum $1,120
Item 12
22 April 2021
Lump sum $560
Item 9
28 May 2021
Lump sum $305
Item 15
Disbursements
Filing fee $125
Item 15
Additional Disbursements
Allow $300
Total
$7,539
[21] This amount has been rounded to nearest dollar.
The Court will allow the Respondent a period of 42 days in which to cause:
·the amount of $16,935 to be paid to the Trustee of Super Fund B on behalf of the Applicant; and
·the amount of $7,539 to be paid to the Applicant in such method of payment as is directed in writing by the Applicant.
In the event that the above payments are not made by the due date, interest will thereafter accrue in accordance with the Act and FCC Rules.
CONCLUSION
The Court’s findings have now be stated.
The Court has found that the Respondent should pay the following:
·the amount of $16,935 to be paid to the Trustee of Super Fund B on behalf of the Applicant; and
·the amount of $7,539 to be paid to the Applicant in such method of payment as is directed in writing by the Applicant.
The Court has allowed the Respondent the period of 42 days in which to make the necessary payments. If the payments are not made by the required date, interest will thereafter be payable pursuant to the Act at the rate set by the FCC Rules.
There will be Orders of the Court to reflect this decision.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Monahan. Associate:
Dated: 28 May 2021
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