Bakalov & Bakalov (No 2)
[2022] FedCFamC1F 30
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Bakalov & Bakalov (No 2) [2022] FedCFamC1F 30
File number(s): BRC 13229 of 2020 Judgment of: WILSON J Date of judgment: 2 February 2022 Catchwords: FAMILY LAW – ARBITRATION – indemnity costs sought – ordered. Legislation: Family Law Act 1975 (Cth) s 117, 117(2A)(c) and (f) Cases cited: Fitzgerald & Fish (2005) 33 Fam LR 123
Fountain Selected Meats (Sale) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 364
In the Marriage of Hogan (1986) 10 Fam LR 681
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70
Bakalov & Bakalov [2021] FedCFamC1F 161
Phillips & Hansford [2020] FamCAFC 28
Division: Division 1 First Instance Number of paragraphs: 19 Date of last submissions: 24 November 2021 Place: Melbourne Solicitor for the Applicant: Cherry Family Lawyers Solicitor for the Respondent: Allan R De Brenni & Company ORDERS
BRC 13229 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS BAKALOV
Applicant
AND: MR BAKALOV
Respondent
ORDER MADE BY:
WILSON J
DATE OF ORDER:
2 FEBRUARY 2022
THE COURT ORDERS THAT:
1.On or before 4:00pm on 9 February 2022 the husband must pay the wife’s indemnity costs of $20,067.66 from the sum held in the trust account of D Solicitors Trust Account.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
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 by this Court under the pseudonym Bakalov & Bakalov is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
These reasons address the wife’s application for indemnity costs consequent upon the husband’s unsuccessful application to review the arbitral award.[1] As these reasons explain, in my view indemnity costs should be ordered.
[1] Bakalov & Bakalov [2021] FedCFamC1F 161.
The wife has sought an order that the husband pay her $20,067.66 on account of indemnity costs made up of $16,767.66 calculated in the manner set out in paragraph 3 of the wife’s 10 November 2021 affidavit together with $3,300 calculated in the manner set out in paragraph 7 of the same affidavit.
Pursuant to the arbitral award, the parties’ property interests were altered as to 55% in favour of the wife and as to 45% in favour of the husband.
On behalf of the wife, it was submitted that –
(a)the principle reposed in s 117(1) of the Family Law Act that each party should bear his or her own costs had been displaced in the circumstances of this case;
(b)it is just[2] in all the circumstances for a costs order to be made under s 117(2) of the Family Law Act; and
(c)a costs order on an indemnity basis is appropriate.
[2] In the Marriage of Hogan (1986) 10 Fam LR 681.
In support of her application for a costs order the wife relied on several bases. They included –
(a)s 117(2A)(a), that is to say, the husband’s conduct in his application to review the arbitrator’s award; and
(b)s 117(2A)(f), that is to say, one or more offers of resolution of the husband’s unsuccessful application to review the arbitrator’s award.
The husband’s submissions in opposition to the wife’s application for costs relied on several contentions. They included –
(a)while the husband was wholly unsuccessful on his review application, he failed on largely technical grounds[3] rather than on the assertion of the concealment of income;
(b)the usual trigger for the imposition of an order for indemnity costs has not been established in the circumstances of this case, especially the existence of exceptional circumstances;
(c)if, contrary to those contentions, indemnity costs were to be ordered, they ought to be limited to $11,500.
[3] Paragraph 8 of his written submissions.
As has been observed in Fitzgerald & Fish,[4] only one of the subsections of s117(2A) needs to be engaged in order for an order under s 117(2) to be validly made.
[4] (2005) 33 Fam LR 123.
So far as the wife’s reliance on s117(2A)(c) was concerned, she emphasised how the husband failed to identify the relevant basis on which his review application was premised, a matter specifically mentioned in my reasons at paragraphs 4, 14 and 15. The wife contented that by reason of the husband’s failure to precisely articulate whether the application was grounded in s 13J or s 13K, she was put to the burden of addressing each section thereby increasing her legal fees. She submitted that she put the husband on notice about that issue in correspondence dated 30 June 2021, in her response filed 30 August 2021 and in her submissions filed on 10 September 2021, 17 September 2021 and 27 September 2021. She submitted that the husband was silent in relation to that correspondence. As to all of those contentions, the wife submitted as follows –
In all of the circumstances, it is submitted that the Husband commenced and continued a case that where, properly advised, (noting that he retained solicitors and Counsel in relation this litigation) should have known that he had no chance of success.
The husband argued in response that he was wholly unsuccessful “but on technical grounds as to which section of the Family Law Act was being relied on” (his words).[5] To my mind, the husband correctly conceded that he was wholly unsuccessful in his review application. However, it was erroneous for him to argue that he was wholly unsuccessful “on technical grounds.” Sections 13 J and 13K are very different, raising quite different grounds of relief. The husband made no attempt to distinguish between the two. I am unable to ascribe the inconsequential effect of his failure to properly articulate the ground on which he sought relief. To my way of thinking, there was real merit in the wife’s contentions at paragraph 27 of her submissions.
[5] Paragraph 8 of the husband’s written submissions dated 23 November 2021.
According to Fitzgerald & Fish, success under s 117(2A)(c) would be sufficient to justify an order under s 117(2), so long as the making of such an order were otherwise just.
Having regard to the reliance placed by the wife on s 117(2A)(f), it is necessary to address that ground.
It must be kept in mind that the sum of $25,000 is presently held in trust pending determination of this costs dispute.
The wife submitted that the husband’s application in an arbitration filed 26 July 2021 was the subject of her proposal in which she told him to withdraw the application. She submitted that the husband did not withdraw his application. Further, the wife submitted that she requested the husband to consent to withholding $25,000 in trust, such request representing a variation of the award. She submitted that she filed an application in an arbitration on 1 November 2021, served on 2 November 2021, in response to which the husband proposed on 5 November 2021 that the sum of $10,000 be retained, not $25,000. That proposal was rejected and the husband proposed instead $11,550. That proved otiose as the parties consented on 2 November 2021 to the sum of $25,000 remaining in trust.
In essence the wife argued that she was put to expending the sum of $20,067.66 in relation to resisting the husband’s unsuccessful review application and in dealing with the application to quarantine the sum of $25,000 in trust. She said she should have her costs, assessed on an indemnity basis.
It seemed to me that –
(a)the husband was wholly unsuccessful on his review application, thereby enlivening s117(2A)(c) of the Family Law Act; and
(b)the husband’s resistance about setting aside $25,000 in trust was ultimately futile as he consented on 2 November 2021 to such an order, thereby enlivening s 117(2A)(f) of the Family Law Act.
Costs should follow in such manner that the husband should pay the wife’s costs. The next issue is whether those costs should be ordered on an indemnity basis and if so, what sum is an appropriate amount.
In my view, the review application[6] was doomed. It should not have been brought in the manner it was, bereft of a proper basis under s 13J or s 13K. No endeavour was made to analyse the element of either section. Nor was any endeavour made to cast the husband’s evidentiary position under either section. Without proper examination of the elements of each section, the husband’s application had no reasonable prospects of success. On that basis the indemnity costs application is resolved in accordance with the observations in Phillips & Hansford[7] where the court relied on the holdings of the Federal Court in Fountain Selected Meats (Sale) Pty Ltd v International Produce Merchants Pty Ltd.[8] In that case the Federal Court held that indemnity costs may be awarded where an applicant, properly advised, should have known that he or she had no chance of success. To my mind, that proposition is apposite here. Neither ground of the review application urged by the husband had hope.[9] That is a basis for ordering indemnity costs.
[6] For clarity, the application determined by my decision dated 27 October 2021, Bakalov & Bakalov [2021] FedCFamC1F 161.
[7] [2020] FamCAFC 28.
[8] [1988] FCA 364.
[9] J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70 (at [5]).
The sum of $25,000 was the subject of a consent order only after the wife brought her application for that order. She was put to expense in bringing that application where, had common sense prevailed, the consent given by the husband should have emerged sooner.
As to the amount of costs sought, the wife has quantified them at $20,067.66. That amount is less than the sum in trust and it seems within the ambit of reasonableness and proportionality. In those circumstances I order that the wife’s indemnity costs of $20,067.66 be paid from the sum in the trust account of D Solicitors Trust Account by 4:00pm on 9 February 2022.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 2 February 2022
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