Balken & Vyner (No. 2)
[2020] FamCA 1019
•8 December 2020
FAMILY COURT OF AUSTRALIA
Balken & Vyner (No. 2) [2020] FamCA 1019
File number(s): MLC 2867 of 2017 Judgment of: MACMILLAN J Date of judgment: 8 December 2020 Catchwords: FAMILY LAW – PROPERTY – where following the delivery of reasons for judgment the matter was adjourned for the parties to make submissions with respect to the form of the orders – where the parties could not agree - where having heard each party’s submissions the Court has made orders.
FAMILY LAW – COSTS – where the husband sought orders that the wife pay his costs in relation to the slip rule amendment on an indemnity basis – where the circumstances do not merit indemnity costs being awarded – where the wife is ordered to pay the husbands costs on a party/party basis.Legislation: Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Kohan & Kohan (1993) FLC 92-340
Munday v Bowman (1997) FLC 92-784
Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029
Number of paragraphs: 45 Date of last submission/s: 30 November 2020 Date of hearing: 23 November 2020 Place: Melbourne Counsel for the Applicant: Mr Waller QC with Mr Mereine Counsel for the Respondent: Mr Dickson QC with Mr Nehmy Solicitor for the Applicant: HWL Ebsworth Lawyers Solicitor for the Respondent: Kenna Teasdale Lawyers ORDERS
MLC 2867 of 2017 BETWEEN: MS BALKEN
Applicant
AND: MR VYNER
Respondent
ORDER MADE BY:
MACMILLAN J
DATE OF ORDER:
8 DECEMBER 2020
THE COURT ORDERS THAT:
1.That the Husband pay to the Wife the sum of $5,189,510 (the total payment) as follows:
(a)The Husband and Wife forthwith do all acts and things and sign all necessary documents to authorise Kenna Teasdale to pay the funds held by them on behalf of the Husband and the Wife (“the Kenna Teasdale Funds”) together with any interest less the sum of $270,000 of those funds, which is to be held on trust for the parties to meet the husband's liability (if any) and legal fees in County Court Proceedings no …, to the wife (being “the first payment”);
(b)On or before 1 February 2021 a further payment of $3,000,000 less an amount equivalent to the first payment less the sum of $189,510 (the second payment); and
(c)A final payment of $2,000,000 upon settlement of the sale of the property at G Street, Suburb E (the G Street Property) or by 4.00pm on 4 June 2021 whichever first occurs (the third payment).
2.If the husband fails to pay the wife any of the amounts in paragraphs 1 of these Orders by the due date, the husband shall pay to the wife interest on the amount outstanding from time to time from the due date to the date of payment (both days inclusive) compounding monthly at the rate prescribed by the provisions of the Family Law Rules 2004 (Cth).
3.That pending the second payment the Husband pay to or on behalf of the Wife the following:
(a)Rental payments in accordance with paragraph 7 of the orders of 25 May 2019 ("the 2019 orders"); and
(b)Payments in accordance with paragraph 4 of the orders of 3 May 2017 ("the 2017 orders")
4.That upon making the second payment the 3 May 2017 and 25 May 2019 orders be discharged and pending the third payment the Husband pay to or on behalf of the Wife the following:
(a)The sum of $6,250 per calendar month;
(b)The Wife's life and health insurance; and
(c)Insurance and maintenance expenses for the Motor vehicle 1 vehicle driven by the Wife.
5.That unless within 14 days of the date of these orders the parties' have agreed in writing as to the value of the real property owned by YY Ltd (the YY Ltd property) then the parties do all acts and things to engage DB Realtors to value the YY Ltd property, the costs of the said valuation to be paid as to 75% by the husband and 25% by the wife.
6.That within 30 days of receipt of the single expert's valuation or written agreement as to the value of the YY Ltd property the Husband pay to the Wife a sum equal to 25% of the assessed value of the YY Ltd property, using the Reserve Bank Country AX/AUD conversion rate on the 30th day after receipt of the expert’s valuation.
7.The contents remaining at the G Street Property, originally at the G Street Property but now in the possession of the Husband and originally at the G Street Property but now in the possession of the Wife be divided by agreement and absent any agreement between the parties within 14 days of the date of these orders the parties do all acts and things necessary to engage a single expert valuer(s) to value the chattels, the costs of the said valuation to be paid as to 75% by the husband and 25% by the wife, and the parties to make such payment between them as is required to effect a 75/25% division in favour of the husband of the value of the chattels, having regard to those items already in the possession of each party, and each party make all such items available to the Single Expert for the purpose of completing the valuations.
8.That within 28 days the Husband and Wife do all acts and things and sign all necessary documents to cause the Motor vehicle 4 and Motor vehicle 1 motor vehicles driven by or in the possession or control of the Wife to be transferred to the Wife at her expense.
9.That Orders 8-14 of the orders made on 11 April 2018 be discharged and thereafter the Husband have the sole conduct of the sale of the G Street Property save that the husband:
(a)Provide the Wife 21 days’ notice in writing of his intention to fix a selling price below USD$6,499,000 and any further proposed reduction in the selling price thereafter;
(b)Provide the Wife with 21 days’ notice in writing of his intention to change the selling agent;
(c)Advise the wife in writing of any offer or offers to purchase the property and the terms of any offer as soon as practicable after receipt of same; and
(d)Advise the Wife in writing of his intention to accept any offer to purchase the property and not enter into any contract for the sale of the property for at least 7 days after having provided the said notice in writing to the wife save and except with the consent in writing of the Wife.
10.Pending settlement of the sale of the G Street Property:
(a)The husband shall pay all interest and capital payments, rates, taxes, insurances, HOA fees, maintenance costs and cost of presentation for sale as and when they fall due (the “holding costs”);
(b)The husband hold the wife's 25% interest in the G Street Property on trust pursuant to these orders; and
(c)Neither party encumber or further encumber the G Street Property save and except that the husband be permitted to encumber the property for the purposes of compliance with paragraph 1(c) of these orders.
11.That upon settlement of the sale of the G Street Property the proceeds be applied as follows:
(a)Firstly, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge the Mortgage and any other encumbrance affecting the property;
(c)Thirdly, to set aside such sum as is required to pay any Capital Gains Tax arising from the sale;
(d)Fourthly, the balance to be divided as follows:
(i)25% to the wife less 25% of the holding costs as and from 31 December 2017 which is to be paid to the Husband;
(ii)75% to the husband (from which the husband is to make the third payment if not already paid).
12.Following settlement of the sale of the G Street Property and distribution of the proceeds in accordance with these orders, the parties do all things and sign all documents to wind up The TT Trust, the costs of the said winding up to be paid as to 75% by the husband and 25% by the wife, provided however that the entitlements as determined by these orders shall override any entitlements as determined by the Trust Deed for the TT Trust.
13.Save as otherwise provided in these Orders, the Husband retain to the exclusion of the Wife, his interest in:
(a)RR Pty Ltd ATF The Mr Vyner Family Trust;
(b)RR Pty Ltd ATF The Mr Vyner Family Trust No. 2;
(c)SS Company ATF Mr Vyner Family Trust (US);
(d)DQ Inc;
(e)Mr Vyner ATF The VV Trust (USA)
(f)UU Pty Ltd;
(g)WW Inc;
(h)XX Ltd;
(i)YY Ltd;
(j)ZZ Pty Ltd;
(k)AB Pty Ltd ATF The Mr Vyner Family Trust;
(l)V Pty Ltd ATF The HH Trust;
(m)AC Pty Ltd ATF The Mr Vyner No.1 Trust ;
(n)AD Pty Ltd ATF AF Property Trust;
(o)AG Pty Ltd ATF AK Trust;
(p)Any other entity in which the Husband has an interest;
(q)The Husband's Motor vehicle 1; Motor vehicle 3 and Motor Vehicle 2;
(r)His cash at bank;
(s)Any superannuation or employment entitlements owing to the Husband;
(t)Any other assets in the Husband's name.
(The Husband's property)
14.Save as provided in these orders, the Husband indemnify the Wife absolutely with respect to any and all liabilities of or attaching to the Husband's property past, present and future of whatsoever nature and kind.
15.Contemporaneously with the third payment the wife do all such acts and things and sign all such documents as may be necessary, at the expense of the husband, to relinquish any office holding or shares in any of The Companies and Trusts and assign to the husband any monies which may be standing to her credit in any the accounts of The Companies and Trust.
Division of the Kenna Teasdale Funds
16.That $270,000 of the Kenna Teasdale Funds be held on trust for the parties to meet the husband's liability (if any) and legal fees in County Court Proceedings no …, capped at $270,000 and for the purpose of this order the husband provide to the wife an itemised written invoice of the legal fees incurred by him 14 days prior to drawing on the Kenna Teasdale Funds.
17.If, at the conclusion of the County Court Proceedings, there is any credit balance in the Kenna Teasdale Funds or there is a payment or award made in the husband's favour in the Country Court Proceedings, the funds are to be forthwith divided and paid:
(a)25% to the wife; and
(b)The balance to the husband.
18.Save as otherwise provided in these Orders, the Wife retain to the exclusion of the Husband:
(a)The partial property payments received by her in the sum of $2,172,371;
(b)The Motor vehicle 4 motor vehicle;
(c)The Motor vehicle 1 motor vehicle driven by the Wife;
(d)Any superannuation or employment entitlements owing to the Wife;
(e)Any other assets in the Wife's name.
(The Wife's property)
19.The Wife indemnify the Husband absolutely with respect to any and all liabilities of or attaching to the Wife's property past, present and future of whatsoever nature and kind.
20.Save as otherwise provided in these Orders and save and except for the purposes of enforcing these Orders, or any subsequent Orders:
(a)Each party is solely entitled to retain all property (including choses-in-actions) in the name or possession of that party as at the date of these Orders to the exclusion of the other party;
(b)Money standing to the credit of the parties in any bank accounts to be the property of the party in whose name such bank account is held;
(c)Each party hereby foregoes and abandons any claims they may have to any superannuation or work-related benefits and entitlements belonging to or earned by the other or alleged to be owing to them;
(d)Life insurance policies remain the sole property of the owner named in the policy; and
(e)Any joint tenancy of the husband and the wife in any real or personal estate is hereby expressly severed.
21.The parties have liberty to apply in relation to the implementation of these orders and/or disputes arising relating to the valuations required by these orders.
22.The Wife pay the Husband’s costs fixed in the sum of $12,342.56.
IT IS FURTHER ORDERED THAT
23.All extant applications are otherwise dismissed and removed from the list of cases awaiting hearing save and except with respect to any application for costs.
IT IS DIRECTED THAT
24.All documents produced to the Court pursuant to subpoena and exhibits relied upon by the parties be returned by the subpoena clerk of the Family Court of Australia, Melbourne Registry, to the person or organisation who produced same.
NOTATION:
A.That pursuant to Section 81 of the Family Law Act (1975) (Cth) the parties intend these orders to finalise their Financial Relationship and to avoid any further proceedings between them.
B.For the purpose of these orders "holding costs" includes interest and capital repayments, rates, taxes, insurances, HOA fees, maintenance costs and costs of presentation for sale.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Balken & Vyner has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
MACMILLAN J
Reasons for Judgment ("the Reasons") having been published on 30 September 2020 and corrected and republished on 18 November 2020 the matter was further listed for mention before me to allow the parties to make submissions with respect to the form of the orders to be made based upon the published Reasons prior to orders being pronounced.
Both the husband and the wife had prepared a minute of the orders they proposed having regard to the Reasons and although they were able to resolve some of the issues between them the following issues remained in dispute:
(a)The timing of the capital payments the husband is required to make to the wife;
(b)At what point the maintenance the husband pays to the wife should be reduced and/or be discharged;
(c)Whether the husband or the wife should retain the Motor vehicle 4 and the Motor vehicle 1 in the wife’s possession but registered in the husband's name;
(d)The terms of sale of the property at G Street Suburb E (“G Street Property”), whether the holding costs should be treated as a cost of the sale or be borne by the husband and what provision should be made for the payment of any Capital Gains Tax (“CGT”) upon sale;
(e)How the chattels originally located in the G Street Property should be dealt with and who should be responsible for the cost of them being valued in the event that there is no agreement as to their division
(f)The distribution of the funds held by Kenna Teasdale with respect to the litigation arising out of the sale of the Suburb F property; and
(g)Whether the wife should be required to indemnify the husband in relation to any claim that might be made against him by her sons Mr L and Mr N Balken.
Neither party made provision for the balance of the funds held by Kenna Teasdale after deduction of the $270,000 to be set aside for the County Court proceedings. Counsel for the Husband had previously agreed that the balance after deduction of $270,000 could be paid to the Wife as part of her entitlements and I propose to make orders to that effect.
MOTOR VEHICLES
For convenience I will deal firstly with the Motor vehicle 4 and Motor vehicle 1 as the amount the husband is required to pay the wife will depend upon which party retains these vehicles.
It is the wife's case that both the Motor vehicle 1 and the Motor vehicle 4 are registered in the husband's name, that it was not part of his case that the wife should retain those vehicles and she has no desire to do so and that the husband can sell the vehicles and retain the proceeds as part of his entitlements.
Whilst it may be that the husband did not put his case on the basis that the wife should retain the vehicles they have a total value of $37,000 and arguably given the value of the assets in this case were never likely to be a significant focus for either party.
It is not in dispute that the vehicles have been in the wife's possession since her return to Australia following separation in March 2017 and it is the husband's case that for practical reasons, in circumstances where he has no knowledge of the condition of the vehicles and in any event cannot travel to Australia, that the vehicles should be transferred to the wife.
Whilst the parties agreed upon the value of the vehicles for the purposes of the hearing as submitted by the husband only the wife knows what condition they are in and what price they are likely to achieve on a sale and whatever condition they are now in lies in her control. Whilst they might not be able to be sold for the values attributed to them the wife has in any event had the benefit and the use of the vehicles since separation.
In my view it is both practical and proper to make an order for the transfer of both the Motor vehicle 1 and the Motor vehicle 4 to the wife at the value attributed to them in the asset pool. As a result the total amount payable to the wife will be $5,189,510, as provided by the Husband in his minute of proposed orders.
TIMING OF CAPITAL PAYMENT AND THE SALE OF THE G STREET PROPERTY
The husband proposed that the capital payment be made as follows:
(a)The sum of $189,510 within 7 days ("the first payment");
(b)Further payment of $3,000,000 within 90 days ( second payment"); and
(c)A final payment of $2,000,000 upon settlement of the sale of the G Street Property ("the third payment")
The husband further proposed, although that was not his primary position, that in the event that the Court was of the view that there should be an end date and the final payment not be dependent upon settlement of the sale of the G Street Property, that the husband should have 6 months to make the final payment. The husband further submitted that if the Court were to adopt this course the husband should have the sole conduct of the sale of the G Street Property.
The wife proposes that the husband be required to pay her the total of her entitlements within 14 days of the date of the orders. It is her case that Reasons having been published on 30 September 2020 the husband has known at least since then that he would have to pay the wife at least $5,000,000. The wife submits the husband could and should have arranged his affairs to enable him to make that payment within the time frame she proposes and that it is unreasonable to expect her to wait until the G Street Property is sold, particularly so given the history of the party's unsuccessful attempts to sell the property.
Counsel for the wife also referred to the orders made by consent on 10 August 2018 restraining the husband and/or BF Pty Ltd from taking more than $250,000 per month out of Australia that order similarly putting the husband on notice that the funds held by BF Pty Ltd would be required to meet any payment the husband was ordered to make to the wife by way of property settlement.
Although the husband submitted that it is clear from the evidence at the trial that he is asset rich but cash poor and does not control the various entities which provide him with the bulk of his income it is also the case, as submitted by the wife, that he has known since September 2020 that he would need to pay the wife at least $5,000,000 and in my view it would be surprising if he had not already considered how he could meet that commitment. Even if he has not done so I am satisfied that if I allow him two months to make the second payment he will have sufficient time to raise the necessary funds. I propose to make orders in those terms.
The wife's case is that she needs all of her entitlements to be paid in order to get on with her life and that if orders were to be made in the terms proposed by the husband she would not have sufficient funds to enable her to purchase a home and generate sufficient income from the balance to meet her living expenses resulting in her having to dip into capital to meet those expenses. In my view there is some force in her submission that she will be left in limbo if she is required to wait for the sale of the G Street Property before receiving the balance of her entitlements.
The wife also proposed detailed orders with respect to the sale of the G Street Property including an order that the husband vacate the property, that DP Group and DR Group be appointed as joint selling agents to sell the property on the following terms :
11. Within 21 days of the date of these Orders:
…
(b) The parties are to execute a joint sale authority in respect of the G Street Property which appoints the DP Group and DR Group as the joint selling agents on the following terms and conditions unless otherwise agreed in writing:
(i) The selling price is to be US$6,500,000;
(ii) The agents commission is to be a total of 5%;
The period of the appointment is to be 8 months;
(iv) The escrow period is to be no more than 45 days;
(v) Fixtures and fittings are to be included in the sale of the property; and
(vi) Any repairs to the G Street Property requested by a buyer, including repairs by their own contractor, who has paid the full requisite deposit shall be agreed and deducted from the purchase price if they do not exceed a total of 3% of the sale price;
Significantly in my view the wife proposed that each of the selling agents be instructed to provide details of all enquiries to both parties contemporaneously within 24 hours of receipt and that all instructions to the agents be provided jointly in writing. The underlying premise of this proposal being that the husband would somehow frustrate the sale in order to delay the final payment. Although Counsel for the wife referred to there having been previous sales that have fallen through there is no evidence before me as to those matters. The husband's proposal was similarly based upon his concern that the wife having received her entitlements would then frustrate the sale leaving him with the unsold property. I similarly do not have any evidence before me of the wife having frustrated the sale of the property.
In my view it is proper that there should be an end date and I propose to make the final payment payable 6 months from the date of the orders irrespective of whether or not the G Street Property has been sold. Although the wife may not immediately have access to all of her entitlements she will have the certainty of a final payment within a specified period allowing her to plan more effectively for her future. Although there was no evidence with respect to the husband's capacity to realise investments in order to make the payment and the wife herself in her proposed order did not refer to any asset which might be used as security for the payment the husband will have the time to make whatever arrangements may be necessary.
In these circumstances I am also satisfied that there is no basis for the wife's concerns with respect to the sale being delayed to avoid that final payment being made. And to the extent that the wife is concerned that the property realises the best possible price the orders I propose to make will give the husband an incentive to finalise the sale at the best possible price not only because for every dollar the wife is entitled to he is entitled to three dollars but also because if it is not sold he will need to make other arrangements to meet the final payment and even on his own case will have to continue paying spousal maintenance until that final payment is made.
In my view given the level of distrust between these parties and the history of this matter an order that they jointly instruct the agents would almost certainly lead to further proceedings and in all of the circumstances I propose to accede to the husband's proposal that he have the conduct of the sale of the G Street Property subject to the requirement that he not appoint new agents and not reduce the sale price without first giving notice in writing to the wife and keep her advised of any offers that might be made.
CAPITAL GAINS TAX AND HOLDING COSTS
Notwithstanding that the value of the property for the purposes of the asset pool allowed for the costs of sale and the estimated CGT the wife's proposal was that the husband should bear any Capital Gains Tax incurred upon the sale of the G Street Property and the holding costs and that her 25% share should be calculated after deduction of the commission and the mortgage. The holding costs are described by the husband for the purposes of his proposed orders as including interest and capital repayments, rates, taxes, insurances, HOA fees, maintenance costs and costs of presentation of sale. The wife's submission with respect to the CGT and the holding costs and expenses of the sale was based upon what she said was the lack of transparency and with respect to the CGT whether or not the husband had losses which might be offset against any CGT liability.
As referred to in the Reasons with respect to the wife's submission that the husband has the benefit of significant tax and capital losses I found (at [269] of the Reasons”) that "…it is not possible based upon the evidence for me to form a view as to how that would impact upon the financial positions of the various entities…or the husband's overall financial position". I am similarly not in a position to assess what if any losses the husband might have that could be offset against any liability for CGT incurred on the sale of the G Street Property or for that matter whether it is even possible to do so. In my view the intent of the Reasons is clear and the orders should provide for the payment of any CGT out of the proceeds of sale before those proceeds are distributed to the parties. In terms of there being sufficient transparency as to the amount the amount of CGT and holding costs payable there will of course need to be documentation provided to the wife by the husband.
In circumstances where both parties are to receive a benefit from the sale of the property I am satisfied that the husband should be compensated for those holding costs he has been required to pay since 31 December 2017. Although the terms of the TT Trust entitled the wife to half of the proceeds of sale and required her to meet half of those holding costs in circumstances where pursuant to my orders she will be entitled to only 25% of the net proceeds, I am satisfied that she should only be responsible for 25% of those holding costs. As the husband has paid those costs to date and I propose to order that he continue to make those payments pending settlement of the sale the wife will need to reimburse him for 25% of those costs out of her share of the net proceeds of sale.
Although the parties also agreed upon an order in the terms proposed by the husband for the winding up of the TT Trust after settlement of the sale of the G Street Property it was the wife's case that she should only be responsible for 25% of the cost of that winding up. In my view it is reasonable in circumstances where the wife is only receiving 25% of the net proceeds that she should only pay 25% of the costs.
MAINTENANCE PENDING THE FINAL PAYMENT
The wife's case is that the husband should continue the current maintenance, which is in total approximately $16,000 per month, until the final payment has been made whereas the husband proposes that after he makes the second payment he pay the wife $6,250 per calendar month, her life and health insurance and the insurance and maintenance for the Motor vehicle 1 driven by the wife pending the final payment. This is approximately 38% of the amount he is currently paying. The wife has already been paid $2,000,000 and when the second payment is made will have been paid a further $3,000,000 the equivalent of almost 74% of her entitlements excluding her share of the net proceeds of the G Street Property. Although this is not a mathematical calculation in my view it is not unreasonable in these circumstances that the maintenance be reduced after the wife receives the second payment and I propose to make orders in terms of the husband's minute of proposed orders with respect to this issue. Albeit the payments are less than she is currently receiving they will mean that the wife is not totally dependent on capital for her living expenses pending the final payment and payment of her share of the proceeds of sale of the G Street Property.
VALUATIONS AND CHATTELS
As referred to in the Reasons neither the property owned by YY Ltd in Country AX or the chattels in the G Street Property had been valued for the purposes of the final hearing.
Although the parties agree that DB Realtors should be engaged to value the property in Country AX it is the wife's case that she should only pay 25% of the costs of that valuation whereas the husband's case is that they should bear those costs equally. There is no evidence as to what that valuation will cost however in the overall circumstances of this case it is likely to be relatively modest. In those circumstances although the difference in financial terms between their respective positions is not likely to be great I am satisfied that as the wife is entitled to 25% of the value she should be liable for 25% of the cost of the valuation.
The dispute with respect to the chattels is somewhat more complex. The husband's case is that the contents of the G Street and Suburb F properties should be divided between the parties in accordance with a proposal contained in a letter from Kenna Teasdale to HWL Ebsworth lawyers dated 22 May 2019 and that in the alternative the parties jointly engage a valuer to value the remaining chattels at the G Street Property, those chattels from the G Street Property now in the possession of the husband and the wife and the value be adjusted as 75/25 in the husband's favour. In his oral submissions Counsel for the husband included the contents of the Suburb F property although the contents of the Suburb F property were not referred to in paragraph 7 of the husband's proposed minute.
The order proposed by the wife was in my view much more complicated but more importantly makes the prospect of further litigation much more likely. Section 81 of the Family Law Act 1975 (Cth) (“The Act”) requires the Court as far as it is practicable to do so, to "…make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them." It is for that reason I propose to make orders in the terms proposed by the husband, which provide a much simpler mechanism, albeit I do not propose to include the chattels from the Suburb F property. If they were originally in the G Street Property then they will be included, however in circumstances where the chattels in the Suburb F Property were not included in the asset pool and were not an issue in the trial I am not satisfied that I can or that it would be proper to make an order with respect those chattels other than by consent. The parties can of course always reach an agreement in relation to specific items or the chattels generally.
FUNDS HELD BY KENNA TEASDALE
As previously referred to the parties agreed to Kenna Teasdale holding $270,000 of the balance of the proceeds of the Suburb F Property. It is the wife's case that these funds were held on trust to meet the husband's legal fees in the County Court proceedings and that any balance was to be distributed to the parties in accordance with their entitlements. However as submitted by the husband when the matter was mentioned on the 9 September 2020 it was clear that these funds were to be applied to any judgment against the husband arising out of the County Court litigation and not just the legal costs of that litigation. In these circumstances I propose to make an order in the terms sought by the husband.
INDEMNITY
The final issue in dispute with respect to the form of the orders was the wording of the indemnity sought by the husband from the wife with respect to any monies owing to either of Mr N or Mr L Balken. I accept as submitted by the wife that there is no basis for such an indemnity. The wife's sons are not parties to the litigation and there was no evidence with respect to the husband owing them any money. In these circumstances I do not propose to require the wife to indemnify the husband against any claim either Mr N or Mr L may make against him.
COSTS OF SLIP RULE PROCEEDINGS
The husband also sought an order that the wife contribute $15,000 to the costs he had incurred with respect to his application that the Reasons be corrected pursuant to the slip rule. The husband incurred costs of $18,640 calculated pursuant to the terms of the Costs Agreement dated 30 March 2017 and updated by letter dated 27 July 2018. The Costs Agreement and the letter were annexed to the submissions filed on behalf of the husband in support of his application on 27 November 2020. In the alternative the husband seeks costs calculated in accordance with Schedule 3 of the Family Law Rules 2004 (“the Rules”) in the sum of $12,342.56.
The general rule in proceedings pursuant to the Act is that parties to proceedings bear their own costs (s 117(1)). However s 117(2) of the Act allows the court to make an order for costs if it is satisfied that there are circumstances that justify it doing so. In considering what if any order should be made the court must have regard to the following matters, albeit some will be of greater relevance than others depending upon the fact of the particular case:
(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 pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with 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)Such other matters as the court considers relevant.
It is the husband's case that there are circumstances in this case which justify the Court making an order for costs in his favour. Those circumstances being in summary that the Court found, contrary to the wife's submissions, that it had both the statutory and inherent power to correct the Reasons, that correction of the errors did not require an independent exercise of discretion and was a proper exercise of the court’s discretion pursuant to the slip rule and that that in any event the Court was not functus officio.
Both parties in this case have, by community standards, substantial wealth and although I am satisfied that the husband can afford to meet his own costs it is also the case as submitted by the husband that the wife has the capacity to meet any order for costs the Court might make.
The crux of the husband’s case is that notwithstanding that the wife acknowledged the mistakes she opposed the correction of those errors her case appearing to be that the Court should pronounce orders based upon the incorrect figures. As a consequence the parties, but in particular the husband given it was his case that the errors should be corrected, were put to the cost of further written submissions. Ultimately as submitted by the husband the wife was wholly unsuccessful.
Although I afforded the wife the opportunity to make submissions opposing the correction of the errors those submissions were only required because of her opposition to the husband’s application that they be corrected using the slip rule and in circumstances where I found that I both could and should correct the errors. Whilst the wife was entitled to raise the matters and refer the Court to the authorities she submitted supported her case there was always the possibility if the Court did not accept her submissions that there would be an application for costs and she opposed the correction of the orders in that context. I do not accept that the wife was “obliged” to draw the Court’s attention to those authorities and ultimately having chosen to oppose the husband’s application those authorities upon which she relied in my view did not support her case. I am satisfied that there are circumstances in this case that justify the Court departing from the general rule and making an order for costs in the husband’s favour.
It is also generally the case that when the court makes an order for costs those costs are payable on a party and party basis whereas in this case the husband is seeking costs on an indemnity basis.
When determining whether costs should be awarded on an indemnity basis the Full Court in Kohan & Kohan (1993) FLC 92-340 (at page 79,614) stated that 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”.
Holden CJ in Munday v Bowman (1997) FLC 92-784 at page 84-660, summarised the circumstances which might warrant an order for indemnity costs identified by Shepherd J in the decision of Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. They include the following:
·Where an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts;
·The making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
·Evidence of particular misconduct causing loss of time to the court and to other parties;
·The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions;
·An imprudent refusal of an offer to compromise.
As the Full Court said in Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029 the circumstances which might support an order being made on an indemnity basis are not closed.
The husband relied in particular on the wife’s opposition to the correction of the errors in circumstances where it was submitted that properly advised she should have known that she had no chance of success. It was his case that in those circumstances the Court could presume that she did so for some ulterior motive or that she disregarded the known facts. Although in my view the wife’s opposition to the correction of the errors was misconceived and she probably should, properly advised, have known that it had little prospect of success I am not satisfied that the circumstances of this case are of “exceptional kind” that would warrant an order for costs on an indemnity basis.
Rule 19.18 of the Rules sets out the methods for calculating costs as follows:
(a)Of a specific amount;
(b)As assessed on a particular basis (e.g. lawyer and client, party/party or indemnity);
(c)To be calculated in accordance with the method stated in the order;
(d)For part of the case, or part of the amount, as assessed in accordance with Schedule 3.
Rule 19.18(3) of the Rules provides that in making an order under sub-rule (1), the court may consider:
(a)The importance, complexity or difficulty of the issues;
(b)The reasonableness of each party's behaviour in the case;
(c)The rates ordinarily payable to lawyers in comparable cases;
(d)Whether a lawyer's conduct has been improper or unreasonable
(e)The time properly spent on the case, or in complying with pre-action procedures; and
(f)Expenses properly paid or payable.
In their written submissions Counsel for the wife has set out the basis of the costs claimed by the husband. The costs sought by the husband in accordance with Schedule 3 of the Act are $12,342. I do not accept as submitted by the wife that that I cannot be satisfied, absent fee slips and tax invoices, that the costs claimed are referable to the correction of the Reasons. In all of the circumstances of this case I am satisfied that the costs claimed by the husband on a party and party basis are reasonable and propose to order the wife to pay the husband’s costs fixed in the sum of $12,342.56.
I certify that the preceding forty-five (45) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Macmillan. Associate:
Dated: 8 December 2020
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
Legal Concepts
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Costs
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Remedies
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Injunction
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Statutory Construction
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