Bannister and Pergolesi

[2019] FamCA 87

FAMILY COURT OF AUSTRALIA

BANNISTER & PERGOLESI [2019] FamCA 87

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)

APPLICANT: Ms Bannister

RESPONDENT: Mr Pergolesi

FILE NUMBER: MLC 3959 of 2018

DATE DELIVERED: 26 February 2019

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: By way of Written Submissions

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Lander & Roger

SOLICITOR FOR THE RESPONDENT: Coote Family Lawyers

Orders

1. That the respondent pay the applicant’s costs for three days of the trial relating to s 90RD of the Family Law Act 1975 (Cth) in respect of senior and junior counsel and solicitor, such costs to be calculated according to the scale in the Family Law Rules 2004 by agreement and failing agreement as assessed.

2. That the application in a case filed 4 December 2018 by the applicant is otherwise dismissed.

3. That the respondent’s application for costs for the hearing of 6 June 2018 is dismissed.

4. That the response of the respondent filed 21 December 2018 is otherwise dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Bannister & Pergolesi has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

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 r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 3959  of 2018

Ms Bannister

Applicant

And

Mr Pergolesi

Respondent

REASONS FOR JUDGMENT

1. In an application in a case filed 4 December 2018, Ms Bannister (“the applicant”) seeks at order for costs for the period between 13 April 2018 and 5 November 2018 incurred by her with her lawyers.  She seeks that those costs be paid by Mr Pergolesi (“the respondent”).

2. The application encompasses hearings and the associated legal work. The hearings about which the claim is made are those of 3 May 2018 before Senior Registrar FitzGibbon, 6 June 2018 before me, 26 June 2018 before Registrar Field, 3 July 2018 before Bennett J, 17 September 2018 before Registrar Field and a number of days in October 2018 before me. In respect of the last item, the issue for determination was whether a declaration under s 90RD of the Family Law Act 1975 (Cth) (“the Act”) should issue in favour of the applicant relating to the de facto relationship which she claimed existed up until early 2018.

3. In addition to the claim by the applicant for costs, the respondent also sought costs by a response filed 21 December 2018.  His claim for costs related to the hearing on 6 June 2019 (sic).

4. It will be readily apparent that both parties seek costs arising out of the hearing on 6 June 2018. 

5. It assists to understand what each of these hearings was about. 

6. The 3 May 2018 before Senior Registrar FitzGibbon, was effectively the first return date of an application filed by the applicant on 13 April 2018.  She sought orders which included injunctions in relation to a real property in B Street and about her use of a motor vehicle, urgent interim spousal maintenance and an interim settlement of property.  She sought a variety of other injunctive orders.  That application pleaded that there had been a de facto relationship with the respondent and “the date of final separation” was 28 February 2018. 

7. It was the respondent’s response to that application that gave rise to the triggering of the dispute about jurisdiction.

8. When the matter came before the Senior Registrar, all parties were represented by experienced counsel and it is apparent from the consent orders made that the issue required the determination of a judge.  Accordingly, the respective proceedings were adjourned to the Judicial Duty List on 10 June 2018.

9. There could be no doubt on 3 May 2018 as to which applications were to be heard in the Judicial Duty List but all of them depended upon the acceptance by the court that it had jurisdiction to hear the matter.

10. It will therefore be readily apparent that the injunctive relief could not proceed to be heard until the jurisdictional issue was resolved.

11. On 3 May 2018 anticipating that the applicant would pursue interim orders, the Senior Registrar (again by consent) ordered the respondent to file any affidavit material by 17 May 2018.  He complied.

12. In respect of the hearing on 6 June 2018, the matter came before me.  The respondent sought an adjournment on the basis that only the day prior to the hearing, the applicant filed a raft of affidavit material.  I ruled that the adjournment was necessary because of the factual determination required of the court.  I considered that the absence of the opportunity for the respondent to provide his side of the story was a problem.  In publishing reasons, I said:

    13.This particular adjournment arises out of the fact that the applicant filed material at the very last moment and even if the respondent was on some form of notice that it was going to happen, it does not enable the court to have all of the information before it to deal with the raft of relief that the applicant seeks. 

    14.In my view, natural justice requires that the respondent have the appropriate time for that responding material to be provided. 

13. It will be self-evident from what I have said that although the adjournment was necessitated by the late filing of the material, I had then taken the view that the respondent was on notice as to the nature of what was going to be put but it was the court that required the relevant affidavit material. That becomes relevant on the question of whether or not the respondent should now succeed in his application for costs against the applicant. It will be remembered that both parties have sought costs of that day. Having regard to what I have just said, there is no basis for the applicant to seek costs even taking into account her ultimate success on the s 90RD application because in my view, she had created a position where, notwithstanding the notice to the respondent, the court needed to hear from him. She left the filing and service of documents too late.

14. That determination affects what (if any) costs should be made in favour of the applicant in respect of the overall proceedings.

15. The matter came before Registrar Field on 26 June 2018.  Doing the best I can, this hearing arose from my referral of the respective applications to the case management judge.  It is not readily apparent to me how the parties were brought before the registrar but as both wanted relief, they appear to have achieved that objective.  The respondent wanted to deny the applicant injunctive relief and he needed to establish that the applicant’s assertion as to jurisdiction was wrong.  For the applicant to succeed, she obviously had to prove the contrary.  In that sense, even though this appears to be all part of the rolled-up costs application arising out of the substantive proceedings, both parties achieved their objective. 

16. Unfortunately, Registrar Field listed the matter for a special fixture before Bennett J on 30 July 2018. Indeed, rather than that date, her Honour brought the parties before her on 3 July 2018 where there appeared to be two disputes. The first related to injunctive relief concerning the real property in B Street, and the other related to the s 90RD jurisdictional issue. It is not entirely clear to me why the two were separated because one obviously depended upon the other. However, her Honour indicated that the matter would proceed on 30 July if the injunctive relief issue was pursued by the applicant. However, it is difficult to see how that was possible having regard to the fact that the s 90RD issue had not been determined.

17. Bennett J made an order that the jurisdictional issue be adjourned to a date to be fixed as a three to four day matter so it is quite clear that the matter could not proceed as anticipated by the applicant in relation to the injunctive relief. Bennett J did not reserve the parties’ costs and it would seem that there was consensus that the observations I have just made about jurisdiction were then correct and the hearing on 30 July 2018 was therefore abandoned. To the extent that the applicant seeks costs of the hearing on 3 July 2018 before Bennett J as part of the rolled-up costs for the period mentioned at the beginning of these reasons, it is hard to see how that entitlement can encompass the hearing before Bennett J when it ought to have been abundantly clear to both parties that it was not the injunctive issue that was critical but rather the jurisdictional point that needed determination under s 90RD of the Act.

18. On 17 September 2018, the matter came before Registrar Field again. This too was a management hearing in which the registrar ascertained the availability of the resources to commence the determination of the jurisdictional issue on 12 October 2018. A timetable was then made. On any view, both parties achieved their objective of obtaining the hearing that they both needed. I repeat, the respondent wanted a determination of the duration and ending of the relationship and the applicant wanted the injunctive relief. It is difficult for me therefore to see how the applicant can seek costs in respect of that hearing despite the fact that ultimately the s 90RD application proceeded to determination.

19. Finally therefore, the hearing began before me on 12 October 2018 and proceeded over the ensuing week. The matter was hotly contested and numerous witnesses were called and at the conclusion of the hearing on 18 October 2018, judgment was reserved. Judgment was delivered on 5 November 2018 at which time, I granted the declaration under s 90RD of the Act confirming jurisdiction of the court.

20. In her application, the applicant seeks that any costs awarded be on an indemnity basis but with the obvious fall-back position of party and party costs.

21. Each party filed written submissions. Each agrees that the provisions of s 117 of the Act applies. For the purposes of this determination, in addition to the written submissions, I have also had the advantage of the parties’ respective affidavits and those of their practitioners.

22. The solicitor for the applicant said that when the proceedings came on for hearing on 12 October 2018, the respondent resiled from a previously stated position as to the length of the de facto relationship.  He observed that the respondent’s case outline asserted that the relationship subsisted for less than two years between 2012 and 2013.  It is a curious fact that it was only in cross-examination of each party that their own subjective views about the nature and length of the relationship became clearer.  For example, the applicant maintained that the duration of the de facto relationship could be seen to have commenced when she virtually began what could only be described as a friendship or dating arrangement with the respondent and with whom she did not live on any permanent basis for some considerable time thereafter.  In respect of the respondent, he determined that the conclusion of the de facto relationship was upon the cessation of any sexual intimacy.  Whatever the respective lawyers had prepared, and whatever advice the parties had received, these enlightening moments in the evidence indicated that the respective party’s focus was on their own subjective judgment as to the nature of the relationship.  As ought be apparent from my reasoning, the determination of a de facto relationship is much wider.  Indeed, the applicant certainly took that view and I upheld her view as she relied very heavily upon the public recognition of the nature of what she asserted was the relationship with the respondent.  She produced a lot of objective evidence.

23. As to the costs incurred by the applicant, and bearing in mind that the focus was from April 2018 onwards, by the time the s 90RD declaration was made, the solicitor for the applicant deposed to the fact that his client had incurred $759,184.18 much of which included counsel’s fees amongst which were for attendances subsequent to 5 November 2018.

24. So controversial was this case that there were also proceedings in the Supreme Court of Victoria which court deferred to this court to wait the issue of the jurisdiction determination.  Those costs were not included in the figures just mentioned.

25. The solicitor for the respondent deposed to the fact that his client had been billed $511,974.46 but that included counsel’s fees and proceedings in the Supreme Court.  There were also proceedings in the Magistrates’ Court.

26. It will therefore be apparent that even without the issue of what entitlement (if any) the applicant has to an alteration of the interests of property held by the respondent, the parties have already spent in excess of $1 million.  That may or may not be a problem for them because it would appear that the respondent has assets, on his assertion, of at least $110 million whilst the applicant now has assets of at least $5 million.

27. Section 117 of the Act provides that in proceedings under the Act, each party shall bear their own costs unless there are circumstances to depart from that principle. If those circumstances can be seen to exist, before making any order for costs, the court must take into account matters specifically set out in

    
    

    s 117(2A) of the Act.

28. My first focus therefore is on the question of whether there are justifiable circumstances to depart from the principle that each party should bear their own costs. The issue which was addressed by the submissions but which troubles me most here, is the fact that the relevant proceeding which has now been determined revolves around two specific provisions of the Act. The first of those is s 4AA. It provides that a person is in a de facto relationship if not legally married to the other person (nor related by family) and:

    Having regard to all of circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

29. Section 4AA(2) provides that there are a number of circumstances which are obviously not part of an exclusive or comprehensive list that assist in deciding whether or not a court can accept that the parties were in a de facto relationship.  On any reading of that provision, the court has guidance but must use its own discretion to determine whether or not the relationship existed.  That can be seen by reference to s 4AA(3) which provides that no particular finding in relation to any of the circumstances given as examples by the legislature are to be regarded as necessary in deciding whether the persons have been in a de facto relationship.  However, to highlight the subjective nature of court’s determination, the legislature enacted s 4AA(4) which reads:

    A court determining whether a de facto relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.

    The subjective nature of that determination makes it difficult for parties to anticipate whether or not they will be successful in arguing a jurisdictional point of considerable significance as much of the determination revolves around discretion.  Jurisdiction is such a fundamental point for the court that care has to be taken to ensure that it has the power in circumstances where a concession is not made. 

30. In respect of an application for costs in such an application, a fundamental issue is whether or not a party resisting the jurisdiction was being unreasonable having regard to the facts that ought to have been not only common to both parties but obviously so.  In this case, having regard to the view that the respondent took of why he considered that the relationship had ended, I find he was unreasonable bearing in mind he had not only the affidavit material to be relied upon by the applicant but also numerous examples provided by her of public events in which he participated with her.  The unusual feature is whether he was unreasonable right from the beginning of the proceedings or at some point later, when his position must be seen to have been untenable.  It is helpful to remember how each party viewed the basis of determining, in one case, the start, and in the case of the other, the end, of the relationship.  I will find below that confusion compounds the difficulty in a costs application.  Even if the court finds the respondent adopted an unreasonable position, it does not mean that he ought to pay the costs sought by the applicant whether on an indemnity basis or otherwise.  Rather, what matters is how much costs were incurred by the applicant unnecessarily bearing in mind that she too wanted injunctive relief that required a jurisdictional determination.

31. In his affidavit the solicitor for the applicant said that it was open to the respondent at all material times to “abandon” his claim that the relationship subsisted for less than two years but he refused to do so.  To be satisfied that the respondent adopted an unreasonable position must revolve around whether or not I am satisfied that the view that he took as to why he considered there was no de facto relationship was unreasonable.  He could not be asked and I have not been able to conclude, that he was aware of all of the details that the legislation requires. 

32. A second provision is s 90RD of the Act which is the one that provides for the court to inquire and make declarations about the existence of a de facto relationship. Quaintly, s 90RD(2) provides that the court may declare when the de facto relationship “ended”. The use of that language is different from when the parties separated and indeed, different from the concept of living together under the same roof as occurred here. To be critical of the respondent for not accepting the applicant’s position requires the court to assess the state of mind of a party who had concluded that the relationship was permanently at an end. It is conceivable that despite that state of mind, a party might still attend various public functions and appear to the outside world as continuing the relationship. The use of the statutory language also makes it difficult where a costs application is made (as here) based upon the applicant being “wholly successful” or alternatively, that the respondent has been wholly unsuccessful. As it was submitted by the solicitor for the respondent, his client had been successful in obtaining a finding that the relationship did not commence as asserted by the applicant. Technically therefore, both parties could be said to have not been wholly successful and certainly the respondent was not wholly unsuccessful. However, relevantly here, the s 90RD application was mostly about when the relationship ended and in combination with s 4AA, one must then look at what the parties were doing both privately and publically to get some sense of the subjective state of mind (in this case) of the respondent.

33. It would be fair to say that subject to one incident in June 2018 (so well after the applicant said the relationship had come to an end anyway) the respondent was not only a generous man but a calm one. Although it was said that he had given the applicant a clear indication that the relationship had come to an end, that was not his evidence. As such, it was difficult to say then for the purposes of s 90RD that he had been unreasonable subsequent to February 2018 in not making the concession that the parties’ relationship ended well after he said it did. I therefore do not accept that he should be criticised for not having abandoned his position. Whilst there is certainly ample evidence that the court could make the finding based on the evidence presented by the applicant, there is still the dilemma of the state of mind of the respondent.

1. The applicant’s position about the injunctive relief was that a sale by the respondent to an acquaintance was a sham.  The property which was the subject of the putative sale was not only the applicant’s home but also that of at least one of her children.  Whilst the relationship, on the applicant’s view, was of some significant duration, the provisions of s 90SM relating to the alteration of property interests, requires the court to take into account contributions of the parties.  For the applicant to maintain that she wanted to keep the real property on the evidence she presented as to the nature and depth of the relationship, seemed unlikely to succeed.  I readily concede that another judge may take an entirely different view because there are also considerations beyond contributions but in this case, I take into account that the applicant needed the injunctive relief so it was not just the jurisdictional issue which was a problem but also her right to retain a property on an interim basis which had been sold (being in the respondent’s name alone) and to which she had made no financial contribution.  I therefore reject the suggestion that her interim application let alone her substantive application were tied up with the jurisdictional issue.  This case was much wider than that.

2. In a very helpful submission, Martin Bartfeld QC addressed the costs issue on behalf of the applicant.  He readily conceded that there was a problem associated with the claim for indemnity costs because of the absence of the relative court documents but no issue was taken by the respondent with that point. 

3. Mr Bartfeld submitted that the circumstances that justified a departure from the principle in s 117 were that there was a large financial disparity between the parties and secondly, that the applicant had been wholly successful. Thirdly, he submitted that the respondent had proceeded on an erroneous interpretation of the law.

4. In respect of the first of those three points, it was submitted that financial disparity had to be dealt with under s 117(2A). I agree that it is not appropriate that I use that as a justifiable circumstance to depart from the principle in s 117.

5. In respect of the second of the three points, it was submitted that there was no scope for arguing partial success because the question of jurisdiction had to be either determined in favour of one or other of the parties.  I accept the submission put by Mr Bartfeld that in respect of the length of the relationship, the applicant was overwhelmingly successful.  However, as I have already observed, I accept it is not that simple bearing in mind the question of the state of mind.  Mr Bartfeld submitted that the respondent’s whole case revolved around the termination of sexual relations.  As observed by Mr Bartfeld, the respondent led evidence of his own pursuit of sexual relationships with other women.  It was the respondent’s case that the absence of relationships with the applicant, but relationships with other women, was decisive of the lack of the existence of the de facto relationship.  For reasons I have already mentioned, that argument on behalf of the respondent was flawed and I therefore agree with what was submitted by Mr Bartfeld.  However, Mr Bartfeld then submitted that it was “inconceivable” that the respondent was not given advice about the reference to s 4AA given that he was represented by both senior and junior counsel and experienced solicitors.  It was submitted by Mr Bartfeld that it must be inferred that the respondent chose to proceed in the face of knowledge about the likelihood of the findings which were ultimately made.  As much as that is an attractive submission, I do not think on the evidence that I could make that finding. 

6. My observations of the respondent were that he actually believed what he was saying.  In my view however, even accepting that the respondent considered intimacy to be determinative, he did not address the assertions of the applicant relating to how he appeared publically as well as privately.  Accepting that the respondent did not carefully address the assertions of the applicant as to the public nature of their relationship (as she saw it), I accept that his focus was too narrow. 

7. Considerable time was spent hearing evidence from witnesses who the respondent called, particularly those relating to his sexual proclivities with a woman with whom he was having a relationship of a sexual nature on odd occasions, but also his male companions who in a state affected by alcohol, participated in an unseemly incident to try and establish that the sexual relationship was critical to the determination of the relationship.  It clearly was not and his witnesses were of little value.  In my view, that focus and the calling of those witnesses justifies a departure from the principle that each party pays their own costs as much time was wasted.  Costs were unnecessarily incurred.

8. In reply to Mr Bartfeld’s submissions, the respondent said neither party had been wholly successful or wholly unsuccessful.  It was submitted that it could not therefore be argued that his case was not entirely without merit.  I have already dealt with that issue above but in my view, the observation I have just made indicates that the focus of the respondent was far too narrow having regard to the state of the law.

9. It was then submitted that the applicant filed her material on 22 August 2018 at a time when the respondent had to file his reply by 4 September. It was asserted that requests were made for the production of the voluminous documents to be tendered as they presumably (and quite properly) were not part of the affidavit material. It was asserted that the requests were ignored forcing the respondent to make an application to extend the time for him to file his material. It was submitted that this was all part of a cumulative effect as to conduct referred to in s 117(2A)(c). It was therefore submitted that if that was accepted, the applicant’s conduct militated strongly against any order for costs in her favour. It is difficult for me to accept that submission bearing in mind no-one suggested at the commencement of the trial a need to adjourn the proceedings, or that material should not be relied upon, because it had not been properly discovered. More importantly, much of the focus of the applicant’s exhibited material concerned photographs. They were photographs of events at which the respondent had attended. He must have known that he attended those particular events and more importantly, knew that he was being photographed. There were even photographs of him in a quaint scene where the applicant was adjusting his clothing prior to the couple attending an event. In my view therefore, the lateness of filing material in this case is not something that affects the costs issue.

10. It was further submitted that the applicant had been found to have lied and misled the court in relation to her financial circumstances.  The findings against the applicant in respect of those matters were clear but those matters could not have affected her truthfulness in respect of the fundamental evidence relating to the public face of the parties’ relationship.  I found the applicant less than honest in relation to property that she owned and which she had endeavoured to hide from the court but again, those are matters more appropriate for the ultimate substantive proceedings.  None of those matters which go to credit could have affected the determination in this case bearing in mind the focus was on the public face of the relationship.

11. I find in the circumstances that there are matters that justify a departure from the principle in s 117 that each party pays their own costs. Those matters relate to the fact that the respondent’s focus was too narrow in the face of overwhelming evidence. To be clear, when these particular pieces of evidence were put to the respondent, he had no answer for why he participated in the activities with the applicant other than that was the nature of his interest. On any view however, the subjective finding was that notwithstanding the respondent said that he had warned the applicant about bringing their relationship to an end, he continued with it as I have described.

12. No order could be made here without contemplating in s 117(2A).

13. There is no doubt, as the submission by the applicant observed, there is a vast gulf between the financial circumstances of the respondent and the applicant. However, it is not a matter of great weight in this particular case because of the fact that the applicant does have her own property. Some of that arises from consent orders made subsequent to my determination but because there is also a live application for substantive relief on foot. I cannot predict its outcome. It is not appropriate therefore that I see the respondent as an extremely wealthy man and the applicant only having the assets she currently has which are something in the vicinity of $5 million. Whilst there is a gulf between the parties, neither of them is impecunious. Each is prepared to spend significant sums of money on this litigation. Each party was represented by senior and junior counsel. Each party had contracted with their respective solicitors to incur costs well outside of the scale set out in the Family Law Rules 2004. In my view therefore, the issue of the financial disparity of the parties is much more relevant to the issue of the ultimate property settlement than it is in respect of this issue.

14. Another consideration concerns the conduct of the parties as litigants.  Here, I have been critical of both parties.  The applicant certainly was not candid in respect of financial matters albeit they did not necessarily affect the outcome of the proceedings.  In respect of the respondent, he too laboured with issues associated with witnesses who could have made little or no difference to the ultimate outcome.  In my view, the conduct of the parties as litigants arose from their obsession to prove that the other party was wrong.  That can be seen from the fact that the applicant saw the relationship starting as a de facto relationship well before it could have.  In respect of the respondent, after he said that he warned the applicant about the relationship ending, he continued to live in the same environment albeit not necessarily in the same bed.

15. The court is also entitled to take into account, and must consider, such considerations as the question of whether somebody has been wholly unsuccessful.  In my view, the respondent has been wholly unsuccessful in that a declaration was made which goes to jurisdiction which he resisted.  That is a factor that I take into account in determining the costs.

16. Obviously, there are no legal aid considerations here. 

17. In my view, there should be an order for costs made in favour of the applicant but only in respect of the duration of the trial rather than the material that the applicant had to produce.  It is difficult for me to make any finding that the various hearings to which I have earlier referred made any difference.  The parties got their hearing and their determination.  This case took a number of days and in my view, at least three of those days were unnecessary having regard to the nature of what the respondent was arguing.  He should pay the costs of the applicant for those three days.

18. The costs that the applicant incurred should not only be that of her senior and junior counsel but also the attendance of an experienced solicitor.

19. Should the costs be awarded on an indemnity basis?  The submissions of the applicant are that they should.  In my view the law is clear.  The circumstances have to be at least unusual if not exceptional for the court to depart from the scale of costs determined by the court rules.  In my view, having regard to what I have said about the subjective nature of the determination and the approach that each party took, I do find the circumstances exception.  I find there is no basis for an order for costs of the magnitude claimed by the applicant and certainly not costs on an indemnity basis.  In the circumstances, I order the respondent to pay the applicant’s costs for three days of the trial incurred in respect of senior and junior counsel for whom I certify and a solicitor’s attendance but that those costs be calculated at the scale and in respect of counsel, on the highest scale applicable. 

20. The same logic applies in respect of the respondent’s claim for costs against the applicant.  True it is that the applicant caused the adjournment but the respondent knew what the applicant was going to argue.  That is clear from the reasons that I gave in June.  In my view, in relation to the respondent’s claim, there are no circumstances here to justify a departure from the principle that each party pays their own costs.  The respondent could not have proceeded that day having regard to his own argument about the jurisdiction in any event.

21. In my view the respondent’s application for costs should be dismissed.

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 26 February 2019.

Associate: 

Date:  26 February 2019