Berrell & Tily (No 4)
[2023] FedCFamC1F 241
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Berrell & Tily (No 4) [2023] FedCFamC1F 241
File number(s): SYC 3428 of 2018 Judgment of: CHRISTIE J Date of judgment: 5 April 2023 Catchwords: FAMILY LAW – COSTS – Where the Court heard a 90RD threshold hearing – Where the Court declared that a de facto relationship did not exist – Where the respondent to that application now seeks costs – Where there were previous proceedings in the Supreme Court of NSW – Where the matter was transferred back to the Supreme Court of NSW – Where the applicant in the substantive proceedings was wholly unsuccessful – Where the applicant abandoned his relief on the final day of hearing – Where it is appropriate for indemnity costs to be ordered. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) r 10.17 Part 12.6
Cases cited: Berrell & Tily (No 2) [2022] FedCFamC1F 715
Colgate-Palmolive v Cussons Pty Ltd (1993) 119 CLR 118
InterTan Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54
MCG Group Pty Ltd v Ftrus Pty Ltd (Formerly Fortrus Pty Ltd) [2017] FCA 359
Munday v Bowman (1997) FLC 92-784
Penfold v Penfold (1980) 144 CLR 311
Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175
Schwarz & Schwarz (1985) FLC 91-618
Division: Division 1 First Instance Number of paragraphs: 44 Date of hearing: 24 March 2023 Place: Sydney Solicitor for the Applicant: Mr Gittoes-Caesar, Lander & Rogers Solicitor for the Respondent: Mr Hall, Hall Partners Solicitors ORDERS
SYC 3428 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR TILY
Applicant
AND: MR BERRELL
Respondent
order made by:
CHRISTIE J
DATE OF ORDER:
5 april 2023
THE COURT ORDERS THAT:
1.Within 28 days the respondent pay the applicant’s costs of and incidental to these proceedings on an indemnity basis in the sum of $473,534.66.
2.Within 28 days the respondent pay the applicant’s costs as ordered on 21 December 2021 fixed in the sum of $19,949.10 plus interest in accordance with r 10.17 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
3.Within 28 days the respondent pay the applicant’s costs of and incidental to the Application in a Proceeding filed 8 September 2022 on an indemnity basis in the sum of $39,341.15.
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 Berrell & Tily has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
This is an application for costs following the making of final orders and delivery of reasons in a matter which concerned jurisdictional issues.
The applicant for costs is Mr Tily. The respondent is Mr Berrell.
At issue before me at the trial was whether Mr Berrell and Mr Tily were in a de facto relationship.
The issue arose for determination in a commercial dispute filed by Mr Tily (the plaintiff) in the Supreme Court of New South Wales. In answer to the plaintiff’s Statement of Claim, Mr Berrell (the defendant) filed a Defence and Cross-Claim and asserted that the plaintiff and defendant had been in a de facto relationship.
The proceedings were transferred to this Court. The determination of the whole of the controversy was not possible until such time as this Court decided whether there had been a de facto relationship, since absent a de facto relationship, there was no jurisdiction to consider the matter.
Following a contested hearing I found that there was no de facto relationship between the parties to the litigation and accordingly made a declaration to that effect.
Mr Tily has brought a costs application seeking his costs of the proceedings before this Court on an indemnity basis.
THE LAW
In the proceedings under the Family Law Act 1975 (Cth) (“the Act”) the usual rule is that each party bears his or her own costs: s 117(1) of the Act.
Where there are justifying circumstances the Court may depart from the usual rule: s 117(2) of the Act. The discretion is broad and the general rule should not be understood as creating a bar where the circumstances warrant: Penfold v Penfold (1980) 144 CLR 311.
The power to make a costs order includes the making of an order for indemnity costs if there are exceptional circumstances which bring the matter within that band of cases where such an approach is warranted.
This Court has applied the principles discussed in Colgate-Palmolive v Cussons Pty Ltd (1993) 119 CLR 118 (“Colgate-Palmolive”) which require that a party seeking indemnity costs is able to demonstrate some “special or unusual feature in the case to justify the court in departing from the ordinary practice”. Writing in Munday v Bowman (1997) FLC 92-784 Holden CJ, in reliance on the principles set out by Sheppard J in Colgate-Palmolive, developed a useful list of circumstances in which it may be appropriate to consider the making of an order for indemnity costs. That list was as follows:
(a)Where it appears that 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.
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud.
(c)Evidence of particular misconduct causing loss of time to the court and to other parties.
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
(e) An imprudent refusal of an offer to compromise.
(Citations omitted)
The mere existence of one of the matters in this list will not of necessity require the making of an order for indemnity costs but may be persuasive when viewed in light of the factors set out in s 117(2A) of the Act.
To these considerations may be added the observations of the Federal Court of Australia in InterTan Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 (as cited in MCG Group Pty Ltd v Ftrus Pty Ltd (Formerly Fortrus Pty Ltd) [2017] FCA 359) where their Honours considered that special circumstances could include bringing and pursuing an application “not for the bona fide purpose of protecting and enforcing a legal right, but to achieve an ulterior or extraneous purpose” quoting Davies J in Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175.
The Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) (“the Rules”) provide in Chapter 12 for provisions concerning the making of costs orders, including in particular Part 12.6 which deals with the calculation of costs.
CONSIDERATION
The Cross-Claim which first raised the issue of a de facto relationship was filed in 2015. The transfer to this Court occurred on 29 November 2017.
Mr Tily maintained the position that there had been no de facto relationship between the parties from the time he filed his Defence to Cross-Claim in 2015.
The parties in this matter have had a number of court events between 2018 and 2022 including case management hearings, interim hearings, vacated and rescheduled final hearings before the final trial which took place over four days in November/December 2022.
The matters which present as having relevance to the exercise of the discretion to order (or refuse) costs in this case are: the conduct of the proceedings and the fact that Mr Berrell was wholly unsuccessful.
Conduct of the proceedings
The relief sought by Mr Berrell was:
1.A declaration pursuant to s 90RD of the Family Law Act 1975 (Cth) that a de facto relationship existed between the Applicant and the Respondent from the middle of 2007 until September 2014 or such other duration as the Court determines.
2.An order pursuant to s 90SM of the Family Law Act 1975 (Cth) by way of property settlement on terms that the Court considers appropriate.
3. That the Respondent pay the Applicant’s costs.
Following three days of hearing, on the fourth day, Mr Berrell’s solicitor withdrew the application for a declaration.
In the reasons for judgment I made the following finding:
110.All the evidence is consistent with the assertion of a de facto relationship being a construct of [Mr Berrell] after the parties’ friendship and financial relationship had ended. I am satisfied that it is appropriate to make the declaration sought by [Mr Tily] that the parties were not in a de facto relationship and return the proceedings to the Supreme Court for want of accrued jurisdiction.
111. In closing submissions Mr Hall, solicitor for [Mr Berrell], said:
We simply say that the orders that we ask for are the natural consequence of the respondent’s evidence and it will either happen or it will happen before the Supreme Court of New South Wales and that’s where it is destined.
(Transcript of 1 December 2022, p. 428 lines 44 – 47.)
…
We say that there is no ongoing issue raised by us of relationship between the parties because even if there was one, it’s not a matter that we press in terms of the relief that we would claim in opposition to my friend’s amended statement of claim in the Supreme Court of New South Wales and that this application was defensive in nature.
…
What we say here is that the allegation of a de facto relationship is raised as part of a defence to proceedings that were initiated not at my client’s choosing. He wasn’t the instigator. That’s what we mean by defensive in nature.
(Transcript of 1 December 2022, p. 429, lines 1-5 and lines 29 – 31.)
112.This submission seems to support the conclusion that [Mr Berrell’s] application to this Court was a cynical attempt to assist him in collateral proceedings. That is supported by his late withdrawal of his own application for a declaration.
With the benefit of those reasons for judgment the respondent maintained this position before me at the costs hearing. In his affidavit filed 23 March 2023 he said:
19.I further say that the existence of a de facto relationship was only one aspect of any defence capable of being raised by me to the proceedings commenced by [Mr Tily] in the Supreme Court, and that in order for me to succeed in my defence to the proceedings, it is only necessary for me to succeed on one aspect of the defence raised by me to the proceedings. If that succeeds, then the plaintiff is usually ordered to pay my costs of the proceedings.
The respondent is within his rights to take advice about how to defend commercial proceedings but he cannot hide behind his decision to pursue (unsuccessfully) a declaration that the parties were in a de facto relationship as though that is sufficient, without more, to result in this Court agreeing with his submission that the appropriate approach is costs in the cause. The pursuit of the declaration, while seen by the respondent as merely one limb of his defence, was a cause separate and distinct from the litigation relating to M Pty Ltd.
Ironically, as against those findings, the submissions on behalf of Mr Berrell in resisting the costs application say:
It is apposite to note that everything else that has flowed in these proceedings by consequence of the refusal to concede the obvious has been nothing other than a waste of time, a waste of costs, and arguably an abuse of process.
In this context the “refusal to concede the obvious” is a reference to Mr Berrell’s assertion that the proceedings have been prolonged by Mr Tily’s refusal to acknowledge that the endeavour undertaken by them through the vehicle of M Pty Ltd was a partnership. That submission if accurate, entirely misses the point. The proceedings were delayed because Mr Berrell contended that the parties were in a de facto relationship and maintained that contention for a period of seven and a half years. In a court exercising jurisdiction under the Family Law Act, that would always require determination as a threshold issue before any substantive adjudication of a merits based claim arising from a relationship, or from commercial relationship, would be entertained.
In resisting a costs order Mr Berrell’s solicitor pointed to his client’s preparedness to have the proceedings returned to the Supreme Court of New South Wales in late 2021. True it is that Mr Berrell was proposing such a transfer at that time. But that cannot be a shield against the costs incurred – since what was proposed was effectively that this Court make an order (without adjudication) returning the matter to the Supreme Court of New South Wales in circumstances where that Court had transferred the matter of its own motion. It would have left the issue of whether there was a de facto relationship (the very basis upon which the Supreme Court had determined to transfer the matter unresolved). It was not as though Mr Berrell was conceding the jurisdictional issue as at late 2021.
Fundamentally, the factor which persuades the Court that the proceedings are ones in which it is appropriate to make an order for indemnity costs arise from my concern that Mr Berrell was using the proceedings for a declaration for a collateral purpose.
It is no answer to submit, as Mr Berrell’s solicitor did, that commercial sense should have prevailed and Mr Tily should have (one assumes if the logic of the submission is followed) consented to a declaration that he was in a de facto relationship. Relationship status is not a trivial matter and the suggestion that there was something untoward in Mr Tily resisting Mr Berrell’s application is rejected.
Wholly unsuccessful
After Mr Berrell withdrew his own application for the making of a declaration he continued to resist the making of a declaration as sought by Mr Tily, namely that there had been no de facto relationship between them. In addition, Mr Berrell, failing to acknowledge the limits of this Court’s jurisdiction, continued to seek orders for winding up the company M Pty Ltd, notwithstanding the jurisdictional difficulty such an application faced (absent the declaration he sought). In this regard, Mr Berrell was wholly unsuccessful in the proceedings. This factor supports the making of a costs order.
Financial circumstances
It is necessary to consider the parties’ financial circumstances.
Little is known from the evidence about Mr Berrell’s financial circumstances. Mr Berrell’s solicitor did not make any specific submissions about this topic except obliquely in the written submissions where Mr Berrell’s solicitor describes his client as “starved of funds”. In any event, as the applicant submitted, impecuniosity, if that is what is being asserted, is not a bar to the making of a costs order: Schwarz & Schwarz (1985) FLC 91-618.
Conclusion
For the above reasons, I find that there are justifying circumstances warranting a departure from the usual rule as to costs. Further, I find that this is a matter in which it would be appropriate having regard to [20] – [28] above, that the applicant receive the benefit of an indemnity costs order.
Quantum
At the hearing of this application I asked that the solicitor for Mr Berrell address me concerning the quantum of costs sought. Apart from disputing them in a general sense and asking that, if an order were to be made, that it be made on the basis that the costs be assessed, I was not taken to any matter said to undermine the very detailed schedules of costs which had been served in support of the application.
I accept that it was appropriate for senior counsel to be engaged at final hearing by the applicant. I accept the submission on behalf of the respondent that the exercise of granting or refusing a declaration is a fact finding exercise but that does not, in my mind, make the matter simple or straightforward. As I observed in the reasons for judgment, the cross-examination conducted by senior counsel successfully undermined findings which might otherwise have been available and accordingly, I certify for senior counsel. I note that the matter was unfortunately before this Court for five years with various interlocutory and procedural issues. In those circumstances the amount of the indemnity costs sought, while large, is not surprising or objectively concerning.
There is one aspect of the fees which might properly be excluded from the costs order payable by Mr Berrell to Mr Tily and that is counsel’s cancellation fees – being an amount which was the subject of disclosure between senior counsel and his client but could not necessarily have been in contemplation by Mr Berrell. That amount appears in the evidence of Mr Tily as $31,680 inclusive of GST and will be deducted from the total of the indemnity costs claimed.
I otherwise accept that it is appropriate to order costs in a sum certain as is permitted by the Rules in circumstances where detailed evidence of those costs is available to the parties and the Court and no proper challenge is made to quantum.
The schedules of costs upon which the applicant relies are attached to his affidavit filed 22 February 2023. Accordingly, those schedules were available to the respondent for at least 28 days prior to the hearing of the matter.
Costs of 19 December 2021
The applicant asked that I make an order quantifying an existing costs order – made on 21 December 2021. I note that it is yet to be paid. I note that the applicant is entitled to interest on the sum outstanding.
Costs schedules were served by the applicant on 21 April 2022 and an itemised cost account was filed on 9 September 2022. Accordingly, the respondent has had ample time to consider the quantum of costs.
It has been necessary for the applicant to bring this application, in part, because of the respondent’s failure to comply with the costs order.
I was not taken to any notice disputing costs or any matter which would convince me that I ought not fix the sum of costs. I made the order on a party/party basis and I am satisfied that the schedules which are in evidence have undertaken the calculation of costs on that basis.
Costs of 21 September 2022
On 8 September 2022 the respondent filed an Application in a Proceeding which sought appointment of a liquidator and sought an order restraining the applicant from appointing an administrator to M Pty Ltd. I dismissed that application. In approaching the question of costs, I stood them over for determination at the final hearing and accordingly they were the subject of submissions.
Given the circumscribed nature of the jurisdiction which may be exercised (see Berrell & Tily (No 2) [2022] FedCFamC1F 715 at [13]) when the jurisdiction of the Court has not been confirmed, the application was one which was almost inevitably likely to fail and the respondent, properly advised, ought to have known this.
Having regard to the matters already the subject of consideration above and my finding at [43], it is a proper exercise of the power to order costs that the respondent pay the costs of this application on an indemnity basis as well.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie.
Associate:
Dated: 5 April 2023
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