BLANCO & BLANCO (No.2)
[2019] FCCA 2458
•10 September 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BLANCO & BLANCO (No.2) | [2019] FCCA 2458 |
| Catchwords: FAMILY LAW – Arbitration – review of arbitral awards – consideration of the circumstances in which the Court should review an arbitral award – principles applicable to the review of arbitral awards – consideration of whether the Arbitrator’s exercise of discretion was so unreasonable or plainly unjust as to constitute an error of law – consideration of whether the Arbitrator’s reasons were adequate – consideration of whether the Arbitrator’s costs award was made on the basis of errors of law comprising errors of principle and/or failure to give reasons - costs of the review – conduct of the parties to the proceedings – consideration of whether a party to the proceedings has been wholly unsuccessful. |
| Legislation: Family Law Act 1975 (Cth), ss.13J, 13K, 13E, 75(2), 117 |
| Cases cited: Pavic & Pavic [2018] FCCA 3386 |
| Applicant: | MR BLANCO |
| Respondent: | MS BLANCO |
| File Number: | WOC 88 of 2018 |
| Judgment of: | Judge Harman |
| Hearing date: | 12 August 2019 |
| Date of Last Submission: | 12 August 2019 |
| Delivered at: | Parramatta |
| Delivered on: | 10 September 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms Eldershaw of Counsel |
| Solicitors for the Applicant: | Heard McEwan Legal |
| Counsel for the Respondent: | Mr Ford of Counsel |
| Solicitors for the Respondent: | Kovacevic Lawyers |
ORDERS
That the application for review of arbitral awards pursuant to s.13J Family Law Act 1975 filed 17 May, 2019 be dismissed.
That the application to set aside arbitral awards pursuant to s.13K Family Law Act 1975 filed 17 May, 2019 be dismissed.
That Ms Blanco pay the costs of Mr Blanco, with respect to the determination of the above applications, such costs being fixed in the sum of $9,674 and to be a charge upon Ms Blanco’s interest in the property C Street, Town D in the State of New South Wales and to be paid to by Ms Blanco simultaneous with payment by Ms Blanco to Mr Blanco of the sum required to be paid pursuant to clause 5 of the arbitral award 12 April, 2019 or paid from Ms Blanco’s portion of the proceeds of sale of that property (clause 10(e)(ii) of the arbitral award) whichever occurs first.
Remove all issues from the list of cases awaiting hearing.
IT IS NOTED that publication of this judgment under the pseudonym Blanco & Blanco (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
WOC 88 of 2018
| MR BLANCO |
Applicant
And
| MS BLANCO |
Respondent
REASONS FOR JUDGMENT
These proceedings come before the Court following the filing of Applications for Registration of two arbitral awards.[1]
[1] The Applications to Register Arbitral Awards are filed on 17 and 18 April, 2019 respectively.
The first arbitral award, dated 9 April, 2019, determined costs of and incidental to the arbitration. To adopt the language used in the wife’s case,[2] this award shall be referred to hereafter as “the costs award”.[3] The second arbitral award, dated 12 April, 2019, determined a property adjustment dispute between the parties. This award shall be referred to hereafter as “the property award”.[4]
[2] Paragraphs 4 and 5 of the wife’s affidavit affirmed 15 May, 2019 and filed 17 May, 2019.
[3] No issue is taken by counsel for the wife as to the arbitrator’s jurisdiction to deal with costs of and incidental to the arbitration. Indeed, one of the costs issues addressed by the arbitrator had been specifically referred to the arbitrator. Further, as discussed in Pavic & Pavic [2018] FCCA 3386 at [109]-[116], an arbitrator has an inherent or inferred power to determine costs of and incidental to the arbitration and would, in accordance with the model AIFLAM arbitration agreement entered into by the parties, have the consent of the parties to do so (although as the issue was not agitated it has not been necessary to ascertain whether an arbitration agreement was, in fact, entered into although it can be inferred that it was so as an order requiring it be done was made 18 November, 2018). Regulation 67F Family Law Regulations 1984 does not mandate that the parties and the arbitrator enter into a written arbitration agreement (it provides that they “may”) although best practice would dictate that such a written arbitration agreement would be entered into noting that the arbitrator’s jurisdiction and authority is derived from the consent of the parties and the subject of contractual agreement.
[4] The property award was delivered following the costs award as the arbitral award had been amended in accordance with the slip rule. No issue is taken as to the ability of the arbitrator to amend the arbitral award in this fashion. Clause 42 of the standard AIFLAM Arbitration Agreement expressly provides a “slip rule” power.
A Response to an Application in a Case was filed[5] in response to the Applications to Register the Arbitral Awards. The Response seeks relief in the following terms:
“The Respondent Wife seeks a Review of the Awards… under Section 13J and/or Section 13K of the Family Law Act 1975 on the grounds set out in her Affidavit filed with this Response”.
[5] On 17 May, 2019. A Response to an Application in an Arbitration should, perhaps, have been filed instead but the form used to raise the wife’s position is of no real consequence especially in light of section 42 Federal Circuit Court of Australia Act1999 (Cth) and the mandate upon the Court to operate informally.
Jurisdiction
Whilst the wife’s affidavit states that she opposes registration of the awards,[6] no plea objecting to registration of the Arbitral Awards was contained within the wife’s Response. The arbitral awards were registered by order 18 June, 2019.[7] As discussed in Cooney & Fitzsimons [2019] FCCA 373, absent objection to registration,[8] and a valid basis for objection to registration being established, registration of the arbitral award is mandated 28 days after service of the Application for Registration of the Arbitral Award.[9] Further, it is registration of the arbitral award which enlivens the Court’s jurisdiction to review the arbitral award.[10]
[6] Paragraph 7. The legal representatives for the mother also indicated during an appearance in the substantive proceedings on 18 April, 2019 that the wife would agitate an objection to registration of the arbitral awards.
[7] An appearance occurred that day and the legal representatives for the wife confirmed that no objection was pressed. It is noteworthy that Regulation 67Q(3) Family Law Regulations 1984 (Cth) provides “A party on whom an application is served may, within 28 days after service, bring to the attention of the court any reason why the award should not be registered” and concludes with the following note “An example of a way of bringing a matter to the attention of the court is by filing an affidavit”. Hence, confirmation that the objection suggested by the wife’s affidavit was sought and obtained before proceeding to register the arbitral awards.
[8] Pavic & Pavic [2018] FCCA 3386 at [36]: “Objection to registration deals with the constitution of the arbitral tribunal and the necessary preconditions thereto, matters such as the giving of notice, submission to arbitration and the like”
[9] Regulation 67Q(4) Family Law Regulations 1984 (Cth)
[10] Registration of the arbitral award is also necessary to enliven the Court’s jurisdiction to affirm, reverse or vary an arbitral award.
Section 13J Family Law Act 1975 provides that a party to a registered award may apply for review of the award, on “questions of law”. As discussed in Braddon & Braddon [2018] FCCA 1845 (“Braddon”) and Pavic & Pavic [2018] FCCA 3386 (“Pavic”) this would require that the party seeking review establish an error of law. Neither counsel sought to advance any contrary position.
It is apparent that the wife seeks to proceed under section 13J. The wife seeks that in the event that an error of law is established that the Court would re-exercise discretion.
Section 13K provides that a Court may affirm, reverse or vary a registered award on four specific grounds.[11] As discussed in Pavic, this is a power analogous to Sections 79 and 90SN. None of the bases relevant to enliven the Court’s jurisdiction under this provision are alleged nor was this plea for relief pressed by counsel for the wife. Accordingly, the section need not be further considered.
[11] Namely, the award was obtained by fraud (including non-disclosure of a material matter), the award is void, voidable or unenforceable, circumstances that have arisen since the award was made such that it is impracticable for some or all of the award to be carried out or the arbitration was affected by bias, or there was a lack of procedural fairness in the way in which the arbitration process, as agreed between the parties and the arbitrator, was conducted.
Subject matter of proceedings
As would be apparent from the referral to arbitration,[12] the substantive proceedings, determined by the arbitral awards, related to issues of property adjustment and costs arising therefrom.
[12] Section 13E Family Law Act 1975 provides for consensual referral to arbitration of only Part VIII and VIIIAB proceedings (save proceedings relating to financial agreements).
The Court is called upon to hear and determine two applications, namely:
a)The applications by the wife to review each of the arbitral awards on the basis of specific alleged errors of law; and,
b)Costs arising in and from the prosecution of the wife’s application for review.
At the conclusion of submissions, Counsel for the husband sought, in effect, to make an oral application with respect to reimbursement to the husband of certain payments made by the husband with respect to one of two mortgages or lines of credit encumbering a home at Town D. It is common ground that the wife has, since separation, lived within that property. Orders were made 20 March, 2018 which obliged the wife to indemnify the husband with respect to that mortgage.[13] These reasons will also deal with this third application.[14]
[13] Order 3 of the orders 20 March, 2018 provided, so far as is relevant, that “the Respondent Wife shall indemnify and keep indemnified the Applicant Husband in relation to all utilities and personal outgoings in respect of the said Town D Property including all payments in respect of the loan and mortgage repayments”
[14] Both leave to make application and the application itself were opposed by the wife.
History of proceedings
It is necessary to have some brief regard to the history of the proceedings so as to understand some aspects of the matter and, in particular, issues with respect to costs.
The proceedings were commenced by an Application Initiating Proceedings filed on 30 January 2018.
The matter first came before the Court on 20 March 2018. On that date orders were made, by consent, referring the proceedings to mediation. A number of orders were made regarding disclosure and the commissioning of valuations. Injunctive orders were made regarding certain items of personal property. Orders were made for the wife to be responsible for all payments with respect to the mortgages encumbering and outgoings relating to a home at Town D. As noted above, it is common ground that since the making of that order that the husband has serviced, for some if not all of the subsequent period, one of two mortgages encumbering the property.
The matter next came before the Court on 15 May 2018. The parties had attended mediation 11 May, 2018 although a number of matters, the subject of the above orders, had not been attended to. It would appear common ground that disclosure was incomplete and valuations had not been completed. Not surprisingly, no resolution was achieved.
On 15 May, 2018 the parties consented to the totality of the Part VIII proceedings being referred to arbitration. An order was made, pursuant to section 13E of the Family Law Act1975, referring the proceedings to arbitration. A broad suite of orders were made to facilitate the arbitration. Those orders need not be considered save to observe that the arbitration was ordered to be:
…conducted by an arbitrator (being an arbitrator appearing upon the list of qualified arbitrators maintained by AIFLAM pursuant to regulation 67B, Family Law Regulations 1984) as agreed between the parties, or failing agreement between the parties as to an arbitrator, within 14 days of the date of this order, then the parties or either of them shall be at liberty to make application in writing to the president, for the time being, of AIFLAM requesting the appointment of an arbitrator.[15]
[15] No issue is taken by the parties or either of them that the Court lacks jurisdiction to make such an order. For the avoidance of controversy, I am satisfied that such an order is authorised by section 13E(2) Family Law Act 1975 providing “If the court makes an order under subsection (1), it may, if necessary, adjourn the proceedings and may make any additional orders as it thinks appropriate to facilitate the effective conduct of the arbitration”. This power was again exercised by orders made 14 November, 2018. See also Blanco & Blanco [2018] FCCA 3977.
The respondent, Ms Blanco, then nominated a particular arbitrator.[16] The applicant agreed to this appointment although it would not appear that an arbitration agreement was executed at this time.[17]
[16] Ms Gillies SC
[17] Again, Regulation 67F of the Family Law Regulations 1984 does not mandate that the parties and the arbitrator enter into a written arbitration agreement (it provides that they “may”). However, in the absence of a written arbitration agreement the terms of the parties’ consent and the arbitrator’s authority are less clear. Whilst the standard AIFLAM arbitration agreement authorises the arbitrator to proceed, effectively, on an undefended basis, absent the arbitrator’s investment with this power by written agreement it is explicable thatan arbitrator would be cautious in doing so.
Following referral to arbitration, the proceedings next came before the Court on 20 July 2018.[18] On 20 July 2018 legal representatives appeared for the applicant husband and the respondent wife appeared in person both by telephone. It is germane to observe that immediately prior to this appearance,[19] the then legal representatives for the wife had filed a notice of ceasing to act.[20]
[18] The matter was initially adjourned to 22 October 2018 but had been relisted on that date at the request of the parties or one of them as dispute had arisen as to the conduct of the arbitration.
[19] Indeed, prior to the request made by the husband’s legal representatives to relist the proceedings.
[20] This occurred on or about 10 July 2018. An arbitrator had, by that date, been appointed and a date for arbitration fixed, namely, 24 July, 2018. That arbitration date was subsequently vacated.
On 20 July 2018 orders and notations were made as follows:
a)It is noted that the parties have appointed Ms Gillies SC as arbitrator.
b)It is noted that dates for an arbitral hearing, 6 and 7 September 2018, have been fixed and that the applicant has served the evidence upon which he intends to rely.
c)Discharge order 2(b) of the orders made 15 May 2018.[21]
d)The respondent shall file and serve all evidence upon which she proposes to rely upon in the arbitration by 4 pm 24 August 2018.
e)The applicant shall serve all evidence in reply to that of the respondent by 4 pm 31 August 2018.
f)The parties shall jointly complete and provide to the arbitrator by 4pm 31 August 2018 a balance sheet, a statement of agreed facts and disputed facts and a schedule of objection either proposes to raise with respect to the evidence of the other.
g)Each of the parties shall do all things necessary to be ready to proceed to arbitration 6 and 7 September 2018 and shall attend arbitration with the arbitrator, Ms Gillies SC, on those dates.
h)Reserve the costs of both parties with respect to today’s appearance such costs to be determine by the arbitrator.
[21] That order had required that the date for arbitration be no more than 49 days from the date of appointment of the arbitrator. As a consequence of the withdrawal by the wife’s then legal representatives and the subsequent rescheduling of the arbitration the time period could not be achieved.
What subsequently transpired is that objection was raised, by the wife, to the appointment of Ms Gillies SC as the arbitrator. That is so notwithstanding the above specific orders. This is all the more curious as it would appear common ground between the parties that Ms Gillies SC had been nominated by the wife as her preferred arbitrator. The husband had agreed to that appointment and the parties had jointly engaged Ms Gillies SC to arbitrate their dispute. It would also appear common ground that the wife’s subsequent objection to the appointment of Ms Gillies SC was on the basis that Ms Gillies SC had chambers on the same floor as counsel for the husband, Ms Eldershaw. I need not address the issue as to whether Ms Blanco had any entitlement to, or could appropriately, withdraw her consent to the appointment as arbitrator of Ms Gillies SC as it is not a matter which is agitated. I make clear that the purported basis of objection is fallacious.[22]
[22] In using this term, I rely upon and respectfully concur with and adopt the arbitrator’s comments at paragraph 51 of the costs award.
On 22 October 2018 the matter again came before the Court. The husband’s legal representative appeared by telephone as did the then self-represented wife. The proceedings were further adjourned as the wife indicated, during the course of the mention, that she was experiencing certain health difficulties and could neither concentrate nor properly participate. It was noted that the dispute had not yet been arbitrated due to difficulties with payment of the arbitrator’s fees and suggested issues with respect to disclosure. Ultimately, orders were made which required that:
Each party shall ensure that they had done all things, given all consents, authorities and instructions and otherwise aided and co-operated with the other party to ensure that all and any material that either party has sought from the other is able to be obtained by that party, or if that party cannot obtain it themselves, provided to them and that prior to the next Court event that the parties would confer with each other as to the orders that might be considered necessary to advance the arbitration and conclude it, including payment of the arbitrator’s fees and any other order considered necessary.
Again, the husband’s costs were reserved.
On 14 November 2018 the matter was again mentioned. The legal representatives for the husband appeared by telephone. There was no appearance by or on behalf of the wife. The matter proceeded in the wife’s absence.[23] A number of orders were made regarding conduct of the arbitration. A separate and specific judgment was delivered on that occasion.[24]
[23] Material was tendered evidencing notice to the wife of both the listing and orders sought.
[24] Blanco & Blanco [2018] FCCA 3977
The matter was again before the Court on 18 April 2019. On that date legal representatives for each of the parties appeared by telephone. On the preceding day and on the morning of the mention respectively the Applications to Register an Arbitration Award had been filed. The Applications, or at least one of them, had not yet been served. It was indicated by the legal representatives for the wife that they had not yet had a full and proper opportunity to obtain instructions from the wife as to whether to object to registration of the arbitral awards or either of them or, if the awards were registered, to then seek to review or otherwise impeach one or both of the arbitral awards. The matter was adjourned to 9:15am 18 June, 2019 and leave was granted to the legal representatives for both parties to appear by telephone. The matter was expressed as being listed that day for “further mention and directions”.
On 18 June, 2019 counsel appeared in person on behalf of the husband. A solicitor appeared by telephone on behalf of the wife. The husband, through his counsel, indicated a desire to proceed to deal with and determine the applications for registration of the arbitral awards. The solicitor for the wife indicated that their instructions were to obtain a date for hearing of the application for review filed 17 May 2019. Counsel for the husband indicated that they were in a position to meet the application for review that day. As already noted above, an order was made registering the arbitral awards. The application for review was adjourned for hearing with directions as to the filing of written submissions.
Finally, the proceedings then came before the Court on 12 August 2019. Both parties appeared and both were represented by competent counsel who provided both written and oral submissions. The matter occupied approximately half a day by its conclusion and judgement was reserved.
Material considered
In dealing with the proceedings there is a significant quantity of material to consider.
In the case of the wife I have read and considered:
(a)Response to Application in a Case filed 17 May 2019;
(b)Affidavit of Ms Blanco affirmed 15 May 2019 filed 17 May 2019;
(c)Affidavit of Ms Blanco’s solicitor, Ms Kovacevic, sworn or affirmed 9 July 2019 filed 15 July 2019;
(d)Written submissions provided by counsel for the wife and dated 16 July 2019.
In the case of the husband I have read and considered:
(a)Application to register arbitral award filed 18 April 2019 (the property award);
(b)Application to register arbitral award filed 17 April 2019;
(c)Written outline of submissions prepared by counsel for the husband and dated 24 July 2019.
There were a number of tenders in the proceedings comprising:
(a)Exhibit A1: WIP Ledger of husband’s solicitor dated 14 May 2019 tendered 15 May 2018
(b)Exhibit R1: Correspondence from Green & Associates to the husband’s solicitor dated 12 May 2018 tendered 15 May 2018
(c)Exhibit B: Email correspondence from the husband’s solicitor to the wife dated 6 November 2018 tendered 14 November 2018
(d)Exhibit a1: Husband’s Case for the Arbitration dated 25 February 2019 tendered 12 August 2019
(e)Exhibit a2: Wife’s Case Outline for the Arbitration dated 27 February 2019 tendered 12 August 2019
(f)Exhibit a3: Affidavit of Mr Blanco sworn 3 July 2019 tendered 12 August 2019
(g)Exhibit a4: Affidavit of Mr Blanco sworn 18 February 2019 tendered 12 August 2019
(h)Exhibit a5: Affidavit of Mr E, sworn 9 July 2019 tendered 12 August 2019
(i)Exhibit a6: Affidavit of Ms Blanco sworn 19 February 2019 tendered 12 August 2019
(j)Exhibit a7: Affidavit of Dr F sworn 19 February 2019 tendered 12 August 2019
(k)Exhibit a8: Affidavit of Mr B sworn 19 February 2019 tendered 12 August 2019
(l)Exhibit a9: Text message exchange between wife and Mr B early August 2018 tendered 12 August 2019
(m)Exhibit a10: Text message exchange between wife and Mr B and Mr A dated about February 2018 tendered 12 August 2019
(n)Exhibit a11: Text message exchange between wife and Mr B dated early April 2018 tendered 12 August 2019
(o)Exhibit a12: Chronology and schedule of Correspondence to Respondent’s Lawyer as at May 2018 tendered 12 August 2019
(p)Exhibit a13: Page 17 from G Valuation Report dated 13 February 2019 tendered 12 August 2019
(q)Exhibit X: Costs disclosure document with respect to the husband’s fees incurred to date dated 9 August 2019 tendered 12 August 2019
Issues for determination
The written submissions filed on behalf of the wife refer to a broader controversy than is ultimately determined by the Court. The wife’s counsel raised three substantial challenges to the arbitral awards, namely:
a)That an error had occurred whereby the arbitrator included in pool 1 the provision for prospective payment of GST and sales costs with respect to two parcels of real estate owned by the husband. Those amounts total $79,500;[25]
b)That the arbitrator erred in the exercise of their discretion and/or failed to give adequate reasons in “awarding a five per cent adjustment to the husband” pursuant to section 75(2) of the Family Law Act 1975;[26] and
c)That the arbitrator erred in awarding costs either at all or, in the instances that are relevant, on an indemnity basis.[27]
[25] See paragraph 9, page 2-3 written submission of wife
[26] Paragraph 9(b) to 14 (pages 3-7) of the written submissions on behalf of the wife.
[27] Paragraphs 18-26 (pages 7-11) of the written submissions on behalf of the wife.
The first ground (relating to inclusion of GST and sales costs) was abandoned at hearing and need not be considered. An entirely appropriate concession was made by the wife’s counsel in light of the written submissions of counsel for the husband. Those submissions assert[28] (and it would appear clear from the arbitral award dealing with the substantive proceedings that it is so) that the inclusion of those amounts[29] were conceded by the wife at arbitration and, thus, could not be agitated as a basis for review by reference to authorities such as Metwally v University of Wollongong (1985) 60 ALR 67.
[28] Paragraphs 17-24 (pages 3-4) of the written submissions on behalf of the husband.
[29] That is, GST and prospective sales costs
Thus, these reasons will deal purely with the grounds which remain, namely:
a)The asserted error of law in making an adjustment of five per cent in favour of the husband pursuant to section 75(2).
b)The asserted error of law in awarding costs either at all or on an indemnity basis (rather than a party/party costs basis).
I propose to deal with the relevant principles applicable in a review of the awards and to then deal with each of the grounds relied upon.
Principles applicable to review of arbitral awards
Counsel for the wife refers to earlier decisions of Braddon and Pavic as to the basis of review. The review of an arbitral award proceeds as a judicial review rather than appeal. Any distinction between the two need not be considered for the purpose of this determination as:
a)There is no issue as to the arbitrator’s jurisdiction and powers and no issues as to the arbitrator having acted within that jurisdiction and within those powers; and,
b)Counsel are agreed as to the principles that would apply in determining whether an error of law can or cannot be established.
Counsel for each of the husband and wife are agreed that the principles in House v R (1936) 55 CLR 499 should be applied in this determination.[30] Whilst there is some slight variance in the articulation of those principles as between counsel for each of the parties it is agreed that the award should not be interfered with unless an error of law is demonstrated.
[30] By reference to the written submissions of counsel for the wife, also incorporating Gronow (1979) 144 CLR 513 at 519-520, CDJ & VAJ (1998) 197 CLR 172 at 186, DL & W [2012] FamCAFC 5, Paul & Paul [2012] FamCAFC 64 and Parkin & Sykes [2013] FamCAFC 87, in further support of the same fundamental propositions as arise from House v R (1936) 55 CLR 499.
Counsel for the parties are agreed that an error of law might be demonstrated by:
a)A wrong legal principle having been applied by the arbitrator. This is not advanced by the wife as a basis of review of the property award;[31]
b)A failure to give reasons or adequate reasons to reveal the reasoning process;
c)The arbitrator failing to properly and reasonably exercise discretion such that the purported exercise of discretion was manifestly unreasonable. In approaching any such challenge, it must be acknowledged that reasonable minds might differ. It is not sufficient that the reviewer may have come to a different conclusion. As opined by Tomlinson J in ABB Attorney General v Hochtief Airport GmbH [2006] Lloyd’s Rep 1 at [19] “[i]t is not a ground for intervention that the Court considers that it might have done things differently”.[32] Ultimately, counsel for the parties would appear agreed that the relevant test is as articulated by Wilson J in Mallet v Mallet (1984) 156 CLR 605 (quoting Kitto J in Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621) “…it is sufficient that the result is so unreasonable or plainly unjust that the appellate court may infer that there has been a failure properly to exercise the discretion which the law reposes in the Court of first instance” [repeating House v R (1936) 55 CLR 499 at 504-505].
[31] See paragraph 9(b) [page 3] of the submissions by counsel for the wife. What is identified is a suggested failure to give reasons (paragraph (i)) and “an error of law in the House v R sense” (paragraph iii).
[32] The same position is expressed by Brennan J in Norbis v Norbis (1986) 161 CLR 513 as “The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference”.
Counsel for the wife does not challenge findings of fact made by the arbitrator.
It is sought to impeach the property award on two grounds. Firstly, it is alleged that the arbitrator failed to give reasons “in awarding a 5% adjustment under s.75(2)”[33] such that “[e]rror is asserted because the reasoning process is not apparent to the reader”[34] and that “…the basis of the decision to award the husband a 5% adjustment is not apparent”.[35] Secondly, it is submitted that the exercise of discretion is “so unreasonable or plainly unjust” that an error of law occurred and interference is required.
[33] Paragraph 9(b)(i) [page 3] of the submissions by counsel for the wife
[34] Paragraph 12 [page 6] of the submissions by counsel for the wife
[35] Paragraph 14 [page 7] of the submissions by counsel for the wife
The costs award is sought to be impeached on the basis of an error of principle and/or a failure to give reasons.[36]
[36] Paragraph 18 [page 7] of the submissions by counsel for the wife
Absence of Transcript
Accepting that a failure to give reasons (or adequate reasons) would constitute an error of law and be a valid basis for review of each of the awards, it is necessary to briefly consider the absence of a transcript.
It is common ground that the arbitral proceedings were recorded. Thus, it is open to the wife to obtain a transcript of the arbitral proceedings. [37] It is submitted by counsel for the husband that the reasoning process of the arbitrator is contained within not only the arbitral awards but also interaction between the arbitrator and counsel and discussion and comment during the arbitration. Counsel for the husband correctly submits that absent a transcript of the proceedings the Court cannot see for itself what passed between counsel and the arbitrator in order to ascertain what was or was not in the arbitrator’s mind.[38] However, ultimately nothing turns upon the issue as I am satisfied, for the reasons set out below, that the arbitral awards provide adequate reasons.
Was the arbitrator’s exercise of discretion in the property award so unreasonable or plainly unjust as to constitute an error of law.
[37] As arbitration is a consensual and flexible non-judicial process it is a matter for the parties and the arbitrator to determine whether the proceedings will be transcribed.
[38] Paragraphs 4-8 [pages 2 and 3] of submissions by counsel for the husband
I am satisfied that the answer is no.
It is contended by the wife that an error is established in the exercise of discretion. The challenge is summarised as: [39]
a)Giving weight to extraneous or irrelevant factors; and/or
b)Failing to give sufficient consideration to relevant matters or a failure to give weight to relevant matters;
c)Such that the result is so unreasonable or plainly unjust.
[39] Paragraph 9(b)(iii) [page 3] of the written submissions by counsel for the wife
It is necessary to consider the relevant portions of the arbitral award to consider the arguments that are raised. What is readily apparent is that the arbitrator made findings of fact which are not the subject of controversy.[40] These include the correct and agreed identification of the assets, liabilities and financial resources of the parties at the date of arbitration. These were identified in three separate pools. These pools, as they are described, are set out at paragraphs 45, 48 and 49 of the property award. The pools are referred to as comprising:
i)The parties’ assets – value $2,309,791;
ii)The wife’s post-separation assets and financial resources – value $198,454;
iii)The husband’s post-separation assets – value $58,770.
[40] Whilst the wife submits, for example, that the arbitrator “ignored or gave insufficient weight” to the wife’s age, income and medical diagnosis (paragraph 9(v)(1)-(2) [page 4] of the written submissions of counsel for the wife) findings were made with respect to these matters in accordance with the wife’s evidence.
The total value of these three pools (or, in the language of Stanford, the present legal and equitable interests of the parties) is $2,567,015.
Lest there be any suggestion that the approach adopted by the arbitrator is attended by error, such suggestion is sufficiently addressed, I am satisfied, by observing that the approach was proposed by the wife and agreed to by the husband and then, with the consent of both parties, adopted by the arbitrator.[41] Further, and importantly, the identification of three separate pools was not on the basis of seeking to quarantine any asset. All items and their values were considered and taken into account in framing the arbitral award.[42]
[41] Paragraph 50 of the arbitral award
[42] Paragraph 65 of the Property Award
The property award results in a 55/45% division of pool 1 in favour of the husband. The award sees each party retaining the pool referrable to them. It is instructive to consider the consequence of these orders, as to consider purely the operation of a percentage as against some of the present legal and equitable interests of the parties (pool 1) is misleading.
As a consequence of the property award the husband is to receive or retain:[43]
a)$1,270,385 – Pool 1 x 55%
b)$58,770 – Pool 3
Total: $1,270,385
[43] Without reference to any sale costs of the Town D property. This is not problematic as the sale costs could not be ascertained. The wife had, until the third day of the arbitration, sought to retain the property. Further, if a sale were to eventuate a reduction in the balance sheet would occur.
That which is received or retained by the husband represents 51.78% of the total available nett assets and financial resources.[44] Whilst the arbitrator has concluded that there should be “an adjustment in favour of the husband of some 5%”,[45] this is applied only to the items within pool 1. As against the total pool, the adjustment is more modest being 51.78%.[46] Hence, to the extent that it is asserted that a 5% adjustment in the husband’s favour is “so unreasonable or plainly unjust”, the challenge is misplaced.
[44] $1,270,385/$2,567,015 = 51.78%
[45] Paragraph 64 of the arbitral award
[46] The issue was not agitated by counsel for the husband but reflects the mathematical reality of the arbitral award.
The husband was found to have made a greater contribution than the wife based upon post separation contributions made by the husband.[47] The arbitrator records “(t)hus, the contributions favour the husband”.[48] However, these statements must be seen in their context. So much flows from paragraph 64 of the award wherein the conclusion is stated:
“In all the circumstances, I am satisfied that there should be an adjustment in favour of the husband of some 5% which would mean that the items in pool 1 would be divided as to 55% to the husband and 45% to the wife”.[49]
[47] Paragraph 52 of the arbitral award
[48] Paragraph 54 of the arbitral award
[49] Whilst the findings at paragraphs 52-54 refer to contribution, the adjustment at paragraph 64 is not specific as to the 5% adjustment, albeit applied only to one of three identified pools of property, being pursuant to section 75(2). However, the position advanced by counsel for the wife accepts that section 75(2) is the basis for the adjustment.
Counsel for the husband concedes that the parties’ contributions, up to the date of separation, should be assessed as equal but that since separation the husband has made greater contributions.[50] On this basis, counsel for the husband defends the conclusion that contributions favour the husband.[51] Notwithstanding that the arbitrator discussed the husband’s contribution, the adjustment that results, inherent in the wife’s challenge to the arbitral award, is made by reference to section 75(2).[52]
[50] This is reflected within the arbitral award and would appear to have been accepted by the arbitrator from that contained at paragraph 52 and summarised at paragraph 54 of the arbitral award
[51] And the arbitrator’s discussion of the issue is contained in paragraphs 51 to 53 of the arbitral award
[52] Section 75(2)(o) would appropriately permit such an adjustment. Further, per Jabour & Jabour [2019] FamCAFC 78, this is a preferable approach.
The arbitrator records (as to which there would appear to be no controversy) that:
a)The wife has, at all times since separation of the parties, had the benefit of living in the former matrimonial home;[53] and
b)The husband has serviced one of the two mortgages encumbering that home together with maintaining contents insurance since separation and notwithstanding the orders recited above that the wife be responsible for all such payments.[54]
[53] Paragraph 53
[54] Paragraphs 52 and 53 of the arbitral award.
Counsel for each of the parties concedes that “an adjustment of 5% was made in favour of the husband by reference to section 75(2)”.[55] The challenge mounted by the wife is that this was “plainly wrong”[56] as:
a)The arbitrator had (correctly) found that the husband’s income was greater than the wife’s and that the husband had re-partnered and that his partner earned a salary that was not insubstantial. The wife’s income was (correctly) found to be “significantly lower”;[57]
b)The adjustment was made in favour of the husband notwithstanding a finding that the husband “appears to be in good health”[58] whereas the wife is diagnosed with a specified medical condition. I accept that, as submitted by counsel for the husband, the diagnosis, of itself, would not found an adjustment in the wife’s favour (nor resist an adjustment in favour of the husband) by reference to section 75(2)). The evidence led by the wife, from her treating medical practitioner, was accepted and correctly summarised by the arbitrator as “…not establish[ing] that there is any immediate threat to the wife’s working life”.[59] The unchallenged evidence of the wife’s medical practitioner did not suggest that there was such a threat.
c)The section 75(2) adjustment made by the arbitrator took into account that neither party had responsibility for a child under the age of 18 years. There are two children of the relationship but both are adults. The wife asserts that the arbitrator failed to take into account the wife’s ongoing “duty” to maintain those children or her “responsibility” to support those children.[60] Counsel for the husband took the Court to certain portions of the wife’s evidence.[61] Importantly, in an affidavit by one of the adult children, that child makes clear that the totality of the wife’s (his mother’s) income is paid into his account and that, from time to time, that child provides assistance to his mother and his elder brother who is also a full time university student. Any provision by that adult child is, presumably, from whatever income that child might receive or from whatever resources that child might have available to him. Counsel for the wife took the Court to the wife’s evidence relied upon at arbitration.[62] That evidence does not support a finding that the wife has a duty to support or maintain others, a responsibility to support or maintain others or that, in reality, she does so.
[55] Even though this adjustment of 5% is made only with respect to a portion of the available legal and equitable interests.
[56] It is, in fact, suggested that the arbitrator either ignored or failed to give sufficient weight to “the wife’s compelling section 75(2) factors.
[57] Paragraph 56 and 57 of the arbitral award.
[58] Paragraph 56 of the arbitral award
[59] Paragraph 57 of the arbitral award.
[60] This would fall under section 72(2)(d) being “commitments of each of the parties that are necessary to enable the party to support a child or another person that the party has a duty to maintain”
[61] As set out in exhibit a6 and, in particular, paragraphs 86-88 of that evidence together with an affidavit by one of the two adult children of the marriage, Mr B, exhibit a8
[62] In particular, paragraphs 119 and 203 of her affidavit prepared for arbitration (exhibit a6)
By reference to the above matters, counsel for the wife argues that the arbitrator has either ignored these matters or given such insufficient weight to them, (or impermissible weight to other factors) so as to have miscarried in their exercise of discretion thereby arriving at an outcome that is so unreasonable or plainly unjust. I do not accept that submission.
An adjustment pursuant to section 75(2) is a discretionary and nuanced exercise. All relevant and identified factors must be balanced and weighed against each other. As the Full Court has been clear, the Court should not and cannot afford individual percentages to individual items.[63] It is a matter of weighing all and myriad factors, as are relevant, in their totality.[64] This is what has occurred.
[63] Jabour& Jabour [2019] FamCAFC 78
[64] Indeed, this submission was specifically put by counsel for the wife (see paragraph 9(v)(iii), page 5 of the written submissions of counsel for the wife quoting Soblusky& Soblusky (1976) FLC 90-124, Aroney & Aroney (1979) FLC 90-709 and Axtell& Axtell (1982) FLC 91-208)
The arbitral award clearly identifies the relevant section 75(2) factors that arise from the evidence.[65] The arbitral award makes clear that they are balanced against each other. The discussion of the relevant evidence relating to section 75(2),[66] sufficiently reveals the weight that was applied to each in the balance of factors. The income disparity of the parties was acknowledged as significant.[67] However, the arbitrator also clearly identified two significant factors favouring the husband, namely:
a)That the husband would, as a consequence of the arbitral award, retain superannuation benefits[68] which would not be available to him for 11 years;[69] and,
b)That the husband has contributed to the mortgage and insurance of the property occupied by the wife notwithstanding the wife’s occupation of that property and orders compelling the wife to meet those costs.[70]
[65] Including the husband’s payment of a mortgage and other outgoings which the wife was responsible for as a consequence of orders made on the first return date. Whilst this was referred to as a greater contribution, the arbitral award and the position agitated by counsel of each of the parties, makes clear that these “contributions” were addressed by reference to s.75(2)(o).
[66] Paragraphs 55-63 of the arbitral award.
[67] Paragraph 57 of the arbitral award.
[68] The arbitrator correctly recorded that the husband held and would retain, in its totality, a superannuation fund of $538,844. However, this amount was included within pool 1 (that which is, effectively, divided or adjusted as between the parties). Hence, the wife received an effective cash adjustment of 45% of this superannuation fund but from saleable and realisable assets of the parties. Further, I accept the submissions put by counsel for the husband that the retention by the husband of this financial resource or assets, however it might be described, must be seen as relevant by reference to section 75(2), the fund being presently inaccessible by the husband and, thus, the “character” of the asset having some relevance to section 75(2)(o).
[69] Paragraph 59 of the arbitral award. It would not appear that either party sought a superannuation split and no argument, as best as can be discerned in the absence of a transcript, would appear to have been made by the wife at arbitration that this required adjustment. Certainly, no argument was presented by the wife in prosecuting her application for review, that this approach represented error.
[70] At paragraph 60 of the arbitral award the arbitrator also acknowledged that the value of two properties owned by the husband was included as a sum certain which value may not be achieved on sale.
The section 75(2) adjustment is also suggested to have been made on the basis of a finding that the husband would need to rehouse himself.[71] Perhaps more germane to the argument is the suggestion, put in oral submissions, that no such adjustment or accommodation was made in favour of the wife. The property award provides for the wife to retain the property (in which case no such costs would be incurred). The wife had conducted her case on the basis that she sought to retain the property. Any possibility of sale was only raised on the last day of arbitration.[72]
[71] Argument was also advanced that the arbitrator had found that the husband could face a CGT liability and sales costs for parcels of real estate without any further reasons being provided. However, the wife conceded the inclusion of those amounts in the agreed balance sheet and, hence, reasons need not be further given, the wife having effectively conceded that the properties would be sold.
[72] Paragraph 61 of the arbitral award.
What is clear from the property award is that each of the factual matters that the wife complains were not considered or not given adequate weight were, in fact, considered and were, in fact, given weight indeed adequate weight. Weight is discretionary and best left to the tribunal of fact. The weight afforded to each s.75(2) factor, whether favouring the husband or favouring the wife, and the weight applied in balancing those factors could not be found to be “so unreasonable or plainly unjust” or “plainly wrong” as to constitute an error of law. Factors are identified favouring each and the balancing of those factors results in an extremely modest overall adjustment in the husband’s favour.
Counsel for the husband observes that the arbitrator’s award, and any adjustment in favour of the husband pursuant to section 75(2), must be seen in the context of the totality of the reasons given in the arbitral award. I accept this submission. A number of those aspects have been addressed above.
In addition to the matters discussed above, the arbitrator clearly took into account that the wife would retain all of pool 2. Pool 2 is described within the arbitral award as comprising the wife’s current savings, together with a sum of $165,000 which had been distributed by the wife to the adult children of the parties. [73] Those funds represent a portion of an inheritance received by the wife in the sum of $241,331.35. [74] The different “character”[75] of the assets or resources retained by the parties is instructive in understanding the reasoning of the arbitrator.[76] These funds represent an amount that the wife retains and which must be considered an adjustment by reference to section 75(2)(o). I am satisfied from the reasoning set out within the property award that this is the approach adopted by the arbitrator.
[73] Paragraph 48 of the property award.
[74] Set out at paragraph 119 of the wife’s affidavit (page 89 of the tender bundle and comprising a portion of exhibit A6
[75] To adopt the language of counsel for the husband.
[76] I do not suggest that the arbitrator specifically undertook this task, although the reasoning set out in the arbitral notes clearly show that the arbitrator is aware that the wife has received these funds (indeed, it was the wife’s evidence on oath and unchallenged), had retained their sole benefit and would continue to retain the sole benefit of those funds, or such portions as remained.
In light of the above matters, I am satisfied that the arbitrator has, in fact, applied adequate weight to each of the factors that the parties raised. In summary:
a)Whilst the husband’s income and that of his partner are greater than the wife’s, this was acknowledged.
b)Whilst the husband was noted as being in good health[77], the arbitrator appropriately acknowledged the wife’s diagnosis. However, as is submitted by counsel for the husband, there was no evidence, including the unchallenged evidence of the wife’s doctor, that this diagnosis would, by and of itself, necessarily impact the wife’s earning capacity, quality of life or ability to earn income and support herself and her household;[78]
c)Whilst the arbitrator specifically identified and took into account the possible costs of sale of the husband’s real properties together with his potential future rehousing costs:
i)The costs of sale were included in the balance sheet by consent;
ii)The wife had, until the third day of arbitration, conducted her case on the basis that she would seek to retain the home in which she resides. The orders are framed to allow the wife to retain the home if possible (in which case the wife would not face housing costs). Whilst any potential rehousing cost is acknowledged with respect to the husband this in given context by the concluding sentence of the relevant paragraph[79] wherein it appears clear that the inclusion of those properties at fixed values rather than what they might achieve on sale is what significantly exercised the arbitrator’s mind. The same reality applies as regards the wife and the Town D property if it is to be sold. In any event, consideration of the factor does not take the outcome outside of a reasonable range of discretion.
d)The wife’s evidence, taken on its face as more probably correct and accepting it at its highest, could not and did not establish to the arbitrator’s satisfaction that there was a “duty” on the part of the wife to maintain any other person, including the adult children of the relationship. Indeed, as already commented above, the evidence of the adult child who had filed an affidavit in the proceedings made clear that this did not, in reality, occur.
e)The character of assets or resources to be retained by the parties and, specifically, the husband’s superannuation and the wife’s available cash funds, was a factor which exercised the arbitrator’s mind and is set out in his arbitral award. The reference made by the arbitrator[80] that “[i]t is significant that there will be no superannuation split” must support this position.[81]
f)Finally, the statement that “contributions favour the husband” by reference to payment of a mortgage and other expenses suggests that this factor exercised the arbitrator’s mind by reference to 75(2)(o).[82]
[77] Indeed, there was no evidence led by the husband to suggest that he was not in good health.
[78] Indeed, the wife is working and is sufficiently well resourced to be able to have the totality of her income paid to an account in the name of one of the adult children of the parties.
[79] Paragraph 60 of the property award.
[80] At paragraph 59
[81] The property award acknowledged that the husband would not be able to access those funds until retirement and that this was approximately 11 years away.
[82] Even if this was not expressly articulated within the arbitral award, I am satisfied that it would necessarily flow or be inferred from paragraph 54 and the overall conclusions reached by the arbitrator at paragraph 64.
For all of those reasons, I am satisfied that the complaint that the arbitrator had applied inappropriate weight to certain factors, had ignored or failed to give weight to relevant factors or gave undue weight to irrelevant factors is not made out. Thus, the review of the property award must, on that basis, fail.
Were the Arbitrator’s reasons adequate?
I am satisfied that the answer is yes and for the reasons given above.
The arbitrator has identified (and correctly identified) each of the findings made in considering section 75(2). The factors are balanced and found to modestly favour the husband.
It is not necessary for the arbitrator to apportion specific weight to each relevant factor in a mathematical fashion. Counsel are agreed that to have done so would have constituted reviewable error. What the arbitrator has done is to indicate the factors that were considered of particular significance. Each of the factors described as significant[83] have favoured the husband and support the finding of adjustment in the husband’s favour.
[83] These being the husband’s payment of expenses post separation (paragraph 54) and the absence of a superannuation split (paragraph 59) whereas the wife retains the totality of pool 2 comprising significant cash and/or saleable, tangible assets.
The reasons given sufficiently reveal the arbitrator’s reasoning and the basis for the award. That being so, the application for review of the property award to fail.
The Costs Award
The bases upon which it is sought to review the costs award (in combination with two separate issues of costs which I am asked to determine) are broken up by counsel for the wife, helpfully so, into six specific events or classes of events. Each can be identified, to follow the submissions of counsel for the wife, as follows:
1.The failed mediation
2.The first aborted arbitration
3.The second aborted arbitration
4.Disposal of an application in a case seeking procedural orders to guide the arbitration and the subject of the earlier, published judgement;
5.Costs of the appearance 18 June 2019; and,
6.Costs of and incidental to the conduct of the review hearing 12 August 2019.
Items 1-4 are to be dealt with by way of review of the costs award whilst items 5 and 6 do not relate to a review of the award and, thus, fall squarely within section 117 of the Family Law Act.
The costs award is sought to be reviewed on the basis of errors of law comprising errors of principle and/or failure to give reasons.
Costs principles
Costs were awarded with respect to each of the four events considered by the arbitrator. Two of the awards were on an indemnity basis, namely, the failed mediation and the second, aborted arbitration. Two of the awards were on a party/party basis and the quantum of costs calculated by reference to Division 21 and Schedule 1 of the Federal Circuit Court Rules 2001.
It is common ground that all four awards of costs were determined by reference to s.117 Family Law Act 1975 which requires findings, per Re JJT; Ex parte Victoria Legal Aid [1998] HCA 44, of both a justifying circumstances for departure from the “general rule” (that each party pay their own costs)[84] and that such departure be just.[85]
[84] Section 117(1)
[85] Section 117(2)
The Full Court discussed the issue of indemnity costs in considerable detail in Prantage & Prantage (Costs) [2013] FamCAFC 105[86] and earlier in Muldoon & Carlyle [2012] FLC 93-513. In the earlier authority the Full Court stated at [115]-[116]:
It is beyond doubt that in order to justify an award of indemnity costs, it must be demonstrated that there are exceptional circumstances, such that the usual order for party-party costs should be departed from (Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225; Kohan and Kohan (1993) FLC ¶92-340; Munday v Bowman (1997) FLC ¶92-784; Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC ¶93-029; Limousin & Limousin (Costs) (2007) 38 Fam LR 478; Fennessy & Gregorian (2009) FLC ¶93-399; D & D (Costs) (No 2) (2010) FLC ¶93-435, Stephens v Stephens and Anor (2010) 44 Fam LR 117). As was said by the Full Court in Stephens (at [67]):
An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages...
In support of the application for indemnity costs, counsel pointed only to the fact that it was always apparent there was no merit in the appeal. This is in our view not an exceptional circumstance as would justify an order for indemnity costs.
[86] Also as referred to by counsel for the wife in D & D (Costs) (no.2) (2010) FLC 93-435, Kohan & Kohan (1993) FLC 92-340 and Limousin & Limousin (Costs) [2007] 38 FamLR 478, all of which have been considered.
A useful discussion of the principles applicable to indemnity costs is undertaken by Jackson J in John Holland Pty Ltd v Adani Abbot Point Terminal Pty Ltd (No.2) [2018] QSC 48 at [9]-[14]:[87]
[9] There are numerous cases that consider similar statutory powers to order that costs be assessed on the indemnity basis, which is sometimes included in the category of a “special” order for costs. Many of the cases refer to the 1993 decision in Colgate-Palmolive Co v Cussons Pty Ltd[88] as containing a leading statement of some of the relevant considerations. In the context of the legislation applying in Queensland, the Court of Appeal has made a number of useful pronouncements that inform the exercise of the general discretionary power.
[10] In Di Carlo v Dubois,[89] White J said:
“… [In] Colgate-Palmolive… Sheppard J was able to derive a number of principles or guidelines. At p232-p234 his Honour recognised that the categories in which the discretion may be exercised are not closed. Woodward J at 637 in Fountain said that there needs to be some special or unusual feature in the case to justify a court departing from the ordinary practice. Sheppard J instanced the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; misconduct that causes loss of time to the court and the other parties; the fact that the proceedings were commenced at or continued for some ulterior motive; or in wilful disregard of known facts; or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; the imprudent refusal of an offer to compromise; and costs against a contemnor.”[90]
[87] The discussion is consistent with the Full Court’s discussion in Prantage & Prantage (Costs) [2013] FamCAFC 105. The case dealt with an application for leave to appeal on a question of law arising out of an arbitral award.
[88] (1993) 46 FCR 225
[89] [2002] QCA 225
[90] [2002] QCA 225, [37]
[11] White J reviewed other cases in which cognate statements were made and continued:
“It is important that applications for the award of costs on the indemnity basis not be seen as too readily available when a particular party against whom the order is sought is seen to carry responsibility for the state of affairs calling for a costs order without some further facts analogous to those mentioned in Colgate and other considered decisions.”[91]
[91] [2002] QCA 225, [40]
[12] In Schache v GP No. 1 Pty Ltd,[92] Muir JA considered the power to order costs on the indemnity basis as follows:
[92] [2012] QCA 233
“The circumstances warranting the ordering of indemnity rather than standard costs were discussed at some length by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd. In that case, his Honour observed that the settled practice in Australia has been for costs to be awarded to the successful party to a proceeding on, what is in effect, the standard basis unless the circumstances warrant departure from that course. His Honour noted that some of the circumstances which had been thought to warrant the making of an indemnity costs order were: the making of allegations of fraud which were either known to be false or irrelevant; the engaging in misconduct that caused loss of time to the court and other parties; the commencement or continuation of proceedings for some ulterior motive ‘or in wilful disregard of known facts or clearly established law’; the making of allegations which ought never to have been made or the undue promulgation of a case by groundless contentions; and an imprudent refusal of an offer to compromise. Sheppard J concluded this list with the observation:
‘The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.’”.[93] (footnotes omitted)
[13] In LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo,[94] Boddice J said:
“The applicable principles for the awarding of indemnity costs were usefully summarised by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd. However, those principles operate as a guide to the exercise of the relevant discretion. They do not define all of the circumstances in which the discretion is to be exercised and do not limit the width of that discretion. Further, the categories in which the discretion to award indemnity costs may be exercised are not closed.
Whilst the awarding of costs on an indemnity basis will always ultimately depend on the exercise of a discretion in the particular circumstances of each individual case, the justification for an award of indemnity costs continues to require some special or unusual feature of the particular case. As was observed by Basten JA in Chaina v Alvaro Homes Pty Ltd, the general rule remains that costs should be assessed on a party and party basis, and the standard to be applied in awarding indemnity costs ought not ‘be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part.’”[95] (footnotes omitted)
[14] To those observations, it may be added that the Court of Appeal has treated a case of abuse of process as sufficient ground for an order that costs be assessed on the indemnity basis.[96]
[93] [2012] QCA 233, [40]
[94] [2013] QCA 305
[95] [2013] QCA 305, [21]-[22]
[96] Hammercall Pty Ltd v Robertson [2011] QCA 380, [69]
The above principles are accurately and eruditely stated at paragraph 29 of the costs award.
I propose to deal with each of the four events that were the subject of the costs award.[97]
[97] Paragraphs 30-40 of the costs award are relevant to all four events and will not be repeated.
The failed mediation
This event is addressed at paragraphs 9-17, 41-45 and 58-59 of the costs award. I do not propose to canvas that evidence as there is no challenge to the accuracy of the findings made as set out therein.
Costs with respect to the failed mediation were awarded on an indemnity basis in the sum of $7,287.50 together with one half of the mediator’s fee being a further $893.75 ($8,181.25 in total).
With respect to these costs, it is submitted by counsel for the wife[98] that “There was non-compliance by the wife with respect to orders of the Court. It is conceded that this conduct brings the claim for costs within section 117 (2A)(c)”. The challenge to the costs award is as to quantum it being submitted that the arbitrator fell into error by awarding indemnity costs when party/party costs by reference to schedule 1 of the Federal Circuit Court Rules 2001 should have been awarded. The appropriate item is identified by counsel for the wife as item 5 “Dispute resolution litigation intervention” - $1,867.
[98] Paragraph 26(c) [page 10]
Counsel for the husband submits that the wife’s behaviour with respect to non-preparation for the mediation and active interference with preparation, including evincing and acting upon an intention to generate costs, is egregious and constituted the wife putting the Court and the husband to undue cost and delay.[99]
[99] Paragraph 50 [page 9] of the submissions by counsel for the husband together with the specific submissions with respect to costs thrown away relied upon at arbitration (pages 12-15 of the case outline provided by counsel for the husband).
Counsel for the husband points to specific aspects of the wife’s conduct which were the subject of evidence before the arbitrator and which cannot but have exercised the arbitrators mind.[100] This included evidence of the wife failing to instruct her then legal representatives, failing to properly prepare for the mediation, failing to facilitate valuation of the home, which she occupied and had effective control of, and taking deliberate steps, and causing or requesting others, including the adult children of the parties, to take steps or give evidence, ultimately struck out, generative of delay and cost.
[100] See paragraph 51 of the case outline of counsel for the husband together with the specific submissions re costs thrown away [ibid 99] and exhibits a1, a4, a5 and a8.
Having regard to the totality of material before the arbitrator I am satisfied that the award of indemnity costs was based upon exceptional circumstances or demonstrated obfuscatory and egregious behaviour and a permissible and appropriate departure from the usual order for party/party costs.
As regards the adequacy of reasons within the costs award I accept the submission of counsel for the husband[101] that “[45] the reasons may be brief at times but the process has been exposed. It is not necessary for a decision maker at first instance to traverse every fact in the case. To do so would be unduly onerous and contrary to public policy of the law governing the referrals to arbitration being to give parties timely and relatively informal access to methods by which they can quell their dispute…[46] although the decision maker is obliged to give reasons the scope or content of such reasons is incapable of precise definition”.[102]
[101] Paragraphs 45-46 [pages 8-9] of the written submissions of counsel for the husband and relying upon Pettit & Dunkley [1971] NSWLR 376 at 382, 384 and 388; Public Service Board (NSW) v Osmond (1986) 159 CLR 656 at 666; Housing Commission of NSW v Tatmar Pastoral Company [1983] 3 NSWLR 378 at 380E-382B and Waterways Authority v Fitzgibbon [2005] HCA 57 at [130]
[102] This submission applies with equal force to the adequacy of reasons in the property award.
The NSW Court of Appeal expressed the proposition in the following terms: [103]
216. The underlying difference between arbitration and court litigation should be borne in mind at all times: see in particular the article by Lord Bingham ‘Reasons and Reasons for Reasons: Differences Between a Court Judgment and an Arbitration Award’ op cit. Though courts and arbitration panels both resolve disputes, they represent fundamentally different mechanisms of doing so. The court is an arm of the state; its judgment is an act of state authority, subject generally in a common law context to the right of appeal available to parties. The arbitration award is the result of a private consensual mechanism intended to be shorn of the costs, complexities and technicalities often cited (rightly or wrongly, it matters not) as the indicia and disadvantages of curial decision making.
217 That some difficult and complex arbitrations tend to mimic the procedures and complexities of court litigation may be a feature of some modern arbitration, but that can be seen perhaps more as a failing of procedure and approach rather than as reflecting any essential character of the arbitral process that would assist in a conclusion (erroneous in principle) that arbitrations should be equated with court process and so arbitrators should be held to the standard of reasons of judges.
[103] Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 216-217
A not dissimilar view was expressed by the High Court on appeal from the decision.[104] This is eruditely expressed by Croft J in extra curial writing as: [105]
The matter ultimately found its way to the High Court where the High Court held that the requirement that arbitral awards display a judicial standard of reasoning ‘placed an unfortunate gloss upon the terms of s 29(1)(c)’[106] and that what was required by way of reasons in a given case depended on the circumstances of the case.
[104] Westport Insurance Corp v Gordian Runoff Ltd (2011) 244 CLR 239
[105] Croft “How the Judiciary can support domestic and international Arbitration” The Arbitrator and Mediator Volume 33 Number 1 September 2014 pp1-26 at 16-17
[106] Commercial Arbitration Act 2010 (NSW)
The award of indemnity costs was not punitive in nature and was based upon clear disclosure and evidence of the costs, in fact, incurred by the husband.[107] The husband complied with all relevant requirements as to frank disclosure and notice to the wife and, as submitted, by counsel for the husband,[108] did not seek an order for indemnity costs as a “blank cheque”.
[107] Detailed evidence of costs and the basis upon which they were calculated was led by the husband and the husband’s legal representative and tendered both at arbitration and trial.
[108] Page 12 of the written submissions of counsel for the husband and referring to and relying upon Munday & Bowman (1997) 22 Fam LR 32
Rule 21.10 of the Federal Circuit Court Rules 2001 provides:
Unless the Court otherwise orders, a party entitled to costs in a proceeding…is entitled to…costs in accordance with Part[s] 1 of Schedule 1 and disbursements properly incurred
Schedule 1 is an indicative, event-based schedule of costs. Even if costs had been awarded on a party/party basis, departure from Schedule 1 costs is contemplated and permissible. I am satisfied that the work required and thrown away in not only attending mediation[109] but in preparing and attempting to prepare for mediation was substantially increased and, as reflected by the agreed evidence as to such attempts to resolve the impediments to preparation and successful negotiation,[110] would warrant a significant departure from schedule 1. If this were to occur then the discrepancy between indemnity costs and costs as appropriately assessed or fixed would be modest.
[109] Fruitlessly if not pointlessly so as it was impossible to negotiate an outcome to the proceedings without disclosure and, importantly, without valuation evidence as the wife was, until the third day of arbitration (and the need for a third day rather than the two days as fixed for arbitration is addressed at paragraphs 53 and 54 of the written submissions of counsel for the husband [pages 9 and 10]), stridently pressing for relief whereby she would retain the Town D property and thus its valuation was fundamental.
[110] Paragraphs 13-15 of the costs award
As the wife’s refusal to engage with valuation rendered the mediation ineffective and incapable of success, the husband would also be entitled to his contribution to the mediation fee as a disbursement.[111]
[111] Item 14 Schedule 1
The review of this portion of the costs award fails.
The first aborted arbitration
This event is addressed at paragraphs 18-21, 46-49 and 60-62 and of the costs award. I do not propose to canvas that evidence as there is no challenge to the accuracy of the findings made as set out therein.
Costs with respect to the first aborted arbitration (24 July, 2018) were awarded on a party/party basis in the sum of $6,947 together with disbursements being a further $275.50 ($7,222.50 in total).
With respect to these costs, it is submitted by counsel for the wife[112] that “[T]here are insufficient reasons to support the finding that [the wife’s] anterior conduct or her omission caused the arbitration to be aborted”. However, this is to ignore the agreed facts[113] that the wife had not paid one half of the arbitrator’s fees, had not prepared or fully prepared for the arbitration and that “…the ostensible reason for the first arbitration not proceedings was the withdrawal of the [wife’s] solicitor two days before the arbitration was due to start”.
[112] Paragraph 26(d) [pages 10-11]
[113] Paragraphs 46 and 47 of the costs award
What is clear is that through no fault of the husband, his costs were thrown away. The husband was ready to proceed and had done all that was necessary to proceed. The wife had not. In those circumstances the clear reasoning of the arbitrator makes out a valid exercise of discretion in awarding costs on a party/party basis.
The review of this portion of the costs award fails.
The second aborted arbitration
This event is addressed at paragraphs 19-26, 50-53 and 61-63 and of the costs award. I do not propose to canvas that evidence as there is no challenge to the accuracy of the findings made as set out therein.
Costs and disbursements with respect to the second aborted arbitration (4 and 5 September, 2018) were awarded on an indemnity basis in the sum of $15,875.50 in total.
With respect to these costs, it is submitted by counsel for the wife[114] that the wife was self-represented,[115] that the award is in the nature of a penalty and “has the nature of a cancellation fee about it”. Ultimately, it is submitted that party/party costs by reference to schedule 1 “would have been more appropriate”.
[114] Paragraph 26(e) [page 11]
[115] Although it is conceded that this is “no excuse”
On the basis that the matter was prepared as a two-day matter[116] the costs which would have been calculated by reference to schedule 1 are, for purely illustrative purposes:
Item 7 (preparation for 2 day hearing) $5,921
Item 13 (attend hearing – 2 x $2,241) $4,482
Counsel’s Fees $7,975[117]
Item 14 (half arbitrator fee) $385
Item 14 (room hire) $250
Item 15 (photocopying and sundries) NK
Total $13,092
[116] Neither party submits that costs in accordance with schedule 1 should be discounted on the basis that the matter is to be arbitrated rather than heard by the Court and hence I need not address the issue.
[117] I have not referred counsel’s fees as disbursements as to do so would be demeaning to counsel and inappropriate as regards the engagement of counsel as an advocate. Further, I do not seek to engage in controversy as to whether Item 13 of Schedule 1 (with, perhaps, an advocacy loading (item 12)) is the appropriate way to include counsel’s fees. Counsel are entitled to be instructed by the solicitor by whom they are retained and hence, I am satisfied that both would be allowed if costs are to be ordered.
The costs that are awarded with respect to “applicant’s solicitors costs and disbursements” appropriately make no allowance for attendance at arbitration. The arbitration was cancelled. However, I am satisfied that the costs award sufficiently articulates, when the totality of reasoning is considered,[118] the basis for and adequate basis for the award. This is especially so when one considers the detailed submissions of counsel for the husband as were before and accepted by the arbitrator.[119]
[118] Which includes incorporation of the submissions of counsel, of which those of counsel for the husband are known, and the exhibits that were before the arbitrator and again tendered in this determination.
[119] See page 14 of the written submissions of counsel for the husband and the exhibits referred to therein. Paragraphs 30-40 of the costs award, as well as the specific portions of the costs award enumerated above, all support the arbitrator’s reasoning process.
The wife’s conduct at that point in the proceedings would have significantly increased and inflated the work which the husband’s legal representatives would have been required to undertake such that the allowance made for solicitor’s costs, even on a party/party basis were justified. The wife was not engaging with the proceedings on any level.
Significantly, and as was noted in the costs award, the wife was engaging in egregious behaviour through:
a)Her words and conduct, suggesting, for example, that “he [the husband] is fucking going down”, suggesting that the wife would “destroy him [the husband]” and the like, all directly supporting the arbitrator’s findings of deliberate action to increase both delay and cost;[120]
b)Raising matters which were not ultimately supported by evidence;[121]
c)Failing to produce any evidence that supported the wife’s claims that she was impecunious and unable to meet the arbitrator’s fees or that she experienced health difficulties that impeded instruction, preparation or attendance;[122]
d)Seeking to pursue unnecessary forensic accounting and adversarial valuation issues;[123] and,
e)The wife’s unfounded allegations of apprehended bias with respect to the arbitrator initially appointed.
[120] Page 13 of the written submissions of counsel for the husband (suggesting these matters are “breathtaking for its viciousness and desire to destroy the other party rather than litigate the matter in an orderly and proper way”. See also paragraphs 30-40 of the costs award.
[121] Page 13 of the written submissions of counsel for the husband (under heading “collusion with witnesses and trumped up medical evidence”)
[122] Page 13 of the written submissions of counsel for the husband.
[123] The basis upon which the matter required a third day of arbitration and a basis upon which the wife sought vacation of the second arbitration notwithstanding specific orders by the Court that the arbitration proceed.
The above matters, whether individually and certainly in combination, are explained in the costs award as supporting an award of indemnity costs and appropriately so. The husband should, in those circumstances, be compensated for the costs he has, in fact, incurred when those costs are significantly inflated by the wife’s attitudes, acts and omissions. To restore the husband to the position that he would have been in but for the wife’s egregious behaviour is not a penalty of the wife.
The review of this portion of the costs award fails.
Disposal of an application in a case seeking procedural orders to guide the arbitration
This event is addressed at paragraphs 26-28, 52-53 and 64 of the costs award. I do not propose to canvas that evidence as there is no challenge to the accuracy of the findings made as set out therein.
Costs with respect to the application in a case were awarded on a party/party basis in the sum of $2,324.50.
With respect to these costs, it is submitted by counsel for the wife[124] that each party should pay their own costs or, if costs are awarded, that the costs should be calculated per schedule 1 (as they are).
[124] Paragraph 26(f) [page 11]
The costs award contains clear and reasoned basis for costs. The application in a case was necessary to remedy the wife’s defaults and refusal to participate. The application was necessitated by the wife’s failure to comply with several earlier orders of the Court. The application was heard on an undefended basis after notice to the wife and the husband was wholly successful. The husband is entitled to his costs.
The wife has not established any error of law or inadequacy of reasons.
The review of this portion of the costs award fails.
Costs of the Review
Costs are sought with respect to determination of the review. This includes the Court event 18 June.
I am satisfied that the wife should pay the husband’s costs or and incidental to the review application, such costs to be paid on a party/party basis.
Costs must be determined by reference to section 117 Family Law Act 1975. The discussion of the provision above is incorporated for the purpose of this determination. In determining whether costs are justified and just I must have regard to the non-exhaustive list of factors in section 117(2A) to the extent that those factors are relevant.
The financial circumstances of each of the parties to the proceedings
These are well known. The factor does not assist. Neither party is in such a position of financial strength, relative to the other, that they would be oppressed by the other’s wealth.
Whether any party to the proceedings is in receipt of legal aid
Neither is.
The conduct of the parties to the proceedings in relation to the proceedings
This provides justification for an order for costs.
The wife has been wholly unsuccessful in prosecuting her application for review. The husband wholly successful in resisting the application for review.
I am conscious of the Full Court’s decision in Davida & Davida (Costs)[2011] FamCAFC 61 and the passage therefrom:
The other justifying circumstance is the husband’s relative success. True it is that the relevant paragraph in S.117(2A) refers to a party being “wholly unsuccessful”, but I think it is fair to say that the practice has been to look what one might term the relative merits of success between the parties, even if necessary doing that under the last matter mentioned in S.117(2A), being any “other” matter.
In this context, “wholly unsuccessful” means there was no justified basis for the position adopted having regard to the outcome of the proceedings. Being “wholly unsuccessful” must look not just at the outcome but the position adopted by the party as well. This would apply to several aspects of the wife’s response to being served with the applications to register the arbitral awards.
On 18 April, 2019, the wife, though her legal representatives and repeated in her affidavit filed 17 May 2019 (as discussed above), purported to oppose registration of the awards.[125] That was a misguided or erroneous position. There was no valid basis to oppose registration. Further, on the basis that the wife sought review of the arbitral awards, registration of the arbitral awards was a precondition.
[125] Beyond the mere assertion of opposition, no evidence was lead and, appropriately, the issue was not pressed.
Counsel for the wife has not today agitated the issue. Indeed, the issue was incapable of agitation as the solicitor who appeared by telephone 18 June made clear that objection was not pressed thus permitting registration of the two arbitral awards that day.
The wife framed the relief sought in the alternative. The wife sought, as what might be inferred as her primary position, to review the arbitral awards. In the alternative the wife has sought to vary or set aside the awards. However, the later ground, again, was not agitated by counsel and appropriately so. The ground was not available.
In prosecuting the application for review the wife readily abandoned the first of three grounds (as discussed above). Neither of the two remaining grounds have found favour for the reasons set out above. The wife’s application for review has failed in its entirety and the arbitral awards remain unimpeached.
As the wife has been wholly unsuccessful and noting that the husband sought no order save registration of the arbitral awards (which he obtained 18 June, 2019) I am further satisfied that it is just that the wife pay the husband’s costs of her failed application. It would be unjust if it were not so especially having regard to the vigour with which the wife has resisted the determination and finalisation of these proceedings.
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
The application for review has not been so necessitated.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
This is largely addressed above under the heading of “conduct”. However, in addition, the basis upon which the wife sought to review the property award was, in large part, ill-conceived.
The wife’s challenge to the property award on the basis that the husband received an adjustment of 5% (producing a 10% difference between the parties) was, with the greatest of respect, plainly wrong. The wife did not acknowledge that the percentage adjustment made was with respect to only one of three pools.
The wife’s bases for review, whilst unsuccessful, do not, to my mind, warrant indemnity costs nor do I understand the husband to argue for that. Accordingly, costs will be awarded on a party/party basis.
This is a further basis supporting findings of both justification for an order for costs and the justice of an order being made.
Whether either party to the proceedings has made an offer in writing
None are raised.
Such other matters as the court considers relevant.
None need be considered.
Quantum of Costs
By reference to Schedule 1 I am satisfied that the following allowances are appropriate:
Item 3 (interim or summary hearing)[126] $1,867
Item 13 (hearing and solicitor’s attendance to instruct) $2,241[127]
Item 16 (travel) $ 630[128]
Item 15 (photocopying) $ 231[129]
Item 13 (Mention 18 June, 2019) $ 305
Counsel’s fees $4,400[130]
Total $9,674
[126] This item does not perfectly describe the nature of the application but is the nearest referable.
[127] The matter consumed more than half a day. I am satisfied that a full day should be allowed. On the basis that counsel’s fees are allowed I have not included advocacy loading.
[128] The parties and the solicitors for each party are from Wollongong and have travelled substantially to attend the Parramatta Registry.
[129] On the basis of tendered documents, a significant amount of copying has been undertaken. In excess of 100 pages are tendered which would have been copied at least 3 times and hence 300 pages is allowed.
[130] As indicated above, I am satisfied that Counsel’s fees should be allowed at the rate charged. A substantial amount of preparation has been undertaken and an earlier attendance by counsel thrown away. Counsel’s fees are not a disbursement but neither should counsel be expected to appear without instruction (and if only one allowance is made for item 13 (even if an advocacy loading is applied) the solicitor is effectively compelled to appear without payment.
The basis of the listing 18 June, 2019 is addressed above and need not be repeated save to observe that the listing was “for mention and directions” and both parties had been granted leave to appear by telephone.
Whilst as a matter of policy, the Court endeavours to hear and determine applications relating to arbitrations as expeditiously as possible, the matter was expressly listed for mention on 18 June, 2019. Whilst I accept and appreciate that highly competent counsel was before the Court, familiar with the matter, fully prepared and ready to proceed with the hearing of the review application from the husband’s perspective, the matter was before the Court 18 June, 2019. The matter was listed in a busy duty list and with no guarantee that it would be reached.
I have received substantial assistance from counsel for each of the party in the conduct of the matter. The preparation undertaken for the earlier date was not lost and thankfully the disposal of the applications for review, even with judgement reserved, has been delayed by only some weeks.
By reference to the above an order for costs for the amounts set out above will be included. Those costs will be a charge upon the wife’s entitlements pursuant to the arbitral awards and paid on settlement (whether that should occur by the wife making payment to the husband or by deduction from the wife’s share of the proceeds of sale of the home).
The husband’s oral application
The husband seeks an order that the wife reimburse to him a sum equal to all that his has expended in servicing a mortgage encumbering the home in which the wife continues to reside and in keeping that property insured.
It is common ground that the amounts expended by the husband were to have been paid by the wife.
It might be suggested that the husband’s remedy lay in his discontinuance of payments. However, I accept that the husband was conscious of the impact upon his credit worthiness and protection of his property rendering such a “self-help” remedy unpalatable.
On the basis that the payments made by the husband have been taken into account by the arbitrator and form a significant basis for a modest adjustment in the husband’s favour I am satisfied that the husband’s application must be dismissed. To require the wife to reimburse the husband for payments that have been taken into account to the husband’s benefit in the property award would be “double dipping”.
The application that the husband makes is essentially founded in enforcement of an order made by the Court. Enforcement is discretionary. On the basis that the payments have been taken into account in the award made by the arbitrator the husband’s application would be refused.
I certify that the preceding one hundred and forty (140) paragraphs are a true copy of the reasons for judgment of Judge Harman
Date: 10 September 2019
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