Campbell and Morgan and Anor

[2018] FamCA 261

FAMILY COURT OF AUSTRALIA

CAMPBELL & MORGAN AND ANOR [2018] FamCA 261

FAMILY LAW – COSTS – Application for costs by an intervener against the applicant father – where the father became a bankrupt in 2006 and the Trustee in Bankruptcy became the intervener – where the father and the mother have been in a dispute over financial de facto property and parenting matters – where the father withdrew the property proceedings on realisation of the extent of his financial predicament – where the Trustee in Bankruptcy sought costs against the father – where no trial affidavits had been prepared – Ordered the application for costs is dismissed

Family Law Act 1975 (Cth) ss 8AB, 78, 90SL, 117

APPLICANT: Mr Campbell

RESPONDENT: Ms Morgan

INTERVENER:	Mr Verboer as Trustee in Bankruptcy
FILE NUMBER:						NCC	618	of	2016

DATE DELIVERED: 27 April 2018

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Cleary J

HEARING DATE: 4 April 2018 – in chambers

REPRESENTATION

COUNSEL FOR THE APPLICANT: Not applicable

THE APPLICANT: Self-Represented

COUNSEL FOR THE RESPONDENT: Not applicable

SOLICITOR FOR THE RESPONDENT:	Not applicable
COUNSEL FOR THE INTERVENER:	Not applicable
SOLICITOR FOR THE INTERVENER:	Rostron Carlyle Lawyers

Orders

1. The Application in a Case filed 2 March 2018 is dismissed.

2. No order as to costs.

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

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC618/2016

Mr Campbell

Applicant

And

Ms Morgan

Respondent

And

Mr Verboer
Intervener

REASONS FOR JUDGMENT

INTRODUCTON

1. This is an application for costs by an intervener in ongoing Family Law proceedings between parties to a de facto relationship.

2. The application for costs is made by the intervener against the applicant father in those proceedings Mr Campbell (“the father”).

3. The father has been in dispute with his former partner Ms Morgan (“the mother”) over financial de facto property and also parenting matters involving their seven year old son.

4. There was a relationship between the parties from 2001 to 2014.  A period of 13 years.  During that time on 3 November 2006 the father became a bankrupt.  On that day the intervener became the Trustee in Bankruptcy for the father.

5. It is unclear on the evidence before me as to whether the father continues to be a bankrupt.  In an affidavit of the intervener filed on 21 June 2017 he referred to the bankruptcy being “scheduled for discharge on 20 September 2017”.  There is no evidence before me that discharge has taken place although it may have.

The Evidence

1. The documents relied on in respect of the application are as follows: 

   The Intervener [Applicant]

   (a)Application in a Case e-filed 2/03/2018;

   (b)Affidavit of Mr B, solicitor for the Trustee in Bankruptcy e-filed 2/03/2018;

   The Father [Respondent]

   (c)Response to an Application in a Case filed 23/03/2018;

   (d)Affidavit of Mr Campbell filed 23/03/2018;

   Submissions

   (e)Submissions for the applicant intervener filed 2/03/2018;

   (f)Reply Submissions in Response to the Affidavit of the father filed 28/03/2018.

2. The orders sought by the intervener are as follows:

   1.The applicant father pay the intervener’s [Trustee in Bankruptcy] costs thrown away as a result of the applicant’s abandonment of his application for property orders on an indemnity basis, otherwise on a party/party basis.

   2.The costs sought in paragraph 1 be fixed by the Court pursuant to Rule 19.18 of the Family Law Rules 2004.

   3.Such further or other orders as the Court sees fit.

3. The father opposes the application and seeks its dismissal.

Short History of This Application

1. These proceedings were transferred from the Federal Circuit Court in Newcastle to this Court on 31 March 2017.  At that time the Trustee in Bankruptcy was considering whether or not to intervene in the proceedings between the parents.  A Notice of Address for Service had been filed but no application had been made.

2. On 21 June 2017 a Notice of Intervention was filed by Mr Verboer as trustee of the bankrupt estate of the father.  If there were to be costs their calculation would commence on this date with the intervention by the trustee.

3. On 7 February 2018 orders and directions were made to prepare the matter for hearing.  Hearing dates were allocated to commence on 7 May 2018 and directions made for filing of affidavits.

4. On that day the father indicated that he would not pursue the property aspect of the proceedings.  The Trustee in Bankruptcy sought costs against him. 

5. The general principal established by s 117 of the Family Law Act 1975 (Cth) (“the Act”) is that each party to proceedings shall bear his or her own costs. Subsection 2 contains the qualification that if the Court is of the opinion that there are circumstances that justify in doing so, the Court may subject to certain other subsections make such order as to costs and for security as to costs whether by way of interlocutory order or otherwise as the Court considers just. The footnote to certain other subsections is s 117 (2A), (4), (4A), and (5).

6. The considerations for what order, if any, that should be made are set out in ss 2A and I shall deal with them as follows:

a) The financial circumstances of each of the parties to the proceedings

1. The applicant is an official Trustee in Bankruptcy and intervened in that professional role. Had the father pursued his application for an adjustment in interest in de facto property then pursuant to s 90SL of the Act[1] that property could have vested in the trustee pursuant to the Bankruptcy Act 1966 (Cth).

   [1] The submissions for the applicant refer to s 78 of the Act but the appropriate section under s VIIIAB of the Act is in identical terms

2. The financial circumstances of the father could be described as parlous.  He has been negotiating for the discharge of his bankruptcy for some time.  His offer to pay $6,000 was rejected by the Trustee.  It appears that the liability of the father, at least on 4 July 2017, was $9,456.83.[2]

   [2] Affidavit of the father filed 23/03/2018, Annexure E

3. The father has given evidence that he withdrew his application in respect of property to focus on the parenting aspect which is time and communication with the parties’ son.

4. The father is no longer legally represented.  His former solicitors filed a Notice of Ceasing to Act on 13 March 2018.

5. The father asks the Court to take into account the following matters in relation to his financial position:

   ·That he would probably consider going back into bankruptcy if costs were ordered against him;

   ·That he has to date paid out over $60,000 in legal costs and is not in a position to pay any more;

   ·That he has relied on financial assistance from his father in meeting the legal costs to date and does not wish to continue to impose on him financially.

b) Is a party in receipt of a grant of Legal Aid?

1. Neither of the parties to this Application has the benefit of a grant of Legal Aid, although the mother does.

c) Conduct of the parties

1. This ground is heavily relied on by the intervener.  His case is that costs expended by the Trustee in Bankruptcy have been thrown away in attending hearings relating to the father’s property claim. It is undoubtedly true that the trustee has incurred costs since intervening on 21 June 2017.  However costs are ordered as compensation to a party who has successfully defended a claim. 

2. In this matter the father had no control over the intervener becoming a party.  The intervener presumably made his own commercial assessment of the benefit or detriment of intervening.  The father’s claim at its highest was for the sum of $50,000 to be paid to him by the mother.

3. During the course of the de facto relationship, and after the father became a bankrupt, the mother acquired a property at C Town in which the parties lived. There remains a substantial mortgage on that property.

4. The intervener was aware through having management of the bankruptcy that the father had no legal interest in that property.

5. In a report to creditors annexed to the affidavit of the father there is this reference:[3]

   [Mr Campbell] (the father) advised in his Statement of Affairs that he also has a joint interest in a property located at [D Street, C Town]. [Mr Campbell] advised the property may be worth $320,000 and Westpac Banking Corporation is owed $270,000 pursuant to a registered mortgage.  I have enquired with Westpac Banking Corporation whether [Mr Campbell] is a co-guarantor or co-borrower of the secured loan.  My searches show [Mr Campbell] has never been a registered owner of the property.  Accordingly, given the estate has no legal title to the property, I do not anticipate that any recoveries will be made from this source.

   [3] Affidavit of the father filed 23/03/2018, Annexure B, page 2 of the report

6. Accordingly, the intervener was relying on the outcome of the de facto property claim made by the father.

7. The father made the decision not to pursue his claim for adjustment of interests on a purely financial basis. He has been self-representing since his solicitors ceased to act.

8. If the Court was considering making an order for costs against the father, in these circumstances it would be unjust to order indemnity costs.  The bar for the award of indemnity costs is a high one.  There must be exceptional circumstances to enliven the award of costs on that basis.[4]

   [4] Colgate Palmolive Company v Cussons Pty Ltd [1993] 46 FCR 225

9. The intervener argues that costs were incurred and thrown away which are attributable to the actions of the father.

10. I was referred to the decision of her Honour Justice Rees in the matter of Marrow and Dane [2012] FamCA 503. That was a case where both parenting and property issues were to be determined. The wife abandoned a cluster of financial matters such as setting aside a Binding Financial Agreement, leave to institute spouse maintenance out of time and an application to vary child support.

11. Those facts in my view are quite dissimilar to the situation here.  In that case the husband, the applicant for costs, had prepared his case to meet the financial claims of the wife.  He had filed a financial statement of himself and his partner and a large component of his affidavit and annexures refer to those matters.  On the first day of trial the wife advised the Court that she did not wish to proceed with those applications.  The costs of the husband’s preparation of that material were thrown away.  The trial judge accepted the evidence of the wife that she had no idea what was involved in the prosecution of her own applications and was not in a position to prosecute them.  On that basis the application for indemnity costs was rejected.  However an order for party/party costs was made.

12. In this matter the father had no control over the involvement of the trustee and could not have restrained the trustee from continuing to pursue the property claim commenced by the father in March 2016.  I accept the submission of the father in that regard.

CONCLUSION

1. In those circumstances where the father is in straitened circumstances and has made a decision to give priority to the litigation about his son and to forego his financial claim because he cannot afford to maintain it, I do not consider it is appropriate for any order for costs to be made against him on that ground alone.  However, there is nothing in the conduct of the father which would persuade the Court to make an order.

2. The intervener, as a Trustee in Bankruptcy is entitled to do, looked to pursue the interest of the father and to acquire any financial benefit which he obtained from these proceedings as having been acquired during the course of the bankruptcy.

3. In any event as soon as the father realised the extent of his financial predicament he withdrew.  No trial affidavits had been filed when he made that decision.

4. For those reasons I consider that the application of the Trustee in Bankruptcy must fail and an order for dismissal of the application is made accordingly.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 27 April 2018.

Associate: 

Date:  27 April 2017