Campbell and Schmidt (No.2)

[2016] FCCA 1374

FEDERAL CIRCUIT COURT OF AUSTRALIA

CAMPBELL & SCHMIDT (No.2) [2016] FCCA 1374

Catchwords:
FAMILY LAW – Costs – Whether an Applicant whose Application was dismissed for want of jurisdiction should pay for the Respondent’s costs.

Legislation:

Family Law Act 1975 (Cth); s.117 sub-s.(2A)

Applicant: MS CAMPBELL

Respondent: MR SCHMIDT

File Number: MLC 6363 of 2014

Judgment of: Judge Small

Hearing date: 14 April 2016

Date of Last Submission: 14 April 2016

Delivered at: Melbourne

Delivered on: 14 April 2016

REPRESENTATION

Counsel for the Applicant: Dr Kovacs

Solicitors for the Applicant: MST Lawyers

Counsel for the Respondent: Ms Campbell

Solicitors for the Respondent: Forte Family Lawyers

ORDERS

1. The Oral Application for Costs made by the Respondent on 19 February 2016 is dismissed. 

2. Upon the Oral application of the Applicant, the matter be adjourned to Federal Circuit Court of Australia on 26 May 2016 at 9:30am for Final Hearing on the issue of costs for the Respondent’s costs application with an estimated hearing time of 1 day (“the Final Hearing”).

3. In the event of any applicable filing, setting down, mediation or enforcement fee or fees (“the Fees”) not having been waived, the party responsible for the payment of the Fees or any of them do pay or cause to be paid such of the Fees as shall be payable by that party in accordance with, and within the time specified in the Family Law (Fees) Regulation 2012.

IT IS NOTED that publication of this judgment under the pseudonym Campbell & Schmidt (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 6363 of 2014

MS CAMPBELL

Applicant

And

MR SCHMIDT

Respondent

REASONS FOR JUDGMENT

(Revised from Transcript)

1. These reasons for judgment were delivered orally.  They have been corrected from the transcript.  Grammatical errors have been corrected and an attempt has been made to render the orally delivered reasons amenable to being read.

2. The matter comes before me today on a costs application by the respondent in the substantive proceedings.  The substantive proceedings were for a property settlement and a declaration of the existence of a de facto relationship between the parties. 

3. After trial my decision was reserved and I delivered my decision on that matter on 19 February 2016.  The decision that I made was that there had not been a de facto relationship between the parties as a matter of law and therefore the application of the applicant was dismissed for want of jurisdiction. 

4. The respondent immediately made an application for costs and I sought written submissions in relation to that application.  The order that I made on that day on 19 February, was that:

   The respondent file written submissions in relation to the oral application made this day for his costs by 4 March 2016 and that the applicant file her written submissions in response by 18 March 2016. 

5. The respondent did file his submissions on 4 March and the applicant filed her response to those submissions on 18 March.  There are two further documents:  one is the respondent’s submissions in reply to the application’s response dated 18 March and the other is a further applicant’s response to those submissions dated 29 March.  I have not considered the respondent’s submissions in reply to the applicant’s response or the applicant’s submissions in reply to the respondent’s second submissions.  They were not ordered by the Court and were I to accept them, there would be an opening of opportunity for further submissions to have been made up until this morning so I have considered the submissions made by the respondent and I have considered the submissions made by the applicant.

6. Those submissions on both sides were comprehensive and detailed submissions on the law regarding the costs and I have to say, I was impressed by both. 

7. As I said, the reason for the dismissal of the applicant’s application was that the Court was not satisfied on the evidence before it that a de facto relationship had existed at law.  There is no doubt that a relationship had existed between the parties and that the applicant and the respondent had lived together in what in lay terms might be called a de facto relationship for a period of up to two years.  I did not have to decide the date of separation at that time.

8. There were actually three responses to the applicant’s application initially.  The response of the respondent or the case of the respondent was that the application should be dismissed because there was no de facto relationship.  Second, if there were a de facto relationship the application had been made out of time and therefore should be dismissed; and third, if the application were not made out of time then it would not be just and equitable in all the circumstances for me to make an order.  I did not have to go to the second or third responses of those the applicant’s application fell at that first hurdle. 

9. The Act is very clear on the question of costs. Section 117 of the Family Law Act is the section that deals with costs and subsection (1) of that section essentially says that each party to proceedings under this Act shall bear their own costs subject to the matters set out in subsection (2). And subsection (2) says:

   If, in proceedings under this Act, the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to subsections (2A), (4), (4A) and (5) and the applicable rules of court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as to the court considers just.

10. I repeat: “As the court considers just”. 

11. The first thing that the Court needs to take into account in relation to those matters in deciding whether it is just is the financial circumstances of the parties to the proceeding. 

12. As a result of the proceedings the applicant has been left with a tax debt and a Centrelink debt which she was unaware that she had incurred because of a distribution of $60,000 of income made to her by the respondent’s family trust after the relationship had been over.  The applicant did not know of that particular distribution although she had had as I found the benefit of the moneys.  Her financial position is that she owes something like $90,000.00 in legal fees in relation to the application.  She owes the tax on the $60,000 distribution and she owes the Centrelink debt because she received during that time Centrelink payments which had she known about the distribution she was not eligible for.  That puts her in debt of over $100,000 well and truly so her position is quite impecunious. 

13. She has I understand since the trial purchased a property with her now partner.  I am unaware of the exact circumstances of that and whether it in fact went through but that was the situation at the time of trial. 

14. The respondent on the other hand has retained his property at (omitted).  It is valued at – and I did not have cause to make findings about the valuation but it is valued in terms of the parties’ material and the evidence before the Court somewhere between $700,000 and $1.2 million.  I did not as I said have cause to make a finding on that but if I had I must say that on the evidence before the Court from the valuers, my finding would have been at the upper end of those valuations.  So he has the house;  he has a mortgage over that property which at the time of trial I think was about $285,000, but he just before trial, encumbered that property further to pay for his legal fees in the sum of about $115,000.  So that extends his liabilities.  He is working.  His evidence was that his business had contracted. 

15. The applicant has the care of her 10-year-old son.  The relative financial positions of the parties are that the respondent is currently in a much better position than the applicant.  The applicant says that she is not in a position to pay costs.  I think that is probably right.  If she owes over $100,000 as a result of these proceedings and as a result of the distribution made to her and she is I think not working certainly not full time, then there is little ability for her or capacity for her to make those payments. 

16. The other things that are relevant – and I will not go through every one of them because not all of them are relevant but the next thing that is said to be relevant is the conduct of the parties. 

17. The respondent says that the fact that the case was dismissed indicated essentially that there was no merit in it but I do not accept that argument.  I do not believe that the application was frivolous in any way.  It was certainly not malicious in any way and it involved quite intricate questions of law and I cannot find that the conduct of the applicant during the proceedings was in any way reprehensible enough to give rise to an application for costs.  Indeed, the response to the costs application of the applicant sets out in some detail the failure of the respondent himself to comply with court orders and to provide discovery in the proceedings which may on balance having read the submissions of both parties, have led to a decision that the conduct of the respondent was more detrimental to the proceedings and to the incurring of costs than was the applicant’s behaviour in filing the application.

18. The applicant has been wholly unsuccessful in the proceedings and that is a matter to be considered under section 117 subsection (2A). The fact that someone fails in a proceeding does not automatically in itself mean that a costs order ought be made. The circumstances of the case will always need to be taken into account and none of the factors under section 117 subsection (2A) has precedence over any of the others. And because subsection (1) of 117 says that “each party to the proceedings” subject to those matters “shall bear his or her own costs”, in other words that is the default position it is only if matters can be shown under subsection (2) and subsection (2A) that a costs application would be made. In other words, costs do not flow with the decision of the substantive proceedings. I do consider the fact that the applicant has been unsuccessful but I do not consider that it overrides the other factors that I need to take into account.

19. The other circumstance which I am asked to consider is the issue of whether a party has made an offer in writing to the other party to settle the proceedings and the term of any such offer.  The documents before the Court show that a letter was sent on 26 November 2014 by the solicitors for the respondent and by the solicitors for the applicant on 14 May 2015.  The submissions of the applicant in relation to that matter hold I believe some force.  They say clearly that the offer of the respondent was little more than a restatement of his pleadings which were as I have said, that the application ought to be dismissed for one of the three reasons that I have previously stated. 

20. The applicant says that she filed an offer for settlement, which was a genuine offer of settlement which complies with the legal requirements for such an offer and that the respondent did not.  As I’ve said, I am persuaded by those arguments.  I think that’s right, that the letter which simply relies on the pleadings of the respondent does not fulfil the requirements of a letter of offer or an offer in writing for the purposes of this subsection.

21. For all of those reasons and also in terms of such other matters as the court might consider relevant, I said in my judgment in this matter that I had some sympathy for the applicant and the position that she found herself in. 

22. She had changed her life circumstances to a considerable extent in moving into the home of the respondent. She finds herself at the end of that relationship in a much lesser financial circumstance than she was at the beginning. She finds herself with a debt incurred during the relationship which the respondent also incurred as a result of the distribution of the trust but which the business has paid on behalf of the respondent. However, the business has not offered to pay the applicant’s tax debt on those terms and she is left with it on her own. I do take that into account as a matter under subsection (g) of section 117(2A).

23. In all of those circumstances, I decline to make an order for the costs of the respondent as set out in the oral application and in his submissions.

24. Those are the orders of the court.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judge Small

Date: 7 June 2016