Caughey & Peckham (No 5)
[2024] FedCFamC1F 431
•25 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Caughey & Peckham (No 5) [2024] FedCFamC1F 431
File number(s): SYC 3782 of 2019 Judgment of: CHRISTIE J Date of judgment: 25 June 2024 Catchwords: FAMILY LAW – COSTS – Where each party seeks costs of litigation that exceeded the length of the parties’ de facto relationship – Where there were a number of discrete interlocutory issues which the parties brought before the Court prior to a final determination – Where the final orders provided for the division of the net equity in the joint property so as to provide the de facto husband 85 per cent and the de facto wife 15 per cent – Where there are circumstances justifying the de facto wife to have her costs from the date of her offer of settlement to the date of the de facto husband’s offer as agreed or taxed on a party/party basis – Indemnity costs refused – Where there are circumstances justifying the de facto husband to have his costs at scale in relation to two discrete case management hearings and attendant applications Legislation: Family Law Act 1975 (Cth) s 117 Cases cited: Colgate-Palmolive Co v CussonsPty Ltd (1993) 46 FCR 225
Fevia v Carmel-Fevia (Costs) [2010] FamCA 143
Hogan and Hogan (1986) FLC 91-704
Prantage & Prantage (2013) FLC 93-544
Division: Division 1 First Instance Number of paragraphs: 54 Date of hearing: 18 June 2024 Place: Sydney Counsel for the Applicant: Mr Givney Solicitor for the Applicant: Apex Legal Counsel for the Respondent: Mr Livingstone Solicitor for the Respondent: Holmes Donnelly & Co Lawyers ORDERS
SYC 3782 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CAUGHEY
Applicant
AND: MR PECKHAM
Respondent
ORDER MADE BY:
CHRISTIE J
DATE OF ORDER:
25 JUNE 2024
THE COURT ORDERS THAT:
1.Ms Caughey pay Mr Peckham’s costs of:
(a)the Application in a Proceeding dated 25 March 2022; and
(b)the Application in a Proceeding dated 8 June 2022;
such costs to be payable in accordance with the scale set out in the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
2.Mr Peckham pay Ms Caughey’s costs as agreed or taxed on a party/party basis from 7 November 2019 until 12 February 2024 excluding the costs of the applications in Order 1(a) and (b) above and the costs of the hearing on 29 October 2019.
3.The parties’ respective applications are otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Caughey & Peckham has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
I am dealing with the costs of proceedings commenced 13 June 2019 and concluded (save for costs) nearly five years later by the making of final orders on 25 March 2024.
Those proceedings concerned the adjustment of interests in property following the breakdown of the parties’ de facto relationship – a relationship which lasted about two years and three months.
In summary, the relationship lasted less than half the length of the litigation arising out of the relationship.
Both parties seek an order for costs and, accordingly, in these reasons, for clarity, I will refer to them by their names rather than designating them “applicant” and “respondent”.
It is necessary to understand that there were a number of discrete interlocutory issues which the parties brought before the court before the application for final relief:
(a)An interim application for spouse maintenance by Ms Caughey and discontinued without hearing (“the spouse maintenance application”);
(b)An application for a declaration that there was no de facto relationship between the parties by Mr Peckham (“the threshold application”);
(c)An application by Ms Caughey for Mr Peckham’s solicitor to be restrained from acting (subsequently withdrawn) (“the injunction application”);
(d)An application for Campton J to recuse himself (“the recusal application”);
(e)Case management hearings relating to an affidavit which was filed by the wife and ultimately withdrawn by her (“the sealed affidavit case management hearings”)
(f)An application filed 22 March 2022 relating to Ms Caughey’s non-compliance with trial directions (costs of Mr Peckham reserved) (“the first case management hearing”);
(g)An application filed 8 June 2022 relating to Ms Caughey’s non-compliance with trial directions (costs of Mr Peckham reserved) (“the second case management hearing”);
(h)An application for the court to accrue jurisdiction to hear and determine proceedings for defamation by Mr Peckham (“the accrued jurisdiction application”); and
(i)The final property adjustment proceedings (“the final hearing”).
BACKGROUND
On 13 September 2023 I made final orders. Those orders adjusted the parties’ interests in property such that each party retained his or her own assets, liabilities, superannuation interests and financial resources and the only jointly owned asset was transferred to Mr Peckham simultaneously with his discharge of the mortgage and a payment to Ms Caughey of $345,000.
Some background concerning the acquisition and value of that jointly owned asset is necessary. In my reasons for judgement (Caughey & Peckham (No 4) [2024] FedCFamC1F 197) I found:
6.The parties own a property at [M Street], [Town L] (“the [Town L] property”) which was purchased [in late] 2018 as tenants in common in equal shares.
7.The purchase price was [over $1,700,000]. In addition, stamp duty of $61,000 was payable on the transaction. The applicant contributed the sum of $86,250. The respondent contributed the sum of $400,000. The parties obtained a loan for the remainder of the purchase price in the sum of $1,300,000. The loan repayments (which are in the sum of $1,950 per week at present) have been met by the respondent alone.
8.In addition, the respondent says he has expended funds on improvements and maintenance and has met the outgoings. He provides an estimate of those expenses in the sum of $812,500.
9.The Respondent wishes to retain the property and to that end seeks orders that the applicant transfer to him her interest in the [Town L] Property.
10.The property is currently valued by the single expert at $3,600,000 and is subject to a mortgage in the sum of $1,299,858.
11.The equity in the [Town L] Property is $2,300,142.
…
46.I have set out the history in respect of this property acquisition above and those facts were not in contest.
47.One of the matters I am considering is the contribution the applicant made as a joint mortgagee. In Calverley v Green (1984) 155 CLR 242 the High Court was considering whether a case where both parties had been joint mortgagees but only one party had paid from their own funds towards the purchase led to a situation where the party who had made no direct financial contributions held the property on resulting trust for the party who had made direct financial contributions. The situation in this case is different in so far as the applicant did make a contribution to the purchase price and both parties acknowledge that I am not dealing with a situation of resulting trust but rather one where I am obliged to assess the parties’ actual financial and non-financial contributions in the context of a de facto relationship.
48.Nonetheless it remains the case that one of the contributions I am considering is the applicant being a joint mortgagee. The bank provided the funds on the basis that both parties were liable at law for the repayment of principle and interest in accordance with the terms of the mortgage. The applicant has remained liable from the time of the mortgage to the time of trial. Against that the respondent has had an identical responsibility and in addition has met all mortgage payments, leading to the inevitable conclusion that his contributions have been substantially greater both because of the initial disparity in the contributions to the purchase price and because of the repayments made subsequently, accepting that the mortgage balance remains at about the same amount as it was when the loan was first advanced.
49.Somewhat more controversial was the weight to be attached to the funds which the respondent has spent on improvements to the property. There is no question that the parties intended to undertake work on the property after acquisition. The relationship broke down about the time of separation and accordingly the parties were not able to put those plans into effect together.
50.The respondent’s affidavit estimates the value of that work at $812,500. The applicant was critical of the lack of supporting documentation. I accept that all work which has been undertaken has been undertaken at the respondent’s expense. I accept the respondent’s evidence that the payment for work undertaken has come from his bank account which was discovered (albeit belatedly). Against that the applicant applied funds from her mother to some outside gardening tasks and the installation of a security system.
51.There is no evidence by which I could be satisfied that any increase in value is attributable to work undertaken as opposed to the effluxion of time and movement of the market. Accordingly, while I regard the work paid for by the respondent as a post-separation contribution, I am unable to make any finding as to whether it has contributed to an increase in the value of the [Town L] Property. For this reason while I acknowledge that the applicant experienced frustration arising from the lateness of the discovery and disclosure I am not of the view that it is material to the ultimate outcome.
The ultimate orders resulted in a division of the net equity in the joint property so as to provide that the Ms Caughey received 15 per cent or $345,000 and Mr Peckham the balance (85 per cent).
THE LAW
These applications are governed by the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”). Section 117(1) provides that each party should ordinarily meet his or her own costs. I am permitted to depart from that position by operation of s 117(2), which refers to making such order as the Court considers just and departing from the position established by s 117(1) where “there are circumstances that justify” that approach. In approaching the task, I am required to have regard to the matters in s 117(2A). The establishment of one of the matters in s 117(2A) does not require me to depart from the usual rule since the discretion to order or refuse to order costs remains. Costs may be ordered if “just in all the circumstances”: Hogan and Hogan (1986) FLC 91-704.
In Colgate-Palmolive Co v CussonsPty Ltd (1993) 46 FCR 225 at 233 (“Colgate-Palmolive”), Sheppard J stated:
4.…The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5.Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 ay 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. 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.
In Prantage & Prantage (2013) FLC 93-544 the majority (Thackray and Ryan JJ, with whom Murphy J agreed) held that the principles set out by Sheppard J in Colgate-Palmolive were applicable to costs applications in this Court.
CONSIDERATION
Ms Caughey seeks an order for legal costs for the period 7 November 2019 to 25 March 2024. This is an order from the date on which she made an offer of settlement until the conclusion of the trial.
As set out in Mr Peckham’s written outline of argument, he seeks an order that Ms Caughey pay his costs of and incidental to the following:
(a)The Applicant’s unsuccessful application to restrain the Respondent’s solicitor from acting for the Respondent, heard on 29 October 2019.
(b)The Case Management hearing on 8 November 2019 in respect of the affidavit material filed by the Applicant on 5 November 2019 and the subsequently aborted fixed trial for 12 and 13 November 2019; together with all costs relating to the review, consideration and listing of the matter to strike out her filed primary affidavit of evidence.
(c)The respondent’s application in a proceeding dated 25 March 2022 relating to the Applicant’s late filing of consolidated trial affidavit;
(d)The Respondent’s application in a proceeding dated 8 June 2022 relating to the Applicant’s late filing of tender material;
(e)The Applicant’s amended application for final orders pursuant to section 90SM of the Family Law Act filed 16 November 2022.
It is necessary to understand a number of matters that bear on evaluation of the competing costs applications:
(a)The parties’ respective final and interlocutory applications;
(b)Offers of settlement;
(c)Value of the jointly owned asset at the time of offers of settlement;
(d)Legal fees expended before and after the offers of settlement; and
(e)The impact of post-separation contributions on the assessment of entitlements.
I will consider one general matter which bears upon each of the discrete applications before turning to consider any other matters peculiar to the individual applications.
The financial circumstances of each of the parties to the proceedings
Counsel for Ms Caughey submitted that the financial disparity between the parties to these proceedings was a relevant consideration under s 117(2A)(a). I accept that the net assets and superannuation of Ms Caughey at trial (excluding the jointly owned property) were between $1,532,045 and $2,391,670. In contrast the net assets and superannuation of Mr Peckham at trial (excluding the jointly owned property) totalled between $16,031,031 and $23,521,187 before consideration of financial resources.
This financial disparity, it was submitted, allowed Mr Peckham to pursue interlocutory applications (which were ultimately determined against him). In contrast it was submitted that Ms Caughey was required to compromise applications to save costs. The financial capacity to engage in litigation which had the effect of prolonging the proceedings with attendant cost was tied to Mr Peckham’s superior resources.
I accept that submission. It is consistent with the principles discussed by Murphy J in Fevia v Carmel-Fevia (Costs) [2010] FamCA 143 at [34]:
In the context of an application for costs, the respective capacity for each of the parties to bear the financial risk of litigation is, in my view, directly relevant not only to their respective financial circumstances per se but also to the disparity in those financial circumstances.
By the same token the disparity in the parties’ financial circumstances does not preclude me from ordering costs against Ms Caughey.
The applications and their disposition
It is notoriously difficult to exercise the discretion conferred by s 117 in respect of an application which was heard and determined by another judicial officer.
Application to restrain Mr Peckham’s solicitor from acting
On 29 October 2019 a judicial officer had an application before them to restrain Mr Holmes from acting for Mr Peckham. Ms Caughey tendered a copy of the affidavit which had been prepared on her behalf outlining the factual circumstances which she said gave rise to the application.
I was not the judicial officer on 29 October 2019. Counsel for Ms Caughey submitted that she withdrew her application and the matter was listed for determination of the threshold hearing on that day (12 and 13 November 2019). No party provided me with any reasons for judgment made that day or any orders made that day in support of these respective positions. Counsel for Ms Caughey asked me to find that the application was bona fide (on the basis of Ms Caughey’s evidence). Counsel for Mr Peckham inferentially asked me to take into account that Ms Caughey was wholly unsuccessful in respect of that application.
On the basis of the material before me I am unable to find that either party should have the costs of that application.
Sealed affidavit case management hearings
On 5 November 2019 Ms Caughey filed an affidavit which dealt with events on what I ultimately found was the date of the parties’ final separation. Mr Peckham made an application for that affidavit to be sealed. Ms Caughey consented to the affidavit being sealed. While counsel who appeared for Mr Peckham filed submissions which appear to link this issue to the vacation of the hearing dates, I accept that the hearing dates were vacated because neither party believed the matter would be confined to the two days which had been allocated.
I accept that it was conduct on the part of Ms Caughey (the filing of affidavit) which precipitated the application for its sealing. However, two matters convince me that this is not a justifying circumstance to persuade me to depart from the usual rule in respect of costs concerning this application. The first is that Ms Caughey consented to the affidavit being sealed. The second is that at the hearing before me on 1–5 August 2022 Queens Counsel appearing for Mr Peckham effectively unsealed the affidavit in aid of a submission that I would find Ms Caughey lacking in credit. I made the following findings in my determination (Caughey & Peckham (No 2) [2022] FedCFamC1F 670):
132.[Mr Peckham] asked that I make a finding about what occurred on 4 January 2019. [Ms Caughey] contended that a finding was unnecessary. The agreed facts permit me to conclude that [Ms Caughey] walked in and unexpectedly found [Mr Peckham] with a woman. This precipitated the parties’ continued estrangement and resulted in their eventual separation.
133. [Mr Peckham] says a finding is necessary because it goes to the credit of [Ms Caughey]. Given the content of exhibits C and D, I would not make a credit finding adverse to [Ms Caughey] about the events of 4 January 2019, and I decline to otherwise make a finding about what occurred on that day as it is unnecessary in the assessment of the evidence concerning the breakdown of a relationship or otherwise.
I therefore decline to find justifying circumstances to depart from the usual rule.
First case management hearing
I accept that the relisting of the matter on 25 March 2022 was as a consequence of Ms Caughey’s failure to comply with the court’s directions. I reserved Mr Peckham’s costs. Notwithstanding the financial disparity between the parties, Mr Peckham should have his costs of the relisting at scale.
Second case management hearing
I accept that Mr Peckham’s application in a proceeding dated 8 June 2022 was necessitated by Ms Caughey’s failure to comply with the court’s directions. I reserved Mr Peckham’s costs. Notwithstanding the financial disparity between the parties, Mr Peckham should have his costs of the relisting at scale.
Costs of the threshold application
Counsel who appeared on behalf of Mr Peckham on this application for costs pointed to the representation made on behalf of Ms Caughey in her Initiating Application to the effect that the parties had commenced cohabitation in 2014. I accept that this was not Ms Caughey’s evidence either at the threshold hearing or on the application for substantive relief.
The application was concerned with one issue – whether the parties’ relationship satisfied the criteria in the Act such as to warrant the making of a declaration. In that regard, Mr Peckham was wholly unsuccessful.
Costs of the application for accrued jurisdiction
On 22 June 2023 I heard and determined an application by Mr Peckham to join proceedings for defamation to the substantive property relief application as an exercise of this Court’s accrued jurisdiction.
I dismissed the application. Mr Peckham was wholly unsuccessful. Ms Caughey engaged a barrister with experience in defamation law to meet Mr Peckham’s application.
Costs of the application for substantive relief
In effect, both parties seek their costs of the application for final relief.
Ms Caughey submits that the offer which she made at the commencement of the proceedings is relevant. She also says the failure by Mr Peckham to make any offer until the month prior to the final hearing is a relevant matter.
Offers of settlement
Ms Caughey made an offer of settlement on 7 November 2019. That offer required Mr Peckham to make a payment to Ms Caughey of $250,000 at which time Mr Peckham would refinance the mortgage secured over the jointly owned property and Ms Caughey would transfer her interest in the property to Mr Peckham.
The offer was open until 11 November 2019. It was not accepted. There is no evidence before me to suggest that there was a response to the offer.
The offer was made five months after the Initiating Application was filed and before substantial legal fees had been incurred by either party.
Ms Caughey’s legal fees as at 18 March 2024 were $226,415 and Mr Peckham’s $301,364. The evidence does not permit a finding as to the amount accrued as at the date of offer but the substantial hearings occurred in 2023 and 2024 so it can be safely assumed that the majority of fees post-date the offer of settlement.
It is not apparent on the evidence what the value of the jointly owned property was at the date of offer. What is known is that it was purchased in late 2018 and the parties had contributed equity of $86,250 (Ms Caughey) and $400,000 (Mr Peckham) to the over $1,700,000 purchase price. If there was no increase in value between purchase and the date of settlement, then the parties’ contributions represented the available equity.
Ms Caughey’s offer of settlement must be placed in that context. I do however accept that, had Mr Peckham accepted the offer, then he would be in a better financial position vis-à-vis these proceedings.
I can also find that Mr Peckham’s knowledge and his representation by solicitor and counsel throughout the life of these proceedings mean I am satisfied that, notwithstanding the offer was only open for a short period, he would have appreciated sufficient of the legal and financial consequences of failing to accept the offer at this stage.
A single expert valued the parties’ jointly owned property at $3,600,000. This represented an increase in value since the date of purchase of $1,900,000. The increase came with holding costs (which were met almost exclusively by Mr Peckham) but Ms Caughey was also without access to her funds which had been contributed to that purchase during the period and continued as a joint mortgagee. It stood to reason that Ms Caughey’s entitlements in a dollar value would have increased.
In that context, Mr Peckham made an offer of settlement on 13 February 2024 which if accepted would have seen Ms Caughey receive $400,000 in exchange for discharge of mortgage and transfer of her interest in the jointly owned property. As is plain the ultimate order provided that Ms Caughey receive $345,000. Had she accepted Mr Peckham’s offer then Ms Caughey would have received $55,000 more than I ordered and not been liable for her legal fees for the hearing which took place on 18–19 March 2024.
On balance, while I do not accept that the making of the offer by Mr Peckham effectively at the heel of the hunt should entitle him to recover costs, I do think that it should disentitle Ms Caughey to costs from the date of that offer.
Quantum
Ms Caughey sought indemnity costs.
The basis for indemnity costs was articulated as being twofold:
(1)Ms Caughey should not be out of pocket in respect of the determination of a simple factual issue; and
(2)Mr Peckham, properly advised, ought to have known that the court would find the relationship exceeded two years.
I am not persuaded that the first basis is a proper basis for the award of indemnity costs in a jurisdiction governed by a statute which provides that each party ordinarily bear his or her own costs.
As to the second basis, while I self-evidently found in favour of Ms Caughey in respect of this threshold issue, I did so in circumstances where I accept that Mr Peckham may not have subjectively understood himself to have been in an de facto relationship until a time much later than I found and accordingly, while I accept it was a finding of fact (as opposed to the exercise of a discretion), I accept that alternate outcomes may have been available before the evidence had been tested.
I therefore decline Ms Caughey’s application for costs on an indemnity basis.
Conclusions
I have indicated that there are two discrete case management hearings (and attendant applications in a proceeding) for which Mr Peckham should have his costs at scale.
I otherwise determine that Ms Caughey should have her costs from the date of her offer of settlement (excluding the applications referred in the immediately preceding paragraph and the 29 October 2019 hearing) until the date of Mr Peckham’s offer of settlement on a party/party basis as agreed or taxed. That will self-evidently include the costs of the threshold hearing and the costs of the accrued jurisdiction hearing.
Neither party sought a sum certain or provided me with any information to allow make to make a reasonable assessment of the costs payable by the other.
Accordingly, I am not in a position to fix costs (except as I have indicated according to scale).
The making of orders for costs will, accordingly, require the parties to agree in respect of costs or in the absence of agreement to have costs assessed.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie. Associate:
Dated: 25 June 2024
0
8
1