Chen and Chen and Ors

[2019] FamCA 88

FAMILY COURT OF AUSTRALIA

CHEN & CHEN AND ORS [2019] FamCA 88

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)

APPLICANT: Ms Chen

FIRST RESPONDENT: Mr Chen

SECOND RESPONDENT: Ms Quen

THIRD RESPONDENT: C Pty Ltd (ACN …)

FOURTH RESPONDENT: Quen Pty Ltd (ACN …)

FIFTH RESPONDENT: E Pty Ltd (ACN …)

SIXTH RESPONDENT: F Pty Ltd (ACN …)

SEVENTH RESPONDENT: G Pty Ltd (ACN …)

EIGHTH RESPONDENT: Mr A Chen

NINTH RESPONDENT: Mr B Chen

TENTH RESPONDENT: Mr C Chen

FILE NUMBER: MLC 5805 of 2016

DATE DELIVERED: 26 February 2019

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 7 February 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT:	Ms Smallwood
SOLICITOR FOR THE APPLICANT:	Taussig Cherrie Fildes

COUNSEL FOR THE FIRST RESPONDENT: Mr Wilson

SOLICITOR FOR THE FIRST 

RESPONDENT:

Bowlen Dunstan and Associates

COUNSEL FOR THE SECOND

RESPONDENT:

Mr Glick QC

SOLICITOR FOR THE SECOND

RESPONDENT:

Kenna Teasdale Lawyers

THIRD TO TENTH RESPONDENTS:

No Appearance

Orders

1. That the second respondent pay the costs of the wife arising out of the application to set aside the financial agreement on the basis that the wife’s costs are calculated on the scale set out in the Family Law Rules 2004 but only for senior and junior counsel and one solicitor for 11 days and of that 11 days, one-third of the wife’s costs shall be borne by the second respondent.

2. That the costs referred to in paragraph 1 of these orders be by agreement and failing agreement as assessed.

3. That the costs as assessed or agreed shall be offset against the order for costs made on 18 October 2018.

4. That the enforcement of the order for costs made on 18 October 2018 is stayed until the determination of the agreed on assessed costs order.

5. That the application in a case filed 2 November 2018 and the response thereto filed 23 November 2018 are otherwise dismissed.

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 Chen & Chen and Ors 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 MELBOURNE

FILE NUMBER: MLC5805 OF 2016

Ms Chen

Applicant

And

Mr Chen

Respondent

And

Ms Quen

Second Respondent

And

C Pty Ltd (ACN …)

Third Respondent

And

Quen Pty Ltd (ACN …)

Fourth Respondent

And

E Pty Ltd (ACN …)

Fifth Respondent

And

F Pty Ltd (ACN …)

Sixth Respondent

And

G Pty Ltd (ACN …)

Seventh Respondent

And

Mr A Chen

Eighth Respondent

And

Mr B Chen

Ninth Respondent

And

Mr C Chen

Tenth Respondent

REASONS FOR JUDGMENT

1. By an application in a case filed 2 November 2018, Sui Chen (“the wife”) sought costs against Ms Quen (“the second respondent”).  Those costs were said to be of, and incidental to, a “bifurcated hearing” and the sum sought is $217,629. 

2. In addition to the order for costs against the respondent, the wife sought that an order for costs against her made in favour of the second respondent for $54,782.87 be offset against any order that the court might now make in her favour.

3. Orders were also sought in the alternative to those.

4. By her response filed 23 November 2018, the second respondent sought orders that the wife’s application for costs be dismissed and that the applicant pay her costs associated with this particular application. 

5. Notwithstanding the proposed orders of both the wife and the second respondent, paragraph 5 of the second respondent’s written submissions read that the wife’s application should be dismissed or in the alternative, adjourned to the final hearing of the proceedings and in the alternative again, that if the wife’s application should succeed in any degree, that is any order for costs was made, that order should be made against the husband instead of the second respondent.  As an alternative again, the second respondent said that if the court was minded to make an order for costs it should be made against the husband and the second respondent jointly and severally.

6. It will be seen from those proposals that the second respondent has brought Mr Chen (“the husband”) into the costs dispute.

7. As a consequence, the husband filed a submission (but not an application for any orders) and he said that if the court was persuaded that both he and the second respondent should bear some responsibility for the wife’s costs, they should not be made jointly and severally because he anticipated that the second respondent would be likely to seek that the entire costs be borne by him.  He said any costs order made in the wife’s favour should be made against the second respondent to reflect that at all times, he had agreed with the wife’s application in the substantive proceedings.  I refer below to that substantive application.

8. He then sought an order that as between he and the second respondent, if any order was made, it should “permit the second respondent to recoup some of the wife’s costs paid by the second respondent in a fixed portion”.

9. The second respondent then filed a submission about her position and said that to the extent that the husband argued there was no formal application against him, I had given an indication at a hearing on 27 November 2018 that formal applications were not required.  That is correct.

10. The submission of the second respondent went on to say that in the alternative, any requirement to formally seek an order for costs should be dispensed with because there was no real disadvantage to the husband in terms of his awareness of the case against him.  That too is something with which I agree.

11. To be abundantly clear, the second respondent specifically sought an order for costs of and incidental to her response to the husband’s application to set aside the financial agreement which is what the substantive proceedings was about.

12. The wife replied to the second respondent’s submission by filing her own submission on 15 January 2019 in which she said that the second respondent’s position should be rejected because the wife had not sought (and did not seek) any orders of that nature and secondly, it was the second respondent but not the husband, who as the “contradictor to, and thereby resisted”, the wife’s application to set aside the financial agreement in the substantive proceedings.

13. Silent in all of this were the remaining respondents.  I shall refer to them in a moment.

14. This jockeying may sound confusing and require some explanation.  That explanation is drawn from the reasons for judgment published when the orders were made on 17 October 2018.  I said as follows:

    4.[Ms Chen] and [Mr Chen] were husband and wife and I understand and accept them to be estranged and separated. The wife is described as [Ms Chen] and the husband is already known as [Mr Chen]. 

    5.[Mr Chen] commenced a de facto relationship with [Ms Quen] while still not only married to [Ms Chen] but was living with her part of his time and raised three children to her. [Mr Chen] led a double life.

    6.From her de facto relationship with [Mr Chen], two children were born.  Both are under 18 years of age. At all times, [Ms Quen] knew of [Mr Chen’s] marriage to [Ms Chen] and the family [Mr Chen] had there.

    7.A group of companies constitutes the 4th to the 7th respondents.  They were joined because of property ownership rights and the need for orders to be implemented but they may have their own causes of action which are not immediately relevant.

15. I turn then to the costs applications and responses. 

16. In support of her application, notwithstanding I did not require such, the wife’s solicitor filed an affidavit deposing to the fact that his client (the wife) had incurred costs of $320,000 which included disbursements.  However, as I have already indicated, a costs order was made on 2 March 2017 against the wife which provided that both the wife and the husband be jointly and severally liable for the costs of the second respondent at that particular interlocutory hearing.  The court assessed those costs and there is now an order for $54,782.87.  That is the order that the wife seeks to either stay or off-set against any order that she might obtain against the second respondent. 

17. In the same affidavit, the wife’s solicitor set out that she sought, against the second respondent, a fixed amount of $217,629 which reflects the costs earlier mentioned off-set by the already assessed costs order.  That means, she seeks that the second respondent pay $162,846.13 based on a percentage reduction determined in the taxation but which is not relevant here.

18. The proposed order for costs and the amount sought by the wife do not reflect the scale of costs used by the court as set out in the Family Law Rules 2004. As such, the wife sought as an alternative that her costs as against the second respondent be assessed on a party and party basis and that the order that she pay the second respondent’s costs be stayed until that ultimate determination.

19. As with the wife, the second respondent filed an affidavit through her solicitor and he supported the application for orders most of which related to historical matters which could be described as argumentative.  Whilst I have taken those matters into account, I propose to determine the matter on the basis of the submissions prepared and filed. 

20. The determination of any costs dispute is governed by the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”). That provides that in proceedings under the Act, each shall bear their own costs unless there are circumstances that justify a departure from that principle. The Act does not define what circumstances justify a departure from the principle. If the court finds there are such circumstances, before making any order, it must take into account the matters set out in s 117(2A) of the Act.

21. The approach to the determination was not controversial.

22. As already indicated, the substantive proceeding before the court was an application by the wife to set aside a financial agreement executed between the husband and the second respondent.  The husband had conducted two personal relationships over a number of years and it was upon the conclusion of his de facto relationship with the second respondent that saw the preparation and execution of the financial agreement.  Ultimately, that agreement was set aside on the basis that the wife was not aware of it.  The success of the wife in setting aside the agreement however is not a basis by itself for making an order for costs.  I turn first to the respective costs applications. 

23. It was submitted by the wife that this was an “archetypical” case for the invocation of the Act to set aside an agreement having regard to the fact that there were a multitude of financial arrangements of which the wife was unaware and the transactions were being undertaken by her husband and the second respondent behind her back. In the proceedings, I found that the second respondent was certainly aware of the existence of the wife but chose to make the arrangements with the husband in a financial agreement which carries finality of obligations and she did so without the wife’s knowledge.

24. It was submitted that this was no “ordinary case”.  Counsel for the wife pointed to my observation that there was a complex web of entities, parties and financial transactions as well as a complex web of commercial interests.  That statement has to be seen in the context of the chronology in which the husband and the second respondent over a number of years were conducting financial transactions about which, the wife was oblivious.  The hearing traversed all of those years and took 11 days.  Normally, the assessment of whether a financial agreement should be set aside along with any consequential relief would be dealt with in one hearing but it was the second respondent’s application that the hearing be bifurcated having regard to the complexities of the matters.  It was on the urging of the second respondent that a determination might make the consequential relief much easier to determine, I granted the bifurcated order.

25. It was submitted that the financial circumstances of the parties justified the making of an order for costs here because, as the hearing showed, the wife was in a significantly inferior financial position to that of the second respondent having regard to what the husband had agreed to in the financial agreement.

26. It was then submitted on behalf of the wife that the second respondent had refused to provide discovery compromising her ability to conduct her case and that that was a basis to make an order for costs.  Finally, the wife submitted that she had been wholly successful or, that the second respondent had been wholly unsuccessful. 

27. It was then submitted that rather than have an assessment of the costs which had ironically been required in respect of the earlier order for costs, the court should fix the sum based upon the material provided by the solicitor for the wife.

28. As the primary focus of the wife’s application was on the second respondent, it is helpful to look at her submissions next.

29. The second respondent submitted that there was no proper basis for any order for costs and that the wife’s submissions were not based on a fair reading of the totality of the reasons for judgment.  It was submitted that the wife had had a level of awareness of the husband’s business involvements and that their adult children had a higher level of awareness.  Be that as it may, I do not consider that is a basis to make or deny an order for costs.  It was submitted on behalf of the second respondent that the husband as well as the adult children were as much a part of the conduct that gave rise to the ultimate application by the wife.  It was submitted, the second respondent could not have been acting alone yet the wife sought costs only against the second respondent. 

30. It was also submitted that the court was currently unaware of the full extent of the husband’s business ventures and just what interest the wife had.  It was submitted that all of that required a full hearing.  As such, it was said, the costs issue should await the final hearing.  I reject that as I will not be the trial judge and leaving the question of assessing justifiable circumstances to another judge is fraught with difficulty.

31. The rest of the submission was responsive to the matters raised by the wife. 

32. The fundamental question is whether this hearing could have been avoided or truncated by some concession on the part of the second respondent who alone stood out in defending the action of the wife.  The second respondent’s position was that the wife well knew of what the husband was doing and that the adult children were certainly acting in her interests.  I have rejected her position.

33. Ultimately, I found that there was no agency in the husband and wife relationship and that the actions of the second respondent in finalising the matters in the agreement as she did, bearing in mind she had legal advice throughout that period, was reckless. 

34. In my view, the second respondent should have conceded the wife’s case at least after the wife was cross-examined at length about what she knew and what she had done.  The cross-examination highlighted how the wife had been limited in her business activities.

35. Insofar as the role of the husband was relevant, I agree with the submission on behalf of the second respondent that he was a cause of this whole mess as was the second respondent but he at least conceded the wife’s position from the beginning of the proceedings.  However, I found him to be an unmitigated liar in whose evidence I could have little confidence and as such, his concession was of little value.  In addition, he had a motive to support the wife’s case.  As such, he contributed to the complexity of the case because his concession put the second respondent in the position where she had to challenge his evidence as part of her case.  However, her challenge of the husband went far beyond the agency question.

36. It was submitted on behalf of the second respondent that she should not alone be responsible for all of the wife’s costs because of the involvement of all of these other people.  There is some merit in that but it seems to me that the just way of looking at this is how much more complicated the conduct of the hearing was because of the position that she adopted.  Having regard to what I have just said, I consider she was entitled to challenge the evidence of the husband to some degree and that added to the duration of the case.  She was also entitled to challenge the evidence of the wife because there was no other way of finding out how much the wife knew of what was going on with the husband even if, as I have said, the second respondent acted recklessly by not approaching the wife to see whether there was any prejudice to her in what she was doing.

37. As such, the preparation for the 11 day hearing was necessary from all parties’ perspectives as each had legitimate arguments to put.  The hearing which took probably longer than it should have arose because of the long cross-examination of all witnesses.  However, the only criticism I could make justifying a departure from the principle that each party should pay their own costs is that the second respondent should have conceded the wife’s case had merit after she was cross-examined.  I find that her challenging of the husband’s evidence and also the evidence of the three adult children was appropriate having regard to how fundamental that was to corroborating the evidence of the wife.  In my view, it is just to make an order for costs against the second respondent but not for all as the wife sought.  I consider it just to make an order against the second respondent that she pay the wife’s costs for one-third of the 11 days of hearing.  I define those costs as senior and junior counsel and one instructing solicitor.  I do not propose to include in those costs any preparation or affidavit material or indeed, written submissions when the hearing concluded.

38. To the extent that the wife seeks costs on an indemnity basis, notwithstanding what I have said about the complexity of the case and the fact that the second respondent should have conceded the wife’s case at least after the wife and the husband and children were cross-examined, the law provides that indemnity costs are very much the exception and the court must take into account that parliament has made clear that there is a fundamental underlying principle that each party pay their own costs.  Despite the complexity, the circumstances here were not exceptional because the second respondent was entitled to challenge the truthfulness of the wife as there was no other way of her knowing just how much the wife knew other than what the wife had said in her affidavit.  I do not consider the second respondent’s approach was doomed to fail or that her case had no merit.  Much of this case as I have already said, revolved around credit and I found the wife truthful.  The second respondent was entitled to test that.

39. Accordingly, I would not make an order for indemnity costs.

40. It goes without saying that I have taken into account the submission by and on behalf of the husband but for the reasons just outlined, I see no basis to make an order for costs here to be carried jointly and severally or indeed shared by the husband.  The order I have made focuses on the way in which the second respondent conducted the litigation.

41. Having found there is a basis to make an order for costs, the provisions of

    
    

    s 117(2A) apply. There is a significant difference between the financial circumstances of the wife and that of the second respondent but I am unsure what the second respondent’s position will be after the order I have made is implemented and I have no concept of what financial position the wife will have after she ultimately resolves her alteration of property interests with the husband. Having regard to my understanding of the assets involved in this case, it is inconceivable that the wife will be impecunious. The financial disparity between the parties is therefore not something of much weight.

1. In respect of the conduct of the proceedings, I have already made observations about that but the particular provision in s 117(2A) must be that as a litigant. The very foundation for making an order for costs here arises out of the way in which the second respondent conducted the litigation.

2. The court is entitled to take into account any offers and as I understand it, there are none that are relevant here nor is there any legal aid consideration and nor should there be.

3. It is submitted on behalf of the wife that she had been wholly successful and by implication therefore, the second respondent was wholly unsuccessful.  Whilst I accept that, it is only a consideration as to the nature and extent of the order that should be made that is relevant.  As I have already indicated, I would not make an order for the whole of the proceedings against the second respondent.

4. The wife also sought an order that the payment of the costs in favour of the second respondent be stayed.  That order should be made here having regard to my uncertainty as to how much the costs will ultimately be.  In my view common sense should prevail here and there should be an offsetting of those costs.  The fact that there may very well be a disparity between the quantum of the two orders is in my view irrelevant having regard to the basis upon which each of the respective orders was made.

5. I propose therefore to grant the application of the wife for a stay of the enforcement of the earlier costs order until such time as the costs order is either agreed or assessed arising out of the present application and that the respective orders be then offset one against the other. 

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 26 February 2019.

Associate: 

Date:  26 February 2019