Chiodo and Shaw (No 2)
[2011] FamCA 1061
•16 December 2011
FAMILY COURT OF AUSTRALIA
| CHIODO & SHAW (NO 2) | [2011] FamCA 1061 |
| FAMILY LAW – COSTS |
| Family Law Act (1975) (Cth) |
| Chiodo & Shaw [2011] FamCA 639 Colgate-Palmolive Company and Anor v Cussons Pty Ltd (1993) 46 FCR 225 Fraser v Moedt (unreported, 30 October 1997) Gallo v Dawson (1990) 93 ALR 479 Kohan and Kohan (1993) FLC 92-340 Munday & Bowman (1997) FLC 92-784 Nemeth & Nemeth (1987) FLC 91-844 Oriolo and Oriolo (1985) FLC 91-653 Yunghanns & Yunghanns (2000) FLC 93-029 |
| APPLICANT: | Mr Chiodo |
| RESPONDENT: | Ms Shaw |
| FILE NUMBER: | PAF | 3138 | of | 1987 |
| DATE DELIVERED: | 16 December 2011 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan J |
| HEARING DATE: | By way of written submissions |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | No submissions filed |
| COUNSEL FOR THE RESPONDENT: | Mr Jackson |
| SOLICITOR FOR THE RESPONDENT: | Helliars Solicitors |
Orders
That Mr Chiodo pay eighty per cent (80 per cent) of the costs incurred by Ms Shaw in relation to proceedings commenced by him in this Court on 3 August 2005.
That the quantum of costs shall be assessed and calculated on an indemnity basis.
Interest on the amount assessed is payable at the applicable rate set out in the Family Law Rules 2004 commencing from 28 days after the costs have been assessed.
IT IS NOTED that publication of this judgment under the pseudonym Chiodo & Shaw (No 2) is approved pursuant to the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: PAF 3138 of 1987
| Mr Chiodo |
Applicant
And
| Ms Shaw |
Respondent
REASONS FOR JUDGMENT
Before the court is an application by Ms Shaw that her former husband, Mr Chiodo, pays legal costs which she incurred as the respondent in proceedings he commenced in August 2005. The substantive proceedings involved a determination of whether to discharge or enforce child maintenance, spousal maintenance and property settlement orders made pursuant to the Family Law Act 1975 (Cth) (“the Act”) in 1990.
On 1 August 2011, I dismissed Mr Chiodo’s application and made orders in favour of Ms Shaw which enforced the 1990 child maintenance, spousal maintenance and property settlement orders. Mr Chiodo was ordered to pay $66,897.13 by way of enforcement of the 1990 child maintenance order, $102,771.43 by way of enforcement of the 1990 spousal maintenance order and $87,810.47 by way of enforcement of the 1990 property settlement order plus interest.
Background Facts
The background facts of this case are detailed in paragraphs 27 to 62 in the substantive judgment. Accordingly only the salient facts will be repeated here.
The parties married in 1972. Their children were born in 1972, 1975, 1978, 1980 and 1983 and thus are all over the age of 18.
In March 1987, the parties separated but continued to live in the same house. Physical separation occurred later that year.
On 15 August 1990, after a defended hearing, final child and spousal maintenance and property settlement orders were made. Amongst other orders made on that day, Mr Chiodo was ordered to pay Ms Shaw $40,000.00 by way of property settlement, $50.00 per week per child for child maintenance and $150.00 per week for spousal maintenance.
An appeal by Mr Chiodo against these ordered was finalised in March 1991. Mr Chiodo’s obligations under the orders did not change as a result of that appeal.
On 16 April 1991, Mr Chiodo transferred his title in a property at G Street Suburb 1 (“G Street”) to his brother and his interest in L Pty Ltd (“L”) to his sister. Mr Chiodo’s brother simultaneously borrowed $195,000.00 from the National Australia Bank which was given to Mr Chiodo. A few days later, Mr Chiodo left Australia.
Between 15 August 1990 and 25 April 1991, Mr Chiodo paid Ms Shaw $30.00 per week per child in child maintenance. On 25 April 1991 the payments ceased.
Between 25 April 1991 and 2002, Mr Chiodo lived in Country E, with only a couple of visits to Australia during that time.
On 12 November 2002, Mr Chiodo returned to Australia.
In November 2002, Mr Chiodo’s brother passed away and a dispute arose with his brother’s wife in relation to Mr Chiodo’s interest in G Street. Mr Chiodo commenced proceedings in the Supreme Court of NSW in relation to G Street and L.
In 2003, Ms Shaw married Mr Shaw.
On 21 November 2003, Mr Chiodo returned to Country E where he remained until he returned to Australia on 21 November 2004. Mr Chiodo has lived here ever since.
In April 2005, Mr Chiodo lodged a caveat with the NSW Land Titles Office to protect his claimed half interest in G Street.
On 3 August 2005, Mr Chiodo commenced these proceedings.
On 31 August 2006, Mr Chiodo issued a Statement of Claim in the Supreme Court of NSW against his late brother’s wife and L.
On 17 December 2008, the Supreme Court ordered that L be wound up.
Judgment was delivered by the Supreme Court on 28 April 2010. In summary, Mr Chiodo was declared entitled to a half interest in G Street.
This matter came before me on 6 June 2011 and, as I noted above, I delivered judgment on 1 August 2011: Chiodo & Shaw [2011] FamCA 639 (“the substantive judgment”).
Costs Submissions
When the substantive judgment was delivered and orders made, Ms Shaw made an oral application that Mr Chiodo pays her costs in relation to which written submissions were received from her on 24 October 2011. Order 11 of the 1 August 2011 orders provided that she file and serve any submissions within 28 days. Thus her submissions were due by 29 August 2011. No explanation was provided as to why her submissions were filed late. However, no submissions were filed at all by Mr Chiodo and thus no issue was raised by him about the late filing of submissions. The nature of the proceedings, the reasonably complex matters traversed in the Court’s reasons for judgment and the overall interest of justice makes it appropriate that an extension of time for the filing of cost submissions from Ms Shaw is given. (Gallo v Dawson (1990) 93 ALR 479.)
Order 12 of the 1 August 2011 orders gave Mr Chiodo 21 days to file and serve written submissions in reply. Thus his submissions were due by 14 November 2011. Because at that date the Court had not received written submissions in reply from Mr Chiodo or on his behalf, a letter was sent to him on 29 November 2011 which confirmed that the Court had received written submissions from Ms Shaw but none in reply from him. Mr Chiodo was informed that if he had already provided the Court with submissions a copy of those submissions could be emailed directly to my associate within seven days. Nothing was received from Mr Chiodo.
Discussion
Ms Shaw seeks an order for costs calculated on an indemnity basis.
Section 117(1) of the Family Law Act (1975) (“the Act”) is the relevant provision concerning costs and provides the general rule that that subject to s 117(2), s 117AA, s 117AB and s 118, each party to proceedings under the Act shall bear his or her own costs. Ms Shaw did not submit that s 117AA, s 117AB or s 118 are relevant. If there are circumstances that justify it in so doing, the Court may make an order for costs pursuant to s 117(2) as the Court considers just.
In considering what order, if any, should be made, whether on a party/party basis or on an indemnity basis, I am required to consider those matters set out in s 117(2A)(a)-(g) of the Act, in so far as they are relevant.
Subsection (a) is concerned with the parties’ financial circumstances.
Counsel for Ms Shaw, in his submissions, refers to the findings made in the substantive judgment with respect to Ms Shaw’ financial circumstances. In that regard, I made the following findings:
87.Turning then to the respondent’s circumstances from when the 1990 orders were made. At that time she was in receipt of a Sole Parent Benefit. As a consequence of the property settlement orders, she retained the former matrimonial home at [Sydney Suburb 3], its contents and a car. Between 1990 and 1995 the respondent continued to receive a Sole Parent’s Benefit which from about 1994 until 1999 included a carer’s allowance (in relation to her mother). During these years her financial circumstances were so difficult she regularly obtained charitable assistance for food, car repairs, school clothing plus vouchers for electricity and water. From time to time her Parish Priest financially helped her. Her church support group gave her money for necessary living expenses and on several occasions undertook home repairs. Arrangements were made by the respondent with the children’s private school for a waiver of school fees, subject only to a token fee for one girl in high school.
88.The respondent obtained part-time work in a school canteen and from 1993 she worked two or three nights per week at a sheltered workshop. The elder children cared for their younger siblings whilst she was at work. At times she took in ironing and for about three months in 1995 three nights a week she worked at a garage. At the garage, the respondent was held up at gunpoint as a consequence of which she understandably resigned. In relation to the garage incident the respondent received $18,000.00 compensation. This money was used to purchase a second hand car for $10,000.00, $4,000.00 for her mother’s funeral and to take [D] to visit relatives in [Country F].
89.Between 1995 and 2003 the respondent worked as a process worker.
90.Since her marriage in 2003 the respondent has been employed by her husband from who she presently earns approximately $950.00 per fortnight.
…
94.As was mentioned earlier, the respondent sold [Sydney Suburb 3] to [D] in 2004 for $475,000.00. The sale proceeds have previously been discussed. It is apparent that between 1990 and 2004 the respondent increased her loan from $10,000.00 to $40,000.00, which funds I infer were used to meet her and the children’s necessary expenses. Although the respondent does not specifically identify how much of this she needed to support herself compared to the children’s expenses, because the applicant waited so many years before he commenced these proceedings it would be unrealistic and inappropriate to expect her to produce this type of evidence.
…
96.The respondent’s current circumstances are set out in her Financial Statement filed on 21 April 2011. Her weekly income comprises $510.00 salary and $17.00 interest. Her total weekly personal expenditure is $261.00. This comprises $55.00 tax, $46.00 superannuation, $130.00 rates (unit levies) and $30.00 on credit cards. Her husband has an average weekly income of $900.00 but does not meet her expenses. She discloses property which comprises her half interest in [B Street] worth $240,000.00, savings of about $24,000.00, a 2003 motor vehicle worth $6,000.00 and household contents worth about $4,000.00. Her superannuation is worth $75,000.00 and she has $2,100.00 outstanding on a credit card. Although she did not mention it in her Financial Statement, the respondent acknowledged [D] owes her $125,000.00 which she will receive in 2013. Her husband’s share in [B Street], I infer is worth the same as hers. He is the principal in his own accounting practice and I infer has a good income.
Ms Shaw refers the Court to paragraphs 83 and 86 of the substantive judgment in relation to Mr Chiodo’s financial circumstances. With respect to his financial circumstances I made the following findings:
83.The applicant still has a 50 per cent interest in [G Street]. I accept the opinion expressed by [Mr C] that [G Street] is worth $1.65 million. Although Order 4 of the Supreme Court orders refers to the consent of any mortgagee being sought by the applicant’s sister-in-law’s estate (“the estate”) to the transfer there is no evidence of a mortgage or that the applicant’s half share would be devalued thereby. My point being the effect of the 2 July 2010 Supreme Court orders is that the applicant obtained an interest in [G Street] worth about $825,000.00.
…
86.Because the applicant failed to give full and frank disclosure I do not know the likely value of his inheritance. In addition to [W Street, Sydney Suburb 2] this may well include property she owned in [Country E]. I infer the applicant failed to disclose these and other matters because he believed disclosure would be to his disadvantage and advantageous to the respondent’s claim. I am satisfied the applicant is likely to inherit a not insignificant sum from his late mother’s estate.
Counsel for Ms Shaw also relied upon paragraph 85 of the substantive judgement in which I found that “[t]he close relationship which existed between the applicant and his late mother, him being her sole surviving child and her being a widow at the time of her death persuades me that it is reasonably likely the applicant is entitled to [W Street, Sydney Suburb 2]”.
In comparing the parties current financial circumstances, in the substantive judgment I made the following comments at paragraph 112:
… [Ms Shaw’] husband has a good income, they own a home, she is employed and has savings and a car and will receive about $125,000.00 when [D] pays her the balance due on [Sydney Suburb 3]. Unlike the applicant they are both employed. The applicant’s net asset position has already been discussed and it is noted he does not appear to have good future employment prospects. Even if I accepted the respondent’s current financial circumstances are superior to the applicant’s, he is not penniless and he divested assets and failed to avail himself of earning capacity so as to avoid enforcement of his maintenance obligations. In other words his current financial situation is the direct result of this course of action. Thus, even if I accepted his financial circumstances were somewhat more limited than are the respondent’s it would neither be right nor proper for this to be elevated to just cause.
Counsel for Ms Shaw submitted that “There is a marked contrast with the financial circumstances of the Husband, which is clearly much stronger than that of the Wife’s” (submissions, paragraph 13). With respect, based on the findings I made in the substantive judgment, I did not conclude that Mr Chiodo’s financial circumstances are “clearly much stronger” that those of Ms Shaw. Although Mr Chiodo’s present situation is largely of his own making and he has not insignificant assets, he was ordered to pay Ms Shaw in excess of $250,000 in the 1 August 2011 orders and he does not have good future employment prospects. The application of the subsection is moot.
Neither party is in receipt of a grant of legal aid (subsection (b)).
Subsection (c) requires me to consider the conduct of the parties to the proceedings, including but not limited to their conduct in relation to pleadings, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters.
In dealing with this subsection, counsel for Ms Shaw relied upon Oriolo and Oriolo (1985) FLC 91-653 in which the Full Court of the Family Court held that as a result of a husband’s failure to give full and frank disclosure of his financial circumstances he should pay his former wife’s costs of her investigation of his financial circumstances. Counsel for Ms Shaw also referred to the decision in Nemeth & Nemeth (1987) FLC 91-844 in which the Full Court of the Family Court held that a failure to be completely open and forthcoming about financial affairs should always place that party at risk in relation to a costs order.
There are numerous incidences recorded in the substantive judgment that illustrate Mr Chiodo’s poor record with regards to the disclosure of financial documents and information connected with this matter.
I observed at paragraphs 53 and 54, that although in April 2005, Mr Chiodo lodged a caveat with the NSW Land Titles Office to protect his claimed half interest as tenant in common in G Street, he did not make reference to this claimed interest when he commenced these proceedings a few months later. At that time he was legally represented and I infer informed of his disclosure obligations. It is beyond dispute that Mr Chiodo’s obligation to give full and frank disclosure (r 13.04 Family Law Rules 2004) required him to reveal the interest he claimed in G Street.
I also noted at paragraph 84 that “[i]t is consistent with the [Mr Chiodo’s] divestment of assets in 1991 and failure to disclose the interest he claimed in that property that he delays registration of the legal interest in G Street until these proceedings are finalised” and at paragraph 85 that Mr Chiodo “was served with a Notice to Admit Facts (and Authenticity of Documents) to which he did not respond … A series of propositions were put to the effect that he is the primary beneficiary of his late mother’s estate. Requests made by the respondent for production of his late mother’s Will went unanswered…”
Moreover, at paragraph 86, I noted that “because [Mr Chiodo] failed to give full and frank disclosure I do not know the likely value of his inheritance. In addition to W Street, Sydney Suburb 2 this may well include property she owned in Country E. I infer [Mr Chiodo] failed to disclose these and other matters because he believed disclosure would be to his disadvantage and advantageous to the respondent’s claim”.
There were also inconsistencies on the part of Mr Chiodo in relation to the sum of $195,000. It appeared that Mr Chiodo transferred his interest in the property in G Street to his brother for a sum of $195,000. As was noted in the substantive judgment and as was submitted on behalf of Ms Shaw, how Mr Chiodo used these funds was controversial with four different versions presented by him to this and the Supreme Court of NSW (paragraphs 74 to 76 of the substantive judgment).
As was mentioned earlier, the question of Mr Chiodo’s interest in G Street and other matters concerning L were the subject of proceedings in the Supreme Court of New South Wales initiated by him in 2006. The Statement of Claim was attached to Ms Shaw’ affidavit filed 21 April 2011. In his Statement of Claim, Mr Chiodo provided evidence that was contrary to the evidence given by him to this Court (paragraph 75 substantive judgment). In relation to this I made the following comments at paragraph 76:
If the applicant’s representations in the Statement of Claim are correct and the reason he transferred his interest in [G Street] was to raise $195,000.000 for his use secured against that property, it is difficult to understand why he and his brother engaged in such convoluted transactions. It would have been less risky for the applicant and his brother for these funds to be borrowed by the applicant and repayment secured against his interest. Of course, the approach they adopted meant that in the event he defaulted on his obligations under the 1990 orders, enforcement by the respondent against [G Street] became far more complicated, if not impossible. Particularly with him out of the country and her rearing five children alone on welfare benefits. Lest it be thought the respondent could enforce against the applicant’s share in [L], it will be recalled his shareholding had been transferred to his sister-in-law.
It is also important to note that the substantive proceedings were initiated by Mr Chiodo in 2005. As counsel for Ms Shaw submitted, Mr Chiodo pursued this application fully aware that he had not complied with those orders. Furthermore, Mr Chiodo decided partway through the hearing not to participate, walking out of the proceedings on the day of the trial.
These matters weigh heavily in favour of costs (including on an indemnity basis) in favour of Ms Shaw.
Subsection (d) relates to whether the proceedings were necessitated by the failure of a party to the proceedings to comply with orders. Counsel for Ms Shaw submitted that there is an “uncomplicated nexus” between the lack of compliance by Mr Chiodo with the 1990 orders and the current proceedings; namely that the proceedings were necessitated by his failure to comply with the 1990 orders. I agree. There is no doubt that Mr Chiodo was aware of his obligations under the orders including his requirement to pay child and spousal maintenance. He chose not to. This choice has meant that Ms Shaw and the children were left in the parlous financial circumstances detailed in paragraph 87 of the substantive judgment. Counsel for Ms Shaw submitted that any successful application for enforcement that relates to a failure by the other party to comply with previous court orders should be a factor that is afforded considerable weight by the Court. Without expressing a view about whether this might be appropriate in other cases, it is manifestly appropriate here.
Subsection (e) requires the Court to consider whether any party to the proceedings has been wholly unsuccessful. As I have already noted Mr Chiodo’s initiated these proceedings and he sought to have the orders made on 15 August 1990 concerning child maintenance, spousal maintenance and property settlement discharged. He was entirely unsuccessful. He also failed to persuade the Court that Ms Shaw’s enforcement application was statute barred, that the “12 month rule” limited the Court’s ability to enforce money orders, or that the Court, in the exercise of its discretion ought not to enforce the 1990 orders.
Counsel for Ms Shaw also submitted that Ms Shaw was wholly successful in her application for enforcement. In summary she sought dismissal of her former husband’s application and that the Court enforces the 1990 child maintenance, spousal maintenance and property settlement orders. With this aspect of her application, Ms Shaw was wholly successful.
However, Ms Shaw also sought a large amount of interest in relation to arrears of child and spousal maintenance, as well as interest on the property settlement. There is discretion conferred by s 117B for the Court to make an order for payment of interest accrued on an unpaid property settlement. I found that the circumstances of this case justified an exercise of that discretion (see paragraphs 142-145 of the substantive judgment). However, there is no legislative foundation for Ms Shaw to claim interest on the 1990 child maintenance and spousal maintenance orders and thus this aspect of her application was dismissed. Therefore it can only be said that Ms Shaw was substantially successful in her application. Her substantial success is afforded significant weight.
Subsection (f) is concerned with offers to settle the proceedings and the terms of any such offer. There is no evidence of offers having been made.
There are no other relevant matters.
I am satisfied that Ms Shaw has established circumstances which justify making an order for some of her costs. I make this finding primarily based on Mr Chiodo’s conduct during the proceedings including his lack of disclosure, the fact that the proceedings were only necessary due to his non-compliance over many years with previous orders and the fact that Mr Chiodo was wholly unsuccessful.
As I have already noted, Ms Shaw seeks an order for cost on an indemnity basis. Where costs are sought on an indemnity basis and the costs incurred arise under a costs agreement, the terms of the agreement must be disclosed to the Court (Family Law Rules 2004, r 19.08(3)). The costs agreement between Ms Shaw and her lawyer are before the Court. It is unremarkable.
The Full Court of the Family Court in Kohan and Kohan (1993) FLC 92-340. said this of indemnity costs (at 79,614):
The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the court may make such order as the court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the Rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges …
Consequently, the court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.
…
Indemnity costs orders are still an exception in this and other jurisdictions. (citations omitted)
Counsel for Ms Shaw, in his submissions, relied on a number of authorities supporting the application for costs on an indemnity basis, including Fraser v Moedt (unreported, 30 October 1997), Yunghanns & Yunghanns (2000) FLC 93-029, Munday & Bowman (1997) FLC 92-784 and Colgate-Palmolive Company and Anor v Cussons Pty Ltd (1993) 46 FCR 225.
In Colgate-Palmolive v Cussons, Sheppard J identified some of the circumstances where the exercise of the discretion to award costs on an indemnity basis have been thought to be warranted, which included (at 234):
the making of allegations of fraud knowing them to be false and the making of irrelevant allegation of fraud…; evidence of particular misconduct that causes loss of time to the court and to other parties..; the fact that the proceedings were commenced or continued for some ulterior motive…or in wilful disregard of known facts or clearly established in law …; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; an imprudent refusal of an offer to compromise … and an award of costs on an indemnity basis against a contemnor.
Sheppard J then went on to stay that “[t]he 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.” (at 234).
In Yunghanns, the Full Court of the Family Court affirmed that the making of an indemnity order is “a very great departure from the normal standard” and, referring to the decision in Colgate-Palmolive v Cussons, went on the say that “the categories of circumstances which enliven the discretion to award indemnity costs are not closed” and reiterated Sheppard J’s comments noted above.
Conclusion
In addition to finding that the circumstances of this case justify the making of an order for costs in favour of Ms Shaw, I find that Mr Chiodo’s conduct with respect to this matter, including his patent and deliberate non-disclosure over an extended period of time and his decision to not fully participate in the hearing, is conduct that is of an “exceptional kind” as referred to in Kohan and the other authorities noted above. I therefore find it appropriate that Mr Chiodo pays a proportion of Ms Shaw’ costs on an indemnity basis. As to the proportion of costs that should be ordered, I take into consideration that Ms Shaw was not wholly successful and that her submissions concerning the quantum of maintenance owing was impossible to reconcile and had to be recalculated. In relation to the miscalculations and claim for interest the Court was informed that this involved considerable effort by Ms Shaw’ lawyers. I thus find it appropriate that Mr Chiodo pay 80 per cent of Ms Shaw costs on an indemnity basis.
It was submitted on behalf of Ms Shaw that the Court would quantify the award of costs. To this end, the costs agreement entered into between Ms Shaw and her lawyers was submitted as well as an itemised account of legal fees incurred by Ms Shaw to date. It details fees of $82,351.03. I note that the itemised account includes legal fees in relation the costs application that is the subject of these proceedings. Ms Shaw oral application for costs did not extend to costs of the costs application. I am not in a position to assess Ms Shaw’ costs and will order that they be assessed.
For these reasons I make the orders identified at the start of this judgment.
I certify that the preceding fifty seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 16 December 2011.
Associate:
Date: 16 December 2011
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