Connor & Oswald

[2013] FamCA 101

FAMILY COURT OF AUSTRALIA

CONNOR & OSWALD AND ORS [2013] FamCA 101

FAMILY LAW - COSTS – order made for costs on an indemnity basis

Family Law Act 1975 (Cth)

Calderbank v Calderbank [1975] 3 All ER 333
Colgate-Palmolive Co & Another v Cussons Pty Ltd (1993) 118 ALR 248
Munday v Bowman (1997) FLC 92-784
Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397
Tetijo Holdings Pty. Ltd. v. Keeprite (unreported, Federal Court, 3 May 1991)
Ragatta Developments Pty. Ltd. v. Westpac Banking Corporation (unreported, Federal Court, 5 March 1993

APPLICANT: Mr G Connor

RESPONDENT: Ms Oswald

SECOND RESPONDENT: D Pty Ltd

THIRD RESPONDENT: Mr M Connor

FILE NUMBER: MLC 5758 of 2009

DATE DELIVERED: 22 February 2013

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: By written submissions

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Glover

SOLICITOR FOR THE APPLICANT:	Harwood Andrews Lawyers
COUNSEL FOR THE RESPONDENT:	Ms Stoikovska

SOLICITOR FOR THE RESPONDENT: Hogg & Reid

COUNSEL FOR THE SECOND RESPONDENT:: Dr Ingleby

SOLICITOR FOR THE SECOND RESPONDENT: Berry Family Law

COUNSEL FOR THE THIRD RESPONDENT: Mr Mellas

SOLICITOR FOR THE THIRD RESPONDENT: Kenna Teasdale Lawyers

it is ordered that

1. The applicant husband, the second and third named respondents jointly and severally pay the respondent wife’s costs of and incidental to the respondent wife’s Application in a Case filed 29 March 2011, the applicant husband’s Amended Initiating Application filed  13 March 2012, the respondent wife’s Response filed 12 June 2012, the second named respondents’ Amended Response filed 21 December 2011, the third named respondents Reply filed 21 June 2012 and the respondent wife’s Application in a Case filed 26 October 2012 seeking orders for costs, including written submissions with respect to costs calculated on an indemnity basis as and from 27 January 2011.

2. In default of agreement as to the costs payable by the applicant husband and the second and third named respondents pursuant to these orders, such costs be assessed and once assessed paid on an indemnity basis.      

3. Upon payment pursuant to paragraph 1 hereof paragraphs 1 and 2 of the order made on 8 November 2013 with respect to restraints against the respondent husband and the second respondent D Pty Ltd be discharged.

4. The respondent wife’s Application in a Case be otherwise dismissed

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 5758  of 2009

Mr G Connor

Applicant

And

Ms Oswald

Respondent

And

D Pty Ltd
Second Respondent

And

Mr M Connor
Third Respondent

REASONS FOR JUDGMENT

Introduction

1. On 10 October 2012 I delivered my reasons and made orders dismissing the applications of the applicant husband and the second and third named respondents. On 26 October 2012 the wife filed an Application in a Case in which she sought her costs be paid jointly and severally by the husband and the second and third named respondents on an indemnity basis, or in the alternative on a solicitor/client basis.

2. On 8 November 2012 I made orders that the wife file and serve written submissions as to costs on or before 4.00 pm on 22 November 2012, that the husband and the second and third named respondents file and serve written submissions with respect to costs by 4.00 pm on 6 December 2012 and that the wife file and serve any response to the written submissions of the husband and the second and third named respondents by 4.00 pm on 13 December 2012.

3. The second and third named respondents filed their submissions opposing the wife’s application for costs by 6 December 2012 in accordance with the orders, however the husband has not filed any submissions with respect to the issue of costs. The wife’s application as against the husband is on that basis unopposed.

4. On 2 December 2010 the husband and the wife consented to final orders for property settlement. The second named respondent was joined as a party to the proceedings and similarly consented to the orders. The husband and the second and third named respondents, albeit for different reasons, each applied to set aside the orders and the second named respondent sought in the alternative to extend the time for filing an application for review of the final orders for property settlement which had been made by Registrar Sikiotis.

Legal Principles

1. The general rule is that each party to proceedings pursuant to the Family Law Act 1975 (Cth) should pay their own costs. However the Court may, if it is satisfied that there are circumstances that would justify it doing so, make an order for costs in favour of a party. In doing so the Court must have regard to the matters set out in s 117(2A) of the Act in determining whether it should make an order for costs and if so, the quantum of that order. The matters to which the Court should have regard and relevant for the purposes of this case are as follows:

The financial circumstances of the parties

1. It is submitted by the wife that her financial circumstances are such that although she is in employment she is not in a strong financial position. This evidence was not the subject of any challenge.

2. The husband’s evidence was similarly that he was not in a strong financial position, however as submitted by the wife he did give evidence that he was earning approximately $145,000 per annum and living in a house owned by his new partner. He also conceded that his financial affairs had been arranged in such a way as to make if difficult, in the absence of the production of his partner’s bank documents, to determine his financial position but had not produced that documentation. As previously mentioned the husband has not filed any submissions in response to the wife’s application for costs.

3. It was submitted by the wife that the second named respondent is the registered owner of the property at R Street, Suburb B. Although the second named respondent asserted that the real property was held on trust I found that I was not satisfied on the balance of probabilities that that was the case.

4. It was clear from the evidence of the third named respondent that he has extensive commercial and real estate interests. I was also assured by Counsel for the third named respondent by way of his response to the wife’s application to restrain the third named respondent from dealing with his assets that he had the financial capacity to meet any order for costs that I might make.

5. In all of the circumstances I am satisfied that the costs of these proceedings would impose a significant financial burden on the wife. I am also satisfied on the basis of the evidence before me that the respective financial circumstances of the husband and the second and third named respondents would not preclude me making an order for costs in the event that I determined I was otherwise justified in doing so.

Legal Aid

1. None of the parties in this case was in receipt of legal aid.

The conduct of the parties to the proceedings, in relation to the proceedings

1. It was submitted on behalf of the wife that the conduct of the applicant and the second and third named respondents is relevant in this matter. She relied upon what she said was the costs incurred by the wife as a result of what I found to have been in each case their false and misleading evidence. I was referred to several of my findings with respect to their evidence.

2. They included my finding that the husband’s evidence was, on occasions, vague and evasive and that I had questioned his evidence about his financial affairs and his evidence with respect to the alleged debt to the third named respondent.

3. I described Mr C Connor, who gave evidence in his capacity as a director of the second named respondent, as quite disingenuous and found that he would dissemble and feign lack of knowledge or interest of the affairs of the second named respondent notwithstanding that he was purporting to give evidence on behalf of the second named respondent.

4. My strongest criticism was reserved for the evidence of the third named respondent. I found that his evidence was, at best, evasive and, at worst, deliberately misleading. He gave a number of versions of the alleged debt which was ultimately significantly reduced. I was left with the impression by his evidence that he was prepared to make a claim with respect to the repayment of alleged loans, irrespective of whether he could substantiate his claim, and say whatever was necessary to advance his claim.

5. The way in which the case was put by the husband and the second and third named respondents required the wife to incur the significant costs of having to meet a case based upon what I have found to be unsound evidence, evidence which goes to the very heart of the case she was required to meet.  I am satisfied that the conduct of the husband and the second and third named respondents has lead to and resulted in the wife incurring unnecessary costs both by way of preparation and in the running of her case to meet that evidence. 

Wholly unsuccessful

1. The husband and the second and third named respondents have been wholly unsuccessful in these proceedings. They sought orders setting aside the orders made by consent on 2 December 2010 or, in the case of the second named respondent, in the alternative that time be extended to review the Registrar’s orders. Those applications were all dismissed.

Offers in writing to settle the proceedings

1. Both the second and third named respondents seek to rely upon the offer of settlement, based upon the principles in Calderbank v Calderbank [1975] 3 All ER 333, contained in the letter dated 14 February 2012 to the wife’s then solicitors T J Mulvaney & Co and signed by the solicitors for the husband and the second and third named respondents. It is submitted that the wife, as a result of my orders, will receive less than she would otherwise have received if she had accepted the offer.

2. Both the second and third named respondent place reliance upon p 162 of my reasons for judgement in which I said the “.. outcome may be quite different to that which was expected by the parties but it does not follow that it is impracticable.” Their reliance upon that passage of my reasons is, in my view, misplaced. Clearly the very basis of those comments was that the question to be determined was whether the orders should be set aside, not what the result of those orders would be. The basis upon which the offer of settlement was put and the proceedings were conducted was that the orders be set aside. The orders were not set aside. The question of enforcement and what the wife recovers pursuant to the orders was not an issue that I was required to determine. 

3. Even if I accepted that it was appropriate to do so, I would not be in a position on the evidence before me to assess whether or not the wife would have been better off if she had accepted the offer.

Indemnity Costs

1. I am satisfied that the conduct of the husband and the second and third named respondents and the fact that they were wholly unsuccessful are circumstances which in this case justify the making of an order for costs in favour of the wife.

2. The next question is whether, as the wife seeks, those costs should be paid on an indemnity basis.

3. The rule is that unless there are exceptional circumstances an order for costs should be made on a party/party basis. Sheppard J in Colgate-Palmolive Co & Another v Cussons Pty Ltd (1993) 118 ALR 248 set out in some detail the circumstances that might give rise to an order for indemnity costs. Those circumstances were summarised by Holden J in Munday v Bowman (1997) FLC 92-784 at page 84,660 as follows:

   (a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397).

   (b) Making allegations of fraud, knowing them to be false, and the

   making of irrelevant allegations of fraud (see Fountain Selected

   Meats (Sales) Pty. Ltd. (supra)).

   (c) Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v. Keeprite

   Australia Pty. Ltd (unreported, Federal Court, 3 May 1991)).

   (d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v. Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)).

   (e) An imprudent refusal of an offer to compromise.

4. It is clear from my findings that the basis upon which the case was commenced by the husband and the second and third named respondents was fundamentally flawed and that the evidence underpinning their respective cases was at best evasive and at worst deliberately misleading unnecessarily adding to the length, complexity and cost of the litigation.

5. I am satisfied that the circumstances of this case fall squarely within the examples of what might constitute “exceptional circumstances and in particular paragraphs (a), (c) and (d). Accordingly I am satisfied that there are exceptional circumstances in this case with respect to each of the husband and the second and third named respondents that warrant my exercising my discretion to make an order for indemnity costs in favour of the wife. The wife was placed in the impossible position of having to meet a case which I found to be not just without merit, but based upon evidence of which I was highly critical and in relation to orders which I found were made by consent and with the knowledge of all of the parties to these proceedings. The wife has signed a costs agreement as required by both her previous solicitors Taussig Cherrie Fildes and her current solicitors. It is clear from both those agreements, which have been provided to me, that the hourly rate she has been charged is significantly higher than is provided for in the Family Law Rules 2004. I am satisfied that in all of the circumstances of this case the wife should not be required to bear the cost consequences, being in this case the amounts she is required to pay pursuant to those costs agreements.

Who should pay the costs?

1. It is submitted by the wife that the husband and the second and third named respondents should be jointly and severally liable for payment of the wife’s costs.  

2. It was submitted by the second named respondent that there is no reason why it should be required to pay costs or be jointly or severally liable to pay costs in circumstances where the proceedings were initiated by the husband. It was further submitted that the second named respondent dealt with a discrete issue and that, in the event that I were to make an order against the second named respondent, that order should be limited to costs incurred after the second named respondent issued its application on 21 April 2011.

3. The third named respondent submitted that the wife has not demonstrated why an order should be made against the third named respondent rather than the husband, that the proceedings with respect to the third named respondent were a discrete issue and that if I were to make an order against the third named respondent it should be limited to costs incurred after 22 December 2011 when he filed a Notice of Intervention, or why an order should be made against the husband and the second and third named respondents jointly and severally.

4. Although the second named respondent did not file its application until 21 April 2011 it is clear from the letter from Harwood Andrews dated 27 January 2011, followed by the letter from Berry Family Law on behalf of the second named respondent a day later, that it objected to the orders and on that basis sought the wife’s consent to set those orders aside. That is what lies behind these proceedings.

5. Although the third named respondent did not formally intervene in the proceedings until 22 December 2011, on 31 May 2011 he filed an affidavit in which he asserted that the husband and wife owed him $305,460.88, that this debt was not disclosed by either of them and that the proceeds of sale of E Street should be held in trust until proper arrangements were made for repayment of the alleged debt. He was represented at the hearing before Cronin J on 2 June 2011 by Mr Spicer of Counsel who also appeared on behalf of the second named respondent.

6. As submitted on behalf of the wife, these parties are not at arms length. They are brothers. The third named respondent is a director of the second named respondent. He and his brother, who is the other director, have some mutual business interests.

7. I have found that the third named respondent had significant involvement in the husband’s financial affairs, including becoming a shareholder of the husband’s companies after the husband and wife separated. The third named respondent’s in house accountant attended the round table conference when the husband and the wife reached their in principle agreement. It was acknowledged by both the husband and the third named respondent that the husband was not good with finances and relied upon the third named respondent for information.

8. Both the husband and the third named respondent consulted Harwood Andrews in December 2010, as a result of which Harwood Andrews accepted instructions to act on behalf of the husband, and on 27 January 2011 wrote to the wife’s solicitors advising that the orders were incapable of being carried out as the husband could not get finance and that it was further complicated by the fact that the third named respondent, as a director of the second named respondent, had not been consulted and was in the process of obtaining independent advice.

9. Whilst strictly speaking each application may represent a discrete issue I was left with the impression that the decisions in relation to this litigation were family decisions. Each of the husband, the second named and third named respondents relied on elements of each other’s evidence in support of their respective cases and it was clear that the husband was reluctant to say anything that might contradict the evidence of either of his brothers and in particular the evidence of  the third named respondent. The fact that there was no mention of the alleged debt to the third named respondent until after the commencement of the proceedings, notwithstanding that the third named respondent was both involved in seeking advice with and assisting the husband and involved in his capacity as a director of the second named respondent only strengthens my impression that this litigation was a family affair aimed at ensuring that the wife would agree to renegotiate the settlement. The letter of offer dated 14 January 2012 only confirms that view.

Conclusion

1. I am satisfied that in all of the circumstances I should make an order that the husband and the second and third named respondents should jointly and severally be liable to pay the wife’s costs of and incidental to the proceedings which were initiated by the wife by way of her Application in a Case filed 29 March 2011 seeking enforcement of the orders made 2 December 2010 and including her Application in a Case filed 26 October 2012 seeking an order for costs and to include the submissions with respect to costs. Those costs should be calculated on an indemnity basis from the 27 January 2011 when her then solicitors received a letter from Harwood Andrews indicating that the settlement was overgenerous making its implementation impossible for the husband and at the behest of the third named respondent raising the question of the payment of CGT.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 22 February 2013

Associate: 

Date:  22 February 2013