Costello and Condi & Anor

[2013] FamCA 336

FAMILY COURT OF AUSTRALIA

COSTELLO & CONDI AND ANOR [2013] FamCA 336

FAMILY LAW – PROPERTY – Orders by consent – Variation of an order restraining the Second Respondent from dealing with the property of the substantive proceedings

FAMILY LAW – COURT – COSTS – Security for costs – Applicant not impecunious – Where the evidence does not establish a material risk that the Applicant would be unable to pay a costs order

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Gerber & Bradley & Ors (Security for Costs) [2011] FamCAFC 206
Luadaka & Luadaka (1998) FLC 92-830

APPLICANT: Mr Costello

FIRST RESPONDENT: Mr Condi by his Case Guardian Mr E

SECOND RESPONDENT: Ms Condi

FILE NUMBER: BRC 3380 of 2011

DATE DELIVERED: 14 May 2013

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Kent J

HEARING DATE: 6 May 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr North SC with him Mr Waterman

SOLICITOR FOR THE APPLICANT: Slater & Gordon

COUNSEL FOR THE RESPONDENT: Ms Carew

SOLICITOR FOR THE RESPONDENT: Rice Naughton Buckley

Orders

UPON The Undertakings of the First Respondent (by his Case Guardian, Mr E) and the Second Respondent not to raise any defence to the Applicant’s claims that may arise by reason of either the mortgage being granted or the mortgaged property being sold

IT IS ORDERED BY CONSENT

1. That the injunction pursuant to Order 3 of the Orders of the Court dated 16 May 2012 be deleted and varied as follows:

   3.  Subject to Order 3a., the second respondent is restrained from selling, transferring, mortgaging, encumbering or otherwise dealing with the property situate at … F Street, Suburb B, Qld, 4065 more particularly described as Lots … and … on RP… title reference (the property):-

   3a. The second respondent is at liberty to borrow funds in the sum of $155,000 on the terms set out in the loan documents which are Exhibit “EC-8” to the Affidavit filed 28 March 2013, and grant a mortgage over her interest in the property in order to secure those funds.

   3b. In the event that for any reason the mortgagee exercises its power of sale under the mortgage referred to in (a) hereof the Second Respondent, her successors and assigns shall:-

   (I)Direct the mortgagee to pay all sums due to her as registered proprietor  to her solicitors on the record herein to be held by them on trust subject to the terms hereof.

   (II)direct her solicitors to invest a sum equal to one half of the net sale proceeds of sale after the costs of sale but before repayment of the mortgage debt in an interest bearing account pending the determination of these proceedings or earlier order of the Court.

   (III)make such direction as she may choose as to the remaining sum if any.

   3c. Liberty to either party to apply.

IT IS FURTHER ORDERED

1. That the Application in a Case filed on 28 March 2013 be otherwise dismissed.

2. Subject to Order (4), each party’s costs of and incidental to the Application in a Case be reserved to the trial judge.

3. Should any party seek an order for costs of the Application in a Case now rather than having that issue reserved to the trial judge:

   (a)within fourteen (14) days of the date hereof the party shall cause written submissions to be emailed to the associate to Justice Kent via … with a copy to be served upon the other parties;

   (b)within fourteen (14) days thereafter any other party shall cause written submissions in reply to be emailed to the associate to Justice Kent via … with a copy to be served upon the other parties;

   (c)unless any written submission contains an express objection to such costs issue being determined by the Court in the absence of the parties the issue will be determined on the papers in the absence of the parties;

   (d)should any party require a hearing to determine the issue then the costs of each party having to attend such hearing as a result will be heard and determined as a discrete costs issue.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Costello & Condi and Anor 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 BRISBANE

FILE NUMBER: BRC 3380 of 2011

Mr Costello

Applicant

And

Ms Condi by his case guardian Mr E

First Respondent

And

Ms Condi

Second Respondent

REASONS FOR JUDGMENT

1. The factual background to, and the nature of, the substantive proceedings is comprehensively set out in the reasons for judgment of O’Reilly J delivered on 16 May 2012, read before me. That obviates any need for me to restate either here. Further particulars of alleged background facts and specifics of the claims advanced by the Applicant in the substantive proceedings are contained in his Points of Claim filed on 8 June 2012 pursuant to Her Honour’s orders.

2. Those reasons for judgment were delivered in support of orders including, by order 3, an injunction restraining the Second Respondent in the substantive proceedings (the applicant on this Application) from any dealing with an identified property the focus of the substantive proceedings. (“the property”).

3. Order 4 of those orders contemplated the prospect of an application by the Second Respondent to vary the terms of the injunction, provided she could demonstrate preservation, until trial, of the First Respondent’s former interest in the property. The property is currently valued at $775,000 with a market appraisal to about $800,000.

4. By Application in a Case filed on 28 March 2013 the Second Respondent sought orders varying the injunction to enable her to borrow funds in the amount of $155,000 secured by mortgage over the property. On the Second Respondent’s case, those funds are needed to provide for litigation expenses of defending the Applicant’s claims in the substantive proceedings.

5. At the outset of the hearing before me the respondent to this application (the Applicant in the substantive proceedings) opposed the variation of the injunction sought on the asserted basis that the Second Respondent was unable to demonstrate the preservation, until trial, of the First Respondent’s former interest in the property if the variation sought was permitted. The essence of the Applicant’s contention was that the proposed order would undermine the relief claimed in paragraph 92 of the applicant’s points of claim; and that no mechanism was proposed by the Second Respondent whereby the First Respondent’s former interest in the property could be preserved in the event that the prospective mortgagee exercised its powers or the property was sold.

6. In the event, with the encouragement of the Court and the assistance of the parties’ respective legal representatives, and the involvement of Mr E, the Case Guardian for the First Respondent, the parties were able to reach consent as to orders to be made to vary the injunction. Thus it was unnecessary for me to determine that part of the Application and orders are to be made by consent with respect to that part of it.

7. What then remained in issue was the further orders for security for costs and associated stay of proceedings and injunctive relief sought by the Second Respondent.

8. Based upon estimated total solicitor and own client costs of the proceedings past and future in the order of approximately $300,000, the Second Respondent sought an order that the Applicant provide security in the sum of $286,441.17 by paying that sum into court or by way of an unconditional bank guarantee or to otherwise provide security for that amount. Pending the provision of that security an order was sought to stay the proceedings and that the Applicant be restrained from dealing with his real property interests as identified.

9. In Gerber & Bradley & Ors (Security for Costs) [2011] FamCAFC 206 at [2] the Full Court (Finn, May and Strickland JJ) summarised the principles in relation to an application for security for costs as follows:

   2. In the recent decision of the Full Court (Coleman, Thackray and Strickland JJ) in Palma & Caleffi and Anor (Security for costs) [2011] FamCAFC 174 the following principles, which govern an application for security for the costs of an appeal, were set out (adopting what was said by an earlier Full Court (Finn, May and Thackray JJ) in Sawer & Sawer [2007] FamCA 140):

   19. The power in this Court to make an order for security for costs is to be found in s 117(2) of the [Family Law Act 1975 (Cth) (“the Act”)], which is in the following terms:

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

   20. The provisions of s 117(2A) are as follows (- s 117(4) and (5) are not presently relevant):

   In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g)such other matters as the court considers relevant.

   21. The authorities establish that in exercising the discretion to order security for costs, it may also be relevant for the Court to consider in addition to the financial circumstances of the parties and the other five specific matters mentioned in s 117(2A), the following matters:

   a)        the prospect of success of the litigation;

   b)       whether the claim for security is made bona fide;

   c)whether or not an order for security would stifle the litigation;

   d)whether or not the litigation may involve a matter of public importance;

   e) whether or not there has been a delay in bringing the application for security;

   f) whether there would be difficulty in enforcing an order for costs

   (Luadaka v (sic) Luadaka (1998) FLC 92-830; Jones and Jones (2001) FLC 93-080; Adult Guardian and Mother's Parents and B and Child's Representative (2002) FLC 93-116.)

10. In Luadaka & Luadaka (1998) FLC 92-830 the Full Court referred to s 117(2A) of the Act as to what is required for an application for security for costs to succeed and said at [61]:

    It is not necessary to establish that there are special circumstances. However, it is necessary to establish that there are justifying circumstances. The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.

11. The content of rule 19.05 of the Family Law Rules 2004 reflects the considerations identified in the authorities that may be relevant to the exercise of discretion. There is obviously a degree of overlap in the identified considerations and no order of priority is attached to any of them, consistent with the nature of the discretion involved. Clearly in a given case only one or several considerations may be seen as determinative without exhaustive contemplation of each and every consideration identified. Moreover, it is not suggested that the considerations identified are necessarily an exhaustive list.

12. The proposition that the Second Respondent would suffer significant prejudice if she were unable to recover her costs of successively defending the substantive proceedings from the Applicant can be readily accepted as constituting, prima facie, “justifying circumstances” for an order as to security for costs. Both the First Respondent and Second Respondent have no assets of significance other than the Second Respondent’s ownership of the property. They are both of advanced years; the First Respondent has significant health issues such that he requires a Case Guardian and the Second Respondent (who herself has health issues) is his paid carer. Their income consists only of social security benefits and a modest UK pension. The Applicant is in a substantially superior financial position.

13. However, even accepting that and also for the purpose of the present discussion that the Applicant faces many “hurdles” to success in the substantive proceedings and that his “prospects of success are not very strong” as is submitted on behalf of the Second Respondent, it seems to me that the essential question is whether there is a real risk of the Second Respondent being deprived of recovery of her costs if she succeeds in the substantive proceedings and obtains a costs order.

14. Ms Carew of Counsel for the Second Respondent frankly acknowledged at the outset of her submissions on this aspect of the application the difficulties then confronted by the Second Respondent in advancing the security for costs application in light of the evidence contained in the Applicant’s affidavit filed on the day of the hearing.

15. The Applicant’s evidence is that he holds assets in the order of $1,375,000 in value with total liabilities currently (as opposed to loan limits) of $246,000. Thus, the Applicant can point to a positive asset position to the extent of something in the order of $1.1 million.

16. The Applicant deposes to being a professional who is actually engaged in his field. On his evidence he is clearly not impecunious and he deposes on oath as to an intention to continue to reside in Queensland and to continue to practise in his field.

17. As Counsel for the Second Respondent acknowledged, it cannot be said that the applications made in the substantive proceedings are not brought on a bona fide basis.

18. It may also be observed that the original judgment debt, none of which has been paid by the First Respondent, now comprises an amount inclusive of interest of approximately $273,000 albeit that the Applicant has apparently elected not to seek enforcement against the other judgment debtor for part of that debt.

19. On this evidence it does not seem to me that it could be concluded that there is a material risk that in the event that an order for costs was made in favour of the Second Respondent against the Applicant that he would be unable to pay those costs or would seek to avoid his obligations to pay such costs.

20. If that position can be demonstrated to have altered substantially for any reason obviously a further application for security for costs might be advanced.

21. For these reasons the current application for security and associated relief is dismissed.  

Costs

1. At the hearing of the application I indicated that if either party sought to agitate issues of costs consequent upon the determination of this application in a case written submissions could be provided and, if necessary, a date set for oral argument.

2. Absent such agitation I would order that each party’s costs of and incidental to this application be reserved to the trial judge.

3. I therefore make Orders to enable such application to be made or otherwise reserve each party’s costs to the trial judge.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 14 May 2013

Associate:   

Date:  14 May 2013