Degan & Nader (No 3)

[2024] FedCFamC1F 669

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Degan & Nader (No 3) [2024] FedCFamC1F 669

File number:	NCC 4292 of 2021
Judgment of:	AUSTIN J
Date of judgment:	3 October 2024
Catchwords:	FAMILY LAW – COSTS – Application for costs of substantive proceedings – Where the first respondent joined the second, third and fourth respondents (“the other respondents”) to the proceedings seeking relief directly against them but abandoned those claims after about 12 months – Where the other respondents make an application for the first respondent to pay their costs –  Where the first respondent’s joinder of the other respondents was not futile – Where the financial circumstances of the other respondents are substantially superior to those of the first respondent – Application dismissed.
Legislation:	Family Law Act 1975 (Cth) Pt VIIIAB, ss 90AF, 106B, 117)
Cases cited:	Degan & Nader (No 2) [2024] FedCFamC1F 544
Division:	Division 1 First Instance
Number of paragraphs:	32
Date of hearing:	3 October 2024
Place:	Sydney
The Applicant:	Litigant in person (did not participate)
Counsel for the First Respondent:	Mr Keserovic
Solicitor for the First Respondent:	Robertson Saxton Osborne
Counsel for the Second, Third and Fourth Respondents:	Mr Klooster & Mr King
Solicitor for the Second, Third and Fourth Respondents:	Shore Lawyers

ORDERS

NCC 4292 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR DEGAN

Applicant

AND:

MS NADER

First Respondent

MR B DEGAN

Second Respondent

MS C DEGAN (and another named in the Schedule)

Third Respondent

ORDER MADE BY:	AUSTIN J
DATE OF ORDER:	3 OCTOBER 2024

THE COURT ORDERS THAT:

1.The Application in a Proceeding filed on 17 September 2024 is dismissed.

2.The Response to an Application in a Proceeding filed on 1 October 2024 is 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 the pseudonym Degan & Nader has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).

EX TEMPORE
REASONS FOR JUDGMENT

AUSTIN J:

1. On 19 August 2024, judgment was delivered to finalise a financial cause of action between the applicant and the first respondent under Pt VIIIAB of the Family Law Act 1975 (Cth) (“the Act”), to which cause the second, third and fourth respondents were joined (Degan & Nader (No 2) [2024] FedCFamC1F 544).

2. The second, third and fourth respondents now make an application for the first respondent to pay their costs of those proceedings, which should be dismissed.

   Background

3. In the financial cause between the former de facto spouses, the only asset usefully available for division between them (aside from superannuation) was a parcel of real property, of which the applicant was the sole registered proprietor (“the property”).

4. In early 2023, the second, third and fourth respondents obtained money judgments against the applicant in the Supreme Court of NSW and acquired legal possession of the property by order granted by that court, which they intended to sell to execute the judgment debts.

5. Only days afterwards, the first respondent successfully applied to join the second, third and fourth respondents as parties to these proceedings and to restrain them from executing their judgment debts against the applicant by selling the property, pending the resolution of the financial cause.

6. In mid-2023, after the second, third and fourth respondents were joined to this proceeding, the first respondent amended her application to include relief claimed directly against them under s 90AF and s 106B of the Act, challenging the validity of their judgment debts obtained against the applicant. However, in June 2024, the first respondent resiled from reliance upon s 90AF and s 106B of the Act and thereby accepted the validity and enforceability of the second, third and fourth respondents’ judgments against the applicant.

7. On 30 July 2024, the solicitor for the second, third and fourth respondents wrote to the solicitor acting for the first respondent contending her claim against them was forlorn, but by then the first respondent had already realised that, as she amended her claim the month before.

8. The trial proceeded on 12 August 2024, at which time the first respondent conceded the secured debts owed by the applicant to the second, third and fourth respondents (totalling $1,052,109) should take priority over her claim upon any share of the de facto spouses’ property. For their part, the second, third and fourth respondents conversely did not seek to press that the unsecured debts owed to them by the applicant (totalling $320,140) should also take priority over the first respondent’s claim against the applicant under Pt VIIIAB of the Act. That being so, the second, third and fourth respondents were discharged from further participation in the cause contested between the applicant and the first respondent.

9. When judgment was delivered a week later, on 19 August 2024, the question of costs was reserved for 28 days (Order 9). The second, third and fourth respondents sought to avail of that order by filing an Application in a Proceeding on 17 September 2024 seeking costs against the first respondent, supported by an affidavit filed by their solicitor on 13 September 2024.

10. The application was filed one day late. With the first respondent’s consent, leave was granted for the second, third and fourth respondents to prosecute it.

11. The second, third and fourth respondents sought costs of $124,610.79, but alternatively, party/party costs of an indeterminate amount.

12. The first respondent filed a Response to an Application in a Proceeding on 1 October 2024 opposing any costs order, supported by an affidavit filed by her solicitor on the same date, the financial statement of the first respondent filed on 22 July 2024, and paragraphs 31 and 32 of the first respondent’s affidavit filed on 22 July 2024.

    Legal principles

13. Parties to proceedings under the Act should ordinarily bear their own costs (s 117(1)), though costs orders can be made when warranted (s 117(2)), in which event the Court must consider certain mandated factors (s 117(2A)).

    Section 117(2A)(a)

14. The first respondent is employed and derives net income of about $1,000 per week. She has no assets of any realisable value.

15. The first respondent incurred approximately $300,000 in legal costs and disbursements in the proceedings and is still indebted to her lawyers for about $92,000 of that sum.

16. The financial circumstances of the second, third and fourth respondents are substantially superior to those of the first respondent.

    Section 117(2A)(b)

17. Neither the first, second, third or fourth respondent was legally aided in the proceedings.

    Section 117(2A)(c)

18. One of the central planks of the costs application made by the second, third and fourth respondents is that the first respondent conducted the litigation recklessly, by needlessly joining them to the proceedings, maintaining unmeritorious claims for relief against them for about 12 months, before finally abandoning such claims only about two months before the trial.

19. However, the second, third and fourth respondents did not make any application for the summary dismissal of the claims made against them, suggesting they were not confident they could establish the first respondent’s claims were devoid of any reasonable prospect of success. By the time the second, third and fourth respondents wrote to the first respondent in July 2024 asserting the lack of merit in her claims against them, she had already withdrawn her claims for relief against them.

20. The first respondent’s abandonment of claims for relief against the second, third and fourth respondents under s 90AF and s 106B of the Act did not mean they should never have been joined as parties to the proceedings in the first place because there was still a residual argument between them about the manner in which the debts due to them by the applicant should be treated, about which issue they wished to be heard. That argument about whether and how the debts due by the applicant to the second, third and fourth respondents would be quarantined was compromised on the morning of the trial.

    Section 117(2A)(d)

21. The underlying dispute was not necessitated by any party’s failure to comply with orders of the Court.

    Section 117(2A)(e)

22. The first respondent was not wholly unsuccessful in the proceedings because she succeeded in having $60,000 split from the applicant’s superannuation interest in her favour.

23. Nonetheless, the other central plank to the costs application is the contention of the second, third and fourth respondents that the first respondent was wholly unsuccessful in the proceedings as against them, but that submission is rejected in view of their eventual concession that $320,140, being the unsecured component of the debts owed to them by the applicant, need not take priority over the first respondent’s financial claim upon the property owned by her and the applicant. Until the trial, the second, third and fourth respondents had collectively contended that the entirety of the judgment debts, comprising $1,372,249, should take priority over the first respondent’s claim against the applicant’s property interests.

24. The second, third and fourth respondents’ additional submission that they were “entirely successful” is rejected, but is not a submission which engages the terminology of s 117(2A)(e) of the Act in any event, as the provision is directed at the losing party’s complete lack of success. Neither the first, second, third or fourth respondents was wholly unsuccessful in the arguments they advanced against one another.

    Section 117(2A)(f)

25. No offers of compromise were made between the first, second, third and fourth respondents. The letter sent to the first respondent by the other respondents in July 2024 did not make any offer to compromise their dispute. The letter simply alleged the first respondent’s position was untenable and made plain their expectation she should capitulate. No incentive was offered for her to do so.

    Section 117(2A)(g)

26. The second, third and fourth respondents did not comply with the trial directions. They were obliged to file their trial affidavits and Case Outline by 19 July 2024, but did not do so until just days before the trial. The evidence now before the Court shows that a considerable portion of the costs now claimed by the second, third and fourth respondents were incurred by them after the first respondent abandoned her claims for relief against them under s 90AF and s 106B of the Act in June 2024. The preparation work for trial by the second, third and fourth respondents after June 2024 was largely wasted because, by then, the argument between them and the first respondent had devolved to a neat legal argument which was not influenced by vast swathes of evidence.

27. The second, third and fourth respondents’ counsel commendably accepted that proposition and, as a fall-back position, contended the Court could instead consider awarding to the second, third and fourth respondents costs confined to the hearing on 12 August 2024, estimated at $5,000 for counsels’ fees. No solicitors’ fees could proportionately be included in the assessment because they need not have attended the Court to watch their counsel make good on a singular legal argument.

28. The second, third and fourth respondents’ fall-back position has some ostensible merit, but is outweighed by other considerations. Had they only sought costs of $5,000 (instead of $124,610.79) from the outset, this hearing may not have been necessary. As it is, counsel conceded the second, third and fourth respondents had incurred much more than $5,000 to prepare for and conduct this costs hearing. Their pursuit of this application has also caused the first respondent to incur more costs she can ill-afford.

29. As a salient consideration, the second, third and fourth respondents also rely upon their restraint by interim injunction from moving to sell the property to satisfy the judgment debts owed to them by the applicant. That is not an influential consideration because they are now relieved of the injunction and are free to sell the property. Their judgment debts have continued to accrue interest in the meantime, which interest is incorporated within the calculation of the secured debt at $1,052,109, meaning they have lost nothing by the delay in the execution of the judgment debts. Nor is it relevant that the first respondent obtained the interim injunction without giving an undertaking as to damages. The entitlement of the second, third and fourth respondents to accrued interest on the judgment debts cures any prejudice.

    Conclusion

30. The first respondent joined the second, third and fourth respondents to the proceedings to seek relief directly against them but abandoned those claims after about 12 months. However, the joinder of the second, third and fourth respondents was not thereafter futile because the first respondent’s claim against the applicant’s property still indirectly affected their interests, as her claims had the potential to impinge upon their capacity to execute their judgment debts against the applicant. The second, third and fourth respondent undoubtedly wanted to be heard in relation to the resolution of the competing priority between the first respondent’s claim against the applicant and their resort to use of the applicant’s property to satisfy their judgment debts. Ultimately, that issue was resolved between the first, second, third and fourth respondents, but not until the trial.

31. The first respondent’s conduct of the proceedings, to the extent it can be the subject of legitimate criticism, is outweighed in any event by the first respondent’s penury. Her debts exceed her assets by a considerable margin and she has only modest income. It is well accepted that impecuniosity is not a bar to a costs order being made, but it is an influential consideration nonetheless.

32. The second, third and fourth respondents fail to demonstrate an entitlement to costs so it is unnecessary to consider the manner in which any costs order should be assessed.

I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Austin.

Associate:

Dated:       3 October 2024

SCHEDULE OF PARTIES

NCC 4292 of 2021
Respondents
Fourth Respondent:	MS D DEGAN