E Pty Ltd & Ors & Zunino & Anor (No 2)

[2020] FamCAFC 272

FAMILY COURT OF AUSTRALIA

E PTY LTD AND ORS & ZUNINO AND ANOR (NO. 2) [2020] FamCAFC 272

FAMILY LAW – APPEAL – COSTS – Where the wife seeks indemnity costs against the appellants in relation to their application for leave to appeal orders dismissing interlocutory applications – Appellants wholly unsuccessful – Offer to settle by the wife unanswered – Where the circumstances justifying an order for costs also justify an order for indemnity costs – Indemnity costs order made in favour of the wife.

Family Law Act 1975 (Cth) s 117

Family law Rules 2004 (Cth) Sch 3

Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801
Conrad and Anor & Conrad [2020] FamCAFC 255
E Pty Ltd and Ors & Zunino and Anor [2020] FamCAFC 216
Farmer & Panshin (2014) FLC 93-587; [2014] FamCAFC 78
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Mansfield and Ors & Mansfield and Anor (2019) FLC 93-920; [2019] FamCAFC 186
Pennisi v Pennisi (1997) FLC 92-774; [1997] FamCA 39
Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93‑029; [2000] FamCA 681

FIRST APPELLANT: E Pty Ltd

SECOND APPELLANT: F Pty Ltd

THIRD APPELLANT: F2 Pty Ltd

FIRST RESPONDENT: Mr Zunino

SECOND RESPONDENT: Ms Zunino

FILE NUMBER: PAC 1885 of 2019

APPEAL NUMBER: EAA 134 of 2019

DATE DELIVERED: 5 November 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Heard by way of written submissions

JUDGMENT OF: Ainslie-Wallace, Ryan & Tree JJ

HEARING DATE: In Chambers

LOWER COURT JUDGMENT DATE: 15 November 2019

LOWER COURT MNC: [2019] FamCA 845

REPRESENTATION

SOLICITOR FOR THE FIRST TO THIRD APPELLANTS: Matthews Folbigg Pty Ltd

FIRST RESPONDENT: No appearance

COUNSEL FOR THE SECOND RESPONDENT: Mr O’Brien  

SOLICITOR FOR THE SECOND RESPONDENT: Hammond Nguyen Turnbull

Orders

1. Within twenty-eight (28) days of these orders, the appellants pay the wife’s costs of their application for leave to appeal filed on 12 December 2019 in the amount of $30,763.09.

2. Within twenty-eight (28) days of these orders, the appellants pay the wife’s costs of this application for costs in the amount of $2,000.

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 E Pty Ltd and Ors & Zunino and Anor (No. 2) 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).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EAA 134 of 2019
File Number: PAC 1885 of 2019

E Pty Ltd

First Appellant

And

F Pty Ltd

Second Appellant

And

F2 Pty Ltd

Third Appellant

And

Mr Zunino

First Respondent

And

Ms Zunino

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. On 1 September 2020, this Court dismissed an application by E Pty Ltd, F Pty Ltd and F2 Pty Ltd (together, “the appellants”) to appeal the dismissal of various interlocutory applications.  Their applications were made in the context of property settlement proceedings between Ms Zunino (“the wife”) and Mr Zunino (“the husband”) to which the appellants are reluctantly joined.

2. The wife seeks her costs from the appellants of resisting their unsuccessful application and it is to this issue that these reasons pertain.

3. So as to avoid the trouble and expense of a further hearing in relation to the question of costs, at the appeal hearing, we invited submissions on the point.  Brief submissions were made, however, senior counsel for the wife sought to adduce further evidence in relation to the wife’s claim for indemnity costs and, by agreement, directions were made so that the question of costs could be determined after judgment and without a further appearance.

4. At [26] of our reasons for judgment (E Pty Ltd and Ors & Zunino and Anor [2020] FamCAFC 216) we said:

   26.The appellants have failed to establish that leave to appeal should be given and the application for leave will be dismissed.  In these circumstances the wife seeks her indemnity costs.  The appellants do not cavil with an order for costs in the wife’s favour calculated on a party/party basis but resist indemnity costs.

5. The appellants contend that senior counsel who appeared did not concede that an order for party/party costs in favour of the wife could be made unopposed. Rather, it is submitted that, properly understood, senior counsel indicated nothing more than the appellants did not cavil with the quantum of party/party costs sought by the wife. In response, the wife contends that it is incumbent on the appellants to take steps to amend the record and reasons for judgment and, having failed to take those steps, the appellants cannot now withdraw the concession recorded at [26]. Although we agree that those steps might have been taken, the issue is not of sufficient magnitude for us to be concerned that they were not. However, the appellants should have provided the appeal transcript and their submissions should have engaged with what was said.

6. In any event, we have examined the appeal transcript and we are satisfied that [26] accurately records what occurred.  However, it is also accepted that there may have been some misunderstanding.  This hearing was undertaken by video link between Sydney, Far North Queensland and at various locations.  On this occasion, there were difficulties with technology and the hearing was bedevilled with sound problems.  This may well have contributed to misunderstanding and miscommunication in relation to this point.  Accordingly, we will permit the appellants to withdraw the apparent concession and the wife’s application for costs will be determined as though it were not made and by reference to the written submissions.

7. The wife seeks costs on an indemnity basis and, failing that, in accordance with Sch 3 of the Family Law Rules 2004 (Cth). Calculated on an indemnity basis, the wife claims costs for the application of $30,763.09 or $24,209.35 calculated in accordance with Sch 3 on a party/party basis. As would be apparent, the appellants resist any order for costs. Furthermore, notwithstanding that “[i]t is conceded that the financial circumstances of the [a]ppellants are not factors in their favour” (appellants’ submissions filed 29 September 2020, paragraph 5), they contend that if an order for costs in favour of the wife is made against them, it should not be payable until the conclusion of the proceedings between the spouse parties.

Is the wife entitled to costs?

1. An application for costs falls to be determined in accordance with s 117 of the Family Law Act 1975 (Cth) (“the Act”). Section 117(1) provides that each party to proceedings under the Act should bear his or her own costs, unless the Court is of the opinion that there are circumstances that justify the making of a costs order (s 117(2)). Where the Court is satisfied that the circumstances justify the making of a costs order, s 117(2A) sets out matters to which the Court should have regard in determining what, if any, order should be made. As well as the specific matters listed in s 117(2A), s 117(2A)(g) enables the Court to take into account such other matters that are relevant.

2. In this application, the relevant factors are:

   ·the parties’ financial circumstances (s 117(2A)(a));

   ·whether a party to the proceedings has been wholly unsuccessful (s 117(2A)(e));

   ·an offer of settlement made by the wife (s 117(2A)(f)); and

   ·the appellants’ contention that payment of any costs ordered against them should be deferred (s 117(2A)(g)).

The parties’ financial circumstances

1. It is uncontroversial that the appellants have the capacity to pay costs in the amount sought without discomfort.  Although we do not have evidence which would enable us to quantify the appellants’ financial circumstances with precision, we can safely proceed on the basis that they have substantial assets available to them which are well in excess of those presently available to the wife.  For her part, the wife has exclusive use of the marital home, which is valued in the vicinity of $3.2 million, cash at bank, a car, personalty and a partial property settlement order of some $300,000.

2. The wife is not impecunious, but as we have already said, the appellants’ financial circumstances are superior to hers.  The appellants’ concession that their financial circumstances do not weigh in their favour is apt.  That said, the appellants’ superior financial circumstances does not, in isolation, justify an order for costs in favour of the wife.

Success

1. The appellants have been wholly unsuccessful in securing leave to appeal orders which did not determine substantive rights.  The barriers to appellate intervention in relation to such orders are discussed in our primary reasons for judgment and for present purposes it is sufficient to acknowledge that the barriers are high indeed.  The appellants, who themselves incurred approximately $46,000 prosecuting their application for leave to appeal, can be taken to have understood this and, nonetheless decided to proceed.  It is inferred that they also understood that in the event they were unsuccessful, they were vulnerable to an order for costs.  Even a rudimentary examination of this Court’s decisions in relation to unsuccessful applications for leave to appeal, would establish the point.

2. These factors weigh heavily in favour of an order for costs in favour of the wife.

The wife’s offer of settlement

1. On 1 May 2020, the wife offered to settle the application for leave to appeal, which offer remained open until 8 May 2020.  In summary, the wife’s offer provided:

   a.An assessment of the lack of prospects of success of the [appellants’] appeal after having assessed the [appellants’] summary of argument;

   b.That the [wife] had incurred legal costs of around $6,000 in reviewing and assessing the appeal and the summary of argument in support;

   c.That the [wife] would forgo those costs if the [appellants] withdrew their appeal;

   d.That the [wife] would incur additional costs of around $30,000 plus GST; and

   e.If forced to meet the appeal, the [wife] would seek payment of her costs in the sum of $35,000.

   (Wife’s submissions filed 16 September 2020, paragraph 7) (As per the original).

2. In an attempt to minimise the significance of the appellants’ failure to accept the wife’s offer, the appellants contend that “the rejection of an offer to settle in isolation may not warrant an Order for costs” (appellants’ submissions filed 29 September 2020, paragraph 11).  Although we agree, there is no dispute that the rejection of an offer to settle on terms equal to or better than the result achieved may well justify an order for costs.  Of course, an offer in writing to settle the proceedings must be considered, as must the context of the case (Pennisi v Pennisi (1997) FLC 92-774; Farmer & Panshin (2014) FLC 93-587).

3. The appellants did not even respond to the wife’s offer.  The discourtesy is obvious and bespeaks a cavalier disregard to a generous and serious offer by the wife to settle the proceedings on terms similar to those ordered.  In and of itself the terms and timing of the wife’s offer to settle amply justifies an order for costs in her favour.

Other matters

1. In aid of their opposition to an order for costs, the appellants emphasise that the primary judge considered that the wife’s ‘alter ego’ case raised against them is weak.  The relevance of this is said to be that “in the context of a costs application [there] is the risk of a grave and substantial injustice upon the appellants if they are subject to a costs Order in the appeal; where ultimately the substantive application of the wife is dismissed” (appellants’ submissions filed 29 September 2020, paragraph 21).  However, as the wife correctly points out, this submission ignores the reality that an application for leave to appeal is a separate proceeding.  It follows that an order for costs against the appellants in this application would not occasion an injustice against them, even if the wife fails at first instance.  No doubt, the wife presents her case at first instance knowing that where a non-party to a marriage is joined to proceedings and the action against them is wholly unsuccessful, in the ordinary course this would amount to circumstances which justifies an order for costs in favour of the non-party (Conrad and Anor & Conrad [2020] FamCAFC 255 at [43]). The effect of this is that the costs consequences of the proceedings at first instance will be dealt with at first instance and will not influence the disposition of the application for costs under consideration.

2. As the potential for an adverse costs order in favour of the appellants against the wife at first instance is the only reason advanced to justify the deferral of payment of any order for costs made against the appellants in this application, that application also lacks merit.

Conclusion and quantification

1. Individually, both the appellants’ lack of success and their rejection of the wife’s offer of settlement justifies an order for costs against them in favour of the wife.  The question which must then be answered is whether the wife should have her indemnity costs or a lesser sum.

2. As the parties’ submissions acknowledge, there are numerous decisions of the Full Court which endorse the principles stated in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 concerning the approach to indemnity costs (see for example Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; Limousin v Limousin (Costs) (2007) 38 Fam LR 478). It has also been accepted that in proceedings under the Act, where the usual rule is that each party shall bear his or her own costs, an order for indemnity costs is even more exceptional than in jurisdictions where the usual rule is that costs follow the event (Mansfield and Ors & Mansfield and Anor (2019) FLC 93-920 at [7]).

3. Somewhat unusually, indeed refreshingly, the difference between the wife’s party/party and indemnity costs is only about $7,000.  We are used to there being a much greater divergence.

4. In any event, as we said earlier, the appellants should have attended the wife’s offer of settlement and considered more carefully their decision to prosecute the application for leave to appeal.  It is reasonably clear that their comparative wealth emboldened them to proceed without regard to the legal expenses they would incur or the risk that they might be ordered to pay the wife’s legal expenses.  Indeed, they willingly incurred costs well in excess than those of the wife.  When regard is had to the modest difference between the wife’s indemnity and party/party costs, the same factors that justify an order for costs in the wife’s favour, in particular the long line of authority against appellate intervention in matters of this type, also justify indemnity costs.

5. In our view, the seemingly mistaken concessions recorded on behalf of the appellants as to costs, were concessions the appellants should have made.  On any reasonable view of the facts and the law, their decision to challenge even an order for party/party costs in favour of the wife cannot be justified.  Their approach has wrongly added to the wife’s costs burden and is further justification for an order for costs in her favour in relation to the application for costs, which we understand by her application for indemnity costs she also seeks.  We will not tolerate the question of costs being turned  into its own piece of satellite litigation and, having regard to the wife’s costs agreements and the work undertaken, we are satisfied that an additional $2,000 is appropriate.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ainslie-Wallace, Ryan & Tree JJ) delivered on 5 November 2020.

Associate:

Date:  5 November 2020