ELDEN & JACOBS (No.2)
[2020] FCCA 2870
•21 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ELDEN & JACOBS (No.2) | [2020] FCCA 2870 |
| Catchwords: FAMILY LAW – Costs – whether justifying circumstances to make costs order – costs sought on an indemnity basis – costs order made. |
| Legislation: Family Law Act 1975 (Cth), ss.90RD, 117 Federal Circuit Court Rules 2001, rr.21.02, 21.04, 21.10 |
| Cases cited: Bant & Clayton (Costs) [2016] FamCAFC 35 |
| Applicant: | MS ELDEN |
| Respondent: | MR JACOBS |
| File Number: | BRC 13206 of 2019 |
| Judgment of: | Judge Tonkin |
| Hearing date: | 15 October 2020 |
| Date of Last Submission: | 15 October 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 21 October 2020 |
REPRESENTATION
| The Applicant appeared in person |
| Solicitors for the Respondent: | JMW Legal |
ORDERS
In accordance with the Notice of Discontinuance filed on 21 August 2020 the wife’s application for adjustment of property interests and leave to extend time is withdrawn and dismissed.
Within forty two (42) days of the date of these Orders, the wife pay the husband’s costs fixed in the sum of $25,000 by way of bank cheque payable to “JMW Legal Law Practice Trust Account or by direct deposit to JMW Legal Law Practice Trust Account BSB ... Account ...17 with reference ....
The wife be at liberty to return to the Suburb LL property on a date to be agreed with the husband via his solicitor within 28 days of the date of these orders to collect her personal property and she shall be accompanied by police for that purpose.
The husband has liberty to re-list the matter in the event that the keys and remote controls to the Suburb LL property have not been returned.
IT IS NOTED that publication of this judgment under the pseudonym Elden & Jacobs (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRC 13206 of 2019
| MS ELDEN |
Applicant
And
| MR JACOBS |
Respondent
REASONS FOR JUDGMENT
Introduction
On 4 November 2019 the wife commenced proceedings seeking a declaration under section 90RD of the Family Law Act1975 (Cth) that a de facto relationship existed between the parties from 2005 until 18 January 2018. The respondent sought a declaration under section 90RD (1) (b) that no de facto relationship existed between the parties after 2010. The matter was heard by me on 13 July 2020. I delivered judgment on 13 August 2020[1] and made a declaration that pursuant to section 90RD (1) (b) no de facto relationship existed between the parties after 2010. I ordered that the matter be listed for mention regarding the wife’s application for leave to extend time. On 21 August 2020 the wife filed a Notice of Discontinuance.
[1] Elden & Jacobs [2020] FCCA 2252
On 17 September 2020 the husband filed an application in a case seeking costs fixed in the sum of $32,795, that the wife surrender the keys and remote controls for the home situated at RR Street, Suburb LL Queensland and the wife have liberty to return to the RR Street, Suburb LL property to collect her personal property on a date to be agreed. The wife filed a response on 7 October 2020 seeking an order that the husband’s application be dismissed.
Background
The parties commenced cohabitation and lived as a de facto couple for about 3 years. The parties separated in 2009 and did not live together as a de facto couple after 2010. There are two children of the relationship currently 12 and 10 years old.
Orders sought by the parties
The husband seeks an order that the wife pay his costs fixed in the amount of $32,795 within 14 days, that the wife surrender the keys and remote controls for the RR Street, Suburb LL property and the wife be permitted to return to the RR Street, Suburb LL property to collect her personal belongings in the company of police on a date to be agreed.
The wife sought that the husband’s application be dismissed.
Legal principles
The starting point with respect to a consideration of an application for costs is subsection 117 (1) of the Family Law Act 1975 (“the Act”) which provides that each party shall pay his or her costs. Subsection 117 (2) of the FLA provides however that the Court may make an order for costs if satisfied there are justifying circumstances.[2] When exercising its discretion the court is required to have regard to the factors set out at subsection 117 (2A) of the FLA in so far as they are relevant.
[2] Penfold & Penfold (1980) 144 CLR 311 at 315
In Stephens & Stephens [2010] FamCAFC 117 at [67] the Court observed that “An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 per Mason CJ at 543 and McHugh J at 567; Ruddock and Ors v Vadarlis and Ors (2001) 188 ALR 143 per Full Court of the Federal Court at [12] and Brott and Joachim [2006] FamCA 256; (2006) FLC 93-259 per Full Court (Holden, Warnick and Boland JJ) at 80,403-404”.
Rule 21.10 of the Federal Circuit Court Rules 2001 (Cth) provides:
Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Parts 1 and 2 of Schedule 1; and
(b) disbursements properly incurred.
Rule 21.02(2) of the FCC Rules confirms that:
In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
Rule 21.04 of the FCC Rules provides:
If the costs of a motion, application or other proceeding are reserved, the costs reserved follow the event unless the Court otherwise orders.
Indemnity costs
Regarding the applicant’s contention that an order for costs be made on an indemnity basis Shepherd J in Colgate-Palmolive v Cussons Pty Ltd (1993) 118 ALR 248 having reviewed relevant authorities summarised the applicable principles with respect to costs at [24] as follows:
“[24] It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:-
1. The problem arises in adversary litigation, i.e. litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, for example a government agency or statutory authority.
2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. …. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it……
4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. ….. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the Court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require.” Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice…..
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations 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 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 ………. The 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.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.”
The Full Court in Prantage & Prantage [2014] FamCA 850 endorsed Shepherd J’s approach in Colgate Palmolive (supra) when considering an application for indemnity costs.
Evidence
The husband deposed in his affidavit filed on 17 September 2020 that prior to the wife commencing proceedings on 4 November 2019 through his lawyers he wrote to her on 7 March 2019 pointing out that the parties had reached a property settlement by 2013 and from 2010 he paid child support with respect to the two children of the relationship.
On 13 June 2019 the husband’s solicitor confirmed with the wife’s solicitor that the parties had completed a property settlement in 2013 and had separated on a final basis in 2010.
The husband produced documents on 7 August 2019 including a statement from his accountant wherein the accountant was advised by the husband soon after the birth of Y in 2010 that he made arrangements to pay the wife child support such payments included in his tax returns. The wife also advised the husband’s accountant that he had made arrangements for child support and those arrangements included permission for the wife and children to live rent free in the husband’s property at Suburb Z.
The wife commenced proceedings on 4 November 2019. On 24 January 2020 the husband incurred costs and filed a response. On 29 January 2020 he made an offer to the wife that she file a notice of discontinuance otherwise he would seek costs against her on an indemnity basis.
On 31 January 2020 the husband filed his affidavit and by covering email sought a response to his offer of 29 January 2020. No response was received.
On 15 June 2020 the wife made an offer that she receive 65% of the net asset pool. On 16 June 2020 the husband rejected that offer and through his solicitor advised the wife that he would accept the wife withdrawing her application and vacating the RR Street, Suburb LL property.
On 6 July 2020 the wife advised the husband’s solicitor that she agreed to vacate the RR Street, Suburb LL property by 22 August 2020 and again sought 65% of the net property pool.
On 7 July 2020 the husband’s solicitor rejected the wife’s offer that she receive 65% of the net property pool and advised the wife to immediately vacate the RR Street, Suburb LL property and opposed her remaining there until 22 August 2020. He also advised her that he would be seeking costs on an indemnity basis if the Court found in his favour.
The matter proceeded to trial on 13 July 2020 with judgment delivered on 13 August 2020 such judgment finding in the husband’s favour and a declaration made that no de facto relationship existed after 2010.
The husband argued that costs should be awarded on an indemnity basis for the following reasons:
a)He advised the wife prior to commencing proceedings that he denied the de facto relationship existed after 2010 and despite that she proceeded to commence proceedings;
b)The wife did not seek mediation or any alternative dispute process prior to commencing proceedings;
c)There was independent evidence to support the husband’s contention that the parties had separated on a final basis and did not live together as a de facto couple after 2010. These included evidence that the husband had paid child support from 12 May 2009, the parties had reached a property settlement and the wife had received $200,000 and the wife had sought advice from a lawyer to draw up terms of settlement for property orders though consent orders had never been filed.
d)The husband made a number of offers to settle the proceedings and the wife made no reasonable attempt to compromise the matter;
e)The husband incurred significant costs that may have been avoided including costs of the substantive proceedings in the amount of $29,796.60 and costs with respect to the costs application in the amount of $3000 being a total of $32,796.60. The husband seeks an order for $32,795.00.
The husband contends that should the Court refuse to make an order for costs on an indemnity basis then an order for costs at scale should be made in the amount to $11,927.05.
The husband did not update his financial circumstances. He indicated at the time of the costs proceedings that he was unemployed. He was not in receipt of Jobseeker or Jobkeeper having lost his employment prior to the commencement of the Covid-19 pandemic. He said he was ineligible from receiving those benefits. He had formerly worked as a tradesman earning about $3094 gross per week in addition to receiving benefits for living away from home and travel allowances worth about $793 per week and rental income from a duplex he owned of about $630 per week. In his financial statement filed in January 2020 he deposed that he owned three properties worth $1,750,000 with mortgages of $696,652. He had savings of about $43,000 at that time. He was paying the wife $502 per week for the children in child support.
The wife filed an affidavit on 7 October 2020 and deposed that she did not have the funds to pay the husband’s legal bills. She deposed that she was residing in one of the three properties she owned while the other two were tenanted from which she derived a combined rental income of $715 per week. She incurs real estate fees and charges with respect to the rental properties.
She deposed that she is employed on a casual basis with Employer SS and earns around $4000 to $5000 a month after tax. After mortgage payments she is left with $4330 per month to live on. She pays for private school fees, sporting activities and expenses for all three properties. She deposed that her work is not steady. In her financial statement filed on 4 November 2019 she deposed she owned property worth about $1,028,073. She recently refinanced her mortgage which has increased to $785,390.99.
She said she incurred $60,000 in legal fees and is no longer in a position to hire lawyers. She submitted that she has no capacity to pay the husband’s legal fees. She deposed “I concede that I lost but still remain in my resolve that my truth was distorted by others.” She deposed that if an order for costs is made she will need to have a payment plan to pay the husband.
Discussion
Pursuant to subsection 117 (1) of the FLA each party shall pay his or her costs. Subsection 117 (2) of the FLA provides that the Court may make an order for costs if satisfied there are justifying circumstances.
Pursuant to subsection 117 (2A) (a) of the FLA the wife is in receipt of both rental income after tax of between $6860 and $7860 per month and casual employment income after tax of between $4000 to $5000 per month giving her an annual income after tax of between $130,320 and $154,320 p.a. The husband is currently unemployed. I am satisfied there is a significant disparity in the parties incomes. I take that into account.
Pursuant to subsection 117 (2A) (e) of the FLA the husband made a number of offers to the wife prior to the wife commencing proceedings and thereafter offered that she discontinue or withdraw the proceedings otherwise he would seek a costs order against her. There existed a significant amount of independent or objective evidence which tended to prove that the parties were separated after 2010. In particular the payment of child support declared by the husband in his tax returns, the payment of $200,000 to the wife which the husband contends was by way of property settlement in 2012 or 2013. Further the engagement by the wife of a solicitor in 2011 to draw up consent orders for property settlement. It is unclear whether the wife received proper advice from her solicitor regarding the prospects of success of her property application.
Regarding the determination of the issue of the date of separation the wife was wholly unsuccessful. While the wife ultimately elected to discontinue her property application discontinued applications are not seen as “wholly unsuccessful” for the purposes of s117(2A)(e).[3] Subsection 117(2A) (e) of the FLA is directed to “cases where an application is heard and determined and the applicant is wholly unsuccessful”.[4] In this particular matter the findings I made pursuant to my judgment would have indicated to the wife that there was little utility pursuing any application for leave to extend time in which to commence proceedings. I am satisfied that overall the wife has been wholly unsuccessful. I take that into account.
[3] Parke & Estate of the Late A Parke (2016) FLC 93-748 at [17]
[4] Bant & Clayton (Costs) [2016] FamCAFC 35 at [22].
Indemnity costs
Pursuant to subsection 117(2A) (c) of the FLA the parties conduct is a relevant consideration. There are a number of authorities that indicate the type of conduct that may lead to a costs order for example where a party gives false or misleading evidence especially where extra time and expense is occasioned to disprove that evidence,[5] and where there has been a failure of a party to provide proper information or obstruction in the collection of material.[6] In my judgment I made a finding that I did not accept the wife’s assertion that the parties reconciled between July 2009 and 2011 primarily because the wife applied for a single parent’s benefit in 2009 and continued to receive those payments until 2011. About that time she was no longer entitled to an income tested pension having regard to the assets she owned. Of significance the wife gave evidence that she and the husband were in a de facto relationship between 2009 and 2011 and she was aware at that time that she was not entitled to a single parent’s benefit. She agreed that this would mean she was defrauding the Commonwealth obtaining benefits she was not entitled to. I ultimately rejected the wife’s assertion that she was not entitled to the single parents benefit at this time as I found that the parties had separated and did not reconcile after 2010. In addition the husband had paid child support from 12 May 2009 and the wife had instructed a lawyer to draw up consent orders for final property settlement. I formed the view that the wife was untruthful and prepared to go to any length to achieve the outcome she sought a further adjustment of property interests from the husband.
[5] Penfold & Penfold (1980) FLC 90 - 800
[6] Greedy & Greedy (1982) FLC 91 – 250, Johnson & Johnson (No 2) (Costs) (2000) FLC 93 - 040
Conclusion
In this matter I am satisfied that there are justifying circumstances that a costs order should be made against the wife as discussed above. Further I am satisfied that there are circumstances in this case to depart from the usual course with respect to making an order for costs and an order should be made on an indemnity basis.
There was significant independent or objective evidence as set out above to support a finding that the parties had separated on a final basis and did not reconcile after 2010. I am satisfied that the wife’s evidence regarding the continuation of the de facto relationship was false and time and expense was incurred with the husband being required to disprove that evidence. I take into account the parties financial circumstances and also take into account the disparity in the parties’ income noting that the husband is unemployed and has incurred significant legal costs. I accept the husband is seeking an order for the payment of some $32,000. Taking into account all relevant factors I intend to order that the wife pay the husband’s costs fixed in the amount of $25,000 rather than the full amount sought by the husband on an indemnity basis. I am satisfied that such an order is justified in the circumstances.
Application to vacate the RR Street, Suburb LL property
In his application in a case the husband sought orders that the wife return the keys and remote controls to the RR Street, Suburb LL property. He said the wife and children had occupied that property since November 2017 “mostly against his wishes.” He observed that during the hearing the wife gave evidence that she could vacate the property within 30 days i.e. by 12 August 2020. The wife’s solicitor advised that the wife was prepared to vacate that property by 22 August 2020. On 17 September 2020 the wife still resided in that property. On 21 August 2020 the wife’s solicitor advised that the wife would not vacate the property until 30 October 2020. The husband deposed that the wife had the ability to move into the property her mother was currently residing in located at NN Street, Suburb OO.
The husband deposed that on 31 August 2020 he instructed his solicitor to request the wife vacate the property by 19 September 2020 the last day of school term being 18 September 2020. On 8 September 2020 the husband was advised that the wife’s solicitor had ceased to act on her behalf.
The wife filed an affidavit on 7 October 2020 and deposed that her address was NN Street, Suburb OO. I accept the wife’s evidence that she has now vacated the RR Street, Suburb LL property. With respect to the issue in delaying vacating the property the wife deposed that “my tenants were able to move out on 19 September 2020 and she moved in on 26 September 2020.” That statement is contrary to the husband’s assertion that the wife’s mother resides in that property.
The wife deposed that she had handed all the keys and remote controls for the RR Street, Suburb LL property over on 2 October 2020. She maintains that she left the keys with TT Accountants (next door to JMW Legal). I accept that evidence. Hence it is unnecessary to make any further orders as sought by the husband however if it is not the case that the wife has vacated the Suburb LL property and/or handed over the keys and remote controls of the property the husband has liberty to re-list the matter.
There is some evidence that the wife has personal belongings on the RR Street, Suburb LL property. I intend to make an order that the wife attend the RR Street, Suburb LL property on a date agreed to by the parties in the company of police to collect her personal belongings.
I make orders accordingly.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Tonkin
Date: 21 October 2020
0
9
3