Ettridge and Somers (No. 3)

[2018] FamCA 943

FAMILY COURT OF AUSTRALIA

ETTRIDGE & SOMERS (NO. 3) [2018] FamCA 943

FAMILY LAW – COSTS – where the respondent opposed an order for indemnity costs as sought by the applicant – when the applicant relied upon a Calderbank offer, but that was prior to s 90RD declaration – costs ordered on a scale basis.

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

Colgate-Palmolive Company & Anor v. Cussons Pty Ltd [1993] FCA 801; 46 FCR 225
Ettridge & Somers [2017] FamCA 1173
Ettridge & Somers (No. 2) [2018] FamCA 863
Harris & Dewell and Anor (No. 2) [2018] FamCAFC 180
Munday v Bowman (1997) FLC 92-784
Somers & Ettridge [2018] FamCA 874
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681,
(2000) FLC 93-029

APPLICANT: Ms Ettridge

RESPONDENT: Mr Somers

FILE NUMBER: MLC 11262 of 2015

DATE DELIVERED: 20 November 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: By way of written submissions

SUBMISSIONS RECEIVED FROM

SOLICITOR FOR THE APPLICANT: Carew Counsel

THE RESPONDENT: In Person

Orders

1. That the respondent pay 60 per cent of the applicant’s costs according to the scale under the Family Law Rules 2004 (Cth) for the period from the day after the hearing on 7 June 2018 (but excluding the hearing and the incidental costs associated with the hearing on 7 September 2018) by agreement with the respondent and failing agreement, as assessed.

2. That the application by the applicant contained in the submission filed 9 November 2018 and the respondent’s response filed by submission on 16 November 2018 are otherwise dismissed. 

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 Ettridge & Somers (No. 3) 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).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 11262 of 2015

Ms Ettridge

Applicant

And

Mr Somers

Respondent

REASONS FOR JUDGMENT

1. On 29 October 2018, I made final property orders between Ms Ettridge (“the applicant”) and Mr Somers (“the respondent”)[1].

   [1] Published as Ettridge & Somers (No. 2) [2018] FamCA 863

2. Claims and counterclaims against each other have been significant in this case since its commencement in 2015. Costs have been controversial from the beginning.  It would be reasonable to say that the applicant’s position has been that the respondent has been unreasonable throughout the litigation forcing her to ultimately go to trial.  Similarly, the respondent would argue that the applicant has refused all forms of negotiation and mediation and as a person without legal representation, he wanted to resolve the proceedings but could not do so because of the attitude adopted by the applicant.

3. Arising out of the final orders, the applicant now seeks costs against the respondent on an indemnity basis in the sum of $234,574.64 and in the alternative, on a scale basis of $168,455. The respondent opposes any order being made.

4. In the final orders made on 29 October 2018, I made provision for cost applications by way of written submission. The applicant filed hers on 9 November 2018, and on 16 November 2018, the respondent filed his.

5. For the reasons that follow, I am satisfied in order for costs should be made but not on an indemnity basis and certainly not on the basis of anything more than the party and party costs incurred from the day after the case was set down by Johns J on 7 June 2018.  In circumstances where the Court is not provided with the breakdown of the cost claims to which I have already referred, I do not consider it appropriate to guess and the parties will have to undergo an assessment if they cannot reach agreement.

6. The only background matters of relevance are that the respondent owned a property in Suburb C into which the applicant moved to live in during the relationship between them. The legal title to the property remained with the respondent at all times. Shortly after the relationship commenced, the applicant was seriously injured in a motor vehicle accident, a consequence of which was that she received substantial damages. When the relationship came to an end, the respondent denied the parties were in a de facto relationship leading to a five day trial before Thornton J culminating in a declaration under s 90 RD of the Family Law Act 1975 (Cth) (“the Act”) on 15 September 2017[2].

   [2] Published as Ettridge & Somers [2017] FamCA 1173

7. On 7 June 2018, the matter was set down for trial by Johns J in her Honour’s capacity as the Case Management Judge.  The orders of that day were very clear and compliance in readiness for trial becomes an issue on this costs application.

8. There were further disputes between the parties about the readiness for trial in September 2018 at a mention before Johns J in which a variety of orders followed. Those orders culminated in the matter coming before me in a trial that was conducted over three days.

9. The applicant’s basis for seeking an order for costs is essentially that the respondent was wholly unsuccessful and that his conduct in the running of the litigation forced her to incur substantial costs.

10. Underpinning a substantial portion of the quantum of the applicant’s costs is a claim against the respondent for contribution towards her costs in the hearing before Thornton J. The applicant submits that as there was a Calderbank offer in existence from 2016, it was inappropriate to tell Thornton J about that. The applicant sought costs against the respondent at the conclusion of the making of the orders by Thornton J and her Honour declined, directing that each party pay their own costs. The applicant now says that she ought to be given the opportunity to raise the Calderbank offer, but in the context of having had to litigate before Thornton J over the s 90 RD argument. The respondent is a litigant in person without legal representation and his response was largely that her Honour urged the parties to negotiate and that otherwise, it was inappropriate to make an order for costs.

11. In my view, the principle that governs this particular part of the determination is res judicata. The issue was determined and the applicant chose not to put all the matters available to her for tactical reasons. It might be open to argue that she is caught by an Anshun Estoppel point. However, it seems to me that she had a solution namely to reserve the costs having regard to the Calderbank position but she chose not to. In my view, she cannot raise the issue now.

12. The second component of the applicant’s claim relates to the hearing before Johns J on 7 September 2018 at which her costs were reserved.

13. In setting the matter down for trial on 7 June 2018, Johns J listed a mention on 7 September 2018. Immediately prior to that hearing, the respondent filed an application in a case seeking litigation funding and also the return of some money. He also raised an issue of disclosure.  The applicant sought dismissal of his application but then sought injunctions in respect of his dealings with the Suburb C property. She also sought a specific order relating to the valuer having access to that property.

14. I have the advantage of the published reasons delivered ex-tempore by Johns J on 7 September 2018[3] but there is nothing in those reasons that indicates why the costs of the applicant were reserved.  Her Honour decided some of the issues on the basis that they were matters that required testing of the evidence and the final hearing was only just over one month away. 

    [3] Published as Somers & Ettridge [2018] FamCA 874

15. Her Honour made orders in favour of both parties (see [25] and [28]). In my view, there is no justifiable circumstance that I can find such as would enable me to depart from the principle to which I refer below as set out in s 117 of the Act for the September hearing.

16. I turn then to the question of the costs associated with the trial.

17. I have already indicated the two main bases upon which the applicant seeks costs. She submitted that the applicant had denied the existence of the de facto relationship and continued to do so, repeatedly failing to comply with “numerous orders of the court” requiring discovery. True it is that the respondent felt aggrieved by the declaration made by Thornton J, but that is irrelevant having regard to the fact that the order was not appealed and no new circumstances were raised such as to enable me to set aside the declaration. More importantly, the “numerous orders” referred to by the applicant seem mostly to relate to the period prior to June 2018. In my view, to the extent that the respondent had not been responsive and compliant, the remedy was in the hands of the applicant. 

18. The applicant argued that the respondent’s conduct increased her legal costs and that she had no choice but to proceed to a final hearing. In my view it is not discovery that caused the final hearing to proceed but rather the obstinate view of the respondent as to the entitlement of the applicant.

19. The trial began with the parties filing outlines of argument. In those documents, reference was made to the final orders that each proposed.  It was very unclear what orders the respondent was seeking and some time was spent on the first day trying to clarify that. It was not until the end of the trial that the picture became clearer from the respondent’s point of view, but in my view, he again changed his position inconsistently with how he had opened the case three days before. 

20. A number of matters were raised by the applicant which I shall not repeat, but they have been taken into account. In my view they are not of much assistance. The Judgment of the Court from 29 October 2018[4] is self-explanatory. I found the respondent unresponsive, loquacious and argumentative and that extended the time of the trial because much of what the respondent wanted to argue was irrelevant to the ultimate determination.

    [4] [2018] FamCA 863

21. Significantly, on 29 August 2016, the applicant through her solicitors provided to the respondent what is described as a Calderbank offer. The letter of that date is attached to the submissions. Therein, the applicant sets out a structure for a resolution of all property matters on a final basis the fundamental issue of which was the sale of the Suburb C property and the division of the proceeds.  Having regard to the findings I have made and the orders of 29 October 2018, it is clear that the respondent would have been better off financially had he accepted the applicant’s offer. Conversely, by virtue of having to conduct the proceedings including the 2017 hearing before Thornton J, the applicant was much worse off because she expended significant sums of money on her legal fees.

22. The respondent’s submission appeared carefully thought out. He pointed to his request to Thornton J to direct a settlement discussion. However, in hindsight, any such discussion would have been pointless having regard to the way the respondent viewed the entitlement of the applicant as can be seen in the documents he filed with the Court including his outline of case document. Literally read, it was hard to see that the respondent was offering the applicant much at all.  Unlike the professionals involved and indeed the Court, the applicant would have known the way in which the respondent’s thought processes worked, and in those circumstances, she was in a good position to decide whether negotiating with him would be fruitful or otherwise. It would appear in the circumstances that she made the right decision, because her costs would have otherwise been much higher had she negotiated with a person who had adopted a dogmatic view of her entitlement.

23. In his submission, the respondent adopted the mantra of indicating that he had consistently attempted to settle “in recognition of the substantial disadvantage litigation brings to both parties both personally and financially”. That is trite to say but all of the evidence that I heard over three days would indicate that far from his assertion that his negotiation efforts had been exhaustive, his approach was quite the contrary.

24. In his submission, the respondent asserted that the applicant had failed to make discovery of bank accounts but that too was dealt with by Johns J and has no merit.

25. The respondent then said that he was a person who had been taken advantage of during the threshold hearing and that the applicant had successfully ensured that he remained without legal representation. The orders of Johns J on 7 September 2018 indicate otherwise.

26. In his submission, the respondent said:

    [34]The respondent asserts that the applicant’s application for costs on an indemnity basis is unreasonable and does not wish (sic) consume the courts (sic) time or his own.[5]

    [5] Written Submissions of the Respondent, filed on 16 November 2018

27. The respondent then said that the matter was a simple property settlement which had been in the Federal Circuit Court. I can find no such detail.  Unfortunately, he complicated the matter by the way he litigated.

28. The power of the Court to make an order for costs lies in s 117 of the Act. In simple terms, it provides that each party to proceedings under the Act shall bear their own costs. That principle must however give way in circumstances where the court finds there are justifiable circumstances to depart from it.

29. The circumstances here that justify departure from the principle are that the respondent was unreasonable in adopting the position that he did after the determination by Thornton J. Whilst he might have adopted the contrary approach up until that declaration, thereafter, there was no excuse. In his own words, this was a simple property proceeding. He however complicated it by adopting obtuse arguments and his cross-examination was largely irrelevant to the matters that he acknowledged he understood the Court had to consider in s90 SM of the Act.

30. I readily accept that as a litigant without legal representation, the degree of difficulty increases not only in respect of negotiation but also in the conduct of litigation and in particular, the hearing. However, it was the respondent’s choice to take that approach as he had before Thornton J. To the extent that he felt disadvantaged in the legal system, after having conducted a five-day hearing before her Honour, he could have obtained legal advice. It is no excuse to say that he could not afford legal representation because Johns J specifically contemplated that in the hearing on 7 September 2018 and indeed made an order that he did not take up.

31. In the circumstances, the provisions of s 117 of the Act as a principle that each party pay their own costs, can be set aside having regard to the way in which the respondent conducted the proceedings both in respect of his approach but also his rejection of the 2016 offer.

32. Costs are not intended as a punishment, but rather to compensate the person who has little choice but to participate in the proceedings and in this case, I am satisfied the applicant had no choice.

33. Whilst the offer was made in 2016, having regard to the fact that the respondent denied the existence of a de facto relationship, the offer itself takes on real significance after the declaration by Thornton J. It becomes even more significant after June 2018 when Johns J set the matter down for trial. With the applicant’s offer in hand, the respondent was prepared to push on, even in the face of his own concerns that the applicant would not negotiate. He made no similar offer to that of the applicant and was ultimately found wanting.

34. In cases where the Court finds that there are circumstances to justify a departure from the principle in s 117 of the Act, before making any order, it must contemplate the matters set out in s 117(2A) of the Act. In this case, neither party is impecunious although a substantial portion of the applicant’s capital has been spent on legal fees unnecessarily. Nothing in the respondent’s financial circumstances would cause me to think that he cannot afford to make a contribution towards the applicant’s costs. Whilst the respondent is currently unemployed, I found that he had the capacity to earn a reasonable income, whereas the position of the applicant was much less clear. The financial circumstances of the parties is not a factor relevant to not making an order for costs in this case. There are no legal aid considerations, nor should there be, having regard to what the parties were disputing. I have already set out the details about the conduct of proceedings. “Conduct” in the sense used in s 117(2A) of the Act is a reference to that of a litigant rather than as a person. I have no doubt that the respondent saw himself as disadvantaged and that the position adopted by the applicant in seeking a property settlement was an affront to his sensibilities. However, after five days of hearing before Thornton J and receiving her Honour’s judgement, he could no longer justify adopting the position that he did in relation to any entitlement of the applicant.

35. Section 117(2A) of the Act entitles the Court to look at a number of other matters, but in my view, the relevant ones here relate to the conduct of the parties and their current financial circumstances. To deny the applicant any costs would mean that having received no reasonable offer after 2016, the applicant had little choice but to pursue the litigation well knowing that she was eating up costs. However, she chose to contract with lawyers whose costs exceeded the scale set by the Court and in the costs agreement attached to the affidavit of the solicitor[6], the applicant acknowledged that she had been advised of her right to seek independent legal advice before she executed the agreement in December 2015.

    [6] Affidavit of Ms E, affirmed and filed on 9 November 2018

36. In my view, costs should be awarded, but only from the day after the hearing before Johns J on 7 June 2018. I would not permit costs to be ordered against the respondent in relation to the hearing on 7 September 2018, notwithstanding the order made by Johns J having regard to the matters that I earlier mentioned. Otherwise, there should be an order for costs.

37. The applicant sought costs on an indemnity basis and referred to the decisions of Munday v Bowman (1997) FLC 92-784 and Colgate-Palmolive Company & Anor v. Cussons Pty Ltd [1993] FCA 801; 46 FCR 225, along with the Full Court decision in Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681, (2000) FLC 93-029.

38. All of those decisions set out a variety of contemplated circumstances where an order for indemnity costs might be made. They include allegations of fraud knowing them to be false, particular misconduct causing loss of time to the Court and to parties and making allegations which ought never to have been made or which are groundless. Significantly, one basis is the imprudent refusal of an offer to compromise. That issue is made much more difficult where a party is a litigant in person who obfuscates and indicates a desire to settle but does the exact opposite having regard to the negotiating position adopted. In this case, I have already observed the degree of difficulty that the applicant faced.

39. Despite that degree of difficulty, the court has to struggle with parties who do not have the advantage of legal representation as well. In Harris & Dewell and Anor (No. 2) [2018] FamCAFC 180, the Full Court (Strickland, Murphy and Johnston JJ) referred back to the Full Court judgement in Prantage & Prantage (2013) FLC 93-544; [2013] FamCAFC 105. In Harris (supra) their Honours said:

    [26]…in proceedings under the Act, an overriding “usual rule” is prescribed by s 117(1), namely that each party bears their own costs. The degree of departure between that “usual rule” and a result where one party bears the totality of the other party’s costs can be seen to be all the greater. 

    (original emphasis)

    In other words, a party has to show some exceptional circumstances or at least one that is very unusual to justify claiming that all of their costs should be paid by the other. Whilst I find that the respondent may have been difficult to deal with, I could not say that he was any more difficult than many other litigants who struggle with not only the legal process but also coming to terms with the ending of their relationship and the need to satisfy the equitable requirements of the Act. I am very conscious of the fact that the applicant in turn contracted out of the scale costs and therefore understood what she was paying. She must have contemplated a problem having regard to the “usual” rule that each party pays their own costs in a case where she knew how difficult the respondent was going to be.

1. That leaves the question of whether the respondent should pay all of the costs of the applicant after the matter was set down. Even allowing for the Calderbank offer, the applicant needed the assistance of the Court to end the litigation. As the Suburb C property was in the respondent’s name alone as it had always been, the applicant needed orders to enable enforcement of her entitlement. Importantly, she and the respondent had set up a self-managed superannuation fund which contained her member account. Albeit she desired more than her member account (65 per cent was her application), the order was that she have access to her member account. For a number of years, even allowing for the absurd actions of the respondent in endeavouring to remove the applicant as a trustee of the fund, the fund remained non-compliant. That inactivity out the fund’s capital at risk and one of the issues in the proceeding was the rectification of that problem. The applicant therefore needed that assistance.

2. In the circumstances, it would not be just to make the respondent pay all of the applicant’s costs. The most significant portion of the applicant’s costs has been in pursuing what I consider was rightfully hers and that should have been abundantly clear to the respondent after the determination of Thornton J. His approach after that date meant that the applicant had to litigate in respect of the cash component of her claim for relief unnecessarily. Accordingly, I would assess the contribution that the respondent should make to her costs as 60 per cent. That reflects the Calderbank offer but also takes into account the need of the applicant to obtain the superannuation fund rectification and resolution.

3. In my view therefore, the appropriate order is to direct that the respondent pay 60 per cent of the applicant’s costs from the day after the 7 June 2018 hearing (but excluding the hearing before Johns J on 7 September 2018) according to the scale under the Family Law Rules 2004 (Cth) by agreement, and in default of agreement, as assessed by a registrar.

4. The final orders made reference to the conveyancer making a further adjustment to the ultimate payment of the proceeds of Suburb C to include any orders for costs. As I have been unable to calculate those costs because there was insufficient detail provided, the parties will have to either calculate that sum before Suburb C is settled or alternatively, if the respondent insists on a distribution before any assessment is concluded, the applicant will need to file an application for an injunction precluding the distribution until the assessment is completed.  

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 20 November 2018.

Acting Associate:

Date:  20 November 2018