Ewellyn and Ewellyn and Ors

[2010] FamCA 526

FAMILY COURT OF AUSTRALIA

EWELLYN & EWELLYN AND ORS [2010] FamCA 526

FAMILY LAW – COSTS – Circumstances justifying order – Where second and third respondents successful in securing orders and declarations consistent with proposals made from the outset – Where wife resisted second and third respondents claims as leverage in property settlement proceedings – Abuse of Court process – Indemnity costs – Wife to pay the costs of the second and third respondent on a party-party basis

Family Law Act 1975 (Cth)

Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225
In the Marriage of Munday & Bowman (1997) FLC 92-784
Penfold v Penfold (1980) FLC 98-800
Younghanns v Younghanns (2000) FLC 93-029

APPLICANT: Mr Ewellyn

FIRST RESPONDENT: Ms Ewellyn

SECOND RESPONDENT: Mrs Ewellyn (Snr)

THIRD RESPONDENT: Mr Ewellyn (Snr)

FILE NUMBER: (P)NCC 143 of 2008

DATE DELIVERED: 22 June 2010

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: The Hon. Justice Ryan

HEARING DATE: 15 June 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Cummings

SOLICITOR FOR THE APPLICANT: Boyd Olsen Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Mr Dura

SOLICITOR FOR THE FIRST RESPONDENT: Galloways Solicitors & Attorneys

COUNSEL FOR THE SECOND RESPONDENT: Mr Wilson

SOLICITOR FOR THE SECOND RESPONDENT: Turnbull Hill Lawyers

SOLICITOR FOR THE THIRD RESPONDENT: Catherine Henry Partners
Mr S Rugendyke

Orders

1. That the wife pay the costs incurred by the second respondent on and from 11 August 2008 in these proceedings on a party/party basis which costs are to be paid within 28 days of being agreed or assessed.

2. That the wife pay the costs incurred by the third respondent on and from 28 August 2008 in these proceedings on a party/party basis which costs are to be paid within 28 days of being agreed or assessed.

3. All outstanding applications are dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Ewellyn & Ewellyn and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: (P)NCC 143 of 2008

MR EWELLYN

Applicant

And

MS EWELLYN

First Respondent

And

MRS EWELLYN (SNR)

Second Respondent

And

MR EWELLYN (SNR)

Third Respondent

REASONS FOR JUDGMENT

1. Mrs Ewellyn Snr (the second respondent) and Mr Ewellyn Snr (the third respondent) have applied for orders for indemnity costs against Ms Ewellyn (the wife).  The second and third respondents had been given leave to intervene in property settlement proceedings initiated by their son, Mr Ewellyn, against Ms Ewellyn (the wife).  It was asserted by the second respondent that she was the beneficial owner of a property at T, title to which was registered in the husband and wife’s name.  It was alleged by the second and third respondents that beneficial ownership (but for a specified portion) of the sale proceeds of a property at H which had been registered in the husband and wife’s name, was vested in them and an associated investment trust. 

2. On 15 June 2010 the parties presented proposed consent orders which resolved the property settlement proceedings and the applications by the second and third respondents.  Orders were made by consent in accordance with the proposed orders, which, subject to these costs applications by the second and third respondents, finalised all outstanding applications.

3. In relation to the property settlement proceedings, the net non-superannuation pool was in the vicinity of $2.8 million.  There was approximately $530,000 in the superannuation pool.  In general terms, the property settlement orders provided that the wife would remain in occupation of a property at O until its sale whereupon the husband would transfer his interest in a property at R to her.  The latter property had an agreed value of $1.2 million.  From the sale proceeds of O property, the wife is to receive $150,000.  In the unlikely event insufficient funds remained from the sale proceeds of O property to pay the wife the adjusting amount of $150,000, the husband must make good the shortfall.  Subject to the wife being required to give up possession of a motor vehicle and tractor, she will otherwise retain those assets in her possession, including her small superannuation interest.  Thus, while the husband received a greater share of the matrimonial assets, it would appear that this outcome recognised, at least in part, his greater contributions. 

4. It is appropriate to set out the agreement and orders[1] which involved the second and third respondents.  This is because the settlement of their claims was virtually identical to the relief sought by them from the outset. 

   [1] Exbibit ‘B’

   1.That within 21 days the Applicant Husband and the First Respondent do all acts and things necessary and sign all documents to transfer their interest in the property situate and known as [T] more particularly described in Certificate of Title Folio Identifier […] to the Second Respondent, [Mrs Ewellyn Snr], as her property absolutely.

   2.That upon the Applicant Husband and the First Respondent complying with Order 1 hereof, the Second Respondent, [Mrs Ewellyn Snr], indemnify the Applicant Husband and the First Respondent as to all liabilities and outgoings relating to the property situate and known as [T].

   3.That pursuant to section 78 of the Family Law Act this Court declares that the proceeds of sale of the real property known as and situate at [H] be the property of the parties as follows:

   a.As to the sum of $10,000.00 to the Second Respondent, [Mrs Ewellyn Snr].

   b.As to the sum of $70,000.00 to the [Ewellyn Snr] Investment Trust.

   c.As to one-third of the balance to the Second Respondent, [Mrs Ewellyn Snr].

   d.As to one-third of the balance after the declarations contained in paragraph a. and b. to the Third Respondent, [Mr Ewellyn Snr].

   e.As to the balance then remaining, to the Applicant Husband.

Brief background facts

1. It is unnecessary to set out in considerable detail the background facts.  The following facts are sufficient to lay the framework for consideration of the cost applications. 

2. Before the husband and wife commenced a relationship the second and third respondents conducted in partnership a trucking business.

3. In October 1973 Ewellyn Trucking Services Pty Limited was incorporated.  For the hearing it was valued at approximately $3.5 million.  During the course of the marriage in this company, the husband acquired 65,000 (A) redeemable preference shares, 15 (A) ordinary shares and 15 (B) ordinary shares.  The value of the husband’s interest in this company was approximately $48,000.

4. In the late 1970’s the second and third respondents brought the husband and their daughter into the partnership.

5. On 29 June 1981 the partnership was wound up.  At the same time Ewellyn Haulage Pty Limited was incorporated at which time the husband was allocated one (E) class share.  The partnership assets were transferred to the company.  Ewellyn Haulage Pty Limited was valued at approximately $3.3 million in relation to which the husband’s share was valued at $1.

6. The husband and wife married in September 1981.

7. As a gift, in January 1985 the third respondent purchased T property in the names of the husband and the wife.  The husband and wife did not contribute to its acquisition costs. 

8. Following renovations to T property, during 1986 the husband and wife took up occupation of the property.

9. In 1990 the second and third respondents separated.  They have never divorced.

10. In the mid 1990’s the husband and wife purchased a property at H for $105,000 as joint tenants.  The second respondent paid a $10,000 deposit with the balance provided through a commercial bill advanced to the husband and the wife.  Interest payments on the commercial bill were paid by Ewellyn Haulage Pty Limited.  At the end of each financial year, Ewellyn Haulage Pty Limited declared dividends in favour of the husband, second and third respondents.  The dividend payments to each of them included a one-third share of the interest paid on the commercial bill during the preceding financial year.

11. In 1995, the husband and wife unsuccessfully attempted to sell T property.

12. In June 1996 Ewellyn Haulage Pty Limited paid $25,000 by way of reduction to the H property commercial bill.  One-third of this amount was declared by way of dividend to each of the husband, second and third respondents.

13. In March 1997 Ewellyn Snr Pty Limited, as trustee for the Ewellyn Snr Investment Trust paid $70,000 to discharge the H property commercial bill.  This amount remains recorded in the accounts of Ewellyn Snr Pty Limited as part of a fluctuating loan between Ewellyn Snr Pty Limited and Ewellyn Haulage Pty Limited.

14. In 1998, the husband and wife sought but were unable to sell T property.

15. The husband and wife put T property to auction during 1999 but it failed to sell.  It was then listed for sale by private treaty. 

16. The husband’s sister lived in the property adjacent to T property.  For some time the second respondent had suggested within the family that she acquire T property.  The wife was privy to a reasonable number of these conversations. 

17. During 2000, the second respondent again proposed she buy T property for which she offered to pay $670,000.  This was the amount for which the property was listed for sale.  Agreement was reached in those terms and for payment of the purchase price to be made by instalment.  Pending the second respondent being able to move in the husband and wife planned to remain in occupation of the home while they looked for a larger rural property.  The husband and wife were informed that in order to raise the necessary funds, the second respondent would need to sell her home P.  This property was listed for sale on 3 April 2000. 

18. The second respondent paid the purchase price as follows:

    a.5 June 2000 – payment to the husband from

    
    

    the second respondent’s Newcastle Permanent

    account  $ 30,000.00

    b.     30 October 2000 – payment of proceeds of sale of

    
           

    P property  $200,000.00

    c.     19 July 2002 – payment from Ewellyn Haulage

    
           

    Commonwealth Bank account  $ 24,140.00

    d.     23 August 2002 – payment from Ewellyn Haulage

    
           

    Commonwealth Bank money market account                   $ 85,000.00

    e.     23 August 2002 – payment from Ewellyn Haulage

    
           

    Commonwealth Bank money market account                   $ 15,000.00

    f.     15 November 2002 – payment from Ewellyn

    
           

    Haulage Commonwealth Bank money market account     $200,000.00

    g.     7 August 2003 – payment from third respondents
    Commonwealth Bank money market call account
    (accounted for in the Ewellyn Snr Investment Trust

    
           
           

    annual accounts)  $119,293.38

    TOTAL  $673,433.38

19. On 23 April 2003 the second respondent’s then solicitors, Sparke Helmore, sent a letter to the husband and wife jointly in which they summarised the terms of the sale and enclosed a memorandum of transfer for signature by the transferors.  The wife denied she saw this letter.  According to the second respondent the husband informed her that he and the wife signed the transfer which was lost. 

20. In August 2003 the husband and wife purchased R property.  At about the same time they vacated T property.  Once T property had been vacated the second respondent paid for significant repairs and renovations to it.  The wife was aware of the renovations and repairs being undertaken to the T property.

21. In about September 2003 the second respondent moved into T property.  Since then, she has treated the property as her own with all outgoings paid by her. At no stage prior to or since did the wife demand payment for the property from the second respondent.  I am satisfied this is because from the outset she participated in the discussions and agreement for the acquisition of the property by the second respondent.   In addition, that she has been aware that the second respondent complied with the agreement and paid the monies for which the husband and wife agreed to sell the property.

22. The husband and wife attended a party held by the second respondent as her “Welcome to my new home party”.  That is welcome to T property.

23. On 3 May 2005, the husband and wife separated.

24. In July 2005 Sparke Helmore submitted a second transfer to the husband and wife which was not returned. 

25. According to the second respondent, in September 2005 the wife conceded she had paid for T property in full and said, in accordance with her then solicitor’s advice, she declined to sign the transfer so as “to use the home as leverage”.  According to the second respondent, the wife subsequently spoke to her on a number of occasions in which she acknowledged that T property was owned by the second respondent. Although these matters were included in correspondence and on oath the wife has never, even in material in reply, denied this evidence on oath.

26. In early 2006, the husband and wife listed H property for sale.  This step was taken at the direction of the third respondent.

27. In April 2006 Sparke Helmore again asked the husband and wife to execute a memorandum of transfer of T property in favour of the second respondent.

28. Settlement of H property was completed on 27 September 2006.  Because the parties were unable to agree upon the distribution of the sale proceeds, these were held in trust by Sparke Helmore. 

29. The second respondent changed solicitors and on 20 September 2007, Turnbull Hill, who were her incoming solicitors, wrote to the wife and sought that she transfer her interest in T property to her.  When no response was received to that letter, on 6 November 2007 a further letter, in similar terms, was sent to the wife’s then solicitors.[2]  By that time, the husband had executed a Memorandum of Transfer in which he transferred his interest in T property to the second respondent.  In this correspondence the second respondent informed the wife that unless within the specified timeframe she completed a Memorandum of Transfer the second respondent would commence proceedings and thereafter the second respondent “would only resolve the matter on the basis that her costs were met”.

    [2] Exhibit ‘C’

30. On 13 May 2008 the husband filed an application for property settlement orders in this Court.  Relevantly, he sought orders, which would require the husband and the wife to transfer title in T property to the second respondent, and that he would receive the H property sale proceeds.  Although the order was phrased in terms that the husband would receive “the net proceeds of sale” of H property, absent joinder of the interested parties in those sale proceeds, the husband and wife could only deal with that portion of the sale proceeds in which they had an interest.  However, in his financial statement filed the same day the husband deposed that the H property sale proceeds were “held in Sparke Helmore trust account on behalf of husband and wife.”  He claimed a 50 per cent interest in the monies held in trust and inferentially asserted that the balance was held in trust for the wife.

31. On 21 July 2008 the wife filed a response.   None of the orders sought by the husband were agreed by her.  Summarised, the wife sought that the husband transfer his interest to her in properties at O and R unencumbered and that he pay her $3 million dollars.  The wife did not seek orders in relation to the Sparke Helmore trust account nor T property.  Thus, it would appear the wife proposed the Sparke Helmore funds would remain in trust and title to T property would remain with her and the husband.  Such an outcome would have offended s 81.  The better view is that impliedly she conceded the husband could have these assets. 

32. On 11 August 2008, the second respondent filed an application in a case in which she sought leave to intervene in the proceedings.  In support of her application she filed and swore an affidavit, which contained a précis of the facts, she relied upon.  In this affidavit, the second respondent deposed to conversation she had with the wife in which the wife acknowledged that the second respondent had paid for the property and made the “leverage” remarks earlier referred to.

33. By consent, on 19 August 2008 the second respondent was given leave to intervene. 

34. On 28 August 2008, the third respondent filed an application in a case in which he sought leave to intervene in the proceedings.  He applied for orders consistent with those made by consent at the start of this hearing.  In support of his application, he swore an affidavit, which contained the facts, relied upon by him in support of his application in relation to the H property sale proceeds.  The husband conceded these facts.  The wife has never presented material to the Court, which would undermine the veracity of the matters there deposed. 

35. At par 9 of the third respondent’s affidavit filed 28 August 2008, he deposed:

    Following separation, [the wife] regularly came to our company office to collect a payment that [the husband] was making to her.  On one of those occasions in 2007 [the wife] said to me words to the effect:  ‘I’m sorry about the money from [H property].  I know it’s not mine but I’m just trying to use it for some leverage.’  Approximately two months ago when visiting the company office [the wife] said to me words to the effect:  ‘Look dad – I’m sorry about that money.  I’m trying to do something about it now.’

36. On 12 September 2008, the second respondent filed an amended application in relation to which she sought orders for the transfer of T property to her and that the H property sale proceeds be disbursed essentially in accordance with the orders made on 15 June 2010. 

37. On 16 September 2008, the second respondent’s solicitors wrote to the wife’s current solicitors.  They set out in considerable detail the evidence relied upon by the second respondent in support of her claim to beneficial ownership of T property.  Reference was again made to the wife having informed the second respondent and others that she would not sign the transfer “as leverage in the property dispute with [the husband].”  The second respondent confirmed her support for the third respondent’s claim to an interest in the H property sale proceeds and the transactions and discussions, which supported its acquisition.

38. On 18 September 2008, the third respondent was granted leave to intervene.

39. On 8 December 2008, by consent, the following orders were made:

    1.That the parties do all acts and things and sign all documents necessary to instruct Sparke Helmore, Lawyers, to pay the proceeds of sale of the property [at H] in the State of Queensland as follows:

    1.1As to the sum of ten thousand dollars ($10,000.00) to [Mrs Ewellyn Snr];

    1.2As to the sum of seventy thousand dollars ($70,000.00) to the [Ewellyn Snr] Investment Trust;

    1.3As to one third of the balance to [Mr Ewellyn Snr];

    1.4As to one third of the balance to [Mrs Ewellyn Snr];

    1.5As to the remainder to the husband, [Mr Ewellyn].

    2.That the monies payable to the husband pursuant to Order 1.5 be paid as partial property settlement as follows:

    2.150% to the husband;

    2.2The balance to the wife.

    3.That the monies paid to the parties pursuant to Order 2 be accounted for as property received by the husband and the wife respectively on the final determination of the division of property between them pursuant to s 79 of the Family Law Act 1975.

    4.That the Court note that the distribution of monies pursuant to Order 1 does not constitute an admission by the wife as to the existence of a trust in respect of the proceeds of sale of [H property] in the State of Queensland.

40. On 18 December 2008, the husband and wife jointly instructed Mr C to value the husband’s interests in Ewellyn Haulage Pty Limited and Ewellyn Trucking Services Pty Limited. 

1. On 17 April 2009 Mr C, who is a Chartered Accountant filed an affidavit to which he attached his valuation reports of Ewellyn Haulage Pty Limited and Ewellyn Trucking Services Pty Limited.  Attached to his reports were financial records, which included the husband’s loan accounts with the companies.

2. After the matter was docketed to me and because the wife opposed the relief sought by the second and third respondents, I ordered them to file and serve statements of particulars of their claims.  The statements of particulars were served in late 2009.  The information therein contained duplicated information which had previously been provided to the husband and wife. 

3. In her responses to the statements of particulars, the wife denied there was an agreement between the husband, her and the second respondent in relation to T property.  In relation to the claim by the third respondent, she denied that she was privy to any discussions relating to the H property being acquired by the husband and wife in part for the other parties.  She admitted the third respondent’s assertions in relation to the acquisition costs.

Applying the law to the facts

1. An application for costs is governed by s 117 of the Family Law Act 1975 (Cth). Section 117(1) sets out the general rule that subject to s 117(2), s 117AA and s 118, each party to proceedings shall bear his or her own costs. None of the parties to the costs proceedings submitted s 117AA or s 118 was relevant. Section 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs (Penfold v Penfold (1980) FLC 98-800).

2. There were a number of matters, which whether considered individually or cumulatively, established circumstances that justified the making of cost orders against the wife in favour of the second and third respondents.  Firstly, the second and third respondents have been entirely successful in the sense they have secured orders and declarations consistent with proposals they made from the outset.  Next, although the wife has sworn a number of affidavits in which she denied or put into issue matters raised by the other parties, she did not on oath, deny the sworn evidence given by the second and third respondents that to each of them she acknowledged the legitimacy of their claims and withheld her consent to the relief they sought as “leverage” in the property settlement proceedings. 

3. The manner in which the wife dealt with the claims made by the second and third respondents in these proceedings is consistent with their evidence she withheld her consent to obtain a perceived forensic advantage against the husband.  For example, the wife did not include in her financial statements the property or assets claimed by the second and third respondents.  Although the wife did not concede the orders proposed by the husband, which related to the assets claimed by the second and third respondents, she did not identify orders, which she said the Court should make in relation to the H property funds or T property.  In relation to this matter the wife’s evidence was: 

   We also owned a block of land in Queensland [H property] that was in both our names but was paid for by the company.  This was one of the benefits received from working in the family company.  As such, I do not believe any arrangements were put in place as between my husband and the company regarding this transaction.  This property has since been sold and the money, which was held with Sparke Helmore in trust, was distributed in accordance with the consent orders of 8 December 2008.

   The property at [T] is still registered in the joint names of my husband and myself.  My husband’s mother, named as the second respondent in these proceedings, currently lives in this property.  I have been requested by the second respondent to consent to a transfer of this property into her name.  My husband has told me that his mother has purchased this property from my husband and I and that we have been paid the purchase monies in their entirety.  I am unsure of this and am yet to see any documents that confirm this.  Until such time as I, and my legal representatives have been above to confirm this, I do not consent to the transfer.

4. The wife’s evidence recited above is contained in her affidavit filed 16 November 2009.  This affidavit was sworn seven months after Mr C gave the parties his valuation reports which related to Ewellyn Haulage Pty Limited and Ewellyn Trucking Services Pty Limited.  The significance of this is that attached to his reports were, inter alia, the husband’s, and the second and third respondents’ loan accounts.  There was also attached to Mr C’s affidavit, his joint letter of instruction.  There was no issue raised by the wife that the various transactions identified by the second and third respondents made by the Ewellyn Snr Investment Trust and Ewellyn Haulage Pty Limited in relation to H property and T property had not been paid or utilised in a manner other than as alleged by the second and third respondents.  In a similar vein, the opinion expressed by Mr C in relation to the value of the husband’s share in Ewellyn Haulage Pty Limited and Ewellyn Trucking Services Pty Limited was accepted by the wife as the valuation for those entities in the property settlement proceedings.  So too was the husband’s evidence in relation to the balance of his loan account in the company.  Had the monies which the second and third respondent said had been paid been incorrect described this would have been reflected in either, perhaps both, the husband’s loan account and the value of his interest in the company. 

5. It was submitted on behalf of the wife that it was reasonable for her to wait until the husband gave sworn evidence in his trial affidavit about discussions he had with the second and third respondents about their intentions in relation to their dealings with H property and T property.  As I understood the submission, it was to the effect that only then was an essential component that is, donor’s intentions, in the trusts claim made by the second and third respondents established.  This submission ignores that intention may be inferred and that at its highest the presumption of advancement could only have been asserted in relation to one-half of the deposit paid by the second respondent for H property.  In other words, the presumption did not apply to assets received by the wife or to funds advanced by the company or investment trust.  It also ignores that the wife was privy to the details of the agreement to transfer T property to the second respondent. 

6. In the correspondence, statement of particulars, affidavits and financial records available to the wife prior to the husband’s May 2010 affidavit, the second and third respondents had established a strong claim to the relief sought by them.

7. To determine what order, if any, should be made as a consequence of my findings made pursuant to s 117(2), I am required to consider those matters set out in s 117(2A)(a) – (g) insofar as they are relevant.

8. Subsection (a) is concerned with the parties’ financial circumstances.  Because of the property settlement orders the wife will have assets the most valuable of which are worth in the vicinity of $1.35 million.  Other than outstanding legal fees, she will have few liabilities.  Although I directed the wife’s solicitors to file a costs memorandum, they did not.  I was informed from the bar table her outstanding fees were approximately $85,000.  Presently, the property she will retain produces a rental income of $950 per week.  If the wife retains the property it is likely she will continue to receive a rental income of at least this amount.  After the husband and wife separated the wife retrained as a receptionist and in recent time has been able to secure casual part-time work in this field.  Her financial statement showed that at present she earns approximately $320 per week from paid employment and receives $70 per week Family Assistance.  The husband pays the wife $250 per week child support, which is likely to continue to be paid until their youngest son finishes school in a few years time.

9. The second and third respondents are in their seventies.  The third respondent continues to have day to day management responsibility for the family companies while the second respondent’s involvement is primarily as a share holder and director.  Their interests in the family companies are substantial and as I understood it, it is likely they have other valuable assets.  Notwithstanding that the second and third respondents are older than the wife, they are and are likely to remain in a materially stronger financial position than her.  The application of the subsection weighs in favour of the wife.

10. Neither party is in receipt of a grant of legal aid.

11. There are no s 117(2A)(c) or (d) matters which require consideration.

12. Subsection (e) requires the Court to consider whether any party to the proceedings has been wholly unsuccessful.   In relation to the claims made by the second and third respondents, the wife has been wholly unsuccessful.  As I understood it, she conceded this point.  If my interpretation of the submissions made on her behalf was incorrect, this is in any event my view.  The application of subsection (e) heavily favours the second and third respondents. 

13. Subsection (f) is concerned with offers to settle the proceedings and the terms of such offer.  No offers of settlement were mentioned.

14. Subsection (g) entitles the Court to take into account such other matters as the Court considers relevant.  It is most relevant that the second and third respondents gave early and detailed notice of their claims and the basis for them.  The wife did not present evidence which cast doubt upon the veracity of the claims made by the second and third respondents.  It was no answer to the legitimacy of their claims that the wife relied upon evidence of their generosity in other transactions, which resulted in them giving valuable assets, including money, to the husband and the wife.  She produced no evidence which suggested that in relation to the assets under consideration, the second or third respondent ever suggested these assets were given to the husband and/or the wife.  Or in relation to T property did she demand payment by the second respondent. As I have earlier found this is because at all material times the wife was aware the second respondent had paid the money due to her and the husband.

15. As I have already discussed I accept the evidence from the second and third respondents in relation to the wife’s statements to them that she was resisting their claims as “leverage” in the property settlement proceedings.  These remarks and the wife’s approach in this instance warrant strong criticism.  Such an approach is in effect, an abuse of the Court’s process.  The point being that the wife conducted the proceedings in so far as they related to the second and third respondents for an ulterior motive.  I am strongly satisfied the wife appreciated the legitimate and strong claims made by the second and third respondents, but withheld her consent to their applications for perceived forensic advantage.  These findings would support not only an order for costs but potentially an order against the wife on an indemnity basis. 

16. Indemnity costs are rarely awarded and when awarded, it is generally accepted that the circumstances which warrant elevating an order for party/party costs to indemnity costs would be exceptional and are “still an exception in this and other jurisdictions”.  In the Marriage of Munday & Bowman (1997) FLC 92-784 at 84,661 per Holden CJ. In Munday & Bowman Holden CJ cited with approval Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225, in particular the circumstances identified by Shepherd J, where, in the exercise of the Court’s discretion, indemnity costs have been warranted. Subsequently, in Younghanns v Younghanns (2000) FLC 93-029 the Full Court of the Family Court commented that the category of circumstances that would justify an order for indemnity costs is not closed. The exceptional nature of indemnity costs orders means it is important for the Court to be able to assess the reasonableness of the costs agreement executed by the party who has applied for indemnity costs. The costs agreements executed by the second and third respondents were not in evidence. Although the Court received “ball park estimates” it is not possible to determine the extent to which these would result in fees greater than reasonable party/party or solicitor/client costs.

17. Thus while I am strongly satisfied that the wife should pay the second and third respondents costs of the proceedings I am persuaded these should be calculated on a party/party basis.  Because I am satisfied the wife fully appreciated the strength and legitimacy of the claims made by the second and third respondents and that these people were strangers to the marriage costs will be payable from when they applied to join the proceedings.  I am conscious that this outcome is likely to result in the wife having to utilise a reasonable proportion of the adjusting amount she will receive from the husband.  Also that the second and third respondent are in superior financial positions to them.  While this is unfortunate for the wife, she chose to disregard the Court’s early observations that she appeared to have adopted a very risky approach to the second and third respondent’s claims which potentially exposed her to significant costs consequences.

18. For these reasons I make the orders identified at the start of this judgment.

I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan

Associate: 

Date:  22 June 2010