G & M and Ors

[2005] FamCA 1155

[2005] FamCA 1155 FAMILY LAW ACT 1975

IN THE FULL COURT

OF THE FAMILY COURT OF AUSTRALIA

AT BRISBANE   Appeal Nos. SA67L of 2003

and 68L of 2003

File No. MLF5382 of 1995 

IN THE MATTER OF:

G

Applicant Wife

- and -

M

Respondent Husband

- and -

C PTY LTD

Second Respondent

- and -

M

Third Respondent

REASONS FOR ORDERS MADE

CORAM:  Finn, May and O’Reilly JJ
DATE OF HEARING AND ORDERS:     11 June 2004
DATE OF JUDGMENT:  30 November 2005

APPEARANCES (via video link from the Melbourne Registry):

Mr Strum of Counsel (instructed by P J R Gould & Co Solicitors, 10 Keilor Road, Essendon North, VIC 3041; DX 38304 North Essendon) appeared on behalf of the applicant wife.

Ms Stewart of Counsel (instructed by the respondent husband) appeared on behalf of the respondent husband.

Ms Nancarrow (instructed by Starnet Legal Pty Ltd, Level 1, 20 Lygon Street, East Brunswick VIC 3057) appeared on behalf of the second and third respondents.

APPEAL SUMMARY

MATTER:  G v M & Others
APPEAL NUMBER:  SA 67L of 2003 and SA 68L of 2003
  (MLF 5382 of 1995)
CORAM:  Finn, May and O’Reilly JJ
DATE OF HEARING AND ORDERS:     11 June 2004        
DATE OF JUDGMENT:  30 November 2005

CATCHWORDS:     

FAMILY LAW – APPEAL – EXTENSION OF TIME to file an application for security for costs and application for SECURITY FOR COSTS of the application for leave to appeal and appeal (if any) – Principles governing an application for security for costs in relation to an appeal discussed.

APPEAL – COSTS of the application for security for costs.

Legislation cited:

Family Law Act 1975 (Cth): s 44(3)

Caselaw cited:

Adult Guardian and Mother’s parents and B and Child’s Representative (2002) FLC 93-116

Application to extend time to file an application for security for costs granted.

Application for security for costs of the application for leave to appeal and appeal (if any) dismissed.

No order for costs.

1. On 11 June 2004, this Full Court made orders whereby we:

   ·granted JEG (“the wife”) an extension of time in which to file an application for an order that LQM (“the husband”), C Pty Ltd (“the company”) and DM (“the husband’s mother”) provide security for the wife’s costs in relation to applications by the husband, the company and the husband’s mother for leave to appeal orders made by Morgan J on 26 November 2003 (and the appeals, if any); and

   ·dismissed the application by the wife for an order for security for costs in relation to the applications for leave to appeal (and the appeals, if any).

2. We also determined on that day that there should be no order for costs in relation to the applications which had been before us.

3. We undertook when making our orders to provide our reasons in due course.  These are our reasons.

Background

1. At the date of our orders there were pending, in the Melbourne Registry of this Court, proceedings for property settlement initiated by the wife (by an application filed on 6 July 2000 for leave pursuant to s 44(3) of the Family Law Act 1975) against the husband, the company and the husband’s mother.

2. On 26 November 2003, Morgan J made orders giving the wife leave for those property settlement proceedings to proceed “on an undefended basis” and requiring the husband, the company and the husband’s mother to pay the wife’s costs of a hearing on that day (26 November 2003) and on two previous days (being 6 October and 27 October 2003).

3. In her ex tempore reasons for judgment in relation to those orders, Morgan J explained:

   ·that on 6 October 2003 she had ordered that the husband, the company and the husband’s mother file and serve within 14 days proper affidavits of documents, and that in the event that that order was not complied with, the wife was to have liberty to proceed against all respondents on an undefended basis;

   ·that one of the issues in the property proceedings between the husband and the wife related “to the holding of beneficial interests in assets” held by the company (of which the husband’s mother is a director) “and in particular a property in [Q Street] and a restaurant business,” with the wife’s case being that the company and the husband’s mother are under the control of the husband;

   ·that on 27 October 2003, when the matter had returned to court, there was no appearance for the husband, the company or the husband’s mother; and

   ·that at the hearing on 26 November 2003, the husband had appeared in person but there was once again no appearance for the company or the husband’s mother.

4. Her Honour went on to explain that the husband had already provided three affidavits of documents on 19 December 2002, on 28 January 2003 and on 20 October 2003.  Her Honour also explained that an affidavit had been sworn by the wife's solicitor on 22 July 2003 in which he set out those documents which he alleged should have been discovered by the husband and/or the company and the husband’s mother.

5. Having listed the few documents which were set out in the husband’s three affidavits of documents already provided, and having commented that the husband had made no attempt to respond to the detailed list of documents set out by the wife’s solicitor in his affidavit, her Honour concluded in relation to the husband:

   10.In particular, even if what the husband alleges is correct, that is, that the company is in fact not controlled by him and therefore certain documents were never in his possession or control, that list provided by [the solicitor for the wife] contains details of real property which, as I understand it, was the property of the parties to these proceedings or in which they in their own right had beneficial interests.  I am satisfied that the husband has not and continues not to provide a proper affidavit of documents.

6. Her Honour then turned to the position of the company and the husband’s mother.  She outlined the contents of the two affidavits of documents filed by the husband’s mother to that date, and she referred to significant documents in relation to the restaurant business conducted by the company which had not been discovered.  Again, in relation to the company and the husband’s mother, her Honour stated that she was satisfied that no attempt had been made to provide a proper affidavit of documents.

7. Then in relation to the wife’s application for leave to proceed on an undefended basis, her Honour referred to the fact that in her orders of 6 October 2003, she had given the wife leave “to proceed on an undefended basis in the event of non-compliance with the order to provide a proper affidavit of documents.”  Her Honour also referred to the “inordinate amount” of court time which the matter had occupied, and she concluded her reasons by saying:

   15.… I am satisfied that in the husband's case he has had ample opportunity to comply with orders.  In the case of [the company] and [the husband’s mother], not only have they failed to comply with orders, but they have seen fit not to appear before the court and not to present to the court any reason for their non-appearance, save that…the husband…told me that [his mother] was unwell.  No medical evidence to explain non-appearances today or on 27 October or 6 October have been provided.

   16.I am satisfied that enough is enough in this matter and I propose to give the wife leave to proceed against all defendants on an undefended basis.

8. On 26 November 2003, her Honour also made an order for costs against the husband, the company and the husband’s mother in the following terms:

   2.That the husband, [the company] and [the husband’s mother] jointly and/or severally pay the wife’s costs of the 6th October 2003, the 27th October 2003 and this day with such costs to be fixed by agreement or failing agreement to be taxed and that payment thereof be stayed until the determination of the property proceedings between the parties.

9. On 24 December 2003, the husband filed an application for leave to appeal her Honour’s orders giving the wife leave to proceed on an undefended basis and awarding costs to the wife.  Similarly, on 24 December 2003, the company and the husband’s mother also filed an application to appeal those orders.

10. On 29 January 2004, Kay J made the standard directions for the applications for leave to appeal to be heard with the appeals.

11. On 6 May 2004, the wife filed an application against the husband as first respondent, the company as second respondent and the husband’s mother as third respondent seeking the following orders:

    1.That within 7 days the Respondents pay the sum of $34,098.50 to the solicitor for the Wife by way of security for her costs of their Applications for leave to Appeal and any Appeal.

    2.That in default of payment within 7 days:

    (a)by the Respondents of security for costs pursuant to paragraph 1 hereof;

    (b)by the First Respondent of the sum of $4,679.67 pursuant to taxed costs orders (plus interest in accordance with paragraph 3 of the Ordes [sic] of Fitzgibbon R. made 21 April, 2004) and

    (c)by the Second and Third Respondents of the sum of $19,411.95 pursuant to taxed costs orders (plus interest in accordance with paragraph 1 of the aforesaid Orders of Fitzgibbon R.),

    the aforesaid Applications(s) of the Respondent(s) be dismissed.

    3.Such further or other Orders as the Full Court of this Honourable Court deems appropriate.

12. On 17 May 2004, the wife filed a further application again against all three respondents seeking the following order:

    1.That pursuant to rule 1.14 of the Family Law Rules 2004, the time provided by rule 22.49(1) for the filing of an application for security for costs be extended.

13. The wife’s applications filed 6 and 17 May 2004 were heard and determined by us on 11 June 2004.  On that occasion, the wife was represented by Mr Strum of Counsel and the husband was represented by Ms Stewart of Counsel.  The company and the husband’s mother were represented by Ms Nancarrow of Counsel.

The extension of time to file the application for security

1. When, on 24 December 2003, the husband, the company and the husband’s mother filed their applications for leave to appeal Morgan J’s orders, there was no provision in the Family Law Rules prescribing a time limit for the filing of an application for security for costs in relation to an appeal (or an application for leave to appeal).

2. On 29 March 2004 the new Family Law Rules 2004 came into operation. Rule 22.49 provides that a respondent to an appeal “may apply for security for costs within 21 days after the service on the respondent of the notice of appeal.”

3. There is apparently no issue that when the wife in this case filed her application for security for her costs of the applications for leave to appeal (and the appeals, if any), she did so outside the 21 day time limit now prescribed by the Rules.  Accordingly, those representing the wife considered it necessary, or at least prudent, to apply for an extension of time to file the application for security.

4. Although both Counsel for the husband and Counsel for the company and the husband’s mother made it clear that they would wish to rely on the wife’s delay in filing her application for security in opposing that application, neither Counsel put any submissions of any substance in opposition to the application to extend time for the filing of the application for security.

5. We were of the view that the application by the wife for an extension of time to file her application for security had only been made necessary (if indeed it was necessary) because of the introduction of the new Rules which had occurred the three months after the applications for leave to appeal had been filed.  In our view, the interests of justice clearly required that the wife be given any necessary extension of time, and we were prepared to so order.

6. We made it clear that the question of whether such an extension of time was technically necessary was not agitated before us and thus we need not express any views on that question.

The principles governing an application for security for costs in relation to an appeal

1. Before considering the submissions made in support of, and in opposition to, the wife’s application for security for the costs of the applications for leave to appeal, it will be convenient to set out the principles which govern the determination of such an application and against the background of which the submissions of all parties were made.  

2. These principles and the relevant statutory provisions were set out by the Full Court in its decision in Adult Guardian and Mother’s parents and B and Child’s Representative (2002) FLC 93-116 in the following terms:

   34.The power in this Court to make an order for security for costs is to be found in s 117(2) of the Act, which is in the following terms:

   If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsection (2A) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

   35.The provisions of s 117(2A) are as follows:

   In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has, in accordance with section 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g)such other matters as the court considers relevant.

   36.The principles which should govern the exercise of the power in s 117(2) to make an order for security for costs have been considered in the two relatively recent decisions of the Full Court of this Court of Luadaka v Luadaka (1998) FLC 92-830 and Jones and Jones (2001) FLC 93-080.

   37.In Luadaka, which was concerned with the making of an order for the provision of security in relation to the costs of proceedings at first instance, the Full Court made the following observations concerning the matters to which regard should be had in determining whether or not to exercise the discretion to order the provision of security (emphasis added):

   39.An order that an applicant provide security for costs may be made in appropriate circumstances.  However, it must be established that there are circumstances justifying the making of such an order.  In considering whether to make such an order regard must be had to the provisions of s.117(2A).  The Family Law Act does not separately list factors which should be taken into account when dealing with an application for security for costs of a pending application for relief pursuant to provisions of the Act. 

   …

   61.In our opinion, when dealing with an application for security for costs the general rule provided for in s 117(1) applies, namely that subject to s 117(2) each party to proceedings shall bear his or her own costs.  However, if the court is satisfied that there are circumstances that would justify an order then the court may, subject to s 117(2A), make such order for security for costs as the court considers just. It is not necessary to establish that there are special circumstances.  However, it is necessary to establish that there are justifying circumstances.  The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.

   62.The purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other.  In considering whether or not to make an order, apart from those referred to in s.117(2A), matters which may be relevant include the following:

   62.1It may be relevant to take into account the means of an applicant to satisfy an order for costs if he or she is unsuccessful.  Ordinarily the means of the applicant is not alone sufficient to justify an order for costs because of the rule that poverty should be no bar to justice.  This is reinforced by s.117 (1).  However, the financial circumstances of the applicant do not prevent an order being made if there are other grounds which justify an order.  Financial weakness may be relevant, for example, if the applicant is a company. In relation to the means of the respondent, who is the applicant for security, it was held by Goldstein J in Alexander and Alexander (supra) and Gee J in B and B (supra) that the question is whether or not the respondent is able to pay his or her costs.  Section 117(2A)(a) requires consideration of the financial circumstances of both parties.  However, we do not accept that it will only be in cases where the applicant for security does not have the means to meet his or her costs that an order would be made.  In appropriate circumstances an order may be made even if the applicant for security has the means to pay his or her costs.

   62.2The prospects of success is a relevant matter to take into consideration: Parkinson & Co Ltd v Triplan Pty Ltd (supra).  However, ordinarily the court will not undertake a detailed assessment of the likelihood of the applicant’s success unless it can be demonstrated that there is a high probability of success or failure:  Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420 ; Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR ¶40-972. This is because of the lack of material at the time the application is dealt with. However, such an assessment may be possible in circumstances where, as in this case, affidavits have been filed in which the case sought to be made out is set out.

   62.3It is a relevant consideration whether the applicant’s claim is made bona fide, whether it is genuine and not trivial, vexatious or a sham: Parkinson & Co Ltd v Triplan Pty Ltd (supra); Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133; J & M O'Brien Enterprises Pty Ltd v Shell Company of Australia Ltd (1983) 7 ACLR 790.

   62.4It may be relevant to consider whether or not an order for costs would be oppressive or stifle the litigation.  In Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304 Byrne J said at 306:

   “A factor in deciding whether security should be required is that the order may well mean that the action cannot proceed.  That prospect does not require refusal of the application but it is often a significant matter.”

   See also Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 and Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 5 ACLC 480.

   62.5It may be relevant to consider whether or not the litigation may involve a matter of public importance:  Equity Access Ltd v Westpac Banking Corporation (supra); Jodast Pty Ltd v A & J Blattner Pty Ltd (1991) 104 ALR 248. In Quick on Costs at [4.9440] it is said that this will militate against the making of an order.

   62.6It may be relevant to consider whether or not there has been delay in bringing the application.  An application may be refused if there is delay in making the application and prejudice is caused to the respondent to the application: Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 and Loreva Pty Ltd v Cefa Associated Agencies Pty Ltd (1982) 7 ACLR 164 .

   62.7Other relevant matters may include any difficulties of enforcing an order for costs and the amount of costs to be incurred.

   63.We do not suggest that the above matters are exhaustive of what may be taken into account.  However, such matters may be relevant to the exercise of discretion.

   38.Subsequently in Jones, where the Full Court was concerned with the making of an order for security for the costs of an appeal, the Full Court, after setting out paragraphs 61 to 63 of the judgment in Luadaka, went on to say (emphasis added):

   20.There is no doubt that the wife is impecunious, that she may well be unable to proceed with the appeal if she is ordered to provide security and will be unable to meet an adverse order for costs in the appeal.  The prospect, however, of the husband being left without a remedy in respect of a costs order if the appeal is dismissed is significant.

   21.It has long been recognised that, as a general rule and in the exercise of an unfettered discretion, mere impecuniosity of a litigant who is a natural person, will not of itself be a basis for ordering that person to provide security.  There is, however, an exception to that general rule, namely in the case of appeals.  See Cowell v Taylor (1885) 31 Ch. D. 34 at 38, J. & M. O’Brien Enterpreises Pty Ltd v The Shell Co. of Australia Ltd (No. 2) (1983) 70 FLR 261 at 264, Ciappina v Ciappina (1983) 70 FLR 287 at 290 and Paton v Campbell Capital Limited (unreported, Federal Court of Australia, 1 July 1993).

The financial positions of the parties

1. One of the principal matters relied on by Counsel for the wife in support of the application for security, and also as an explanation for the wife’s delay in filing that application for security, was the evidence given by and/or submissions made on behalf of the husband, his mother and the company at the hearings on 7 and 21 April 2004 of certain costs enforcement applications by the wife against those parties.  That evidence and the submissions in question are set out in detail in paragraphs 11 to 16 of the affidavit of the wife’s solicitor filed on 6 May 2004 in support of the wife’s application for security.  (See also paragraph 7 of the affidavit of the wife’s solicitor filed 17 May 2005 in support of the application to extend time to file the application for security). 

2. It is sufficient here to quote the summary of that evidence which was given in the oral submissions to us of Counsel for the wife, being that the husband, his mother and the company were “impecunious” and “unable to pay their debts” (Transcript 11/06/04 p 9).  It was further submitted by Counsel for the wife that such evidence was “quite frankly alarming” to the wife, and led to the filing of the application for security on 6 May 2004.

3. It is important that we record that Counsel for the husband informed us that the husband took no issue with the statements said to have been made by him regarding his financial position at the enforcement hearings on 7 and 21 April 2004, and which were relied on before us by the wife in support of her application for security.  Furthermore, Counsel for the husband conceded there were substantial unpaid costs which the husband had neither the capacity to pay, nor any immediate prospect of paying (Transcript 11/06/04, p 19).

4. However Counsel for the husband then sought to rely on the husband’s impecunious position in support of a submission that an order made for security at this relatively late stage (when the applications for leave to appeal (and the appeals, if any) were listed for hearing before the end of June 2004) would be likely to stifle not only the appeal process but also the pending property settlement proceedings (because of Morgan J’s order that the wife could proceed undefended in those proceedings) (Transcript 11/06/04, p 20).

5. Counsel for the husband’s mother and the company also confirmed that neither of her clients had the capacity to pay security for costs (Transcript 11/06/04, p 26) and she also submitted that an order for security would stifle not only the appeal, but would also have the effect that Morgan J’s orders would then stand and thus be likely to have the effect that the husband’s mother and the company would be “shut out” of the proceedings at first instance (Transcript 11/06/04, p 28).

The prospects of success of the applications for leave to appeal/appeal

1. A further matter which the authorities establish has relevance in an application for security and on which substantial reliance was placed by Counsel for the wife was the lack of merit or lack of any real prospects of success of the applications for leave to appeal (and the appeals, if any) by the husband, his mother and the company.  In support of this submission we understood Counsel to rely on the history disclosed by the affidavit material from all parties of failures on the part of the husband, his mother and the company to participate in the property settlement proceedings brought by the wife and in particular their failure to make adequate discovery.  Also in this context, Counsel for the wife submitted that the prospects of success in this case must be even more limited when regard is had to the fact that the proposed appeal was not as of right but rather was subject to the “onerously heavy burden” of leave (Transcript 11/06/04, pp 11-12).

2. In response on this issue Counsel for the husband submitted that if there had in fact been significant “non-disclosure in terms of discovery” (which was in any event disputed by the husband), Morgan J had not explored the other options available to the Court in circumstances where discovery is insufficient (Transcript 11/06/04, p 22).  Further reliance was also placed by Counsel on the fact that there are remedies available at trial when non-disclosure is found.  A similar submission was made by Counsel for the husband’s mother and the company, being to the effect that insufficiency of discovery is a matter that should be left for the trial Judge at the hearing of the property settlement proceedings (Transcript 11/06/04, p 27).

Conclusion

1. While we understood the concerns for the wife arising out of the evidence given at the hearings on 7 and 21 April 2004 regarding the financial positions of the husband, his mother and the company, and while we also understood why such concerns would have prompted the wife’s late application for security, we were nevertheless not prepared to conclude that an order for security would be justified in this case. 

2. Our reasons essentially were that an order for security at the late stage at which the applications were made (although understandable) would be highly likely to stifle not only the application for leave to appeal and the appeals, but also, significantly, the property settlement proceedings at first instance, at least so far as the husband, his mother and the company were concerned.  We were also not persuaded that the applications for leave to appeal and/or the appeals might not have some substance, particularly given that issues of non-disclosure are more usually a matter for the trial Judge in property settlement proceedings.  We considered that on balance the interests of justice required that the application for leave to appeal and/or the appeal should be permitted to proceed.

3. Given our conclusion that we would not make the order for security, it was unnecessary for us to consider issues relating to the amount sought by way of security or the calculations behind that amount.

4. Finally we mention that the wife also sought a somewhat unusual order to the effect that if certain outstanding costs orders were not paid by the husband, his mother or the company, prior to the hearing of the applications for leave to appeal, then those applications should be dismissed.  We were not persuaded that this Full Court would have the power to make such an order.  It was unnecessary for us to explore the question of whether the Full Court before which the applications for leave to appeal were listed for hearing would have the power to make such an order.

5. At the conclusion of the hearing before us, an application was made on behalf of the husband and also on behalf of the husband’s mother and the company for an order that the wife pay their costs in relation to the unsuccessful application for security.  We were of the view that the circumstances did not justify the making of an order for costs in relation to the application for security.

I certify that the 36 preceding paragraphs are a true copy of the reasons for judgment delivered by this Honourable Full Court

Associate