Gallieni and Gallieni and Ors
[2013] FamCA 314
FAMILY COURT OF AUSTRALIA
| GALLIENI & GALLIENI AND ORS | [2013] FamCA 314 |
| FAMILY LAW – COSTS – Indemnity Costs – wife sought order that the husband, third and fourth interveners (the husband’s parents) pay the wife’s costs of the substantive property proceedings on an indemnity basis – the first and second interveners (the wife’s sister and brother in law) sought an order that the husband, third and fourth interveners pay indemnity costs of the proceedings – the wife, first and second interveners sought orders that the husband pay costs of the stay application – the wife, first and second interveners sought orders that the Liquidator use funds otherwise payable to the husband to meet existing costs orders and as yet other unassessed costs and various consequential orders |
| Family Law Act 1975 (Cth) ss 117(2), and 117(2A) Family Law Rules 2004 (Cth) rr 19.18(1) and 19.34 |
| Arundel Chiropractic Centre Pty Ltd and Deputy Commissioner of Taxation [2001] HCA 26; [2001] 179 ALR 406. Brito v Jalaba [2012] FamCAFC 188 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 Re Coomber v Coomber [1911] 1CH Fountain Selected Meats (Sales) Pty. Ltd.v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397. MG Corrosion Consultants Pty Ltd v Vinciguerra (No 2) [2011] FCAFC 48 (4 April 2011) Fitzgerald (as child representative for AF (Legal Aid Commission of Tasmania)) v Fish and Anor (2005) 33 Fam LR 123 Kohan and Kohan (1993) FLC 92-340 Latoudis v Casey (1991) 70 CLR 534 Limousin v Limousin (Costs) (2007) 38 Fam LR 478 Munday v Bowman (1997) FLC 92-784 Penfold v Penfold (1980) 144 CLR 311 Pencious & Pencious (No 2) [2012] FamCA 212 Ragatta Developments Pty. Ltd. v. Westpac BankingCorporation (unreported, Federal Court, 5 March 1993) Tetijo Holdings Pty. Ltd. v. Keeprite Australia Pty. Ltd (unreported, Federal Court, 3 May 1991) |
| APPLICANT: | Ms Gallieni |
| RESPONDENT: | Mr Gallieni |
| FIRST INTERVENER | Mr D |
| SECOND INTERVENER | Ms D |
| THIRD INTERVENER | Mr H |
| FOURTH INTERVENER | Ms H |
| FILE NUMBER: | MLC | 7541 | of | 2008 |
| DATE DELIVERED: | 9 May 2013 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Hobart |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 12 March 2013. Final written submissions 3 May 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr O’Shannessy |
| SOLICITOR FOR THE APPLICANT: | Slater & Gordon |
| COUNSEL FOR THE RESPONDENT: | In Person |
| SOLICITOR FOR THE RESPONDENT: |
| COUNSEL FOR THE 1ST & 2ND INTERVENERS: | Ms Smallwood |
| SOLICITOR FOR THE 1ST & 2ND INTERVENERS: | Mallesons Stephen Jacques |
| COUNSEL FOR THE 3RD INTERVENER: | In person |
| COUNSEL FOR THE 4TH INTERVENER: | In person |
Orders
The husband and Mr H (the third intervener) pay the costs of the wife and the costs of Mr D and Ms D (the first and second interveners) of the substantive proceedings and this costs application;
(a)The costs of the wife to be assessed as against the husband as and from 1 January 2009 and as against the third intervener as and from 7 July 2009;
(b)The costs of the wife to be assessed on an indemnity basis; calculated having regard to the hourly rates set out in the costs agreement between the wife and her legal practitioners dated September/October 2008 (being annexure “A” to the affidavit of Christopher Forster filed 28 November 2012), as varied by letters dated 29 October 2009 (being annexure “C” to the affidavit of Christopher Forster filed 5 March 2013). Such costs are not to include any claim for interest and such costs are not to include any ‘uplift’ or ‘loading’ whether 15% or otherwise.
(c)The costs of the first and second interveners to be assessed as against the husband; from the date that the first and second interveners applied to become parties to the proceedings (including the costs of that application) and as against the third intervener; from the date that the first and second interveners applied to become parties to the proceedings (including the costs of that application) or from 7 July 2009, whichever is the later.
(d)The costs of the first and second interveners to be assessed on an indemnity basis; calculated having regard to costs agreement dated 21 February 2011 between the first and second interveners and their legal practitioners and having regard to the Federal Court costs scale otherwise applicable in a commercial matter. Such costs are not to include any claim for interest and such costs are not to include any ‘uplift’ or loading whether 15% or otherwise. Such costs are not to include any allowance for research into the matter and the hourly rates claimed by solicitors shall not exceed $360 plus GST for any solicitor.
The husband shall pay the costs of the wife and of the first and second interveners in respect of the application in a case filed 22 November 2011 (being the husband’s stay application) such costs to be assessed in accordance with the Family Law Rules and on a party/party basis.
In respect of the costs assessed pursuant to these Orders against the husband and the third intervener (which costs relate to the same period and work) the husband and third intervener shall be jointly and severally liable for such costs.
For the purpose of the operation of Order 16(e) made 13 October 2011, the Liquidator shall not make any distribution of money to the husband and shall retain such money which would otherwise be payable to the husband and pay such money as follows:-
(a)$4,687 to the first and second interveners pursuant to the costs order made 3 February 2011.
(b)$5,628.70 and $550 ($6,178.70) to the wife being the costs payable pursuant to orders of the Court made 3 February 2011 and 1 March 2011 respectively.
(c)The balance to be paid to the wife and first and second interveners being the payment of the costs as agreed or determined pursuant to these orders and pursuant to the costs orders of the Full Court made 7 December 2012.
(d)If the money held by the Liquidator is insufficient to meet all of the liabilities for costs pursuant to the various costs orders then the distribution shall be as agreed between the wife and the first and second interveners.
(e)Nothing in these orders is intended to create a preference in favour of the wife and first and second interveners as between themselves or as between them (or any one or other of them) and any other unsecured creditor, should the husband become a bankrupt or enter into a deed of arrangement in respect of his creditors.
(f)If, after the payment of costs in accordance with these orders, there is money remaining due to the husband, such money to be paid to the husband.
Order 1 made 14 February 2012 is discharged.
Leave is given to the Liquidator to seek directions in respect of this order upon giving fourteen (14) days notice to the husband, wife and first and second interveners.
Order 2 made 14 February 2012 is discharged.
All remaining and outstanding applications for costs of or by the parties, not otherwise dealt with in these orders, are dismissed.
IT IS NOTED
For the benefit of the Liquidator the amount due to Citibank liability, as at 31 December 2012 was approximately $50,566.
The Order made 12 March 2013, that leave be granted to the Liquidator to draw his outstanding fees of $85,000 plus GST, remains in force.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gallieni & Gallieni and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT HOBART |
FILE NUMBER: MLC 7541 of 2008
Ms Gallieni
Applicant
AND
Mr Gallieni
Respondent
AND
Mr D
First Intervener
AND
Ms D
Second Intervener
AND
Mr H
Third Intervener
AND
Ms H
Fourth Intervener
REASONS FOR JUDGMENT
INTRODUCTION
There are costs and other related applications made by Ms Gallieni (“the wife”) and Mr D and Ms D (“the first and second interveners”) following reasons delivered by this Court on 5 October 2011 and subsequent property and corporation orders made 13 October 2011.
THE ISSUES
The costs issues that this Court needs to determine are:-
a)In terms of the first and second interveners, are the costs of the proceedings determined pursuant to the original corporations jurisdiction of the Family Court under the Corporations Act 2001 (Cth) or are they determined pursuant to the Family Law Act 1975 (Cth).
b)Whether the husband should pay the costs of the substantive proceedings and the costs application of the first and second interveners. If so, whether on an indemnity basis and from which date.
c)Whether the husband’s parents (the third and fourth interveners) or either of them should pay the costs of the first and second interveners. If so, whether on an indemnity basis and from which date.
d)Whether the husband should pay the first and second interveners costs of the stay application made in the shadow of the husband’s substantially unsuccessful appeal.
e)Whether the husband should pay the wife’s costs of the substantive proceedings and the costs application. If so whether on an indemnity basis.
f)Whether the third and fourth interveners (or either of them) should pay the wife’s costs of the substantive proceedings and the costs application. If so, whether on an indemnity basis and from which date.
g)Whether the husband should pay the wife’s costs of the stay application made in the shadow of the husband’s substantially unsuccessful appeal.
h)In regard to any costs orders made in respect of the same work and period against the husband and against one or both of the third and fourth interveners; whether they should be jointly and severally liable to the party who has the benefit of such cost orders.
The substantive proceedings related to disputes under the Corporations Code and property proceedings pursuant to the Family Law Act. In my reasons delivered 5 October 2011 I set out an introduction and a background in paragraphs 1 to 17 and I repeat them here:-
1.These are property proceedings between [Mr Gallieni] and [Ms Gallieni] over a relatively modest asset pool. The proceedings are complex because they involve the intermingling of property with other members of the parties’ families and other jurisdictional issues. In these proceedings the evidence was that the legal costs have, and will continue to extinguish a significant proportion of the parties’ wealth.
2.It is of value in these reasons to introduce the parties to these proceedings, they are:-
·[Mr Gallieni] (“the husband”), a university educated [professional], who describes himself as an entrepreneur.
·[Ms Gallieni] (“the wife”), the long term wife of the husband. She was the primary carer of their three children and describes herself as having been dominated by the husband throughout most of the marriage. She says she was either deceived or kept in the dark about financial issues.
·[Mr and Ms D]. [Ms D] is the wife’s sister and she and her husband describe themselves as naïve investors who relied upon the assertions and representations of the husband. They assert that they have been the victims of fraud and other improper business practices employed by the husband. They likewise say they relied upon the husband in terms of a major property investment. They are the first and second interveners.
·[Mr and Ms H]. They are the husband’s parents. [Ms H] claims that she relies almost wholly on that which [Mr H] says and otherwise has limited knowledge of the surrounding facts, that assertion was not seriously challenged by any of the other parties, including her husband. On the other hand, [Mr H] asserts that he is ‘his own man’. [Mr H] claims a significant interest in the assets of the parties and says that he was well informed about the financial dealing insofar as they related to him, the wife and the interests of [Mr and Ms D]. The case for the wife and [Mr and Ms D] was that [Mr and Ms H] have been used and are being used by the husband to meet his own ends. That assertion is strenuously denied by the husband and by [Mr and Ms H]. They are the third and fourth interveners in these proceedings.
3.The complexity that engulfs these proceedings has defied the wit and wisdom of the parties (and those who advised them) in finding their own solutions. This complexity includes the nature of a property investment made in 1991 by some or all of the relevant parties.
BACKGROUND
4.The husband and wife married in January 1987 and separated in mid 2008. There are three children of their marriage, twins [G] and [N] now aged about 24 and [R] now aged 18.
5.The husband is a [professional person].
6.The wife has trained and worked [in the beauty industry] and as a receptionist. As at October 2010 she was working as a receptionist and had an income of about $33,000 per year.
7.The wife and husband each owned property at the time they married, the value of husband’s property at that time was greater than that of the wife. The extent of that difference is in issue.
8.The evidence of the husband was that he had net assets valued at about $255,000 and the wife had net assets of about $10,000. The wife disputes the values and equity asserted by the husband at the time of the marriage. No objective evidence was provided by the husband in terms of the real estate values he promoted. Having regard to my concerns about his evidence I am not convinced that the difference was as stark as he claims.
9.However, the financial circumstances of the parties in the first few years after marriage diminished. By 1989 they had jointly acquired some real property and by 1990 the evidence of both the husband and the wife was that their overall net wealth was negligible.
10.From mid 1989 the finances of the husband and wife were in a parlous state. According to the husband, this was a time of high interest rates and flat or declining property values. The parties had apparently defaulted on a purchase of real estate and owed considerable money to a bank on non income earning assets. Their family trust had acquired vacant land at [Lot AA in J] in 1988 for $263,000 and they were unable to commercially sell that land. They later used this property as part consideration for the acquisition of the factory at [Lot BB in J] by [K Pty Ltd].
11.The husband and wife, together with their twin children, commenced living with and at the home of the husband’s parents, [Mr and Ms H]. The family remained living at that home for about two and a half years. [Mr and Ms H] provided accommodation for that period and assisted in the care of the children over that period and beyond.
12.In 1991 the husband and wife acquired an interest in a factory unit by way of their two-thirds shareholding in [K Pty Ltd]. The funding of that investment to purchase the factory was in part provided by:-
· [Mr and Ms D] by way of money loans, a substantial mortgage over their home and personal guarantees;
· the husband and wife who contributed capital for their shares by way of directing their family trust to transfer an adjacent vacant property it owned as part consideration. In this regard [Mr and Ms H] and the husband borrowed money from Citibank to reduce an existing loan over the land. The Citibank loan was secured by personal covenants of the husband and his parents and by a mortgage over the home of [Mr and Ms H]. That loan was secured by personal guarantees given to [Mr and Ms H] by the husband and wife and later further security by way of mortgages over the husband and wife’s [S Street] home. The nature of that arrangement is an issue; and
· Further money was secured by mortgages over the [K Pty Ltd] factory and personal covenants of the husband, wife and [Mr and Ms D].
13.The factory owned by [K Pty Ltd] now has a value of about $2,000,000. The rights and entitlements of the husband and wife, [Mr and Ms D] and [Mr and Ms H] in relation to [K Pty Ltd] are a major issue of dispute in these proceedings. That determination was fundamental to enable the Court to ascertain the pool of assets of the husband and wife. The precise extent of the pool of assets will not be known until such time as [K Pty Ltd] has been wound up.
14.During the course of the marriage the husband and wife acquired their own home and directly and indirectly contributed to the creation of a superannuation fund.
15.When the husband and wife separated in May 2008 they had money in the bank of about $200,000 which, after deducting credit cards debts left them with net cash savings of about $160,000. Since separation this money has been spent by the husband and there is a question of an allowance in the context of contributions in respect of that sum.
16.This hearing was conducted over a lengthy period of time and involved a significant number of issues of fact. I am alive to the comments made by Fletcher and Moulton LJ in Re Coomber v Coomber [1911] 1CH 723 at 729 where they said of cases involving alleged fiduciary relationship that there is “no class of case in which one more carefully to bear in mind the facts of the case”. In reflecting on the fact finding in this case I have borne in mind that observation and I have endeavoured to be very careful about making such findings.
17.I have not endeavoured to repeat or list the large volume of evidence, although I have had regard to it in making the various findings. In these reasons any statement of fact is to be treated as a finding of fact, unless the contrary is clear form the context.
Subsequent to orders being made on 13 October 2011 the husband appealed against those orders to the Full Court. That appeal was substantially dismissed save for a relatively minor issue regarding the allocation and division of the fees of the Liquidator. The Full Court is yet to deliver final reasons in respect of that aspect; however, it will not be a significant feature in terms of these costs applications.
The first and second interveners filed an application in a case (subsequently replaced by their amended application filed 8 February 2013). In that amended application the interveners sought indemnity costs orders against the husband and the third and fourth interveners in relation to the substantive property and corporations proceedings and this costs application. The costs of the first and second interveners should only apply against the third and/or fourth interveners from the latter of the dates upon which the interveners became involved in the proceedings. Similarly, any costs orders to which the third and/or fourth interveners should be liable to the wife should not predate their intervention. When considering the applications and making the orders I had that caveat in mind.
In her written submissions counsel for the first and second interveners said:-[1]
3. The amount of the distribution anticipated to be made to the husband by the liquidator is likely to be less than the quantum of the costs orders sought by the First & Second Interveners, and the wife. The First & Second Interveners’ costs are estimated to be not less than $386,801.00, not including the costs of this application, which are also sought in this application, and the costs of the appeal, as granted by the Full Court. Costs have been calculated and charged to the First & Second Interveners pursuant to a costs agreement dated 21 February 2011. The agreement and details of the Federal Court scale otherwise applicable in a matter such as this can be provided if necessary …
[1] Dated the 6 March 2013.
The material referred to was not in admissible form and as such I directed (by way of a Chambers Order) that an affidavit be filed on behalf of the interveners and gave time for the husband and the third and fourth interveners to make further written submissions.
The first and second intervener filed an affidavit of Mr Marc Fauvrelle on 19 April 2013. That affidavit had annexed to it the costs agreement dated 11 February 2011, to which agreement I have had regard. The agreement contained a provision for ‘research into the matter’. That provision ought to be included in taking instructions and/or preparing material. The hourly rate claimed is $695 plus GST for a partner and $395 plus GST by a solicitor. I note that the wife’s solicitors claim $360 per hour plus GST for a partner reducing to $285 per hour plus GST for a solicitor. Having regard to these differences, I will limit the hourly rate payable by the husband and his father to a maximum of $360 per hour plus GST. I have also had regard to the relevant Federal Court scales.
At the same time I sought written submissions as to whether I could or should make orders against one or other of the third and fourth interveners. I have read and considered those submissions.
The third intervener, Mr H, filed and swore an affidavit on 3 May 2013, which affidavit I have read. Unfortunately, the affidavit was initially incomplete, however, the missing page was provided to me on the day before these reasons were delivered and I have had regard to them. Mr H deposed that the husband had helped him prepare the affidavit. Much of the content of the affidavit is by way of submission. I have had regard to the material and submissions contained in that affidavit. I have not had regard to his evidence as to the medical condition of Ms H, the fourth intervener.
The first and second interveners sought a costs order against the husband in respect of his stay application filed 13 October 2011. They also sought directions for the Liquidator to pay (from the funds held by him for the husband) to them:-
a.an amount of $4,687 due to them from the husband pursuant to an order made in this court on 3 February 2011;
b.the costs payable pursuant to the orders of the Full Court (as yet undetermined); and
c.any costs payable to them pursuant to their amended application (which would be undetermined as to the amount).
The first and second interveners sought a direction that the Liquidator not make any payments to the husband until the costs due to them were paid. If that order was made the first and second interveners sought a consequential discharge of a previous restriction on payment (pursuant to an order made 14 February 2011). Finally they sought an order that the husband and the third and fourth interveners be jointly and severally liable for the outstanding costs. Clearly this later application for a joint and severally liable order, if made, could only apply to costs (whether they be due to the wife or the first and second interveners) to which both the husband and the third and/or fourth interveners were liable. By way of example if the husband is liable to the wife for costs from 1 January 2009 to 13 October 2011 and the third intervener liable from 7 July 2009, the costs from 1 January 2009 to 6 July 2009 would be the sole responsibility of the husband and the costs from 7 July 2009 to 13 October 2011 would be the joint and several responsibility of the husband and the third intervener. As such if the costs are not agreed then separate bills would need to be prepared for each relevant period of time.
It was made clear to me, and I make it clear in these reasons, that it is not intended to give the first and second interveners (or for that matter the wife) any priority above any other unsecured creditors in the event that the husband or the third and/or fourth interveners become bankrupt or enter into arrangements with their creditors.
In her amended application in a case filed 8 February 2013 the wife sought indemnity costs orders against the husband and the third and fourth interveners for the payment of her costs on this costs application and costs of the substantive property and corporations proceedings.
Insofar as the husband was concerned the wife sought costs from 19 December 2008. This date being after the final parenting order was made and from a few days after the conciliation conference was held in relation to the substantive proceedings. She also sought costs against the third and fourth interveners on an indemnity basis as and from when they intervened in the proceedings.
Insofar as the third and fourth interveners were concerned the wife sought costs from when they sought to intervene, namely 7 July 2009.
The wife sought costs on the stay application filed 22 November 2011.
The wife, in her application in a case, sought the sum of $8,991 being payments not made by the husband pursuant to a stay order. Counsel for the wife subsequently withdrew that application but asked that the Court have regard to the husband’s failure to comply with that order in determining the question of costs, including indemnity costs.
The wife sought directions for the Liquidator to pay (from the funds held by him for the husband) to her:-
a.an amount of $5,628.70 due to her from the husband pursuant to an order made in this Court on 3 February 2011 and $550 due to her from the husband pursuant to order made 1 March 2011;
b.the costs payable to her pursuant to the orders of the Full Court (as yet undetermined); and
c.any costs payable to her pursuant to her amended application (which would be undetermined as to the amount).
The wife sought a direction that the Liquidator not make any payments to the husband until all the costs due to her were paid. If that order was made the wife sought a consequential discharge of a previous restriction on payment (pursuant to an order made 14 February 2011).
In harmony with the applications of the first and second interveners, the wife sought an order that the husband and the third and fourth interveners be jointly and severally liable for the outstanding costs. Clearly this later application for a joint and severally liable order, if made could only apply to costs (whether they be due to the wife or the first and second interveners) to which both the husband and the third and/or fourth interveners were liable. By way of example if the husband is liable to the wife for costs from 1 January 2009 to 13 October 2011 and the third intervener liable from 7 July 2009, the costs from 1 January 2009 to 6 July 2009 would be the sole responsibility of the husband and the costs from 7 July 2009 to 13 October 2011 would be the joint and several responsibility of the husband and the third respondent. As such if the costs are not agreed then separate bills would need to be prepared for each relevant period of time.
In seeking these orders Counsel for the wife and counsel for the first and second interveners made it clear that there was no issue between the first and second interveners with regard to distribution as between them.
The wife sought an order against the third and fourth interveners on an indemnity basis.
In his submissions the husband said that he had hoped to win the appeal and that as a consequence those costs orders would have been irrelevant. The costs orders still stand and I intend to direct that, notwithstanding any other orders, the Liquidator pay $6,128.70 to the wife (pursuant to the orders of 3 February 2011 and 1 March 2011) and to the first and second interveners a sum of $4,687 pursuant to the costs order made 3 February 2011.
I see no reason why these amounts ought not to be paid at the present time. The husband did not dispute the amounts (he was clearly not happy that the orders were made) however, there was no evidence of any appeal against those orders and there is no reason these monies ought not to be paid.
The costs applications were heard by me on 12 March 2013. The husband was unrepresented as was Mr H, the third intervener who represented himself and Ms H, the fourth intervener.
Unfortunately an interpreter was not available in the morning of that day and only became available at 2.00pm. The third intervener submitted that as a consequence only half a day’s barrister’s fees ought to be allowed for the day. The morning was not wasted as a number of issues pertaining to the husband were addressed prior to the arrival of the interpreter, these issues would have needed to have been addressed in any event. As such I will not be making a direction limiting the costs for the wife’s and first and second interveners’ counsel and solicitors that day.
The husband relied upon his affidavit filed 8 February 2013 in opposing the applications, including the application by the Liquidator. The husband asserted his financial circumstances were parlous, including a credit card liability of $172,000, $84,000 in unpaid legal costs and a $50,000 loan from his brother. The affidavit contained submissions and evidence in respect of both himself and his parents. I had regard to that material.
The third intervener relied upon his affidavit filed 18 February 2013. He contended that his intervention and that of his wife was made in the absence of legal advice. At some levels that assertion was disingenuous having regard to the legal assistance these interveners had in the proceedings and the amount of money provided by the husband to his parent’s (directly and indirectly) to meet legal expenses.[2] The third intervener also asserted that the Court was aware that the fourth intervener was excused from attending the hearing as a result of a recent diagnosis of Alzheimer’s disease. That was not the reason she was excused from attending, it was her dizziness and nausea. In any event the third intervener relied upon a report dated 1 February 2013 from Dr HH who said that a specialist had diagnosed the fourth intervener with Alzheimer’s disease with the consequence that she had ‘some problem with memory and her decision making’.[3]
[2] Reasons for Judgment 5 October 2011 at paragraph 200.
[3] Annexure A of the affidavit of Mr H filed 18 February 2013.
Also attached to his affidavit was a financial statement which showed that these interveners were in receipt of age pensions and that their significant joint assets were a home with a value of about $520,000 and savings of about $35,000.
APPLICATION FOR DIRECTION BY THE LIQUIDATOR
Mr L is the Liquidator of K Pty Ltd (“the Company”) pursuant to the orders made 13 October 2011. He sought permission for the payment of his liquidation fees amounting to $85,000 plus GST. This submission was contained in his letter forwarded to the Court and dated 8 March 2013. The husband, the first and second interveners and the wife all had copies of that application. It was a not an issue in terms of the third and fourth interveners, any equity that they claimed in the Company was extinguished by the orders made 13 October 2013 and the third and fourth interveners did not seek to disturb those orders. There was a debt due to them by the Company which was addressed in the October 2011 orders. I accept and adopt the submissions of counsel made on behalf of the first and second interveners as to the relevance of that application to them, as the third and fourth interveners had no equity in the company.
There was no application for cross-examination of the Liquidator and whilst the process was somewhat informal, having regard to the costs lost in these proceedings, it made sense. The material provided by the Liquidator set out the difficulties in terms of the liquidation. I accept that document as a business record of the Liquidator. The Liquidator asserted that he had incurred additional fees due to a number of unforseen issues including issues with completing the sale of a property and the minimal books and records provided to him. The Liquidator provided a detailed description of the tasks undertaken by him.
The wife and the first and second interveners consented to the request by the Liquidator for additional fees. The husband’s objection was that he [the Liquidator] had quoted an amount of $50,000, and therefore the amount ought to remain at that figure.
The husband said:-
2.9 The liquidator (through the lawyers for [the first and second interveners] made representations and commitments to the court that their fees would be capped at $50,000 for the winding up of [the company]. No other action in relation to any financial investigation into the accounts of [the company] was undertaken (at the direction of the trial judge), so there is no reason to accept the liquidators claim beyond $50,000.
The husband then went on to comment on the decision of the Full Court and complaint (from his perception) of the lack of investigation into the Company.
The Liquidator is empowered to seek directions in relation to his task[4] and he is entitled to be adequately remunerated for undertaking the court directed liquidation in liquidating the assets of the Company and accounting to the parties. The husband made no submission on the detail of the work alleged to have been undertaken by the Liquidator. The Liquidator had minimal books and records and I am satisfied that the additional costs incurred are not unreasonable.
[4]Order 14 made 13 October 2011.
Accordingly, I made an order that the Liquidator be paid his outstanding fees of $85,000 plus GST.
Counsel for the wife requested that I make a declaration as to the amount outstanding to Citibank. The amount outstanding, as at 31 December 2012 was set out in a document annexed to the affidavit of the third intervener. It disclosed an amount outstanding, at that time, of $50,566.93.[5]
[5]Annexure “D3” to the affidavit of Mr H filed 18 February 2013.
In his affidavit filed 5 March 2013 the wife solicitor’s, Mr Forster, provided a schedule in relation to the liquidation and the costs which were going to be charged. Included in that was the amount outstanding to Citibank which was shown at $224,299. Clearly the amount owing was much less and the figures needed to reflect that sum. I have made the declaration and I note that it is likely that the payout will depend on whether repayments have been made and the timing of the repayment.
Whether the costs application of the first and second interveners as to the substantive proceedings are determined pursuant to provisions of the Corporations Act or s 117 of the Family Law Act?
The proceedings between the first and second interveners and the husband and the third and fourth interveners related substantially to issues determined under the Corporations Act. In particular s 1337C of that Act confers on the Family Court original jurisdiction with respect to civil matters arising under the Corporations legislation.
Harmoniously, s 31(1)(d) of the Family Law Act enables the Family Court to exercise original jurisdiction under the Family Law Act or any other Act, and provides:-
31(1) Jurisdiction is conferred on the Family Court with respect to:
…
(d) matters (other than matters referred to in any of the preceding paragraphs) with respect to which proceedings may be instituted in the Family Court under this Act or any other Act [emphasis added].
To determine the property of the husband and the wife and their alter egos, it was necessary to deal with issues raised by the wife as to the structure and management of the Company. The first and second interveners joined the proceedings and that part of the proceedings was conducted with regard to various aspects of the structure of the Company including the winding up order, the rectification of the share register and the proof of debt injunction. The provisions of the Corporations Act were the primary source of statutory power to make the relevant orders in regard to the Company.
Section 1335(2) of the Corporations Act provides:-
The costs of any proceeding before a Court under this Act are to be borne by such party to the proceeding as the Court, at its discretion, directs.
It was submitted by counsel for the first and second interveners that the Family Court has power, by conferral, to make a costs order pursuant to s 1335(2) of the Corporations Act. She went on to submit that the significant difference between the costs determined under the Corporations Act, and those determined under the Family Law Act; is that under s 1335(2) there is no primary position that each party shall bear their own costs.
The Family Law Act at s117(1) provides:-
…each party to proceedings under this Act shall bear his or her own costs.
Counsel for the first and second interveners submitted that her client’s joined the proceedings in the Family Court, but sought relief under the Corporations Act and further that the wording of s 117(1) defines its application, that is, proceedings under the Family Law Act. She further submitted:- [6]
…the directives contained in section 117, including the primary position that each party shall bear their own costs, do not apply, unless the proceedings can be categorized as being under the Family Law Act. If they cannot be so categorized, it is submitted costs should follow the event, without the need to consider circumstances justifying a departure from the primary position of each paying their own costs.
It is submitted the combined operation of section 31(1)(d) of the Family Law Act and section 1337C of the Corporations Act enabled the determination of the first and second interveners’ claim, pursuant to the provisions of the Corporations Act. (viz section 1337C of the Corporations Act).
[6] At paragraph 11 of the first and second intervener’s written submissions dated 6 March 2013.
The proceeding, insofar as they related to the substantive conflict between the first and second interveners of the one part (supported by the wife) and the husband and his parents of the other part, were an exercise of the original jurisdiction by this Court under the Corporations Act. Accordingly, costs should be determined under the costs power provided in the Corporations Act and not pursuant to s 117 of the Family Law Act, which limits costs to proceedings conducted under that Act.
I considered the power to award costs in the Federal Court. The statutory power provided to the Federal Court is much broader than that provided under the Family Law Act. Section 43 of the Federal Court of Australia Act 1976 empowers that Court to award costs, it provides:-
43(1) Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.
…
The Full Court of the Federal Court considered the interaction of s 43 of the Federal Court of Australia Act 1976 and s 1335(2) of the Corporation Act in MG Corrosion Consultants Pty Ltd v Vinciguerra (No 2) [2011] FCAFC 48 (4 April 2011). Although this was in a different context that Full Court observed:-
15.In Re Firepower Operations Pty Ltd (in liq) (No 3) [2010] FCA 141; (2010) 183 FCR 150, Siopis J was required to consider whether the Court had jurisdiction to order Mr Johnston (a non-party) to pay costs for his failure to appear at a liquidator’s examination. Mr Johnston was ordered to pay the wasted costs of the liquidator in respect of his failure to appear and costs of a notice of motion. Mr Johnston had submitted that the Court had no jurisdiction to order that he pay the liquidator’s costs as he was a ‘non-party’. Reliance was placed on the statutory provisions of s 43 FCA and on s 1335(2) CA and r 11.10 of the Federal Court (Corporations)Rules 2000 (Cth). Siopis J rejected the argument that the broad jurisdiction conferred on the Court by s 43 FCA was fettered in any way by the provisions of s 1335(2) CA. Siopis J followed Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd [2009] FCA 399; (2009) 176 FCR 348 per Lander J noting (at [16] – [18]):
16.The Court, in the case of Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd [2009] FCA 399; (2009) 176 FCR 348 (Consolidated Byrnes), considered a similar argument to that which is raised by Mr Johnston as to the construction of s 43 of the Federal Court Act and s 1335(2) of the Corporations Act. Lander J found that s 1335(2) was not intended to limit the jurisdiction of this Court described in s 43(1) of the Federal Court Act to make costs orders in respect of proceedings before the Court brought under the Corporations Act.
17.Lander J reached this conclusion after closely examining the existing authorities. Lander J found the reasoning of Chernov J in UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd [1998] VSC 13; [1999] 1 VR 204 (UTSA) compelling. Lander J also observed that Brereton J in the case of Re Struthers (Liquidator of Project Management, Architecture and Construction Interior Pty Ltd) (No 3) [2005] NSWSC 1113; (2005) 64 NSWLR 392, had also found the reasoning of Chernov J in UTSA compelling and had followed the decision in UTSA in preference to the first instance decisions in this Court in Re Wridgemont Display Homes Pty Ltd [1992] FCA 604; (1992) 39 FCR 193 (Wridgemont) and Australian Forest Managers Ltd (in liq) v Bramley (1996) 65 FCR 13. Lander J also noted the criticism of the Wridgemont decision by Professor Dal Pont in Law of Costs (2nd ed, Lexis Nexis Butterworths, 2009).
18.Like Lander J and Brereton J, I, too, find the reasoning of Chernov J in UTSA compelling and, therefore, follow Lander J's decision in Consolidated Byrnes. Accordingly, I find that s 1335(2) does not have the effect of preventing this Court from making an order for costs against non-parties under s 43 of the Federal Court Act in proceedings brought under the Corporations Act; nor does it preclude the making of rules which permit the making of such costs orders in respect of the Corporations Act proceedings.
19.Similarly, in City of Swan v Lehman Bros Australia Ltd (No 3) [2009] FCA 1190 (at [13]), Rares J concluded that under s 1337S(1)(c) CA, the Court’s rule making powers under s 59 FCA were extended ‘without limitation, with respect to costs’. It followed that the width of the costs powers in s 1337S(1)(c) CA could extend to non-parties despite the word ‘parties’ in s 1335(2) CA.
20.A similar power was also exercised in Huntingdale Village Pty Ltd v Corrs Chambers Westgarth [2011] WASC 44 by Le Miere J (at [30]-[34]).
21.It follows, therefore, that there is power to make an order with respect to costs in relation to a non-party to a proceeding.
The thrust of the Federal Court approach is in the discussion of their power to make orders against third parties. It is the breadth of the Federal Court legislation that prevents s 1335 of the Corporations Act operating as a bar to restrict that broader application of the costs power.
In the context of the Family Law Act and Corporations Act I am satisfied that s 1335(2) should determine the basis to which costs are ordered as between the husband and the first and second interveners, as the primary issue is that under the Corporation Act. If the issues are combined (such as they were in the stay application and in the framework of the wife’s issues with the husband) then s 117 of the Family Law Act should apply.
However, in the circumstances of these proceedings the distinction is not that significant as either way the result is unlikely to be different. Discretion cannot be determined in a vacuum. I will have regard to and apply the various factors set out in s 117(2A) of the Act in identifying matters to consider when exercising that costs discretion.
Whether the husband should pay the costs of the first and second interveners in the substantive proceedings and this costs application? If so, whether on an indemnity basis and from which date?
I have determined that the husband should pay the costs of the first and second interveners of both the substantive proceedings and the costs application. In addition I have determined that such cost should be on an indemnity basis. Finally, I have determined that the husband’s liability for such costs should commence from the date the first and second interveners made application to intervene, viz 7 July 2009.
The interveners were brought into the proceedings because the husband’s conduct of the case was unreasonable, many parts of his case were without foundation and dishonest. He exhibited a wanton disregard to the costs of the wife and the first and second interveners. To that end I accept and adopt the written submissions of counsel for the wife, to which I will refer further elsewhere in these reasons.
For the purpose of all of the costs applications there is no evidence that any of the parties were in receipt of legal aid.
Section 117(2A)(a) and (b)
The first and second interveners are of modest means. Their assets are their home, a small parcel of shares and their interest in the Company. They have expended significant money in the costs of these proceedings; their costs have been estimated at $386,801.
The husband now has limited assets but has an earning capacity of $250,000 to $280,000 per year.[7] The financial circumstances of the husband enabled him to pay $236,840 on the costs of his appeal.
[7] Reasons for Judgment 5 October 2005, paragraph 257.
May J concluded in Brito v Jalaba [2012] FamCAFC 188 that ‘it was well established that a party’s impecunious circumstances are not a bar to an order for costs’. Although, it is and remains a relevant consideration. A similar observation can be made about a person who will become impecunious if the Court were to make an adverse costs order (Rittman v Rittman [Costs] [2012] FamCAFC 151).
The fact that a costs order will leave the husband without significant assets is an unfortunate outcome, however that was a result for which he must take full responsibility. Having regard to the findings in the substantive proceedings, the husband spared no expense in litigating on a win at all costs fashion. The extent of the husband’s costs liabilities, (other than his own) as a consequence of the orders I intend to make, are likely to be in excess of $500,000.
I have considered his financial circumstances. A litigant must be conscious of the possible consequences of an adverse costs order.
Section 117(2A)(a) and (b)
The husband’s conduct in relation to the proceedings was found to be dishonest and adverse comment was made by the Court about him and his evidence.
A large quantity of affidavit and documentary material was produced and relied upon; there were many volumes of exhibited documents. These documents needed to be examined, considered and some were tested by cross examination. The husband’s oral evidence at times contradicted his affidavit material. He obfuscated and tried to confuse various financial transactions. His approach significantly extended the hearing time. He gave false evidence about meetings, signatures, payments by and to various entities, and agreements reached. The third intervener substantially supported his contentions both on affidavit and in oral evidence.
One of the examples of this was in the husband’s affidavit filed 26 November 2010. The husband was responding to an affidavit of Ms D dated 14 September 2009 and made the following allegations against Ms D:-[8]
The statements made in Point 38 [of Ms D’s affidavit] are a complete fabrication. The alleged $80,000 payment by me to [B Pty Ltd] is completely fictitious … [Ms D’s] statement is false.
[8] At paragraph 470, under the heading ‘Point 38’.
Contrary to the husband’s allegations, and notwithstanding cross-examination of Ms D on these matters at paragraph 173 of my Reasons published 5 October 2011 I found Ms D’s statements ‘to be an accurate recollection of what occurred at the time’.
In those same reasons at paragraphs 90 – 92 I accepted and adopted submissions by the wife and the first and second interveners regarding the fraudulent conduct of the husband both in the affairs of the Company and in the conduct of the trial. These submissions included that the ‘Husband told the Court that a note produced by [Ms D] was a “complete fabrication.” The husband later withdrew that allegation.
The conduct of the husband was that he acted fraudulently; he failed to make proper disclosure and conducted the proceedings upon a significantly false basis.
Section 117(2A)(e)
The first and second interveners where wholly successful in their proceedings against the husband and against the third and fourth interveners. The corollary to that was that the husband and the third and fourth interveners were wholly unsuccessful in that which they sought. It was submitted by counsel for the first and second intervener that ‘In any test of credit, on material matters, their evidence was rejected’.[9] I accept and adopt that submission.
[9] At paragraph 19 of the first and second interveners written submissions dated 6 March 2013.
Section 117(2A)(g)
It was submitted by counsel for the first and second intervener that as the dispute between her clients and the husband and the third and fourth interveners, was commercial in character costs usually follow the event. She asserted that this was a proper consideration under s 117(2A)(g) (Yunghanns & Ors v Yunghanns (2000) FLC 93-029, [35.4]).
Having regard to the discretionary nature of the costs determination, I did not start on the basis that costs should follow the event. I commenced with an open mind and considered all of the facts, findings and circumstances of which were set out in the Reasons of 5 October 2011.
Having done so I conclude that the husband should pay the costs of the first and second interveners and (as I indicated earlier) those costs should be calculated from the date the interveners sought to intervene, including the costs of the initiating instructions and the costs of the application to intervene.
Indemnity Costs
In Munday v Bowman (1997) FLC 92-784 Holden J at 84,660 referred to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 and provided examples of circumstances which would give rise to the exercise of a courts discretion to award costs on and indemnity basis:-
a.Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty. Ltd.v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397.
b.Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra)).
c.Evidence of particular misconduct causing loss of time to the court and to other parties (seeTetijo Holdings Pty. Ltd. v. Keeprite Australia Pty. Ltd (unreported, Federal Court, 3 May 1991)).
d.The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v. Westpac BankingCorporation (unreported, Federal Court, 5 March 1993)).
e.An imprudent refusal of an offer to compromise.
Indemnity costs orders should be rare as observed by Callinan J in Arundel Chiropractic Centre Pty Ltd and Deputy Commissioner of Taxation [2001] HCA 26; [2001] 179 ALR 406. In that case his Honour observed that indemnity costs should be exceedingly rare because they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers.
In these proceedings I have seen the costs agreement between the first and second interveners and they seem reasonable in the circumstances of this litigation, particularly having regard to the approach adopted by the husband. I considered both the Federal Court and Family Court scales as one of the factors in coming to the conclusion that the husband should pay the interveners’ costs on an indemnity basis.
The others are those matters to which I have alluded to elsewhere in these Reasons.
In these proceedings these Reasons and the Reasons of 5 October 2011 are repeated with examples of circumstances in terms of the husband which would give rise to the exercise of a courts discretion to award costs on and indemnity basis.
The proceedings were pursued against the first and second interveners where the husband should have known that he had little chance of success. His continuation of the litigation was with the knowledge that:-
·The husband was an entirely unreliable witness and a wilfully dishonest witness.
·The business records of the company for which he was primarily responsible were unreliable.
·The husband, on his own admission was someone who intentionally deceived others for a financial advantage.
·His untrue statements that he has or had no income, when he had been working in paid employment,
·The husband was not a frank and truthful witness.
·The husband’s position on anything at any particular time was always shifting and was multi positional and simultaneously held mutually inconsistent positions to such an extent that it was impossible to discern just what was his evidence or his case at any particular time save that if any document was consistent with the wife or the first and second interveners’ case he disagreed with it.
·The husband told the Court that he had paid all of his legal costs from his own funds, but was later forced to admit that he had paid some of his legal costs from company funds.
·The husband lied to St George bank in 2005 in order to obtain further funds.
·The husband admits that St George Bank was misled as to the directorship of the Company, on the first loan occasion inadvertently, and the second and third by deception, as agreed by all directors.
·The husband asserted that he and the wife had personally borne the interest repayments on the money borrowed by the third and fourth interveners pursuant to the Citibank loan, used to fund their initial capital contribution to the company. The evidence and affidavit of Mr M revealed that the husband had wrongly recorded these interest payments by C Pty Ltd as loans advanced to the Company, and had in turn wrongly advanced monies from the Company to repay them.
·The husband admitted to asking his mother to sign a letter of demand that she could not read.
·The husband lied to his employment agent as to the reason he had been recently unemployed.
·The husband provided misleading statements to Centrelink, on behalf of his parents.
·The husband lied and misrepresented to [Mr and Ms D] in respect of their shareholding in the Company over a period of 11 years.
I am satisfied that the husband should pay the costs of the first and second interveners on an indemnity basis.
Whether the husband’s parents (the third and fourth interveners) or either of them should pay the costs of first and second interveners? If so whether on an indemnity basis and from which date
As to the husband’s parents I have already referred to their limited income, assets and resources. I have likewise referred to those of the first and second interveners.
I repeat the comments made by me in determining costs against the husband in the previous paragraphs.
As to the third intervener, Mr H, he was the subject of scathing criticism by counsel for the first and second interveners and I accepted and adopted significant parts of that criticism in my 5 October 2011 Reasons.[10]
[10] Paragraphs 195 to 240.
I accepted that the third intervener was not an innocent dupe of the husband but rather he was an unreliable witness prepared to say what he thinks will assist his son.
Some examples include that much of the information of the third intervener came from the husband. That which arose in relation to the evidence he gave early in the trial about his legal costs. The third intervener said that the amount of the legal costs paid by the husband or his company on his behalf was about $83,000. That was inconsistent with the evidence of the husband. Sometime later that day, after there had been an adjournment, the third intervener changed his evidence so that it was consistent with the husband’s.
Another example arose when the third intervener asserted in an affidavit,[11] on legal advice, that the husband held 11 shares in K Pty Ltd on trust for himself and Ms H, the fourth intervener. During the course of the proceedings however, the third intervener changed his evidence and said that he and Ms H’s entitlement was only really a benefit and not shares. The third intervener said that the “on trust” position was his lawyer’s incorrect words, not his. The effect of the third intervener’s evidence was that the $187,000 loan was a contribution based upon a promise and an understanding that he and his wife would receive half of the husband and wife’s share of the factory. I was satisfied that his evidence was changed to fit in with the story promoted by the husband.
[11] Filed the 16 October 2009.
The third intervener asserted that he had been frank with Centrelink, yet he was not.
Overall I found that Mr H, the third intervener, was not a witness of credit.
As to the fourth intervener I found:-
241. [Ms H] gave evidence in accordance with her affidavit filed 16 October 2009. During cross-examination by counsel for the wife, [Ms H] said she had read her affidavit but did not understand it. There was no evidence of the affidavit being interpreted for her. When [Ms H] was shown a copy of her husband’s affidavit she said that she had read her husband’s affidavit, but did not understand it. [Ms H] said that while she can understand individual words, when you put them into a paragraph she does not understand them.
242. [Ms H] said on a number of occasions that she worked in the kitchen, did the housework and left all the decision making to her husband, to whom she had been married for a very long time and trusted.
243. [Ms H] accepts and adopts almost everything her husband says and almost all of her information comes from what her husband tells her.
244. [Ms H’s] evidence was that she would typically be undertaking domestic duties when matters relating to [K Pty Ltd] were being discussed and she would sign what her husband asked her to and did what her husband asked her to do. She said that she did not have much to do with the affairs of [K Pty Ltd].
245. In the course of her cross examination by the solicitor for the husband, [Ms H] said that she recalled going to the meeting on 18 March 1997. She also supported the views of the husband and [Mr H] to a limited extent.
246. The evidence of [Ms H] can be given little weight. That is not a criticism of her, but a reflection of the role that she adopted in her relationship.
The evidence about the health of the fourth intervener provided by the husband and the third intervener was troubling. I raised with the parties whether I ought to seek a case guardian for her, such a guardian was not sought.
The third and fourth interveners were wholly unsuccessful in their litigation. They ought not to have become involved. Their involvement prolonged and delayed the hearing. The third intervener cross examined witnesses and strongly supported the husband’s case.
I am satisfied that I ought to make an order that the third intervener pay the costs of the first and second interveners and given the circumstances outlined above, that such costs ought to be calculated on an indemnity basis. I have had regard to the costs agreement between the first and second intervener and their legal practitioners.
As to the fourth intervener I do not intend to make any costs orders. Her involvement in the proceedings was limited and did not, in itself, prolong the hearing. I was concerned about her health during the substantive hearing and this was amplified during the costs hearing.
Costs which are subject to s 117 of the Family Law Act
I repeat the comments I made in Woodley & Thyme and Anor [2008] FamCA 162 where I said:-
30.In Brown v Brown (1998) FLC 92-882, Kay J said at pp 85,346 to 85,347:
The obligation under s 117(2A) is that the court shall have regard to the various matters set out thereunder. This is in contrast to the previous provisions under which costs orders were made, namely, under the Family Law Regulations and in particular reg 173 which required that the court may in making an order take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter in my view of some substance.'
31.In the absence of their being circumstances that justify the court making an order for costs, then s 117(1) provides that each party will bear his or her own costs of the proceedings under the act.
32.The interpretation to be applied to s117 and the inter relationship of s 117(1) and s 117(2) was considered by the High Court in Penfold v Penfold (1980) FLC 98-800. In this case Stephen, Mason Aickin and Wilson JJ, said at 75,053-75,054:
It is an accurate description of sec. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to sec. 117(2). As subsec, (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently…we do not agree with the suggestion…that an order can only be made under sec. 117(2) in a ‘clear case.
Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when the costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised.
Moreover, the transcript shows that it was only after the respondent’s financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a Form 19… (which) presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest... (at 75,054).
Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order.”
Funds of either the Company or the husband and wife were used to fund legal costs for the third and fourth interveners. The third intervener embraced and supported the husband in this substantially commercial litigation with regard to the shareholding and structure of the company.
The husband was not frank in his capacity to pay. It was an agreed fact that he paid $236,840 in relation to his costs on the appeal. Of this there is evidence that he borrowed $50,000 from his brother, his credit card liability has increased from about $115,000 to $170,000 over that period of time, being another possible contribution from that source of about $50,000 which meant that the husband contributed a sum in excess of $100,000 from his own funds, presumably from working. The husband has the capacity to meet an order or some order.
It was asserted that the husband’s parents were active participants. As I indicated earlier that was certainly the case in relation to Mr H, the third intervener, who was, in many ways, a stalking horse for the husband, but Ms H, the fourth intervener, simply followed the directions of her husband and her son.
The wife seeks the costs of the proceedings, and indemnity costs, against the husband as and from 19 December 2008, being from after the final order[20] was made with respect to the child R, and from a few days after the conciliation conference[21] was held. I will be making the costs order in respect of the wife, as and from 1 January 2009. It was open for the husband at that early stage to avoid the high level of conflict. In the preceding May 2008 the wife had tried to have a meaningful negotiation with the husband about their relationship breakdown. The husband adopted, and has continued to adopt, a confrontational and destructive ‘win at all costs’ approach to this dispute. The consequence of that is that the parties have between them spent close to one million dollars on costs, in what is a relatively modest pool of assets.
[20] 10 Dec 2008.
[21] 11 Dec 2008.
Having regard to all of these factors and circumstances, I am satisfied that the husband should pay the wife’s costs of the substantive proceedings and of this costs application as and from 1 January 2009, excluding the costs already the subject of existing costs orders.
Having regard to the factors and circumstances insofar as the third respondent was concerned, I am satisfied the he should pay the wife’s costs of the substantive proceedings and of the costs application.
As I said earlier, the evidence about the health of the fourth intervener provided by the husband and the third intervener was troubling. Her involvement in the proceedings was limited and did not, in itself, prolong the hearing. I was concerned about her health during the substantive hearing and this was amplified during the costs hearing. The third and fourth interveners were wholly unsuccessful in their litigation. They ought not to have become involved.
However, whilst I am satisfied that I ought to make a costs order against the third intervener in favour of the wife, I am not satisfied that I ought to make a costs order in favour of the wife against the fourth intervener.
In terms of indemnity costs orders that the wife seeks against the husband and against the third intervener, I have had regard to the costs agreement between the wife and her legal practitioners.
The approaches adopted by the husband to which I have alluded earlier in these reason are such that a costs order in respect of the substantive proceedings and this costs application should be calculated on an indemnity basis.
Similarly, the approach adopted by the third intervener, to which I have alluded earlier in these reasons, are such that the costs orders in respect of the substantive proceedings and this costs application should also be calculated on an indemnity basis.
The costs order against the third intervener should operate in respect of the costs of the wife as and from 7 July 2009 being the date of the filing of the application to intervene and affidavit in support sworn by Mr H.
In coming to these decisions I considered that the starting point of s 117 is that each party pays their own costs. However, the circumstances of this case, and the husband’s conduct suggest the examination of the matters in s 117(2) and the question of whether the husband should pay the wife’s costs and if so on what basis.
I am satisfied in respect of the costs application by the wife that this Court has the jurisdiction to make an order for indemnity costs and that the exceptional circumstances in respect of each application justify the departure from the ordinary rules.
In regard to any costs orders made in respect of the same work and period against the husband and against one or both of the third and fourth interveners; whether they should be jointly and severally liable to the party who has the benefit of such cost orders.
In respect of the substantive proceedings and the costs applications, I will make orders that the husband pay the indemnity costs of the wife and of the first and second interveners and I will also make orders that the third intervener pay the indemnity costs of the wife and of the first and second interveners.
Significant parts of these costs will be for the same work and it is not intended that the wife or the first and second interveners are paid twice for the same costs.
It was open for me to order that the third intervener pay such of the costs as are not paid by the husband. I considered but rejected that course having regard to the extent of the possible costs and the level of engagement in the proceedings demonstrated by the third intervener.
It is likely that the total costs determined under these and other orders will extinguish the assets of both the husband and the third intervener. That was the risk that they took. The third intervener was unrepresented at the final and costs hearings, but had significant legal assistance at times during the course of this litigation.
As a consequence of these proceedings the wife and the first and second interveners have incurred significant cost much of which was brought about by the approaches adopted by the husband and the third intervener. From the evidence before me it is unlikely that all of the costs of the wife and the first and second interveners will be met by the combination of the husband and the father’s …let alone individually.
Having determined that their ought to be costs orders, with a significant part on an indemnity basis, an order that the husband and third intervener are jointly and severally liable will likely enable the wife and the first and second interveners to have the fruits of the costs orders. To do otherwise could emasculate the underlying intent of the costs orders.
OTHER ISSUES
The husband sought an adjustment or allowance in his favour in the sum of $3,060 in relation to money allegedly taken by the wife.[22] That issue was dealt with at paragraph 57 of my Reasons which said as follows:-
57.The husband sought that the wife’s alleged personal debt of $3,060 be repaid to the company from her share of the sale of the property. The issue of that debt seems to me to be a matter for the liquidator, subject to my supervision as contained in the orders
[22] Husband’s affidavit filed 18 February 2013 – paragraph 2.13.
That issue was a matter for the Liquidator.
The husband sought an order that all parties be equally responsible for the costs of the valuations and the mediation.[23]
[23] Ibid paragraph 2.15
On the 26 August 2009 Bennet J made procedural orders in respect of the parties’ property. Order 5 provides;
5.That the parties do all things and sign all documents to cause the sum of $20,000 (alleged by the husband to be the balance remaining in the bank account of [K Pty Ltd] (“the company”)) to be applied as follows:
(b) The mediators fee expected to be about $3,500 (see paragraph 17 of this Order for details of the mediation);
(c) The fees of the single expert factory valuer to be retained by the parties and expected to be about $2,500; and
(d) The fees of [Mr MM], accountant, expected to be at first instance about $5,000.
On the 2 September 2010 Bennett J made further orders in respect of the valuation of the parties property and in particular orders 7, 8 and 9 provide:-
7. That the husband and the wife do all things in accordance with the rules to obtain a single expert valuation of [S Street, Suburb E] unless agreed in writing within 7 days.
8.That the parties do all things in accordance with the rules to have the existing single expert valuation of the factory at [Lot BB at J] updated unless agreed within 7 days.
9.That in regard to valuations described in paragraphs 7 and 8 herein, the husband shall bear the expense thereof in the first instance with that expense to be adjusted at final hearing in accordance with the rules, subject to any further order of the trial judge.
Having regard to all of the other matters set out in these Reasons and including the husband’s failure to meet all the loan repayments on the matrimonial home, notwithstanding the conditions of the stay, I am not satisfied that there ought to be an order in favour of the husband requiring the wife to pay monies towards these valuations.
In any event having made orders for indemnity costs this request or application becomes moot and the need for the payment of these valuations will be matters for the Registrar on calculating the costs.
The husband sought leave to cross- examine counsel for the wife and counsel for the first and second interveners in relation to the rates and the hours claimed.[24] I gave him the opportunity to do so in respect of the solicitors, however, I declined to do so in respect of counsel. Neither counsel swore affidavits and their charges would have been well known to their respective instructors.
[24]Ibid 2.14.
The husband sought ‘independent taxing’ of costs by the Legal Services Commissioner (presumably of Victoria). As these are proceedings under Commonwealth Law and there is a process to facilitate this in the Family Court that application was not accommodated.
The husband and the third intervener sought the return of documents handed up by each of them. This was dealt with in the 13 October 2011 orders.
The wife and the first and second interveners sought orders that the monies due to them pursuant to the costs orders they seek in respect of these proceedings and the costs orders made in the Full Court proceedings ought to be deducted (when those costs are determined) from the monies otherwise payable to the husband pursuant to orders made by me on 13 October 2011.
The husband spent a considerable amount of money on the costs of his appeal (as set out in earlier discussion) and managed to find those monies through borrowings, income and otherwise but did not pay the outstanding costs orders to the wife and the first and second interveners.
The husband sought a stay of the orders in relation to the transfer of some property and I acceded to one part of his request on the basis that he paid the mortgage instalments on the former matrimonial home. That was his application and I made orders as sought by him to that effect. For some months the husband has not paid those instalments.
I am satisfied that the husband is unlikely to willingly comply with further costs orders. Accordingly it seems to me just and equitable that the monies that would otherwise be payable by the Liquidator to the husband be retained pending the payment of costs to the wife and the first and second interveners. It is likely that the whole of the amount retained by the liquidator on behalf of the husband ($190,000.00 to $200,000.00) will be applied towards the payment of outstanding costs to the wife and the first and second interveners. Accordingly, I will be making that order.
The wife and the first and second intervener seek a discharge of order 1 made by me on 14 February 2012 if the preceding order is to be made. Having regard to my determination to make the orders sought by the wife and the interveners I will be consequently discharging order 1 made by me on 14 February 2012. Similarly I will be discharging order 2 made by me on 14 February 2012 as it no longer applies, the appeal having been determined and the substantive orders remaining in place.
In submissions made to me I was informed, and I accept, that there is no conflict between the first and second interveners and the wife. As such, in relation to monies held by the Liquidator those parties will agree to the division of the monies as between themselves.
From the material provided by the husband he asserts that he is impecunious and that his liabilities exceed his assets. If that is the case there is a possibility that the husband could become insolvent and become a bankrupt during the course of the winding up of these proceedings. At the end of the day that will be a matter for the husband and/or his creditors.
Nothing in these orders is designed to give a preference to the wife and/or the first and second interveners as between themselves and any other unsecured creditors of the husband. I will make a notation to that effect in the orders I propose to make.
I certify that the preceding one hundred and sixty one (161) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 9 May 2013.
Associate:
Date: 9 May 2013
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