Gandega & Fulmali (No 3)
[2024] FedCFamC1F 453
•5 July 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Gandega & Fulmali (No 3) [2024] FedCFamC1F 453
File number(s): PAC 4811 of 2016 Judgment of: RIETHMULLER J Date of judgment: 5 July 2024 Catchwords: FAMILY LAW – COSTS – Costs applications brought by the second, fifth and eighth respondents – Consideration of matters set out in s 117(2A) of the Family Law Act 1975 (Cth) – Costs where successful appeal on issues of jurisdiction not raised by the parties before trial judge – Where Full Court refused to order costs on appeal – Where significant costs incurred which could have been avoided if issues upon which appeal was allowed were argued earlier – Where applicant for costs unsuccessful on the merits at trial but successful on appeal on issues the subject of jurisdiction argument not raised at trial – Where claim now being re-litigated in Supreme Court – Partial costs order for principle proceedings – Costs of enforcement actions after judgment ordered on party and party basis – Costs of costs application ordered on party and party basis – No matters of principle. Legislation: Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth) ss 78, 79, 106B, 117
Cases cited: Akbar & Gandega [2023] FedCFamC1A 174
Anison & Anison (2019) FLC 93-908; [2019] FamCAFC 108
Beck v Spalla (2005) 223 ALR 21; [2005] FCAFC 82
Collins and Collins (1985) FLC 91-603; [1985] FamCA 15
Gandega & Fulmali and Anor [2018] FamCA 491
Gandega & Fulmali [2023] FedCFamC1F 308
Hockey v Fairfax Publications Pty Ltd (No 2) [2015] FCA 750
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123; [2005] FamCA 158
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Division: Division 1 First Instance Number of paragraphs: 36 Date of hearing: 1 March 2024 Place: Parramatta Solicitor for the Applicant: Marsdens Law Group Counsel for the First Respondent: Ms Spain Solicitor for the First Respondent: Crumpton Lawyers Counsel for the Second, Fifth and Eighth Respondents: Mr Cox SC Solicitor for the Second, Fifth and Eighth Respondents: David Leamey Solicitor & Barrister Solicitor for the Third Respondent: Did not participate. Solicitor for the Fourth Respondent: Did not participate. Solicitor for the Sixth Respondent: Did not participate. Solicitor for the Seventh Respondent: Did not participate. ORDERS
PAC 4811 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS GANDEGA
Applicant
AND: MR FULMALI
First Respondent
MR AKBAR
Second Respondent
EE PTY LTD (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
RIETHMULLER J
DATE OF ORDER:
5 JULY 2024
THE COURT ORDERS THAT:
1.The applicant and first respondent pay costs to the second respondent fixed in the sum of $25,000.
2.The applicant and first respondent pay the fifth and eighth respondents’ costs of and incidental to the Enforcement Application filed 14 June 2023, as agreed, and failing agreement, as assessed on a party and party basis.
3.The applicant and first respondent pay the costs of the Costs Applications of the second, fifth, and eighth respondents’ as agreed, and failing agreement, as assessed on a party and party basis.
4.The time for payment of the costs awarded in Orders 1 to 3 be the date upon which final orders are made in the Supreme Court of New South Wales proceedings number ….
5.The Costs Applications be otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
RIETHMULLER J:
The second, fifth, and eighth respondents (the first and second applicants in this application) seek costs orders with respect to the proceedings between the parties determined in Akbar & Gandega [2023] FedCFamC1A 174 (“Akbar”). The applicant wife and first respondent husband (in the substantive proceedings) are the respondents to this application.
BACKGROUND
The wife commenced proceedings in the Family Court of Australia in 2016, seeking property settlement orders against the husband and the second respondent. The claim was poorly articulated when commenced.
In June 2018, following argument in November and December 2017, issues relating to the joinder of the parties other than the spouses were determined by Foster J in Gandega & Fulmali and Anor [2018] FamCA 491. The substance of the claims was summarised by Foster J as:
82It is clear that the husband seeks to hold the second respondent liable to account for his interest in the corporate entities as it should have been. The second respondent controls those entities and his own to which it appears there will be an argument as to the “phoenixing” of the business of [B Pty Ltd] to entities under the control of the second respondent. Indeed the wife seeks that the disposition of the husband’s shares be set aside.
The claim for relief, loosely described as “pheonixing”, necessarily arises pursuant to the Corporations Act 2001 (Cth) (pursuant to which this Court has original jurisdiction) and at equity. There was also a pending claim pursuant to s 106B of the Family Law Act 1975 (Cth) (at [92] of Foster J’s Reasons) seeking orders to set aside the transfer of shares that had been held by the husband. Justice Foster declined to remove the second respondent from the proceedings (at [83] of Foster J’s Reasons). No appeal was brought against the orders of Foster J. No other challenge was made with respect to jurisdiction in the proceedings.
During the litigation the second respondent sought to rely upon a contract (which was ultimately relied upon by the applicant wife and respondent husband in the trial of the matter) for the transfer of the husband’s interests in a company to the second respondent in order to defend the claims concerning his alleged breaches of duty when operating the company. The contract between the second respondent and the husband was a central feature of the factual matrix concerning the dealings with the companies in which the husband held interests, and central to the defence against any order pursuant to s 106B of the Family Law Act.
By the time the matter proceeded to trial, the companies at the centre of the dispute had been de-registered or placed into liquidation. The applicant wife and respondent husband were no longer pursuing claims under the Corporations Act, nor pursuant to s 106B of the Family Law Act, relying only upon the claims in equity (analogous to many of the rights that arise pursuant to the Corporations Act) in their points of claim. During the course of the trial, they were permitted to pursue the claim that arose from the contract that was relied upon by the second respondent as a feature of his defence. The relevant facts and circumstances are set out in the trial judgment: see Gandega & Fulmali [2023] FedCFamC1F 308.
The second respondent appealed against the orders made in the trial judgment on the basis that the reliance upon the terms of the contract was not raised prior to the trial.
Whilst the second respondent had not agitated any dispute as to jurisdiction at any time after the judgment of Foster J in 2018, the question of jurisdiction was raised by the Full Court on its own motion. The husband and wife argued that the dispute with the second, fifth and eight respondents fell within the jurisdiction of the Court on the basis that it was sufficiently closely connected to the property settlement proceedings pursuant to s 78 or s 79 of the Family Law Act.
For reasons that remain unexplained, neither the husband or wife relied upon arguments that the claim was within the accrued jurisdiction of the Court as a result of its connection with the Court’s original jurisdiction pursuant to the Corporations Act, or with respect to the claim as per s 106B of the Family Law Act to set aside the various transaction (see generally Beck v Spalla (2005) 223 ALR 21 at [25]–[26]). Nor did either party seek to rely upon Part 8AA of the Family Law Act.
The husband and wife’s arguments that the claims were within the accrued jurisdiction of the Court as a result of the matter that arose pursuant to s 78 or s 79 of the Family Law Act was, unsurprisingly, rejected by the Full Court.
After setting aside the trial judgment (Gandega & Fulmali [2023] FedCFamC1F 308), the Full Court determined that there ought to be no order as to costs, saying:
44The appellant in this matter [who is the second respondent in the primary proceedings] has succeeded in the appeal as a result of our finding of want of jurisdiction on the part of the primary judge to make the orders which are the subject of the appeal.
45Until alerted to our concern, that was not, however, a ground of appeal pursued by the appellant.
46In those circumstances, while the appellant has been wholly successful or, conversely, in terms of the provisions of s 117(2A)(e) of the Act, the respondents have been wholly unsuccessful in terms of that sub-section, we are not satisfied that this is an appropriate case to depart from the general principle set out in s 117(1) of the Act, that each party bear their own costs.
47Further, having regard to the fact that the error on the part of the primary judge occurred in circumstances where the primary judge had not been addressed on the issue of jurisdiction, we are not satisfied that it is appropriate to grant costs certificates as sought by the parties pursuant to the Federal Proceedings (Costs) Act 1981 (Cth).
48Accordingly, the additional orders of the Court, being Orders 4 and 5 are that the appellant’s application for costs is dismissed and Order 5, that the parties respective applications for costs certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) are also dismissed.
It appears that none of the parties raised with the Full Court that there was an outstanding costs application pending with respect to the proceedings.
The current costs application relates to the whole of the costs of the proceedings (other than the costs of the appeal). The costs application by the fifth and eighth respondents relates to an Enforcement Application brought against them following the trial judgment. The second respondent is also seeking the costs of removing a Request (dealing number …) from the title of real properties owned by the fifth respondent amounting to $1,643.30.
POWER TO ORDER COSTS
The power to order costs in proceedings in the Federal Circuit and Family Court of Australia (Division 1) is provided by s 117 of the Family Law Act. The section provides that ordinarily each party is to bear their own costs, subject to circumstances justifying a costs order: see Penfold v Penfold (1980) 144 CLR 311 at 315. The legislature has set out a list of relevant factors in s 117(2A) as follows:
(2A)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 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.
The provision should not be read restrictively (Collins and Collins (1985) FLC 91-603), and any one of the factors may be sufficient to justify an order (Fitzgerald v Fish and Anor (2005) 33 Fam LR 123).
It is open to the court to make lump sum orders as to costs if there is appropriate evidence before the court. I have the benefit of a detailed costs assessment that carefully analyses the costs amount claimed.
THE PARTIES’ SUBMISSIONS ON COSTS
The second, fifth and eighth respondents’ costs arguments
When the costs applications were set down for argument, counsel for the second, fifth and eighth respondents sought to challenge the findings of the Full Court as to costs on the basis that the judgment of Foster J demonstrated that jurisdiction had been challenged in 2018, around five years before the trial. It was not suggested that any challenge to jurisdiction was raised after 2015 by the second, fifth and eighth respondents. Indeed, the issue was not the subject of a ground of appeal. It was made clear that any attempt to challenge the findings of the Full Court could not be appropriately brought before a judge of the trial division. This argument was not pursued by senior counsel on the hearing of the application. The Full Court has made various findings when dealing with the costs of the appeal. Those findings are not open to challenge in this application.
The second respondent argues that he ought to have all or part of his costs on the basis that:
(a)The husband and wife were wholly unsuccessful (see Anison & Anison (2019) FLC 93-908); and
(b)The wife initially joined the second respondent to the proceedings and adopted the husband’s position against him at trial.
The wife’s claim (as articulated in the Further Amended Initiating Application filed before trial on 14 April 2020) sought to recover the profits pursuant to the contract but did not particularise the basis for the recovery nor did it particularise the calculations. The lack of clear pleading of the contract claim was the ground of appeal relied upon by the second respondent on the appeal against the trial judgment, but it was not determined as a result of the finding of lack of jurisdiction. The method of calculating the claim pursuant to the contract was particularised during the hearing (relying upon evidence from the second respondent’s expert). As set out in the second respondent’s Outline of Submissions filed 28 February 2024 (at paragraph 9(h)): “At the hearing the husband substantially changed his position from a claim based on breach of directors’ duty and an account – to a contract claim...”. Although, it was accepted that the second respondent was on notice as to the underlying facts: see the second respondent’s Outline of Submissions filed 28 February 2024, paragraph 9(k).
The second respondent accepts that the deficiencies in disclosure and findings as to his credit may have added to the cost of the trial and argues that this is not a disqualifying factor. It was submitted that, if the court finds it appropriate, it can result in a partial costs order, for example an order for a percentage of the costs: see Hockey v Fairfax Publications Pty Ltd (No 2) [2015] FCA 750.
The fifth and eighth respondents (a related entity and the second respondent’s wife) seek a costs order with respect to the Enforcement Application filed 14 June 2023 on the grounds that the husband and wife were wholly unsuccessful in this application, which was brought whilst the appeal was pending.
The second respondent is also seeking the costs of removing the Request to Record Court Orders dealing lodged with PEXA (“the Request”) from the title of two real properties owned by the fifth respondent. The Request was lodged to enforce trial orders and in late 2023, the husband and wife were ordered to remove the Request, however they failed to do so in a reasonable time. It is the second respondent’s evidence that in late 2023, he provided a draft Request form to the husband and wife to be signed and lodged with PEXA, and that the husband and wife declined to do so. As a result, on 22 November 2023, the second respondent applied for a registrar to sign the removal under s 106A and this was registered on 23 November 2023. The second respondent claims the costs for the removal of the Request amounted to $1,643.30.
THE WIFE’S SUBMISSIONS ON COSTS
The wife relies heavily upon the fact that the second, fifth and eighth respondents did not raise the jurisdictional issue either at trial or on the appeal, effectively acquiescing to the matter being heard and determined at trial. She points to the Full Court declining to make a costs order or to issue costs certificates as indicative of the view of the Full Court as to the costs questions.
The wife says she has no capacity to meet any costs order, as she presently relies upon funds from social security to supplement a modest income from casual employment. She suffers depression and medical conditions. She has an interest in the former matrimonial home, although at present, the title is still held by the husband.
The wife submits and I accept that the second respondent had been selective, if not obstructive, with respect to the discovery process in the matter, which can be seen in light of the course of conduct that the second respondent embarked upon when the husband was first incarcerated overseas.
I also note that the wife was not significantly involved in the relevant businesses, rather, she pursued a reasonable share of the assets of the parties following separation from the husband.
The husband’s submissions on costs
The husband points out that on the findings at trial, the second respondent has obtained the benefit of the husband’s business assets, which are a significant sum, even if the husband was unable to recover the amount on the judgment that was set aside. The husband is of limited means. The second, fifth and eighth respondents have not clearly set out their financial circumstances.
The proceedings were made significantly more difficult by the second respondent’s conduct in obtaining an adversarial expert, failing to make proper disclosure (even claiming documents were lost as they had “flown off the back of the truck” (see husband’s written submissions filed 27 February 2024)), placing companies into liquidation, and complicating the claims. The conduct of the second respondent significantly increased the costs and complexity of the proceedings. The husband also points to the conduct of the second respondent towards him when he was incarcerated in Asia, prior to his ultimate acquittal, denying his access to funds, however, this does not appear to have resulted in greater costs in the proceedings.
The husband points to the failure of the second respondent to challenge the jurisdiction of the Court. Indeed, had the issue of jurisdiction been raised prior to trial, the questions of accrued or implied jurisdiction could have been squarely addressed (and subject to an interlocutory appeal, if disputed). Alternatively, the whole matter could have been cross-vested to the Supreme Court.
CONCLUSION
The circumstances that arose in these proceedings are very unusual. When considering the matter as a whole, in the context of s 117 of the Family Law Act, I am not persuaded to make a costs order in favour of the second respondent for the whole of the proceedings.
For the purpose of the costs argument, it is appropriate to accept that the outcome of any early challenge to jurisdiction would have been the same outcome as occurred on the appeal of the trial judgment. Had the jurisdiction issue been squarely raised at an appropriate time, the vast majority of the costs could have been avoided. I am persuaded to order that the husband and wife meet the second respondent’s costs to remove the Request from the fifth respondent’s real properties. I am also persuaded to order that the husband and wife meet part of the costs of proceedings against the second respondent. Having regard to the costs evidence and the circumstances of this case I fix the total amount of costs payable to the second respondent at $25,000.
I am persuaded that the fifth and eighth respondents should have a costs order for the costs incurred with respect to the Enforcement Application filed 14 June 2023 after the trial judgment. I am not persuaded that costs should be ordered on a scale more generous than party and party costs. I am not persuaded to fix the sum for costs in this regard on the material before me and will make orders for the parties to have the costs assessed if they are unable to agree.
The second, fifth and eighth respondents have succeeded in obtaining costs orders and should have their costs of the costs applications on a party and party basis.
I am not persuaded to make any further costs orders.
I accept that it is appropriate that the costs be made payable at the time of judgment in the Supreme Court proceedings where the substantive issues continue to be litigated.
I will make orders accordingly.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Riethmuller. Associate:
Dated: 5 July 2024
SCHEDULE OF PARTIES
PAC 4811 of 2016 Respondents
Fourth Respondent:
N PTY LTD
Fifth Respondent:
FF PTY LTD
Sixth Respondent:
BV PTY LTD
Seventh Respondent:
R PTY LTD
Eighth Respondent:
MS AKBAR
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