Garston & Yeo

[2022] FedCFamC1F 235

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Garston & Yeo [2022] FedCFamC1F 235

File number(s):

SYC 6928 of 2018

Judgment of:

WILSON J

Date of judgment:

13 April 2022

Catchwords:

FAMILY LAW – ARBITRATION – application for indemnity costs – one party persisting from commencement of litigation until his cross-examination with his assertion that he did not own property in China, that he had no interest in a business in Country B and that $500,000 was a gift to him – that witness conceding in cross-examination that each of those matters had been falsely contended throughout – application of principles in Colgate-Palmolive Co v Cussons Pty Ltd – held, indemnity costs of the proceeding ordered.

Legislation:

Family Law Act 1975 (Cth) ss 13H ,13E and 117(2A)

Cases cited:

Bacall & Zagar [2020] FamCA 350
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Guild & Stasiuk [2020] FamCA 564
Fitzgerald v Fish (2005) 33 Fam LR 12
Hatcher v Cohn (2005) 146 FCR 275
Hearl & Digby [2020] FamCA 474
Honeysett v The Queen (2014) 253 CLR 122
In the Marriage of Kohan (1992) 16 Fam LR 245
Lao v Zeng (2021) 64 Fam LR 332

Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Moy & Pao [2020] FedCFamC1A 17

Prantage v Prantage (2013) 49 Fam LR 197
Stasiuk & Guild [2021] FamCAFC 62
Patrick Parkinson AM, Why are Decisions on Family Property So Inconsistent? (2016) 90 ALJ 498.

Division:

Division 1 First Instance

Number of paragraphs:

40

Date of last submissions:

9 March 2022

Place:

Melbourne

Counsel for the Applicant:

Mr D. Brown QC

Solicitor for the Applicant:

Tiyce & Lawyers

Counsel for the Respondent:

Dr M. Barnett

Solicitor for the Respondent:

Crawford Ryan Lawyers Pty Ltd

ORDERS

SYC 6928 of 2018

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR GARSTON

Applicant

AND:

MS YEO

Respondent

ORDER MADE BY:	WILSON J
DATE OF ORDER:	13 APRIL 2022

THE COURT ORDERS THAT:

1.The applicant must pay the respondent’s costs of the entire proceeding, in both court and in the arbitration, assessed in default of agreement on an indemnity basis.

2.If the parties are unable to reach agreement on the precise quantum of those indemnity costs, a registrar of this Court must assess those indemnity costs with the respondent paying the costs of that assessment.

3.On or before 4:00pm on 13 July 2022 the assessment must be completed.

4.On or before 4:00pm on 15 July 2022, I order a registrar of this court to assess the respondent’s indemnity costs by specifying a certified sum for those costs.

5.The further hearing of this proceeding is adjourned to 10:00am on 18 July 2022.

6.On or before noon on 22 April 2022 the applicant’s legal representatives must contact my associates to inform me of the date which the registrar has set aside to assess costs.

7.The parties have leave to apply generally to ensure that the costs assessment actually takes place and that a sum specific for the assessed indemnity costs is ordered as provided for in paragraph 4 hereof.

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).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 the pseudonym Yeo & Garston is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

WILSON J

1. On 26 May 2021 the arbitrator published his award in this proceeding, which was subsequently registered under s 13H of the Family Law Act so it became a decree of the court.

2. By amended application in a proceeding filed 8 October 2021 Mr Garston (who I simply call “Mr Garston”) sought a collection of orders in relation to the costs of this proceeding.  Those orders were expressed in the following terms –

   1.That within 28 days of the date of these orders the Respondent pay the Applicant's costs of and incidental to the proceedings on an indemnity basis and fixed in the sum of $850,000.

   2.That in the alternative to Order 1 the Respondent pay the Applicant's costs of and incidental to the proceedings on an indemnity basis within 28 days of agreement as to quantum of costs or of assessment of costs.

   3.That within 28 days and without concession the Respondent pay the Applicant's costs of and incidental to the proceedings on a solicitor/client basis fixed in the sum of $500,000.00.

   4.That in the alternative to Order 3 and without concession, the Respondent pay the Applicant's costs of and incidental to the proceedings on a solicitor/client basis within 28 days of agreement as to quantum of costs or assessment of costs.

   5.That within 28 days and without concession the Respondent pay the Applicant's costs of and incidental to the proceedings on a party/party basis fixed in the sum of $300,000.00.

   6.That in the alternative to Order 5 and without concession, the Respondent pay the Applicant's costs of and incidental to the proceedings as assessed on a party/party basis within 28 days of quantification or taxation.

   7.Respondent pay the costs of and incidental to this Application for Costs in the event it is opposed and the Court fix such sum of costs to be paid within 28 days.

3. Ms Yeo (who I simply call “Ms Yeo”) filed a response to Mr Garston’s amended application.  It was in the following terms –

   1.         That the Application in a Case filed 6 July 2021 be dismissed.

   2. That the Applicant pay the Respondent’s costs of this Application on an indemnity basis.

4. Each of the parties relied on written submissions prepared and filed in accordance with orders made by me.  On 24 February 2022, at my direction, my associates emailed the parties inviting further submissions about the phrase “exceptional circumstances” when used in authorities in this Court on indemnity costs.[1]   The parties duly responded.

   [1] Those authorities include but are not limited to In the Marriage of Kohan (1992) 16 Fam LR 245, Prantage v Prantage (2013) 49 Fam LR 197, Stasiuk & Guild [2021] FamCAFC 62, Moy & Pao [2020] FedCFamC1A 17 and Hearl & Digby [2020] FamCA 474, to name but a few.

5. In his amended application in a proceeding Mr Garston’s principle relief was an order for Ms Yeo to pay indemnity costs of the proceeding in the fixed amount of $850,000.  Thereafter, if that order was refused, Mr Garston sought a cascading collection of orders expressed to be in differing amounts and on different bases for the imposition of a costs order.  In each of the seven paragraphs of his amended application in a proceeding, Mr Garston sought a costs order “of and incidental to the proceedings” (sic – there is only one proceeding) rather than his applying for a costs order in relation to one or more discrete parts of the proceeding.  In other words, the costs orders (of whatever variety) sought by Mr Garston applied to the entirety of this proceeding, from its commencement to the date of these reasons.

6. As these reasons explain, in my view Ms Yeo must pay Mr Garston’s indemnity costs of the entire proceeding.

   THE ARBITRATION

7. On 18 August 2020 her Honour Judge Boyle made an order pursuant to s 13E of the Family Law Act referring the whole of this proceeding to arbitration.  The parties appointed former Federal Circuit Court of Australia Judge Giles Coakes as the arbitrator.

8. The arbitration was conducted over three days the last of which was 21 April 2021. Each party was represented by senior counsel. The arbitrator produced his award on 26 May 2021. On 28 May 2022 I made an order registering the award pursuant to s 13H of the Family Law Act.  It took effect thereafter as a decree of this Court, that is to say, of Division 1 of the Federal Circuit and Family Court of Australia.

   THE EVIDENCE ON THIS COSTS APPLICATION

9. Mr Garston made an affidavit on 21 June 2021.  He also made an affidavit on 8 October 2021.  Ms Yeo made an affidavit filed on 24 September 2021.  Each party relied on his affidavit material on this costs application.

10. Taking first the two affidavits of Mr Garston, in the first he deposed to the conduct of Ms Yeo as supporting the making of a costs order. He also deposed to the unreasonable refusal by Ms Yeo as supporting the making of a costs order. He also deposed to the unreasonable refusal by Ms Yeo to accepting Mr Garston’s offers of compromise as a basis for the making of an order against Ms Yeo. He needed to successfully invoke only one provision of s 117(2A) of the Family Law Act in order to become eligible for a costs order in his favour.[2]

    [2] Fitzgerald v Fish (2005) 33 Fam LR 123.

11. Mr Garston addressed conduct issues by reference to disclosure and by reference to money held in trust.  So far as financial disclosure was concerned, Mr Garston deposed to the following –

    (a)on 30 October 2018 Ms Yeo filed a financial statement in which Ms Yeo failed to disclose his interest in property in China and his interest in a business in Country B;

    (b)despite Mr Garston’s repeated requests for disclosure, Ms Yeo failed to disclose his interest in a property in China for about two and a half years;

    (c)only when Ms Yeo was cross-examined did Ms Yeo reveal his interest in a property in China;

    (d)the arbitrator concluded that Ms Yeo’s failure to disclose his interest in property in China was deliberate;

    (e)by January 2021 (I interpolate, shortly prior to the commencement of the arbitration) Ms Yeo’s position remained, namely that he did not own any property in China;

    (f)Mr Garston expended significant amounts of money demonstrating in the arbitration that Ms Yeo owned the interest in the property in China to which he later admitted in cross-examination;

    (g)Ms Yeo did not disclose his interest in the property in China or his interest in the business in Country B in order to secure a spousal maintenance order in his favour, pursuant to which Mr Garston has paid Ms Yeo approximately $80,000; and

    (h)Mr Garston incurred $15,000 in legal fees in unsuccessfully appealing against an order of her Honour Judge Boyle in relation to Ms Yeo’s deficient financial statement, subsequently admitted to having been deficient by reason of its omission of Ms Yeo’s interest in the China property and in the Country B business.

12. So far as the moneys held in trust issue was concerned, Mr Garston deposed to the fact that since this litigation began , Ms Yeo asserted that the sum of $500,000 was a gift and that it was not money held for Mr Garston’s benefit.  Mr Garston stated that this was a central issue in the case.

13. Mr Garston deposed that during cross-examination Ms Yeo admitted that he (Ms Yeo) knew he was holding the sum of $500,000 for Mr Garston since late August 2018.  Mr Garston deposed to making the first request for the return of that amount on 19 November 2018.

14. Mr Garston deposed to expending a significant amount of legal fees in order to prove that Ms Yeo conceded to Ms Yeo’s first solicitor in late August 2018 that the sum of $500,000 was not a gift absolutely to Ms Yeo.  Mr Garston stated that Ms Yeo knew from the commencement of this proceeding that the sum of $500,000 was not Ms Yeo’s as Ms Yeo asserted.

15. So far as the offers of compromise were concerned, Mr Garston deposed to the last proposal emerging on 12 October 2018.  On that date, Ms Yeo put an offer of settlement on the basis that Mr Garston pay Ms Yeo the sum of $280,000 and that he retain $500,000 said to have been a gift.

16. Mr Garston deposed to filing his response to Ms Yeo’s initiating application and that the orders Mr Garston proposed in Mr Garston’s response, had Ms Yeo accepted them, would have constituted a better outcome than the orders obtained following arbitration.

17. Mr Garston deposed to attending a mediation with Ms Yeo on 24 September 2019 at which Mr Garston put a formal offer to Ms Yeo that –

    (a)Mr Garston pay Ms Yeo $104,000;

    (b)Ms Yeo transfer certain C Bank Corporation shares; and

    (c)the spousal maintenance order be discharged.

18. Ms Yeo rejected that offer.

19. Mr Garston deposed to the fact that the offer put at mediation was more favourable to Ms Yeo than was the upshot of the mediation.

20. In Mr Garston’s affidavit made 8 October 2021 he deposed to certain costs agreements that Mr Garston, through his solicitors, entered into.  In that affidavit Mr Garston estimated –

    (a)his costs on an indemnity basis to be between $800,000 and $1 million;

    (b)his costs on a solicitor client basis to be between $447,000 and $530,000;

    (c)his costs on a party/ party basis to be between $270,000 and $320,000; and

    (d)his costs of the appeal to have been approximately $150,000.

21. So far as the spousal maintenance order was concerned, Mr Garston deposed to Ms Yeo’s evidence leading the Court into error and that, in view of the arbitrator’s orders, pronounced after a full ventilation of the issues, no amount for spousal maintenance is due.

22. Mr Garston deposed to his making a part property payment on 10 December 2019 in the sum of $100,000.  Mr Garston stated that in view of Ms Yeo’s non-disclosure, the partial property order was not supported.

23. Ms Yeo made an affidavit sealed on 24 September 2021.  In it (relevantly paraphrased) he deposed to the following –

    (a)a mediation was conducted and terms of confidentiality in relation to it governed the mediation that Ms Yeo considered Mr Garston was breaching;

    (b)pursuant to the arbitrator’s decision, Ms Yeo was required to return to Mr Garston’s D Company shares which Ms Yeo said were valued at less than $500,000;

    (c)Ms Yeo denied that in respect of the offer put to him by Mr Garston at mediation, had it been accepted, Ms Yeo wold have been better off;

    (d)Ms Yeo addressed matters under the heading “conduct of Mr Garston”; and

    (e)Ms Yeo deposed to his current financial circumstances.

    SUBMISSIONS

24. Mr David Brown QC provided supplementary written submissions.  Ms Yeo provided written submissions although the amount of costs in them was unstated. 

25. Before going to the submissions, it is important to point out that in relation to the amounts sought by Mr Garston in costs (assessed on any of the several bases urged) those costs were estimates only.  No evidence was before me beyond Mr Garston’s estimates.  Those were lay estimates, unsupported by evidence of a costs consultant.  I deduce, therefore, that those estimates were proffered to provide something of a monetary attribution (but nothing more) of the large sums involved.  I do not doubt that this proceeding has cost the parties large amounts.  But I am unable to receive Mr Garston’s estimates as evidence of those amounts for the simple reason that Mr Garston is not an expert, properly so called, on legal costing within the contemplation of such authorities as Makita (Aust) Pty Ltd v Sprowles,[3] Honeysett v The Queen[4] and Dasreef Pty Ltd v Hawchar.[5]

    [3] (2001) 52 NSWLR 705.

    [4] (2014) 253 CLR 122.

    [5] (2011) 243 CLR 588.

26. It is also important to point out that Ms Yeo did not address a major tenet of Mr Garston’s case for costs, namely –

    (a)the admission made by Ms Yeo in cross-examination that he had an interest in property in property in China as well as in a business in Country B; and

    (b)the admission made by Ms Yeo that the amount of $500,000 was not a gift in the manner asserted by Ms Yeo.

27. Those issues were important, it seemed to me.  I say that for several reasons.  First, Ms Yeo advanced his application in his litigation (in court and later before the arbitrator) on the basis that both of those matters in the subparagraphs immediately above were true when they were not.  In addition to credibility issues, a persuasive argument can be advanced to the effect that Ms Yeo’s attitude towards those two issues, from 2018 when this case was commenced until his concessions in cross-examination, largely shaped Mr Garston’s approach towards his resistance to Ms Yeo’s claims.  In other words, had Ms Yeo conceded from the commencement of this litigation that that he did in fact have an interest in a property in China, that he did in fact have an interest in a business in Country B and that $500,000 was not a gift to Ms Yeo, it is highly likely that this litigation would not have run nor would the parties have suffered its attendant exorbitant costs. 

28. It is also important to point out that the orders obtained for spousal maintenance were premised on false information.  Ms Yeo said nothing about Mr Garston’s contentions in that regard in Ms Yeo’s affidavit material, preferring instead to direct attention away in relation to nebulous assertions about Mr Garston’s conduct.  I found Ms Yeo’s arguments in that regard specious.  I reject them. 

29. Mr Brown QC pointed out that one of the criterion set out by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd[6] was whether a party had commenced or continued with a proceeding with wilful disregard of known facts.  I find it impossible to accept that Ms Yeo did not know, from the moment he commenced this litigation, and thereafter when he continued with the arbitration, that his assertions were false in relation to –

    (a)the China property;

    (b)the Country B business; and

    (c)the $500,000 he alleged was a gift.

    [6] (1993) 46 FCR 225.

30. In Guild & Stasiuk I delved in considerable detail into costs issues.[7]

    [7] [2020] FamCA 564.

31. So far as indemnity costs are concerned, no authority at intermediate appellate level of this court has authoritatively stated what “exceptional circumstances” are or what that phrase means.  I take that the view that Kiefel J’s statement in Hatcher v Cohn[8] provides extremely useful guidance in holding that “exceptional” means out of the ordinary.  My decision in Guild & Stasiuk was overturned on appeal.[9]  At first instance since then, a plethora of trial judges of this Court have made indemnity cost orders.  They are too numerous to footnote.  That tends to relegate the reasons in the appeal from my decision in Guild & Stasiuk to what Professor Parkinson described as “the very inconsistent decisions”[10] of this court at appellate level on property cases.  Most recently in Lao v Zeng,[11] indemnity costs were ordered applying Colgate-Palmolive Co v Cussons Pty Ltd, in the reasonably run-of-the-mill circumstances there described by the appellation “exceptional circumstances”.

    [8] (2005) 146 FCR 275.

    [9] [2021] FamCAFC 62.

    [10] Patrick Parkinson AM, Why are Decisions on Family Property So Inconsistent? (2016) 90 ALJ 498.

    [11] (2021) 64 Fam LR 332.

32. In my view, it is out of the ordinary for a party to run his case from commencement until he gives evidence maintaining a particular position then to concede the complete opposite when questioned in cross-examination.

33. Further, such conduct speaks volumes about that witness’s overall honesty.  It also speaks volumes of his preparedness to put the other side to immense trouble in the conduct of the litigation requiring that other person (Mr Garston) to disprove his (Ms Yeo’s) asserted falsities.  Such conduct must be denounced.  And I do so by ordering indemnity costs against Ms Yeo.

1. Beyond citing the ageing decision in Prantage v Prantage[12] the written submissions of Ms Yeo were not particularly illuminating.  I reject altogether the submissions by Ms Yeo’s counsel that – 

   (a)the threshold for imposing an indemnity costs order is not reached; and

   (b)a costs order is not warranted at all.

   [12] (2013) 49 Fam LR 197.

2. Ms Yeo maintained from inception that he did not have an interest in property in China, that he had no interest in a business in Country B and that the sum of $500,000 was a gift.  All three propositions were found by the arbitrator to be the opposite to the way Ms Yeo addressed them.  Ms Yeo was under an obligation to not mislead the Court or the arbitrator.  In my view he did in fact mislead both the Court and the arbitrator by falsely advancing his case to the effect that he had no interest in property in China, that he had no interest in a business in Country B and that the sum of $500,000 was a gift to him.  His position on each, right up to his cross examination was also deliberately false.  I am unable to accept that he could accidentally maintain the falsity of all three propositions.  The conduct falls squarely within the criteria set out in Colgate-Palmolive Co v Cussons Pty Ltd.

3. Since September 2021 upon the commencement of the Federal Circuit and Family Court of Australia Act and upon the commencement of the Federal Circuit and Family Court of Australia (Family Law) Rules, parties to litigation in this Court have been subject to the overarching obligations to advance their litigation as cost effectively and as time efficiently as can be done, highlighting the issues truly in dispute.  The arbitrator’s determination preceded the commencement of that Act and those Rules.  Had that Act and those Rules applied, Ms Yeo would in my view have squarely contravened the overarching obligations set out in the Act and in the Rules.  However, even under the Family Law Rules 2004 Ms Yeo squarely contravened the duties imposed upon him in relation to disclosure that I surveyed at length in Bacall v Zagar.[13]

   [13] [2020] FamCA 350.

4. Mr Brown QC for Mr Garston urged me to fix the sum of costs I may order.  Mr Garston’s assertions of his entitlement to costs was, with respect, an imprecise lay person’s estimate.  It would wrong of me to act on that estimate.  Therefore I am unable to accede to Mr Brown’s helpful suggestion that I fix the indemnity costs his client seeks.

   THE WAY FORWARD

5. I order Ms Yeo to pay Mr Garston’s costs of the entire proceeding, in both court and in the arbitration, assessed in default of agreement on an indemnity basis.

6. If the parties are unable to reach agreement on the precise quantum of those indemnity costs I order a registrar of this Court to assess those indemnity costs with Ms Yeo paying the costs of that assessment, such assessment to be completed by not more than three months from today.  To that end I order a registrar of this court to assess Mr Garston’s indemnity costs by 4:00pm on 15 July 2022 by certified sum and I list this proceeding for mention before me on 18 July 2022 to ensure that such a task has in fact been done.

7. I also direct Mr Garston’s legal representatives to contact my associates by noon on 22 April 2022 to inform me of the date which the registrar has set aside to assess costs.  If necessary, the parties have leave to apply generally to ensure that the costs assessment actually takes place and that a sum specific for assessed indemnity costs are ordered by the date I have ordered, namely 18 July 2022 in default of agreement. 

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson.

Associate:

Dated:       13 April 2022