Georgiades and Georgiades and Ors

[2015] FamCA 67

FAMILY COURT OF AUSTRALIA

GEORGIADES & GEORGIADES AND ORS [2015] FamCA 67

FAMILY LAW – COSTS – consideration of Bullock or Sanderson order – conduct of second and third respondents – Sanderson order made requiring husband to pay costs of second and third respondents – wife’s application for costs adjourned pending appeal.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) r 19.08, 19.18

Bullock v London General Omnibus Co [1907] 1 KB 264
Gould v Vaggelas (1984) 157 CLR 215
Lackersteen v Jones(No 2) (1988) 93 FLR 442
Roads and Traffic Authority of New South Wales v Dederer and Anor (2007) 234 CLR 330
Sanderson v Blyth Theatre Company [1903] 2 KB 533

APPLICANT: Ms Georgiades

RESPONDENT: Mr Georgiades

2^nd & 3^rd RESPONDENTS: Mr B and Ms C Georgiades

FILE NUMBER: MLC 11134 of 2011

DATE DELIVERED: 13 February 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Berman J

HEARING DATE: 9 December 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Smallwood

SOLICITOR FOR THE APPLICANT: MCK Legal

COUNSEL FOR THE RESPONDENT: Mr Finkelstein

SOLICITOR FOR THE RESPONDENT: FLA Partners

COUNSEL FOR 2^ND & 3^RD RESPONDENTS: Mr Weil

SOLICITOR FOR 2^ND & 3^RD RESPONDENTS: Berry Family Law

Orders

1. That the husband do pay fifty percent of the costs of the second and third respondents as may be agreed or assessed.

2. Further consideration of the Response filed 2 December 2014 is adjourned to a date to be fixed by a Registrar of the Family Court of Australia following the determination of the husband’s Appeal in SOA69 of 2014.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Georgiades & Georgiades 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

FILE NUMBER: MLC 11134  of 2011

Ms Georgiades

Applicant

And

Mr Georgiades

Respondent

And

Mr B Georgiades and Ms C Georgiades
2^nd & 3^rd Respondents

REASONS FOR JUDGMENT

INTRODUCTION 

1. After nine days of evidence and detailed final submissions judgment was delivered on 8 September 2014 which finalised proceedings for property settlement as between Ms Georgiades (“the applicant”), Mr Georgiades (“the first respondent”) and Mr B and Ms C Georgiades (“the second and third respondents”) respectively.

2. Additional to the wife’s claim for property settlement as against the respondent husband, she also sought a declaration that the second and third respondents held a property situate at D Street, Suburb E (“Suburb E property”) upon trust for the husband and the wife. A summary of final orders made is as follows:-

   (1)That the application of the wife seeking a declaration that the second and third respondents hold the Suburb E property on trust for the parties is dismissed.

   (2)That by way of settlement of property:-

   ·That within 60 days the husband pay to the wife a settlement sum of $269,717.

   ·That the husband indemnify the wife in respect of any and all liability of the husband to his parents.

   ·That subject to the payment of the settlement sum each of the parties shall retain to the exclusion of the other all items of personalty and realty in their respective possession and control free from claim by the other.

3. By Application in a Case the second and third respondents seek an order that the applicant pay their costs of the proceedings to be agreed upon and in default of agreement to be assessed.

4. In support of their application they rely upon an affidavit of the third respondent Ms C Georgiades.

5. By her Response filed 2 December 2014 the applicant seeks that the first, second and third respondents pay her costs in such proportion as the Court considers appropriate.  Her Response is supported by an affidavit of her solicitor Mirka Carmelli.

6. On 6 October 2014 the husband filed a Notice of Appeal seeking the following orders:-

   (1)That paragraphs 2 (a) and 2 (b) of the orders made 8 September 2014 be set aside.

   (2)Consequential amendments to the order to reflect the husband’s obligation to make the payment of $269,717 has been extinguished.

   (3)The wife pay the husband’s costs of the Appeal.

7. The grounds of appeal challenge my treatment of the value of the husband’s interest in F Pty Ltd (Ground 1) and my treatment of the “add back” of cash withdrawals as discussed in paragraphs 325 to 338 of the judgment (Ground 2).  Importantly, there would appear to be no challenge to my findings of “non-disclosure” or “adverse credit” in respect of the husband and his parents.

BACKGROUND

1. The wife commenced the proceedings by Initiating Application filed 19 December 2011 seeking orders for settlement of property.  By Amended Initiating Application filed 1 May 2012 the wife sought orders that the second and third respondents be joined as parties to the proceedings.  The wife highlighted certain items of property that were the subject of dispute namely:-

   ·D Street, Suburb E

   ·Husband’s interest in F Pty Ltd

   ·Boat

   ·Aggregate cash withdrawals by husband

   ·Suburb G mortgage

2. It was the wife’s contention that the second and third respondents held the Suburb E property on trust for the parties that caused their joinder.  The balance of the disputed property are matters as between the husband and wife.  My findings in respect of the disputed property are directly relevant to the application for costs brought by the second and third respondent’s and the wife’s application for costs in response.  Other than the appeal the husband seeks no order for costs.

D STREET SUBURB E

1. Ultimately I determined that the wife was not able to establish that the purported representations were made but even if they were I could not find that there was either detriment or unconscionable conduct as against the husband and wife.

2. It was critical to my determination that without a finding that the construction costs of the house properly came from the husband, I would not be able to make a finding that the parties had suffered or sustained any detriment.

3. I was also not able to find that the purported celebratory dinner during which the wife alleges that the property was promised to the parties occurred in the circumstances as put forward by the wife.

4. Factual circumstances in respect of the Suburb E property and its construction were made more complex by my finding that both the husband and his father were unsatisfactory and unreliable witnesses.  I was satisfied that the wife was a satisfactory witness who was prepared to concede inconsistencies where it was obvious she should do so.  The difficulty for the wife is conveniently summarised in my judgment as follows:-

   (89)To the extent that it was put to the wife she was not telling the truth as to her evidence in respect of the celebratory dinner following the announcement of the parties engagement and the method and manner by which the house was constructed it did not appear to be a deliberate attempt by the wife to mislead but rather, a genuinely held view which, upon proof to the contrary she was prepared to concede.  To a large degree her evidence was coloured by her belief of what she says were representations made by the husband boasting of his involvement in the business and his ability to access cash.  Much of the difficulty in this case arises from the propensity of the husband to “big note and embellish himself” and her reliance upon those misstatements.

F PTY LTD

1. In 1999 F Pty Ltd was incorporated by the husband’s parents as a vehicle to purchase a farm at H Town.  The directors of the company were the four children of the second and third respondents and each of the children (including the husband ) held one share.  It is uncontroversial that the value ascribed to that share was one quarter of the value of the property namely, $266,000. The contention of the husband was that at all material times the share in the company was held on trust for his parents.

2. The position adopted by the husband and supported by the second and third respondents was that they needed to “alienate” the H Town property given that they were in litigation and should not be shown as directors of the company or indeed hold shares in same.

3. The circumstances of the husband’s interest in F Pty Ltd was further complicated by a purported loan agreement allegedly signed in October 1999.  I found that the evidence of the Georgiades family in respect of the purported loan agreement was “unsatisfactory and uncertain”.  The husband’s case was not helped by his own representation in a financial statement filed 23 January 2012 wherein he included the interest in F Pty Ltd at $175,000.

4. The documentation and evidence surrounding an unsecured loan in relation to the company was also found to be unsatisfactory and I considered that the loan agreement was intended to be a device to minimise and remove property from the consideration of the proceedings.  My treatment of F Pty Ltd is the subject of the husband’s appeal.

5. I rejected the position put by the husband and included the husband’s interest in F Pty Ltd into the pool of property at $266,000.

BOAT AND LOAN

1. Whilst there was some uncertainty as to the value to be ascribed to the boat, the argument initially centred upon a purported loan agreement between the husband and his parents in relation to the money allegedly provided by the husband’s father and the terms and conditions if any by which that money was to be repaid.

2. I found that the loan agreement was a concoction and ultimately did not bring to account any liability in respect of the boat.  It was telling that the second and third respondents through their counsel did not wish to be heard in respect of the various inconsistencies that were attached to the purchase of the boat and the circumstances in which monies were provided by the second respondent.

TREATMENT OF CASH WITHDRAWALS

1. Between 20 November 2007 and 2 August 2010 the husband caused cash totalling $217,800 to be banked into his personal accounts.  The husband alleged (and supported by the second respondent) that the money banked by him were the takings of a family company I Pty Ltd.  I did not accept the explanation of the husband and found his version to be “both nonsensical and incredible”.

2. The wife’s enquiry as to the treatment of the cash withdrawals was made more difficult by the assertion of the second and third respondents that documents necessary to confirm the purported link between the monies deposited into the husband’s account and their provenance as takings of I Pty Ltd were either lost or destroyed.  I found that the husband and his father were obstructive and not prepared to make full and frank disclosure.  The husband had not provided any satisfactory explanation as to how the money had been utilised by him and there was no evidence presented as to the destination of the funds following their withdrawal from the husband’s personal accounts.

3. The second limb of the husband’s Appeal is in respect of my treatment of the cash withdrawals.

APPLICATION OF SECOND AND THIRD RESPONDENTS - COSTS

1. By affidavit the third respondent relies upon correspondence forwarded to the wife’s solicitors dated 30 May 2013 putting the wife on notice that if she pursued her claim as against the second and third respondents there would be an application for costs if unsuccessful.

2. Her Offer of Settlement of 24 March 2014 was rejected on 26 March 2014 with a counter proposal to resolve the proceedings in so far as it involved the second and third respondents on the basis that the claim against them is withdrawn and that the wife should pay their costs.

APPLICATION OF WIFE - COSTS

1. The wife refers to an Offer of Settlement made to all parties on 24 March 2014 proposing to settle the matter as between the parties on the basis that the wife receive a settlement sum of $200,000.

2. That offer was rejected by the husband and the second and third respondents.

APPLICATION FOR COSTS - GENERALLY

Section 117 Costs

1. Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides as follows:-

   Subject to subsection (2), subsection 70NFB (1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

2. Rule 19.08(1) of the Family Law Rules 2004 (Cth) (“the Rules”), the second and third respondents have applied for an order that the wife pay their costs. The application is made by an Application in a Case.

3. The method of calculation of costs is referred to in Rule 19.18:-

   (1)The Court may order that a party is entitled to costs:-

   (a)Of a specified amount:

   (b)As assessed on a particular basis (e.g. lawyer and client party/party or indemnity);

   (c)To be calculated in accordance with the method stated in the order; or

   (d)For part of the case, or part of an amount assessed in accordance with Schedule 3.

4. Sub-rule 19.18 (3) provides that the Court may consider:-

   (a)The importance, complexity or difficulty of the issue;

   (b)The reasonableness of each parties behaviour in the case;

   (c)The rate ordinarily payable to lawyers in comparable cases;

   (d)Where a lawyer’s conduct has been improper or unreasonable;

   (e)A time properly spent on the case or in complying with the pre-action procedure; and

   (f)Expenses properly paid or payable.

5. In considering what order should be made if any in respect of any application for costs, s 117 (2A) of the Act requires the Court to have regard to the following:-

   (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 fact, 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 matter as the court considers relevant.

6. Obviously the section gives the Court a wide discretion when considering a potential costs order.

7. I have had an opportunity to better understand the financial circumstances of each of the parties.  The wife is in employment and is in receipt of a modest income.  The property pool (not including the Suburb E property) is modest and notwithstanding the settlement sum payable to her if the husband’s appeal is unsuccessful, it is likely that HER costs of litigation are onerous.

8. The husband was not represented during the trial but did have legal representation for part of the proceedings. Little is known of the true financial position of the husband.  His most recent financial statement is entirely unreliable and I have no confidence in the assertion by the husband that his total income from his employment with I Pty Ltd is limited to about $30,000 per annum.  The husband has the advantage of residing in the Suburb E property, that his family provide significant assistance in respect of bills and other outgoings including his legal fees incurred prior to him becoming a self-represented litigant.  I am satisfied that those fees have been paid by the second and/or third respondents without any genuine expectation that those monies or indeed any other alleged loan will be required to be repaid.

9. The application filed on behalf of the second and third respondents seeking that the wife pay their costs contains no financial information as to their circumstances.  The evidence supports the contention that the second and third respondents own substantial property and hold significant business interests.  Substantial monies were paid by them for the construction of the Suburb E property, the purchase of the husband’s boat, the ownership of significant business and real estate holdings together with a substantial loan outstanding from F Pty Ltd currently on the company books for more than $1,000,000.

10. I am satisfied that the financial position of the second and third respondents is not a relevant consideration.

11. Neither party is in receipt of legal aid.

12. I have made clear and detailed findings as to the conduct of the husband and his parents in respect of the proceedings.  Those matters are set out in detail in the Reasons for Judgment delivered 8 September 2014 but in summary, I found the evidence of the husband and the second and third respondents to be wholly unreliable and in many instances was simply not reflective of the truth.

13. Of more concern in terms of the considerations that are to be given to the factors under s 117(2A) are my findings that the husband and his parents were deliberately obstructive to the provision of necessary relevant documents and failed to make full and frank disclosure.

14. Whilst it could not be said that the proceedings were necessitated by the failure of a party to proceedings to comply with previous orders of the Court, there is some importance that can be attached to the status of the Contentions of Fact and Law as ordered by Bennett J on 23 October 2013. The import of these documents was clearly intended by her Honour to better understand the case that was put forward by the wife in respect of the declaration sought as to the Suburb E property.  Equally as important (given that the document contained contentions of fact) was to better understand the response of the husband and his parents.  It was reasonable to assume that the preparation of the notices of contention documents had been the subject of substantial consideration and effort.

15. Whilst I found that the contention documents could not have the status of evidence, nonetheless they were helpful in that they provided a detailed summary of relevant issues directed to the status of the Suburb E property.

16. During cross-examination the husband was challenged in respect of the preparation of his document and he asserted that his document had not been prepared either by reliance upon the contentions document prepared on behalf of the second and third respondents, or that he gained any assistance from his parents’ solicitors.

17. He did explain that it was a document prepared with the assistance of his brother-in-law Mr J.  Mr J gave evidence that it would have been effectively impossible and certainly beyond his ability that he should be able to construct a contention document.  I accepted his evidence entirely.  The evidence of the husband on this topic was unsatisfactory and I found his position was both bizarre and demonstrably false.

18. The wife and her solicitors were entitled to rely upon the contention documents as at least being an accurate reflection of the case that she was to meet.  It places her in a difficult position when the husband’s evidence in respect of his document was so demonstrably false.

19. The second and third respondents argue that the wife has been wholly unsuccessful in her application seeking a declaration in relation to the Suburb E property.  Whilst demonstrably this must be the case, my decision in that regard was tempered by my findings that the husband had exaggerated and embellished his involvement with the property.  The inherent unreliability of both his evidence and that of his parents made it reasonable for the wife to pursue her enquiry until it became apparent that there was uncertainty as to her ability to fix the alleged celebratory dinner and to establish detriment.

1. I am less concerned as to the relevance of the offer made by the second and third respondents.  It is no offer to propose that which is axiomatic upon a consideration of the proceedings.  There is no advantage to the wife in accepting an offer that would see her withdraw proceedings against the second and third respondents but paying their costs.  Certainly she would save the costs of further litigation both in respect of her own legal fees and potentially an application for costs brought against her, but it could not be said that the offer provided any real incentive over and above every decision that every litigant must make to proceed with their application understanding the consequences or the potential consequences of unsuccessful litigation.

2. In the circumstances of this case I consider it appropriate that there be an order for costs in favour of the second and third respondents for fifty per cent of their costs as may be agreed or assessed.  I bring to account that the wife was ultimately unsuccessful in her application, but also the conduct of the second and third respondents, their failure and/or refusal to make full and frank disclosure and the significant exacerbation of the proceedings arising out of the unsatisfactory manner in which their evidence was received.

BULLOCK/SANDERSON ORDER – PRINCIPLES TO BE APPLIED

1. A Bullock order, if successful, may have the effect of directing an unsuccessful applicant to pay the successful respondents costs, but to allow the applicant to recover them from an unsuccessful respondent.  In this case the unsuccessful respondent may be considered to be the husband; see Bullock v London General Omnibus Co [1907] 1 KB 264. A Sanderson order however is an order that would require the costs of the successful respondent to be paid directly by the unsuccessful respondent at first instance rather than the applicant; see Sanderson v Blyth Theatre Company [1903] 2 KB 533.

2. In the decision of Roads and Traffic Authority of New South Wales v Dederer and Anor (2007) 234 CLR 330 at [180] it was held that whilst the ultimate effect of a Sanderson order or a Bullock order is obvious, the principles as to whether either order should apply are nonetheless the same. A Bullock or Sanderson order will not be made unless the conduct of the unsuccessful respondent makes it just to do so, see Gould v Vaggelas (1984) 157 CLR 215 at 230.

3. In Gould v Vaggelas the High Court considered whether the Full Court was right in setting aside an order made by Connelly J requiring the unsuccessful defendant to the counter-claim to pay the plaintiffs by counter-claim the costs ordered to be paid by them to the successful defendants. Gibbs CJ said at page 229:-

   …In my respectful opinion, however, the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant.  Obviously a judge should make a Bullock order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff’s error or overcaution. 

4. Further at page 230:-

   …In my respectful opinion the true position was clearly stated by Blackburn C.J. in Steppke v. National Capital Development Commission (1978) 21 A.C.T.R. 23 at 30-1, when he said that “there is a condition for the making of a Bullock order, in addition to the question whether the suing of the successful defendant was reasonable, namely that the conduct of the unsuccessful defendant has been such as to make it fair to impose some liability on it for the costs of the successful defendant”.

5. In Lackersteen v Jones(No 2) (1988) 93 FLR 442 Asche CJ noted the following principles were preconditions to the granting of a Bullock order at [24]:-

   (1)It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant.

   (2)The cause of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other.

   (3)While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient.  The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion.

   (4)Finally, in considering whether to make such an order, the Court should, in the exercise of its discretion balance overall two considerations of policy:- the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; the second, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.

6. I am satisfied that it was not unreasonable for the wife to think that the Suburb E property was intended for the parties but certainly the husband.  She was integral to the planning and decoration of the property.  She attended with the husband to purchase fixtures and fittings in circumstances where the husband (if he is to be believed) deliberately refrained from telling her that he had instructions from his mother as to the purchase of certain whitegoods.

7. I sought submissions from counsel as to whether it would be appropriate to make a Bullock or Sanderson order in the circumstances of this case.  Mr Finkelstein who appeared for the husband candidly accepted that my findings in terms of the husband’s conduct, his failure to disclose and his significant lack of verity would entitle a Court to consider an order made against the husband in favour of his parents.

8. The only submission of substance made on behalf of the second and third respondents in response was to highlight the husband’s alleged parlous financial situation.  I have already found that I can place no weight or confidence in the representation of the husband as to either his income, or interest in property or other personalty.

9. Accordingly, I consider that adequate grounds exist to make a Sanderson order that would require the husband to pay the costs of his parents as determined by me.

WIFE’S APPLICATION

1. The wife seeks her costs be paid by either the first, second or third respondents and in such proportion as the Court may consider appropriate.

2. It is argued on behalf of the wife that the clear interrelationship between the husband and his parents is such that they should not be considered as genuine separate parties to the proceedings but rather as one respondent.  Counsel for the wife highlights the bizarre contention of the husband that he and his brother-in-law prepared his Notice of Contention in the absence of assistance from the his parents’ solicitors, the frank admission by the husband that he has little or no decision making and that he does the bidding of his parents but in particular his father, the preparedness of both the husband and his parents to concoct evidence as to the existence of retrospective loan agreements and his almost complete reliance on his father to financially support him personally but also to have paid the substantial legal costs in circumstances where it is unlikely those monies will ever be repaid.

3. Whilst the wife’s argument may have much to commend it, it would be artificial to consider the wife’s application until the husband’s appeal has been heard and determined.  It is a significant aspect of the wife’s application that the husband (and by implication his parents) did not accept an offer of settlement which provided for a settlement sum significantly less than that which has been ordered.

4. I propose therefore to make orders as set out at the commencement of these reasons in terms of the costs application of the second and third respondent, but to adjourn for further consideration the wife’s application for costs to a date after the determination of the husband’s appeal.

I certify that the preceding sixty one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 13 February 2015

Associate: 

Date:  13 February 2015