Gerber & Bradley (formerly Gerber) and Ors (Security for Costs)

[2011] FamCAFC 206

FAMILY COURT OF AUSTRALIA

GERBER & BRADLEY (FMLY GERBER) AND ORS (SECURITY FOR COSTS) [2011] FamCAFC 206

FAMILY LAW – APPLICATION IN AN APPEAL – SECURITY FOR COSTS – where the appellant husband had filed an appeal against property orders made in the Family Court – where the respondent wife sought an order that the appellant husband provide security for her costs of the appeal – where the appellant husband would be unable to meet an order for security or an order for costs in favour of the respondent wife in the event that his appeal was unsuccessful – where an order for security would stifle the appeal in circumstances where the appellant husband had filed the appeal books and a summary of argument – where there were funds of the parties held in a controlled money account – where the Full Court found that there were circumstances that would warrant the holding of a part of the controlled money account as security for the respondent wife’s costs of the appeal – application granted.

Family Law Rules 2004 (Cth)

Halsbury & Halsbury [2008] FamCAFC 170
Palma & Caleffi and Anor (Security for costs) [2011] FamCAFC 174
Sawer & Sawer [2007] FamCA 140

APPELLANT: Mr J Gerber  

1ST RESPONDENT: Ms Bradley (formerly Gerber)

2ND RESPONDENT: A Pty Ltd

3RD RESPONDENT: B Pty Ltd 

4TH RESPONDENT: Mr R Gerber

FILE NUMBER: PAF 2087 of 2004

APPEAL NUMBER: EA 145 of 2010

DATE DELIVERED: 21 October 2011

PLACE DELIVERED: Canberra

PLACE HEARD: Sydney

JUDGMENT OF: Finn, May and Strickland JJ

HEARING DATE:	19 October 2011
LOWER COURT JURISDICTION:	Family Court of Australia

LOWER COURT JUDGMENT DATE:	24 September 2010
LOWER COURT MNC:	[2010] FamCA 861

REPRESENTATION

SOLICITOR FOR THE APPLICANT: In person

SOLICITOR FOR THE 1ST RESPONDENT: Mr Iuliano and Ms Staka

SOLICITOR FOR THE 2ND RESPONDENT: No appearance

SOLICITOR FOR THE 3RD RESPONDENT: No appearance

SOLICITOR FOR THE 4TH RESPONDENT: No appearance

Orders

1. The sum of $10,000.00 in the “controlled money account” (being Commonwealth Bank Account Number … ) be held as security for the wife’s costs in Appeal Number EA 145/2010 pending further order of the Full Court.

2. Notwithstanding any other order or direction to the contrary, the respondent wife have until 28 days prior to the date on which Appeal Number EA 145/2010 is listed for hearing to file her summary of argument in respect of the appeal.

3. That the costs of and incidental to the application for security in relation to the costs of the appeal, be reserved as costs in the appeal.  

IT IS NOTED that publication of this judgment under the pseudonym Gerber & Bradley (fmly Gerber) and Ors (Security for Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 145 of 2010
File Number: PAF 2087 of 2004

Mr J Gerber  

Appellant

And

Ms Bradley (formerly Gerber)

First Respondent

And

A Pty Ltd

Second Respondent

And

B Pty Ltd    

Third Respondent

And

Mr R Gerber

Fourth Respondent

REASONS FOR JUDGMENT

1. This is an application by the wife for an order against the husband that he provide security in the sum of $47,135.00 for the wife’s costs in an appeal (EA 145/2010) which the husband has filed against orders made by Coleman J on 24 September 2010 in property settlement proceedings between the wife and the husband and certain other parties.

Relevant principles

1. In the recent decision of the Full Court (Coleman, Thackray and Strickland JJ) in Palma & Caleffi and Anor (Security for costs) [2011] FamCAFC 174 the following principles, which govern an application for security for the costs of an appeal, were set out (adopting what was said by an earlier Full Court (Finn, May and Thackray JJ) in Sawer & Sawer [2007] FamCA 140):

   19. The power in this Court to make an order for security for costs is to be found in s 117(2) of the [Family Law Act 1975 (Cth) (“the Act”)], which is in the following terms:

   If, in proceedings under this Act, the court is of [the] opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

   20. The provisions of s 117(2A) are as follows (- s 117(4) and (5) are not presently relevant):

   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.

   21. The authorities establish that in exercising the discretion to order security for costs, it may also be relevant for the Court to consider in addition to the financial circumstances of the parties and the other five specific matters mentioned in s 117(2A), the following matters:

   a)        the prospect of success of the litigation;

   b)       whether the claim for security is made bona fide;

   c)whether or not an order for security would stifle the litigation;

   d)whether or not the litigation may involve a matter of public importance;

   e) whether or not there has been a delay in bringing the application for security;

   f) whether there would be difficulty in enforcing an order for costs

   (Luadaka v Luadaka (1998) FLC 92-830; Jones and Jones (2001) FLC 93-080; Adult Guardian and Mother's Parents and B and Child's Representative (2002) FLC 93-116.)

2. Also in Palma & Caleffi (supra) the Full Court set out the following observations made by the Full Court (Finn, Boland and Murphy JJ) in Halsbury & Halsbury [2008] FamCAFC 170; these observations have relevance in the present case:

   …

   34.      Before concluding we take the opportunity to make the following observations regarding applications for security in relation to the costs of an appeal.  Such applications appear increasingly to be taking up the time and resources of the litigants and of the Court.  The proper place of such applications and the competing rights that lie at the heart of such applications need to be borne in mind by those seeking them.

   35. Appeals are a part of our system of law.  They operate as part of the proper checks and balances on the actions and decisions of trial judges.  Litigants have a right to appeal in circumstances where they, properly and bona fide, allege error on the part of the trial judge (subject of course to the requirements in certain circumstances of leave to appeal being granted).  That right to appeal is an important part of our system of law.  It should not be fettered except for good reason. 

   36. The remedy for those who have a basic right to enjoy the fruits of their judgment and who have that right disturbed by an appeal which is ultimately held to be unmeritorious, is to receive confirmation of the right by the dismissal of the appeal, and, frequently, to have their costs met by the unsuccessful appellant. Although it needs to be recognised in this jurisdiction that s 117 of the Act has the potential to impact on the latter part of that remedy.

   37. As we earlier indicated, in the present case both parties put before us relatively detailed arguments in support of, and in opposition to, each ground of appeal.  Furthermore, in the present case the wife had already demonstrated her bona fides, by having prepared and filed the appeal books on 7 November 2007.  Thus the appeal could well have been heard in the Full Court sittings in which the application for security was heard.

   38. Indeed, in our view, and with great respect to the husband and those advising him, the hearing before us of the security application at which it should be noted the husband was able to be legally represented, would have been better devoted to the hearing of the appeal itself.

   39. It is also important to stress (but without in any way reflecting on the conduct or intentions of those involved in the present case) that applications for security for costs should not be regarded as a method of funding a respondent’s costs of legal representation in an appeal. This consideration should particularly be borne in mind in this jurisdiction where the fundamental rule regarding costs is that contained in s 117(1) of the Act, being that each party pays his or her own costs.

   …

Matters relied on by the wife in support of the present application for security

1. In written submissions in support of the security application (which were provided to us at the commencement of the hearing of the application), the solicitor for the wife endeavoured to address all relevant matters which the authorities require to be considered in the determination of such an application. However, it is fair to say that the essential arguments ultimately put on behalf of the wife for the order for security were: the likelihood that the appeal would not succeed (given that it was an appeal against a discretionary judgment in which there had been adverse credit findings and findings of non-disclosure made against the husband); the conduct of the husband and/or other parties associated with him during the course of the trial; and the poor financial positions of both the husband and herself.

2. In relation to the merits of the appeal, or its likely prospects of success, it is impossible for us to form a view about this matter. It can only be said that the trial Judge’s reasons for judgment are relatively long (extending to some 68 pages) and deal with a number of complex issues. It must also be said that the husband’s solicitor (who now no longer represents the husband) has been able to draw not only comprehensible grounds of appeal, but also a comprehensible summary of argument in support of those grounds. It cannot, in our view, be said that the appeal has no prospects of success.

3. In relation to the wife’s reliance on the conduct of the husband during the trial, this would not generally be a matter relevant to an application for security for the costs of an appeal. Rather it is a matter relevant to the costs of the trial (which are yet to be determined). Thus we place no reliance on this aspect in determining this application.

4. What is usually relevant though is whether there is a history of non-compliance with costs orders by the party against whom the order for security is sought. In that regard we were informed by the wife’s solicitor that while the husband may not have complied with certain procedural orders in the past, he has not had a history of non-compliance with costs orders, although few, if any of such orders have apparently been made.

5. As to the financial position of the husband, the wife claims, and indeed the husband admits, that he has no income or assets of any value, and he would thus be unable to meet any costs order made against him in the event that his appeal was unsuccessful and he was ordered to pay the wife’s costs.

6. There is, however, as a consequence of the trial Judge’s orders and certain orders subsequently made by Collier J, what was described before us as “a controlled money account” (being Commonwealth Bank Account Number … ) containing just over two hundred thousand dollars. It can be demonstrated (as was done before us) that ultimately the husband could be entitled to a sum of at least $77,000.00 out of this account. However, the solicitor for the wife was at pains to stress the husband would have to meet out of these monies a claim by his former solicitor (which would be well in excess of $77,000.00) and also any order in relation to the wife’s trial costs which might yet be made. Thus, on the wife’s case even taking into account this controlled money account the husband would still have no capacity to meet an order for costs in favour of the wife in the event that his appeal was unsuccessful.

The position of the husband in relation to the application for security

1. The husband is clearly aggrieved by the trial Judge’s orders and thus anxious to pursue his appeal. It is also important to note that he has to date managed to file not only his appeal books, but also the supporting summary of argument. To this extent, at least, he has shown that he is bona fide in pursuing his appeal.

2. In relation to the application that he provide security for the wife’s costs of the appeal, his primary position is that he opposes the application. However, having conceded that he would not be in a position to comply with an order for security, nor would he be able to meet an order to pay the wife’s costs if his appeal was unsuccessful, he informed us that he did not oppose our making an order which would cause a small part of the controlled money account to be held as security for the wife’s costs in the appeal.

Conclusion

1. While we cannot emphasise too strongly the general lack of utility and overall burden on court resources and ultimately also on litigants’ resources of applications for security for costs in a jurisdiction where the primary rule is that each party bears their own costs and where the time taken to hear and determine the security application would be better spent hearing and determining the appeal (see again the observations in Halsbury (supra) referred to in Palma & Caleffi (supra)), we consider that there are circumstances in this case which would warrant an order for security directed to the controlled money account. We take this view for the following reasons.

2. The husband should be entitled to pursue his appeal, particularly given that he has now managed to file the appeal books and a summary of argument. But it is clear that an order which required him to provide the security out of his own pocket at this time would be unlikely to be met by him and this would “stifle” the appeal (in other words, bring it to an end, but not on its merits).

3. However, it is also clear that the wife, whose own financial position is poor, would be at significant risk that any costs order which might be made in her favour following an unsuccessful appeal, would not be met by the husband.

4. Fortunately, there is available in this case the controlled money account, a small part of which can be “ear-marked” to be held by way of security for the wife pending the outcome of the appeal. To adopt such a course would, in our view, be just to both parties.

5. As to the amount that should be secured for purposes of the wife’s costs of the appeal, the wife originally sought a sum of over $40,000.00 by way of security although that amount was calculated on a solicitor-client basis. Having regard to costs as provided in the “scale” (Schedule 3 of the Family Law Rules 2004 (Cth)), we consider the sum of $10,000.00 is the appropriate sum, and will order accordingly.

Costs and other matters

1. We also propose to order that the wife have until 28 days before the date on which the appeal is set for hearing, to file and serve her summary of argument in reply to that of the husband already filed.

2. We further purpose to reserve the costs of this application as costs in the appeal.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, May and Strickland JJ) delivered on 21 October 2011.

Associate:

Date: 21 October 2011