Gometto and A Firm and Anor (No 2)

[2010] FamCA 849

FAMILY COURT OF AUSTRALIA

GOMETTO & A FIRM AND ANOR (NO. 2) [2010] FamCA 849

FAMILY LAW – COSTS

APPLICANT: Ms Gometto

RESPONDENT: A Firm

RESPONDENT: Mr E

FILE NUMBER: SYC 5065 of 2007

DATE DELIVERED: 8 September 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Cohen J

HEARING DATE: 8 September 2010

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Mr Simons

Remington & Co

SOLICITOR FOR THE RESPONDENTS:

Mr T

A Firm

Orders

1. That the applicant pay the respondents’ costs:

a)of the applicant’s Application in a Case filed 1 March 2010; and

b)of the costs application heard today

as taxed or agreed to be paid within 30 days of such taxation or agreement.

IT IS NOTED that publication of this judgment under the pseudonym Gometto & A Firm and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5065 of 2007

MS GOMETTO

Applicant

And

A FIRM

Respondent

And

MR E

Respondent

REASONS FOR JUDGMENT

1. In these proceedings, a firm of solicitors who previously acted for the wife seeks costs against her of an application she made for extension of time to file a notice disputing their itemised costs account, which I heard and in which I found against her. 

2. The issue of costs is governed by section 117 of the Act.  Section 117 provides principally and as its main thrust that each party shall bear their own costs unless there are circumstances which justify the Court making an order for costs after considering the matters which it must consider and which are listed in section 117(2A) of the Act. 

3. I am of the view that in this particular instance, there are circumstances that would justify an order for costs being made in the event that, after the matters listed in section 117(2A) of the Act have been considered, and based upon them, it is found to be an order which is otherwise justified.  The reason why I say that such circumstances could justify an order is that these are not proceedings between a husband and wife.  Section 117(1) are principally intended to ensure the level of conflict between ex-spouses is not exacerbated by costs order, particularly because it is in the public interest that people who have children and still have relatives in common through the children should be allowed to settle down and lower their levels of conflict rather than increase the level of conflict through these proceedings and costs orders. A costs order, rather than refusal of a costs order, is likely to increase the level of conflict between ex-spouses, but these proceedings are not only more in the nature of civil debt proceedings governed by strict rules relating to disclosure because of the nature of the solicitor/client relationship, the proceedings that are before me were actually part of a dispute over costs which the wife failed in.  In those circumstances, I think costs ought to be considered pursuant to section 117(2A). 

4. The first of the things that I must consider in determining whether a costs order should be made against the wife in favour of the solicitors is the financial circumstances of each of the parties to the proceedings, and by that I mean the proceedings to extend time for filing a notice disputing an itemised costs account, the parties being the wife and her former solicitors.  There is no evidence before me of the solicitors’ financial circumstances.  In those circumstances, I should assume that they can afford to fail, that failure to obtain an order for costs against the wife will not put them in a situation of hardship. 

5. Nevertheless, I should also consider that they will have done work that they were forced to do as a result of the wife's original application, and they will have incurred costs themselves that they will have to bear if an order for costs is not made in their favour. 

6. The issue of the wife's financial circumstances has, as the case has evolved before me today, assumed more importance than it might otherwise be thought to have assumed.  In my judgment, where I refused the wife's application to extend time, I made, at paragraph 19, findings about the wife's financial circumstances.  In effect, I found that she owned a home worth between $900,000 and $1.1 million and she owned an investment unit worth $550,000 and had mortgage liabilities of about $670,000.  I held that her net assets pool was worth something between $750,000 and $650,000 by averaging the values that the husband had put on the former matrimonial home and she had put on the former matrimonial home in her statement of financial circumstance. 

7. The wife's statement of financial circumstances was sworn by her in August 2007.  It was actually drafted by the solicitors who are now the applicants for costs.  I held that, given the circumstances, she would have net assets, after her mortgage liabilities of $670,000 and money she might have to pay the husband under section 79 were taken into account, of between $750,000 and $650,000. I can now extrapolate from those findings what her actual net assets should have been at the time, bearing in mind the more up to date evidence about the two properties that has been put before me today.

8. The wife's evidence is that the former matrimonial home was sold for $900,000.  It is also that the home unit is worth $650,000 and that she paid to her husband, pursuant to section 79, $260,000.  Making those adjustments, she, on my calculations, ought to have net assets of $657,000, less other monies that she may have had to pay subsequently to 2007.  I note that in the financial statement the wife, that is, the one of 31 August 2007 that the wife swore, she said she had $1.49 million in gross property and she had $673,000 in debts. 

9. That leaves a net balance of $817,000, slightly less than the $900,000 that I estimated, which was based upon, to some extent, the husband's own evidence of values and an assessment of what he would get as his entitlement under section 79.  One now knows that the unit which is included in the $817,000 at a value of $550,000 is worth 650,000 and that the wife had to pay $260,000 to the husband. Therefore, one adds to $817,000, $100,000 and takes from the total of $917,000, $260,000 leaving $657,000. 

10. The wife says that she has recently paid a debt of $32,500 and she has had other expenses; however, she now says that she has assets of less than $150,000 net.  One must ask where the $475,000 has disappeared to.  The wife was given the opportunity in the witness box to explain away the differential.  She convinced me in attempting to do so that she has never told the truth about her assets or her income.  Her financial statement discloses that she had two mortgages in August 2007:  one for about $320,000, the other for $350,000.  She claimed in the witness box today she had a further mortgage debt of something like $600,000 that was not included in her August 2007 financial statement. 

11. In that statement, she said her income was $1750 per week gross and after her expenditure she was left with $1000 a week, meaning that she paid far less than $750 a week on her mortgage indebtedness, which, from what she says, must have been about $1.2 million.  She explained it away by saying, that at the time she could afford to pay the mortgage instalments because she had boarders in her matrimonial home because it was a large home.  There is nothing about boarders in her financial statement and, in any event, she says in that statement her income was $1750 a week.  She could not have afforded to repay, nor could she have obtained, with any reasonable likelihood, loans of $1.2 million with an income of $1750 per week gross.

12. Even if she had 30-year loans and even if the interest rate on the loans was at the current low rates, which they would not have been, she would have needed to pay something like $8000 a month or $2000 a week to service $1.2 million worth of loans.  As a woman working as a nurse, I find that her evidence has been unbelievable, and that it is unbelievable in general is reinforced by the fact that I have no doubt that she lied in her financial statement of August 2007 in relation to her income.  She now says it was larger than she then said it was.

13. I find that the wife is a person whose evidence cannot be relied upon in these proceedings as to her financial circumstances and that they are much more likely to be similar to those that are set out in her financial statement of 31 August 2007 with adjustments for knowing how much she paid her husband and the change in value of her investment unit and, therefore, that it is more likely that she has assets of something like $600,000 rather than less than $150,000, and in any event, I think it is likely that she has understated her assets at $600,000. 

14. Mr T, who acted as her solicitor, put it to her that she ended his instructions after he found that she had not declared a third property that she owned. Her evidence in relation to that was to deny that situation and say that she had ended the solicitor's instructions because of their incompetence, which she described in great detail or attempted to do.  I found her evidence on this incredible but consistent with my findings in the previous proceedings when I dismissed her application. There I held that she had habitually used the excuse of blaming her solicitors for every default that she was herself guilty of in the conduct of the proceedings and that, because she was out of time then, it was her fault not her solicitor's fault. 

15. Therefore, I find that although I do not know the wife's financial circumstances, I do not know them because she has not been candid about them, and I cannot say that she cannot afford to pay an order for costs without suffering hardship. 

16. The next thing that I have to consider is whether any party to the proceedings is in receipt of assistance by way of Legal Aid and, if so, the terms of the grant.  In fact, there is no formal Legal Aid grant to the wife. However, she has, in effect, legal aid, because Mr Simons, her solicitor, is acting pro bono for her for political rather than any other reason.  I do not regard that as a formal grant of Legal Aid, and nor do I regard the form of legal aid that she has in the circumstances to be a reason why an order for costs should not be made against her.  She has legal aid because the NSW Law Society deems it appropriate to provide it to people who claim inability to pay a lawyer to challenge their prior lawyer’s bill. It is likely that to obtain it she understated her financial resources.

17. The next matter I have to consider is the conduct of the parties to the proceedings, including their conduct in relation to pleadings, particulars, discovery, inspection, directions, etcetera. The essential reason why the wife made the application which failed was that she had not complied with the Rules for making the application.  She was out of time for doing so.  I held that she was out of time because of her own fault and falsely blamed the solicitors for it.  Her conduct in those circumstances is such that it warrants an order for costs to be made against her to discourage this type of behaviour.  Of course, that conduct is now exacerbated by my view that she has told lies about her assets for the purpose of these proceedings. 

18. The next aspect is whether the proceedings were necessitated by failure of a party to comply with previous orders of the Court.  In my understanding, there has been no such failure. 

19. The next aspect is whether any party to the proceedings has been wholly unsuccessful.  I have no doubt that the wife has been wholly unsuccessful in the application for extension of time. I have to consider whether there has been an offer in writing.  I cannot recall such an offer. 

20. Then I have to determine and consider any other matters which I regard as otherwise relevant.  I have already considered all of the matters that are otherwise relevant.  I think this is a matter in which there are two main reasons for ordering costs against the wife, and they are strong reasons.  Firstly, her disingenuousness and lying on oath, in particular in relation to her blaming others for her own fault. Secondly, understating her income and assets or at least not stating them correctly, in circumstances where she was fighting to avoid the costs claim of her solicitor.  

21. Those two matters are very important, but the fact that it was a dispute over costs which created her application and she lost the application she made to extend time and therefore lost her dispute over costs, because of her conduct lead me to a clear view that she should be made to pay the solicitors’ costs of the application. I shall order her to do so and to pay the costs of today’s application.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen delivered on 8 September 2010.

Associate:     

Date:              24 September 2010