Gongsun and Paling (No 2)
[2020] FamCAFC 284
•18 November 2020
FAMILY COURT OF AUSTRALIA
| GONGSUN & PALING (NO. 2) | [2020] FamCAFC 284 |
| FAMILY LAW – APPEAL – COSTS – Where the Full Court dismissed an appeal by the appellant from orders made in the Supreme Court of New South Wales – Where the respondent sought costs of the appeal from the appellant on a party/party basis, or alternatively, in a fixed sum – Where the appellant has been wholly unsuccessful – Where the appellant’s rejection of a Calderbank offer was unreasonable – Where there were other circumstances justifying an order for costs pursuant to s 117(2A) of the Family law Act 1975 (Cth) – Costs ordered in a fixed sum – Costs order to be met from the appellant’s share of the net proceeds of sale of the property the subject of the litigation. |
| Family Law Act 1975 (Cth) ss 90SM, 90UM, 117 Uniform Civil Procedures Rules 2005 (NSW) r 42.1 |
| Calderbank v Calderbank [1975] 3 All ER 333 Valdez & Frazier(No. 2) [2017] FamCAFC 208 |
| APPELLANT: | Ms Gongsun |
| RESPONDENT: | Mr Paling |
| APPEAL NUMBER: | EAA | 24 | of | 2020 |
| DATE DELIVERED: | 18 November 2020 |
| PLACE DELIVERED: | Cairns |
| PLACE HEARD: | In Chambers |
| JUDGMENT OF: | Aldridge, Watts & Tree JJ |
| HEARING DATE: | Heard by way of written submissions |
| LOWER COURT JURISDICTION: | Supreme Court of New South Wales |
| LOWER COURT JUDGMENT DATE: | 2 August 2019 |
| LOWER COURT MNC: | [2019] NSWSC 1022 |
REPRESENTATION
| THE APPELLANT: | No appearance |
| COUNSEL FOR THE RESPONDENT: | Mr Zipser |
| SOLICITOR FOR THE RESPONDENT: | Vaarzon-Morel Solicitors |
Orders
The appellant pay the respondent’s costs fixed in the sum of $30,000.
To give effect to Order 1 herein, in addition to the amount to be paid to the respondent under Order 8(c)(i) of the orders of the Supreme Court of New South Wales issued 3 February 2020, the trustees for sale of the Suburb B property (as therein defined) are to cause a further $30,000 to be paid to the respondent from the appellant’s share of the net proceeds of sale.
Otherwise the respondent’s Application in an Appeal filed 14 October 2020 is dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gongsun & Paling (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EAA 24 of 2020
| Ms Gongsun |
Appellant
And
| Mr Paling |
Respondent
REASONS FOR JUDGMENT
Introduction
On 30 September 2020, we dismissed an appeal by Ms Gongsun (“the appellant”) from orders made in the Supreme Court of New South Wales, and further dismissed an Amended Notice of Contention filed by Mr Paling (“the respondent”). Now, by Application in an Appeal filed 14 October 2020, the respondent seeks a costs order in his favour, together with an order that those costs be paid from the net proceeds of sale of the property that was the subject of the litigation (“the Suburb B property”).
Although in the orders made on 30 September 2020, we established a timetable for the appellant to respond to any application for costs that the respondent may make, no material has been filed by her. However we shall determine the application for costs on the assumption that it is opposed by the appellant, albeit only by reference to the respondent’s material.
For the reasons which follow, orders will be made substantially as sought by the respondent in his Application in an Appeal filed 14 October 2020.
Background
In this case, it is helpful to give a little more background than may perhaps be usual in dealing with an application for costs, given the slightly unusual facts at play here.
The respondent commenced proceedings in the Equity Division of the Supreme Court of New South Wales seeking, in ultimate terms, the sale of the Suburb B property, and the division of the net proceeds of sale equally between himself and the appellant. The pleaded basis for seeking that ultimate relief was on several alternatives. Primarily, he sought a declaration that his 2010 gift of the Suburb B property to the appellant was only of legal, rather than beneficial interest, and hence was held by the appellant pursuant to a resulting or constructive trust, of which they were equal beneficiaries. In the first alternative, he next sought to have the transaction by which the Suburb B property was given to the appellant set aside on grounds that it was procured by undue influence, or unconscionable conduct. However to cover the prospect that none of those claims succeeded, the respondent also sought, as a second alternative, pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”) that the Suburb B property be divided equally between the parties. Further, because the parties had previously entered into a Binding Financial Agreement (“BFA”), in order to obtain such relief under s 90SM, he also sought to have the BFA set aside under s 90UM of the Act.
The respondent did not succeed before the primary judge in relation to his resulting or constructive trust claims, however he was successful in relation to his claims of undue influence and unconscionability. To cover the eventuality that his Honour was in error in so concluding, the primary judge also determined that, if it had been necessary, he would have made a property division order under s 90SM, such that the respondent would have obtained a 50 per cent interest in the Suburb B property in any event.
From those orders, the appellant appealed to the New South Wales Court of Appeal. However on 19 February 2020, that Court determined that s 7 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (“the Cross-Vesting Act”) compelled the transfer of the appeal to this Court. That was because by Notice of Contention filed in the New South Wales Court of Appeal, the respondent sought to uphold the primary judge’s orders, if necessary, by reference to s 90SM of the Act.
Should there be any order for costs?
The power to order costs in appeals is derived from s 117 of the Act which provides as follows:
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) 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.
(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 question, 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.
By reference to those considerations, firstly the respondent concedes that there is little direct evidence as to the parties’ financial circumstances, but contends that to the extent that they have assets, it is likely to be only their respective interests in the Suburb B property. Further, even if it might be the case that the appellant is impecunious, the respondent correctly argues that is, of itself, no bar for an order for costs being made, if it is otherwise warranted (Valdez & Frazier(No. 2) [2017] FamCAFC 208 at [53]).
Next, the respondent contends that although he has at times been in receipt of legal aid, the terms of that assistance require him to refund such payments from any proceeds recovered. However the matter is a little more complicated, in that whilst the respondent was in receipt of legal aid whilst the appeal was in the New South Wales Court of Appeal, once it was transferred to this Court, he was required to submit a fresh application to a different area of New South Wales Legal Aid, which was unresolved by the time of the hearing of the appeal, and accordingly was withdrawn. There is a further complication, in that by terms of the respondent’s grant of legal aid, in the event that he obtains a costs order in his favour, then there is an uplift applied to the amount that he is obliged to pay to New South Wales Legal Aid of 175 per cent.
In substance, the point which is relied upon by the respondent referrable to this consideration, is that although in receipt of legal aid, by virtue of his success, he will be required to repay the amounts paid under the grant, and in the event of any costs order being made in his favour, he will have to pay 175 per cent of the amount paid by way of legal assistance.
Next, the respondent says that the appellant was wholly unsuccessful in her appeal, notwithstanding that one ground of appeal (relating to undue influence) in fact succeeded. Correctly, counsel for the respondent noted that, in order to substantially succeed in the appeal, the appellant needed to not only persuade us to disturb the findings in relation to undue influence and unconscionability, but also overcome the matters raised in the Amended Notice of Contention.
We are satisfied that the appellant was wholly unsuccessful in the appeal.
The respondent also relies upon a Calderbank offer which his solicitors made to the appellant by letter dated 7 April 2020. In substance, the offer was to consensually dismiss the appeal, with each party bearing their own costs, and that upon the sale of the Suburb B property pursuant to the primary judge’s orders, the respondent would agree to a further $20,000 from his share of the proceeds of sale being paid to the appellant. The respondent points out that the offer was due to lapse only after the appellant had seen, and had an opportunity to consider, the respondent’s submissions in the appeal, and further, in its terms, the offer contemplated that, if further time was required by the appellant to consider the offer, she should advise the respondent’s solicitors. However no response, whether to the substantive offer or seeking an extension of time, was forthcoming from the appellant’s solicitors.
Counsel for the respondent identifies that the offer was a genuine attempt at compromise, in that it protected the appellant from any application for costs upon the dismissal of the appeal, and further, gave her a direct additional benefit of $20,000. Its rejection by silence is therefore said to be unreasonable, and more particularly, in any event, was a better outcome than in fact was obtained by the appeal. We agree.
Finally, the respondent says that the bulk of the appeal, as it transpired, dealt with matters which, but for s 7 of the Cross-Vesting Act, would ordinarily be dealt with in the New South Wales Court of Appeal, where costs usually follow the event. In other words, he says that but for the Amended Notice of Contention seeking to uphold the primary judge’s orders by reference to s 90SM of the Act, he would ordinarily have been entitled to a costs order, unless there were circumstances which displaced the usual rule (r 42.1 of the Uniform Civil Procedures Rules 2005 (NSW)).
We are satisfied that weighing all of those matters in the balance does indeed tell in favour of an order for costs. Further, we are satisfied that the order can lawfully encompass the costs of the respondent in the New South Wales Court of Appeal prior to its transfer, as was specifically adverted to by the New South Wales Court of Appeal itself at [34] of its reasons for transferring the matter to this Court on 19 February 2020.
Should the respondent’s costs be assessed or fixed?
The precise order which is sought in the Application in an Appeal filed 14 October 2020 is as follows:
1.[The appellant] pay [the respondent’s] costs of Family Court of Australia proceeding EAA24/2020 and NSW Court of Appeal proceeding 2019/253200 (which became Family Court of Australia proceeding EAA24/2020 on transfer to the Family Court of Australia in February 2020):
(a)on a party/party basis; or
(b)in a fixed amount as determined by the Court; or
(c)on a party/party basis up to a fixed amount determined by the Court.
…
Application 1(b) is to be read together with the respondent’s written submissions filed 15 October 2020:
24.…[The respondent] invites the Full Court, in the first alternative position, to make a fixed costs order in the amount of $30,000 or $40,000…
In his affidavit filed in support of the Application in an Appeal on 14 October 2020, the respondent’s solicitor deposes that the amounts which New South Wales Legal Aid has paid to the respondent’s lawyers is $6,270 in total, which, when subjected to the 175 per cent uplift, will see the respondent obliged to repay the sum of $9,721.25. Further, the respondent’s solicitor says that since then he has charged the respondent $10,744.80 for his costs, and there have been counsel’s fees in the sum of $45,324. However it is immediately apparent that those fees are calculated by reference to the fee agreement between the respondent and his solicitor, rather than necessarily drawn at scale. Therefore if ordered to be paid, those amounts would be, in effect, an indemnity to the respondent, albeit the indemnity may not be in a particularly greater sum than his party/party costs might prove. However absent a schedule of costs having been provided, we could not be satisfied that it would be just to make an order for the full amount of costs particularised in the respondent’s solicitor’s affidavit, as they may not in fact reflect the party/party costs.
Whilst one option would be to order that the party/party costs of the respondent be assessed, generally speaking in appeals in the Family Court, it is sought to avoid the need for assessment by fixing an amount for costs. That would certainly be the preferable course here, assuming it does justice to both parties. That then brings in to focus the first alternative proposed by the respondent, namely that costs be fixed in a sum, with the proffered range being between $30,000 and $40,000. That, of course, represents a significant discount from the total fees which the husband will be obliged to pay New South Wales Legal Aid and his own solicitors.
Our experience in appeals informs us that the claimed range is likely an accurate one in which the party/party costs of the respondent calculated to the family law scale would probably lie. In fairness to the appellant however, we choose the lower of the range, and will fix the respondent’s costs in the sum of $30,000, including the costs of the appeal when it was in the New South Wales Court of Appeal.
Should the respondent’s costs be secured against the sale proceeds of the Suburb B property?
There is no evidence which would enable us to be satisfied that the respondent’s costs would be able to be met by the appellant from anything other than the proceeds of sale of the Suburb B property. We have already mentioned that the appellant, for reasons which are not clear, has chosen not to put any material in response to that of the respondent in relation to the question of costs. We are therefore satisfied that there should be an order such as that made by the primary judge in relation to the costs of the trial, namely that the appellant’s proceeds of sale from the Suburb B property be charged with a further sum of $30,000. By structuring the order in that way, it overcomes the difficulty adverted to by the respondent’s counsel in his submissions that we may be seen to be varying the relevant order of the primary judge. There will therefore, in effect, be two charges over the appellant’s share of proceeds of sale, the first reflecting the costs order of the primary judge, and the second being the costs referrable to the appeal.
Conclusion
For these reasons, there will be orders that the appellant pay the respondent’s costs fixed in the sum of $30,000, with such costs to be met from the appellant’s share of the net proceeds of sale of the Suburb B property.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Aldridge, Watts & Tree JJ) delivered on 18 November 2020.
Associate:
Date: 18 November 2020
0